The arithmetic of the industrial equipment lifecycle is less known in many executive committees than the economic weight of the phenomenon justifies. The basic figure, documented consistently by BCG, places aftermarket at around 40 per cent of the total economic value an end customer will pay for a piece of equipment over its useful life. If the company sells the equipment for one monetary unit, the customer will pay approximately 0.7 additional units in parts, maintenance, upgrades, technical support, spares and associated services in subsequent years.
The relevant directorial question is who captures that 0.7. The spontaneous intuition suggests that the original manufacturer has a structural advantage, given its knowledge of the equipment, its access to original parts and its prior relationship with the customer. The operational reality is more nuanced. PwC documented in its 2022 Industrial Manufacturing Digital Operations Survey that only 30 per cent of industrial manufacturers have visibility of their installed base beyond the first year post-sale. The remaining 70 per cent lose track of the equipment, and with it the opportunity to capture aftermarket.
When the manufacturer loses visibility, the aftermarket does not disappear. It is redirected to three types of actors who do capture it. Independent maintenance operators offering multi-brand service at lower cost. Distributors and local partners who have maintained operational relationships with the customer. Suppliers of alternative parts competing with original parts at lower price. In every case, the structurally higher margin of aftermarket goes to hands other than the original manufacturer's.
The economic consequence is severe. An industrial company that captures 40 per cent of its aftermarket operates with a consolidated EBIT significantly higher than another that captures 10 per cent, even though both sell the same number of units of equipment at the same price. The difference in consolidated EBIT can range between 5 and 15 percentage points, depending on the product mix and sectoral maturity.
The frequent operational error is to assume that aftermarket capture is a natural function of technical-service quality, without specific commercial management. The assumption is mistaken. Aftermarket capture requires an active installed-base management system that combines commercial intelligence, differentiated value proposition, authority to invest in the customer relationship between transactions and contractual discipline that secures repetition.
Three components define a functional system. An installed-equipment database with up-to-date operational information, maintained with the same seriousness as the commercial CRM. A specific commercial proposal for recurring services, articulated with differentiated value against independent and multi-brand alternatives. A commercial team dedicated to aftermarket capture, with its own metrics and authority, distinct from the new-equipment sales team.
For general management, the organisational implication is direct. Aftermarket capture is not a by-product of equipment sales. It is a business unit with its own dynamics requiring specific resource allocation, explicit responsibility and separate metrics. Without that allocation, operational inertia redirects aftermarket to the actors who do manage it as a business.
The standard objection is that investing in installed-base visibility systems and a dedicated aftermarket commercial team is expensive and slow to return. The arithmetic holds the opposite. The cost of installing the system rarely exceeds the first year of additional aftermarket captured. From there, the investment amortises with ease and the return accumulates over the entire useful life of the installed equipment.
Recognising that the customer pays almost a second time to maintain the equipment, and deciding who captures that second time, is one of the most relevant strategic decisions an industrial executive committee can take.