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The Strategic ROI of Effective Aftersales Services: Boost Your Business Profitability in the Aftermarket
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Aftersales service is one of the most powerful levers for boosting ROI, yet it remains one of the most underestimated priorities for OEMs. Many businesses fail to recognize that exceptional aftersales service not only enhances Customer Lifetime Value but also strengthens brand reputation.
However, the complexity of tracking key metrics like fill rates and repair times makes it difficult to gauge the true ROI of aftersales efforts. This challenge is compounded by the fragmented nature of existing systems, which often lack the integration necessary for accurate measurement and optimization. Investing in comprehensive aftersales management tools can address these pain points, transforming aftersales service into a strategic asset that benefits the entire business ecosystem.
Aftersales service isn’t an easy thing to get right, but once you overcome the challenges, your business, your customers, and your employees will thank you.
What is ROI in aftersales
Return on investment (ROI) is a metric that helps comparing a company’s earnings to its expenses. A straightforward formula is used to compute it: ((money gained – money spent) / money spent) times 100 = ROI.
So your return on investment is 50% if you invest $100 on customer service and receive $150 in return (150 – 100 = 50; 50 / 100 = 0.5; 0.5 x 100 = 50%).
Everything seems orderly and basic, and the equation is pretty straightforward. For aftersales teams, however, obtaining precise data to include in the computation and taking into consideration the influence of more qualitative customer support pose significant challenges.
The importance of calculating ROI in Aftersales
Whether you’re a new entrepreneur bootstrapping your own venture or the leader of a public company, when you invest in your business, you better be confident that your investment will have a Return on Investment (ROI). In business, if an investment – big or small – doesn’t come with a positive ROI, it’s probably not worth it.
For companies and OEMs that dabble in the aftermarket business, providing effective aftersales service is one of the best investments for organizational growth and longevity. Many business leaders overlook aftersales services, but if you think about them from the consumer standpoint, they make the biggest difference. Picture this:
You just purchased a washing machine from Maytag. You take it home and set it up, but after 2 months, it starts making a weird sound and not working properly.
Now, if Maytag sends out a service technician the next day, replaces a faulty part, and sends you back on your merry way, you’re going to be such a happy customer. You won’t be upset about the fact that something went wrong in the first place, and instead, you’ll just be glad that aftersales service was provided so swiftly and professionally. You’ll be a loyal Maytag customer for life.
What happens if they don’t?
If Maytag waits a few days to respond, doesn’t send a technician until next week, and has to order in a replacement part that won’t arrive for 12 days, you’ll be livid. You can’t operate a household without a washing machine for nearly a week. You probably will never buy a Maytag product again.
That simple story is the difference between poor aftersales service and stellar aftersales service and let us make one thing clear: only stellar aftersales service is going to have the ROI that your business needs.
When you can create lifelong customers who are happy with their experience and will recommend your company to their own networks, a world of opportunity will open for your business. With the right approach to the aftermarket business, you’ll see amazing customer retention, lowered operational costs, and even revenue boosts. In the aftersales space, anything less than that only opens the door for a company that can do it better to steal your spotlight.
Provide amazing aftersales service. Reap the ROI. Keep the spotlight on your business – where it should be.
How Aftersales Service Impacts ROI
Aftersales management is anything but easy; anticipating customer needs, getting ahead of machine downtime, and perfecting spare parts management create a never-ending web of challenges. But understanding the science behind aftersales service – how to streamline technician interactions, conduct proactive maintenance checks, and monitor key aftersales metrics – will impact every aspect of your business. Here are some of the biggest ROI wins of getting it right:
Customer Retention and Lifetime Value
There’s nothing more frustrating than bad service experiences, but there’s also nothing more reaffirming than positive ones. When an OEM can illustrate to a customer a willingness to solve problems and rectify less-than-perfect situations, the customer is getting the reassurance they need to stick around.
