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December 2017
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Optimists always understand opportunity!
John Walker
John Walker

According to Webster an opportunity is:  A favorable or advantageous circumstance or combination of circumstances, a chance for progress, profitability or advancement . . .

I am, and always have been, an optimist. I have, through training and experience always understood the opportunity available in my company’s area of expertise, the aftermarket. While many equipment dealers consider their aftermarket an afterthought, and many consider it as no more than a necessity, we continually describe it as the greatest opportunity available to any and all equipment dealers. The equipment dealers’ opportunity certainly meets Webster’s definition and we define it as a dealer’s focused opportunity!

We thought after the last economic slowdown that equipment dealers had really begun to recognize their aftermarket opportunities.  Many promised themselves that they would change, that they would not make the same mistakes in the future. They promised themselves they would work towards the goal of 100% Absorption Rate. Many promised a total effort to market their service departments. Many did reverse their thinking. However, many forgot their resolutions and fell back into their old habit of just marketing their new and used equipment, chasing that elusive dream of achieving the manufacturer’s market share goal! Too many hung on to that old philosophy that the “back-end” of the business is there only for the benefit of “make-ready” and handling warranty and that it was a necessary evil of being in the equipment business!  Few manufacturers saw the total aftermarket as an opportunity to make their dealers profitable. Some still don’t look upon it as a truly profitable opportunity. Therefore, when the next business down-turn developed they again found themselves wishing they had done what they knew they should have done years ago . . . . . look to their focused opportunity!

Numerous times over the past years we have reviewed with dealers their aftermarket numbers in seminars and in our articles. Some have listened, others have not! Too many fall in love with the product and forget that they went into business to make a profit and to do it by servicing their customers. Some have come up with so many reasons why they cannot make a decent profit that they have all begun to believe their own reasoning . . . “our shop’s too small, we can’t find technicians, and the customer built his own shop and provides his own labor”. The arguments don’t change no matter what line of products you have chosen to handle.

This weekend I was reviewing a large dealer’s computer report for sales. This report shows customer’s equipment sales in dollars along with parts and service sales in dollars. I was looking for what I call “low-hanging-fruit.” We look for several things, but mainly for those customers who buy equipment from the dealership, but not a significant amount of parts or service. A glaring example in this dealer’s computer report:  A customer over a three year period had purchased from the dealer $1,424,443 in equipment sales, absolutely nothing in parts and only $40.00 in service. This was one of several hundred customers who showed similar numbers on the dealer’s list. Maybe, just maybe, this equipment is sitting on the job site, not being used, or maybe the manufacturer builds a product that does not require service. Do you believe that?

There were numerous customers on the list who showed no dollars spent on equipment but a whole lot of parts dollars, like $300,000 in parts that we can only speculate are customers who are independents or “shade-tree” technicians who are servicing the equipment the dealership sold. A call on these customers might be required to determine where all these parts are being used.

These kinds of reports are available to all equipment dealers. Not all of these reports carry the same name, but the report is simple enough for any information service provider to supply for you. Then all a dealer has to do is have his service manager, parts manager or CSR/PSR go out and tell this “low-hanging-fruit” customer that your dealership might just be able to provide quality service and parts at a highly competitive price. Who knows, even though you may have ignored this customer for years, he might just welcome you back into the fold with a trial order for your service, on a particular job no one wanted to touch or try to fix.

Years ago, back in the 30’s and 40’s we were all taught: If you build a better mousetrap, the world will beat a path to your door!

Highly successful equipment dealers understand their need for a professional sales force.  The extremely successful equipment dealers also recognize that they need not only professional equipment and rental sales forces, but also a highly professional aftermarket service sales force.

Over the years we have both surveyed and analyzed hundreds of equipment dealerships.  The equipment sold by these clients’ range from large earth moving equipment to walk-behind mowing equipment.  In previous articles we have pointed out that in a mature equipment dealership, service opportunities range from 22% to 25% of the dealership’s total sales.  Parts opportunities will run from 25% to 28% of the dealership’s total sales.

On numerous occasions we have compared these numbers with industry Cost of Doing Business studies (CODB) and have found the typical equipment dealer comes up short in achieving the desired guidelines.  Compare your own figures with your industries Cost of Doing Business studies.  Check out what would happen to your overall profitability by adding just a few percentage points to your present numbers.

In all cases where dealers have and are marketing their aftermarket, the numbers are running considerably higher than the averages found in the Cost of Doing Business surveys.  In our surveys we have discovered that equipment dealers who aggressively market their aftermarket and have an active aftermarket service sales force, their sales will run 10% to 12% higher on service contribution versus the typical or average dealer in the CODB studies.

We did not originate the phrase: “Service is a key element in developing your parts business!”,  but you’ve heard us and others say it many times . . . the easiest way to increase your parts business is to increase your service business! In our test markets, dealers with a strong and aggressive product support sales force are averaging increased parts sales of 18% to 23% by increasing the dealership’s service business.

How does your dealership sell a planned maintenance contract to a customer without personally calling on that customer?  How does your dealership sell a customer on the idea of converting from doing their own work to using your dealership’s service facilities without calling on that same customer and selling your proposal?  How does your dealership promote and sell your dealership’s operator training programs without presenting the idea to the customer on a face-to-face basis?  Don’t allow the equipment sales person to market this last profitable opportunity . . . they will end up giving it away!

We strongly recommend to all equipment dealers to develop and approach their equipment base of customers with a positive and proactive approach. Clearly state to your customer base that your dealership wants to be the sole provider of service to those customers who have over the years purchased equipment from your dealership!

Make a “three-pronged” attack: 1) Get somebody out there calling on the customer “face-to-face” asking for the business, focusing upon that “low hanging fruit” you have identified, 2) bombard your customers with flyers, direct mail, email, text, every form of communication available to you, 3) get on the phone and call your customers . . . tell them you want a shot at servicing their fleet of equipment. Recognize that this group of customers is not going to beat a path to your door; you are going to have to beat a path to theirs! These customers bought your line of equipment and you want them to return to the dealership to have this equipment serviced by a highly qualified dealer . . . your dealership!

Stop ignoring the greatest opportunity available to any equipment dealership: Sell your entire dealership to the customer before, during and after the sale of the equipment!

John R. Walker is president of Aftermarket Services Consulting Co. Inc. E-mail editorial@mhwmag.com to contact John.

 
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