Abstract
This study examines how original equipment manufacturers (OEMs) can segment their product-oriented services customers with the help of a recency, frequency, and monetary value (RFM) analysis of service consumption. The study is an interventionist case study that uses two large OEMs as case companies, both seeking profitable growth in the area of services. The originality of the paper is threefold. First, the research extends the RFM analysis using four product-support-service-specific variables, and it outlines the similarities and differences between the industrial service and consumer business contexts when using the RFM analysis. Second, by applying and modifying the RFM model to better suit the product-support-service context, the study contributes to the literature on the governance of product-oriented services in manufacturing. Third, the paper contributes to the literature on management accounting supporting service business development, by introducing a method that can use installed base and customer information to measure, analyze and govern the business potential of an industrial machinery “fleet”. In all, the paper is particularly helpful for service management and accounting academics and practitioners who wish to understand product-oriented service governance in environments in which there is a vast installed base of products at the customers, with remarkable potential for extending service business.
Highlights
There is emerging literature on creating revenue streams from after-sales services
The objective of this paper is to examine the applicability and possibly supportive role of the RFM analysis in Original equipment manufacturers (OEMs)’ product-oriented service sales and service business development
The present paper shows that OEMs could use the RFM analysis for customer segmentation regarding their product-oriented services
Summary
There is emerging literature on creating revenue streams from after-sales services. Original equipment manufacturers (OEMs) especially can generate substantial revenues from a large installed base of products that have long life cycles (Gebauer et al 2005). Exact knowledge of the installed base and its service requirements could advance, for example, managing the offerings consisting of products and related product-oriented services, e.g., spare parts management (Wagner and Lindemann 2008) and end-user-oriented services such as training (Oliva and Kallenberg 2003; Ala-Risku 2009). According to another conceptualization, such knowledge could advance services that aim to ensure functioning product life-cycle, support customers’ processes, gain asset efficiency or even operate delegated shares of customers’ processes (Ulaga and Reinartz 2011). In this paper, we consider that Oliva and Kallenberg’s (2003) definition best suits our vocabulary, and we will use their term hereafter
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