CoDestiny

Building Life Cycle Relationships With Customers

Friday, October 22, 2010 - Permalink
One of our colleagues recently published a paper titled 'Equipment and Aftermarket Growth Strategy.'  What he found was that for firms that made equipment with long life cycles, there was a tremendous opportunity to link strategies related to the original equipment to strategies for aftermarket parts and service support.

His paper includes case studies of firms that used their parts and service superiority in order to build a preference for their equipment.  Another firm’s business model involved equipment design that facilitated modernization and upgrades over its life.

When your product is going to be used by customers for years and years, there is a great opportunity to learn from firms that have built life cycle relationships with their customers.  These firms not only get the parts and service business, but also are well positioned when it’s time for their customers to replace the equipment itself.

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Comments
Jon Gabrielsen commented on 25-Oct-2010 04:22 PM
An example that pulls many of the key factors for a very successful ownership lifecycle approach all together is that of an industrial refrigeration equipment supplier who sold through distributor refrigeration contractors. Through the process of servicing the equipment they built up very strong close relationships with all of the end users in their area. Thus whenever the end users were considering the purchase of new equipment it was the distributor contractor and therefore the equipment supplier that was always in the know long before it went out to bid, and in many cases it never went out to bid. Hence the ownership lifecycle support approach created a virtuous cycle of repeat sales that was all but impenetrable by the competitors.

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"Understanding the customer chain is the lever for value creation in any business. Companies that follow the path outlined in CoDestiny will unlock growth opportunities, build customer loyalty, motivate employees, and grow shareholder value."

David D. Petratis, Chairman, President, and Chief Executive Officer, Quanex Building Products, Houston, TX, and former President and Chief Executive Officer, Schneider Electric North America
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