For decades, manufacturers have prioritised capital sales. The big contracts, the one-off deals, the large numbers that drew headlines and bonuses. But behind those high-profile wins is a quieter, more profitable engine: after-sales.
Author Nick Saraev
Photo: Freepik
At Manufacturing Pricing Excellence 2025, Jerker Johansson challenged the audience to revisit their assumptions.
Drawing on two decades of experience in pricing and transformation, he laid out a compelling argument for making after-sales a strategic priority rather than an operational afterthought.
A Cultural Bias Toward Capital Sales
Most manufacturing firms have deep roots in capital equipment. Their founders were inventors, builders, and product specialists, and that legacy still shapes today’s business structures.
Johansson pointed out that many leadership teams are stacked with people who came up through product and capital sales roles. Few have backgrounds in after-sales or service. As a result, most organisations direct their energy where it has always gone—to the next deal.
Capital sales are easier to see and celebrate. A single €10 million contract gets attention, while dozens of small service wins do not. But that visibility comes at a cost.
After-Sales Is Already More Profitable
According to Johansson, many companies are sitting on a goldmine without fully realising it. Even organisations that claim not to have a mature after-sales business usually do. They just haven’t measured it properly.
He listed common after-sales activities that often go unnoticed:
- Spare parts and consumables
- Routine maintenance and repairs
- Technical support and remote diagnostics
- Hardware and software upgrades
- Inspections, change requests, and extensions
- Upselling based on installed base needs
Most of these generate higher profit margins than capital sales. And yet, after-sales remains under-supported.
Why After-Sales Gets Overlooked
Johansson compared the dynamic to parenting. If one child excels and the other struggles, the struggling child naturally gets more attention. In the same way, capital sales (with their complexity and fierce competition) often receive more resources simply because they’re harder to win.
Even companies that earn more profit from after-sales tend to compare it against their own capital sales. Johansson argued that this is the wrong benchmark.
Instead, firms should measure their service profitability against peers with best-in-class service operations.
The Mindset Gap
Much of Johansson’s presentation focused on the structural and cultural biases that prevent companies from treating service as a strategic pillar.
He noted several key gaps:
- Profitability targets for service are often undefined or minimal.
- Tools and systems are designed for product sales, not service workflows.
- Training, communication, and incentives still favour capital-focused thinking.
Even basic price anchoring causes problems. Companies that win capital deals in competitive tenders often set a low reference point. That anchor carries into after-sales, making it harder to price service work according to value.
Johansson advises treating after-sales as a separate business. New customers, different value perceptions, and distinct decision-makers require a tailored approach.
Real-World Impact
To illustrate the potential upside, Johansson shared results from companies he had worked with directly.
In one installation business with a 50/50 split between capital and service revenue, a 5% uplift in service pricing created €2.3 million in additional profit. To achieve the same result through capital sales alone, the company would have needed to win €58 million in new contracts.
In another example, a manufacturer offering both hardware and software raised service profitability by 5% in a single year.
These firms started from low baselines, but even modest gains would justify the shift.
Start Small, Then Scale
Some leaders believe that service transformation must begin with a sweeping change—bundled subscriptions, uptime guarantees, or platform-based business models.
Johansson urged a different path, encouraging businesses to start where you are. Focus on basic improvements, like charging for services that already deliver value or incur costs.
He recommended practical actions:
- Introduce surcharges for rush work or short-notice changes.
- Review billing for time and materials.
- Identify contract gaps where advisory services are unregulated.
- Simplify fixed-price offerings for common onsite work.
Progress beats perfection. One client, one contract, or one region is enough to begin. Learn, adapt, and expand based on evidence.
How to Gain Buy-In
Shifting investment from capital to service requires internal persuasion. Johansson advised framing the conversation in financial terms.
He shared a breakdown from one of his cases: with service accounting for 40% of revenue and a 5% price increase generating €2.3 million in profit, the equivalent capital sales needed to match that gain were €58 million.
When the CEO and sales director saw that, the case for change became clear.
The same logic applies even with modest improvements. A 1% price increase in after-sales might only be a small shift in day-to-day work, but could require a 16% increase in capital sales to match the profit.
Common Pitfalls
Several attendees raised concerns in the Q&A, particularly about the risk of pricing spare parts too high and eroding product competitiveness.
Johansson acknowledged the danger but advised against focusing service pricing solely on parts. Most of the untapped value lies in areas like diagnostics, advice, configuration changes, and on-demand execution.
He also cautioned against trying to convert all after-sales work into subscription models too soon. While concepts like “power by the hour” are attractive, they can be hard to implement.
It took one well-known company ten years and ten clients to make that shift work. Subscription pricing may not be the best starting point for most manufacturers.
A New Kind of Pride
One of Johansson’s more human points was the importance of making after-sales teams feel proud of their work. Too often, they’re seen as second-tier support rather than value creators.
By shifting the attention to the service team’s contribution (and helping them understand, price, and communicate that value), companies not only improve margins but also retention and motivation.
Final Recommendations
Johansson closed with a simple message: uncertainty boosts demand for service.
Supply chain delays, inflation, and labour shortages make reliability and responsiveness more valuable than ever.
His final checklist:
- Treat after-sales as a business unit, not an add-on.
- Benchmark service profitability against peers, not just internal sales.
- Aim to double or triple profit compared to capital sales.
- Focus on simple, practical changes to pricing and billing.
- Empower service teams to understand and communicate their value.
Manufacturers already have strong capital sales engines. But in today’s environment, service is the opportunity hiding in plain sight.
The companies that embrace this shift stand to gain not just in margin, but in differentiation and customer trust.
