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After-Sales & Service – key profit lever, but frequently underestimated

Portrait of Sebastian Feldmann
Partner
Munich Office, Central Europe
+49 89 9230-8317
October 7, 2019

Ten per cent more profitability: how good service has become a margin saver in volatile times

"Achieving tomorrow's success requires excellent, efficient and adaptive service operations. Use your full service potential!"
Portrait of Sebastian Feldmann
Partner
Munich Office, Central Europe

Economic slowdown, Brexit, trade wars and ever-shrinking margins – many companies rely on efficiency programs and " adaptive operations " to stay competitive. The focus is usually on the "classic" functional areas such as purchasing and production, while the after-sales and service are often neglected. However, with a potential of up to 10 per cent additional profitability, there are more than enough reasons to be professional in the after-sales and service business. Our whitepaper shows the necessary measures.

Companies are well-advised to significantly increase their focus on all activities in the product life cycle. Because these "after-sales" topics are not only able to successfully cushion fluctuations in the economy through high and stable margins, but also ensure a significant improvement in the competitive position in the long term. Hardly any customer buys new products even if no professional services are available for them. In many industries, especially in the industry and capital goods branches, after-production service is the second largest sector in terms of the number of employees. Increases in efficiency have a particularly high leverage effect here. Service makes the difference!

Service, After-Sales, Boost, Turbo, Steigerung
After-sales & service: in no other area can a comparable income be achieved with a similar expense.

Service is challenging, customer-oriented and global. Many challenges can only be successfully addressed with the understanding of service as an independent business model. To increase service profitability, it is, therefore, necessary to introduce a profit centre structure for all service units and to clearly define the target margins. This is the only way to create the foundation to unlock the full-service potential of your business. In the three potential areas (service revenues, service costs and service contracts), we can draw on a wealth of experience and have identified eight concrete fields of action that help significantly increase the service margin.

Make service profitable!

One of the eight fields of action is intelligent price control, which leads to higher revenues without compromising customer satisfaction. However, not only the increase in service revenues contributes to the success, but there are also scopes for reducing costs that are far too rarely tackled. The 360-degree service cost assessment deserves special mention here – it is a ruthless analysis of all costs incurred in the service area. Not least, the targeted control of service contracts within the framework of "Recurring Revenue Management" is a critical core competence of successful companies in the service.

The Roland Berger BOOST model for service optimisation

The BOOST model developed by Roland Berger provides the most important starting points for optimising and strategically realigning the service area of companies. Starting from the central question of which business model the service occupies in the company, the operative margin improvement, service "Industrialisation", Strategy & Setup, as well as digital technologies, are the levers and success factors in the design of the service business.

With our BOOST model for service optimisation, we will do justice to the "classic" service topics as well as new technologies and take them to a new level together. Our experience with companies across multiple industries shows that looking at purely product-related changes and technological issues in the service area is not enough if the existing services are not done professionally. Predictive maintenance, artificial intelligence (Al) and other data-based services are not a cure-all. Besides, they’re extremely dependent on the "classic" service business. A holistic optimisation, which also considers topics such as customer proximity, service supply chains or sales competencies, is worthwhile, because unimagined reserves are still slumbering in the existing services - except by all industries. Use your service potential!

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White paper

After-Sales & Service – key profit lever, but frequently underestimated

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Professionally operated, the after-sales and service profitability can be increased by up to ten percent.

Published October 2019. Available in
Further reading
Portrait of Sebastian Feldmann
Partner
Munich Office, Central Europe
+49 89 9230-8317