 "Winning in the aftermarket")
There is such a massive supply of goods and services nowadays both on the internet and on the high street in practically every industry that looking after customers and keeping them happy has become almost a hygiene factor in business today. Most companies understand that and many of them are continuously tweaking their aftermarket strategies to cut costs and make customers come back for more. Some have outsourced part or the whole function of after-sales to a third party; some others are consolidating them under one roof to make them more efficient. Here we look at the experiences of three companies - Philips, Micromax and Volkswagen - that have made radical changes in their after-sales service models over the last two years or so and are seeing the results pouring in.
The experiences of the three companies were different - the first two decided to outsource part of the service function while the last decided to spruce up its act by throwing in its might for more in-house work. But all three realised that it would be fatal to let things be.
Take Philips, for instance. A little over two years ago, the management noticed a growing number of complaints by customers on social media on how the company managed its aftersales. The customer care department, the management felt, was not equipped to handle the aftermarket queries and the resultant delays in handling customer complaints was putting off many prospective consumers. "We struggled with our service centres, customers were dissatisfied with the products and we realised we needed processes that could effectively to address this issue," says ADA Ratnam, president, Philips Consumer Lifestyle India. Additionally, even while the customer base in Tier-II and Tier-III cities was growing, the management noticed, repeat customers were few and far between simply because there were no service stations to repair the kitchen appliances that were sold in those markets.
Given the mess, the top management at Philips felt it would be wise to outsource a major chunk of its aftermarket activities while it took time to create a more robust and strong distribution network/centres, complete with after-sales service facilities for the customer. In 2013, it inked a deal with HCL Care, an aftermarket service provider, for pan-India support for its consumer lifestyle products. "We understood that we needed a much wider reach and network to address the growing concerns of the customers," says Ratnam. HCL Care currently handles the distribution and service of spares of Philips consumer lifestyle products across India. The service team is jointly trained and developed by HCL Care and Philips. The company has a different service partner to cater to complaints specifically emerging from Tier-II and Tier-III markets. In fact, when Philips acquired Preethi, the south Indian home appliances brand for Rs 350 crore three years ago, the idea was to amass both manufacturing and after-sales facilities of the company. "For any company looking to rope in a customer for the long haul, after-sales is key," adds Ratnam.
While it is too early to start counting the fruits of Philips' move, aftermarket experts reckon that the results may already be showing - the company's consumer lifestyle division that comprises domestic and kitchen appliances (also the area where after-sales service was relatively weak compared to the company's other divisions) has become profitable after struggling with flat to low growth till about two years ago.
Partner for progress
As experts will tell you, it is good for companies to innovate and bring out newer products and models, but it is then even more crucial for them to have a robust after sales/aftermarket strategy, especially if you are operating in a market that seems to have hit a speed-breaker.
See how Volkswagen, the German automaker, is now learning from its mistakes and making after-sales an integral part of its growth strategy in India. When Volkswagen entered India in 2010, it had an ambitious aim of grabbing around 20 per cent market share in the country by 2018. But the automaker's travails began soon after and it noticed that sales were slipping as customers were complaining about the unavailability of parts. Volkswagen, it appears in hindsight, had forgotten one crucial thing: putting the customer in the front seat. In an earlier interview to The Strategist, Michael Mayer, director of passenger cars in India for Volkswagen, admitted that while a market like India with its complexities posed a challenge to the automaker, Volkswagen didn't realise how critical after-sales service was for the customer. "After-sales becomes a critical factor for the customer in deciding which car to buy next," Mayer had said, admitting that the auto maker desperately needed to go back to the basics, think deeply and emerge with a solid after-sales service strategy.
Over the last year or so, Volkswagen has been working on decoding the Indian customer's expectations. For starters, Volkswagen needed to deliver genuine parts to customers, especially in south India. Though a part distribution centre (PDC) was operating out of Gurgaon, near Delhi, (it was set up in 2012, two years after the auto major entered India), customers were fed-up with the time taken for the required parts to be delivered to the authorised service stations of the company.
That problem would be sorted to an extent, hopes the company, when the company's part distribution centre in Bangalore becomes operative from mid-2015. This centre is being set up to expand the company's after-sales and spare parts infrastructure in the country, especially in the southern region, while also reducing the current lead time to reach genuine parts to dealers and service centres. With this development spare parts will reach in 24 hours flat (and not days as was the case earlier) to improve customer satisfaction.
