Customer excellence in industrial manufacturing 

Boosting growth in the industrial B2B sector with customer-centric strategies – especially in times of crisis

Customer-centric strategies are the foundation for numerous success stories in the digital age. Until now, such strategies have been largely the domain of companies with consumer-facing business models. However, putting the customer at the centre is also highly relevant in the B2B market. Especially in times where supply chains are deteriorating and cost bases are exploding, transforming sales, marketing and the organization towards customer focus is the key to win the future. In a new whitepaper series, Deloitte experts explain what industrial equipment and machinery manufacturers stand to gain from customer-centricity – and how to achieve it. The initial volume covers the first step towards that goal: gathering and leveraging customer insights.

Customer excellence has not been a prominent strategy for industrial manufacturers so far. While the concept has more than proven its worth in companies serving the end customer, it rarely takes centre stage in the industrial sector. One reason may be that other pressing priorities have demanded the sector’s attention, such as process optimization, digital service initiatives, and supply chain resilience. Another reason is that customer excellence is often regarded as less relevant in B2B. However, this assumption is premature. Because customer excellence is highly important for industrial manufacturers as well, as it helps them to leverage customer data for sales growth and efficiency gains, among many other advantages. 

As our new three-part whitepaper series demonstrates, a customer-centric approach provides industrial companies with three effective levers for business success: better insights, improved sales targeting, and cooperative business transformation. The first whitepaper discusses the first lever, describing five steps towards leveraging customer insights for profit growth. The individual relevance of each lever depends on each company’s definition of an optimal customer experience, and on its specific business model – from businesses focusing on a standardized product range with many customers and external distributors to specialized machinery producers with few larger direct customers. The potential gains vary as well but are generally very attractive: For machinery manufacturers, the transition from a product-centric view to a customer-centric view can unlock sales gains of up to 20 percent.

  1. Smart customer segmentation 
    Grouping customers into segments allows companies to target them more precisely and efficiently. However, the question arises which criteria to choose for this segmentation. One option is to use static criteria such as size, proximity, sector, or sales. This may be simple but yields only limited benefits. A more useful approach is to segment customers according to their types of needs, based on dedicated market research carried out by the organization. A third option focuses on added value per customer, enabling companies to prioritize customers with high value-add and profit potential, who typically account for 70 to 80 percent of a mechanical engineering businesses’ earnings. Smart customer segmentation can be achieved by applying the concept of customer lifetime value, a metric that should not only include historical data but also factor in forecasts about potential future value creation. 
  2. Understanding the customer journey
    The concept of the customer journey is well established in the consumer space, where it enables targeted customer experience improvements along various touchpoints. Yet, it is also applicable to B2B customers. A typical customer journey in machinery and production equipment includes the definition of customer needs; procurement (information, tendering, purchase); installation and training; operation, maintenance, and repairs; resale and disposal. By tracking and assessing each touchpoint along the journey enables manufacturers to improve the customer experience, increase satisfaction and boost efficiency. Obviously, B2B journeys will vary widely depending on individual circumstances and additional services, such as consulting, online monitoring, and joint development. In this context, companies are required to balance flexibility needs with standardization of tools and practices to increase efficiency. It is recommended to start with a focus on the single most important customer, improving their customer journey first and then expanding the approach.
  3. Market-oriented pricing
    Customer-centric pricing strategies represent another important step for leveraging customer insights. Currently, machine manufacturers typically calculate list prices on a cost-plus basis, adding the target margin to production cost. However, in light of wide-spread discounts of up to 50 percent, these prices are largely hypothetical. Furthermore, this rigid approach fails to address the pricing imperatives of today’s dynamic markets. While personalized and dynamic pricing is less straightforward for the B2B sector than for B2C-oriented companies, it is still possible to improve B2B customer focus through insights-based pricing, especially for solution-based offerings with service packages. Options for market-oriented pricing models include segment-specific price lists, market- and competitor-oriented pricing, and pricing based on project type. Overall, the pricing strategy needs to ensure profitability while also remaining in line with the current market pricing trends. 
  4. Customer data strategy
    Using customer insights requires a comprehensive data foundation. Building on customer data gathered across functions, companies should create a centrally managed and standardized database. In the past, customer-specific knowledge was often decentralized, with access limited to particular functions and staff (sales, service, accounting etc.). In order to facilitate a 360-degree customer view, data should be unified, available everywhere, and updated meticulously. Important data points include company data (e.g. size, sector trends), customer data (contact persons, demand and order cycles, installed machine locations and data, service levels), touchpoint data, order status / ex-pected orders, financial data (customer profitability), and customer satisfaction assessment in comparison with the competition. Real-time data access enables manufacturers to conduct in-depth customer analysis, ensure up-to-date team information, and realize efficiency gains, as well as generally fostering a customer-centric mindset in the organisation. 
  5. Customer-centric organisation
    For the mechanical engineering sector, a critical focus of the customer-centric approach is product development. Companies offering products to a broader customer base could benefit from creating the position of a customer manager or market manager. Their task is to gather insights regarding customer needs and to help translating these into development projects. Customer managers should also play a role in marketing, sales, and service processes. Again, the success of their work depends on a high-quality customer database.

Know your Customer: The new whipepaper

In this first publication of the new series, Deloitte experts discuss these five steps in much more detail, including brief case studies that describe successful implementation projects from their wide experience in the field. In addition, the whitepaper provides data about current practices and opportunities. And it provides recommendations for first steps towards a successful customer-centric approach for different levels of maturity (beginners and professionals). 
To find out more, download the comprehensive whitepaper “Customer excellence in industrial manufacturing” here.

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