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1、Annual Aftermarket Benchmark StudySURVEY REPORT 2022ContentAn Opportunity Missed?3IntroductionThe Way Forward39ConclusionThe State of the Service Business Unit in the Organization6Chapter 1Servitization and Digital Transformation Progress16Chapter 2Profitability and Pricing Models for Service26Chapt
2、er 3Strategies for Coping with Current and Future Challenges32Chapter 42022 marks the fourth consecutive year Vendavo has partnered with Copperberg to study the state of After-market business within the industrial manufacturing sector.In that time,weve seen significant swings that,looking back,can b
3、e at least partially attributed to the volatility of a global pandemic and persistent economic uncertainty.In 2022,a question arises:have manufacturers missed an opportunity to increase revenue and profitability through services?We look at the data in the 4th annual Aftermarket Benchmark Study and,e
4、ven more impor-tantly,our pricing experts outline a way forward for 2023 and beyond.The 2022 Aftermarket Benchmark is the 4th annual research project conducted by Copperberg and Vendavo.With the lux-ury of being able to look back over several years of response data,and especially since the initial s
5、urvey was fielded pre-Covid,we are now able to see how industrial manufacturers assess organizational change since 2019 and how the after-market business contributed.Their response data,when compared to what respondents said about revenue and margin contribution by the services business over the 4-y
6、ear period,might be the single most important,and frankly most startling insight that this survey reveals.To set up the perspective of change over the last four years,this survey included a new question:“How much would you say your organization has changed compared to 2019?”IntroductionAn Opportunit
7、y Missed?SURVEY REPORT 2022ANNUAL AFTERMARKET BENCHMARK STUDY 20224INTRODUCTIONThe respondents report their organization has changed sig-nificantly.On a 1-10 scale,the most frequent response(the mode)is 7.The response data for this question was also a great example of when you dont want to use avera
8、ges because there was a wide range of responses.The mean,or arithmetic average,was just 5.6 not particularly insightful given the range of 1 to 10.For this question,applying a median to the response data is not appropriate,as the choices were nominally categorical.In what ways have organizations cha
9、nged?In this report,well look at the revenue and margin contribution by the services business over the 4-year period and compare that to how respondents answered questions on organizational change.The results reveal a troublesome conundrum:is it a post-pan-demic return to normalcy or is it a missed
10、opportunity?Read on to discover what decision-makers within the indus-trial sector have to say about:The State of the Service Business Unit in the Organization;Servitization and Digital Transformation Progress;Profitability and Pricing Models for Service;Strategies for Coping with Current and Future
11、 Challenges.Chapter 1The State of the Service Business Unit in the OrganizationSURVEY REPORT 2022COPPERBERG5INTRODUCTIONAftermarket revenue percentage contribution has declinedOver the last 4 consecutive surveys,respondents report significant swings in the amount of revenue the aftermarket business
12、generated as a percentage of total company reve-nue.While there were some large changes in years that one would expect 2020,and 2021,as the pandemic wreaked havoc throughout the global business environment the aftermarket revenue contribution of 2022 is back to being very similar to what was reporte
13、d 4 years ago in 2019.The optimists would view this as a return to normalcy.Pessimists would suggest this sameness shows a missed opportunity to change the perception and significance of the aftermarket business for overall revenue.Key TakeawaysAftermarket business profit contribution dropped 11 per
14、cent over the four-year period.In 2022,manufacturers are operating on a reactive service model at the highest rate over the 4 years of surveys.K 1K 2COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 202278CHAPTER 1THE STATE OF THE SERVICE BUSINESS UNIT IN THE ORGANIZATION0904030201050-69%30-49
15、%70%+0-29%63%23%10%4%61%32%4%2%63%19%13%5%65%23%8%4%The services business has contributed less to the bottom lineIf the four-year trend on revenue contribution from after-market sales was troubling,the responses for how much PROFIT aftermarket business generated as a percentage of the bottom line we
