Enhancing Customer Satisfaction: The Synergy of Service Level Agreements, Active Selling, and Smart Pricing Strategies

SW (Machinen), a manufacturer of high-precision CNC machines, understands this well. Despite being relatively young, the company has rapidly expanded its global footprint and is now embarking on a digital transformation journey to optimise its service and spare parts business.

This article explores how SW is enhancing customer satisfaction through a strategic synergy of service level agreements (SLAs), active selling, and smart pricing strategies. By addressing key challenges and implementing structured solutions, the company aims to improve efficiency, boost customer loyalty, and drive profitability in the long run.

The Importance of Customer Satisfaction in Manufacturing

Business success relies on customer satisfaction. While the first machine sale is driven by the sales team, repeat purchases and long-term business relationships are built on the foundation of service quality and after-sales support. Several key factors influence customer satisfaction in the manufacturing sector:

• Product Quality – Customers expect high-performance, durable machines that function reliably.
• Service Quality – Rapid response times, expert technical support, and effective communication are key to maintaining trust.
• Competitive Pricing – Customers compare service and spare parts pricing with competitors, influencing their perception of value.
• Availability and Logistics – Quick access to spare parts and timely service interventions are vital in minimising downtime.
• Customer Experience – An intuitive and accessible interaction model (including digital platforms) enhances satisfaction and engagement.

Despite being in the industry for over 20 years and integrating industrial data systems into its processes, SW has yet to introduce a webshop for spare parts management. This presents both a challenge and an opportunity for digital transformation.

Service Level Agreements (SLAs) as a Customer Retention Strategy

SLAs play a large role in ensuring high service standards and fostering long-term customer loyalty. For SW, these agreements serve as a structured way to reward loyal customers and provide them with predictable service expectations.

In the past, SLAs were granted inconsistently, sometimes favouring smaller customers over larger, more strategic clients. To create a more structured approach, SW is now implementing a two-step SLA system:

• Bonus Agreements – Customers who achieve a specific turnover threshold receive a financial incentive, such as a percentage-based rebate.
• Service Agreements – Customers who demonstrate consistent growth and engagement receive enhanced benefits, such as discounted service rates, priority technical support, and improved payment terms.

The aim is to build a mutually beneficial relationship where customers receive value-based pricing and enhanced service reliability while SW ensures a steady revenue stream and increased brand loyalty.

However, SW faces a common challenge—some customers demand discounts without demonstrating increased spending or growth. The company is addressing this by clearly defining SLAs as a two-way commitment rather than a one-sided concession.

Smart Pricing Strategies: Balancing Competitiveness and Profitability

Pricing is one of the most complex aspects of spare parts and service management. Customers seek low costs and high availability, while manufacturers must maximise margins and maintain operational efficiency. SW is addressing this challenge with a value-based pricing approach, which considers the following factors:

• Part Type Classification – Articles are categorised based on complexity, with custom-engineered parts commanding a higher price due to their unique specifications.
• Market Competitiveness – SW analyses competitor pricing to ensure its offerings remain attractive without compromising profitability.
• Cost Transparency – Customers often compare prices across regions, necessitating a structured pricing model based on a standard reference (German list price) plus logistics and exchange rate adjustments.

While SW aims to remain competitive, it doesn’t position itself as the cheapest option. Instead, it focuses on availability, reliability, and value-added service, ensuring customers receive justifiable pricing for high-quality products and support.

One challenge the company faces is handling customer pushback on pricing fluctuations. Customers often reference older invoices to argue against price increases, requiring SW to maintain clear, data-driven justifications for price adjustments.

Additionally, the company has leveraged external market intelligence tools, such as MarkPilot, to benchmark its pricing strategy and align with industry standards. This helps SW remain competitive while sustaining profitability.

Active Selling: Moving from Reactive to Proactive Customer Engagement

Currently, SW operates in a predominantly reactive selling model. Spare parts are purchased in emergency situations when machines are down. In such cases, customers prioritise fast resolution over price, as downtime costs can reach tens of thousands of euros per hour.

To shift towards a more proactive selling model, SW is implementing several strategies:

• Customer Data Analysis – Through analysis of historical purchase data, SW identifies patterns in customer buying behaviour and anticipates their spare parts needs.
• Service Account Managers—These key personnel act as a single point of contact for customers, providing seamless communication across the service, parts, and retrofit departments.
• Regional Cross-Checks – Comparing purchase trends across different regions helps SW refine its sales approach and offer tailored solutions to customers.

The transition from reactive to active selling is still in its early stages and requires significant manual effort, including data consolidation and customer outreach. However, with improved digitalisation and CRM tools, SW aims to streamline this process and increase sales effectiveness.

The Role of Digitalisation in Customer Experience

Despite its extensive industrial data system integration, SW lacks a digital platform for spare parts management. Currently, customers must call or email for inquiries, which limits efficiency and accessibility. Moving forward, digitalisation will be essential in enhancing customer experience through:

• Web Shop Development – Providing customers with an intuitive online portal for part identification, ordering, and tracking.
• Automated Customer Support – Implementing AI-driven chatbots and self-service tools to streamline interactions.
• Targeted Promotions – Leveraging digital sales programmes to offer discounts, seasonal promotions, and bundled deals.

A web-based solution will not only improve operational efficiency but also enable SW to launch structured sales campaigns—something that is currently challenging due to outdated communication methods like email lists.

Conclusion

SW is at a pivotal stage in its journey towards digital transformation and enhanced customer service. Refining its approach to SLAs, adopting smarter pricing strategies, and shifting towards active selling, the company is laying a solid foundation for future growth.

While manual processes and a lack of digital tools present challenges, SW recognises the need for a structured, technology-driven approach to service excellence. Through continued investment in digitalisation and customer-centric strategies, SW aims to elevate its spare parts and service business, ensuring long-term customer satisfaction and sustainable success.

As the manufacturing industry evolves, companies that prioritise digital transformation and proactive customer engagement will emerge as industry leaders. For SW, the journey has just begun, but the path ahead is clear—customer satisfaction remains the key to unlocking new opportunities and driving business growth.