October 18, 2019
As manufacturers look for new ways to better serve their customers and boost profitability, new research shows a renewed emphasis on services is delivering against both goals. Vendavo, the market leader in commercial excellence solutions, in partnership with Copperberg, announced findings this week in a new report, Aftermarket 2019 Benchmark Survey Report at the Aftermarket Europe Conference in Nyköping, Sweden.
The new report confirms sales of services has a much higher profit margin than product sales. Two-thirds of respondents say more than 30% of total profit is driven by services. Manufacturers are taking notice of the bottom-line benefit services provide. In the last two years, the services business model has shifted to be proactive says 15% and even predictive says another four percent.
“A clear business trend today is that more and more companies are seeing the potential in increasing the servitizing portion of their business,” said Mitch Lee, Profit Evangelist, Vendavo. “This is clearly the case in the aftermarket business, which for many companies, can represent as much as half of the total business volume.”
Manufacturers are reacting to growing market pressure and prioritizing their pricing function. Nearly half of the survey respondents say increased global competition is a top pricing challenge while 44% say the need for different prices in different markets is the impetus for change. Thirty three percent point to better informed customers.
The research also shows:
- 16% use four or more pricing methods today
- 29% plan to invest in pricing software in the next 12 months
- 39% say the frequency of their pricing revisions have increased
The basis for the new report is a survey of 215 service practitioners across machinery/industrial equipment, automotive, marine and healthcare verticals. The resulting report, co-authored by Copperberg and Vendavo, is a deep dive across three manufacturing business areas: digital strategy, pricing and worker competence.
- Get the infographic: Aftermarket Services: The Great Profit Generator for Manufacturers
- Read the blog: Is Product-As-A-Service The Secret Sauce To Increased Profitability?