Currently, the UK is the 9th largest manufacturing nation in the World and the sector has increased on average 1.4% a year since 1948. One of the main reasons for this is that manufacturing companies within the UK have been a major exponent of Servitization.
What is Servitization?
Servitization was first introduced in the 1980’s by Vandermerwe and Rada who recognised that manufacturers needed a way in which to set themselves apart from the competition while retaining current customers. The servitization process allows companies to achieve this through the offering of associated services as well as the physical products.
Why should I implement it?
As well as helping companies differentiate from their competitors, servitization also offers the following benefits.
- Improved Customer Retention:
The implied added value of the additional services allows the company to meet the wants and needs of the customer which help develop the relationship, resulting in a higher customer retention rate.
- Increase Offering:
Providing services such as support allows the company to increase their capabilities without out increasing the overheads associated with physical products.
- Financial Stability:
Selling services such as Service Level Agreements (SLA’s) allows the company to guarantee a regular, long term revenue stream and increase the opportunity to build a loyal customer base. In addition to this, there is also the opportunity to cross-sell and upsell due to assisting the customer develop their product.
- Improved Product Insights:
The manufacturer has the ability to gain useful insights of potential product improvements through analysing the performance of the product first-hand.
Which companies have implemented it?
The servitization process has been implemented in a wide range of companies of varying size and specialities, including:
Initially Rolls Royce sold aero engines directly to their customers and then charged for repairs etc. meaning that the worse the engines were, the more money Rolls Royce made. Although this generated a substantial amount of revenue, it was contrary to the needs and wants of the customer.
When the company implemented the servitization process, the interests of the customer and Rolls Royce became much more aligned as rather than making money when a product failed, they made money on keeping the product running. To achieve this, the package sold to the customer included the physical product and ongoing maintenance to ensure that the engines operate effectively and deliver the agreed power levels.
Here at AGW we not only develop wound components and assemblies, we also work with our customers at each stage of the product life cycle, from assisting with the initial concept, through prototype manufacture and production engineering to technical and practical support.
For more information on the products and services we offer, and how we have helped our customers, check out the following information:
"I would highly recommend both AGW's service and products. They took the time to understand us as a customer and worked to build a good customer relationship, demonstrating strong technical understanding and realistic lead times."
Damien Cunningham. Commercial Director - LPA Excil Electronics
Want to know more?
If you would like more information about AGW and how we can help you, please contact us by completing our enquiry form, or by calling 01246 473086.