I received a very interesting email last week from a manufacturer of industrial automation equipment. It was a marketing piece promoting the use of their “original” spare parts over “generic” parts sold by third party providers. I gather this manufacturer was losing market share in the Aftermarket and was taking steps to rectify. I don’t know how I got on this mailing list because I don’t own any of their equipment. Nevertheless, what I found so troubling about the email was that it attempted to discredit “generic” parts by claiming that they were cheaper in price because they were of inferior quality.
I find these types of claims troubling for three reasons. First, they “trash the competition”. Effective marketers and sales people know that going negative is not good for business. Most manufacturers would not use this approach when it comes to selling their equipment in their primary market. Yet some believe anything is fair game in the Aftermarket. The second reason why I oppose this type of advertising is because it’s just not accurate. The truth is that generic spare parts can be more reliable than original parts. This is because third party manufacturers often spend many hours reverse engineering original parts in order to learn how to design and manufacture new ones. In doing so, they can find ways to improve upon the design and reliability of the original part. This is particularly true of remanufactured parts. Third, in some markets the parts used by OEMs and Third Parties are the exact same parts. For example, a device assembled with commercially available off the shelf (COTS) parts.
The bigger issue is not about false advertising but about what role Third Party Maintainers (TPMs) also known as Independent Service Organizations (ISOs) and Generic Parts Manufacturers play in the Aftermarket. Obviously, these providers create competition for OEMs. However, this type of competition is really not a bad thing for a number of reasons:
- It legitimizes the market – – Markets are defined by the presence of competition. In order to win business, competitors must actively market their products and services. As a result, customers become more aware of the options available to them and purchase more quantities and more frequently.
- It creates choice – Competition offers customers the freedom of choice. The theories of capitalism and free trade are built on this basic premise.
- It improves quality & efficiency – Competition in the Aftermarket forces third parties and OEMs to continue find ways to improve the quality of products and services offered while at the same time finding ways to cut costs and improve efficiency. In other words, competition raises the bar and results in better prices for customers.
- It leads to innovation – In addition to raising quality and improving costs, competition drives service providers to become more innovative. Without competition, it is hard to know whether or not service providers would focus on finding ways to add value. Would service providers be just as compelled to invest in new systems and technology like SaaS, Mobility, and IoT if not for the impact that competition has on innovation?
- It leads to greater cooperation – OEMs also have the choice to subcontract service to TPMs/ISOs. This can help them improve their own cost structure, fill in white space in service delivery, and obtain access to capabilities that they may not otherwise be able to build themselves. Under this scenario, OEMs and ISOs can learn from each other and use this knowledge to drive innovation, reduce costs, and improve quality
In summary, competition in the Aftermarket is good for all parties concerned. Everyone benefits; from the customers to the OEMs and third party providers. Even the technology vendors benefit from competition in the Aftermarket. Quite frankly, any company that feels that is has to trash their competition is probably troubled in some way. Rather than resort to this tactic, a company that is very concerned about their competition is advised to look within their own organization to find ways to leverage competitive forces to their strategic advantage.
Please share your thoughts and reactions to this post.