As we end 2024, aftermarket service sales have become a critical focus for manufacturers seeking to enhance revenue, build meaningful customer relationships and stay competitive. Economic pressures, evolving customer demands, and technological advancements are reshaping the role of aftermarket services. Here are the top five reasons why aftermarket sales matter more than ever for manufacturers today.  

1. Economic Shifts Favoring Maintenance Over New Purchases

With high inflation and rising interest rates, many companies are delaying major capital investments, opting instead to extend the life of their existing equipment. Manufacturers are meeting this need by focusing on aftermarket services like maintenance and upgrades, allowing customers to avoid the financial strain of new purchases. By pivoting to aftermarket services, manufacturers can adapt to a market that prioritizes maintenance over new purchases, positioning themselves as essential partners in helping customers maximize the value of their existing equipment.

2. Higher Margins for Long-Term Profitability

Aftermarket services offer financial benefits that often surpass those of new product sales. According to Deloitte, aftermarket services contribute an average of 25-30% of manufacturers’ revenue but represent over 50% of profits due to significantly higher margins.  Additionally, McKinsey research shows that companies with a strong aftermarket focus can see profit margins up to ten times higher than those relying on new equipment sales alone. This margin advantage makes aftermarket sales a crucial part of a sustainable, profitable business model.

3. Growth Potential in a Booming Market

The aftermarket sector is experiencing rapid growth.  This booming market presents manufacturers with fresh opportunities to expand their services portfolio. With higher margins and customer demand increasing, aftermarket services are an attractive and reliable revenue stream across various manufacturing sectors. As business face increased competition, those who leverage aftermarket services will find themselves in new opportunities to capitalize on the expanding market. 

4. Strengthening Customer Relationships through Regular Interactions

Aftermarket services provide manufacturers with ongoing touchpoints with their customers, enabling them to build and maintain strong relationships. Ongoing service interactions allow manufacturers to understand customers’ evolving needs, offer personalized recommendations, and increase long-term loyalty. A report from the Service Council indicates that companies focusing on service achieve 25-30% higher customer retention rates, with repeat customers contributing significantly to long-term revenue. Through tailored services, manufacturers can turn one-time buyers into long-term partners.

5. Aligning with Sustainability and Market Trends

As sustainability becomes a priority, aftermarket services align with market demands for eco-friendly practices. By maintaining and refurbishing existing equipment, manufacturers contribute to reduced waste and promote sustainable practices—a factor that appeals to environmentally conscious consumers. Additionally, with the rise of electric and hybrid vehicles, specialized maintenance and support services are becoming essential, presenting new growth opportunities for manufacturers.  

Tacton: Empower Manufacturers to Succeed with Aftermarket Sales 

Today’s manufacturers face mounting pressure to create lasting value beyond the initial sale. With Tacton’s upcoming Service Sales solution, manufacturers will soon be able to offer both products and services within a single, unified Configure, Price, Quote platform. By integrating service options like maintenance, spare parts, consumables, and training, Tacton empowers sales teams to unlock new aftermarket revenue streams, increase customer retention, and improve profitability. Through seamless quoting of both products and services in one system, manufacturers can enhance revenue, protect service margins, and build deeper customer relationships. Stay tuned for how Tacton will transform aftermarket offerings into powerful, long-term revenue streams for sustained success. 

 

In the realm of complex manufacturing, various terms and concepts shape the sales landscape and play a pivotal role in helping business leaders understand how to drive efficiency, enhance customer satisfaction, and ignite the sales process. Among those, Configure Price Quote (CPQ) software stands out as one of the most vital tools for streamlining sales processes and elevating buyer experience. CPQ software automates the configuration, pricing, and quoting process, enabling sales organizations to provide accurate quotes tailored to customer needs swiftly. Below we share several terms that define the next phase of efficiency and innovation within manufacturing sales. But first, a look at some of the enabling technology that improves the production process, sales process, and the buyer experience for new and existing customers. 

Understanding the Role of CPQ Software for Complex Manufacturing Sales 

Complex manufacturing involves the creation of highly customized products that involve multiple parts, processes, and raw materials. CPQ is one of the most crucial technologies for automating the configuration, pricing, and quoting process, enabling the sales team to streamline their processes and improve buyer satisfaction. In industries such as manufacturing, where product part combinations can number in the billions, CPQ is essential for streamlining customer relationship management, sales processes, and improving buyer satisfaction. 

CPQ software is particularly useful for complex manufacturing sales, where products are highly customized and have multiple components. By automating the sales process, CPQ software can help sales teams quickly and accurately configure products, calculate prices, and generate quotes. This automation is crucial in complex discrete manufacturing, where the sheer number of product combinations can be overwhelming. CPQ software simplifies this complexity, ensuring that sales teams can provide precise and timely quotes, enhancing the overall customer experience and increasing sales. 

