Worldwide News UNDERAPPRECIATED COMPETITIVE FACTOR Every car owner probably receives mail at least once a year from the car dealership offering a summer checkup, snow tire service or a reminder for a major inspection or annual routine maintenance. The customer may see this primarily as a helpful service, but it has huge economic significance for the providers. Satisfied service customers are four times as likely to buy the same brand again as unsatisfied customers. Moreover, the service business is highly lucrative for manufacturers and dealers. Spare parts for example generate only 10 % of turnover for car makers but they rake in chinery and equipment manufacturing industry and a German share of € 212 billion, there is clearly huge potential out there, but small and mid-tier suppliers in particular tend to underestimate the opportunities. VDMA studies reveal that companies which operate after sales services as an independent business have an average contribution margin of 47 %. On average, large suppliers with annual turnover in excess of € 1 billion generate a quarter of turnover with services, but smaller suppliers lag well behind. The consequences of substandard after sales service are even more detrimental. If the services are limited to the bothersome task of handling warranty claims and are given low priority, the product 50 % of profits. Automotive service centers generate 60 % of earnings with spare parts. This consumer products model is readily transferrable to the capital goods industry. Despite the fact that an increasing number of machinery and equipment suppliers are aware of this, little effort has been made so far to exploit the existing potential. Many systems component suppliers take a rather complacent approach to after sales service. According to VDMA (German Engineering Association) estimates, German machinery manufacturers only generate 15 % of turnover with the after sales and service business. Given an estimated total worldwide turnover of € 2.25 trillion (2012) in the ma- 10 A special edition from PROCESS Picture: KSB No more “service wasteland”. In today’s world, service providers and other businesses make a big effort to keep their customers happy. However this derogatory term seems to stubbornly persist in the world of industry despite the fact that cleverly designed services and B2C businesses create a win-win situation for suppliers and customers. Pumps, valves and controls are a good example. Learn how after sales services create added value for system component manufacturers and process operators alike. KSB service employees at a chemical plant in Shanghai, China. Services currently generate around a quarter of the company’s corporate earnings. This article is based on an ACHEMA trend report. More information is available at www.achema.de.
ACHEMA Worldwide News2/2015
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