After-sales relationships as a competitive advantage

We are in living in the golden years of service; every organization needs to transform itself to provide unique and competitive services in order to survive. Historically, the relationship between a company and its clients pivot around the company’s core product(s); however, the global business climate demands a more customer-centric view. Therefore, more emphasis is placed on satisfying the client’s needs and improving the experience in such a way that it generates value to both buyer and seller. It is the so-called Golden Circle introduced by the speaker and author, Simon Sinek, where why comes before what as it relates to a product or service offering.

Within this context, post-sales service plays an extremely relevant role and, due to oversight is frequently not seen at the same level of importance as it should be. The net effect leads to loads of inefficiencies.

Since organizations have started to offer solutions instead of products, it is more evident than ever that selling spare parts and other post sales services such as repairs, modernizations, inspections and preventive maintenance must be considered as an important revenue stream.

The relationship between buyer and seller does not end upon completion of the transaction. It is, actually, a prelude to a vast and bountiful new relationship. It is estimated that the business turnover in the aftermarket is 4-5 times bigger than the original equipment business, and, on top of that, with a more appealing margins, if it is well managed. According to the AMR Research Report, post-sales services generates around 45% of the profits of the company, only accounting for the 24% of total sales. At the present time, the majority of mature industries have little room for differentiation, since global manufacturing standards have conformed their production processes to produce increasingly homogeneous products. As a result, post-sales services stand out as a clear competitive advantage. Through a good post-sales service, companies will be sending the right message to their clients creating a predisposition to create a long-standing relationship with them; this way, it is possible to win their trust and, hence, business will prosper.

Most organizations should ask themselves whether they really devote the same amount of effort in finding new clients as opposed to nurturing those who are already in their portfolio; the answer is clearly they do not. There is an abundance of references illustrating the effectiveness that marketing and sales has on new clientele, for what it is used an extraordinary amount of effort and resources: marketing campaigns, new technologies, applied psychology, etc. However, it is hard to find any referral in media or any economic or professional forum about revenue generated post-sales, which seems curious, taking into account that retaining a customer costs 5 times less than gaining a new one.

Many of our clients face this situation, where we find great opportunities to improve post-sales transactions. The aftermarket presents an excellent opportunity for companies to ensure a relationship with the client post transaction taking into consideration the whole product life cycle; the longer the lifespan of the asset, the bigger the opportunity to sell along the way.