Boost Revenue, Build Loyalty: The Servitization Strategy Every Manufacturer Needs

Manufacturers are discovering significant opportunities by transitioning from traditional product sales to a model that combines products with services.  

This shift, known as servitization, allows companies to better meet customer needs while boosting revenue and profitability.  

By adopting asset monetization and servitization (AM&S) strategies, manufacturers not only enhance the value provided to customers but also strengthen their role as a trusted partner rather than just a supplier.  

Through AM&S, manufacturers can maximize asset value and increase customer satisfaction in ways traditional sales models cannot achieve.

What Is Servitization, and Why Does It Matter?

‍

We are in an era dominated by technological advancements like IoT, AI, and cloud computing. Servitization empowers manufacturers to add value through services connected to their core products. Instead of simply selling machinery or equipment, manufacturers can now offer comprehensive solutions that include maintenance, repairs, upgrades, training, and analytics.

This strategic shift moves companies from a focus on transactional product sales to building long-term, value-driven relationships with their customers.

A key component of this value lies in the deep knowledge and expertise manufacturers possess—expertise that many customers do not have. By leveraging their technical know-how, manufacturers can guide customers in maximizing the performance, efficiency, and lifespan of their equipment.

This unique advantage positions the manufacturer as not just a supplier, but a trusted partner who delivers tailored solutions and ongoing support.  

Key Benefits of Servitization for Manufacturers

Transitioning to a servitization model can yield substantial benefits for manufacturers, including:

Enhanced Revenue Streams: Offering services alongside products can create recurring revenue streams through contracts and subscriptions.

Optimized Asset Utilization: Monetizing underused assets, such Pay-Per-Use and Subscription Services, Integrated Maintenance and Support Services, Data-Driven Insights and Analytics, and Revenue from Complementary Services.

Customer Retention and Engagement: By integrating end-to-end solutions, manufacturers remain connected with customers throughout the product lifecycle, building loyalty and customer lifetime value.

Servitization in Action: Real-World Examples

Several manufacturing giants have successfully implemented servitization to reshape their business models and drive revenue growth.

Xerox’s Managed Print Services: Moving from selling copiers to offering 'Printing As A Service', Xerox achieved a 10% annual increase in service revenue, which now represents 80% of its total income.

Rolls-Royce’s TotalCare Program: By monetizing its engine health data, Rolls-Royce provides predictive maintenance for aircraft engines, generating over $5 billion annually and comprising over half of its Civil Aerospace revenue.

Caterpillar’s Equipment-as-a-Service: Caterpillar’s subscription model for construction equipment, which includes telematics and maintenance, generated over $20 billion in service revenue and is expected to grow.

How Manufacturers Can Get Started with Servitization

Embarking on a servitization journey requires thoughtful planning and a commitment to cultural and operational change. Steps to begin include:

Identifying Monetizable Assets: Determine which assets, like machinery or digital platforms, can be leveraged for new services.

Building a Servitization Roadmap: Implement a clear plan that includes technology integration, staff training, and process adaptation to support the shift.

Designing Value-Added Services: Develop services that enhance the customer experience, such as installation, maintenance, and data analytics.

Overcoming Challenges in Servitization

While the rewards of servitization are significant, challenges exist, including resistance to change and the complexity of integrating product and service systems. Addressing these obstacles requires a solid change management strategy, cross-functional training, and a focus on balancing product and service innovations.

These challenges can, however, be addressed with the right partner supporting your integration efforts.

A New Era for Manufacturers through Servitization

For manufacturers, servitization offers an opportunity to change their business models, providing comprehensive, outcome-based solutions that improve customer satisfaction and drive sustainable revenue growth.  

As manufacturing companies embrace servitization, they position themselves as essential partners in their customers' success, creating lasting competitive advantages in the service-oriented economy of tomorrow.

‍