Companies pursuing growth focus on their main products – equipment, hardware, whole goods, “big iron,” lead line, software licenses, etc. These products typically account for 60-80% of a
manufacturer’s revenue. However, companies seeking growth often overlook their aftermarket. This is a big mistake. Aftermarket sales are a significant revenue growth opportunity and an even larger profit growth opportunity. Companies need to apply strategy to their aftermarket sales just as they do with their main products.
The aftermarket consists of several categories of products and services – parts, repair and maintenance services, professional services, accessories, supplies and software tools.
The aftermarket is of strategic importance for many reasons. First, as noted above, margins are higher than primary products and therefore the aftermarket represents a disproportionately larger (and often under-recognized) share of most companies’ overall profitability. Second, the aftermarket gives manufacturers, and their channel partners, an opportunity to build an on-going relationship with customers. With capital equipment, customers may only purchase once every three, five or even ten years. The aftermarket provides the manufacturer with an opportunity to maintain its brand image, predict the beginning of the next buying cycle and monitor customer needs/trends during the intervening years. Third, the aftermarket is an avenue for competitor entry, so manufacturers need to defend their aftermarket.
The first step in building an effective aftermarket program is ensuring that senior management is on-board and that a competent, strategy-minded executive is assigned to run/coordinate aftermarket sales and marketing.
With leadership in place, the company should then conduct a customer segmentation study looking at the aftermarket in terms of product needs, pricing, preferred sourcing, etc. After segmenting the customer base and developing appropriate strategies, manufacturers than need to administer those strategies through specific programs, policies, and tools.
To build a strong aftermarket strategy, manufacturers need to implement best practices internally and at their channel partners. To read more about this topic and get a complete list of best practices call 312.558.4808 or e-mail: firstname.lastname@example.org and I’ll send you my article on this topic.