German machinery manufacturers are increasingly finding that marketing products as ‘Made in Germany’ is not enough anymore when it comes to international sales. More and more often, the clincher is the provision of first-class customer service.
“It is no longer possible to justify premium prices simply with the label ‘Made in Germany,’ ” said Dorothee Herring, a partner at the Dusseldorf office of the consulting firm McKinsey. “Service is becoming an ever more important distinguishing feature.”
Germany-based LPKF Laser & Electronics and its subsidiaries, for example, have been present for years in the Asian market, and countries such as China and Japan are among the firm’s biggest customers. The maker and supplier of machines for the electronics industry derives more than half of its annual revenues of €120 million ($130.6 million) from the region. In particular, subcontractors for large manufacturers of smartphones utilize the products of the listed firm, based in Garbsen near Hanover.
Sales in other Asian countries are modest, yet LPKF is building up its presence there.
“Production firms increasingly expect that machine builders develop custom-fitted solutions for them on site.”
“The first customers are beginning to shift entire factories – recently to Southeast Asia as well,” said Ingo Bretthauer, chief executive of LPKF. “They expect us to follow suit.”
Recently a branch service office was set up in Malaysia, where LPKF machines frequently operate around the clock. When service is needed, technicians must arrive on the scene quickly, Mr. Bretthauer said. “The fact that we are readily available for service is an important sales argument.”
German manufacturers, which are number one in the international export business with a 16 percent market share, are already well-positioned when it comes to customer service. According to a study by the German Engineering Federation (VDMA), German service has the best reputation worldwide. But the service provided by Japanese firms is receiving similarly positive evaluations, and the competition from China is catching up.
In order to maintain their lead in the future, German machine manufacturers will have to locate themselves even closer to their customers, Ms. Herring said. “Production firms increasingly expect that machine builders develop custom-fitted solutions for them on site,” from technical adaptations all the way to maintenance concepts, she added.
In fragmented markets such as Southeast Asia or Africa, that presents companies such as LPKF with challenges. And the rising demand for service is having an impact on small and mid-sized companies too.
Albrecht Bäumer, a 300-employee family firm based near the western German town of Siegen, provides machines for handling foam to mattress manufacturers, automotive firms and furniture makers. The company has sales subsidiaries in the United States, China, Japan and South Africa. Bäumer’s service operations, however, were long located at the company headquarters. Some of the service department’s 40 mechanics were always on call in case a machine broke down somewhere in the world.
For a long time, the company did well with this procedure. But now, because of considerations of time and expense, customers are less and less willing to have experts flown in from Germany, said Jörn Lidde, the head of service at Bäumer. “We now need a worldwide service network,” he said.
The company has hired new technicians at its sales subsidiaries and is increasingly demanding technical expertise from its trading partners. Because of limited finances, Bäumer can’t be present in all relevant markets.
“Our compromise is that we can reach any location in the world with a flight time of three to four hours,” Mr. Lidde said.
Markus Ströbel has also chosen a pragmatic approach to the service business. He is a managing director of Bausch + Ströbel, a machine manufacturer in the state of Baden-Württemberg in southern Germany. In order to improve customer service around the world, the company and four other machine builders set up the Excellence United association. All members of the partnership provide equipment for the pharmaceutical industry.
“We have repeatedly worked together on individual projects,” Mr. Ströbel said. “Since 2011, we have given that collaboration a fixed structure.”
The companies have merged their service and sales departments in seven countries. In formal terms, each location is a subsidiary of just one company – with the exception of Russia, where three firms are involved. In all cases, the companies operate their own accounts, explained Mr. Ströbel: “Similarly to a distributor, bills for services are drawn up in terms of commissions.”
This creates an incentive to be equally active for all companies in the association. This sort of procedure is a rarity in the industry.
“You have to be ready to make compromises,” said Mr. Ströbel. “That’s no easy matter for companies that are used to operating on their own.”
But the partnership has benefits in addition to better utilization of branch offices for service and sales. “Together we are able to sell complete solutions that are otherwise offered only by much larger companies,” he added.
Steffen Ermisch works for the JP4 press agency. To contact the author: firstname.lastname@example.org