It’s no secret that the industrial landscape is evolving quickly, and the rate of change is only accelerating. So as we move into 2019, keep in mind these four key facts, identified by Technology Service Industry Association (TSIA):
- Revenue growth is not living up to expectations; whether growth is coming from new or existing accounts, performance is not where shareholders need it to be.
- In the last year, gross margin has gone down five points.
- Only one out of five companies is growing profitably.
- Business buyers are increasingly focused on discussing business outcomes rather than product features or functions.
The Solution
The main takeaway here? While revenue, margin, and profits are declining, our sales and marketing efforts are still selling speeds and feeds, not pieces per hour.
However, for OEMs, there is a logical solution. You can make two changes in parallel: Invest in building or upgrading your service business, and train every customer-facing employee to effectively talk about and sell the solutions you provide. Doing one without the other will lead to major disappointment, but doing both together will help you reverse the declining trends and win back disappointed customers — yours and your competitors’.
Let me explain.
People purchase your products because they need the outcomes that they get from using the products. If customers get better outcomes than promised, they are really happy. If the outcomes fail to live up to the promises made, they are disappointed. Everyone is so busy that they do not care how the outcomes are achieved — whether through speeds and feeds, special features, or sophisticated technology. Customers just want to get what they paid for.
Outcomes, Not Features
The simplest way to start is to sell outcomes. Don’t sell a milling machine that can plow a ¼-inch wide, ½-inch deep, 6-inch long groove in 316L stainless steel in 30 seconds with an end mill rotation rate of 10,000 rpm. Instead, get drawings of a few typical parts from your prospect, and set up a demonstration for the buyer to show the cycle time for producing each part, and convert that time into pieces per hour or per shift. Outcomes, not features.
Upgrading a service business should involve two short-term, or Phase 1, objectives:
- Be able to promise a minimal annual uptime while working scheduled downtime into your plan. The uptime commitment allows customers to calculate output per hour, shift, month, or year and plan their business accurately.
- Train your field service technicians to look at a customer’s site (manufacturing facility, data center — whatever is appropriate for your business), and be able to talk about ways that the customer can increase outcomes, reduce costs, or mitigate risks. Again, help the customer plan and improve outcomes.
Achieving both of these objectives will allow you to make a major dent in the four issues listed at the beginning of this post. From there, you can transition to Phase 2 — starting or accelerating your work on moving from preventative and reactionary service to predictive and proactive service. But that discussion is for another day.
Sam Klaidman is the Founder and Principal Adviser at Middlesex Consulting. He helps his B2B product manufacturing clients grow their services revenue and profitability by applying the methodologies and techniques associated with the Customer Value Creation and Customer Experience professions to assist his clients as they design and commercialize new services and the associated business transformations. Contact Sam here.