16、re downright distressing.Again,there were some large changes in years that one would expect due to pandemic-driven business challenges,but over that span of years,the number of companies that cited aftermarket profits as more than half of their total organizational profits decreased from 33%(fully o
17、ne-third of respondents)to just a quarter,at 25%.Implication:Missed opportunityWith this information in hand,the optimists are silent.The pessimists would confirm:the perception and significance Aftermarket revenue percentage contribution to total company revenue20022COPPERBERGANNUAL AFTE
18、RMARKET BENCHMARK STUDY 2022910CHAPTER 1THE STATE OF THE SERVICE BUSINESS UNIT IN THE ORGANIZATIONof the aftermarket business relative to overall business has greatly diminished.The opportunity to leverage the global crisis for improvement has been lost.Assessing organizational changeThe most popula
19、r and frequent response to the level of organizational change was 7 on a scale of 1(not at all)to 10(complete change).It appears that the changes hap-pened outside the aftermarket business units at least in terms of revenue contribution(virtually no change).Or,if the“change”responses were referring
20、to the ability of aftermar-ket businesses to impact total profitability,then yes,there was change.A negative change.Using band mid-points as representative average values,aftermarket business profit contribution dropped 11 percent over the four-year period.This change was not for the better.01005060
21、7080904030201050-69%30-49%70%+0-29%37%30%19%13%42%25%20%13%40%28%24%8%45%30%17%8%Aftermarket profit percentage contribution to total company revenue20022COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20221112CHAPTER 1THE STATE OF THE SERVICE BUSINESS UNIT IN THE ORGANIZATIONFewer organizati
22、ons are planned or proactive in the aftermarket businessWhen it comes to the state of Aftermarket business models,most of our 2022 survey respondents continued to describe their service business model as planned,with a focus on equipment reliability and scheduled maintenance.Planned consistently rep
23、resents the largest share of responses in our 4-year study.Yet,in 2022,the number of business operating under a Reactive/Break Fix model increased to its highest point in 4 years and the number of respondents who indicate they are in a proactive state also declined.Reactive modes are very common in
24、aftermarket,so do not panic,you are not alone!When youre in a reactive mode,that is usually an indicator of overall service business maturity.You can create more proactive services by improving the services maturity.Is there a clear responsibility for your service business?Are the right resources in
25、 place to support your customers?Kalle Aerikkala,Senior Business Consultant,Vendavo09040302010PlannedProactivePredictive9%29%35%6%26%41%8%30%42%8%22%38%Reactive/Break fix27%27%21%33%How would you describe your service business today?20022COPPERBERGANNUAL AFTERMARKET BENCHMARK S
26、TUDY 20221314CHAPTER 1THE STATE OF THE SERVICE BUSINESS UNIT IN THE ORGANIZATIONImplication:Get granularTheres work to be done for most as the most optimal position requires driving a proactive cycle,controlling your pricing,and being ahead of the data.Bringing in proactive and pre-ventive maintenan
27、ce,and taking some of the burden from your customers,can help you open up new recurring service revenue streams.However,volatility and turmoil has prevented many from being proactive as they would like to be.If you find that your team and perhaps your organization is in a reactive mode,a basic best
28、practice is to get granular.Understand what influences each of your margins and think about segmenta-tion as the intersection of customer and product.By under-standing how each customer values each of your products and targeting appropriate premiums in pricing and margin in those intersections,its e
29、asier to share and promote what you have to offer.Chapter 2Servitization and Digital Transformation ProgressSURVEY REPORT 2022COPPERBERG15CHAPTER 1Key TakeawaysThe most common service transformation challenge for most manufacturers is the integration of new technologies in their legacy IT infrastruc
30、tures.Nearly 45%of manufacturers have all new products connected,with most of them having at least some of their old models retrofitted with sensors.The biggest investment on the horizon for 61%of manufacturers is remote diagnostics.K 1K 2K 3A steady pace of digital transformationMore than ever befo
31、re,delivering aftermarket services de-pends on advanced technology capable of remote diagnos-tics and data-driven solutions.A higher degree of servitiza-tion requires a higher level of digital transformation.To evolve their service business,manufacturers need to accomplish their digitalization proje
