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Auto Tech Outlook | Friday, January 24, 2020
Aftermarket sales are difficult; however, OEMs can take certain steps to optimize sales and strategically supply products.
Fremont, CA: Manufacturers are facing challenges such as fewer margins on traditional products and slow sales. Thus, the OEMs have to look forward to aftermarket business to generate revenue and fuel growth. Big players in the aerospace industry, such as Airbus, Boeing, Bombardier, and Embraer, have announced plans to grow their aftermarket revenue. OEMs find it challenging to sell in the aftermarket because they treat service sales similar to original equipment sales. Success in the aftermarket is achieved by determining its uniqueness and transforming the sales team’s approach to adapt to the unique environment.
OEMs know their installed base, and they know the number of equipment sold and the customers who bought the part. The differentiating factor between original equipment sales and aftermarket sales is that the aftermarket is limited by the customers who own the equipment. OEMs can predict maintenance needs based on the installed base. OEMs can forecast significant maintenance needs, which can boost sales. Based on engineering knowledge and the installed base, OEMs can develop unique services products and design the most valuable upgrades for their fleets. Moreover, this helps OEMs to have targeted cross-selling conversations with their customer.
By incorporating gap-to-entitlement, specific upgrades, and cross-selling probabilities for any customers, aftermarket manufacturers can fill their pipelines and not flood the market indiscriminately with spare parts. The manufacturers can decide if they want to sell directly or through a distributor. The most profitable OEMs balance the equation by selling directly to stay close to their customers while choosing a reliable distributor to sell in regions that are too costly to serve. Aftermarket manufacturers use active performance management such as volume rebate incentives, joint sales lead generation, and data sharing to make optimum use of the partnerships. With the help of long-term contracts, the OEMs can generate base revenue. Long-term agreements have less competition as the equipment manufactured is very complicated.
The most entrenched OEMs are facing a lot of competition from part brokers, digital solutions providers, and low-cost repair shops. To maintain and grow their market share, organizations must boost the aftermarket sales team and embed a more scientific way to sell.
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