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From Wait-and-See to Lead-the-Way: Winning the Tariff Game in Spare Parts
Optimize spare parts pricing amid global tariffs: insights, strategies, and expert opinions for OEMs facing market volatility and supply chain...
GUIDE
The Essential Aftermarket KPIs for Success
Discover essential aftermarket KPIs to boost revenue, profitability, and efficiency in the parts business and learn more about the benefits of data-driven decisions with MARKT-PILOT. Download our cheat sheet to succesfully manage your aftermarket KPIs.
Key Takeaways
💡Tracking the right aftermarket KPIs is essential for optimizing revenue, profitability, operational efficiency, and customer satisfaction in the parts business.
💡Data-driven decisions supported by market research and competitive pricing intelligence enable informed pricing adjustments and effective pricing strategies.
💡Monitoring operational efficiency KPIs like inventory turnover, lead time, and on-time delivery helps streamline processes and improve customer experience.
💡Implementing tools like MARKT-PILOT can improve KPI tracking and support sustainable business growth through market-based pricing optimization and improved transparency.
WHY KEY PERFORMANCE INDICATORS MATTER
Why KPIs Matter in the Parts Business
The parts business , often also referred to as aftermarket, after sales or after-sales-service, encompasses all the support and services provided to customers following their initial purchase. This includes maintenance, repairs, spare parts supply, and other value-added services that extend the lifecycle of a product.
The parts business within the machine manufacturing industry is experiencing significant growth. For instance, the global construction equipment aftermarket was valued at over $25 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 4% from 2023 to 2032. Similarly, the agricultural equipment market is expanding, with projections indicating growth from $193.46 billion in 2024 to $344.77 billion by 2032, reflecting a CAGR of 7.5% during this period.
To remain competitive in these expanding markets, pricing and aftermarket managers must track the right KPIs. A key performance indicator (KPI) is a measurable metric used to track progress toward specific business goals.
Tracking KPIs in the aftermarket and pricing allows businesses to measure the effectiveness of their pricing strategies, identify opportunities for improvement, and ensure that their services align with overall business objectives. It ensures informed decision-making, aligning key performance indicators with business goals and pricing goals for process optimization and a proactive approach to market trends. Without proper monitoring, businesses face:
➡️ Missed revenue opportunities due to ineffective pricing strategies, highlighting the need for efficient pricing to optimize revenue and profit margins➡️ Stockouts or excess inventory, leading to higher costs
➡️ Delayed deliveries and poor customer experience
➡️ Reactive rather than proactive decision-making
Revenue and Profitability KPIs
Aftermarket Revenue as a % of Total Revenue
A strong aftermarket business should contribute a significant portion of total revenue. Industry leaders generate up to 30% of their revenue from aftermarket services. Tracking aftermarket revenue also helps assess market share within the industry, as it serves as a key performance indicator for a company's competitive position. A decrease in aftermarket revenue may signal sales volume declines, which could impact overall business performance.
📟 Formula: (Aftermarket Revenue / Total Revenue) x 100Service Contract Renewal Rate
A high renewal rate suggests strong customer satisfaction and recurring revenue potential. Understanding your target audience and addressing the needs of potential customers can further improve contract renewal rates by ensuring your offerings and pricing align with what future and existing clients value most.
📝Formula: (Renewed Contracts / Total Contracts Up for Renewal) x 100Ratio of Aftermarket Margin to Equipment Margin
This KPI highlights the profitability of spare parts and service offerings compared to original equipment sales.
Analyzing this ratio provides valuable insights into the company's profitability and helps inform the overall pricing strategy. Understanding margin ratios also helps identify optimal prices for aftermarket products and services, ensuring that pricing decisions support both profit maximization and strategic business goals. A higher ratio indicates that aftermarket services are a major profit driver.
"For industrial manufacturers, such services not only carry gross margins that are twice the 15% to 25% typically earned from equipment sales, they also create a sticky relationship with customers that drives loyalty, retention, and repeat business." - Boston Consulting Group, 2025
Operational Efficiency KPIs
Operational efficiency KPIs are critical for evaluating and optimizing the performance of aftersales services. These key performance indicators provide actionable insights into how well a company manages its resources, processes, and customer interactions, ultimately impacting profit, sales volume, and overall business performance.