32、cts by adopting technol-ogy with appropriate capabilities and features that streamline the digital transformation of assets.In 2021,manufacturers made huge strides in digital inno-vation as the pandemic gave them no other choice than to accelerate their plans for the sake of business continuity and
33、profitability in times of volatility.COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20221718CHAPTER 2SERVITIZATION AND DIGITAL TRANSFORMATION PROGRESSIn 2022,most survey respondents who were previously behind have now developed at least a partial digital strategy.Further building on 2021 innovations,n
34、early a third say they continue to have a cohesive plan for their digital services.A concerning 10%(No and Dont know)are still falling behind with no digital strategy in mind,however.The good news is that this is a slight decrease(13%)from last years respondents.Having a partially developed digital
35、strategy means that con-necting the installed base is still a work in progress for man-ufacturers,many of which are struggling with managing the online/offline paradigm for different customers.As many as 41%say they only have some of their new products con-nected,while the rest of their new and olde
36、r products are not connected yet.Differentiation is the most important topic to focus on for success.Better technology,quality of products,quality of staffing,or business models will set the winners apart.General capabilities for agility on pricing are a must to help manage volatility.David Anderson
37、,VP Business Consulting,Vendavo09040302010Being developedPartiallyNoYes32%37%23%8%19%39%25%15%30%37%20%11%31%37%22%8%Dont know0%3%2%2%Does your organization have a clear Digital Strategy?20022ANNUAL AFTERMARKET BENCHMARK STUDY 20221920CHAPTER 2SERVITIZATION AND DIGITAL TRANSFOR
38、MATION PROGRESSCOPPERBERGDigital transformation roadblocksNearly 22%of manufacturers revealed that the biggest chal-lenge on their service transformation journey is a lack of re-sources and support regarding the integration of new tech-nologies within their legacy IT infrastructures.Another 22%have
39、difficulty communicating their new value-added offer-ing to their customers.Others are struggling with design-ing new service business models.The challenges hindering progress here are often the lack of support from top man-agement in cultural transformation and the lack of necessary skills and comp
40、etencies from their current workforce.Implication:Lean into your TechnologySo,how are manufacturers planning to overcome these hurdles and evolve their tech stack for further servitiza-tion?Technology solutions take center stage,in the form of remote diagnostics,e-commerce platforms and AI fueled da
41、ta analytics.Bigger budgets for transforming servitizationWithin the next 12 months,most are setting aside budgets specifically for technology investments that support a trans-formation of the service business.Those that report none have hovered in the single digits for the last 4 consecutive years.
42、Remote diagnostics provide the ability to monitor,detect,and solve issues from a distance and these capabilities are now table stakes since the pandemic.It continues to be an ideal solution for aftermarket service providers who want to address customer issues in a timely,efficient manner,while also
43、saving costs on field service expenses.This is reflec-tive of the hybrid model currently overtaking the industry,with manufacturers preferring to attempt remote resolution first,and only sending technicians to customer sites as a last resort.Like last year,many survey respondents are looking to inve
44、st in e-commerce platforms.Over the last four years,e-com-merce platforms and self-service portals have become COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20222122CHAPTER 2SERVITIZATION AND DIGITAL TRANSFORMATION PROGRESSWhich of these technologies are you looking to invest in within the next 12 mo
45、nths,to support your servitization/service transformation journey?20022000607070808090904040303020201010Pricing tools/softwareService automationE-commerce platformCPQNoneAI42%44%29%39%10%5%44%43%29%38%6%8%39%43%28%40%12%9%41%Drones2%3%3%3%VR42%29%23%25%42%Remote diagnostics66%6
46、6%60%61%27%41%16%7%3D printingOther11%8%7%7%8%5%9%7%COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20222324CHAPTER 2SERVITIZATION AND DIGITAL TRANSFORMATION PROGRESSChapter 3Profitability and Pricing Models for ServiceSURVEY REPORT 2022increasingly popular with B2B customers that find the solu-tions c
