Winning with Total Cost of Ownership
A Smarter Path to Growth
2 days of Structured peer Discussion
16 participants
14 organisations from optics to energy
3 deep-dive topics chosen by the group
The Service Leaders Network Summits never seem to fail to deliver, and the latest held at Carl Zeiss SMT in October was no exception. Here is a brief overview:
The questions attendees wanted answers to
- How to use TCO to sell more services and solutions
- How to use TCO to transform the aftermarket, especially data transparency
- How to use TCO to shape service operations, design,clogistics and processes
- How to learn from others
Key learnings based on lived experiences
- TCO is about performance, not price:
This was illustrated with discussions around the Customer Value Iceberg which using TCO techniques helps take companies deep into their customers value chain. going beyond direct and indirect costs to waste and to where the hidden value is often found: the opportunity costs, risk and emotional factors, which often drive the purchasing decision. We heard real stories from service directors in Semi-Conductor, equipment manufacturers, HVAC and fasteners that illustrate that the art of making money is to understand and focus on these value drivers. - Make the value visible to the customer
We shared experiences of how to make this hidden value real to customers in terms of the services we offer. For example a service manager for injection molding equipment who combined his service cost data (inside-out) with machine downtime (outside-in). Lost production far outweighed service costs. A preventive maintenance contract cut losses sharply, but the customer cancelled it because the value was invisible to them, and losses returned. An equipment manufacturer in the fish processing sector who collected data to develop, a “service cost per fish” metric and using this together with services to improve yield to get a customer to accept a week of downtime: payback was under a month. - Service makes lifecycle value tangible
We heard how the Points of Selling (PoS) model maps more than 20 moments across the product lifecycle where a service can be offered, from feasibility and handover to inspections, upgrades, end of warranty and end of life.Customer events such as a
change of management or regulation, relocation or obsolete parts are triggers we can anticipate rather than react to. Collaboration is the working model
The supplier’s customer has a customer and a customers customer. One participant producing equipment for the farming sector even went as far as to talk about there end customer being the “cow”. Value flows from the OEM through dealers and contractors to a farmer whose economics depend on the milk price and the health of that cow. Value and data pass through every link, and a company that sees only its own link misses most of the value it creates. Collaboration therefore works on two levels: externally with customers, dealers and partners, and internally between R&D, Sales and Service. Sales should know the customer’s value drivers so that performance, not price, leads the conversation.Selling TCO to senior leadership
The group’s advice for getting management to invest: frame TCO as a strategic framework linked to vision and strategy, not a service-department tool; make a small first ask, a green light to analyse TCO in our sector and among our customers (direct and indirect costs); define tasks and governance, including partner integration, up front; and present both the internal case (profitability) and the external case, a sales argument that is often about winning the sale at all rather than commanding a higher price.
Three key takeaways
- Use TCO as a framework for analysing customers
- Bring stakeholders in: sales, dealers, contractors and the customer, to collaborate and gain synergies
- Reusable tools: Use Points of Selling to enhance services through the lifecycle, the Customer Value Iceberg to identify hidden drivers of value, and Ecosystem mapping to understand the opportunities in the wider value chain.
In the words of attendees
“Two inspiring days focused on Total Cost of Ownership. The sessions provided valuable insights and new ideas on how to demonstrate the value of a machine beyond its purchase price. Looking at acquisition costs, service costs, and process costs throughout the entire lifecycle helps customers make better decisions and supports them in achieving long-term success. My key takeaway: understand your customer segments and clearly communicate the value you create for each of them. This is where TCO becomes a powerful tool for both sales and customer support.”
“I took away plenty of fresh ideas and a better understanding of how different perspectives connect. I see great potential for applying these concepts globally, even though the German machinery industry still has some catching up to do in terms of adoption and mindset. That’s exactly why these meetings are so valuable: bringing decision-makers together, sharing experiences, and developing new ideas.”
‘This was time well spent with working case studies from Zeiss SMT, Baader and Trumpf, as well as shared insights between service leaders from 14 different organisations”
