Historically, large manufacturers have used third parties to provide services like break-fix and routine maintenance. It has allowed them to focus on their core competencies, rather than equipment maintenance. However, in recent years there has been a trend towards servitization, where manufacturers are beginning to offer additional services of increasing sophistication. Not only can this boost revenue, but it can also help improve customer engagement and retention.
However, the change to servitization isn’t easy and doesn’t happen overnight. It requires a great deal of investment from the operational and commercial teams to offer additional services. It is also tough for salespeople, as they need to switch from a product-focused, Stage One, to a consultative, solution-driven approach. However, if successful, servitization offers the possibility not only for higher revenue but also for improved customer loyalty. After all, who better to maintain and repair a component or device than the organization that created it?
Servitization: Driving revenue growth for manufacturers
Stage Two: Embracing the Upsell Approach
It may sound like a small step to move from offering products to services, but it can be a giant leap for organizations. At this stage, ongoing Sales training and coaching is absolutely crucial to embrace new processes. The focus is on turning product specialists into solution generalists who understand a much broader range of offerings and services. To ensure successful change, salespeople need to develop a new consultative approach, feel comfortable with a much broader portfolio, and be able to answer solution-driven questions.
Although Sales training plays a key role in capitalizing on servitization, our recent research revealed that in manufacturing, Sales training stops after induction for more than half (53%) of staff. Selling a service is a different proposition than selling a product and has its own buyer journey. Successful manufacturing organizations moving to sell servitization must take time to understand how their existing buyers also procure services, and provide content to map to the key purchasing stages.
Similarly, training and practice make perfect: recording salespeople giving their pitches and allow managers and peers to offer feedback has proven beneficial as they improve and become more natural throughout the practice.
To up-sell the new service-driven offerings such as maintenance and repairs, it is essential to involve subject matter experts in early customer meetings. They are usually able to emphasise the reliability of products and solutions, but can also help core Sales staff understand your organization’s future plans in terms of product innovation and how the new services will support it. This will help to position your organization as a forward-thinking player.
Stage Three: Capitalizing on Analytics-Enabled Software Sales
The third stage in the servitization evolution is to use software, often enabled by analytics or AI, to monitor the condition or supply status of the device or part in question. For example, Atlas Copco, a manufacturer of air compressors, has taken this step by offering monitoring and maintenance services with equipment to maintain its condition.
However, this stage can include a number of sub-stages. For example, it may be as simple as re-ordering ink, or it may be as complex as dynamically allocating the nearest maintenance staff member to visit the site and carry out repairs, significantly speeding up the repair process for customers.
The route from a service sell to analytics/AI-driven software sell usually involves discussions around convenience, removing the headache of management and monitoring from the main stakeholder or budget owner. As such, information and content shared must highlight and address these different needs, demonstrating the positive impact in the broader business; for example, fewer interruptions to service, allowing staff to focus continuously on more strategic initiatives.
At this stage, training and coaching are essential as the service offering has become much more complicated. It’s crucial for Sales staff to understand the benefits to the customer of the development in question and practice discussing this with a variety of stakeholders. In particular, when the analytics are complex, reps need to be able to explain them clearly and simply.
Stage Four: Outcome-Driven Sales
The fourth and final stage of the servitization evolution is the departure from a customer owning a piece of equipment at all. Instead, they will pay for the outcomes. One manufacturer that has managed this very well is printer manufacturer, Xerox, offering fixed printing by the page. Many manufacturers will go further and effectively lease equipment to customers, bundling smart services along with it.
Similarly, this stage is often associated with manufacturers using IoT devices to monitor equipment, making it increasingly accurate to predict when they will degrade or need repair. The typical sales path to this usually involves focusing on removing risk and unpredictability, and switching to an OpEx rather than CapEx model. All of the volatility – and revenue potential – in this instance sits with the manufacturer rather than the customer or service provider.
Promoting a shift in business will inevitably involve a much broader stakeholder group to influence, from specialists to the C-Suite. Here, salespeople also need to understand the overall company culture and goals and draw on different colleagues’ expertise, from senior staff to address the C-Suite, to analysts to talk risk. Sealing the deal with a buying committee requires input from multiple people on the selling side as well.
Why Should You Care?
While moving to servitization isn’t an easy path, it is becoming increasingly common and does represent far greater revenue potential for manufacturers than a straightforward product sell. So, if you’re ready to learn more, check out our whitepaper on how sellers in the manufacturing sector can keep up with the rapid change in the industry, including the move to servitization, growing complexity, variety, and more knowledgeable buyers.