Current Issue
Material Handling Wholesaler Cover
November 2017
Warehouse efficiency is being driven by technology today. Read more in the November issue.

Industry News

View Material Handling Wholesaler's profile on LinkedIn



Knowing & understanding your aftermarket opportunities
John Walker
John Walker

Information provides the framework from which a dealer develops his strategy to increase aftermarket volume, profit and market share. Inadequate information means an inadequate framework and an unworkable strategy!

It was a little over twenty years ago that we wrote these words in one of our first articles of our monthly series of articles. Unfortunately, little has changed. Every year both manufacturers and associations calculate and pinpoint product market share and can accurately indicate to their dealers what their particular market share was for specific lines of product. Surprisingly however, if you ask parts or service managers for their market share, they would be hard pressed to come up with anything but a wild guess. In the typical equipment dealership, the overall market plan and/or budget plan for parts and service is little more than a simple percentage increase of last year’s performance.

We know of several manufacturers and dealer groups who are breaking out of this mold and developing specific information for their dealers to use in order to understand what the dealer’s specific unrecognized opportunities really are. These manufacturers/suppliers are attempting to take the guess work out of establishing goals for both sales and profits. See our recent article: What do you know about your service market potential? We also feel that kudos are due to numerous computer system suppliers who are showing their customers how to use this information.

Parts and service sales are tied directly to the amount of equipment sold by the dealer to the end user. Every piece of equipment sold by the dealership should represent a parts and service sales opportunity. Most industry Cost of Doing Business studies only provide dealers one formula for measurement of their performance in product support and that formula is Contribution to Total Sales, and while this is a bit of a measurement it falls short of pointing out to the dealer what percentage are or are not buying the dealers service and parts. In other words what is the dealer’s market share in product support sales? Also it is obvious the Contribution Formula, goes up dramatically when equipment sales go down and the reverse when equipment sales drop off.

Knowing your specific market for product support sales is an area of great vulnerability with most manufacturers and dealers. Without first knowing your true market potential, it is impossible to plan expenditures for: inventories, service facilities, training, hiring, advertising and promotions.

An accurate Dealer Product Support Sales Analysis or Customer Profile is vital to the success of your parts and service marketing program. As marketing professionals you must visualize both equipment owners and types of equipment they own. If this information is not available to you through your manufacturer, then it can be pulled from either your sales and/or rental departments.

Establishing an average worth in parts and service sales for a piece of equipment is what you should be searching for. You would certainly recognize that a piece of equipment used in a foundry three shifts a day, or in a rocky abrasive soil is going to consume more parts and service than the same piece of equipment used one hour a day in a relative clean operation. There are averages to be computed and these averages will show you where you are today in market penetration and where you can go with your market planning.

Where do you start? We suggest you ask your manufacturer or supplier whether or not they have information available as to the worth of a particular piece of equipment in parts and service sales. If your dealership operates a rental fleet, you will have your own records as to parts and service usage for these units in operation.

In other words, you are attempting to determine: What is the average tractor, combine, mower, trencher, sweeper, lift truck, loader, backhoe, grader, crawler or skid steer worth in parts and services sales yearly to your dealership.

With a listing of your customers, the number of pieces of your equipment they own, and the average number of dollars they should spend with you versus the actual dollars they did spend with you, it is possible to determine your market share by customer. You will be able to quickly determine which customers are using your services completely and which customers have a tendency to go elsewhere for those same service and parts. You will then be able to focus on those customers who offer you the opportunity for increased parts and service sales.

This entire process can be difficult or simple, based upon your record keeping methods. A computerized system may provide the information in a matter of hours. Most systems today are capable of tracking customer sales in parts and service and you will certainly want to begin developing your product support sales and profitability of those sales through the computer.  Read our article: It is right in front of you!

If the immediate task proves to be too difficult due to the high number of customers, limit your audit to the top15/25 customers unit wise. However, if you initially work in this manner, do not fail to complete the entire audit as soon as possible. You will find many sleeping giants in this over all profiling project.

Don’t neglect to develop into your profiles what we call product emphasis or maintenance items. These include, but are not limited to: oil and lube, filters, seats, paint, batteries, contact tips, bearings, hoses, tires, forks, teeth, buckets, blades, brushes, brooms and undercarriage. What are these product lines worth yearly to your dealership’s product support sales?

As an example: Statistics and surveys indicate that the typical farmer will spend over $1,100 a year on oil and lubricants. Therefore, if a farm dealership had 300 customers, their oil and lube market would be $330,000 in customer sales. If last year the dealership sold $33,000 in oil and lube, they achieved only a 10% market share. Oil and lube is a very competitive market, no dealer will get all of the business. But by knowing what their market potential is, they can visualize their unrecognized opportunity and set goals and programs to achieve a higher market share, and that is what it is all about!

All customers are not the same! Average is the best of the worst and the worst of the best. This has nothing to do with customer satisfaction or customer retention. It has to do with the fact that certain customers, because of the amount of your equipment they own, will offer your parts and service department greater opportunity for both increased sales and increased profits.

We have always recommended that in developing customer profiles you begin to code the customer as to their profit opportunity to your dealership. You may want to use an ABC or 123 type coding. This coding will rank your customers by potential and you will then want to direct your efforts to those customers who will give you the greatest chance of sales increases and profitability. This coding works particularly well for dealerships that have product support sales personnel. The salesperson is better able to set up their call schedule based upon this coding.

Completion of this product support analysis on all of your customers will provide your dealership with a complete listing of your customers who are or are not using your aftermarket services. The backbone of any successful dealer product support marketing strategy is solid, accurate and usable information!

Because of demand we have extended our special offer on our manual: FOURTEEN STEPS TO MARKETING & SALES SUCCESS WITH PRODUCT SUPPORT! Email us your request with the name and address of your dealership and your position within the dealership and we will email you this document and you will be invoiced $14.99 payable only if you are satisfied. Email us at amsconco@aol.com .

Being aware puts you halfway there!

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

 
-End-  


ADVERTISEMENTS