Businesses spend over $2T annually on maintenance and operating supplies for the equipment they own. OEMS get a small share of this spend. This “Entitlement”, or wallet share gap, arises from an inability to truly understand how the installed base of customers is operating their equipment.
It is not easy; with thousands of customers that are different from one another, operating equipment with hundreds of components, tracking wear and failure rates of different BoM components is nearly impossible. Most manufacturers we’ve spoken with in the past year admit to having a poor idea of the “Duty Cycle” of the equipment they make. A few large, sophisticated companies have invested in understanding this metric, but it takes significant investment of time and resources to get it right. Millions of dollars, to be exact.
Not every manufacturer can afford this level of investment, and so they resort to generic recommendations: “change filters every 6 months”, or “replace pump impellers every 7 years”. The problem with this approach is only a small percentage of the installed base has a duty cycle that matches with these recommendations. For most, these durations are either too short, or too long. For the latter category, the cost of misestimation is an impact on sales/service productivity for the manufacturers. For the former, it could be catastrophic when a customer needs a replacement part, or operating supplies, she will reach out to the most convenient vendor to satisfy this demand. Which means “perishable revenue” for the manufacturer.
All is not lost for OEMs. Here are 3 immediate steps to take
1. Really understand your customers
It is too easy to simply “ship and forget”, but asking your sales, service and customer service reps to understand the customer use case can pay dividends. Keep track of these in your CRM, or other databases accessible by everyone in the company.
2. Consolidate all interaction data into one place
A single source of truth is hard to create, but the investment can be worthwhile, and magical in unlocking productivity and insights about customer behavior.
3. Segment your installed base
There are insights buried in customer data, but requires careful segmentation by use case, type of equipment, geography etc. When complete, groups of customers demonstrate similar replacement and consumption patterns. This can be used to predict and then prescribe, sales and service actions to capture wallet share.