Strategy check in industrial services: reassessing markets and customers

The company had ambitious plans for its after-sales business in a foreign market. Service revenue was to double within a few years while margins also rose. Until then, only a small share of customers bought services as well as products, and that was to change significantly.

There were further goals: securing long-term contracts, tying customers in from their first projects, understanding the market’s particular mechanisms better and expanding further into the market. The strategy check was to establish whether the company’s positioning and market approach matched these goals.

In its basic form, the Innovative Strategy Check consists of a one-day kick-off workshop, a market and customer analysis carried out by transformis and a three-day closing workshop. It can be completed in six to eight weeks.

The kick-off involves the management team and key people from marketing and sales. They set the basic structure of the market analysis, above all the relevant market segments, the evaluation criteria and the scales. They also define the performance parameters used to identify customer expectations and potential.

In this case, the check was combined with a market study. The project took three months, with eight days of in-person meetings in total. The work followed five stages: market assessment, online survey, customer segmentation, focus and value proposition, and strategy map with implementation plan.

First, the logic of the market segmentation was reviewed and twelve relevant market segments were defined. The same evaluation criteria applied to all of them: market volume, market growth, profitability and potential for customer loyalty, each assessed for the present and for an outlook of several years. Consistent criteria make the results comparable and provide a sound basis for resource decisions, especially when segments follow different market logics.

The attractiveness of each segment was set against the company’s competitiveness relative to its main competitors. The assessment drew on secondary sources such as sector studies, trade articles and statistical databases, supplemented by targeted interviews with company representatives and experts.

In-depth interviews at the micro level provided a detailed understanding of decision-making processes and market logics. They asked how purchasing decisions are made, who is involved and who shapes the final decision, what criteria are used to award service contracts, and what a provider needs to offer to be considered at all.

Each market segment was described using the same structure: market conditions, market structure, competitors, further findings and conclusion. For one segment, for example, foreseeable overcapacity and possible consolidation could limit demand and increase price pressure on suppliers, while the size of the market still left considerable scope for services.

Respondents named quality, price and speed as the main purchasing criteria, along with flexible payment terms and the availability of critical spare parts. Service contracts were usually considered only once the warranty had expired. Service was often regarded as something that should be free.

The customers themselves were also surveyed. The survey went to the hundred most important customers, with several contacts at each, spread across all twelve market segments. As part of the project, customer data, including contacts, was checked and updated.

The online platform was tailored to the company’s needs and available in several languages. It was designed to identify threshold benefits and potential for differentiation, and took no more than fifteen minutes to complete.

Topics included interest in system optimisation, tailored service packages and consulting; preferred service terms (ad hoc or contract-based); response times for breakdowns; system audits; preventive maintenance; package pricing; the importance of local presence; and the preferred sales channel.

The segmentation was based on the survey data: the main differences in customer expectations and the factors that determine business potential. The result was eight customer segments, each with different key customer values.

The profiles differed markedly. One segment consisted of experienced customers with a strong need for advice, who preferred contract services, one-stop offerings, local presence and buying direct. Another needed no advice, wanted ad hoc service and had a small budget. A third had backup systems, so time was less critical, but expected system optimisation, full on-site system checks and preventive maintenance.

Surprisingly, customers in the same industry had to be assigned to different segments to realise their full potential.

A separate value proposition was developed for each customer segment. It is built from seven benefit criteria: product and service portfolio, time, quality, price, service, relationship and brand. These are the elements of an offer that customers notice and that deliver value to them.

Each criterion has a threshold benefit: the minimum a customer segment expects. Fall below it and the customer is dissatisfied or ends the relationship. Overestimate it and the company wastes resources, because customers do not value the extra effort. Threshold benefits vary from segment to segment and should not be confused with a low level of service.

Differentiation and value creation happen where potential above the threshold is recognised and served precisely. In the project, threshold benefits and differentiation potential were identified for every service component.

The results fed into an attractiveness/competitiveness portfolio of the market segments. It answers three questions: which market segments are attractive, how competitive is the company in them, and which customer segments matter within them? This identified the target market segments and target customer segments.

A strategy map based on Kaplan and Norton linked this positioning to implementation. It runs from the financial goals (growth with existing and new customers, productivity and costs) through the customer perspective and its value proposition to the internal processes for customer management, service delivery and innovation. The learning and growth perspective covers people, organisational capabilities and assets.

The analysis produced a clear verdict. The company’s existing market approach was capturing only a fraction of the market potential. Doubling service revenue looked achievable and, given untapped revenue and earnings potential, rather conservative.

At the same time, a risk emerged. The company still held a strong market position, but if it carried on as before it was likely to run into difficulties in the medium term, with a clear loss of competitiveness foreseeable in important market segments. One cause was the market approach: each salesperson saw only their own customers and managed them as they saw fit, staff turnover was high and parts of the team lacked experience. On top of this came a business model without local production, a premium pricing strategy and local competitors that were catching up.

Several core assumptions held by key people in sales turned out to be wrong. Certain customer segments were willing to invest in preventive services and to commit to them by contract. Some preferred to buy direct. Customers also did not know the full service portfolio and were not well enough informed about the benefits of the products and services.

The project’s central insight was this: growth in attractive market segments comes only from value propositions tailored precisely to selected customer segments. The service package held considerable business potential, both to create value and to protect customers effectively from competitors.

The case also shows how established assumptions about customers can drift away from reality without anyone noticing. When the strategy process becomes routine, the risk of constant self-confirmation grows, and in dynamic markets that leads to crisis in the long run. Reliable external data makes such assumptions testable.

Analysis only has an effect once the organisation understands it. In this project, the local team initially grasped only a fraction of the market assessment and survey results, despite several rounds of explanation. The project’s outputs also included linking the outside-in findings rigorously to concrete implementation measures and internal measurement points.

• Twelve market segments assessed against the same criteria.
• Eight customer segments defined, each with its own value proposition.
• The survey corrected key assumptions the sales team held about customers.
• Interim assessment: the existing market approach was capturing only a fraction of the market potential.

This case study is anonymised and based on transformis’ project documentation. It describes the approach and the interim assessment; it does not claim an independent measurement of economic impact.