Selling Services For Capital Equipment? What You Call Them Is Important
Sam Klaidman
Partnering with midmarket B2B OEM leaders responsible for growing after-sales revenue and profit and improving customer loyalty.
Today, OEM’s and other sellers of Capital Equipment depend on the revenue and profit from post-sales services to offset the declining revenue and profit from product sales.
Unfortunately, industry has adopted three different terms to label the most common services and, worse yet, these terms are used interchangeably. This post will serve as a starting point for a discussion about agreeing on the best labels and definitions for the most common groups of services.
Definitions
?Note: The first two definitions are based on an article in Warranty Week
A. Warranties – warranties, and their close relative extended warranties, protect the equipment owner against unexpected and undesirable events. For example, product defects, malfunctions, software bugs, and operator error due to bad design.
B. Maintenance Contracts – these are fixed price obligations that cover activities that can be expected to occur during normal operation of the covered equipment. Examples include preventative maintenance, cleaning, remote monitoring, software upgrades, and calibrations.
C. Service Contracts – many companies offer their customers comprehensive service contracts containing elements of both the extended warranty and the maintenance contract. For example, on-site remedial service, preventative maintenance, software upgrades, and calibration.
To many people these three definitions may be a distinction without a difference. However, since the Internet makes comparison-shopping so easy, I think each major industry, like analytical and life science, networking, railroad transportation, etc. should adopt definitions that all service providers in that industry agree to use.
It would definitely make life easier for both buyers and sellers.
The Ask
Please take a few moments to provide us with some basic information. If we get enough comments, I will summarize the data and share on LinkedIn. In the comment area, please choose either A, B, or C to tell us what you primarily offer, A, B, or C to tell us what you call it, and then add your industry.
For example, A, C, servers means you sell warranties, call them service contracts, and are in the server business.
If there are enough comments for me to make an interesting story, I will write another article on LinkedIn.
Thank you.
Partnering with midmarket B2B OEM leaders responsible for growing after-sales revenue and profit and improving customer loyalty.
6 年Brian Halverson what you called Product Services is what I, and many others, sell as a Service contract. In my OEM past, our company had a small Engineering Group called Sustaining Engineering. They "owned" managing support cases until the time when they and Technical Support agreed to transition the support responsibility to Customer Support. Even after that the Sustaining team sent a representative to our daily Support meeting where we discussed all open cases. Their inputs were critical and they found out what the customers were experiencing as soon as the Support team did.
Strategic Service Provider
6 年From OEM my past - "Product Services" included equipment returned for repair, on-site field service, field and classroom training and "extended" warranty beyond the original warranty period. The original warranty period reported to a group within the engineering department so that failure anlysis information could be used as feedback for product improvement, if necessary.
Partnering with midmarket B2B OEM leaders responsible for growing after-sales revenue and profit and improving customer loyalty.
6 年Jason Y., thanks for your data
Assisting B2B-OEM leadership to grow profits by supplying Productivity, Longevity, Availability and Capability Solutions [PLACS] impacting the lifetime value of the assets populating the Installedbase.
6 年Sam: As we have discussed there is no harmonization of terms from industry to industry regarding the term "capital equipment" (i.e. Machine, Device, Machinery, Apparatus, Product, System, Instrument, Robot, Capital Good, Others ) and "service contract" (i.e. Managed Service, Servitization, Contracted Service, Fleet Management, Performance Based Logistics [PBL], Performance Based Contracting, Contracted Logistics Support [CLS], Business Process Outsourcing [BPO], Product-Service, Long-Term Service Agreement, Extended Service Plan, Others. For me, any B2B service contract >1-year that impacts a machine’s balance sheet valuation, the efficiency and effectiveness of its outputs and its employability levels is the horizontal space of what we are discussing.
Aftermarket Business Development manager
6 年A,B,C construction equipment , coding equipment