After-sales Support

After-sales Support
Creating a lasting customer
What can providing after-sales
support do for your business?
• Increase customer loyalty
• Increase profitability
– “ . . . businesses earn 45% of gross profits from
the aftermarket, although it accounts for only
24% of revenues.” Cohen et al 2006
• Increase customer satisfaction
Reasons companies don’t develop an
after-sales support program
Unpredictable demand
How to Develop an After-sales
Support Program
6 Step Approach
6 Step Approach
1. Identify which products to cover
2. Create a portfolio of service products
3. Select business models to support service
Cohen et al 2006
6 Step Approach (cont.)
4.Modify after-sales organizational structures
5.Design and manage an after-sales services
supply chain
6.Monitor performance continuously
Cohen et al 2006
1. Identify products
• All or some
• Complimentary products
• Competing products
– Synergies
2. Design a Portfolio
• Customers’ Parameters
– Time
– Price
• Service Provider’s Abilities
– Location
– Level of Inventory
Create Service Products
• Price based on service level
– Fast and expensive – Platinum
– Slow and economic – Silver
3. Multiple Business Models
Ownership-based vs. performance-based
• Ownership-based
– Low levels of service needed
– Conflict of interests
Business Models (cont.)
• Performance-Based
– Performance of product critical to customer
• E.g. Aircraft Engine
– Product very expensive or . . .
– Producer bares risk of owning product (leasing)
• E.g. Computer System
4. After-sales Organizational
• Products Department vs. Services
Products Dept. Services Dept.
Inventory carrying costs may overlap
Organizational Structure (cont.)
• Outsource services
– Core competency?
• Initial product priced to generate long-term
services sales
– Involve marketing and sales departments
• Innovative technology
5. After-sales Services Supply Chain
• Product Hierarchies
End products – modules – submodules –
• Geographical Hierarchies
Central distribution center– regional and
field stocks– customers’ premises
Services Supply Chain (cont.)
Speed vs. Cost
Most Expensive & Fast:
– End Products
– Customer Premises
Least Expensive & Slow
– Components
– Central Distribution Center
Services Supply Chain (cont.)
• Economies of Scale
• Customer Priority
– Threshold level of inventory
• Planning
Services Supply Chain (cont.)
• Planning
– Short-term (days) – replenishment, shipment,
and allocation of resources
– Med-term (weeks or months) – strategic
placement of resources
– Long-term (years) – services strategy
6. Monitor Performance
• Changing Customer Needs
• Metrics:
– Customer-focused – e.g. waiting time
– Internally focused – e.g. fill rates
• Upgrade technology
• Monitor Competition
Triconex provides safety and critical control
systems for the processing and
manufacturing industry.
They provide after-sales support to their
customers in the following ways:
On-Site Spare Parts Program (OSP)
Extended Warranty Program
Smart Upgrade Program
System Maintenance Program (SMP)
As a manager in a company that produces drillpresses that are sold to manufacturing
organizations you are asked to develop an aftersales support program for your customers.
• Use the principles discussed in the 6 step
1. Identify which products to cover
2. Create a portfolio of service products
3. Select business models to support service
4. Modify after-sales organizational structures
5. Design and manage an after-sales services
supply chain
6. Monitor performance continuously
How can this method be applied
to your current organization?
• 6 Step Approach
– Key Points
Focus on customer needs.
Be flexible. Use multiple business models.
Create hierarchies and priorities.
Plan in order to react quickly to changing demands.
“ . . . after-sales support is the longest-lasting
source of revenues to sellers and requires
the smallest investment. Companies that
ignore the after-market do so at their peril.”
Cohen et al 2006
Suggested Readings
Morris A. Cohen, Narendra Agrawal, Vipul
Agrawal. Winning in the Aftermarket.
Harvard Business Review; May2006, Vol.
84 Issue 5, p129-138.