How to Increase Your Sales Revenue by Focusing on Aftermarket

The aftermarket is a crucial component of your business

Posted on January 21st, 2021

In general, the aftermarket refers to a replaceable part on a product. It is the component that keeps your customer coming back to make another purchase as time goes on. In the compressed air industry, this would apply to any of the serviceable parts on the air system.

If the aftermarket is adequately captured, it will generate reliable, reoccurring sales. Although a seemingly simple source of revenue, many companies neglect to focus on the aftermarket. Frequently, they mistakenly assume customers will automatically call when they are ready to service, but that is not the case.

Spending time developing a solid strategy to maintain aftermarket capture can pay off in the future. We have collected data from our own original equipment sales and partnered with our machine builder customers to help uncover the best practices for increasing aftermarket revenue.

Sales Build Year on Year

Aftermarket sales, when captured effectively, build year after year. In a simple example, if you sold one hundred compressed air filters last year, you should sell one hundred replacement elements (assuming a one year change out period) this year. Then if you sold another one hundred compressed air filters this year, the following year, you have the potential to sell 200 replacement elements. Even if you continuously sell the same number of filters each year and have zero growth, your revenue from aftermarket sales will continue to increase.

Lost Income – A Case Study

We recently met with a large machine builder who supplies a filter with their system. They offer a service contract and warranty program to their customers for the system, but because the filter was such a small component, they did not consider including it in the service contract.

They reviewed their aftermarket sales and found that they had only captured 7.5% of the available aftermarket on their product over the past seven years. This resulted in missing revenue of $1.5 million.

Despite being a small component, the volume sold would have generated a significant amount of revenue that could have been easily captured by adding it to the service and warranty program.

Strategies to Capture the Aftermarket

Aftermarket capture varies depending on your business model. However, below are several suggestions for strategies that could help you improve your current aftermarket capture rates.

Check Filtration and Drying Products while Servicing Systems

If your company has service contracts for compressed air, gas generation, or medical air, it is important that service personnel always check the compressed air filters and dryers to see if they need service. Although a seemingly simple step, it is often overlooked because there could be larger serviceable items.

When your service technician goes out for regular maintenance, they should always have service kits on hand. This will prevent having to schedule a second trip and reducing the occurrence of service being missed or skipped.

Include the Elements in the System Warranty

A sampling of our original equipment customers revealed that those who do not have the filtration products built into a structured service or warranty program captured on average only 26% of the available aftermarket. Meanwhile, those who do include the filters in their warranty programs capture on average 66% of the available aftermarket. The data showed that that was the single best way to increase your aftermarket capture resulting in the most revenue.

Keep in mind that including the filtration products does more than increase your bottom line. By replacing elements by the manufacturer’s recommended service dates, your customers are also keeping contaminants out of the airstream and protecting the entire system.

Set up Email Reminders for Customers

It is important to remind your customers when service is due. Through an external source, like MailChimp or Constant Contact, you can set up an automated email to remind your customers when it is time to place an order for a replacement filter element. This is a relatively low-cost option that can help keep service top of mind to your customers.

There are a few considerations to be mindful of when choosing to set up email reminders for customers. For instance, some companies could place emails from MailChimp and Constant Contact in the spam folder, or email contacts could be outdated due to turnover. However, the investment in setting up and maintaining email reminders is low compared to other aftermarket capture methods.

Educate Customers on Why Change-Out is Needed

We often speak to customers who have unique products where there are no alternatives for the aftermarket available in the market. There is an assumption that the aftermarket would be fully captured since there is no alternative place to purchase the product. However, in some cases, we are still coming across relatively low aftermarket capture rates which means customers are just not changing out products on the recommended schedule.

Depending on the market, it can be helpful to remind customers about the importance of maintaining a regular service schedule to ensure their system is free from contaminants that can lead to energy inefficiencies and costly damage. This can be done with educational email campaigns, social media posts, direct mail, or flyers included in the packaging.

Reminder Labels and Product Inserts

Another low investment option is to include visual reminders with the filter products and replacement elements. Many companies supply a change-out label to place on the product where a service technician can write the next service’s date on the product. These are low cost, and ROI (return on investment) can be achieved quickly.

It is important that the reminder label is seen by the customer. We suggest bright colors and packaging that ensures the label will not be lost in the box. Additionally, product flyers included in the packaging are a great way to place reorder and educational information in front of your customer.

Offer Incentives

Customers generally respond well to monetary incentives. You can provide small percentage discounts for customers who sign up for an auto-reorder or simply offer a discount to those who purchase an aftermarket part within three months of the change out date.

We Can Help

At Walker Filtration, we have worked with many different types of OEM and machine builder customers on strategies to increase their aftermarket share. We would be happy to meet with you to discuss your unique needs and assist with aftermarket strategies. Please contact marketing at USA@walkerfiltration.com.

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