Current volatility and declining revenues combined with product-based margins losing its ground are contributing factors to the transformation in the automotive industry and the need for manufacturers to start looking beyond new product sales. They are tapping potential clients through additional sources to improve top and bottom line and optimizing the margin-rich after-sales service presents lots of opportunities here. According to a report by Research and Markets, in 2016, the global automotive aftermarket has reached USD 643.10 billion while the experts predict it to hit USD 847.15 billion by 2022, at a compound annual growth rate of 4.7% for the stipulated period.
In last few years, mature and highly competitive industries like high tech, aerospace, industrial products, automotive and heavy equipment have seen a decline in already razor thin product-based margins. On the other hand, after-sales service remained healthy. According to the research by NADA profitability from product sales ranges between 6 to 13 % across several manufacturing industries, whereas profitability from the service delivered after the initial sale of a product can make 35 to 60%.
Attractive sales margins and current market volatility are driving top manufacturers around the globe to tap the potential of service-led growth strategies. After-sales service businesses are now seen as opportunities for new revenue and profits. It is also taking customer loyalty to a completely new level.
An OEM can get the benefit of their engineering and manufacturing skills until a vehicle leaves a plant. According to aftermarket outlook AASA, the revenue earned through the initial sale of vehicles is only 37 percent of overall revenue of the automotive industry while the automotive aftermarket brings the rest 63 percent. Efficient aftermarket also helps control revenue leakages while increasing making customer retention and repeat sales easier.
Having strong aftermarket support can really prove to be a distinguishing ground for companies. It can be a key to establish a loyal customer base with impeccable customer service. Furthermore, accentuating the values you share with your customers can play a key role to build customer loyalty.
Though IoT connected vehicles and driverless cars are grabbing attention recently in the automotive world, the automotive aftermarket industry segment perceives a fundamental shift owing to changing consumer preferences about the component purchase, vehicle repair, and service accessibility.
The manufacturing industry is evidently well-acquainted with the value of aftermarket services as a growth driver. Still, OEMs are hesitant due to alarming challenges like gaps in service capabilities, customer mindset, and internal service culture etc in putting aftermarket services strategies into practice. Service led growth strategies need a new way of thinking combined with decision making capabilities and technology designed specially to optimize after-sales service process. Focusing on the 3S that is Spares, Service and Support strategies can help top manufacturers drive results and revolutionize their after-sales business. Providing support generates a low-risk revenue stream over a long period and proves to be distinguishing factor that makes it stand ahead ofthe competition.
Maximizing the benefits with right tools:
Profitable and outstanding services spell manifold benefits. So, having the right parts sold at best possible prices at the correct time and place is of utmost importance. Managing complex supply chains and huge inventories can be time-consuming and discouraging. However, implementing right tools to automate and simplify the process will help you maximize the benefits including customer loyalty and greater profitability.
It’s time to embrace advanced technologies and focus on service excellence. OEMs can overcome cultural and structural challenges and take a leap with worthy rewards, including more opportunities, happier customers. Creating lasting competitive advantage with customer centric approach will surely yield manifold benefits in long run. Get started now!