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Material Handling Wholesaler Cover
December 2017
Enjoy the December cover story as Dave Baiocchi helps you transition from supplier to strategic partner

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Unrecognized opportunities

I start this month’s article with an interesting and provocative quotation which reads: “No one can go back and make a brand new start but anyone can start from now and make a brand new ending!” Let’s relate this to the typical equipment dealer’s service department.

Years ago, this department was referred to as the back of the business, the black hole of the dealership. The only (supposed) value of the department was to handle set-ups and warranties. Seldom did top management venture back there except to voice a complaint or to make sure that all the work in process got out by month’s end. Seldom was it recognized as a true profit center capable of covering the dealership’s fixed overhead and variable selling expenses by providing the dealership a 100% absorption rate.

An exaggeration, in some cases, yes. World class equipment dealers have known for years the value and profitability of a strong service department. They relish knowing how successful their service department is in its contribution to the overall success of the entire dealership. They take pride in pointing out to customers and prospective customers the positive advantages of using their dealership’s quality service. These dealers have one purpose for their service department which is taking care of the customer after the sale has been made. They are proud to point out to customers and prospective customers that their shop is there for them 24, 7, 365, in order to limit the unscheduled down-time of any piece of equipment.

For years we have attempted to point out to equipment dealers this one extremely important and basic fact: When it comes to the equipment dealer’s parts and service, the customer has a choice! They have a choice to go elsewhere to have their equipment serviced.

Therefore, it is extremely critical that the equipment dealer recognize this point and begin to market the quality of the dealership’s service long before the sale is made, during the sales process and, continually after the customer has departed the dealership after the sale has been consummated.

Fortunately, this situation is slowly beginning to change. Dealers are beginning to figure out that as a profit center, the service department is most likely to carry the highest margins of any department within the entire dealership. Dealers are also recognizing at the same time that this department also suffers the lowest contribution to total dealership sales. This is one of the areas within equipment dealerships we refer to as an unrecognized opportunity!

In the past however, many equipment dealers placed little value on their service departments. Shops were there, but these shops were providing little more than “set-up & warranty” for the dealership. Mechanics, so called in those days were easy to find and train. Equipment was not difficult to service and before long most customers recognized they could “do it themselves.”  Dealers invested as little as possible in their shops and quite frankly, those I remember felt service was little more than what they referred to in those days, as a “black hole” in the back of the business. Because of this, they put forth little effort in truly marketing the services of their own shops, hired more technicians when work came through the doors, but did not view their shops as true profit centers.

Customers began to believe that if the dealer was not concerned with the equipment after the sale, they would begin to take care of their own equipment. In those days many manufacturers were offering (for a price) to train customers to maintain their equipment. Many of these self-trained individuals later did their thing and opened shops to repair equipment that the dealer did not feel he had the time, space or manpower to do. This fostered the startup of independents and “shade-tree technicians.” Today, equipment dealers in all industries bemoan the fact that they neglected this opportunity for so long. As we said in the opening, you can’t go back and start all over again, but you can start now to change your ending, or the way you will conduct your business profitably in the near future.

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