Archive for category: Debbie Frakes

Why Your Geographic Market Matters

Guest writers Debbie Frakes and Steve Clegg write about why your geographic market matters, and how this concept directly impacts your business.

Why Geographic Market Matters for Your Business

When it comes to whether someone will work with a company or not, there are a wide variety of factors that come into play. Many of those factors are things you can control, like your parts availability, quality of customer service, and how effective your technicians are. But there are some other factors that are not in your control. For equipment dealers, one of those is your geographic market. 

What is an equipment dealer’s geographic market? 

Distance for geographic market is one of the most important business metrics for your dealership. It measures the number of miles and travel time that a customer will travel in order to work with you or buy products from you. The geographic market for a business can vary, based on the industry, market, or region that a company is located in. But if distance is a factor for your business, like it is for equipment dealers, then a customer is very unlikely to do business with you if you’re beyond that distance. 

In order to learn what the distance for geographic market is for your dealership, you must understand where your current customers are coming from. After knowing how far away from you most of your customers are, you’ll be able to recognize patterns, see if there are any outliers, and know how important a factor distance is for building your customer base. 

Why distance for geographic market matters for you

If a prospect is beyond the maximum range people are willing to travel to work with you, then it will be extremely difficult, if not impossible, to turn them into a customer. In general, most equipment dealers have a maximum service area within a 60-mile radius. The reason for this limit is that with a greater distance than that, it’s too difficult for your field service trucks to respond quickly enough to an emergency service situation. 

Geographic market is one of the most important business metrics for you to pay attention to, because if a customer is beyond that 60-mile range, you don’t want to expend any resources going after them. You should use this metric to focus your marketing and sales strategy on targeting people who are within your maximum distance and, therefore, more likely to work with you. 

How to use geographic market to your advantage 

Although you can’t control how far your dealership is from any given customer, you can use knowledge of geographic market, like other business metrics, to make your marketing and sales efforts more effective. You should only be targeting prospects within your dealer’s range, because they have a much greater potential for your business. 

Over the long term, this type of geographic targeting will save your dealership money, help you tailor your marketing and sales messaging, and allow you to become highly skilled at serving customers in your specific area. All these activities are conducive to your long-term growth and success. 

If you want to understand your dealership’s geographic market and other key business metrics for your operation, then we recommend conducting a market analysis through our partner, Zintoro. It will determine how large your potential market is and exactly what the distance is for your maximum reach. This analysis will help guide your business strategy and keep you from wasting resources.

Schedule a Zintoro market analysis today. 

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Types of Purchases: Understand What Your Customers Are Buying

Guest writers Debbie Frakes and Steve Clegg take a look at customer behavior in this week’s blog post, “Types of Purchases: Understand What Your Customers Are Buying.”

To market your business effectively, it’s important to understand which products and services your customers buy most often and what causes someone to purchase from you. By identifying common buying patterns and the factors that influence purchase decisions, equipment dealers can tailor their strategies to appeal to their target industries and markets. The result is more transactions, improved customer retention, and increased profits.

Why do the types of purchases matter? 

By identifying what triggers a purchase for equipment, rentals, service, or parts, and what is bought most often in each category, you’ll determine what is important to your customer base. Armed with that information, you will know which strategies and messaging for offers, pricing, marketing, and advertising will produce the most significant ROI for your business. Excellent customer service with frequent and consistent customer transactions drive customer retention. Revenue and profits are the result, not the driver.

Understanding what customers purchase most often and why allows you to avoid wasting time and resources featuring products and services with nominal engagement and ROI. 

Capture more sales opportunities. 

The local NAPA, Grainger, and other general supply houses are selling the filters, fluids, and parts to your customers that are required for your equipment. Grainger and Genuine NAPA have an average gross margin above 40%. Most types of equipment require two to six filter changes a year as well as numerous fluid changes. The question is, are you capturing those sales opportunities, or are you allowing someone else to take the order? Recognizing types of purchases will increase transactions, help you engage and retain customers and capitalize on the needs of your customer base. 

Know your trigger products. 

Triggers are items or situations that drive customers to a store or dealer. For example, grocery store trigger products are milk, eggs, and bread, because these items are the reason someone goes to the store in the first place. However, these products represent less than 10% of the dollars spent. They serve to get people in the door, so they can be sold other products sold in the store. 

Examples of equipment dealer triggers for machines, rentals, parts, and service:

• Emergency machine repairs can trigger equipment purchases when the repair cost doesn’t justify the expense versus renting or replacing the machine.
• Machine breakdowns or a specific type of project will trigger renting equipment that is not in the customer’s fleet. 
• Breakdowns or equipment crises will trigger repair or maintenance parts. 
• Offering a free inspection or a season change can trigger service. 

