After-sales Support

Creating a lasting customer relationship

What can providing after-sales support do for your business?

• Increase customer loyalty• Increase profitability

– “ . . . businesses earn 45% of gross profits from the aftermarket, although it accounts for only 24% of revenues.” Cohen et al 2006

• Increase customer satisfaction

Reasons companies don’t develop an after-sales support program

• Locations• Inventory• Training• Unpredictable demand

How to Develop an After-sales Support Program

6 Step Approach

Cohen et al 2006

6 Step Approach1. Identify which products to cover

2. Create a portfolio of service products

3. Select business models to support service products

Cohen et al 2006

6 Step Approach (cont.)4.Modify after-sales organizational structures

5.Design and manage an after-sales services supply chain

6.Monitor performance continuously

1. Identify products• All or some• Complimentary products• Competing products

– Synergies

2. Design a Portfolio• Customers’ Parameters

– Time– Price

• Service Provider’s Abilities– Location– Level of Inventory

Create Service Products• Price based on service level

– Fast and expensive – Platinum– Slow and economic – Silver

3. Multiple Business Models

Ownership-based vs. performance-based• Ownership-based

– Low levels of service needed– Conflict of interests

Business Models (cont.)• Performance-Based

– Performance of product critical to customer• E.g. Aircraft Engine

– Product very expensive or . . .– Producer bares risk of owning product (leasing)

• E.g. Computer System

4. After-sales Organizational Structure

• Products Department vs. Services Department

Products Dept. Services Dept.

Inventory carrying costs may overlap

Organizational Structure (cont.)

Strategies:• Outsource services

– Core competency?• Initial product priced to generate long-term

services sales– Involve marketing and sales departments

• Innovative technology

5. After-sales Services Supply Chain

• Product HierarchiesEnd products – modules – submodules – components

• Geographical HierarchiesCentral distribution center– regional and field stocks– customers’ premises

Services Supply Chain (cont.)• Speed vs. Cost

Most Expensive & Fast:– End Products– Customer Premises

Least Expensive & Slow– Components– Central Distribution Center

Services Supply Chain (cont.)

• Economies of Scale• Customer Priority

– Threshold level of inventory• Planning

Services Supply Chain (cont.)

• Planning– Short-term (days) – replenishment, shipment,

and allocation of resources– Med-term (weeks or months) – strategic

placement of resources– Long-term (years) – services strategy

6. Monitor Performance• Changing Customer Needs• Metrics:

– Customer-focused – e.g. waiting time– Internally focused – e.g. fill rates

• Upgrade technology• Monitor Competition

TriconexTriconex provides safety and critical control

systems for the processing and manufacturing industry.

They provide after-sales support to their customers in the following ways:

http://www.triconex.com/us/eng/triconexSupport/aftersales/default.htm

Triconex• On-Site Spare Parts Program (OSP)• Extended Warranty Program• Smart Upgrade Program• System Maintenance Program (SMP)

PracticeAs a manager in a company that produces drill-

presses that are sold to manufacturing organizations you are asked to develop an after-sales support program for your customers.

• Use the principles discussed in the 6 step approach.

1. Identify which products to cover2. Create a portfolio of service products3. Select business models to support service

products4. Modify after-sales organizational structures5. Design and manage an after-sales services

supply chain6. Monitor performance continuously

How can this method be applied to your current organization?

Summary• 6 Step Approach

– Key Points• Focus on customer needs.• Be flexible. Use multiple business models.• Create hierarchies and priorities. • Plan in order to react quickly to changing demands.

“ . . . after-sales support is the longest-lasting source of revenues to sellers and requires the smallest investment. Companies that ignore the after-market do so at their peril.”

Cohen et al 2006

Suggested ReadingsMorris A. Cohen, Narendra Agrawal, Vipul

Agrawal. Winning in the Aftermarket. Harvard Business Review; May2006, Vol. 84 Issue 5, p129-138.