Decreasing service time
If Volkswagen's aftersales strategy is geared to ensure the company has a better second innings in the Indian market, see what its competitor, and the number one player in the Indian auto industry, Maruti Suzuki, did recently as part of its after-sales strategy. When Kashmir valley was hit by floods last September, the company stationed 900 technicians from different parts of the country to quickly restore damaged cars. As part of its dedicated aftermarket customer care initiative, nearly 6,000 vehicles were repaired in a jiffy and a huge cache of spare parts, supplies and equipment were rushed to the state to cut down time taken to repair the damaged vehicles. Pankaj Narula, executive director, service division, Maruti Suzuki, explains, "Our experience suggests that a key determinant in the car buying decision is the after-sales network, its accessibility, service costs and the availability of spare parts. Our big goal has been to run a robust service network that also supports sales."
Here's how Maruti Suzuki has got its aftermarket strategy spot-on. "As we grew our business, our network kept pace with the spread." The company has a network of over 3,000 service touch points capable of servicing 15 lakh vehicles every month. Then there are concepts like Maruti Mobile Support, under which the customer gets door-step services; Express Service, that aims to complete a service in 90 minutes. Experts say that the most critical part of a good aftersales strategy is addressing the customer complaint in time - at Maruti service centres, workshop service advisors with handheld devices have already reduced the service initiation time from 15 minutes earlier to less than 10 minutes now.
According to Sharad Talwar, head, HCL Care, two of the biggest challenges that make or break an aftermarket strategy for companies is, one, how quickly a complaint is addressed, and two, how quickly spare parts needed to repair products are made available. To be sure, HCL Care, a business unit of HCL Services, has one of the largest and most extensive service networks across the country and provides support services across a range of product categories. According to Talwar, as product categories grow, a good after sales strategy is intrinsic not just to industries such as automobiles and electronics but also to several others, including consumer health care, appliances, telecom, durables etc. "The customer portfolio is changing and though the failure rate of products has gone down considerably with companies investing in R&D and innovation, competition has increased and so has the complexity of customer demand," he adds.
Think about it: a smartphone company, for example, acquires a customer for the first time when she is in her teens but can retain her for the next few decades if it plays the cards right. The cost of customer acquisition, according to analysts, is typically 40 per cent of the value of the brand. However, if the customer is a repeat one, the costs come down significantly.
"A sure shot way for a brand to get recommended is by having a great after-sales strategy and ensuring that each customer- and her complaint - is important," says Talwar. He adds that outsourcing service to an expert might be a good idea simply because they have stronger data analytics, better facilities to train and equip people and address customer complaints.
Talwar cites an example: "For one of our smartphone companies we saw that while two specific models were made obsolete, many customers still came to us requesting us to repair those specific models that they had purchased. We informed the company to give us original spare parts of the old models, we kept those with us for the next two years and that allowed us to service customers well. This step also bode well for the company that realised that innovating didn't mean abandoning what was old."
Staying with handphones, consider the experience of Micromax. While its phones sold like hot cakes, the company realised where it tripped was aftersales. That's when the company decided to increase the number of its partner-managed service centres from 436 in 2013 to 1,250 in 2014. The company also painstakingly put together processes (building its spare part inventory, for example) to reduce the turnaround time to less than seven days - from 15 days earlier.
So there you have it: Whenever consumer spending is slowing down, you need to defend your market position and maintain your competitive edge. And one great way to do that is by looking after your existing customers. They will be your competitors' target market.
So offer better support by being more responsive to their needs and expectations. If possible, through in low-cost benefits such as discounts or loyalty schemes. Remember, it's cheaper and easier to keep customers than to find new ones.
It has been globally acknowledged that after-sales service strategies are used as a tool to consolidate sales and enhance customer experience. It helps stakeholders get a better understanding of customer needs and aids clearer positioning of an organisation's brand in the market.
Enhancing an after sales-service experience is much more than focusing on marketing tools such as brand ambassadors, logos, packaging and unique propositions of product/services. After-sales service is a key influencer in the purchase decision of a consumer. While the customer is getting empowered, companies are spending big bucks to manage their public image.
Negative publicity of brands or products spreads much faster today as customers increasingly share their views on social media platforms. That said, feedback can be used as a tool to help decision making and point out subtle tweaks that may benefit a product. It is also essential in the assessment of the satisfaction level of customers who may have engaged with the brand's after-sales service team.
After-sales can also be a burden on a company's bottom line due to the increase in operational expenses if it is not planned in an efficient manner. Company should plan the exercise in such a manner that it is well aligned with the core
customer problem.