Crises maintenance represents over 25% of a dealer’s customer interactions for parts, service, and rentals. These transactions require same day or next day service and delivery to meet customer expectations. Equipment represents only 1% to 2% of a dealer’s total transactions, whereas parts and services are 88% and rental is 10%. As a result, your parts and service departments create your customer experience and are ultimately responsible for overall customer satisfaction and retention.

Understanding what purchases bring customers through the door tells you where your main focus should be. 

 Place your resources where they make the most difference. 

Every business only has a limited number of sales, marketing, and financial resources they can utilize at any time. The reason why types of purchases is one of the most critical business metrics is that it will show you which products and services to run promos on, which ones to highlight in your emails and on your website, and what to run paid advertising on. In addition, it will determine pricing offers and your inventory requirements. 

You need to know what people are buying and what triggers those purchases. Businesses should carefully consider their target audience and tailor their marketing strategies to appeal to triggers that resonate with specific types of customers. 

Knowing types of purchases helps you introduce people to additional products. 

Armed with the knowledge of which types of purchases are most common, you can familiarize customers with what you offer. They will come to your website or view your email based on the products they typically buy or because of a specific trigger, but then they’ll see other things that you carry. Use your most popular offerings as a hook to get them in the door, where they can see everything that your dealership provides. 

Zintoro provides equipment dealers and other businesses with monthly business analytics reporting to recognize, measure, and take advantage of key business metrics like purchases, purchase frequency, customer retention, at-risk customers, and more. 

Schedule a Zintoro demo to understand your most common types of purchases and start receiving business analytics reporting today! 

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For our course lists, please click here.

Upturn or Recession?

Guest writers Steve Clegg and Debbie Frakes are writing for us this week about the ways in which our accurate forecasts can help us plan for real growth in “Upturn or Recession?”

The equipment industry is cyclical and seasonal. Many dealerships react to events by looking backward at accounting financial statements, explaining why they are victims of current market conditions. But the most successful dealerships always look forward by forecasting and planning for the future. As a result, they can take advantage of both upturns and downturns.

There are effective Artificial Intelligence (AI) models that can be used to forecast and create a business plan, based on these forecasts. During an upturn, you can expect shortages of parts, equipment, and employees, as we have recently experienced. The best approach to maximizing profits is to focus on the customers and industries with the highest retention rates where the best service can be provided to generate a healthy gross margin and a high return on capital. This process builds cash and liquidity and strengthens the balance sheet in anticipation of opportunities during a downturn.

It is important not to chase the upturn, although OEMs and banks are often eager to encourage that approach to accelerate their own growth. A sustainable growth rate for your own facilities, employees, balance sheet, and customer retention, however, places limits on rapid growth. Most dealers cannot sustain a growth rate in customers and transactions greater than 10% to 15% per year, regardless of the opportunities. The requirements for new customers, employees, systems, facilities, training, and capital are beyond their internal capacity to grow and keep their existing customers happy. Using AI Analytics, you can see forecasts with >95% accuracy for the next 12 months for your business, by branch and department, providing the number of customers, transactions, and revenue that can be expected. With AI forecasts you can anticipate exactly what to expect for your customer retention, customer engagement, and even ROI on your sales and marketing programs. This approach allows better accuracy in planning the future and anticipating the best ways to identify opportunities.

During a downturn, successful dealers forecast, then use their strong balance sheets and cash flow to purchase parts and equipment at steep discounts from their suppliers and competition. They also hire the best employees, pick up additional equipment lines and territories, and acquire assets from competitors that have failed. With this approach they create the foundation for real growth during the next upturn. A 1% improvement in customer retention usually generates a 12% annual transaction growth rate. There is less vulnerability to economic downturns when customer retention is strong. Historically, there is only a 7% to 15% reduction in transactions over a 12-18 month period during a downturn, so the improved retention easily offsets this reduction. 

There are five steps management you can take now to ensure your company can weather any type of economic cycle. 

• Create a forecast the next 12 months, based on your current performance, and continue to forecast by updating your results with the prior month’s revenue. With this approach your organization will have a clear picture of what will happen for the next 12 months, if you continue to operate as you have been. 

A platform that is easy to use to produce accurate forecasts is Zintoro.com. Its AI Analytics program provides automated forecasts for customers and transactions, including the resulting gross margin and revenue, by company, branch, and department with a >95% confidence level.

•  Use the 12-month forecast to create a plan that will maximize revenue and profits

Actions for improvements are steps that you plan to begin during the next 12 months to assure you will meet or exceed the forecast, which is your benchmark. 

An action plan for an upturn provides the steps to take to overcome hurdles that are typical during an upturn, such as available working capital, delayed parts and equipment deliveries, dissatisfied customers, increased costs, and accommodating increased order frequency for parts and service with a backup plan to prevent overwhelming your employees and facilities. 

An action plan for a downturn provides the steps necessary to take advantage of the next downturn. 

