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The New Reality – Part Deux

The juxtaposition of the last two blogs is intriguing. I couldn’t ignore it. I have received a lot of flak about my pronouncement of the New Reality. People suggested that I need to be more careful in how I communicated things. That it could be dangerous, I might frighten some people.

Remember Jeff Bezos – social cohesion at the expense of the truth.

I don’t think anything will get better if we ignore it. I had a wonderful teacher in Grade 8 for geometry. My majors at University were Mathematics and Physics so I rather enjoy arithmetic. But I was stubborn as heck and had a hard time with Geometry. Why??  – Because I refused to memorize the theorems. Sound familiar to any of you? Well I had a special grandmother who I call “Granny the Great” who got her Master’s degree in the 1910’s – a truly amazing woman. She got me in line and by the end of the year I was near the top of the class. I learned to memorize things. Well this teacher told me that it wasn’t going to get any better if I kept putting it off. It was going to get worse. Of course she was right.

Lou Holtz says it well.

  • You have to do your best.
  • You have to do what’s right
  • You have to honor the Golden Rule

I want to add a corollary to this list. You have to know what to do and how to do it. So there is another chapter on the New Reality. Nothing will change until we change. The time is now.

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The New Reality

To properly address the New Reality we have to look backwards. From the 1960’s to 1980 management felt pretty good about things. Sales revenues had increased, profits were up, life was good. We thoguht we must be the greatest generation of business managers ever. But it was all inflation.

When Paul Volcker and the Federal Reserve raised interest rates to kill inflation there was a serious adjustment. Businesses reinvented themselves. Operating metrics became all the rage and we developed business models for everything.

Well in a few years we felt pretty good again. With a couple of exceptions sales went up and profits went up and things were good again. But it was all leverage. With George W Bush at the helm we witnessed some of the most severe disruptions in our lifetimes. But we had to lick leverage and he and his Treasury Secretary Hank Paulson started to get it done.

In 1980 for every dollar of US GDP there was $3.70 of debt. By 2005 that debt had grown to $30.00 (The Trillion Dollar Meltdown). I shudder to think what it is today with our deficits and spending seemingly totally out of control. We are clearly in a new era when the Federal Reserve keeps printiing money and the currency continues to be debased. We have to reinvent our businesses again. We have to repair balance sheets and we have seen that happening. For everyone BUT the goverenments, all governments. Don’t forget I live in California and we make Greece look good.

We have seen encouraging signs in the equipment world. Equipment sales have been up dramatically – 30%+ to 40%+ for two years in a row. But we still have a big hill to climb to get back to the previous peak. This is not going to change for a long, long time – that is the new reality. You will survive and perhaps thrive IF your focus is on Parts and Service and for some of you Rentals. If you don’t have that focus….there is a significant risk to you. The time is now.

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The Pursuit of Performance – Change

Last week on the airplane catching up on my reading I was struck by a quote from Jeff Bezos, the founder and creator of Amazon. “Social cohesion at the expense of truth” This took my mind to the world we live in and change.

Do you remember when Jack Welsh said “when the world around you is changing at a rate that is faster than yours…. the end is near.” Do you remember that? Many of you know that I believe we are in an era of change equally as significant as the Industrial Revolution. And most people resist the changes in their lives either at work or at home.

Joel Barker, the famous futurist, calls it “rocking the boat” using the image of a canoe with three paddlers where one of them uses a kayak double blade paddle – rocking the boat. The double blade paddle is clearly more efficient and effective but it sure rocked the boat with the other two paddlers.

The thing I liked about Mr. Bezos’ comment is how it points out that we are hiding from the truth or hiding the truth in our stubborn determination not to change. In my professional life I have been calling these times the times of the “New Reality.” This not to say that the PIMCO “New Normal” isn’t also an apt phrase to describe the times but I like the “New Reality” better. We have to face the truth not hide it. We have to embrace change not resist it. We have to be open to new ideas not shut them down. There is only one way forward and that is being like the turtle – sticking your neck out. The time is now.

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Instore Selling Representatives

So we have identified the Medium Potential Customers. We know who they are and where they are and what they buy and what they own. Now we can assign them for market coverage. That means we have to select the number of customers that is appropriate for one person to handle. But first we have to deal with the fact that this will not be a Product Support Field Representative rather it will be an Instore Sales Representative. Who is that?

This is all those men and women in your parts department and service department who deal with customers today. This is the service clerks, the counter personnel, the telephone sales support personnel, and the parts office and warehouse personnel. Almost anyone who wants to be involved and who has a “sales” personality would work.

I will assign one hundred customers to each Instore Sales Representative. I will expect that there will be five personnel touches each work day by each Instore Sales representative.  If this is different there is no time like the present to get going. Are you ready? The time is now.

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Huggers or Hunters – that is the question

So we have identified the High Potential Customers. We know who they are and where they are and what they buy and what they own. Now we can assign them for market coverage. That means we have to select the number of customers that is appropriate for one person to handle from a geographical and number of machines perspective. This becomes somewhat of an art form rather than pure science. I don’t like to have more than one hundred and fifty customers in one territory and depending on the split of machine types no more than 450 machines.

You have 3000 High Potential Customers which would provide for 20 territories. What kind of sales people are required for these customers? Well now it comes down to what they buy and what they don’t buy.  If you have a high market share of the customer’s business then you want someone to protect your business – a hugger. If you have a low market share then you want someone to grow your business – a hunter. With either individual you need to go about setting objectives for all the commodities and services you provide. You have to get a better understanding of the competitive landscape. What does your customer/competitor neighborhood look like?

We are at the beginning of being able to take advantage of Product Support Selling now.  For those of you who already employ Product Support Sales Representatives – does you market coverage look like this? If this is different there is no time like the present to get going. Are you ready? The time is now.

