Global market and worldwide competition has threatened the profit margins of manufacturing sectors. With global competition, price deflation and rising commodity prices, product companies seek alternative sources of profitable revenue growth. This opportunity has led many businesses to search for better ways to distinguish their products and gain long-lasting customer loyalty, as well as discover new profit sources. Also global vendors are beginning to understand and appreciate the significance of customer-centric business.
Product service is one of the area of growth opportunity and profit for many companies by increasing service revenue or offer additional add-on service to supplement product revenues. Instead of treating a product sale as end point with a customer, companies should take the opportunity to provide value to customers as their product is used, for as long as it is used, to maximize the value and relationship with the customer.
Source: Siemens PLM
Aftermarket services is highly profitable
Aftermarket services represent approximately 25 percent of revenue, with some product companies, especially in production machinery, enjoying double that. As importantly, mature service operations typically contribute 40 to 80 percent of profit.
Service is countercyclical
When product sales slow down, for example, during an economic downturn, service activity tends to rise as customers hold on longer to older equipment. When product sales decrease, service revenues tend to increase and recover some of these losses.
Service for product life extension
As products approach end of life, effective service contracts and attractive pricing could help maintain brand loyalty until the customer is able to replace an aging piece of equipment with a new one.
Service drives customer loyalty
Customer-facing employees, such as call center agents and field technicians, are the face of the brand. They can understand customer needs and work diligently to delight them or, conversely, ruin the customer experience. Additionally, service representatives can become an excellent sales force add-on at no added cost.
Engaging with customers beyond the point of sale opens up new opportunities for companies to provide value, and this value can be monetized into new revenue streams. Moreover, existing parts and services operations can be shifted from a cost center to a profit center by leveraging SLM and maximizing efficiency.
Power of PLM with SLM
Product Lifecycle Management (PLM) is typically used to manage all stages of product development with a specific focus on engineering and product revision. PLM helps to manage cycle of continuous improvement, whereby products are created and sold, then improved to be created and sold again.
Service Lifecycle Management extends this cycle, by information about the product journey after its sale and during which a product is used by a customer. Implementing PLM and SLM solutions together gives companies the power to have a complete process in how a product is made and how it is used by a customer.
The coordination between different resources around the supply value chain is improved, as for networked participants and management activities of product-service lifecycle.
SLM implementation at manufacturing industries is a shift towards a better integration of products and services.