Episode 267: API Heat Transfer was responding to requests for quotation when, according to research in one of its priority segments, buyers had already decided who they trusted. The manufacturer of heat exchangers had strong products and deep engineering expertise. It understood much less about how customers chose a supplier for a particular order.
It would have been easy to miss the gap in understanding. API's revenue grew with healthy margins. Some customers had been buying for decades. But familiarity didn't necessarily give customers enough reason to defend API when a competitor offered a lower price or faster delivery.
Daniel Herrmann, API's Vice President of Corporate Development and Strategy, joins Rob Markey to explore how the company is changing its approach. Historically, a customer provided a specification, API built and shipped the product, and the relationship largely paused until the next order or service problem. Their research revealed how much happened while API wasn't in the conversation.
"We realized we were leaving value on the table," by not maintaining the relationship after the sale, but before another RFQ had been requested, Daniel explains. "More importantly, we were not there for our customers when [it] mattered."
Getting involved earlier required more than scheduling meetings. Account managers agreed that talking with customers was a good idea. But without an order or technical question to discuss, they weren't sure how to make those conversations useful. API introduced regular reviews with larger customers. They developed a global sales development program to help the API team discuss customers' priorities, alternatives, and business plans. As Daniel puts it, "Investing in the relationship is selling."
API also began broadening whose feedback it sought. Procurement's satisfaction with a shipment could reveal little about the maintenance team's experience after a year of operating the equipment. A new relationship survey reaches across decision makers to help API understand what transaction scores alone could miss. Daniel shares with Rob that his focus now is creating what he calls a "central nervous system" for understanding customers and turning stronger relationships into a repeatable way of doing business.
The work is still underway. Rob and Daniel examine the test ahead: whether these changes will lead customers to buy more, give API a greater share of their spending, and generate more profitable business.
Guest: Daniel Herrmann, Vice President, Corporate Development & Strategy, API Heat Transfer
Host: Rob Markey, Partner, Bain & Company
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Timestamped Topics
02:01 – The "invisible infrastructure" behind data centers, power systems, and everyday life
09:19 – API's traditional product-first, transaction-focused model
11:00 – The difference between genuine loyalty and customer inertia
13:33 – Why some customers were leaving
21:38 – How aftermarket service can strengthen loyalty and customer lifetime value
26:16 – Building customer relationships when there is no order on the table
27:18 – Why "investing in the relationship is selling"
30:03 – Moving beyond transactional NPS to measure overall relationship health
Notable Quotes
11:00: "We weren't asking whether this growth was based on inertia or genuine loyalty. And by inertia, I mean the way we had always done things and customers always engaging in a certain way. We never dug into that because everything felt good."
13:50: "We had a very consistent finding that the real purchase decision happens before the RFQ, and we were in this RFQ stage. And we didn't really understand the buying stages because we never had to previously. But when the purchase decision happens, we're not actually in the room, and so vendor selection is effectively determined before any procurement process begins."
22:02: "And there's a real parallel to API's business. Historically, we were not holding these service contracts, and we were not maintaining continuity. So every time a customer needed something after our initial sale, we were starting from scratch. And that really limits how much loyalty you can build, and it limits your share of lifetime value that the customer represents."
27:18: "Investing in the relationship is selling. That's part of the process, and that's how you evolve out of a transactional mindset. It's: you're not an order taker, you're a partner, you're a consultative partner."
37:12: "Frankly, what drew me to API was this gap that I recognized immediately where we have 150 years of history, over 120 engineers, more than a million installations, and one of the most comprehensive portfolios. But we hadn't really built the centralized commercial infrastructure to match that, and, you know, I always look at that as a central nervous system to understanding your customers."