When customers stick around for a long time, customer retention rates go up, the customer is more likely to make future purchases with that provider, and the Customer Lifetime Value skyrockets. Service should never be the reason you’re losing customers – it should always be a reminder to customers why they should stick around.
Brand Reputation and Market Differentiation
Manufacturers are up against some of the stiffest competition ever; everyone has advanced production technology, logistics is getting more streamlined than ever, and products are generally solid. So, what can you use to stand out in your industry? Your thoughtful aftersales service approach.
Notable aftersales service helps build lasting customer relationships, yes, but it also positions your brand as a cut above the rest. Efficient repairs, continued education, and friendly customer service all add value to the customer experience. By increasing the value you offer customers, your brand will be seen as the best choice on the market. And hey, aftersales service might even allow you to increase prices because of all that added value you’re offering.
Operational Efficiencies
Aftersales service encompasses everything that has to do with warranties, repairs, and parts, and as you can imagine, there are a lot of moving components involved. Poor spare parts management or service scheduling can waste time and resources, like inventory or cash on hand, straining your business overall.
Once the aftersales service strategy is nailed down, it’ll lead to planning efficiencies and enhanced resource allocation, resulting in significant cost savings. When you’re spending less money to do more for your customers, a new pocket of value comes into play – for both your customers and your business.
Upselling and Cross-Selling
The best time to get a read on a customer’s needs is through service visits. If the technician hears that they’re having trouble with a certain task or that they’re looking for new equipment, they’ll have an opportunity to upsell and cross-sell to that customer. Without the real-time feedback loop between your clients and your expert staff, you may let a sales opportunity age too long, and your customer might go looking elsewhere.
On the other hand, if your technician identifies a cross-selling or upselling opportunity, they can either make the initial pitch themselves or pass the tip to your sales team, giving you the opportunity to proactively fulfill changing customer needs. Customers want to feel like you can read their minds, and aftersales service is the best way to make that feeling a reality.
Calculating the ROI of Aftersales
Think of aftersales holistically, there are a wide range of metrics that can be used to help determine how your business is performing. All the aftersales KPIs offer unique insights, making it easy for companies to figure out if they’re getting a return in the aftermarket business. As one of the best ways for OEMs to boost revenue, aftersales is crucial. Here are a few core aftersales KPIs to keep an eye on:
- Fill Rates: Customers expect speedy deliveries. When OEMs measure fill rates, they are looking at how long it takes to distribute a replacement part to the end user. The faster the fill rates, the healthier aftersales ROI you’ll have.
- Repair Time: If a customer experiences machine downtime, getting a service technician out to repair the equipment is of utmost importance. The repair time – the time it takes to restore the function of a piece of equipment – has a huge downstream impact on ROI.
- Warranty Claim Rate: The warranty claim rate is an aftersales metric that looks at all machinery sold within a given period to measure the number of machines that required warranty-covered repair or replacements. The higher the warranty claim rate, the more likely it is that the quality of your products is slipping. Warranty managers have many KPIs to measure, but this one is key.
- Compliance with Service Level Agreements (SLAs): When an OEM enters into a contract with a customer, a Service Level Agreement is used to depict the level of service required by the OEM and how it will be measured. As a KPI, compliance with SLAs assesses how an OEM meets those commitments. Are you measuring up?
- Repeat Business Rates: Synonymous with customer retention, repeat business rates is a great metric for understanding how many customers are coming back to make new purchases after their initial experience with your company.
The formula
With all the key aftersales KPIs in hand, calculating the ROI aftersales is simple. Use the following formula:
ROI = (Benefits – Costs) / Costs x 100%
Any revenue or monetary gain that comes from aftersales management would be considered a benefit. On the other side, and costs or lost revenue that happens because of a poor aftersales service strategy would go under the “costs” umbrella.
Aftersales performance monitoring requires detailed data to highlight areas of improvement, understand what’s going well, and adjust the approach as needed. But it doesn’t stop there; aftersales service opportunities provide boosts to businesses that can be a bit harder to measure. By harnessing customer goodwill and creating relationships of mutual trust with customers, you’re paving the pathway to strengthen your brand’s reputation in the public eye, and in business, that’s priceless.
