Marketing Managment

Article 1 How to Sell Services More Profitably

There has always been the question of sales and profitability with manufacturing companies struggling to turn a profit from their service businesses. It is a well-known fact that product-centered companies are pursuing service strategies for a number of reasons. Outsourcing has changed into nonstrategic processes one, whereas commoditization is a realia which cannot be neglected. Consequently, the question of more profitable sale of services is relevant and raises a row of questions of the practical nature.
The author draws an example of a company, a world leader in medical equipment, IT, automotive equipment, and transportation systems. The findings are rather interesting and can be implemented within my company. The back-office production of complex services turned out to be much more difficult than expected. The salespeople were used to selling products with basic service contracts attached, and their traditional contacts at target firms were too low in the hierarchy to make decisions about multimillion-euro solutions contracts. This statement is significant, since it emphasizes the necessity of contacts at target firms being enough for the decision-making process. Finally, much of the knowledge around the service production should not be sourced externally to save time and resources. The board member responsible for services should avoid such mistakes by rejecting the idea of getting so much so soon.
It was a new piece of information to look at the particular investigation on how manufacturers in business markets can develop profitable services, since it consisted of 20 industrial companies operating in a broad variety of product markets, including adhesives, automotive coatings and glass, bearings, cables and cabling systems, energy generation and distribution, onboard electronics for civilian and military aircraft, printing presses, and specialty chemicals. Companies unsuccessful at developing service businesses have tried to transform themselves too quickly. Successful firms begin slowly, identifying and charging for simple services they already perform and using those to build enthusiasm for adding more-complex ones. That is a good point to agree with.
The each step of the path to service profitability requires particular attention. It should be mentioned that companies focus on particular questions and goals, they should be sure they’ve achieved each goal before proceeding to the next step. That is the main logical rule of information obtaining and organization. The proposed scheme in the form of table is to be implemented in my company’s work, since the structured question enable a simple and clear steps of decision-making.
The first step includes the realization of company’s place and role on the market. It is true that to expand a service capability, one should make both the company’s managers and its customers aware of the value provided by existing services. The example of Merck’s success is illustrative, since once the new billing terms had been rolled out to the entire customer base in France, Merck’s profitability in the product category improved significantly, even though the cost to customers was minor. Consequently, the idea of switching services from free to fee clarifies the value of the assets involved for both managers and customers. The positive outcome is may be a sharp reduce in floating inventory, for instance, as Air Liquide did transferring cylinders from customers that didn’t need them to customers that did.
Moreover, large companies can uncover profitable existing service offerings simply by comparing billing practices across their operating units. However, it is absolutely unsuitable for minor and medium sized companies, which is a great drawback of the idea. To clarify the alternative for smaller companies, the author proposes the following decision. Companies can ensure that their service initiatives are not just opportunistic ideas developed by individual business units but part of a strategy to capture best practices and roll them out across the organization. Nonetheless, there is still the open question of whether such a strategy will work in particular companies, whether the outcome depends on extra factors such as country of origin, taxes, law system, etc.