If you are an equipment dealer, you are probably thinking that this has to be the most stupid question you have ever been asked. Hey, it’s an election year; the media is allowed to ask dumb questions. As an equipment dealer you are accustomed to being told (in sometimes impolite terms) that you had better figure out how to (quickly) increase your dealership’s market share.
Dealers in every industry are being pressured on a regular basis to improve their market share. It has become the nature of the beast. We became familiar with the term market share well over 50 years ago. Its usage has grown to the point where it has become the number one issue between manufacturers and equipment dealers today.
Who benefits from increased market share? Is it equipment dealers? If so, how do they benefit? Dealers are constantly being asked (or told) to reduce their equipment margins. Margins on equipment sales today in most industries have dropped to the low single digits, with no end in sight. If a dealer’s market share drops, then he is given a warning and a time
Does the supplier/manufacturer benefit from increased market share? This question is impossible to answer, as the availability of hard number is very limited. I’ve been told it makes stockholders very happy. In many instances, corporate officers and management personnel received bonuses based upon market share. That is one of the reasons market share pressure builds at the end of the manufacturer’s fiscal year.
Herb Kelleher, who successfully started and grew Southwest Airlines, made this comment: “Market share has nothing to do with profitability. Market share says we just want to be big and we don’t care whether we make money doing it!”
On November 29, 2011, American Airlines, one of our country’s largest airlines, filed Chapter 11 bankruptcy. I have a soft spot in my heart for American Airlines. My first airplane flight was with American in August of 1948, on a DC-3 out of Mexico City. It was my beginning of a long relationship with the airlines. Unfortunately I had the opportunity of seeing many, many airlines over my years suffer the same fate as American. I am only glad to see, however that the name American Airlines still flies the skies.
The ultimate goal of not only American but of so many other airlines was to be the leader in market share, even if that goal meant the destruction of their profit margins.
Did all these failures have anything to do with a sagging economy, high fuel prices or unemployment? This is quite likely, but in many experts’ opinions it goes deeper than that. It stems from an overall attitude of indifference from the top down in corporate offices. As reported by numerous news agencies, this indifference results in deteriorating and then destroying customer satisfaction.
Let’s carry this over to the equipment industry. The dealer’s basic function as a customer (a definition we’ve always disputed) of the manufacturer and/or supplier is to both sell and service the products produced by the manufacturer/supplier. These two functions, plus the handling of used equipment, are functions the manufacturer/supplier cannot perform.
Equipment manufactured today is extremely sophisticated and becoming more and more complicated and difficult to service. One thing that has never changed in the market place is the customer’s concern about service after the sale. Customers cannot afford any unscheduled down time. They want to know that after the sale there will be someone there to take care of their service needs and requirements. They continue to want high parts availability and quick service response time.