Tim Geyer, Managing Director of North America, recently joined industry experts from Syncron to break down all things market-based pricing.
Market-Based Pricing as a Driver of Success in the Spare Parts Market
In a networked & digital world, markets are becoming increasingly transparent and accessible, including the global procurement and sales market for parts.
In addition to the familiar challenges and issues in the aftersales of mechanical engineering companies, such as customer loyalty, price sensitivity and a shortage of skilled workers, the focus in 2023 will be on digitalization and globalization.
In a networked and digital world, markets are becoming increasingly transparent and accessible, including the global procurement and sales market for spare parts. What opportunities do market dynamics offer for the aftersales sector? We explain why aligning prices with the market is worthwhile and how you can revolutionize your spare parts business with a market-oriented pricing strategy.
An overview of the potential in the aftermarket
Aftersales has proven to be a resistant business sector even in crises and is considered a secure source of income for mechanical engineering companies.
In the wake of Industry 4.0, digitalization is already firmly established in service at most mechanical engineering companies. In 2023, it's Aftersales 4.0 and rethinking: OEMs are prioritizing digitization topics in service and initiating the transformation change. Customers expect digital products and proactive behavior - and that's what it's all about.
"The potential for the topic of pricing is immense in its own right. Every machine and plant manufacturer is concerned with this topic and it is no secret that almost everyone here generates, or has to generate, a significant part of their earnings with spare parts," explains Rainer Hundsdörfer, senior advisor at MARKT-PILOT and former CEO of Heidelberger Druckmaschinen AG. The focus must be on actively shaping aftersales. This is where the potential lies in market-oriented spare parts pricing."
Aftersales activity is most efficiently shaped by digital solutions. In the aftermarket, the answer to being innovative and proactive is market-oriented spare parts pricing.
Other attempts at a more proactive aftersales department resort to value-based pricing. In recent years, many companies have responded to increasingly transparent markets by differentiating markup factors and taking greater account of aspects such as customers' willingness to pay and market prices of potential substitutes when setting prices. However, the manual and non-automated nature of this solution quickly reaches its limits due to the fluctuations and size of the market and cannot be kept up-to-date. Automated market price research and the associated up-to-date information on prices and delivery times in the market overtake this model and enables holistic, market-oriented pricing of spare parts through market transparency for OEMs.
Based on current evaluations, only 4.1 percent of all spare parts are priced in line with the market. For the remaining 95.9 percent, there is potential for price increases and market share. With the SaaS solution from MARKT-PILOT, these potentials become visible and directly realizable for machine manufacturers.
Customer loyalty, price sensitivity and sales pressure: challenge or opportunity?
"Our claim is to enable machine manufacturers to act proactively in a volatile market and to create added value for the entire industry with our solution," explains Stefan Deuschle, head of customer success at MARKT-PILOT. MARKT-PILOT's SaaS solution actively turns challenges such as customer loyalty, price sensitivity, and sales pressure into opportunities: MARKT-PILOT uses automated market research to make competitive prices and delivery times for machine manufacturers' replacement portfolios transparent. The AI of the PRICE-RADAR software combines offline research at manufacturers & dealers with intelligent online research and delivers information on prices and delivery times from several thousand web stores and marketplaces in the decisive markets. This new market transparency allows the prices of the corresponding spare parts to be actively aligned with the market.
In addition to the positive impact on sales, market-oriented pricing also has a positive effect on customer loyalty and satisfaction, as prices are now based on sound data and are fairly aligned with the market. In this way, companies also counteract customer price sensitivity.
"MARKT-PILOT manages to solve a problem in mechanical engineering in a practical way and to map the benefits effectively in the software. MARKT-PILOT speaks mechanical engineering!" summarizes Pascal Wolf, team leader of spare parts management at OPTIMA packaging group GmbH.
The aftersales market is a large driver of revenue and creates an immense amount of opportunity for machine manufacturers. Utilizing an automated, market-oriented parts pricing strategy will allow for the full potential to be unlocked, especially in the current age of digitalization where businesses require market transparency to be successful.