Value-Added Strategy 4.0 in the Machinery Industry: More Value for your Customers - More Profit for your Business
01.03.2018
Growing price pressure is becoming an increasingly daunting challenge for many companies in the machinery industry. The reasons are manifold: Saturated markets, more demanding customers, rapid technological progress and low-price competition from emerging markets.
What can suppliers do against this development? Basically, there are two strategic options: Either they try to stay competitive by charging low prices or they develop innovative solutions with substantial, financially-quantifiable added value. Low-price strategies always involve the risk that competitors with even lower prices enter the market and start a price war where everybody will lose in the end. By contrast, value-added strategies offer virtually unlimited potential to increase customer value.
In this context, digitization offers entirely new possibilities to build competitive advantage through value innovation: By leveraging predictive maintenance services, machine producers can collect data from their installed base in cloud-based platforms and predict when a specific machine part likely needs to be replaced. Predictive maintenance also makes sure that the part is available when and where it is needed. Customers can profit by saving expensive downtime.
Digitization also enables new monetization and business models: Compressor producer Kaeser has introduced a ´Pay-per-Use´ Model where it charges customers for the consumption of compressed air, instead of selling the machine through a one-time transaction. As a result, customers can use the freed capital for other purposes and gain additional flexibility. Kaeser can monetize the full lifetime of its compressors and generate more turnover and profit as compared to a one-time sale.
Key success factors in the context of a value-added strategy are considering the competitive situation and segmenting customers based on their needs and willingness to pay. In most cases, buyers can be categorized into value buyers and price buyers. For the latter, e.g. product availability, consistent quality and spare parts supply at acceptable prices are important. Value buyers, by contrast, are interested in the supplier´s full offering and prepared to pay a price premium for innovative value-added solutions.