Retailers Missing Out on Aftermarket Revenue Opportunities
Retailers have mastered the art of curating a superior customer experience up to the point of purchase, but new research indicates they're missing the mark when it comes to delivering the superior aftermarket experience today’s customer expects and, as importantly, they're missing out on new revenue opportunities.
Ikea's recent acquisition of TaskRabbit, a sharing economy on-demand platform that connects consumers with skilled “taskers” to handle everyday needs, highlights that at least some retailers are already capitalizing on the huge opportunity that the aftermarket presents. However, with only 15 percent of 2,000 North American homeowners surveyed in a recent CMO Council consumer poll indicating retailers are meeting all pre-sales and aftermarket needs, retailers are clearly leaving money on the table when it comes to the aftermarket.
In the meantime, with Sears dropping Whirlpool appliances after a century, many are asking what manufacturers and retailers need to be doing to remain competitive in an evolving consumer marketplace.
Creating a winning aftermarket experience pays dividends to retailers in terms of both long- and short-term revenue opportunities. In the long term, it’s essential to improved customer loyalty, lifetime customer value and brand differentiation. In the here and now, it represents an immediate opportunity to create incremental revenue in areas such as upselling, parts replacement and out-of-warranty services.
Indeed, retailers surveyed in the CMO Council report, Elevate What Consumers Appreciate, note that customer lifetime value is the No. 1 benefit of investing in the aftermarket. They understand that customer experience today must extend beyond the point of purchase. Today, a truly superior customer experience must include strong aftermarket service and support.
Retailers are already taking advantage of new revenue opportunities offered by the aftermarket, far more so than their manufacturing partners. Incredibly, 65 percent of retailers already gain more than 10 percent of revenue, and 51 percent get more than 10 percent of their profits from aftermarket services. By comparison, only 19 percent of manufacturers say they derive more than 10 percent of their revenue from aftermarket services, and only 20 percent generate more than 10 percent of their profits from the aftermarket.
Yet while leading retailers are already taking advantage of aftermarket opportunities, there's still much work to be done to ensure they deliver a quality aftermarket experience for customers.
Creating New Revenue Opportunities to Meet Customer Expectations
Consumers expect manufacturers and retailers to have a tight relationship and deliver a frictionless experience. They believe retailers should be able to provide all necessary information and support for the products they sell. In many cases, however, those expectations aren't being met. In fact, only 9 percent of retailers rate their ability to help customers find and source parts, manuals and other information as extremely good.
Certainly, better integration between manufacturers and their retail partners is needed to elevate customer experience in the aftermarket. Currently, retailers are carrying the bulk of the responsibility, but often aren't provided with the necessary tools or information by manufacturers to ensure success.
More than half of manufacturers admit they're either heavily reliant (24 percent) or quite reliant (28 percent) on partners for a quality aftermarket service experience. Retailers agree, with some 19 percent saying that the brands they carry are heavily reliant and 38 percent saying they're quite reliant on them to deliver on the aftermarket experience.
Manufacturers and retailers both recognize that there are significant gaps in their ability to deliver a seamless aftermarket experience. Part of what’s holding them back is a lack of data and process integration between the two sides. For retailers, unifying processes and partners and achieving better data unification around products and customers are two of the top three challenges they face. The biggest challenge, however, is finding the right resources, tools and talent to get the job done.
Getting the aftermarket experience right is a complex undertaking, requiring significant investments in technology, tools and people, as well as smart process integration and cooperation between brands and their channel and service partners. Making that change will require not only the adoption and integration of new technologies and systems, but also a significant change in mind-set, commitment and collaboration in today’s aftermarket ecosystem of brands, retailers and service partners.
Sally Lopez is the program director of the CMO Council, a global network of executives dedicated to high-level knowledge exchange, thought leadership and relationship building among senior corporate marketing leaders.