Welcome to the WNS Business Insights Podcast series. I am Ramkumar, Vice President your host for today’s Podcast and I will be discussing a truly transformational offering from WNS, in the form of an After-sales Service solution, which manufacturers can use to outperform competition.
From our experience working with manufacturers, we know that service businesses related to the products usually bring in much more profits than the core products business itself.
After-sales service also provides benefits in the form of recurring revenue streams, provides new sources of differentiation and offers a new counter force to the commoditization in mature industries.
Hence, it is important for manufacturing companies to focus beyond just the sale of products they manufacture and to incorporate after-sales service as a core component of their business strategy.
However, check point… manufacturing companies have not been focusing on this so far. They have mostly chosen to focus on their core business and after-sales service has never truly been given its due as a key element of the sales strategy.
Times have changed, and so have buyers. Think about it… each time you decided to buy a car, what were the top three items that came to your mind? Brand, fuel efficiency and then… after-sales service. This is true of most industries today, particularly in the manufacturing industry.
After-sales service is an untapped goldmine, and in the past three decades, only a handful of global manufacturing leaders have recognized the opportunities that after-sales service provides, and re-looked at the way their businesses are structured. We see that even though over the years, the importance of having a strong service outlook has been slowly gaining traction in the manufacturing industry, companies have not been able to monetize the investments made.
At WNS, we recognize the five key challenges manufacturers face:
The first one relates to the value chain inefficiencies. It is a fact that the after-sales ecosystem is highly fragmented.
Though the after-sales value chain may seem to appear simple at first glance, in reality, it can be a highly complex network of parts and service providers that is difficult to monitor and manage. There may be thousands of parts in each product being supplied by hundreds of vendors. The complexity further increases, considering that the lifecycle for different parts varies. Some may need to be serviced for many decades, while others may need to be delivered to remote parts of the world, and at any time of the day. The nature of services itself is varied.
The second challenge comes from having a weak after-sales strategy. Manufacturers segment customers for their product requirements. But they seldom do basic market research to segment customers based on their service needs. This leads to inaccurate creation of the portfolio of services to take to the market. While after-sales profit margins can be very high, companies often struggle to achieve such margins due to an improper pricing strategy.
The third challenge is in execution. Most manufacturers struggle to provide services that are excellent and still cost-effective. This is mainly because of process inefficiencies and the inability to effectively leverage technology to attain service excellence.
The fourth challenge stems from giving a step-motherly treatment to the service business and from having a reactive service culture. In many companies, the service division does not enjoy the same privileges as the products division. Hence, working in after-sales services is not considered as attractive or prestigious. The picture that often comes to one's mind is that of a business suit clad sales person in an attractive car showroom vis-a-vis an overall clad service technician at a non-descript workshop.
Most service personnel are 'reactive' in their approach. They are trained to provide the services demanded or agreed upon but seldom proactively assess service needs and try to up-sell or cross-sell services.
The fifth challenge is poor governance. Many manufacturers do not have a senior management position responsible for running the after-sales business efficiently. Clear definition of roles and responsibilities is often missing. There is also not much clarity on the right metrics to monitor and drive continuous improvement.
So how can manufacturers overcome these challenges?
Manufacturers can get make their after-sales stronger by doing the following five things:
First and foremost, they should design the right portfolio of services based on the knowledge of the customers to be serviced and their needs. Arriving at the right mix of services involves a four-step process: 1) Segmenting the customers based on their service needs 2) Deciding the segments the manufacturer wants to focus on 3) Designing services that cater to the needs of these segments 4) Targeting the right segment with the right mix of services
Second, , they should price the services right. The key to doing this is to understand the different ways in which services can be priced, to select and to apply the appropriate ones for the set of service offerings chosen so that the needs of the target segment are met, while maintaining healthy margins.
Third,manufacturers need to manage contracts effectively. Monitoring contracts gives companies the insight on how and when to modify contract terms (for example change prices), so that the cost of the service to the company does not go up.
Fourth, and importantly is to have a well-orchestrated execution. This entails reducing the time taken to deliver a service, ensuring zero downtime and constantly upgrading the skills of service personnel to meet the expectations of customers. Service processes need to be standardized and aligned across the organization. It is also essential to change the mindset of field service personnel from a 'reactive' to a 'proactive' one. The personnel must be trained to not just reactively provide the service, but also be trained to proactively identify and sell services to the target segments. Fifth one is Governance. In order to run a thriving after-sales business, it is essential to accord after-sales business its due within the organization. Based on our experience, it also augurs well in most cases to have a separate business unit for after-sales service with its own P&L. It is necessary to make sure that the after-sales business leadership is kept at the same level as that of the product business.
It is prudent to define a Chief Service Officer (CSO) role to focus on creating and running the after-sales business efficiently. A clear marking of roles and responsibilities within the after-sales organization is also essential for achieving success. It is essential to establish key performance indicators to monitor the after-sales business. Performance must be benchmarked periodically to support efforts for continuous improvement. Information gathered from after-sales service can serve as early warning signal to identify product / part defects in time, which in turn helps to improve product quality and the manufacturing process. This however necessitates a good collaboration between the product and the service business.
The question is, given the present economic conditions, shouldn’t this be the key focus area for all manufacturer
Absolutely. Having a strong after-sales function means the world to a manufacturer. An efficient after-sales service with high ROI takes the heat off the products division that generally offers lower margins. We have seen in recent times that businesses that have invested in after-sales excellence have been able to survive periods of economic slowdown much better.