The Customer Journey in Industrial Equipment

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TSIA Art & Science_blog-series_Industrial Equipment.pngSmart, connected products and smart services have had a major impact on the world, not only in the way businesses are run, but also to the customer journey over the whole customer lifecycle. As part of TSIA's research initiatives, we track the latest industry trends affecting the industrial equipment (IE) sector, which includes automation technology, instruments and components, and solution providers leveraging industrial equipment. In this post, I’m going to be sharing how these changes to the customer journey, brought about by the increasing adoption of smart technological capabilities, are playing a part in the industrial equipment sector.

The New Reality

First, I’d like to provide a bit of background into what is causing this disruption:

  • Shrinking margins. TSIA’s Industrial Equipment 40 Index, which tracks 40 IE companies, is showing shrinking product and service margins while the pressure on overall revenues is increasing.
  • More responsibilities for suppliers. This results in an increase of buyer power and customers asking their vendors to take over more risks and to provide adoption and operational services. Instead of investing in assets (CapEx-model) customers want to use products as a service (OpEx-model) which is increasing the supplier responsibility zone.

Supplier responsibility zone then and now.png

(Click image to enlarge).
Today, suppliers are expected to take responsibility for more than just making and selling great products, but also helping their customers achieved their desired outcomes with their purchase through a variety of hands-on activities.

  • The rise of IoT. More of today’s products are smart, connected, and embedded in complex systems. This creates the opportunity to collect a mass of data and to provide digital values for customers. TSIA has created the digital value chain to guide you in building digital offers, which you can read more about in our free ebook, “Why Services is the big IoT Opportunity for Hardware Manufacturers.”

TSIA digital value chain.png

(Click image to enlarge).
TSIA's digital value chain.
Source: “Why Services is the big IoT Opportunity for Hardware Manufacturers,” an ebook by
TSIA’s Vele Galovski and Harald Kopp.

Services have been human-centric and dominated by personal interactions in the past. Now, services are shifting dramatically towards more efficient service channels and customers are preferring to receive tech-assisted help. While this creates opportunities to include this assistance in premium contracts on one site, there is unfortunately a threat to lose customer intimacy through diminishing opportunities for personal interaction.

To face these challenges, suppliers are shifting their primary focus away from servicing their products towards helping customers to achieve their desired business outcomes.

Changes to the Customer Journey

Enhancing the traditional “Make. Sell. Ship.” business model with the addition of “Own. Operate. Get Outcome” changes the customer journey over the whole customer lifecycle. Let’s analyze these changes along TSIA’s LAER model (Land, Adopt, Expand, and Renew).

TSIA LAER model.png

(Click image to enlarge).
The four stages of TSIA's LAER model.

When analyzing the stages of the LAER model, it is important to note that the traditional plays will not disappear, they merely need to be enhanced by new activities which will require your organization to build adjacent capabilities.

Land

All the sales and marketing activities required to land the first sale of a solution to a new customer, and the initial implementation of that solution.”

The traditional play is to sell products, providing commissioning services (the services to build up equipment and help customers to get the desired output, also known as "implementation services"), and attaching maintenance contracts for on-site and remote services. This prevents manufacturers from providing services for free and customers expecting to get everything on warranty.

Today, IE companies want to attach analytic-based services with the initial product deal. To achieve this, Service Sales need to be involved in the initial deal to show the value of smart, connected products/smart services and to build trust to motivate customers to get connected and share data. This is about making the move from selling features towards selling values like asset availability or higher output. Finally, Sales needs to show the contribution to increase customers’ revenues, lower costs, or mitigate risks.

Adopt

“All the activities involved in making sure the customer is successfully adopting and expanding their use of the products or solutions.”

The traditional play for suppliers is to focus on the products. IE companies are very experienced in selling upgrades and training and consulting to modernize the equipment and increase customers' skill in the usage of the products.

Today, equipment is being connected to the Edge to the Cloud. Products are embedded in customers’ operational system and are connected with other devices and machines (M2M communication), as well as with technology suppliers to enable remote services. To optimize the usage of these assets, technology suppliers need to enhance their focus on the processes and the ecosystem in which the equipment is embedded.

As the software and analytics part of equipment is increasing, IE companies need to monetize these services and include them in support contracts, especially software maintenance and upgrades which can be included in service offers.

This creates opportunities to provide and monetize adoption services. Examples of these adoption offers include consumption and predictive analytics, process optimization, and asset management.

MonetizationExamples.png

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Examples of adoption services that you can easily monetize.
“Why Services is the big IoT Opportunity for Hardware Manufacturers.”

Expand

All the activities required to cost-effectively help current customers expand their spending as usage increases, including both cross-selling and upselling.”

The traditional play for IE companies is to leverage customers and the installed base to service and replace old equipment and to sell additional products to existing accounts. Existing customers are an opportunity to upsell contracts to higher service levels, and it’s common practice to use field service and support engineers to create leads for upselling and cross-selling. Service Sales is using them to create additional revenue streams with existing accounts.

Today’s focus on helping customers achieve specific outcomes and the capabilities of consumption and customer experience analytics are creating opportunities for one-to-one marketing and providing customers with tailor-made solutions and offers, such as spare and replacement parts, new or adjusted contract features, training recommendations, or software upgrades.

Those IE companies offering information services and software solutions, or even IoT platforms, are using their accounts to connect and service both their own products as well as third-party products. This way, Services helps customers to manage and improve their processes and decision making across the board, which also creates huge opportunities to expand the business with existing accounts. 

Renew

All the activities required to ensure the customer renews their contract(s) and repurchases your product and solutions.”

In the traditional play, it's best practice is to have defined renewal processes and dedicated renewal specialists in place. Especially for IE, this ensures high renewal rates as well as reliable and predictable revenue streams. But, this requires investments in skills and resources.

Today, consumption and customer experience analytics offer the opportunity to address the customers at the right time with the best offer to ensure their renewal is tech-assisted or at least partially automated. The renewal phase is strongly linked with the adoption phase and your customers’ success in using your products and solutions. In short, the more successful your adoption services and expansion activities are, the higher the stickiness of your customers to your solutions and your renewal rates.

Learn More About the Impact of a Changing Customer Journey

The rise of smart, connected products and the penetration of IoT is creating new opportunities to design the customer journey and increase the business over the lifecycle of an account. We’ll be talking more about changes in the customer journey as it relates to industrial equipment, field services, service revenue generation, analytics, and even more facets of the technology and services industry at our upcoming TSW conference this October, which has the theme of “Art and Science of the Customer Journey.” Be sure to register and catch great keynotes and sessions that will give you the best insight on how you and your organization can design and deliver a better customer experience that is profitable, not just for you, but for your customers as well.

In the meantime, be sure to check out more installments in this “Art and Science of the Customer Journey” blog series for a preview of what you can expect to learn, contributed by the TSIA research team in their respective research areas. As always, thanks for reading, and if you have any questions, feel free to leave me a note in the comments below or email me at [email protected].

Read more posts in the "Art and Science of the Customer Journey" blog series:

About the Author 

Harald-Kopp_new Prof. Harald Kopp is TSIA's director of industrial services research, as well as a teacher in a MBA program for sales and service engineering at Furtwangen University, Germany. His focus is chiefly on services in industrial automation, equipment, instruments and technology companies. He has 20 years of experience in the areas of research, consulting and management in industrial services, supply chain management, and IT-Management in industrial equipment, automotive and enterprise IT industries. He may be reached at [email protected].

 the state of services for industrial equipment manufacturers

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Topics: industrial equipment, internet of things (IoT), smart, connected products, smart services, Art and Science of the Customer Journey

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