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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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Facts are awfully stubborn things

This is a most interesting time, isn’t it? I listened to Jimmy Rogers on CNBC the other night. He was pointing out there is an election this year in the United States, there is one in France. Germany has an election next year. In fact there are 40 governments that will face elections this year. There will be a lot of money spent by the politicians. Yes, they spend our money to get themselves reelected. Sorry to be so cynical.

But 2012 is going to be a good year – one way or another. If we have to show unemployment going down well let’s not look so closely at the shrinking size of the work force;  If the deficits get too large let’s blame it on the recession or the conflicting arguments between one view of the economist Keynes and the rigors of the Austrian school followed by the later Milton Friedman. Politicians will be in the feel good best this political season

The total unit sales in the United States are still less than 50% of what they were at their peak. The customer fleets and rental houses are almost at the complement of units now. So where is the boom going to be coming from in the US? It sure won’t be housing will it? And as long as housing operated with depressed prices the pent up work force movement will not be released.

The only answer is that the market is what the market is and get over it. Get one with it and make the best of it. The happiest people normally DON’T HAVE the best of everything but they do MAKE THE BEST of everything. The time is now.

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A new discussion on market share

Al Wiley, an executive of Xpectmor, sent us a comment on our recent Market Share post. He says that “market share is the definitive measure of customer satisfaction.” Of course he is right. The measure of market share, however,  is what causes the dilemma for many of us.

In the equipment market it is reasonably easy to define market share. There are a finite number of transactions and everyone knows what everyone got. For instance, we have five different suppliers in the market with sales last month. Supplier #1 got 4 sales, supplier #2 got 1 sale, supplier #3got 2 sales, supplier #4 got 2 sales and supplier #5 got 1 sale. The market share is a simple matter of arithmetic. Supplier #1 got 40% market share and so on.

With the parts and service business it gets more complicated. The various suppliers into the market don’t know what the other suppliers sold during any particular period. So how can we possibly calculate the market share of any particular supplier? That is why there has not been any real definitive publication for market share.

When I first started in the Industry in the late 1960’s some suppliers used to conduct a personal survey with each and every one of their customers worldwide. Can you imagine the time and cost for such a survey? Well they did them and they published the results within their distribution network. It was not precisely accurate but it was a very good indicator of where you stood as a dealer in parts and service market share.

As more and more machines get GPS equipped and the dealers/distributors, manufacturers and customers become more adept at understanding telematics and their use we have a terrific opportunity. We can calculate what the consumption of parts and service “should” be on a machine.

This is the first problem. The customer doesn’t always follow the recommendations of the manufacturer of the machine for the maintenance intervals nor the maintenance items to be dealt with for a particular service. Similarly when it is obvious that a repair should be made with a “new component” sometimes a repair that I call “bubble gum and band aids” will be performed. You might be wondering why this is important. Well it is due to the fact that all we can do is calculate the “potential” consumption of parts and service for a particular machine in a specific application running a specific number of hours. It is this potential that we have to use to calculate our “market capture” rate. See now we change the word. It is no longer market share it is market capture.

The dealer captures the potential business based on their actual sales of parts and service. Once we have these facts nad have them for a sufficient period of time we can make a clear statement about capture rates are the success and/or failure of the particular strategy that a dealer is following. The time is now.
 

 

 

 

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Selling Skills

Preparation is one of the keys to good selling skills. Of course that is common sense for most or at least it should be if you want to succeed at selling.

Imagine not know the customer? Not knowing what they want and need. What they own and how to make their operations more effective. The job is to reduce owning and operating costs while at the same time protecting the residual value of the capital good. This applies to everything – cars, boats, ovens and equipment.

Knowing who the customer is; their buying habits, personal attributes, their needs and wants, the relationship that they have with your company. These are critical factors. You should also know that they don’t purchase everything from you yet be sincerely interested in where they do buy if not from you and why. This is when you can bring your specialized selling skills to the interaction. Find out what it is they particularly like about that supplier and you will know what you have to do. Bring on the features and benefits and the value proposition. It is pretty simple if you pay attention and do your homework. The time is now…..

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Here we are…

Welcome to our blog. We will be involved in discussions and debates on all subjects relating to the operational aspects of equipment dealers and distributors in the Capital Goods Industries. Parts, Service, Product Support Selling, Marketing and Customer Service will be our focus here. But we don’t want to limit your repsonses or thinking to those topics alone. We hope you enjoy and will learn without having to incur the scars on various parts of your body or mind.

Keep involved and participate as we communicate with you on a weekly basis. Thanks for your interest.

The time is now…