Changing the Game in Industrial Goods Through Digital Services

Changing the Game in Industrial Goods Through Digital Services

          
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Changing the Game in Industrial Goods Through Digital Services

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    Increasing Sales Through Digitization

    Although transforming current services and creating new digital services and business models are the main opportunities of digitization, it can boost service sales as well. It has already revolutionized the relationship between retailers and their customers in the consumer sphere, and it is poised to alter the dynamic between manufacturers and their customers in industrial goods. By combining data from equipment with new platforms for communicating with customers, service providers can better differentiate themselves from their competition and secure long-term ties. To boost digital service sales, however, service providers will also need to rethink their digital sales tools, sales channels, and marketing platforms, empowering the sales force and extending the company’s reach. (See Exhibit 6.) In some cases, service companies will be pulled along by customers that are technologically better informed and more sophisticated and that seek much greater transparency and collaboration from their providers.

    exhibit

    Digital Sales Tools. Service providers can draw on the variety of data gathered from existing customers to determine the most appropriate upgrade or retrofit for a piece of equipment and when to pitch it. Diligent sales-support functions can go a step further and use that data to develop a profile of the most likely new customers. By matching that profile to the companies in the marketplace, the support staff can develop a list of likely prospects for the salespeople to pursue.

    Indeed, by using big-data analytics to determine customer-acquisition patterns, management can define new customer and product segments on the basis of more specific, more sophisticated factors, such as equipment age, availability of third-party spare parts, or frequency of part purchases. Greater knowledge can also lead to more finely tuned discounts and other incentives that secure a sale without a lot of persuasion or hard data from the sales representative. In our experience, OEMs have increased their margins by 5% to 10% by implementing these initiatives. Providing data to salespeople raises their productivity without a big investment in training them how to use it.

    Service providers can take a cue from other industries, which have made major strides in using purchasing information and history to enhance a customer’s immediate transaction and to generate leads. For example, a major auto-repair chain tracks the make and model of each customer’s car, the vehicle’s age, all service operations performed on the car, and the types of commercial offers (such as online coupons) sent to the customer. Applying big-data analytics to this data, the auto-repair chain’s system not only better diagnoses the issues with each customer’s car that is brought into the shop but also suggests products and services that the shop should cross-sell. These products and services are identified using each customer’s data or on the basis of what’s worked well for similar customers.

    As customers and services become more sophisticated, the sales force has to follow suit. Mobile sales tools can greatly improve how a sales force interacts with customers. Tablets and other devices can help salespeople navigate among various service offerings for customers. In addition to enabling customers to visualize the proposed solution, mobile tools help salespeople address customers’ concerns in real time with value-based arguments and calculations. The tools should also simplify any ordering processes, improving productivity and ensuring consistent information.

    A chemical company that implemented a mobile sales tool was able to increase sales by as much as 4% in only one year. Agile programming techniques enabled the company to have the apps ready for testing in the field in only three months. After the devices were deployed to the sales force, the higher margins and productivity improved the bottom line, enabling the company to pay off its investment within two years.

    E-Commerce. Although e-commerce represents a small percentage of total revenues for service providers, online sales may become a major percentage in the future. E-commerce is spreading in business-to-business sales as a whole, and the services sector is likely to be next. Some non-OEM sales platforms are emerging, offering customers greater transparency on prices and service characteristics. The Shoup Manufacturing website, for example, lets agricultural vehicle owners browse its spare- parts catalog and check prices. Equipment owners may have a long-standing rela- tionship with one OEM or more, but accessible online providers that offer price trans- parency may win sales for smaller parts that customers can install themselves. Such transactions can foster a relationship that cuts into OEMs’ business down the road.

    With this in mind, even OEMs with low expectations for online sales might consider launching their own sales portal. A sales portal offers OEMs the opportunity to connect directly with customers, leapfrogging traditional channels such as the distributor channel. Although connecting directly with customers might generate conflicts with channel partners, it also builds customer relationships that ultimately increase customer loyalty and sales.

    If a third-party e-commerce site is particularly strong, a service provider may want to partner with that company rather than compete with it. By collaborating, a provider can prevent its service competitors from winning market share. But the provider will need to ensure good visibility on the third-party site, such as through minisites, as well as strong promotion of its offering, such as through search-engine optimization.

    Social Media. Online forums are flexible, diverse platforms for presenting the values, expertise, products, and services of a company. These sites accommodate news releases, blogs, articles, event announcements, and product launches, with complex imagery and video as needed. Through frequent updates and clever use of celebrities in their videos, a leader in construction machinery has garnered millions of page views. Its Facebook profile is followed by close to half a million people.

    This manufacturer has also set up algorithms to scan technical forums and social- media sites for mentions of the company name. These searches reveal issues and questions that customers may shy away from raising on the company’s website. These sites can even add value to the product. A home-automation equipment manufacturer has created an online community where users exchange experiences and tips to extract the most value out of its products.