By closely monitoring these operational efficiency KPIs, businesses can identify trends, streamline processes, and implement data driven decisions that improve profitability, support sustainable growth, and strengthen their position in the market.
Inventory Turnover Ratio
This KPI measures how often inventory is sold and replenished within a given timeframe. A high inventory turnover ratio signifies effective inventory management, lower inventory carrying costs, and the ability to swiftly adapt to market demand.
The formula for calculating inventory turnover ratio is the cost of goods sold divided by the total or average inventory, indicating how many times inventory is sold or “turned over” during a period. By optimizing this ratio, companies can increase sales volume, reduce excess stock, and implement pricing strategies that are well aligned with market trends.
📦 Formula: Cost of Goods Sold / Average InventoryOn-Time Delivery Rate (OTD)
Meeting promised delivery dates is critical in the aftermarket business. Timely delivery not only ensures customer satisfaction but also helps maintain the company's reputation and competitive edge. Delays can lead to lost sales, increased costs, and damage to customer relationships.
Therefore, monitoring and improving on-time delivery rates should be a top priority for aftermarket managers. Implementing efficient logistics, accurate demand forecasting, and strong supplier relationships are essential strategies to meet delivery commitments consistently.
🚚 Formula: (Orders Delivered on Time / Total Orders) x 100Production Lead Time (LT)
Efficient production times ensure timely deliveries and minimize customer downtime. Understanding quantity demanded allows businesses to better forecast needs, optimize production schedules, and reduce lead times. In essence, lead time represents the duration from when an order is placed until it reaches the customer.
⏱️ Formula Manufacturing Lead Time = Pre-Processing Time + Processing Time + Post-Processing Time
Downtime to Operating Time
Measures machinery effectiveness and maintenance efficiency. Preventive maintenance reduces downtime, improving operations. This KPI is essential for understanding how well equipment is utilized and maintained, directly impacting production capacity and operational costs.
By minimizing unexpected breakdowns and scheduling timely maintenance, companies can enhance overall equipment effectiveness (OEE), reduce repair expenses, and increase uptime, which contributes to higher margins and better customer loyalty. Tracking downtime relative to operating time also helps identify patterns or recurring issues, enabling targeted improvements and informed decision-making to optimize maintenance schedules and resource allocation.
🆙 Formula: Downtime / Operating TimeYield (First Pass Yield - FPY)
Assesses production efficiency and quality control. A high FPY means fewer defects and rework. This KPI is vital for maintaining product quality and reducing costs associated with defective parts or reprocessing. By improving first pass yield, companies can enhance operational efficiency, minimize waste, and increase customer loyalty through reliable product delivery. Monitoring FPY over time also helps identify process improvements and training needs for production teams, contributing to sustained business growth and competitiveness.
👌 Formula: Parts Passed Without Failure / Total Parts Produced
WHITEPAPER
Benefits of Price Intelligence Software for OEMs
Price intelligence enables machine manufacturers with strategic insights to optimize spare parts pricing strategies and KPIs. Our whitepaper Price Intelligence in Machine Manufacturing provides the key knowledge and tools to increase competitiveness in the parts business.
Customer Satisfaction and Market Positioning KPIs
First-Time Fix Rate (FTFR)
This KPI tracks the percentage of service requests resolved correctly on the first visit. A high first-time fix rate reflects efficient operation, and well-trained service teams. Improving this metric can reduce repeated visits, lower operational costs, and boost customer satisfaction, all of which contribute to higher profits and business growth.
🛠️ Formula: (Number of jobs completed on the first visit / Total number of jobs completed) x 100Mean Time To Repair (MTTR)
MTTR measures the average time required to complete a repair job. Reducing MTTR not only enhances the customer experience by minimizing downtime but also increases the number of service calls that can be handled within a given period. Faster repair times can lead to increased sales volume, improved resource utilization, and a stronger competitive edge in the market.
⏳ Formula: Total Repair Time / Number of RepairsCustomer Service Levels
Measures responsiveness, issue resolution time, and overall service quality which is critical for retention. Monitoring these factors helps identify bottlenecks in service delivery and areas for improvement, ensuring customers receive timely and effective support.