To reduce investments in service assets and cut operating costs, companies should consider the following steps:
Sachin Tayal
managing director, Protiviti
The experiences of the three companies were different - the first two decided to outsource part of the service function while the last decided to spruce up its act by throwing in its might for more in-house work. But all three realised that it would be fatal to let things be.
Take Philips, for instance. A little over two years ago, the management noticed a growing number of complaints by customers on social media on how the company managed its aftersales. The customer care department, the management felt, was not equipped to handle the aftermarket queries and the resultant delays in handling customer complaints was putting off many prospective consumers. "We struggled with our service centres, customers were dissatisfied with the products and we realised we needed processes that could effectively to address this issue," says ADA Ratnam, president, Philips Consumer Lifestyle India. Additionally, even while the customer base in Tier-II and Tier-III cities was growing, the management noticed, repeat customers were few and far between simply because there were no service stations to repair the kitchen appliances that were sold in those markets.
Given the mess, the top management at Philips felt it would be wise to outsource a major chunk of its aftermarket activities while it took time to create a more robust and strong distribution network/centres, complete with after-sales service facilities for the customer. In 2013, it inked a deal with HCL Care, an aftermarket service provider, for pan-India support for its consumer lifestyle products. "We understood that we needed a much wider reach and network to address the growing concerns of the customers," says Ratnam. HCL Care currently handles the distribution and service of spares of Philips consumer lifestyle products across India. The service team is jointly trained and developed by HCL Care and Philips. The company has a different service partner to cater to complaints specifically emerging from Tier-II and Tier-III markets. In fact, when Philips acquired Preethi, the south Indian home appliances brand for Rs 350 crore three years ago, the idea was to amass both manufacturing and after-sales facilities of the company. "For any company looking to rope in a customer for the long haul, after-sales is key," adds Ratnam.
While it is too early to start counting the fruits of Philips' move, aftermarket experts reckon that the results may already be showing - the company's consumer lifestyle division that comprises domestic and kitchen appliances (also the area where after-sales service was relatively weak compared to the company's other divisions) has become profitable after struggling with flat to low growth till about two years ago.
Partner for progress
As experts will tell you, it is good for companies to innovate and bring out newer products and models, but it is then even more crucial for them to have a robust after sales/aftermarket strategy, especially if you are operating in a market that seems to have hit a speed-breaker.
See how Volkswagen, the German automaker, is now learning from its mistakes and making after-sales an integral part of its growth strategy in India. When Volkswagen entered India in 2010, it had an ambitious aim of grabbing around 20 per cent market share in the country by 2018. But the automaker's travails began soon after and it noticed that sales were slipping as customers were complaining about the unavailability of parts. Volkswagen, it appears in hindsight, had forgotten one crucial thing: putting the customer in the front seat. In an earlier interview to The Strategist, Michael Mayer, director of passenger cars in India for Volkswagen, admitted that while a market like India with its complexities posed a challenge to the automaker, Volkswagen didn't realise how critical after-sales service was for the customer. "After-sales becomes a critical factor for the customer in deciding which car to buy next," Mayer had said, admitting that the auto maker desperately needed to go back to the basics, think deeply and emerge with a solid after-sales service strategy.
Over the last year or so, Volkswagen has been working on decoding the Indian customer's expectations. For starters, Volkswagen needed to deliver genuine parts to customers, especially in south India. Though a part distribution centre (PDC) was operating out of Gurgaon, near Delhi, (it was set up in 2012, two years after the auto major entered India), customers were fed-up with the time taken for the required parts to be delivered to the authorised service stations of the company.
That problem would be sorted to an extent, hopes the company, when the company's part distribution centre in Bangalore becomes operative from mid-2015. This centre is being set up to expand the company's after-sales and spare parts infrastructure in the country, especially in the southern region, while also reducing the current lead time to reach genuine parts to dealers and service centres. With this development spare parts will reach in 24 hours flat (and not days as was the case earlier) to improve customer satisfaction.
Decreasing service time
If Volkswagen's aftersales strategy is geared to ensure the company has a better second innings in the Indian market, see what its competitor, and the number one player in the Indian auto industry, Maruti Suzuki, did recently as part of its after-sales strategy. When Kashmir valley was hit by floods last September, the company stationed 900 technicians from different parts of the country to quickly restore damaged cars. As part of its dedicated aftermarket customer care initiative, nearly 6,000 vehicles were repaired in a jiffy and a huge cache of spare parts, supplies and equipment were rushed to the state to cut down time taken to repair the damaged vehicles. Pankaj Narula, executive director, service division, Maruti Suzuki, explains, "Our experience suggests that a key determinant in the car buying decision is the after-sales network, its accessibility, service costs and the availability of spare parts. Our big goal has been to run a robust service network that also supports sales."
