Motor suppliers must do better

A new survey exposes a level of discontent among end-users of integral horsepower motors, with customers' views and opinions indicating that leading suppliers fail to satisfy.

Following over a hundred interviews with engineers, purchasing managers, plant managers and managing directors at motor customer companies, a new survey by Frost and Sullivan has exposed a level of discontent among end-users of integral horsepower motors, with customers' views and opinions indicating that leading suppliers have more work to do to meet customer expectations.

Manufacturers received mixed results in terms of customer concerns and requirements related to pricing, lead times, as well as quality and service factors.

While many manufacturers scored well on a range of criteria, all have areas in which they need to improve to ensure sustained customer satisfaction.

Despite economic and political uncertainty in late 2002, only 16.8% of parties surveyed anticipate a decline in spending on motors during 2003.

In fact, 28.1% of respondents expect integral horsepower motor outlay to climb this year.

So how can companies benefit from this expected trend? Survey participants rated quality as a crucial motivator behind motor purchasing decisions.

Nearly one third of customers ranked quality as the primary consideration; a further 26.5% identified price as the most significant issue.

In many instances, the purchase is influenced by careful price/quality comparison.

"Customers in particular application areas revealed greater interest in price as a determinant of motor purchase.

A low price is perceived to be an important factor among customers in the process industry sector and in the pumps, valves and compressors market.

Manufacturers offering an effective mix of quality, price and delivery should be able to enhance or protect market share", comments Mik Sabiers, Research Manager at Frost and Sullivan.

Owing to their respective strengths in key regional markets, Siemens, the undisputed market leader, and ABB score top marks amongst end-users in terms of overall market presence and customer recognition.

At the same time, however, the competitive landscape is comprised of a number of local fiefdoms - Leroy-Somer, for example, is the dominant force in the French market while Brook Crompton holds the leading, but weakening, position in the United Kingdom.

Siemens' motors pricing policy has drawn criticism from parts of the company's client base.

Respondents' dissatisfaction over Siemens' below average performance in terms of pricing may not be mitigated by the relatively high quality and high reputation of Siemens' products and this could create problems for the company in maintaining market share despite its leading standing for quality and its total market penetration.

Frost and Sullivan's survey reveals that there is a limit to customers' willingness to pay premium prices for high quality and good manufacturer reputation.

Consequently, Siemens may be vulnerable to lower priced competitors.

Notably, the Brazilian firm WEG, a relative newcomer in the European market, outranked Siemens in terms of customer satisfaction levels related to price.

Although it currently accounts for less than 5% of the market, WEG has the potential to strongly grow market share and to encroach on the established players' position.

Siemens must reappraise its use of the price to benefits equation and reduce the premium associated with its brand name and high quality motor products to achieve price satisfaction and increased loyalty.

This could be achieved by widening its product portfolio to offer a motor solution which more closely meets different price/benefit expectations Frost and Sullivan recommends.

"WEG is advised to focus on improving customer perception of its product quality and technical knowledge.

Linked to this is the need to build market reputation.

A system of customer referrals, in which satisfied clients are rewarded for recommending WEG to others, may achieve this aim at relatively low cost", Mr Sabiers notes.

French customers ranked Leroy-Somer more highly than customers elsewhere in Europe.

In its domestic market, Leroy-Somer achieved high satisfaction scores on a number of measures, including price, quality, reputation and service.

Overall, Leroy-Somer should look to enhance its service levels further.

Results also imply that the company could benefit from improving customer relationships in some overseas markets where it is not as strong.

Meanwhile, Brook Crompton also has room for improvement on a number of measures, including customer service, technical knowledge and lead times, indicating that competitors have the potential to seize market share in the UK, where Brook Crompton remains the leading supplier.

Overall, the research shows that established manufacturers may be vulnerable to well-informed competitors that focus on meeting key demands in terms of strengthening their price to benefits ratio.

Frost and Sullivan's analysis of customer satisfaction responses for ABB revealed that the company is in pole position to grow its share of motor sales.

The company ranked well on a range of measures, including price, quality, reputation and delivery time.

Characterised by frequent, low volume and low value purchases, the European integral horsepower motors market is highly focused on both AC motors and low voltage motors, which accounted for some 80 and 84% of total sales, respectively.

Respondents revealed that more than two thirds of motors purchased were at power ratings of less than 7.5kW.

In the end-user market, a remarkable 84.4% of respondents specified their acquisition of motors as replacement purchases.

Increased purchasing from low-cost international suppliers is expected to exert additional pressure on prices in the European motors market in future and is set to have the biggest impact on suppliers of integral horsepower motors to customers in the important HVAC and pumps valves and compressors markets.

Low-cost international suppliers present less threat in geographical markets such as France, Italy and in application areas such as process industries and general industry.

In order to maximise price benefits, 60% of customers purchase motors directly from the manufacturer, with the remaining 40% using distributors for purchase.

E-commerce sales have yet to effectively penetrate the motor market and are unlikely to do so for the foreseeable future.

Motor manufacturers are advised to price products competitively with the market, and to underline quality and service advantages to customers.

Frost and Sullivan's survey demonstrates that while a competitive price is a necessary condition for customers to purchase a particular motor, competitive pricing alone is not sufficient to motivate purchase.

Many customers choose a pool of low-priced motor suppliers and then differentiate between them on the basis of product quality and delivery time.

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