Manufacturing is progressively evolving from traditional commodities production and distribution to a servitization model, in which enterprises offer results and services based on products rather than the items themselves. Though very beneficial, the road to servitization is demanding.
It requires producers to reconsider their design, production, and distribution of products, as well as how to monetize services related to them. In this article, we will look at what is servitization, the benefits, the challenges, and the best practices when shifting to a servitization model.
What is Servitization?
Servitization in any industry, including manufacturing, pushes businesses to center their efforts on their customers, prioritize their requirements and aspirations, and prepare their internal processes to deliver a full field service offering. In simple terms, servitization refers to the process of transitioning from product sales to service delivery.
The service component becomes increasingly significant in company structures. Maintenance and logistics services are becoming more closely linked to and integrated with manufacturing items. The servitization process emphasizes relationships with clients over product sales.
The Three Levels of Servitization
A business that wants to become fully serviced must offer some sort of service in addition to its goods. Various degrees of servitization are available depending on the product type, technology utilized, etc. These, in particular, include:
Basic Services
Basic services consist of merely providing installation services for the technology or items and allowing the client to handle it from there, effectively performing the bare minimum. At this point, the client is unlikely to actually address the problem.
Intermediate Services
Intermediate services include equipment maintenance, updating non-functioning equipment, and providing a customer care line for consumer inquiries. This level of service provides a higher possibility of fixing the issue.
Advanced Services
Advanced services include proactively monitoring the consumer for technical and hidden personal challenges and responding with inventive, suitable solutions, such as advanced product training, to assure complete success. The company may also provide unique contracts with hybrid equipment/service pricing models.
Major Challenges of Servitization
Implementing a new culture and adjusting a company’s goals does not happen quickly. Servitization requires time and dedication. When preparing to make service a more central component of business, producers can expect to face the following challenges:
Internal Change
Old habits are difficult to break, and this is especially true when transitioning to something new at work. Asking professionals who have done their jobs in the same manner for a long time to embrace new ways might be difficult, but when demonstrated with the benefits of servitization and room for greater interpersonal skills in their everyday employment, changing the work culture becomes much simpler.
Prioritizing Service
The transition from product-focused to service-dominant company models requires time, effort, and retraining. While high-quality service is the norm in today’s industry, well-executed enhanced servitization provides businesses with a significant competitive advantage.
Changes in Corporate Structure
As field service takes center stage, leaders in that area will become more active and emphasized. While not always the case, this may need reorganizing the organizational hierarchy, which may raise issues.
Benefits of Servitization
Cost will always be an issue for your clients, but it is not the only one. Servitization enables you to sell your clients on value rather than price, allowing you to market outcome-based benefits such as:
Increased Profitability
When service is central to your company strategy, field service revenue generating becomes a consistent source of cash. As field service representatives spend more time with clients learning about their pain points and operational requirements, they will be better able to help and give solutions. Field service team members will then be able to identify chances for upselling, cross-selling, extended contracts, and other revenue streams.
They will also be able to generate leads for your organization since they can continually surprise and please consumers in the field, therefore enhancing your company’s reputation and overall customer happiness. When you boost customer happiness, you improve client retention, similar to a domino effect.
Lead Generation Program
Incentivizing your field service staff is an excellent method to expand the quality and range of your service offerings. Many manufacturers provide bonuses to field service technicians that enhance sales in the field and contribute to the company’s revenue growth. Incentives and other techniques must be structured in such a manner that they align with your company’s present engineering services culture.
Opportunity to Upsell
Your service staff has a unique opportunity to establish themselves as valued business partners with your clients. When a consumer meets with a service representative, they believe that the representative’s sole purpose is to resolve their issue. After receiving the necessary training, service technicians are able to establish connections with clients and use their interpersonal skills to hunt for and take advantage of opportunities to be of assistance and bring in additional revenue.
Best Practices When Shifting to a Servitization Model
Transitioning to a servitization model may be more efficient when manufacturers follow certain servitization best practices, such as:
Invest in a Training Program
Adopting a new model necessitates acquiring new procedures and abilities. Companies that engage in a program focused on field service and customer relationships may simplify all training processes as well as the field service staff.
Adopt Service Technology
As previously said, technology is essential to provide field service on the level that today’s consumers expect. Technology can also provide your staff with new tools and insights that they have never had before.
Study Your Customer
Knowing your customer’s demands, pain points, priorities, and operating methods can assist any servitization endeavor in succeeding. Field service technicians should devote the necessary time and resources to learning more about their clients so that they may improve in the areas that are most important to them.
Current Trends in Servitization
Servitization is a business strategy in which businesses offer services and solutions instead of only products as their primary focus. The field of servitization is being shaped by several trends, such as:
Transition Towards Outcome-Based Models
Rather than marketing particular goods or services, businesses are concentrating on providing customers with value and the intended results. Offering performance-based contracts, in which clients pay according to results attained rather than goods or services rendered, is one way to do this.
Using Cutting-Edge Technologies
Organizations are utilizing technology such as data analytics, artificial intelligence (AI), and the Internet of Things (IoT) to collect data, track performance, and improve service delivery. To improve the entire customer experience, these technologies provide predictive analytics, remote monitoring, and proactive maintenance.
What are the Applications of Servitization?
Applications for servitization may be found in many different areas and companies. Here are a few instances:
Manufacturing
Manufacturers can now provide extra services like installation, upkeep, repairs, and upgrades along with their products, thanks to servitization. With service agreements and subscriptions, this business model helps manufacturers create enduring relationships with consumers, raise customer satisfaction levels, and create recurring income streams.
Technology
In the technology sector, servitization provides Software-as-a-Service (SaaS) or cloud-based services in addition to physical products. With this method, users can access and utilize software or apps without having to buy and manage their own infrastructure. In order to fulfill client requests, it also enables technology businesses to update and alter their solutions more quickly.
Conclusion
Advanced technology enables the development of servitization models that can drive significant differentiation and growth. The transformation model offers the manufacturing industry a new path to increase productivity and quality through digitalization and servitization. Manufacturers cannot afford to ignore the new forces that come with change, and if they fall behind on transformative advancements, their businesses may face immediate annihilation. Thus, the ability to use digital technologies and servitization is essential in addressing the urgent problem of high-quality business development.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.
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