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Your best margin is not in the product.
"Aftermarket services deliver operating margins more than twice those of equipment sales. The product is what gets you to the customer. The relationship over its lifetime is where the P&L actually lives. Most manufacturers have not designed a service model. They have a spare parts catalogue and call it aftermarket. "
2x+
Aftermarket operating margins vs new equipment margins. Service-first manufacturers outperform by 2.5x on EBIT.
(Deloitte Manufacturing Outlook, 2026)
(Deloitte Manufacturing Outlook, 2026)
51%
Of Rolls-Royce civil aerospace revenue now from services like TotalCare. Not from selling engines.
(StartUs Insights, 2025)
(StartUs Insights, 2025)
"Aftermarket services can be an important revenue source and profit driver for industrial manufacturers, delivering margins that are more than two times higher than equipment sales alone." — Deloitte, 2026 Manufacturing Industry Outlook
The core tension
The margin-per-use model does not mean giving away the product. It means pricing the relationship, not the transaction. The manufacturer who owns the data owns the margin.
The transition from product to service requires four decisions: which customers, what price, what data architecture, and what cost-to-serve model. The ones who make all four before launching outperform the ones who launch and retrofit.
Rolls-Royce
Civil aerospace division. TotalCare: engine performance and maintenance-by-the-hour contract. Over 10,000 engines under long-term service agreements.
51%
Of Rolls-Royce civil aerospace division revenue now generated by services like TotalCare, not by selling engines. The business model shift took two decades but restructured the entire margin architecture of the division.
(StartUs Insights, 2025)
Rolls-Royce TotalCare is the definitive case study in the margin-per-use model. Rather than selling engines and competing on upfront price, Rolls-Royce sells engine uptime: a guaranteed level of performance for a fixed fee per flying hour. The airline pays for thrust-hours. Rolls-Royce owns the engine, the data, the maintenance, and the risk. This inverted model gave Rolls-Royce complete visibility into engine performance across the global fleet, enabling predictive maintenance that competitors cannot replicate. The result: over 51% of civil aerospace revenue now comes from services, not hardware. TotalCare generates EBIT margins structurally above 20%, while the engine sale itself is close to breakeven.
Rolls-Royce does not compete on engine price. It competes on uptime data. 51% service revenue is the outcome of building a data architecture before building a sales model.
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Unresolved tensions
At what cost-to-serve per unit does the usage-based margin model break even against the one-time sale, and which customer segments reach that threshold first?
How do you price the uptime guarantee when your field data is insufficient to model failure rates with actuarial confidence?
When a high-intensity customer converts to EaaS and your cost-to-serve exceeds the monthly fee, what is the contractual mechanism that allows renegotiation without destroying the relationship?
By Fabrice Macarty
This case resonates?
Map your installed base before your next pricing review. Price at the value of the outcome, not your cost-to-deliver. Convert the 20% highest-intensity customers first. Then build the data flywheel that makes switching impossible.
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