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Sam Klaidman Jul 19, 2022
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When planning a digital transformation for your business, the priority is frequently to increase employee productivity or reduce other operating costs. Unfortunately, focusing on internal processes often bypasses the most significant available cost impact — growing sales and profits.
Unless you have already migrated into the world of Product as a Service (PaaS), Robot as a Service (RaaS), or Asset as a Service (AaaS), the easiest and least risky area to start your transformation is e-commerce.
“We expect hardware to decrease from approximately 31% of the company’s profit today, on average, to 23% by the end of the decade,” predicts a recent Bain report.
Today, in many industrial equipment companies, profit comes from services, and the most significant contributor is spare parts and consumables sales. That makes this area a target for growth.
According to McKinsey & Company: “The high bar that B2C giants have set for personal, customized customer experience increasingly extends to B2B companies, including industrial OEMs. As a result, to expand services’ potential, OEMs will want to up their customer-experience game.”
Customer expectations are quickly changing. Customers expect their experiences buying parts and consumables from capital equipment partners to be as quick, easy, and intuitive as when purchasing toothpaste from Amazon.
In past years, customers’ attitude was that if the buying experience from a supplier were as easy as buying from Amazon, the supplier was tops. But now, if the buying experience is not as easy as when shopping at Amazon, the supplier will be removed from consideration for future purchases.
Most non-automated parts sales operations depend on spreadsheets, cheat sheets, and knowledgeable people. Unfortunately, the key people are the ones who are retiring, relocating, or rethinking their careers.
A customer has a non-operating packaging machine, and the input hopper is overflowing with fruits that quickly spoil. Every second the customer is on the telephone with a rookie parts order taker feels like an eternity because the business owner or lead person keeps walking by her workstation. The customer’s displeasure is orders of magnitude worse than when the vendor fails to pass the Amazon test, and the person hanging on the phone feels like her job will end before the end of the shift.
Remember, e-commerce solutions are not just for spare parts and consumables. The system should be used for everything you sell, including off-the-shelf and custom products, spare parts, and services.
According to my friend Kristina Harrington, president and COO at GenAlpha Technologies, a provider of e-commerce solutions to industrial OEMs, the three most common reasons that companies articulate for not moving forward on an e-commerce project are:
According to Kristina, each of these objections can be easily overcome. For example, data should not be a reason to delay starting a customer-facing digital solution. Manufacturers have a multitude of data available in their systems (ERP, CAD, technical publications, PIM, CRM), that if organized well can be repurposed for use in a digital commerce environment. Manufacturers have invested money, time, and resources in creating processes built around these systems.
It’s time to leverage this data to improve the parts identification and ordering process for industrial buyers. Implementing e-commerce is not an event, it is a journey, and improving data is something that will continue as this important sales channel grows.
There are many ways to get started with e-commerce. For manufacturers with dealer partners, improving the parts identification and ordering process for dealers may be the most important first step. If that’s the case, Kristina recommends starting with an e-commerce site for channel partners and key accounts, where they log in to see price and availability and create orders.
Make doing business with you easier, and dealers will likely recommend your brand over competing brands because you are delivering a better experience. Over time, as the business environment changes, manufacturers and dealers may collaborate to open the site to end customers to meet the increased needs of online buyers.
No business should use a new system to take money from their partner’s pockets regarding channel partners. That is an internal issue and should never be an excuse to prevent customers from enjoying the benefits of a digital solution.
As for internal teams viewing e-commerce tools as a threat, this can be overcome easily when stakeholders bring teams into the e-commerce evaluation and implementation process. A good e-commerce site will make everyone’s job easier — customer service, sales, and partners. Dealers and customers increasingly want the ability to self-service. When they have this ability, it will off-load the recurring transactional activities — parts identification, call for price, availability, and order status — and free everyone to work on the more complex challenges and sales opportunities. When done properly, everyone wins.
I asked Kristina this question, adding, “Don’t most parts purchases arise because either a spare part was used to repair a unit and needs to be replaced, or there is something wrong with the equipment, and the end-user needs to purchase a part to use for the repair?” She said that the ease of using the software frequently creates new selling situations.
Here are some examples:
According to Gartner: “Manufacturing buyers want to engage with suppliers through user-friendly online ordering features, even with custom products. Some 64% state that they would switch to another vendor if the company provides real-time, personalized pricing. Some want to receive estimated freight quotes, information on bulk discounts, MOQs, and customization opportunities, preferably at any time of day or night, and via multiple channels.”
If your e-commerce solution impresses your customers, they will likely consider your company for products and services they previously bought from a competitor. They may even convince you to enter new markets you had never considered.
There is no reason for you not to have an e-commerce website. The benefits are significant, while the reasons for not doing it can be resolved quickly. Your customers want and deserve e-commerce.
Sam Klaidman is the founder and principal adviser at Middlesex Consulting. He helps his B2B product manufacturing clients grow their services revenue and profitability by applying the methodologies and techniques associated with the Customer Value Creation and Customer Experience professions to assist his clients in designing and commercializing new services and the associated business transformations. Contact Sam here.
Image Credit: Blue Planet Studio / Shutterstock.com
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