47、onvenient and fast for research and ordering parts.Also similar to the last four years,interest in artificial intel-ligence and machine learning continues to be high,with the advanced solutions facilitating the collection of data insights and evolution toward proactive and predictive ser-vice models
48、.The largest increase from last year is the desire to invest in service automation.Condensing many human-centric ser-vices into a streamlined,software-based online platform is a surefire way to diminish human error and expedite service delivery to customers who have heightened expectations for speed
49、y service.Implication:Get creative and focus on cultural changeResearch shows the biggest challenges to furthering the dig-ital transformation required for servitization are customer capital and proof of value in the technology-based services.Suppliers would be well served to address this with creat
50、ive,solution-based business models.Long-term vision and execution steadily toward that vision will also help solve the status quo.Improving service maturity is seldom fast and does not usually happen in a few quick sprints as it also involves cultural changes in the organization.COPPERBERG25CHAPTER
51、2Key TakeawaysThis year,up to 86%of manufacturers report experiencing some or a significant impact on their service operations margins due to inflation,increased raw material costs,and supply chain disruptions.The number of manufacturers using a primarily cost-plus pricing model for their service bu
52、siness was about 50%in 2019,2020 and 2021.In 2022,this number increased to 62%.As many as 32%of manufacturers are looking to increase their revenue using subscription contract models.K 1K 2K 3In response to inflation,a resurgence in cost plus pricingIn the inflationary environment of 2022,the right
53、price and maximizing profitability is at the forefront of business strate-gies,exposing margin leakages and pressing manufacturers to revise their pricing execution.The overwhelming majority 86%of survey respondents report inflation has some or a significant impact on their service operations margin
54、s.Cost-plus pricing surged as a primary pricing strategy in 2022.This year,62%of manufacturers report using primarily the cost-plus pricing model for their service business which is a significant increase from the approximately 50%of those who used cost-plus methods the three previous years.Although
55、 the cost-plus model seems like a safe and secure comfort zone for many,it can become expensive and result in a major During the current economic volatility,price increases should be strategic rather than making blanket raises across the product and services line which will put companies at risk of
56、losing customer trust and compromising relationships.Matthias Mueller,Principal Product Manager Cloud Solutions,VendavoCOPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20222728CHAPTER 3PROFITABILITY AND PRICING MODELS FOR SERVICEloss of profit over time.Market turmoil driven by inflation and supply chai
57、n disruption is likely the cause in the increased number of manufacturers utilizing this pricing model.But as research has consistently shown,cost-plus pricing does not lead to greater gains in the long run.Servitization should generate more wins and value for cus-tomers which should be equitably ch
58、arged.Since 2019,approximately half of survey respondents use the value-based pricing model for their business.In 2022,this number increased 6%over the previous year to 52%.But 41%admit to lacking an understanding of customer value drivers,so maximizing the potential of a value-added pricing model a
59、nd communicating that value to customers seems next to impossible.At some level,it is reasonable that were seeing manufacturers revert to cost-plus methods of pricing.But it is short term think-ing.It is important not to lose sight of actions your company will need to take to adjust to when inflatio
60、n rates decrease,and supply chain issues no longer affect your business.Mitch Lee,Profit Evangelist and VP of Product Marketing,Vendavo 09040302010Cost-plus50%51%47%62%Other2%0%2%1%Willingness to pay14%13%17%20%Value-based53%48%46%51%Market reference36%38%40%41%Competitor-based24%32%24%27
61、%What is your main pricing method?20022COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20222930CHAPTER 3PROFITABILITY AND PRICING MODELS FOR SERVICECOPPERBERGAlternative revenue boostersTo increase revenue in the immediate future,most are look-ing to new contracts,too.32%of manufacturers are
62、 looking to increase their revenue using subscription contract mod-els,followed by closing performance-based(15%)and out-come-based(12%)deals.These tactics have been gaining traction over recent years because they create opportunities for scaling servitization and digital transformation while also a