Other Terms Customer Success and Sales Team Should Know in Complex Manufacturing 

Supply Chain Management: 

Focuses on the flow of goods and services, including all processes that transform raw materials into final products. Manufacturing operations management (MOM) is the comprehensive process of supervising all tasks involved in manufacturing. In complex manufacturing, effective supply chain management is vital to ensure all components arrive on time, minimizing production delays.  

Smart Manufacturing: 

Integrates advanced technologies – such as loT, AI and automation – to create more efficient and responsive manufacturing processes. A buyer-centric smart factory emphasizes customization and the ability to respond quickly to unique customer needs. By adopting smart manufacturing techniques, companies can improve product quality, reduce costs and adapt quickly to customer demands.  

Quality Control and Assurance: 

Ensures products meet required specifications and standards before they reach the customer. The production process is crucial in ensuring quality control and efficiency to maintain customer satisfaction and brand reputation. 

Sustainability in Manufacturing: 

Focuses on eco-friendly practices and reducing the environmental impact of manufacturing processes. Adopting sustainable practices can help companies appeal to environmentally conscious buyers while also contributing to long-term cost savings and regulatory compliance.  

Sales Automation: 

Tools and techniques to enhance the sales process, including lead management and follow-ups. Sales automation allows teams to focus on high-value interactions instead of tedious tasks, which accelerates the sales process and overall efficiency.  

Product Configuration: 

The process of defining and customizing products based on customer specifications. In complex manufacturing, CPQ software enables customers and sales teams to design highly tailored solutions, efficiently.  

Pricing Strategies: 

Techniques for setting prices that reflect market conditions and customer demand. When products are customized, automating the pricing process and ensuring each quote accurate reflects the cost of selections, applicable discounts and any customer-specific pricing terms not only speeds up the quoting process, but also maintains profitability.  

Quoting Process: 

The steps involved in generating accurate quotes for customers. An efficient quoting process, especially through CPQ software, enables sales teams to quickly provide pricing that reflects product configurations and customer needs. 

Integration with CRM: 

The ability of CPQ software to integrate with Customer Relationship Management systems for improved data flow. 

Guided Selling: 

A feature in CPQ systems that helps a sales team recommend products based on customer needs to enhance the customer experience 

Analytics and Reporting: 

Tools for tracking sales cycle performance and generating reports on quoting activities. 

Customization Options: 

Features that allow customers to tailor products to their specific requirements. 

Contract Management: 

The process of managing contracts associated with quotes and sales cycle. Efficient contract management ensures transparency and helps avoid errors or delays in finalizing deals 

Sales Call: 

The involvement of Subject Matter Experts (SMEs) in sales calls can enhance the value delivered to customers by providing critical technical insights and problem-solving capabilities. 

Contract Acronyms: 

TCV = Total Contract Value 

ACV = Annual Contract value 

SV = Subscription Value 

PV = Period Value 

OTC = One-Time Charge 

MRR = Monthly Recurring Revenue 

ARR = Annual Recurring Revenue 

TCO = Total Cost of Ownership 

Total Contract Value (TCV): Total Contract Value or TCV is the total value of all subscriptions over the length of a contract. 

Annual Contract Value (ACV): Annual Contract Value or ACV is the value per year within a contract. For a 1-year contract, the ACV is the same as the TCV. The TCV is the sum of all ACVs. The ACV is not the TCV ”Number of contract years” since all One-Time Charges (OTC) will be part of the Year 1 ACV and that over the contract length, different periods can be present. 

Subscription Value (SV): The total value of one subscription, including all Recurring Charges and One-Time Charges. 

Period Value (PV): The total value of recurring prices, including discounts for a given period. 

One Time Charge (OTC): One-Time Charges are charges that will be billed on one single occasion at the start of a subscription. 

Monthly Recurring Revenue (MRR): Monthly recurring revenue (MRR) is the revenue that this contract will have on a monthly recurring basis. 

Annual Recurring Revenue (ARR): Annual recurring revenue (ARR) is the revenue that this contract will have on an annual recurring basis. 

Equipment as a Service (EaaS): Equipment as a service (EaaS) is a model where the producer of a product rents out equipment to end-users while collecting payments on a monthly or yearly basis for the usage of the product. 

Meet Customer Needs, Build Accurate Quotes, And Improve Sales Processes 

Understanding key terms and concepts is crucial for driving efficiency, enhancing customer satisfaction, and boosting sales. CPQ technology stands out as a vital tool for automating processes and customizing quotes swiftly, especially in industries where products are highly customized. Additional areas such as Supply Chain Management, Smart Manufacturing, and Quality Control are essential in ensuring smooth operations and maintaining product quality. By ensuring your entire team understands these key terms and embraces the technologies that improve the sales process, businesses can stay ahead of the curve, deliver exceptional customer experiences, and increase sales in the competitive landscape of complex manufacturing sales.