Here's how Maruti Suzuki has got its aftermarket strategy spot-on. "As we grew our business, our network kept pace with the spread." The company has a network of over 3,000 service touch points capable of servicing 15 lakh vehicles every month. Then there are concepts like Maruti Mobile Support, under which the customer gets door-step services; Express Service, that aims to complete a service in 90 minutes. Experts say that the most critical part of a good aftersales strategy is addressing the customer complaint in time - at Maruti service centres, workshop service advisors with handheld devices have already reduced the service initiation time from 15 minutes earlier to less than 10 minutes now.
According to Sharad Talwar, head, HCL Care, two of the biggest challenges that make or break an aftermarket strategy for companies is, one, how quickly a complaint is addressed, and two, how quickly spare parts needed to repair products are made available. To be sure, HCL Care, a business unit of HCL Services, has one of the largest and most extensive service networks across the country and provides support services across a range of product categories. According to Talwar, as product categories grow, a good after sales strategy is intrinsic not just to industries such as automobiles and electronics but also to several others, including consumer health care, appliances, telecom, durables etc. "The customer portfolio is changing and though the failure rate of products has gone down considerably with companies investing in R&D and innovation, competition has increased and so has the complexity of customer demand," he adds.
Think about it: a smartphone company, for example, acquires a customer for the first time when she is in her teens but can retain her for the next few decades if it plays the cards right. The cost of customer acquisition, according to analysts, is typically 40 per cent of the value of the brand. However, if the customer is a repeat one, the costs come down significantly.
"A sure shot way for a brand to get recommended is by having a great after-sales strategy and ensuring that each customer- and her complaint - is important," says Talwar. He adds that outsourcing service to an expert might be a good idea simply because they have stronger data analytics, better facilities to train and equip people and address customer complaints.
Talwar cites an example: "For one of our smartphone companies we saw that while two specific models were made obsolete, many customers still came to us requesting us to repair those specific models that they had purchased. We informed the company to give us original spare parts of the old models, we kept those with us for the next two years and that allowed us to service customers well. This step also bode well for the company that realised that innovating didn't mean abandoning what was old."
Staying with handphones, consider the experience of Micromax. While its phones sold like hot cakes, the company realised where it tripped was aftersales. That's when the company decided to increase the number of its partner-managed service centres from 436 in 2013 to 1,250 in 2014. The company also painstakingly put together processes (building its spare part inventory, for example) to reduce the turnaround time to less than seven days - from 15 days earlier.
So there you have it: Whenever consumer spending is slowing down, you need to defend your market position and maintain your competitive edge. And one great way to do that is by looking after your existing customers. They will be your competitors' target market.
So offer better support by being more responsive to their needs and expectations. If possible, through in low-cost benefits such as discounts or loyalty schemes. Remember, it's cheaper and easier to keep customers than to find new ones.
| After-sales service is a key influencer that can make or break companies: Sachin Tayal |
| |
Enhancing an after sales-service experience is much more than focusing on marketing tools such as brand ambassadors, logos, packaging and unique propositions of product/services. After-sales service is a key influencer in the purchase decision of a consumer. While the customer is getting empowered, companies are spending big bucks to manage their public image.
Negative publicity of brands or products spreads much faster today as customers increasingly share their views on social media platforms. That said, feedback can be used as a tool to help decision making and point out subtle tweaks that may benefit a product. It is also essential in the assessment of the satisfaction level of customers who may have engaged with the brand's after-sales service team.
After-sales can also be a burden on a company's bottom line due to the increase in operational expenses if it is not planned in an efficient manner. Company should plan the exercise in such a manner that it is well aligned with the core
customer problem.
To reduce investments in service assets and cut operating costs, companies should consider the following steps:
- Identify which products to cover
- Create a portfolio of service products
- Design and manage an after-sales service supply chain to optimise location of resources, utilisation and planning for contingencies
- Monitor performance continuously to get customer feedback
- Resolve issues immediately and provide reasonable assurance for better and improved product/services
- Have a customer complaint study to evaluate complaint patterns: This serves as an excellent base for data analytics
- Monitor the after-sales service initiatives of competitors and market leaders
Sachin Tayal
managing director, Protiviti