Product-Dependent or Product-Related? Choosing an Aftermarket Strategy

Written By: Kyle Irby
  • Service & Parts
  • 11/6/2017

A few weeks ago, I outlined the business case for developing a Product-as-a-Service aftermarket strategy. What that strategy looks like in practice depends on a few factors:

  • Your existing competencies.
  • Your overall aftermarket service goals.
  • How customers use your products.

These considerations largely determine whether you choose to deliver product-dependent or product-related services.

Product-dependent aftermarket strategies

In a product-dependent service transaction, you, as the manufacturer, assumes full responsibility for a product’s maintenance after a customer buys it. Contractually, you may be obligated to deliver certain uptime rates, such as 95%. If you fail to do so, you have to pay penalties to your customers.

Analyze your customer’s operating environment, and then develop a maintenance plan that minimizes product degradation. Afterward, ensure your spare parts logistics team is capable of supporting that maintenance plan. Assess how that department forecasts spare parts demand and plans stock accordingly.     

You should implement a product-dependent aftermarket strategy if:

  • Your customers aren’t project-driven: Process manufacturers, hospitals, and other institutions that maintain relatively consistent operations need little consultation as to how to use your products. They care more about uptime than strategic utilization.
  • Your customers want control over the equipment: Product-dependent services absolve customers of maintenance responsibilities, but they grant customers the freedom to use those products however they want within their operating environments.

Product-related aftermarket strategies

Product-related services involve assessing customers’ operational objectives and then choosing products to help them meet those goals.

For example, not all construction projects are the same. Some endeavors may warrant different equipment than others. Suppose you're a heavy equipment manufacturer engaged in a product-related service agreement with a contractor. A part of satisfying the terms of that SLA involves analyzing the contractor's project plans and choosing specific products to help the company complete the work.

The manufacturer will also assess how the project will impact each product’s performance and develop a maintenance strategy to minimize the associated duress. Contracts usually specify that the manufacturer is responsible for all maintenance activities for the duration of the project.

You should implement a product-related aftermarket strategy if:

  • Your customers avoid product ownership: If your products are expensive to maintain and operate, customers may be open to the idea of you handling these responsibilities.
  • Your customers focus on projects: It’s easier to sell product-related service agreements when customer operations vary from project to project. A contractor is a perfect example. It may build a parking garage one year, and construct a bridge the next.
  • Your core products traditionally involve large capital investments: If your products usually involve large capital investments, customers will find value in (and pay for) the ability to minimize spend while achieving the desired outcomes within their operations. Being able to provide the right guidance will gain the customer’s trust, which can lead to either direct product sales or engagement with product-dependent services.
  • You have consultation capabilities: If you possess the human capital capable of analyzing how your customers can minimize costs through the use of your products, then a product-related aftermarket strategy is right for you.

One thing to keep in mind: Customer trust plays a huge part in all of this.

A manufacturer may have more confidence in your ability to select, install, service, and even operate equipment across their factories than they do their own staff. Earning this trust obviously doesn’t happen overnight. But if you prove your ability to optimize product performance, then a customer may be more open to the idea of product-related services.

PTC conducted research in tandem with IDC about what sort of Product-as-a-Service offerings manufacturers are developing. You can dive into the studies below to discover more:

PTC IDC companion white paper on service journey

  • Service & Parts

About the Author

Kyle Irby

Kyle Irby is an Advisor in PTC’s IoT Transformation Advisory Practice (ITAP). He is a seasoned professional with over two decades of experience in Field Service and Operations helping multiple organizations develop the necessary strategies across technology and processes to drive revenue into organizations. Kyle is currently focused on helping organizations understand and create the business transformation models and necessary roadmaps to take advantage of possibilities that IoT and related technologies are creating in the marketplace. It is his belief that organizations that grasp the possibilities and lay the foundations today will become the success stories in the future.