High service quality directly contributes to increased customer satisfaction, loyalty, and repeat business, which are essential for long-term success in the aftermarket industry. Implementing regular feedback mechanisms and training programs can further improve service responsiveness and resolution rates, driving continuous improvement and competitive advantage.
Transparency Towards Customer
Providing real-time updates on order status and pricing builds transparency and customer trust, increasing repeat business. Transparent communication regarding pricing adjustments and availability helps manage customer expectations effectively, reducing disputes and enhancing satisfaction.
Transparency also enables customers to make informed purchasing decisions, which contributes to stronger loyalty and a better overall customer experience. By leveraging technology to automate and personalize updates, businesses can maintain consistent communication, further boosting customer confidence and retention.
Pricing and Market Intelligence KPIs
Profit Margins
Monitoring gross and net profit margins ensures sustainable pricing strategies. These margins are essential pricing KPIs that provide insights into the company's profit health by comparing revenue with the cost of goods sold and other expenses.
Maintaining healthy margins allows businesses to invest in growth opportunities and withstand market fluctuations. Regularly analyzing gross profit helps identify areas where product costs or variable costs can be optimized, while net profit margins reveal the overall efficiency of the company's operations, including fixed costs management.
💲Formula: [(Sales Price- Purchase Price) / Sales Price] x 100Price Elasticity
The concept known as price elasticity is important amongst the pricing KPIs as it measures how sensitive customers are to changes in price. A product with high elasticity will see a significant change in quantity demanded when its price changes, while a product with low elasticity will experience relatively stable demand despite price fluctuations.
Understanding how price changes affect demand is crucial for optimizing pricing strategies. By analyzing price elasticity, businesses can make informed pricing decisions that balance competitive pricing with revenue maximization, ultimately boosting sales volume and improving profit.
⚖️ Formula: % Change in Quantity Demanded / % Change in PriceCustomer Acquisition Cost (CAC)
A lower CAC while maintaining pricing integrity drives sustainable growth. Achieving this balance requires a strategic approach to marketing and sales efforts, ensuring that customer acquisition costs are optimized without compromising the perceived value of products or services. By continuously analyzing and adjusting campaigns based on performance data and market trends, businesses can attract high-quality customers more efficiently.
Additionally, integrating customer feedback and competitive intelligence helps refine targeting strategies, further reducing acquisition expenses while supporting the company's pricing strategy. Ultimately, a well-managed CAC contributes to improved revenue growth and long-term profitability by maximizing the return on marketing investments.
🤝 Formula: Total Marketing and Sales Spend / New Customers Acquired
Customer Lifetime Value (CLV)
Customer Lifetime Value represents the total revenue a business can expect from a single customer account throughout the entire duration of their relationship. By understanding CLV, companies can tailor their marketing and pricing strategies to maximize the value derived from each customer, rather than focusing solely on short-term sales.
This approach encourages investments in customer loyalty, retention programs, and personalized offers, which collectively contribute to sustained revenue growth and improved margins. Additionally, tracking CLV alongside Customer Acquisition Cost (CAC) allows businesses to evaluate the overall efficiency of their customer acquisition and retention efforts, ensuring that resources are allocated effectively to support sustainable business growth.
💰 Formula: Average Revenue per Customer x Customer Retention Period
WHITEPAPER
Use Your Data for Marked-Based Pricing
Market Intelligence is the foundation for succesful parts business. In our whitepaper Ultimate Guide to Marked-Based Parts Pricing we provide the key knowledge and tools to succesfully implement this pricing strategy.
How MARKT-PILOT Supports These KPIs
MARKT-PILOT is a specialized pricing intelligence platform that helps machine manufacturers understand the market competition. A key feature of the platform is its ability to provide market insights, enabling users to collect and analyze data on competitors' spare parts pricing and delivery times.
By utilizing insights from industry experts, MARKT-PILOT enables businesses to develop effective strategies that improve financial performance, including better evaluation of ROI and other key success metrics
Market-Based Pricing Optimization
- Supports KPIs: Profit Margins, Price Elasticity, Aftermarket Revenue %
- Analyzing global market data to ensure pricing aligns with demand while maximizing profitability.
Customer Satisfaction and Service Optimization
- Supports KPIs: Transparency Towards Customer
- Improving transparency in pricing and availability, ensuring customers receive the right parts at the right time.
