Increasing Service Part Market Revenue with Better Customer Service

Just think about the last time you brought your car in for service only to hear, that the part required to fix the problem was not available and had to be ordered from a central warehouse. It would take a few days at least. How how did you feel about that?

These things happen and aren’t uncommon. The result is, of course, an unhappy customer, likely looking for another service provider or third party. It may not seem like a big deal to the company, but it can snowball into one just by word of mouth.

The first example leads to potential loss of sales, which is difficult to quantify, unless your company keeps track of customer repetitive buys and/or inquires, which could be fulfilled directly. We know happy customers talk about his or her experiences to 4-5 people, but you can expect an unhappy customer to double that number.

The other factor to weigh in is additional revenue, which can be generated by improving customer satisfaction. There are simple metrics, which indicate the linkage between parts availability and additional sales. The rule of thumb says for every percentage point of service part availability, revenue grows ¼ of a percent. This is relatively simple to measure, and advanced inventory optimization makes it possible to optimize the service level based on customer and product segmentation.

A happy customer is more likely to return, and your wallet share also increases. According to research by Peter Kriss, the increase of customer satisfaction score from 7 to 8 in transactional business gives 30% more revenue per customer. Since after-market business mostly buys for need, the increase is smaller, but just think what would it mean for your operations, if you get 5% more sales per customer?

Another factor of revenue increase of customer satisfaction for the service parts business of an OEM (original equipment manufacturer) is the link between new product sales and service customer satisfaction. Remember, that the largest part of the lifetime of the product is the time when it is serviced. Ignoring aftermarket customer satisfaction also puts your new product sales at risk. Afterall, sales reliability and service quality is both in B2C and B2B; a very important factor in investment decisions.

It is time to start looking at your own services business from the customer perspective. It is already an unpleasant experience to unexpectedly need service, and missing the critical part to complete makes the experience more of a disaster.

Learn how you can get ahead of this curve and build an agile supply chain with a digital supply chain planning platform like Logility. Have you looked into inventory solutions? Read more about inventory optimization in this blog or download a free copy of our Executive brief: Rightsizing Inventory in a Cash Conscious Economy.