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This question has been answered, and points have been awarded.
Spare Parts Business: How To Fight Pirates And Defend Market Share?
Posted by Anonymous on
8/12/2004 at 4:38 AM ET
I work for a company operating worldwide in the investment goods sector (textile machinery). The sales of spare parts is a major contributor to the firm's bottom line. We are facing fierce competition against low-cost pirates, especially in Asia.
Question: are there any smart ways to ward off pirates, in order to increase our market shares, and still keep the margins? (we are doing following right now: have a dedicated sales force for spares, organize maintenance seminars with customers to have them use original spares, combine spares with maintenance services to differentiate our value proposition to the customers). Any other ideas?
8/12/2004 at 10:52 AM
You seem to be doing the right things!
Here's my bit..
There used to be a time (and still is) when spare parts is the main business for many businesses. THe customers know this and that's why, given a chance they go to the pirates. Everybody values their money. Who has pirated whom? Who owns and idea anyway. It so happens that you stepped on it before the other does. Discoveries are waiting to happen. Its always there. For the hard work and toil to make those discoveries happen, you need a fee. We have patents for that. The pirates are one up on you. THey change the rules in society. They shove the patents to the bin. It hurts..hurts badly. That's why Microsoft has launched an XP Asia version. They don't legally call Linux a pirate, but this is to hit the free OS makers.
My feeling is, goods and services in future will be free. SO if we are in business, we better accept the imminent. THis means that we have to optimise the level of goodies and product enhancements you have to offer the client. You are doing the right thing. Educate the client that getting your licensed product is valuable. Show them (prove it to them) that buying from you will save money in the long run. The computer hardware and software business is running out of breath on this count too. For industrial products, clients value relationships, trouble free services and lesser long term costs. At any cost they wouldn't trade short term profits, to machinery breakdowns. Prove that to them. In case you find it difficult to do so, it means that the pirates make their copy better than the original. THen, either you go with them and learn their trade and do that better or run...Your cash cow is not working anymore, your product is in the last stage of the BCG matrix. Hope thats not the case with you.
THese are some thoughts on your question!!
Hope they help!
8/12/2004 at 12:45 PM
How about playing off the reliability angle? "That pirated part may cost less intially, but how many times will you have to replace it within the life expectancy of our quality parts? What does that down time cost you? Are you really saving money? Plus, what guarantee do you have that the "pirate" will be there when their part breaks?"
People want to feel secure in their purchasing decisions. Those who only operate on a cost basis don't stay in business over the long term.
8/12/2004 at 2:51 PM
We had a similar problem in Eastern Europe for an electronics brand with grey imports.
Although similar, you can extend Gary's reliability suggestions to offer a Service Guarantee Certificate for your parts that have extra value for your customers- assuming your parts are reliable - no offense intended.
Use your customer lifetime value to find what additional offers you can incorporate with your value propositions into the equation. Additionally, you can do a sales promotion to incorporate your Service Guarantee Certificates as a double incentive.
Communicate this to your dealers, agents, network and make a campaign out of it.
Hope that helps.
8/12/2004 at 2:55 PM
Sorry forgot to mention -
Consider doing technical branded campaign - why your parts have been so good and incorporate testimonials into them. Identify and highlight why they buy your products.
You want to remind and re-enforce the goodwill you have built up through years of good service with your customers.
That is not so easy to copy. Good luck!
8/13/2004 at 10:28 AM
The best way is to advertise and alert people about the differences between the original parts and copies. Are there differences? Not only in the appearance, but in the functionality and benefits. Advertise the differences in the same product, send them to the current customers, develop alliances with government departments in charge of taxes and interested in consuming legal parts.
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