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Making Segments that Work

Alright, you have run the reports, established the different levels of purchases, obtained accurate machine populations for the customers and have put this market segmentation code into the name and address record on your computer. Well now you have 64 market segments. I submit to you that this is too many segments to determine a strategy for each segment and have everyone understand. What next.

How about we take all of the Fleet (F) and Large (L) machine population segments that are also either A or B in either of Parts and Service purchases and make them one marketing segment? And let’s take the Medium (M) machine population and all of the C purchases for either of the Parts and Service and make them another marketing segment. Then we will have three segments. What I will call High Potential, Medium Potential and Low Potential.

The High Potential segment customers are the ones that should have a product support sales representatives call of them. The Medium Potential segment customers should be “touched” but perhaps you don’t have the budget to assign a product support representative. What are you to do? Assign and Instore Sales Representative and touch them on the telephone.

Did you know that in America Corporations fail at implementing their strategy 90% of the time? Typically that is because their employees don’t understand the strategy. In order to be able to lead people to conduct themselves in a manner that will allow successful implementation of strategy they have to first of all understand the strategy. Second they have to accept that the strategy is a good one. Finally then they can commit to making it happen.

  • Understanding
  • Acceptance
  • Commitment

We are at the portal of our market coverage strategy. Are you ready? The time is now.

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The Beginning of Marketing

The starting point for market segmentation is the information necessary to determine the potential of each client in the market place to be covered. To determine that in the equipment world we have to obtain a complete and accurate working machine population. This is the usual starting point for any good marketing information in the equipment world. To expand on that we truly have to state that if you don’t have an accurate and complete working machine population you really don’t know your business.

The machine population information required is the make, model, serial number, configuration, year built, annual hours of work, and current hour meter reading. From this information we can make a determination of the market potential for parts and service.

The machine population is normally split up into four categories.

  • Small                       1 – 3 machines
  • Medium                  4 – 12 machines
  • Large                     13 – 24 machines
  • Fleet                      25 + machines

In many cases these categories codes can be split into the same identifiers based on the total machines for all brands owned by the customer as well as the number of machines of the dealer supported brands – this might become an important distinction in some dealerships.

The next levels to consider in market coverage are the relationships that exist between the dealership and the customer. This we can determine by the level of purchases that the customer makes at the dealership for parts and service.

These purchase levels are the old fashioned A, B, C, and D.

  • A             the top 10% of purchases
  • B             the next 15% of purchases
  • C             the next 25% of purchases
  • D             the bottom 50% of purchases

These levels are obtained by providing a descending purchases report for parts and another for service. From these reports you can apply the A, B, C, D categorization to each customer – one for the parts purchases and the other for service purchases. This is the beginning of marketing. This is the starting point for market coverage. Are you ready? The time is now.

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Market Coverage

Being all things to all people has long been impossible. Yet many dealers continue to operate without a strategy for market coverage and as a result continue to do what they have always done. Treat everyone the same, until that special customer has a problem.

To make matters worse for our customers – somewhere in the 1980’s resulting from the huge run up in interest rates, enacted by the Paul Volcker Federal Reserve, dealers made the decision that they didn’t have enough money to provide face to face market coverage. So they cut back on the number of salesmen in the field.

The intent was to reduce sales costs, read market coverage costs, but it meant something else. It meant that the decisions made on market coverage were made by a salesman not by the company. The salesmen were confronted with a time limit – they could only work so many hours. This left them with the decision of who to visit and who to ignore. I remember an old story about a dealership hiring a salesman. He visited with the Sales Manager on first day on the job and was given a customer list, the keys to a vehicle and the boss pointed at the door saying – “here is a list of your customers, your vehicle is parked outside the door, there is the door – see you.” I am sure this is fictitious aren’t you?

The trouble is we have not done a very good job of determining a market coverage strategy. It is all about market segmentation. You need to determine which of your customers you want to have a salesman touch in the field and unfortunately, due to costs, you have to decide who you don’t want to have assigned to a salesman. This can only be done with a proper and complete market segmentation plan – more on that in a future blog. The time is now.

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Points to Ponder v1.1

One of the advantages there is to travel is the ability to have time to read. In my cross country voyage yesterday I had a good chance to catch up on some of my late reading. One point came out that I really enjoyed.

“Social Cohesion at the risk of Truth” this is a quote from Jeff Bezos of Amazon fame.

I think it is amazing in its clarity. Ignoring the world around you, not implementing changes necessary, risks the truth. For some time, in my consulting life, there has is a constant. People are anxious, nervous, or just downright stubborn, when it comes to making the changes necessary. These changes might be required to improve customer service. They might be necessary to “save” the Company financially. They might be necessary for a whole host of solid rational sound reasons. Yet they are often approached with less than an excited mien. The status quo is much safer. This social cohesion – the comfort of everyone involved in many cases outweighs the needs to make change. The time is now.

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Points to Ponder v1.0

When I was a little person we had an elder from the church that we went to by the name of Tony Doxsey. He took an interest in my family and was a wonderful man. He was sophisticated, incredibly well-mannered and an entrepreneur. He owned and operated an Interior Decorating/Design business. So you can imagine the impeccable taste he must have had.

He used to tell me all kinds of things – little words of wisdom. One year he gave me a little pamphlet called “The Ten Commandments of Business.” I would like to share just one of them with you today.

“Be happy in your work…or…. work and be happy. You have no choice you MUST work.

I have remembered that for over fifty years now and it has become a habit. I feel good when I work hard and it makes me happy. And I am truly blessed because I am happy in my work. I hope the same is true for you. The time is now.