It is accepted wisdom that only a small portion of an OEM’s installed base accounts for a large percentage of aftermarket sales or profit or growth or whatever else your favorite metric may be. It’s the famed Pareto principle or 80/20 rule at work !! Companies large and small use this as a rubric to allocate resources, make decisions on tactics etc. 

But if only 20% of the Installed base engages with the OEM in the aftermarket, what happens to the other 80%? It’s simple, they go elsewhere. And take their lifetime spend with them.  This challenge is exacerbated by the fact that your largest customers are often not an OEM’s most profitable. The prime reason being that they often have the power to demand more competitive pricing and therefore lower unit margins. This dramatically increases the importance of engaging frequently and consistently with the next tier of customers – the not so large ones, the ignored ones.

The reality is that OEMs know that there is plenty of lifetime value inherent in the vast majority of their customers. For example (based on our analysis of over 10 million equipment sales and 300 million parts transactions):  for a 10% increase in installed base market share, OEMs can drive a 7% increase in repeat equipment buying. In other words, doing good and doing well. 

But an OEM’s installed base is typically large and complex, and serving it fully and well requires expertise and knowledge from multiple sources.  In addition, OEMs execute numerous activities, events and transactions with their Installed Base, by multiple employees belonging to multiple functional areas. More often than not, this complexity causes inconsistent, incomplete and siloed interactions with the installed base. The problem is that at scale, without complete and accurate information available to each and every customer facing employee, it is just too hard to serve every single customer in the same consistent and cost effective  manner to capture this value. Consequently, most OEMs simply focus on their top customers reluctantly ignoring the rest.

Isn’t this a problem that OEMs can solve? It turns out that it is easier said than done.

In an increasingly digital world, Industrial OEMs are creating and consuming huge amounts of customer data, all of them in siloed and unconnected systems. A typical OEM has up to 9 different touch points with their customers as well as the installed base of equipment: field sales, marketing, field service, factory service, inside sales, technical support, engineering, logistics, finance and executives. And that number is growing with the emergence of IIoT, eCommerce, chatbots, apps, customer portals etc.  

Solving this problem is hard: multiple sources of poor quality incomplete customer data, none of which can be trusted to tell the full and accurate story about the customer, their product usage, and behavior. This is also a very expensive problem: significant productivity losses, high costs of maintaining and managing multiple data sources, poor customer experience from inconsistent use of this data, and elevated sales and marketing costs. 

It is imperative that OEMs solve this problem today: buying habits are changing; customer expectations are becoming more demanding – from easy-to-use applications to the instant resolution of issues, to some form of “self serve, no touch” service. Digital interactions are becoming the norm, and analog-first suppliers are getting phased out.

For the future of their business, OEMs need to serve every customer, not just a few. It’s not just the top 20% & the bottom 20% of customers, your middle 60 need your attention as well.