Why your spare parts strategy may no longer be adding up

Expert point of view :

Sean Duclaux serves as PROS Service Parts Industry Marketing Manager. He is responsible for the development of the company’s go-to-market strategy, and positioning of its Service Parts pricing and revenue management product portfolio. Prior to joining PROS, Duclaux held leadership positions in enterprise software companies, including AspenTech, BMC Software and Empirix. Duclaux earned an M.B.A. from the University of Houston; an M.S. in computer science from the University of New Orleans and a B.S. from Spring Hill College.

Why your spare parts strategy may no longer be adding up

The task of increasing sales and profitability in the service parts industry can be quite challenging. While the industry remains an economic force, a series of trends, including pressure from customers to cut prices, higher costs for raw materials and increased competition from global providers have forced suppliers to find ways to become leaner and more efficient. In order to do this, they have focused primarily on efforts to rationalise capacity and production. The results, as reported by 2011 On the Road: U.S. Automotive Parts Industry Annual Assessment, have had little positive influence on margins. Recognising that price is the number one lever to improve margin, companies must look to improve their pricing strategies in light of these new economic realities.

The service parts industry (specifically, automotive, heavy equipment, aircraft and parts manufacturing and distribution) generates trillions of dollars in annual revenues. Given the fact that many of the industry’s manufacturers and distributors struggle with pricing, it is clear that these revenues, albeit impressive, do not come close to capturing market potential. Why are these companies selling themselves short? The answer to this question may be answered, in part, by considering service parts industry leaders’ miscalculations of their pricing performance.

PROS recently surveyed 100+ service parts industry executives to gauge their strategic pricing performance. The paper below explores the results of this survey, asks probing questions that emerge from these results, and suggests ways for service parts companies to take their pricing strategy to the next level.

Survey says : 

To quantify their performance, our survey respondents were asked to rate their company’s overall pricing performance (e.g., business problems, technology, and pricing strategy). Our survey results (see Fig. 1) indicated that most respondents rated themselves as slightly above average, with a mean score of 3.1 on a scale of 1-5, five being excellent. The responses of the two sectors surveyed were similar; midmarket executives rated themselves an average of 2.8, while enterprise executives scored themselves an average of 3.2.

But, is their pricing maturity really average? What constitutes average? And, as service part industry leaders, are you satisfied with being average?

Download the full whitepaper here.

The EPP Aftermarket Forum

Join us at the EPP Aftermarket Forum on 19+20 June in Frankfurt, organised in partnership with PROS, and with the support of Simon-Kucher & Partners, to discuss the questions that arise from the survey results and look at ways for service parts companies to take their pricing strategy to the next level.  Share your experiences and learn from each other - that's what our pricing and profit optimisation excellence forums are all about !

Early bird special of € 1.100 for 2 full forum days ends on 18 April -- contact nicolene.barnard@pricingplatform.eu to register ! 

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