Charging for maintenance: the turn to recurring revenue (1972)

The contrarian move that turned “selling satisfaction” into income

The heart of this decision was to remake an intangible — servicing — into continuing income, so that the company would not be dragged into competing on price. Miura Tamotsu later said that building a high-performance, high-efficiency product invites a price war, whereas maintenance is a trade in selling the customer reassurance and trust. An idea that came off the shop floor, out of the rounds engineers made to fix broken machines, was pushed into the structure of the business over strong internal opposition. In an era when “after-sales service is free” was simply assumed, Miura took the contrarian route of selling maintenance for money, and endured the four or five years it took to work — which is what underwrote the high share and high margins that followed.

Building service depots across the country early became the barrier that kept later, larger entrants out of a product — the small boiler — in which technical differentiation is hard to sustain. As Inui, deputy head of sales at Kawaju Thermal Engineering, put it, comparing the small boilers of the various makers reveals no technical difference between them; the reason rivals could not take share was “the difference in sales strength.” What decided the contest was less the product than the design of what happens after the sale, and how that relationship is converted into revenue and trust. Rather than compete on scale or price, Miura made the continuing contact of maintenance a pillar of earnings from the outset — a view, set out in the 1970s, that connects directly to today’s businesses built on monthly recurring fees.