How can a manufacturer bring its service offerings to market?

Industrial companies are increasingly considering the service business, which has been neglected for a long time, as a priority.But for many of them it is difficult to find the right strategy for launching a new direction - this is the conclusion of Bain and the University of St. Gallen.

Some industrial companies have historically viewed service as something of an afterthought. Most of their investment, R&D resources, talent, and management attention have been focused on new equipment sales.

Today, priorities are changing. Service is increasingly taking first place in the agenda of the management of companies in the manufacturing and other industrial sectors. Why?

Many industrial companies operate in mature markets and face challenges that make it difficult to grow sales of new equipment. It is becoming increasingly clear that the service not only helps to achieve business stability, but also provides significant opportunities for growth in both the short and long term. This is because an effective service can increase the value created during the life cycle of products, retain customers, stabilize the company's revenue and its resilience to external shocks, and increase profits. The transition to services that combine product and digital solutions, combined with new monetization models, is attracting more and more attention to the service business. Services already make a significant contribution to the revenue and profit of industrial companies. Last year's Bain & Company survey, in which 51 companies took part, showed that services account for an average of 35% of their revenue and 60% of their profits. Today, industrial companies have the opportunity to increase these numbers, as in a pandemiccovid-19 has made having an efficient service a must. Customers are likely to save for a long time to come. Instead of investing in new equipment, they will try to extend the life of the old one. This means that industrial companies need to actively look for new sources of revenue in other areas, in particular in services. Finally, the pandemic has forced industrial customers to invest more in the reliability and continuity of their supply chains, which means that they now value quality service more than ever.

Many industrial companies still have a long way to go to realize the full potential of their service business. The hardest thing for them will be to choose the right commercial model. The Institute for Technology Management at the University of St. Gallen surveyed employees of 54 global industrial companies. Only 13% of respondents said they consider their company's service sales strategy to be "excellent" or "exceptional".

Companies that manage to develop an effective go-to-market strategy for their service offerings can achieve significant benefits in the shortest possible time. Leading companies increased annual service business revenue by 20-30% in three years due to the refinement of the sales approach. And besides, we managed to increase service revenue for individual products by two or three times during their life cycle.

Refine the strategy for bringing service offerings to market