63、llowing a degree of pricing flexibility that enables providers to set prices based on the unique needs of the customers.Implication:Optimize your pricingBased on these findings,price optimization is an urgent con-cern for most manufacturers.Working with pricing experts or putting together a price ma
64、nagement team will help you better manage your pricing models,better understand what drives customer value,and better align your prices to the cus-tomers willingness to pay.The best place to start is with an understanding of value-based negotiation techniques and the options you have during uncertai
65、n times.Know your customers pain points and how the value provided by each of your services address these pain points.Remember to think about the next best alternative for your customer and each of your service offer-ings.This may bring risks but it is crucial to determine the willingness to pay and
66、 have proper reasoning as to why the value of your offering has higher value and price.Chapter 4Strategies for Coping with Current and Future ChallengesSURVEY REPORT 2022COPPERBERG31CHAPTER 3Key TakeawaysFor 34%of manufacturers,the lack of internal alignment and cooperation makes selling services di
67、fficult.About 65%of manufacturers are already experiencing a lack or shortage of skilled labor.41%of manufacturers are equipped with moderate capabilities for data collection and analysis that would allow them to pivot to servitization and predictive maintenance.K 1K 2K 3A challenging landscapePrici
68、ng is but one of the interconnected challenges manu-facturers are tackling during times of inflation.Supply chains continue to face disruption and the costs of raw materials continues to increase.Manufacturers have to keep this big picture top of mind when tackling and understanding cus-tomer value
69、drivers.Manufacturers report facing the following challenges today when selling services:Conflicting internal strategies(25%);Response time to market changes(24%);Increased global competition(20%);Volatile price levels(20%);Different price levels in different markets(19%);Customers who are not well
70、informed(19%);Lack of support in defending and explaining prices compared to the value of the service offered(18%);Lack of internal structures and processes for price management and revisions(16%);Lack of consistency in pricing processes for service offers(13%);Lack of relevant internal service offe
71、rs and price management systems(11%).Organizational misalignment comes with steep price tagIn 2022,nearly 34%of survey respondents report facing a lack of internal alignment and cooperation.Every year,we see the strong connection between pricing excellence and cross-functional collaboration,and this
72、 year is no different.COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20223334CHAPTER 4STRATEGIES FOR COPING WITH CHALLENGESWhen it comes to access to skilled labour in your industry,which statement is most accurate?We do not foresee a lack/shortage of skilled labour in the next 5 yearsWe foresee a lac
73、k/shortage of skilled labour in the next 5 yearsWe already experience a lack/shortage of skilled labour today007080902021202214%12%20%23%25%23%30%32%61%65%50%45%With incoherent and inconsistent pricing approaches,man-ufacturers are losing agility and responsiveness to market ch
74、anges and margins.Implication:Align cross-functionally with all stakeholders involved in aftermarket pricingCross-functional strategies will help manufacturers overcome each of these mounting challenges.Pricing owners within the service organization need to assemble,work together,and streamline pric
75、ing execution.One of the many benefits,espe-cially when there is cross-functional alignment regarding pricing,is that other departments,like marketing and sales,will no longer receive mixed messages about pricing and value.A consistent structure and the right technology will enable them to communica
76、te added value at the right time,to the right customers,and in the right way.COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20223536CHAPTER 4STRATEGIES FOR COPING WITH CHALLENGESCOPPERBERGA lack of skilled laborTeams are often still expected to achieve the same amount of organizational benefit even th
77、ough they may be less resourced.The majority of survey respondents agree that they need more talent for their digitalization projects,techni-cal support,field service,IT development,and data analysis and they anticipate the right people will be difficult to find.For 65%of manufacturers today,the lac
