Selling to your installed base should be the top priority for every B2B OEM
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A recent Entytle report “Priorities for industrial equipment manufacturers for 2022âIndicated that the second highest priority for industrial OEMs is the growth of the aftermarket. If your business is like the 26% of respondents who gave this answer, then selling to your installed base should be the # 1 job.
And I’m not just talking about selling new products. I’m talking about upselling and cross-selling and other value-added things.
While this sounds like product lifecycle management (PLM), it isn’t at all. PLM focuses on the product, not the customer. The customer must be at the center of these efforts because it is the customer who will spend the money to get the most out of their investment. This process is called installed base selling.
How to approach the sale of the installed base
Keep in mind that the customer has already purchased one or more examples of the product for which you are now going to try to sell add-on purchases. They are already seeing value from their initial purchases, they know your business well and they are always interested in improving their business results by doing business with a known supplier. Knowing the life stage of your equipment and having an appropriate offer that will add more value to the buyer is the key to your success.
Here are the stages in the life of capital goods from the perspective of the equipment owner:
What to sell at each stage of the equipment’s life
1. Installation, warranty and integration
The installation, warranty and integration stage is the worst time to up-sell or cross-sell. The customer just bought the product and may not even have paid for it yet. During the sales process, customers expected the quote or proposal to include all of the services required to create the promised or implied value.
During installation, you may discover something that was not discussed during the sales process. Therefore, you may not be able to meet your customer’s expectations without an additional expense. Handling this issue is very tricky because the customer may think your team should have known about the issue and your team may think the buyers cheated on them.
The way your business handles this situation will set the stage for the future relationship. Be careful not to win the battle and lose the war.
2. Full use
During the complete use step, which for many products can easily last more than 10 years, you will find many opportunities to sell additional services and improve products. Here is a partial list of all the possibilities:
- Technical support
- Spare parts
- Repairs on site or in depot
- Service contracts
- Software upgrades
- Product upgrades
- Product remanufacturing
- Certification and training of users and / or maintenance
- Preventive maintenance and / or calibration services
- Remote monitoring
- Efficiency advice
- Equipment moving
- Safety inspections and training
Selling these services typically requires a cooperative effort between your technical and field support staff and the service vendor. However, if you have outsourced service and support to a channel partner or third-party maintenance organization, upselling and cross-selling can be difficult.
You will not know when to contact or what services are appropriate to offer, as you may not receive the same information that you would have received if the service had been provided by your direct employees.
However, it is not impossible. Caterpillar does an outstanding job working with and training its authorized dealers to handle all required services, including major overhauls and rebuilds.
3. Part-time use
When the new equipment offers a big leap in productivity, older equipment will join the ranks of part-time use equipment. Equipment is usually kept in reserve for use only in the event of a temporary increase in demand or if the new equipment is deactivated. In these cases, you may be able to offer scheduled service just to make sure that the equipment will be available when and if it is necessary to come back online.
Sometimes old equipment is moved to less critical factories or sold to new companies looking for a low cost solution for their current needs. In this case, you can start with decommissioning and end up reinstalling the product and offering basic services like training and spare parts.
4. Parts band
Frequently, equipment owners with a large fleet of the same product retire older units and replace them with new products. The old products are then stripped for parts which can be used to support the rest of the units. Frequently, these parts are returned to the OEM for reconditioning and certification before being placed in the customer’s spare parts inventory.
The US Air Force provides a prime example of this process. They have two major logistics facilities: Davis-Monthan Air Base (AFB) and Tinker AFB. Davis-Monthan is the “only aircraft graveyard for excess military and US government aircraft and other aerospace vehicles such as ballistic missiles,” Wikipedia explains, because “Tucson’s dry climate and alkaline soil make it an ideal place to store and preserve airplanes â. The “boneyard”, with more than 4,000 military planes on site, is the largest in the world in terms of aircraft. The planes on site are either permanently stored, dismantled or recycled, demilitarized for exhibition purposes, or restored and put back into service.
Likewise, Tinker AFB, the largest air logistics center in Air Force Materiel Command, âprovides depot maintenance, product support, services and supply chain management. , as well as information support for 31 weapons systems, 10 commands, 93 air force bases and 46 foreign countries. “, According to Wikipedia. Multiple on-site maintenance groups oversee the maintenance, repair, and overhaul of US Air Force and Navy engines and other equipment.
I first learned how to salvage pieces of unusable equipment when I was on active duty in the United States Army. I knew that discarded equipment like vehicles or air compressors were delivered to the junkyard and base salvage. I just never knew what happened after delivery.
While preparing for a major inspection, we discovered that we needed a significant number of tools to complete each vehicle’s authorized tool set – but we ran out of money in our little one. tool budget. Then the light bulb went on in my head. I asked my platoon sergeant, “What happens to tools on vehicles that are turned into scrap and salvage?” He wasn’t sure, so we decided to visit the office.
When we got there we saw rows of boxes with every tool imaginable. At that point, my platoon sergeant asked me to come out. When he came out he said, “Do you think you can get five pounds of cheese and a big box of crackers from the dining hall?” ” I said yes.”
All I will say is that we never worried about replacing lost tools again. And I felt like Steve McQueen was playing Sgt. Eustis Clay in “Soldier in the Rain”.
5. Exchange or scrap
The take-back or disposal step is the last chance an OEM has to generate revenue from a product and its current owner. If the equipment is taken back, it can be refurbished and resold with a short warranty and the ability to start a new income generation process.
And if you pick it up with the intention of scrapping it, you need to take it apart first and repackage all the individual parts and assemblies that are still in demand to support existing products. You may be able to bring parts and assemblies to a level of quality such that they can be declared equivalent to new and sold with a new part warranty.
As the concept of circular economy becomes a more important part of companies’ sustainability plans, this process will become more mainstream than it is today.
All OEMs can use the equipment lifecycle stage approach to find ways to generate revenue from their installed base without investing R&D funds to create new predictive maintenance software or add sensors and controllers. You just have to think about how you approach your customers.
Middlesex Consulting is a team of experienced professionals whose primary goal is to help equipment companies create more value for their customers and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of their clients by focusing on our strengths in service, customer experience, manufacturing and engineering. If you would like to learn more about how they can help your organization improve your revenue generation processes, please contact them directly by e-mail or check out some of our free articles and white papers here.
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