How to Grow Your Aftermarket Business by 50%
If yours is like many Original Equipment Manufacturing (OEM) organizations, your aftermarket product and service provisions represent an under-utilized gold mine, filled with unrealized potential to generate profits possibly exceeding those yielded by primary-product sales.
According to statistics published in The McKinsey Quarterly, for example, aftermarket parts sales for a piece of industrial equipment, marked up at 25%, can easily generate the same amount of profit over the equipment’s lifetime as was made from the original equipment sale (assuming a 15% margin on that sale).
Who wouldn’t want to continue generating revenue on a product after it has been sold? That was the easy question. A much tougher one is “how do we capitalize on our aftermarket sales and service potential?”
Some Simple First Steps to Aftermarket Growth
There are actually ways you can begin your journey to a 50% aftermarket business increase without overhauling your enterprise. You could try any of the following initiatives for example:
- Offer maintenance contracts
- Implement consignment part stocking at your larger customers
- Begin selling wear-part replacement kits
- Begin looking at your products as a “whole” and capture “all” the parts sold
All of these offerings should be relatively straightforward to bring to market, since they require no prototyping, product R&D, or engineering.
Leverage Technology to Enhance Customer Experience
Strengthening the customer centricity of your parts and service sales is another way to entice buyers away from third-party aftermarket providers and to encourage loyalty. This will typically mean introducing convenience factors into your aftermarket customers’ experience.
Leveraging an eCommerce platform, for example, not only provides your customers with the convenience of online purchasing at any time of day or night, but it also serves as an aftermarket sales outlet that doesn’t take breaks, sleep, or require more than a minimal amount of operational labor to support.
Aftermarket Growth Through Organizational Change
Once the low-hanging fruit is in a state of perpetual harvest, securing the full 50% aftermarket business increase will entail some organizational and cultural changes as well. The three areas most likely to require development are:
- People: It’s important, for instance, to avoid the mistake of jealously guarding the roles of your best people in the manufacturing environment. As previously mentioned, aftermarkets offer big profit potential, which in turn deserves the investiture of premium talent and team collaboration.
- Technology: In order to leverage optimally the talent of your brightest and best people, they should be supported by the smartest aftermarket sales and decision-support solutions, enhancing the capabilities of your staff to develop new offerings, upsell, cross-sell, and build strong customer relationships.
- Finance: With an investment of people and technology into your drive for aftermarket growth, it’s prudent to generate a sharp financial focus by providing the aftermarket business with a standalone budget, P&L, and leadership with assigned accountability.
Aftermarket Growth Starts with PartSpot
PartSpot from GenAlpha is your complete OEM aftermarket solution, integrating tools to drive decision making, bring convenience to your customers and streamline parts-inventory management. While it will be your people, their inspiration, and their ideas that drive your aftermarket growth to the 50% target, GenAlpha offers supporting technology with OEM at its core, so your team can do naturally what it does best.
Learn more about our OEM aftermarket platform with integrated decision-support and eCommerce capabilities.
Alternatively, please contact us directly and get your questions answered by a knowledgeable PartSpot specialist.