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December 2017
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Established aftermarket programs increase profits
John Walker
John Walker

Customers don’t always approach you for business. You sometimes have to approach them!

Professional sales and marketing people worldwide, know that in order to sell any kind of product, they must at some point approach and sell (face to face) the customer what they have to offer.

Too many times, in a typical equipment dealership, our marketing approach to the aftermarket is exactly the opposite. We have a tendency to believe that parts, service and rental sales are guaranteed and we have a tendency to wait for the customer to approach us. Most equipment dealers’ aftermarket efforts are reactive rather than proactive.

Forty plus years ago, with the urging of the manufacturers, many successful equipment dealers established a parallel sales force to their equipment sales personnel. Clark Equipment Company was one of the first to champion Customer Service Sales Representatives or CSSR personnel. Several years ago, John Deere’s Agricultural Division initiated their dealer program for calling on the customers before, during and after the sale. This marketing program is growing slowly and where the dealers are involved, the program is proving highly successful. Despite this, in the rest of the industry only a small amount of effort is being put forth by the manufacturers.

With product differences narrowing dramatically, customers are seeking value added services. Surveys continue to reflect the customers’ interest. Customers want to know whether or not the dealer is willing and able to satisfy their needs after the sale. In particular, dealers do a poor job of marketing their service departments.

Will the dealership provide parts availability, quick service response time, rental capability and operator training programs, as well as safety instruction? These important and profitable areas of value added selling keep the customer returning for their second, third and even fourth piece of equipment from your dealership. It is the “key” to increased market share of product.

Your aftermarket support is your dealership’s most unfailing weapon against the competition!

We are continually asked by equipment dealers, how to increase margins on equipment sales (though our area of expertise is not selling equipment.) Margins on complete goods are nowhere near what most equipment dealers want them to be. Despite this, studies and surveys indicate that customers will pay more for equipment if the dealership provides the service after the sale. Research indicates that a very high percentage of purchase decision makers would pay more for the equipment, if quality aftermarket services were discussed and provided. This service cannot just be perceived, it must be a fact of service before, during and after the sale. 

The question is: How much more are they willing to pay? Play a game of “what if” with your financial statement. Add 1% to 3% or even 5% to your margins on complete goods and discover the overall effect this has upon your dealership’s financial strength. We have experienced successful equipment dealers in all types of industries who have learned the truth of these surveys. These successful dealers have increased their complete goods margins, and at the same time, increased both product support sales and product support profits.

This is why the successful and profitable equipment dealer works to develop a strong parallel selling team for the dealership. A selling team devoted to increasing the dealer’s productivity, profitability, and customer delight!

You must recognize up front that in today’s marketplace that your customers have a choice! A choice of where they purchase their parts, their service, their rental and their operator and safety training, after they purchase the equipment from your dealership. If equipment dealers and department managers recognize this important fact, they will quickly recognize the necessity of marketing their aftermarket through a strong CSSR program.

Many times an equipment dealer will tell us they do not need a Customer Service Sales Representative because the dealer is already getting all of the product support business, or at least all the dealership can possibly handle. Most dealers will tell you that their equipment sales personnel do this job very well. In fact these dealers are walking away from the opportunity they created when they sold the equipment in the first place.

Your equipment dealership probably does not need a CSSR if your financial numbers are somewhere close to the following: Parts: 28% of your dealership’s sales are parts, your margins are 30% to 34%, and all your customers are using your dealership for 90% of their parts and accessory requirements. Service: 25% contribution (customer, internal & warranty) of your total dealership’s sales are service, your dealership is achieving an 80%+ service billing efficiency and your service gross margins are running between 65% and 70%. Rental: Your dealership is experiencing 6% of acquisition cost as utilization dollars and a gross profit margin of 45%. Training: Your customers are all using your dealership for operator and safety training and your dealership is showing a 50% gross profit on this training.

We have discovered that the average dealer has little more than a 30% service market share (30% of the dealers’ customer base is using the dealerships’ service department), which leaves 70% of the dealers’ customers shopping elsewhere for service. This 70% is the dealership’s unrecognized opportunity for dramatic sales and profit increases.

If your dealership mirrors this model or is an average dealership then it becomes the time to truly market your service department. The successful equipment dealer should market the fact that the dealership wants the customer’s service business and is willing to guarantee that the dealership wants to keep the customer’s unplanned downtime to an absolute minimum.

As always let us remind the dealer that your service department is a key element in increasing the dealership’s parts business. If your dealership is performing the service business or is performing planned maintenance for the customer, it is your dealership that is getting the parts business. The other reminder is that service sales and profits also have a dramatic effect of increasing the dealership’s Absorption Rate.

As we mentioned at the start of this article, customers don’t approach you for business, you have to approach them! One of our clients in the golf and turf industry could not understand why one of their customers who owned thirty pieces of the dealer’s lines of equipment purchased the bulk of their parts from the will-fitters. A survey of the customer indicated that the will-fitter called on the buyer a minimum of once a month and in season more often. Furthermore, these personal sales contacts were supplemented by a weekly telephone call to the customer from the will-fitter.

The dealership was a short six minutes away from the customer. In a period of five years no one from the dealership’s parts department had called upon the customer to ask for the parts business. It doesn’t take a consultant or a brain surgeon to discover what the problem was at this dealership.

We have mentioned it many times in our articles and seminars, that marketing your dealership’s aftermarket requires the same techniques used in the marketing of complete goods. Equipment dealers have sales personnel for complete goods. It therefore stands to reason that there is a need for sales personnel for product support.

Developing a thriving aftermarket or product support sales program takes a great deal of work and effort. It is a program that must originate with the dealer principal. It is a program that will assist your dealership to regain, retain and grow your overall dealership profitability.

We recommend that dealers who do not have a CSSR program consider the possibilities of developing this program. Those dealers who do have a program should continue to work at the program to keep it successful. Successful dealers will tell you that this program develops the financial strength of the dealership dramatically.

Here’s your Manual Special for this month: Service Marketing for Equipment Dealers, this is a 68 page manual, again on special for $16.99. It covers extensively the topic of selling service to your customer base. It answers every question you might be asked by the customer, it is a must for every Service Manager, every CSSR, PSSR, every prospective CSSR and for Branch Managers and Dealer Principals. Email us at amsconco@aol.com we will email you the manual along with our invoice. If for any reason the manual does not exceed your expectation, email us and let us know and then you may discard your invoice . . . have a great sales and profit week . . .

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

 
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