Many manufacturing companies are stuck in the situation where they sell their product to other companies, which then re-sell the product to the end customer. In many cases, the aftersales service is performed by the re-seller, leaving the manufacturer with a limited potential for growth as they do not realize any of the service revenue. Manufacturing companies must make the right selection of partners and set up service agreements that allow them to create a win-win situation and aim for a prosperous future.

Finding the Right Partner

A manufacturer’s need for partnership can occur because of a skills gap, technology gap, geographical limitations, or other business reasons. When creating a partnership, a policy and a common strategy need to be defined so that the collaboration is effective. In addition, you as the manufacturer need to make sure that your sales and distribution strategy is in line with your service strategy, so that the two can support and complement each other. After you do this internally you have to also make sure that your partner shares your strategy and ensure the sales and service departments of both companies are working towards a common goal and are promoting your services.

Define Your Offer

In order to enter the service business and create new potential for profitable growth, you first have to know the customer needs. You need to figure out a way to add value to the end-user either directly, or through your partners, or a combination of the two. In a reseller situation, you may need to work through your partner to find out the needs of your customers.

For example, a major manufacturing company of the printing industry identified the following needs within their customers:

  • Managing the machines and offering 24-hour service and support (remotely or locally)
  • Managing the use of paper
  • Distributing printed material

Based on these needs they were able to develop and offer services to the end user that were highly valued, thus creating new potentials for profitable growth.

Such services can be promoted directly by the manufacturer to the end customer or through the partner. For example, if you choose to offer a remote monitoring system it can be offered directly to the end customer, or through the partner who will then offer services to the end customer.

However, to be able to use your partners effectively you need to make sure that your partners are willing to invest in their people, so that they are capable of providing these services. You should be prepared to share your knowledge and provide help and support to your partners. Such a cooperation must be part of an agreement that creates a situation where both parties have something to gain. For example, you might agree that the partner works on commission and as the sales of the services increase then your profits also increase. Or you can agree that you handle the big customers and the partner deals with the smaller ones. You need to find ways of incentivizing your partners to become better service providers and service sales people.

Be Important to Your Partners

To avoid losing partners or risk having them become your competitors, you need to make sure that you remain important to them. Help them continue to develop by offering them training and make sure that they keep making a profit from this business. If this is not achieved then you may lose them, as well as the time and money you invested in training them. You could even end up competing with them.

An example of a partnership going well is that of a major white goods manufacturer, which has service partners all over the world. The company keeps educating and training its partners so that they are capable of fixing its machines and also provide the end user with advice on how best to use the machine. The partners follow the same strategy and standards as the manufacturer and is so intertwined with the company and the brand that the end customer can’t tell the difference between a manufacturer’s employee and the partner’s employee.

The risk in using your partners to deliver services on behalf of you is that you are not creating a relationship with the end customer. So, if the partnership fails you may also lose the customers. Going back to the white goods manufacturer, the value of the brand is what customers are looking for and this is the driving force that keeps customers loyal. In other words, you need to have a differentiator, a competitive advantage in order to be the orchestrator of the partnership.

Manufacturing companies need to enter the service business if they want to stand a chance in achieving profitable and sustainable growth. Such an endeavour can be if it is well planned from a strategic point of view and if the right agreements are put into place. If successful, it can empower partnerships and benefit all parties involved.

Noventum Service Management provides best practices, training, guidance and inspiration through our Service Transformation Centre and our Service Transformation Projects. Visit our website www.noventum.eu or contact us via info@noventum.eu or +31 297 566 241 for more information.

Annick Perry
Author

Senior Project Manager Noventum Service Management