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It’s Time for Product Companies to Win Back the Customer Relationship

It’s Time for Product Companies to Win Back the Customer Relationship

Advanced innovators are driving growth through new direct-to-consumer, value-added services and business models—but there is still a long way to go.

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It’s Time for Product Companies to Win Back the Customer Relationship
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This article originally appeared in Fortune as part of our Breakthrough series.

Boosting the customer experience has been on company agendas for the better part of the past 15 years. And yet, many companies still aren’t delivering the value proposition today’s customer expects. 

Today, the key to a successful customer experience is looking beyond the point of purchase. Insurgent brands are delivering customer-centric, purpose-driven, personalized, connected experiences, but most importantly, they are innovating new ways to be part of their customers’ ownership experiences—buyers’ lifetime relationships with the product. Companies that focus on post-sales aren’t just selling goods; they’re driving growth. In fact, during the past 10 years, 50% of new revenue creations from the world’s top 8% growth companies has come from launching a new “Engine 2”—additional profit sources that offset the natural slowing of the core business.

Take, for instance, an auto manufacturer that rolls out a car with a built-in service button to schedule repairs with its dealerships, the smart-appliance maker that offers subscriptions for maintenance through a mobile app, or the game console company that offers exclusive streaming content and gaming community subscriptions. 

These companies entice customers post-purchase, and they are the ones poised to succeed. This tactic works particularly well with digitally native consumers, including millennials, who are driving consumer spending, according to Bain. Yet, many incumbents, specifically product companies, are stuck in incremental optimization of their pre-sales customer experiences and are missing out on the opportunity to create new revenue streams post-purchase.

“The aftermarket DTC opportunity sits at the intersection of what we know investors value: a digital or platform-driven business, a business model that generates recurring revenue, and innovation that revs the loyalty growth engine,” says Joachim Allerup, expert partner at Bain & Company, who specializes in digital innovation and new venture building.

In fact, according to Bain research from 2021, businesses that embraced ecosystem and platform business models—which now fuel many aftermarket service offerings—saw three times higher growth than traditional business models. They've also ranked among the most successful growth companies over the past 15 years. 

The key to giving consumers what they want

Today’s buyers expect a great experience even after they’ve swiped their credit cards. Unfortunately, “too many companies still only focus on the customer experience leading up to purchase,” Allerup says. “They underinvest in the next part of the journey, which is where the next big growth opportunity sits. That revenue is going to disruptive players innovating in the aftermarket.”

Shifting focus to the aftermarket goes way beyond incremental improvements; it means building Engine 2s. To achieve this consumer connection, organizations must leverage existing products as a springboard. From there, companies can upsell and cross-sell aftermarket services that not only build loyalty, but also unlock brand-new DTC revenue streams and direct relationships. Below, Allerup breaks down the four steps to successfully building these new businesses.

1. Connect with current customers

Before a company can engage its customers after a sale, it needs to reach them. So, make sure all channels—call center, website, social, etc.—point consumers to a new digital experience. The best time to connect is once the consumer has the product in-hand—really, within the first 15 minutes. The point, here, is twofold: 1) Using QR codes in the first 15 minutes makes it easy for people to engage while motivation is high; 2) Most of this can only be applied to new customers—so use all channels and interactions as onboarding opportunities of the “installed base” (existing customers).

Messaging should include incentives and simplicity; customers won’t sign up for a new experience or service unless they see the value it can provide them, and it is easy for them to do. Customers respond well to incentives like an extended warranty, new services, online-only features, access to an exclusive community, and accessories.

2. Create an ecosystem of value-added products and services

Selling consumers an app is not a value add in and of itself, unless it actually brings them new value propositions or services. So, first, understand consumer needs, then deliver extra value with services that support or enhance a product. A construction company that bought tools, for instance, might also benefit from a job-site management platform. While a customer that bought a home insurance service might benefit from a water leakage sensor or burglary alarm. Remember: Every additional service the customer takes on typically increases brand stickiness and brings in new revenue.

Partnering with other companies can sometimes be the most efficient way to build a full-service ecosystem. However, if possible, keep ownership of the services that are most profitable and most related to the core business.

3. Capture consumer data ... then spin the flywheel

Each interaction with consumers offers an opportunity to collect data. With these insights, companies can strengthen stickiness, create a more personalized experience, and greatly increase odds that a customer will return for another purchase.  

Make the most of data and move ahead to spin the flywheel—layer on new, relevant products or services that generate even more data, forming the foundation of even more targeted services.

4. Experiment your way to success

Digital business-building offers a rather dubious advantage: Failure can happen faster, more often, and with fewer consequences. A virtual service, for instance, can get to consumers quicker than physical wares, allow for easier correction, and is less vulnerable to product recall, giving companies a license to be bold.

In fact, think of new digital business as a laboratory, a way to experiment with business models. Keep at it, and companies can advance to build a data-driven, DTC sales channel, pushing the right solutions when customers need them. “Launch new interactions, services, and products to build the relationship one step at a time,” Allerup says. “If you wait until all the stars align, chances are, you’ll never hit the market.”

The path forward for incumbents

Ultimately, launching a new post-sale service checks all the boxes as a value proposition: The business gets a new profit center, the service cements relationships with customers, and a mature brand gets the opportunity to be the insurgent, rather than be disrupted by one.

Of course, moving from building physical products to developing digitally enabled services is a challenge, one demanding a drastically different mindset and varied capabilities. “Innovation demands diverse views coming together and transforming into ideas,” Allerup says. “To do that requires interdisciplinary venture teams—someone from marketing, product, IT, design, strategy, commercial, etc. Together, they can build and scale new solutions.”

Ultimately, the reality for product companies today is that moving to Engine 2 is no longer an opportunity. It’s now an imperative.

“If companies don’t continuously evolve their customer experiences and business models, they’ll become obsolete,” Allerup states. “It’s as simple as that.”

If you want to learn more, feel free to get in touch with Joachim Allerup.

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