78、k of skilled labor is affecting service operations and creating obstacles in the way of servitization and digitalization.The increase from 45%in the heart of the pandemic 2020,to 50%in 2021,and now 65%in 2022 is dramatic and concerning.Another 23%of man-ufacturers also foresee a shortage of skilled
79、labor within the next five years,with only 12%being optimistic that there will be no such lack of talent in the future.Implication:Employ pricing managersEmploying pricing managers who can oversee the collabora-tion between departments is one way to achieve the degree of cooperation necessary to ove
80、rcome such hurdles.Many manufacturers already foresee a strong need for price man-agement talent for their service business.It is crucial that pricing teams are transparent and working with other parts of the organization to gain credibility and support for overall business success.In-demand skillsA
81、s the industry moves toward servitization and predictive maintenance,skilled analytics talent will be critical in helping Think about the way your pricing team is organized within your company.Does it work?As you consider your long-term goals,should you make changes?Do you need to move more toward o
82、perative pricing or make other pricing process changes?Look to the future when making staffing decisions today.Kalle Aerikkala,Senior Business Consultant,Vendavo manufacturers pivot toward innovative and more profitable service models.Today,41%of our survey respondents are equipped with moderate cap
83、abilities for data collection and analysis that would allow them to move forward with servi-tization and predictive maintenance should they acquire the right talent to develop the right framework.Another 40%describe their capabilities as basic,and the rest are almost equally split between those not
84、equipped at all and those who are very well prepared to pivot toward ser-vitization and predictive maintenance.The latter will have a much easier time attracting skilled talent,by providing the requisite technology to make their jobs more productive and meaningful.COPPERBERGANNUAL AFTERMARKET BENCHM
85、ARK STUDY 20223738CHAPTER 4STRATEGIES FOR COPING WITH CHALLENGESConclusionThe Way ForwardSURVEY REPORT 2022What are next steps for pricing and sales operations leaders in aftermarket businesses if they missed the opportunity for strategic prioritization?Its just like any other business project:use d
86、ata to build a business case for clear and compelling return on investment in capabilities.You have the people,but youll likely need to augment them either directly,or,given skilled labor short-ages,with a partner that delivers the needed expertise in the short term and perhaps the long term as well
87、.Because these capabilities are new,youll need past proven processes for productive onboarding so everyone on your team can utilize them effectively.And of course,the tech-nology solutions must be future proofed supported by decades of real-life learnings,but unabashedly created for rapid,on-going i
88、mprovements:immediate delivery of time-tested playbooks for success,and quick up-take of new methodologies.ANNUAL AFTERMARKET BENCHMARK STUDY 202240CONCLUSIONAboutVendavoVendavo partners with the worlds leading companies to accelerate growth and profitability,advance innovation,and build more prospe
89、rous communities.Our powerful,cloud-based,AI-powered pricing,selling,and prescribing solutions empower global manufacturers and distributors like Ford,Dell,and Medtronic to manage,optimize,and digitize their end-to-end commercial processes.But we offer so much more than software.Our proven,repeatabl
90、e process,and passionate,experienced people lower risk,accelerate value,and drive profitable,unri-valed business outcomes for our customers.We are passion-ate about helping our customers deliver the right products,at the right prices,at the right time,for the right people.Vendavo is headquartered in
91、 Denver,with offices in Czech Republic,India,and Sweden.AboutCopperbergHerbert Spencer once said:“The great aim of education is not knowledge,but action”.Copperberg creates physical and digital platforms bringing together the manufacturing community in order to grow and build relationships globally.
92、During the recent global pan-demic,we have been focusing on virtual events and digital content ensuring our community remains connected.So,how do we actually do that?On a daily basis,we work hard to improve,develop and inno-vate our concepts and original content in order to ensure the best hands-on,real-life strategies for all our community members.Our ambition is to provide ideas,networking,and industry exchange between peers,that inspires and leads to COPPERBERGANNUAL AFTERMARKET BENCHMARK STUDY 20224142ABOUTABOUTSURVEY REPORT 2022