If you've never read Agenda, the World Economic Forum's online publication, it's worth the read. The WEF is the utmost authority on global trends in industry and business, and they back up nearly everything they write with sound research and quantitative evidence.
Recently, an article by Matthieu Crozet and Emmanuel Milet with the headline, "Does the Future of Manufacturing Lie in Services?" caught my eye. In it, the authors describe how classification systems and sector listings often cause companies to pigeon-hole themselves into a certain class of industry, even though much of what a company does might cross classification divides. Specifically, Crozet and Milet propose that many manufacturers go to market as product makers, even when much of their business is in providing services to their customers.
This is a problem we encounter routinely with client companies in the manufacturing sector. For years, they've marketed and sold what they do as a set of products—machines, parts, etc.—and yet, sometimes 10-35% of their business is based in services they provide on top of the products they manufacture. This is why there's such a great opportunity for industrial manufacturing companies to redefine how they market and sell.
When Manufacturers Add Services They Start Marketing Whole Solutions
One of the points Crozet and Milet make in their article for the WEF is that when manufacturers start providing services on top of the product they create, their sales point and competitive advantage changes. No longer is the product a part of what the buyer needs; with services, a product can become packaged as a whole solution.
Services can amplify the value of a manufactured product and change the whole approach to sales, including pricing. As Crozet and Milet explain:
"Engaging in the provision of services...entails a rethinking of the way firms approach and interact with their consumers. This is what we observe, for instance, when firms from the electronic industry provide integrated solutions. The good is only part of a much larger offer which includes complementary services (software, installation, and training), financing facilities, or insurance. The expected benefits from servitisation depend greatly on the strategy adopted by firms."
Solutions Are Easier Sold Online than Products and Services
We often encounter manufacturers who've struggled to figure out how to properly market and sell their products online. For instance, capital equipment manufacturers usually understand the potential importance of the web, but, it can seem like a challenge when the products they need to describe are large, complex, and not easily detailed in short web copy.
This challenge changes, however, when products are part of whole solutions. A solution answers a problem a buyer has. And online, most visitors are searching because they've encountered problems in what they do. Solutions are more compelling to online visitors because, in most cases, online visitors just aren't ready to learn about the product itself—they want to learn about what the problem the product solves.
Crozet and Milet present data that from 1987 to 2007 the share of services output in the equipment and machinery manufacturing sector made a huge leap. During the same period, the profit gap between servitized firms and manufacturers focused on products alone grew between 4 and 5%. While these results may not be directly because of how solutions are sold versus products alone; they do show that manufacturers may be able to grow their business by adjusting how they incorporate services, and in turn, how they market their products and services.
What Manufacturers Can Learn from Professional Service Firms About Marketing
Perhaps the most important aspect of what servitization in manufacturing yields is the ability for marketers in manufacturing to borrow approaches and best practices from other industries, such as professional services.
In the past 10-15 years, professional services firms—from marketing agencies to the A/E/C category—have found huge success in adopting inbound marketing and generating more leads from online sources. Specifically, the software as a service (SaaS) category was an early adopter of online content marketing, and their success is driven by trying to attract prospects from non-traditional sources.
Manufacturers that offer industrial services as a major portion of their business have an opportunity to find similar success by taking an inbound approach to marketing. When you sell products and services that are packaged into solutions, there's more of a story to guide your content and more content to attract leads online.
If you want to learn more about how we plan inbound marketing for companies that provide whole solutions to their customers, check out our guide below.