Many manufacturers are finding it increasingly difficult to improve their financial performance. At the same time they are getting decreasing returns from their cost reduction initiatives, they are being buffeted by powerful market forces-growing customer expectation, rapid product commoditization, and global competition.
However, manufacturers do have an overlooked asset they can leverage to overcome these challenges: their post-sale service business. Long considered a second-class corporate citizen by many, service businesses are finally being recognized for the valuable contribution they make to the bottom line. Recent studies have shown that a manufacturer gets up to 40 percent of its revenues and more than 50 percent of its profits from services.
Leading manufacturers are now realizing an important fact about their service businesses—customers spend a great deal more on services for a product than they do on its initial purchase. Industry experts have analyzed the total revenue generated by a complex manufactured good over its useful lifespan and found that up to 90 percent comes from services and service-related products, not its initial sale.
To capitalize on this financial opportunity, manufacturers must work to improve the internal perceptions they have about their service business. They must also better understand the critical role service plays in delivering value to their customers.
This white paper explores the growing importance of post-sale service to manufacturers and the steps manufacturers must take–and the investments they must make–to revitalize their service businesses.
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