The Metal Benders Will Steal Your Customers

If you ask equipment manufacturers (metal benders), they will claim that your customers are technically their customers.  What’s changing now is that they want to have their customers pay them for maintenance and repair services instead of you.  

I am, of course, speaking about how manufacturers are increasingly embracing the service business as the next leg of profit to be mined in the market.  The days of distribution channel loyalty are gone.  Prepare to do battle with the well capitalized companies that you used to call “partners.”  Where is the evidence that the drums of a channel war are beating?  Consider these two recent news stories:

GE Buys ServiceMax for $915M

GE just spent almost a billion dollars to buy a software company that specializes in technology for service delivery.  The price tag for that purchase was an estimated 15-times ServiceMax’s current revenue.  GE REALLY WANTED THIS TECHNOLOGY to pay that kind of price.  Note that ServiceMax is built on top of Salesforce’s CRM platform, NOT AN ACCOUNTING APPLICATION.  GE’s aggressive activity in the market says that customer service and sales are the new battlegrounds for manufacturer competitiveness.  They want to control the entire customer experience from initial consideration of their equipment through the maintenance and repair cycle and then finally the upgrade and replacement at end of life.  ServiceMax helps them deliver on this promise with great efficiency and customer visibility.

Boeing Hires GE Exec to Focus on Service

GE was in the news again because Boeing has hired a GE exec from the GE Aircraft Engine business to run the Boeing Commercial Airplane Group (CAG).  Kevin McAllister was selected as the new CEO of Boeing CAG because he specializes in monetizing “after the sale” services for maintenance and repair.  At GE, they sold a program to the airlines that delivered jet engine maintenance and repair for a fixed fee based upon the number of hours on the engines.  That program was just what the airline operators wanted – a no hassle, no risk, fixed cost plan sold by an expert in jet engine technology.  Now, Kevin is heading to Boeing to concentrate on the same type of program for commercial aircraft.

So why are the manufacturers so interested in service these days?  Because lifetime value of the customer is everything, and service is easier than ever to deliver because of technology.  Historically, service was hard because it was unpredictable, and it was not possible to be everywhere the customer needed you to be at one time.  Now, with advanced instrumentation and the Internet, the manufacturers can “see” what is happening in order to better manage a service delivery plan.  Also, customers have come to understand that the company responsible for service needs to be the one with all of the data required to do the service right, and it really doesn’t matter who employs the technician that shows up to turn the wrenches so long as the owners of the data give him good instructions.  Manufacturers can build an enduring ownership bond with the customer throughout the product lifecycle to earn a premium on their stock value.  Check out chapter 5 in my book, The Digital Wrap, about how Tesla has become the envy of the manufacturing world because of this dynamic.

So what are you going to do when the metal benders come after your customers?  Are you just going to hand over the relationship and the data so that you can become the labor bureau and the truck depot for their profit machine?  Or are you going to seek more data and more technology so that you can become the trusted advisor to the customer?  The advisor that informs them of the failure modes of each type of equipment and teaches them how to negotiate with the manufacturers at arm’s length to get the best equipment deal?  The advisor that implements the best customer service technology and sells the best program for hassle-free and risk-free maintenance and repairs?

The great news about the metal benders is that they are still metal benders, and they would struggle to spell customer service if you gave it to them in an anagram.  It will take some time for software applications and technology to overcome their metal bender cultural habits.  The bad news is that they have LOTS of capital, and while they are “figuring it out,” it may still cost you lots of pain and profits if you don’t have a better program.  

Here are my tips for preparing to win the battle for customer loyalty:

1. Focus on technology for customer service and sales, NOT OPTIMIZATION OF YOUR ACCOUNTING FUNCTION!  Your perfect back office process is perfectly irrelevant to a customer looking to eliminate risk and hassles.  Stop looking to the accounting application providers to solve your customer service and sales challenges.

2. Systematically collect customer connections.  Every interaction with a customer should result in an email address and a mobile phone number.  These can be used to connect the customer with the information you generate to demonstrate your value.

3. Innovate in programs for service management.  These innovations can be data collection and mining for predictive service, warranties you sell to those that enter your premium maintenance tier, system monitoring services, fixed price payment plans, or whatever application of technology and business process to limit risk and hassle for both you and the equipment owner.

4. Diversify your expertise across as many manufacturers and brands as you can credibly support.  You want to be in the position of the trusted advisor to the customer, and knowledge is power in this position.  You also want to have credible data and experiences to back up your representations to the customer.

5. Stop concerning yourself with parts margin and instead focus on total margin per applied labor hour.  Parts are not going to be in short supply, but skilled labor will be precious.  Lower your inventory carrying costs by setting up fast response partnerships and technology connections to the best parts suppliers.  Focus on speed and proactive service with the customer, not parts margin.

6. Begin experimenting with non-proprietary, independent monitoring and controls solutions that you can apply across equipment brands.  Use these to build data that leads to credible recommendations and solutions for the customer.

This cultural shift to an information-based service approach with lots of online connections to your customers and their equipment will place you in a position to be the valuable brand that the customer trusts with their important equipment purchases and maintenance programs.  The manufacturers are guaranteed to show up with proprietary solutions because of their metal bender culture.  If you are prepared, you can laugh all the way to the bank as they throw money at a problem that you have already solved.

Also read:

• Stop Selling Parts and Labor and Sell the Program
• Rise of the Machines in Service Industries