After the warranty period of the product expires, the maintenance service will be charged. If you call someone to repair the TV or refrigerator at home and clear the blocked sewer pipe, you will have to pay the service fee, which is the practice of all walks of life.
However, the construction machinery industry is an exception. More than a decade ago, when the competition among the main engine manufacturers was intense, some domestic brands took the lead in shouting the slogan of "lifelong free service", hoping to eliminate customers' concerns about the quality of domestic brands and increase product sales. This practice was also praised by some "experts" in the industry as the "marketing innovation" of Chinese enterprises.
Giving up service revenue is a competitive strategy of Chinese brands. Over the past decade, what has free service brought to Chinese brands?
Hopes to increase sales, which intensifies the internal volume
The policy of "lifelong free service" did not bring the expected increment, because all brands followed suit, making this policy a standard configuration in the industry, resulting in serious internal turnover. From free service, to parts delivery, extended warranty, low down payment, price war, etc., more and more people were sent out, but did not win the increment of customers, and the side effects were extremely serious.
The first consequence of buying equipment for free service is to tell customers that the value of service is far lower than that of products.
The second consequence is to give up the income of the market after service. Agents can only rely on the whole machine maintenance service, but the profit of the whole machine is getting thinner and thinner. In the first half of 2022, more than 70% of agents lost money. According to the 2021 white paper of Construction Machinery Industry issued by Honghu Strategic Research Institute, 72% of service technicians in the industry have worked for more than 10 years, and only 9% have worked for less than 5 years. Free service leads to no one willing to engage in worthless work. In the future, the shortage of service talents will further increase, which makes the customer turnover rate of the industry that relies heavily on service very high, and the OEMs have to subsidize huge service fees to agents every year. Obviously, this is not the result expected by the manufacturer.
Label Chinese brands with low prices
The quality of made in China is getting higher and higher, which can be proved by the customer reputation and market share of excavators. However, Chinese enterprises' cognition of brand is still very superficial, and selling products to earn profits is only the first step. Brand can be at a premium, and it can also increase customer loyalty and sense of belonging. However, brand image largely depends on the inner feelings and emotional experiences of customers in their interactions with enterprises.
"Lifelong free service"? It sounds like the manufacturer lacks confidence in product quality, and the compensation for poor quality to customers is a price war with a new vest. The third consequence of free service is to label Chinese brands with low price. Once this low-end label is affixed, it is very difficult to tear it off again, and the product is difficult to premium. Experienced service technicians, parts warehouses close to customers, and timely and reliable service responses, which do not need investment? For customers, what they value is not the free service, but the return on equipment investment. Paid services that can create value are far more valuable than free services that cannot create value. Rational people will never believe that free services can bring outstanding services.
"Free things are the most expensive." Unfortunately, many people can only understand this sentence after they have suffered a heavy loss.
Become a deadlock on the road of internationalization
When China entered the stock market, many enterprises began to turn their attention to the international market, where we were the latecomers. Many enterprises copied and pasted the practices of the domestic market, thinking that the best weapon to compete with international brands is still low-cost products and free services.
Whether Chinese brands can gain a foothold overseas depends not on products, but on the ability of services and accessories, which is the bottleneck of Chinese enterprises' ability in the international market. The cost of overseas service is higher, and the risk of spare parts inventory is great. There are sufficient social service resources in the Chinese market. Spare parts stores, repair plants, backpackers, Internet platforms, etc. can be used as a supplement to the services of agents and direct companies. However, overseas service resources are limited, and once the service is not in time, it will bring serious harm to the brand.
If we continue to promote free services, how can the local agents survive? With different values, it is difficult to find like-minded partners. Therefore, Chinese brands continue to implement the free service policy in the international market, which is tantamount to suicide!
Don't be silly! If we cannot gain a foothold in the international market and improve the brand value, it will be the biggest sorrow of "made in China", and the final result is to lose money and earn a shout.
Management Master Peter Drucker said, "strategy is not about what we do in the future, but about what we do today." The internationalization of Chinese brands requires a strategic vision and pattern, which tests the wisdom of managers. Enterprises must not be eager for quick success and instant benefits, and only focus on short-term results. Like the free service policy, which is difficult to ride a tiger, it has been proved to be a wrong strategy by countless facts.
