The Uniqueness of Service Parts Pricing: Why After-Sales Service Focus is Key

With an after-sales service focus becoming an increasingly important and strategic focus area for manufacturers around the world, why is it that so many organizations are resisting investing in solutions dedicated solely to its optimization?

Original equipment manufacturers (OEMs) that continue to rely on homegrown pricing solutions, or solutions that are too broadly focused on pricing as a whole, face hidden costs from capital, service, time and resources. And, what they don’t see is that these costs are adding up to more than what they’d be investing in a sophisticated service parts pricing solution.

How Do Traditional Pricing Solutions Differ from Service Parts Pricing Focused Solutions?

Traditional pricing solutions primarily support sales organizations in a B2B environment – solely for them to provide a price and a discount to the end customer. For example, there may be a list price but for any specific customer they can decide to sell a product at a specific discounted price – they use sales transactions to manage the price negotiation. This methodology looks at past sales behavior and uses that information to price better in the next deal, which works in a setting where there is a lot of negotiation and repetitive sales.

The service parts pricing industry isn’t quite like that – there isn’t much negotiation: either the customer buys the part, or they don’t. That’s due to the low amount of volumes of both the individual parts and the number of parts served. And, in a typical B2B application, a company might have 2000 products, but they sell those products for millions of US dollars, whereas in the service parts pricing business, there might be a million items. So, even if you sell half of the volume, the amount of time to base pricing on historic sales transactions is limited, at best.

Why Having an After-Sales Optimized Pricing Solution Matters

First of all, it’s about the amount of parts that need to be priced. With traditional pricing solutions, for example, the focus is on the commercial side; those solutions are good at pricing, say, 5,000 items or 10,000 items, at maximum. But, some OEMs can have up to 2-3 million unique items. And, if they’re active in more than 100 countries, then it’s 100 countries times 3 million items. Traditional systems are simply not optimized for these datasets; they can’t handle it or provide accurate coverage.

It’s also about providing the correct pricing techniques for service parts. Take a value based pricing approach, for example, where you would describe the items based on attributes. Or say in a competitive pricing approach where you have to cross-references to available competitors. These are after-sales specific techniques that have some important differentiators; so, without after-sales optimized pricing, OEMs would lack those necessary capabilities.

That’s why rule-based pricing methodologies are much more crucial in the service parts pricing industry; OEMs need to be smarter about setting list prices for our products. It’s also why using a value-based or competitive pricing approach isn’t needed in a traditional pricing organization as much as it is in a service parts focused organization.

After-sales Service Focus is the Key to OEMs Future Pricing Success

Simply put, partnering with a pricing provider that specializes in the after-sales service side of the business is an extreme benefit to OEMs. A traditional pricing vendor may be keenly aware of pricing problems in an organization, but a partner with an after-sales service focus understands the bigger picture, like overstock challenges, delivery problems and part availability issues. Having that specific focus helps bring synergy to the entire organization, bringing additional value downstream and allowing OEMs to evolve and grow with their pricing provider toward more mature pricing approaches like service contract pricing and pricing for maximized product uptime.

No other pricing provider can deliver this level of industry expertise, so for OEMs to be successful in their pricing journey, it only makes sense for them to choose a pricing partner that knows how important the after-sales service focus in the business is to the core of the company’s future success. That’s why the world’s leading OEMs are looking to companies like Syncron to build a better understanding of what pricing in today’s modern world looks like and will evolve into in the years to come.

Interested in learning more about how to start your journey toward a better pricing process for your organization? Reach out to us today to speak to an expert about how you can get started with an intelligent pricing solution that meets the needs of your business today and will evolve with you into the future.