Profitability and Growth Indicators
- Supports KPIs: Ratio of Aftermarket Margin to Equipment Margin, CLV
- Enabling strategic decision-making by uncovering revenue opportunities in the aftermarket segment.
Market intelligence is the key to a successful parts business in machine manufacturing.
Simple Implementation
Ready to use in less than 30 minutes. No integration or training required.
Accurate Results
MARKT-PILOT takes over market price research for spare parts and delivers validated results through a 1:1 comparison.
+24,500 data sources
Access to validated data points from various online and offline sources for unrivaled data accuracy.
Customer Success Story: Kardex Mlog
THE CHALLENGE
Achieving optimum prices while maintaining customer satisfaction is an extreme challenge for machine manufacturers. This was also the case for Kardex Mlog.
Until now, price differentiation could only be defined by product groups and was therefore associated with a great deal of effort. Additionally, price adjustments only occurred once a year. With customers able to obtain information about prices, delivery times, and the availability of spare parts on the market at any time, Kardex Mlog was faced with a challenge.
EFFICIENT PRICING WITH STRONG MARKET DYNAMICS
The solution? PRICERADAR from MARKT-PILOT. Kardex Mlog has been using the MARKT-PILOT solution for more than a year and has been able to immediately react to market dynamics by conveniently adjusting spare parts prices several times a month.
Especially with the current market dynamics, it pays to have a tool like PRICERADAR. After all, what’s wrong with adjusting prices three times a year? Mlog’s customers also benefit from the increased flexibility and consistently increased potential.
Conclusion
Tracking the right KPIs is essential for driving revenue, profitability, and operational efficiency in the aftermarket business. Adopting a data-driven approach enables businesses to optimize pricing and inventory management effectively. Additionally, prioritizing service excellence and maintaining market transparency are crucial for strengthening customer relationships and fostering long-term success.
By consistently monitoring key performance indicators, companies can identify trends and make informed pricing adjustments based on market conditions and competitor price movements. This proactive management helps maintain a competitive edge, ensuring that pricing strategies remain effective and aligned with business goals. Furthermore, understanding metrics such as average selling price, units sold, and gross margin allows businesses to refine their sales mix and maximize revenue.
Implementing effective pricing strategies supported by clear pricing KPIs also supports revenue maximization and business growth. When businesses leverage these insights, they can better forecast demand, reduce obsolescence, and improve customer experience through timely deliveries and transparent communication. Overall, a comprehensive KPI framework empowers aftermarket managers to make data-driven decisions that enhance operational performance and secure long-term profitability.
What Are Aftermarket KPIs, and Why Are They Important?
Aftermarket KPIs and Pricing KPIs are key performance indicators that measure the success and efficiency of after-sales services, spare parts management, and customer support in the parts business. They are important because they help businesses track progress toward revenue growth, profitability, operational efficiency, and customer satisfaction, enabling informed pricing decisions and strategic adjustments.
How Can Tracking Pricing KPIs Improve My Aftermarket Business?
Tracking pricing KPIs allows you to optimize pricing strategies by understanding factors like profit margins, price elasticity, average price, and competitive pricing. This leads to better revenue maximization, improved gross margins, and enhanced profitability while maintaining a competitive edge in the market.
Which KPIs Should I Prioritize for Operational Efficiency in Aftermarket Services?
Key operational efficiency KPIs include Inventory Turnover Ratio, Lead Time, On-Time Delivery Rate, Downtime to Operating Time, and First Pass Yield. Monitoring these helps streamline processes, reduce costs, improve sales volume, and ensure timely deliveries that boost customer satisfaction.
How Does Customer Satisfaction Impact Aftermarket KPIs?
Customer satisfaction directly influences KPIs such as Service Contract Renewal Rate, First-Time Fix Rate, and Transparency Towards Customer. High satisfaction levels foster loyalty, repeat business, and positive market positioning, which in turn drive sustainable business growth and profitability.
How Can MARKT-PILOT Support Tracking and Improving Aftermarket KPIs?
MARKT-PILOT offers extensive market insights, competitive pricing intelligence, and automated data analysis to help businesses monitor essential KPIs effectively. It supports market-based pricing optimization, enhances transparency, and uncovers revenue opportunities, empowering aftermarket managers to make data-driven decisions that improve financial performance and operational efficiency.
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