• Identify the customers that are not profitable and take steps to reduce interactions with them.
• Determine opportunities to automate wherever possible, from equipment and customer communications to operating systems. 
• Build cash and set up processes to generate a high return on capital employed.

A recession presents a set of severe financial hurdles that typically include: reduction in available capital, delayed customer payments, drop in equipment sales, decrease in rental utilization, and reduced frequency for parts and service orders. 

Rank the ways to cut costs, using the improvement of employee support for your customers as the primary driver. This ranking should answer these questions: 

• What is essential to keep the doors open and assure that stable customers are engaged? 
• Where to invest to acquire and retain stable customers, by market and industry?
• Where to invest to hire and retain the best employees?
• Where to invest in equipment, technology, and facilities at favorable prices?
• How to keep all other costs as lean as possible? 
• Where to automate and outsource? 

 Keep shareholders, lenders, suppliers, and employees informed.

Zintoro.com provides reports for actual results and forecasts to manage expectations and keep these groups focused on the key drivers for customer retention, customer engagement, and opportunities for improvement. Revenues and profits result from customer retention and engagement.  

• Maximize cash and profits.

Implement the following actions quickly to maximize cash on hand and focus on generating additional cash to build and maintain your cash cushion. 

• Monitor the cash flow weekly with a system to show actual receipts and disbursements tracked at least weekly and continually update the cash forecast for 12 months to anticipates any problem periods.

Obtain debt at favorable fixed rates and establish credit lines to ensure cash availability with reasonable lender covenants. Be aware of their liquidity options. Businesses that line up capital sources before they need funding often receive more favorable terms. Funding sources may include revolving credit lines, owner infusions, alternative financing, and private equity. 

In a downturn, revenue and cash availability always fall faster than expenses. Sources of capital dry up and as inflation accelerates, costs climb faster than you can raise prices, reducing your available cash.   

• Put together a list of expenses you can reduce to minimize your cash burn rate and identify sources of additional cash and when they may be required. The longest recession in the past fifty years was 18 months; most recessions last less than 12 months. Your goal is to have enough cash, including capital reserves, available to make up the difference between the potential gap in cash flow, so that you can maintain operations for twelve to eighteen months and take advantage of the opportunities that will be presented during such times to build your business. 

• Manage your supply chain proactively by keeping your suppliers informed with your forecasts and requirements. Anticipate how your customers and suppliers will react when you are projecting your cash requirements. 

In a recession, understanding the financial situation of your customers and suppliers is critical. It’s important to be realistic, not optimistic. Assess customers to identify which ones might slow down their payments or become unable to pay. These customers can double your working capital requirement during a downturn. Meet with your key customers and suppliers to review your forecasts and anticipate their problems by understanding their challenges, too. Negotiate payment plans with suppliers while offering incentives to customers for early payments or bulk orders. 

1. Evaluate your parts and equipment inventory to reduce capital employed       and increase turns.
2. Develop a program for recruiting and training employees. Plus, expand ways to retain your employees proactively. 
3. Track all sales and marketing programs with a return on investment. Cut programs that are not generating a return that you can document.
4. Forecast and plan, don’t wait and react. Without planning you are put in a position of reacting by quickly cutting spending, firing employees, and putting your equipment inventory and assets out for auction at steep discounts. Reacting rather than plan can destroy your ability to recover during upturn that will follow at some point. 
5. Track and invest in marketing programs with the highest ROI. Compare spend for customers who were exposed to a marketing activity versus those who were not. For example, if you have an email program in place to alert your customers of specials and services you offer, compare the spend for customers with an email to those who aren’t receiving your emails. Are you calling customers regularly? Compare the spend to those you’re calling to those you haven’t called. What about contacting customer for follow-up surveys? Are the ones you talk to spending more than the ones you haven’t contacted? Below are some comparisons for a dealer over a 12-month period, as an example.

 

Marketing Transactions Revenue Cost ROI times

Program /Customer /Customer /Customer Active Customers

Telephone

Called         24 $128,440 $28 1231X

Not called     37 $93,965 $0     –

Emails

Emailed               30 $134,270 $35 2378X

No email                 4 $51,0443 $0     –

Surveys

Surveyed               16 $82,423 $35 966X

No survey                 7 $48,616 $0     –

 

Next Steps

Zintoro.com has developed a forecasting program that is updated monthly with your results. Just download the last two years of your invoices, plus invoices from the current year to date, and send them to Zintoro to upload into their password protected portal. They will schedule a call to review where the forecast shows you are headed and what steps you can take to change those numbers. Contact Steve Clegg at csclegg@zintoro.com for additional information.

To get started with marketing programs that you can count on to increase sales and deliver an impressive ROI, contact Debbie Frakes at dfrakes@winsbyinc.com. 

Did you enjoy this blog? Read more great blog posts here.

For our course lists, please click here.