The impact of cloud-enabled equipment on service contracts

November 8, 2018
Richard Theron

In our last post, I took a detailed look into how equipment owners sometimes mistreat their equipment and abuse their warranties, and how this can negatively impact  OEMs. I also looked at the role that equipment data, harvested and delivered via the cloud, could play in helping OEMs identify if their equipment has been used in ways that would void warranties and fight back against warranty abuse. 

However, when it comes to warranties and service contracts, abuse is just one of the challenges. Sometimes, the larger challenge is selling the service contract in the first place. 

Many of us have gone to an electronics store, or a car dealership, or another retail store where we’ve bought an expensive item and been pestered to buy an extended warranty. We’re harangued with warnings about what will happen to us if our product fails after the expiration of its existing warranty to scare us into purchasing extended warranties that we ultimately never use and only function to generate commissions for our salesperson. 

This customer experience has ultimately resulted in a generation of consumers that are wary of service contracts and extended warranties out of fear that we’re being talked into scams. But when it comes to commercial and industrial equipment, service contracts are often wise investments. 

This equipment is often essential for a business. It helps keep buildings habitable, it keeps factory lines moving, and it universally powers others to do their jobs. This equipment is often costly to replace, and replacing it can significantly cut into a company’s productivity. Having service contracts with OEMs can save equipment owners significant heartache down the road, but they’re still resistant to purchasing them. 

What can OEMs do to illustrate the true value of their service contracts to their equipment owners and sell more service contracts? The answer lies in data and business intelligence. 

Know thy customer, sell thine contracts

Often, selling a service contract to an equipment owner is difficult because OEMs aren’t selling something tangible. They’re not selling a piece of equipment that will help them do their job. They’re effectively selling insurance on that equipment, should it break down and need to be repaired. 

In this instance, it’s essential that the OEM illustrates the value of the service contract to that specific equipment manufacturer. And the best way to do so is to understand how the equipment owner uses their equipment, and how that specific usage impacts the life and functionality of the equipment over time. 

For example, if you know that a piece of equipment is the backbone of a factory’s operations and is used consistently for large periods of time a day, you can effectively convey the value of a service contract over time by illustrating the wear-and-tear that this heavy usage has on the equipment. If heavy usage and wear-and-tear has the potential to create problems three years after a new piece of equipment is installed, adding a service contract that covers the equipment past its two-year warranty makes sense for that equipment owner. 

This level of transparency and business intelligence is available to the OEM by simply cloud-enabling their equipment and harvesting the data from that equipment. By gathering usage data and other critical information from each piece of equipment in the field, the OEM can learn more about how it’s used, how it’s performing, and put itself in a position to better illustrate the value of their service contracts to their customers. 

The cloud can do more than help OEMs sell service contracts; it can also help them fulfill them. 

Service so good it’s alarming

Inherent in some OEM service contracts are milestone maintenance and service visits when equipment has reached a certain amount of use or time in service. This is very similar to how your dealership may service your new car. You’re encouraged to bring it in after the first 10,000 miles for routine maintenance and ensure everything is working as intended. 

If the OEM doesn’t know how much use a piece of equipment has, or how long it’s been in service, it can be difficult to ensure that they’re rolling a truck for routine service at the right time. And that’s where cloud-enabling their equipment can help. 

Equipment isn’t always installed and put into service the day it leaves the factory. Sometimes, it can sit in storage before it’s sold. Sometimes, it is sold and held onto until a professional is available to come and install it. These variables all make it harder to ensure that milestone maintenance is being done at the optimal time. 

However, cloud-enabled equipment can report back to the OEMs and let them know when the equipment was installed, or the amount of time it’s been in service. It will even let them know how much usage it’s seen since, much like cars, some owners use their equipment more than others. The OEM can even set up alarms to notify them proactively when their equipment hits a certain amount of usage or time in service. 

With this data in hand, OEMs can make better, more informed decisions about when to schedule milestone maintenance and deliver more timely service to their service contract holders.

There’s another benefit that OEMs can get out of their equipment data and business intelligence, and that involves the sales process. 

More effective sales through data

Many salespeople would attest that growing your business with an existing account or customer in good standing is easier than finding new accounts and customers. The data and business intelligence that OEMs generate about how their existing customers use their equipment could open the door to growing their business within that customer, and make it easier to upsell that customer in the future. 

For example, if a customer is using a piece of equipment for a specific task, but that equipment is underpowered for the task, the OEM can analyze its data and identify that problem. From there, the OEM can reach out to the customer to sell them an upgraded unit now or use this knowledge to ensure they purchase the right piece of equipment in the future. Or, maybe the OEM uses that knowledge to sell the customer a second unit to help reduce the burden on the first. 

Regardless, knowing more about how existing customers are using their equipment generates business intelligence that can help OEMs sell to those customers in the future. Whether it’s new equipment or service contracts, better data means more personalized sales calls, which translates to happier customers and higher revenues.          

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Richard Theron
Richard Theron is the product Line manager for Fieldserver and cloud at Sierra Monitor, where he works intimately with companies in the building automation, industrial automation, energy management and life safety markets to help them cloud-enable their equipment.

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