I am working with a client that designs, manufactures, installs and maintains complex equipment. Until now one of the key drivers for the business has been the number of pieces of equipment sold and hence once a sale is confirmed the sales people focus on the next opportunity. The business leaders are beginning to think about the commercial value of the assets installed in terms of selling value added services such as extended warranty, upgrades, training user on upgrades, advanced user training, offering consulting services etc.
I’m looking for case studies and exercises that will help the leadership team to start to appreciate the value that can be extracted from an installed based of equipment and how to go about it. Does anyone have anything or can point me to a useful source?
One Response
reverse the Total Cost of Ownership theory
Hi John
if you look up "Total Cost of Ownership" you see the matter from the other side……your client sells a bit of kit for say £10,000 (cost £6000, profit £4000) and don’t sell another one to that client for say 5 years.
In the intervening 5 years someone else is providing the consumables, regular service, repair and maintenance for that bit of kit for which they get paid £10,000 for delivering a serivce that costs them £4000
Who is making the most money from the client?
Who has the better cash flow?
Who is keeping their name in front of the client in the intervening period and therefore convincing the client to replace the old kit with their own or someone elses new kit?
Look at most franchised car dealerships…..is the money in selling new cars, or in servicing and repair? Answer: you don’t see many car dealerships that don’t do servicing and repair!
I know this is a bit simplistic but I think it makes the point.
I hope it helps
Rus