How component manufacturers define added value for customers in terms of functions and systems

Components carry out their work unseen in a wider context by most people. In encoway’s experience this affects buying behaviour: on the one hand, customers buy components not for emotional reasons such as appearance, but make their decisions based on the functionality. On the other hand, customers purchase components for use in larger systems, not to operate them individually. Component manufacturers can use this to their benefit by placing the sales focus on functions and systems in order to positively influence the customer’s purchasing behaviour.

The component business is traditionally a highly competitive, primarily price-driven market. The products are easily comparable and for many customers the cheapest provider will get the sale. Today, the cheapest providers usually come from low-wage countries. It will be different to win this competition on price, so it is advisable to focus on the added value you can offer the customer.

The independent customer relieves the pressure on your sales force

The product range of many component manufacturers is becoming more and more diversified with numerous new variants. This is a good thing, and also important in order to create a competitive advantage over the competition. However, the wide variety must be properly communicated to the market.

If customers cannot find exactly what they are looking for, they will either go directly to the competition or try to get help from the sales force. The first option should, of course, be avoided at all costs, but the second is also not necessarily the best case. The costs of a sales representative for a 15-minute customer meeting are often higher than the value of the goods sold. And the component business only works with high volume. Sales-staff support is not scaled for small orders. However, it is possible to calculate the return on investment for a software that addresses the needs of the clients in the search process, and helps them to find a solution independently.

The right component will be easier to locate if you describe the application situation in the words of the customer. In some cases, this is precisely how the appropriate product is found. Hide the technical details and actively include potential customer problems in the selection process. Your customer will then feel more confident in the process and the likelihood of closing the sale will increase.

The functionality of a component as an added value

Look at the product from the customer’s perspective and describe the customer benefits. Transform the image of an everyday component with technical features into a beneficial functional unit. The following examples of encoway customers illustrate this.

The features of a component can be highly dependent on the application. The vacuum specialist J. Schmalz GmbH manufactures components for the lifting and gripping of parts. For production automation, for example, precision lifting of dusty or oily parts is important. For the furniture industry, however, it is advantageous to be able to hold on to parts made of soft materials, without leaving traces. In the configuration project with encoway, the process of product selection was significantly simplified. The user selects their specific requirements, and the allocation of the matching product runs in the background. In addition, Schmalz equips its components with additional functions. For example, the vacuum and pressure switch VSi can be used in the press line of a car manufacturer. By means of NFC (Near Field Communication), the user immediately receives information about the gripping system on-site on their smartphone. They can thus react without delay and, for example, arrange for maintenance, avoiding costly downtime. For the customer this is a real added value, far beyond just being able to grip parts.

Sometimes, different terms are used for the same function depending on the industry. The automation technology specialist Festo AG & Co. KG manufactures pneumatic and electronic products for the processing industry. When choosing an angle seat valve, the medium, such as air, water or steam is of particular importance. However, the term “steam” has quite different meanings in different industries. In the food industry, pipes and valves are cleaned using steam – the technical term is SIP (Steam-In-Place). In the energy industry on the other hand, steam is used in steam turbines for power generation. Here it is simply referred to as steam. The quality of the steam is thus also defined in different ways. In the first case it is mainly about purity, and in the other, the conversion of thermal energy to electricity is key. Customers from the one sector can easily work with their specific wording, but not necessarily with that of the other industry. Festo is currently preparing a new configuration platform together with encoway in which this problem is solved using a guided selling approach.

The supreme discipline when focusing on product features is addressing new market segments using an existing product portfolio. Products are often purchased because of functions for which they were not originally designed. A highly accurate scale, for example, can be used not just for weighing things, but also for counting. If you know the individual weight of an object and want to determine the exact number of objects in a large batch, this can be calculated using the overall weight. Franz Rossmann from Sartorius AG told us: "Our customers do not want to purchase scales. They want to know exactly how many parts are in a particular package. We are fortunate to be able to solve this problem with a scale." Together with encoway, Sartorius has been able to combine the user view with the product range and thus enable their scales to be found via the function “counting”.

Our customers do not want to purchase scales. They want to know exactly how many parts are in a particular package. We are fortunate to be able to solve this problem with a scale.

The above examples clearly show how easily the functionality of components can have a positive effect on the product search process. Of course the individual emphasis on the functionality and thus how the product is presented can vary depending on the industry, however in general, the customer will always benefit from being able to choose a solution on the basis on the features.

The system configuration as an added value

Provide additional customer value by defining system configurations. This type of system may, for example, consist of a sensor, an actuator and a control unit connected via cables. It stands to reason that customers are interested in the functionality of a system, not the functions of the individual components. Anyone who wants to equip their home with a building automation system, is not looking for individual twilight or rain sensors or other individual control units. They are looking for a supplier of system solutions!

Assist your customers with the combination of components by providing a system configuration. Even customers who are familiar with the individual components and can find their way unaided will benefit from this support. They will thus discover new products or product combinations that they were unaware of, and they will save a lot of time thanks to the support provided during the selection process.

Conclusion

The variety offered by component manufacturers is increasing steadily. This is positive and indeed important as regards competitiveness, but it is also a challenge for the product communication.

Despite the challenge, this is exactly why it is important to actively involve the customer in the product search process and also to ease the burden on one’s own sales force in this way. Make the product search easier for your customers by placing the focus on the value of the components, showing their functionality and role within a system.

I hope this article helps you to properly communicate the true added value of your product variety in the market. I will be delighted to answer any questions you may have and look forward to your feedback. encoway has gained a great deal of experience in variant management from a variety of customer projects, and your company will benefit from this experience.

Soon you will be able to read another article for component manufacturers in which I will show you how, in three easy steps, you can establish a system configuration based on your existing components business. Do look in again!