Increasing service revenue with no increase in investment.

Objective

Develop a marketing and sales strategy to grow a $40 million service and spare parts business without adding any additional cost.

Background

Based in Fremont, California, Mattson Technology designs, manufactures, and markets semiconductor wafer processing equipment used to manufacture integrated circuits (computer chips).

Although Mattson Technology has an excellent reputation for quality and customer service, the company was not taking full advantage of revenue potential in the service and spare parts sectors of its business.

Company executives asked Maher Marketing to develop a marketing and sales strategy to improve revenue, market share and profitability.

Assignment Overview

We worked extensively with the VP of Global Sales and Service to develop a successful strategy and introduce that strategy to the sales organization at Mattson’s annual global sales meeting.

The strategy included several key tactics:

• Identify and develop new, customized service and spare parts offerings that would appeal to various groups of Mattson’s customers.
• Lower the costs of delivering services and improve pricing and margins of several offerings
• Enhance service organization morale by reducing travel and relocation requirements that were causing problems
• Get the sales force “on-board” by explaining how the new service products could help their customers
• Train the sales force in how to sell the new products

After evaluating  the organization, the industry, and segmenting the company’s customer base, we recommended a High-Value/High-Quality strategy with corresponding premium pricing, because a “gain market share at any cost” approach would erode profit margins and diminish the value of service from the customer’s perspective.

Working closely with the sales and marketing teams, we developed programs that offered specific service performance and results at specific prices – a significant departure from the industry-standard approach of billing for the number of hours or days worked.

As part of this assignment we also developed a new incentive plan that compensated sales people not only on new business, but the profitability of that business – a more effective approach than paying commissions based strictly on revenue.

Results

The strategy was adopted and implemented, and within 12 months, the company had boosted its revenues by several million dollars and added more than $1M of profit.

Lessons Learned

Some manufacturers view service as an afterthought, and fail to take advantage of the high value that customers place on knowing that their equipment will not only perform, but do so at a predictable cost. For these customers, specific performance agreements at fixed, predictable prices can add significant value.

Although companies may be tempted to offer solutions that serve all customers through a few standard offerings, the end result can be costly in terms of lost revenue and profit. In many cases, manufacturers actually increase revenue and profitability, and improve customer satisfaction by offering services and pricing custom-tailored for each customer.

What’s more, when calculating the lifetime value of a customer, service can and should be a lucrative source of additional revenue and profitability.