How to Maximize Your ROI from Aftersales
Don’t let aftersales service be the reason your business flounders. Providing top-notch service is something that can revolutionize your company as a whole, but it’s not always straightforward. Every OEM knows how many moving components exist within supply chain management today, and those moving parts can be hard to track, understand, and act upon. If you’re ready to up-level aftersales, we’ve got you covered:
Use Technology
Far and away one of the best things you can do for your aftersales revenue stream is to invest in technology that can streamline aftersales from end-to-end. You can get access to automated service scheduling, better monetary management with CRM systems, and Internet of Things equipment monitoring for predictive maintenance.
With these technological capabilities handled, you’ll never have a technician miss an appointment with a customer, the data will always be sound in the background (this is key!), and you can prevent machine downtime before it happens. Your customers will be happier than ever!
Continuous Training
No matter how good your team is, it can always get better. With an ever-changing industry and new technology popping up daily, your team of experts will need continuous training in customer service, technical support, and more. If the development of your staff isn’t a top priority at all times, your team will quickly fall behind industry norms and competitor tactics.
Create Feedback Loops
If you’re looking for hints as to how you can improve your aftersales management, look to your customers for honest feedback. Create an easy mechanism for them to share frustrations, escalate issues, and educate your company on what they need. When you listen to customers and consider their perspectives, it’ll be more than aftermarket sales that get a boost.
Challenges to Maximizing ROI Aftersales
Every OEM leader knows that when it comes to boosting the ROI of anything – especially aftersales – it can be more easily said than done. We’ll be frank; there are plenty of challenges your business might face as you attempt to optimize your aftersales service strategy, but by understanding what those challenges are, you’re more likely to get in front of them quickly.
- Upfront Cost: Investing in anything is pricey, but investing in new processes and technologies can feel overwhelming. Instead of trying to do it all at once, make a priority list. Maybe an aftersales management platform like ClearOps is what you and your customers need the most. Or maybe, staff training for service technicians is the top priority at the moment. Don’t let perfection get in the way of progress – start taking steps in the right direction even if they feel small at the time.
- Cost vs. Quality: All leaders know that money isn’t an infinite resource, but it’s vital to invest in your business in order to grow and improve. Manufacturers need to find the balance between keeping costs as low as possible while also providing top-tier aftersales service. It’s an ever-shifting balance that will need to be monitored closely.
- Resourcing: Having the right people to provide the level of service your customers deserve is a big hurdle. Your technicians need to know their stuff, your office staff need to be able to run things in the background, and your production staff need to ensure that products are being manufactured correctly. Having the right people in the right roles is a secret weapon in any business.
ROI Aftersales: Focus on Service
The aftermarket business has never been easy to navigate. For decades, OEMs left aftermarket tasks up to third-party companies, but in recent years, there’s been a shift away from that. Now, OEMs need to manufacture flawless products, perfect spare parts management, and provide aftersales service that is a cut above the rest. It’s all important, but aftersales service is one of the things that OEMs overlook all too often.
If you can resolve an equipment issue or prevent machine downtime before it happens, your customers will never forget the positive impact of your business. But if your service is slow and the problems persist, they’ll take their business elsewhere. Don’t lose out on business because of aftersales service. Instead, use aftersales service as a tool to boost your revenue, improve your business, and build lasting customer relationships.
Download The Free OEM How-To Guide “Boosting aftermarket performance in a decentralized dealer network”
In the whitepaper you’ll learn:
- Why winning in the aftermarket is a crucial pillar, not just a nice-to-have
- The untapped potential of parts planning among numerous OEMs
- The tangible benefits of enhancing aftersales through a unified downstream supply chain
- A case study: How AGCO supercharged their customer fill rates by a whopping 43% by transitioning from a blind spot in supply chain visibility to an interconnected dealer ecosystem
William Barkawi
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