How is IoT Catalyzing Revenue for Aftermarket Services?

By Editorial Team | Published On August 24, 2021 | Last Updated On September 3, 2021

Deep tech and automation are building connected aftermarket services that drive revenue. Follow this blog to get deep insights into this trend.

Introduction

The global manufacturing and supply chain industry is going through a rough patch with several compliance, modernization, policy, and regulatory challenges creeping up each day. With the COVID-19 pandemic hitting economies hard and stalling the supply chain and logistics sector, the last 18 months have been particularly unsettling. An IDC survey conducted in 2019 found that expanding to newer markets is the biggest challenge that the manufacturing and supply chain industry regularly faces.

However, mitigating the above economic risks and creating new avenues for revenue will be possible if manufacturers consider the importance of connected aftermarket services. Research conducted by McKinsey & Company found out that the Earnings Before Interest and Taxes (EBIT) were 25% for aftermarket services while it was just 10% for brand new equipment. Another survey conducted by Pega termed ‘Global Automotive Customer Expectations for Aftermarket Services’ presented compelling data that concluded that consumers prefer unaffiliated aftermarket service providers who are not related to any brands they own.

These statistics highlight the importance of aftermarket services and how Original Equipment Manufacturers (OEMs) can strengthen their aftermarket services to drive revenue growth. One of the best ways to do this is by employing the massive machine database from automation and the newly emerging deep tech.

What Are Aftermarket Services?

Any service that is dished out apart from the finished product to the consumers can be considered aftermarket services. These include the various parts, logistics support for the original product, maintenance plan, and parts-management services. Industrial manufacturers have understood the importance of aftermarket services and should target their consumers based on their tendency to avail of them. It is one of the best ways to drive their revenue.

Why Are Aftermarket Services in Focus for Revenue Growth?

The manufacturing industry was hit hard by the global pandemic in 2020. As it stands, the sales of new equipment are encountering a slump. In this scenario, competition-building companies can look towards new avenues to address customer retention issues and reap a healthy financial bottom line.

Aftermarket services act as one of the most prominent ways to build revenue and address profitability challenges for companies, thereby leading to an entirely new area of innovation. Automotive and electronics are important aftermarket services industries that have flourished, with a prospective CAGR of 3% and 3.77%, respectively, in the focus period of 2021 to 2026.

The profitability through services has contributed nearly 45% to the growth of manufacturing and production companies. These statistics emphasize the need for improved service scalability. That said, automation and increased attention to machine data are essential to create connected aftermarket services that monitor, control, and optimize assets throughout the entire value chain.

How Are IoT and Machine Data Relevant in Creating Connected Aftermarket Services to Drive Revenue Growth?

Although the aftermarket services generally imply the standard services, parts, accessories, warranties, and recall events, there is the growth of a whole new division in this existing field. This division talks about robust revenue-generating ‘As-a-Service’ offerings amplified with the proliferation of the Internet of Things (IoT).

The IoT is helping manufacturers develop connected products and thereby creating the best aftermarket opportunities. If the customers own and use always-connected products, they will also be offered always-connected services, including:

  • Proactive, preemptive, and predictive service events 
  • Recalls
  • Field service 
  • Warranties 
  • Consumer apps and 
  • Loyalty programs

All of these will be triggered by the connected product data.

And the only way manufacturers will successfully pull these off is by collecting new data, linking to existing data sources, and combining customer and product data. It will help them understand the needs of B2B customers and consumers and act on their analyses to fulfill such needs. Hence, machine data plays a crucial role in driving revenue growth by bolstering aftermarket services.

The Importance of Connected Assets

Connected assets enable the following critical advantages.

Remote service opportunities

It is one of the essential criteria that provide rapid ROI without drastically refurbishing the entire value chain. With products enhanced by sensors that track performance and lifecycle, the field technicians and customer service agents can seamlessly access asset information.

The result involves:

  • Faster solutions.
  • A reduction in equipment downtime.
  • An increase in customer loyalty.

The knowledge of the composition of connected equipment and their performance against standard expected metrics provides the chance to cross-sell/upsell, thereby acting as an additional revenue generation stream.

The edge of analytics

Analytics from connected systems enables seamless and informed data-driven decisions, including:

  • Predictive maintenance in the form of service visits and potential failure alerts. 
  • Real-time information on product usage. 
  • An opportunity to integrate business systems like parts ordering, asset tracking, customer support, fleet management, warranty claim management, and optimize them using IoT. 
  • Enhancement of additional product value quickly and at a lower cost through software upgrades of the connected systems. 

Therefore, connected systems offer the ability to transform customer experiences.

Immediate Revenue Benefits With Connected Systems for Aftermarket Services

Aftermarket services bolstered by IoT and supercharged with data collected from connected systems already show revenue benefits in the following business areas.

  • Reducing warranty costs 
  • Monitoring operating conditions to establish genuine warranty claims and arresting false claims
  • Offering better insights into the performance of equipment and thereby improving design
  • Reducing inventory costs with insights into potential failures 
  • Equipping the field technician with relevant information on equipment configuration, performance, and usage and thereby reducing service costs 
  • Improving the first-time fix rates 
  • Decreasing unplanned equipment downtime and reducing travel costs

Final Thoughts

Automotive OEMs like GM have already been demonstrating the value they are earning with the help of connected aftermarket services. GM’s OnStar operations make use of a centralized and automated decisioning solution to help them take the most appropriate action after analyzing the context of customer inquiries.

Thus, it can be inferred that harnessing technologies like IoT can help manufacturers reap the maximum gains from aftermarket services. Machine data never lies, and therefore, using this capability to obtain the correct information always delivers a competitive edge. Companies can now strengthen their quick decision-making capabilities and use proactive insight-based engagement to drive customer loyalty and revenue growth.