Companies that make consumer and industrial items are up against more competition, and as products become more commoditized, margin pressure and price erosion result.
They therefore find it difficult to meet growth and operating profit targets through just traditional product revenues.
Value-added services enable businesses to broaden their product portfolio and increase operating profits, competitive distinctiveness, and customer centricity.
But how can customer experience really aid in the transition from product based to service based offerings of any business?
Services Ruling The Roost
Nowadays, consumers purchase more services than only goods and are increasingly interested in doing so.
Companies choose to outsource the administration of their assets to the original equipment manufacturer or third party service providers rather than owning their devices or using their own resources to manage and maintain them.
New potential to provide more services and construct outcome-based business models are being created by digital and Industry 4.0. (e.g. pay for performance, availability).
These value-added services have the potential to be very profitable and produce large gross margins.
Also, employing effective service strategies enables businesses to generate more value and get much more intertwined in the client’s process, which in turn increases customer loyalty.
Growing The Customer Experience Scenario
It is not simple or risk-free to make the transition from products to services, simply by enriching the customer experience.
Product lifecycle services, such as product repair and maintenance, are established services that are already provided by numerous businesses.
The expansion into asset efficiency services, support for client processes, or outcome-based solutions like availability and pay-as-you-go services are more challenging.
Take for example, the FleetLink asset management system from industrial products manufacturer Atlas Copco enables remote monitoring of construction equipment by notifying asset owners when maintenance is required.
Or, Kilowott’s CX enhancement of a Dutch Fleet Management Company where we introducing real-time fleet and asset tracking to unlock operational efficiencies to make them expand from a product-based company to a service-based one.
There’s more.
An effective energy monitoring system is offered by Philips smart lighting solutions, allowing for greater customization while using less energy.
Vestas, a maker of wind turbines, provides active output management (AOM) solutions with variable service contracts adapted to clients’ demands and anticipated returns on investments.
The ability of a corporation to foresee long-term contract risks, develop service capabilities, and go past a traditional OEM mindset will determine the success of a customer experience transformation.
Companies that transition into higher value proposition services too quickly, such as moving from parts/repairs, technical, and logistics services to financing, long-term service agreements, and outcome-based solutions, run the risk of damaging their brand, reputation, and financial position if they don’t deliver.
Successful businesses are creating these new services with the customers they are most familiar with; they begin small to show results, and then swiftly expand.
Is successful customer experience transformation enough?
Numerous manufacturers of consumer and industrial goods begin the shift by providing a small number of services, usually in response to customer demand and with the goal of prolonging the product life-cycle.
While the company’s primary concentration is on creating, producing, and selling hardware, these services are seen as an addition to the product they offer.
Service executives are usually aware of the need to expand their services into a new business segment.
They establish discrete P&L accountability, create distinct service-specific processes and capabilities, and commit resources in marketing, sales, operations, and R&D to adhere to a specific service strategy.
In order to grow a service-based firm, there must first be some degree of ring-fencing, with a separate team and unique competencies focused on expanding the service portfolio.
The product and service teams can come back together as a single unit after the service focus and mindset have been accomplished.
As procedures are centered on the entire value chain and product ownership is leveraged to boost competitiveness and value creation, services become a cross-enterprise priority.
Data on product quality and dependability are utilized to enhance the service portfolio’s return on investment.
Leading companies in the market are expanding their service offerings through cooperative business models with ecosystem partners and are reshaping their sector through service innovation.
Operating profit growth will be further fueled by the co-development of highly integrated services solutions and the extension of services to concentrate on the customer process and outcomes.
Innovation, commercialization, and service delivery critical competencies are required for a smooth shift from products to services.
With a focus on speed and scale, cross-functionality inside the organization, and open engagement with partners, investors, and suppliers, expanding the service portfolio through innovation necessitates a customer-centric strategy from ideation to implementation.
A change in commercialization skills with a focus on value selling is necessary to sell services.
As the focus switches from selling to maintenance departments to the asset operator/owners, selling outcome-based services often has a considerably longer cycle and involves a broader, more senior group of client stakeholders.
In the end, successful service delivery depends on the development of competencies across key areas, including partner management, customer management, service supply chain, service operations, and engineering.
We are here to help you with this transition thanks to customer experience transformation. Let’s talk!!!
Need help in building brand campaigns? Let’s talk!
