The rise of the Internet of Things (IoT) and smart, connected products disrupts the whole customer life cycle in industrial equipment. As part of TSIA’s research activities, we track the latest trends affecting the industrial equipment sector, which includes automation technology, machines, instruments and components, and solutions providers leveraging industrial equipment. In this post, I’m going to be sharing how these trends affect customer life cycle management.

Why You Need New Customer Life Cycle Management

These changes happening in the industry are forcing industrial equipment organizations to rethink their current customer life cycle management process. Such factors behind this need include:

  • Commoditization. TSIA’s Industrial Equipment 40 index, which tracks 40 IE companies, is showing strong revenue growth over the last two quarters while product and services margin continues to remain under pressure. This is a clear warning sign that commoditization of feature functionality is reaching this industry.
  • Smart, Connected Products. The rise of IoT creates the opportunity to connect with the customer over the whole life cycle, collect a mass of data, and provide the customer valuable insights. This enables suppliers to help customers optimize their processes and improve their outcomes.
  • Following the Remote Services Continuum. To translate those trends for IE manufacturers and help navigate the transition toward services decoupled from the traditional product business, TSIA has developed a framework that we call the Remote Services Continuum, which you can read more about in our ebook, “Why Services is the Big IoT Opportunity for Hardware Manufacturers.”
  • Higher-Level Services. Following the Remote Services Continuum and providing higher-level services is enhancing the traditional “make, sell, ship, implement” business model. The addition of “own, operate, get outcome” changes the customer journey over the whole customer life cycle. This is the reason why TSIA members are using the LAER model as a guideline to manage all customer interactions over the whole lifetime of the account. IE companies have a lot of experience in the “Land” and the “Renew” portions of the LAER model, but the focus on “Adopt” and “Expand” are new initiatives for most IE companies.
tsias laer model  

TSIA's LAER model

The Industrial Equipment Customer Life Cycle

So, what does the LAER model when applied to the industrial equipment customer life cycle look like?

Land

Today, IE companies want to attach information services with the initial product deal. To achieve this, service specialists needs to be involved in the initial deal to show the value of smart, connected products/smart services and to build trust to motivate customers to get connected and share data.

Adopt

Product support is evolving toward customer success. To optimize the usage of smart, connected products, technology suppliers need to enhance their focus on the processes and the ecosystem in which the equipment is embedded.

As the software and analytics part of equipment is increasing, IE companies need to monetize these services and include them in support contracts, especially software maintenance and upgrades, which can be included in service offers.

This creates opportunities to provide and monetize adoption services.

examples of monetized technology adoption services  

(Click image to enlarge.)
Examples of adoption services you can monetize.

Expand

Today’s focus on helping customers achieve specific outcomes, along with the capabilities of consumption and customer experience analytics, are creating opportunities for providing customers with tailor-made solutions and offers. Such offers can come in the form as spare and replacement parts, new or adjusted contract features, training recommendations, or equipment and software upgrades.

Those IE companies offering information services and software solutions, or even IoT platforms, are using their accounts to connect and service both their own products as well as third-party products. This creates huge opportunities to expand the business with existing accounts.

Renew

Today, product, process, consumption, and customer experience analytics provide the opportunity to address customers at the right time with the best offer and recommendations to ensure their renewal is tech-assisted, or at least partially automated. The renewal phase is strongly linked with the adoption phase. The more successful your adoption services and expansion activities are, the higher the stickiness of your customers to your solutions, and the higher your renewal rates.

To manage these phases in an effective way, you need to become LAER Effective.

How to Become LAER Effective

It is the goal that customers achieve consistent, measurable, and extraordinary outcomes throughout their entire journey with your products and services.

Blended Sales and Service Motions Over the Customer Life Cycle

Give up the silos. All customer interactions with smart, connected products require intensive collaboration between Sales and Services. Establish handshakes between Sales, Customer Success, and Services to optimize the customer life cycle value. Also, be aware that Services interacts with the customer 5-15x more than Sales, giving them unrivaled insight, and valuable data, on how to match products and services with the outcomes customers want to achieve.

Attach and Renewals

TSIA benchmarks show that industrial equipment companies have a support attach rate that is far below other industries. Closing the gap represents significant potential for revenue growth and reliable revenue streams in the long run, with high renewal rates for contracts.

Driving adoption is important for all customer interaction. TSIA Field Services Benchmarks show an improvement in renewal rates up to 7 points when field service engineers took the initiative to drive adoption vs. engaging only in break-fix maintenance activities.

When the customer is using your products and services intensive and successful it makes that customer account more sticky. To reach this you need to…

Create Customer Success Plans

A customer success plan is what you are doing for the customer to help them achieve their business objectives. Such a plan includes activities to analyze the customer’s usage of products and services to enable the CS team to improve customers’ awareness of the capabilities of the solution, its skills, and usage.

Driving adoption is the key to making your customer successful in using your products and services. Effective adoption drives opportunities across the whole life cycle.

Monetize Customer Success

Monetizing some of the customer success activities that customers have come to value is an important step toward becoming LAER Effective. Equipment manufacturers offer information services to help customers use and adopt the equipment more successfully. As these services are often not yet mature, it is difficult to monetize them as standalone offers. IE companies have the opportunity to bundle in such services in premium support tiers.

Expand Customer Spend

Help current customers expand their spending as their usage of your products and services increases.

A systematic customer success approach and an enhanced focus on expansion of existing accounts create additional benefits through upsell and cross-sell of products and services. And, last but not least, it circles back on improvements of the renewals.

Come to TSW to Learn More

If you want to learn more about how to become LAER Efficient, be sure to join us at TSW Las Vegas 2018, October 15-17. There, we’ll have lots of compelling sessions by industrial equipment companies and TSIA researchers on topics such as:

  • IoT offers for IE companies
  • Driving adoption with training
  • Talent management
  • Bridging the gap between equipment and digital services
  • And much more!

There’s still time to register. I hope to see you there!
 

Read more posts in the LAER Effective Company series:

 
 
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Harald Kopp

About Author Harald Kopp

Professor Harald Kopp, is director, Industrial Services Research, for TSIA, as well as a teacher in a MBA program for sales and service engineering at Furtwangen University, Germany. His focus is chiefly on services in industrial automation, equipment, instruments and technology companies. He has 20 years of experience in the areas of research, consulting and management in industrial services, supply chain management, and IT-Management in industrial equipment, automotive and enterprise IT industries.

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