Why Product Managers should care about product life time revenue

     

The life time revenue of a productspare parts-885250-edited.jpg is often split between initial sales (Capex) and Product life cycle (Opex) offerings including provided upgrades, service, spare parts and support. When working with leading industrial companies I often see a lack of full consideration of ALL business opportunities over the full operational life of the product. 

As examples, I’d like to share two personal experiences from the last couple of weeks.

Example #1

The “new” dishwasher from a leading Swedish brand suddenly didn’t want to play any longer.

The fault was rather obvious – the outlet pump wasn’t running properly. (I assume this is the part most prone to wear and tear in such an equipment). Also – the kitchen appliances supplier had provided a built-in error detection system clearly indicating the faulty part on the display.

Now, even if the supplier had their own country-covering service organization, they strongly recommended to replace the entire equipment. I had to balance my personal goals in supporting sustainability versus the very clear business case of going for the new machine.

Was there really an option for the product manager to opt for a service business in this case?

Making sure the outlet pump was an easily replaceable part (with interfaces kept intact over years to simplify using a later pump model). Maybe making sure there was business for the supply and distribution chain by providing 2nd source options for the spares?

Example #2

This time I had a small mishap with an old car. During some maintenance work an air hose in the engine compartment was damaged. 

No way to repair. So – what about finding a spare part. Shouldn’t be a very difficult task – but the car (and engine) was built way back in November 1968 … 
Surely the part was out-of-production since years …

For vintage car fans, there is a plethora of small (and some larger) firms specializing in fulfilling demands on obscure parts.

In this case, however – the part was available as “Original Ersatzteil” (original spare part) from the manufacturer in Zuffenhausen, Germany. And the pricy Price Tag?   A very reasonable €12 including handling and shipping.

Tthe strategy from the supplier clearly is not about making money on spare parts business. It is all about enhancing the loyalty to the brand. 

Spare parts policies are central to many technology products. Proper modularization makes it easier to provide serviceable parts is one key. Also the strategic choice if maintenance should be a profitable business of its own or rather “just” support brand loyalty.

The critical question of defining your “whole product” over the life cycle will be addressed during the upcoming conference Produc Leadership Day together with inspiring speakers. I hope to meet you there to continue the discssuions. Product Leadership Day 2017

About The Author

Erik has extensive experience in product management, business management and development. Within the software, electronics and hardware, Erik has pursued commercial success.