A $20,000 car when rebuilt using spares costs $100,000. This is the potential of the aftermarket.
The Industrial Original Equipment (OEM) manufacturer landscape has undergone significant changes in recent years. Traditionally, the focus has been on selling equipment, while the aftermarket has often been treated as an afterthought. However, with the advent of modern digital tools and the rise of eCommerce, the playing field has shifted. In this blog on the aftermarket potential, we will explore how Industrial OEMs can embrace a blue ocean strategy, leveraging digital transformation to create new opportunities and build long-lasting customer relationships.
Key Factors for Enhancing Aftermarket Potential
The Traditional Approach: Selling Equipment and Neglecting the Aftermarket Potential
For many Industrial OEMs, the primary revenue stream has historically come from selling equipment. Manufacturers have invested heavily in research, development, and production to create high-quality machinery for various industries. While this approach has yielded success, it often overlooks the aftermarket potential.
The aftermarket encompasses all the services and products offered after the initial equipment sale. This includes spare parts, maintenance and repair services, upgrades, and other value-added solutions. Historically, OEMs have seen the aftermarket as a supplementary revenue source rather than a strategic priority.
The Shift Towards Digital Transformation
The rise of digital transformation has disrupted numerous industries, and Industrial OEMs are no exception. The convergence of advanced technologies, such as the Internet of Things (IoT), artificial intelligence (AI), and cloud computing, has revolutionized the way OEMs interact with their customers.
Buyers, especially in the industrial sector, are increasingly looking for trust and reliability. They want to ensure their equipment performs optimally, minimize downtime, and have quick access to spare parts and services. This shift in customer expectations presents a unique opportunity for Industrial OEMs to differentiate themselves and establish long-term relationships.
Building Customer Relationships: The Case for Purpose-built Aftermarket CRM
Aftermarket sales are different from new equipment sales in many ways. Recent equipment sales are typically focused on the latest generation of equipment, while aftermarket sales often involve multiple generations of equipment, sometimes going back decades. This can make it more challenging to design a service offering and quote prices, as the information needed may be scattered across multiple legacy systems, paper files, or even lost altogether.
In addition, each large piece of equipment has its unique personality. While they may share BOM with other equipment in the same line to an extent, there are often subtle differences that can make a big difference in terms of serviceability. This means that aftermarket service providers need to have a deep understanding of the equipment they are working on, as well as the ability to quickly access and analyze data from a variety of sources.
However, the aftermarket has way better profit margins. Aftermarket sales are often recurring. This means that once a customer has purchased a product or service, they are likely to need to purchase it again in the future. This creates a steady stream of revenue for businesses that sell aftermarket products and services. And it unlocks the opportunity for new equipment sales as well. Customers buy trust and confidence and not just equipment. Knowing a customer’s every data point is no longer a choice.
In today’s digital era, Industrial OEMs can capitalize on their aftermarket potential by shifting focus from equipment sales to building lasting customer relationships. By embracing digital transformation and leveraging purpose-built solutions, OEMs can tap into recurring revenue streams and position themselves as trusted partners. This customer-centric approach, supported by advanced technologies, ensures long-term success and a competitive edge in the ever-evolving industrial landscape. Also, read – “The Ultimate Guide to AfterMarTech for Industrial OEMs” and discover the secrets of AfterMarTech success.