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Servitization and Field Service

The on-going squeeze on product margins and global commoditization are forcing companies to look for revenue elsewhere - namely in the form of services. Some would argue that products are now just a platform for services and should be designed and built as ‘service ready’.

Forward thinking management teams are starting to embrace a more offensive approach to changing their business strategy to drive revenue growth, block out competitors and increase customer loyalty - namely through servitization. If you’re not familiar with the term, it essentially involves a firm (often manufacturing companies) transforming from a focus on production to delivering advanced services.

The traditional business model is to sell a product and the customer pays. The relationship with the customer in this context is based on a transaction. Over the past 50 years, manufacturers have focused on efficiently making good products in order to maximise their returns at the moment of sale. However, in a globally competitive market, many products are now commoditised and margins are getting squeezed, diminishing the leverage from such production-centric approaches.

That’s where a service-centric business model comes into its own. Servitization transforms companies from production to service provider, shifting them to delivering advanced services, such as selection, consumables, monitoring, repair, maintenance, disposal, as well as the opportunity to increase service revenues even further by supporting existing third party or competitive products. This creates an on- going relationship with the customer that effectively locks out competitors.

As technology becomes easier and faster to copy by low cost competitors, manufacturers must not only differentiate themselves through new services, but also drive business results at the crucial point of service.

Vanessa Land
Devonshire Marketing
+44(0)7768 693779

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