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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.

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I HATE DISCOUNTS

The people that know me and have worked with me in any capacity of the past forty plus years know that I HATE DISCOUNTS.

I know you have to offer some special pricing every now and again. However, too many people just change the price on an item in a transaction and that leaves a bad impression in the mind of the customer. Oh I get it. The customer feels good about getting a reduced price. Until, that is, they think about it. Sooner or later they begin to understand that if you changed the price on that item one time, without requiring anything more from the customer – well your price must have been too high.

If you have to change a price you must change something else in the transaction in order to justify the reduction in the price. Increase the quantity. Place it on a stock order and have the customer wait for it – anything that makes sense.

Why do I HATE DISCOUNTS??

Well look at this example from a typical service department…

Sell Price              100         Discounted         90

Cost Price              35                                     35

Gross Profit            65                                     55

Expenses               40                                     40

Net Income            25                                     15

A 10% discount on the selling price becomes a 15% reduction in the gross profit and a 40% reduction in the operating profit. I HATE DISCOUNTS.

I know you have to make adjustments from time to time. It is important that everyone understand the implication of a small discount in selling price. It becomes huge at the operating net income line. The time is now.

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A Customer Service Tool

VoIP – voice over internet protocol. What a name. Well what it does is quite remarkable. This is where your computer drives your phone system. A call comes into your Company and the computer directs the call to the appropriate extension while at the same time it paints your computer screen with the pertinent information from your name and address on the customer. Not only that, it can delivery almost whatever information you want.

“Hello Dave, how are you? Wow, we haven’t spoken since last October, where have you been?”

“Hi Dave, congratulations on your anniversary, how many years has it been?”

“Dave I have been meaning to call you, congratulations on your recent purchase of our “xx” machine.”

I am sure you can imagine various pieces of information that you would like to have displayed before picking up the telephone. There is a machine in the shop, or there is backorder outstanding – pretty critical information that would help you in your discussion with the customer.This is similar to the “Vonage” service that runs through your cable. Contact your dealer business system provider or your telephone system provider and ask what is necessary for you to obtain this type of tool. It will give you a terrific tool for customer service. 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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Market Share

If you had to choose between customer satisfaction and profitability, what would be your choice? I would take customer satisfaction as without satisfied customers the ability to make profit is going to have a short life.

 

How to measure customer satisfaction becomes the challenge. Some people define it as repeat business; others measure the change in sales from one period to another; still others use surveys. What is your choice? How satisfied are your customers? One of my favorite indicators of customer satisfaction is the market capture rate. How much of the parts and service business that is available do you in fact receive on the machines that you sell and service? What is your parts market capture rate? What is your service market capture rate? I will put parts at around 35% – 40% and service in the range of 15% – 25%, which by nearly any measure is not very good. The interesting thing about the parts and service business is that management has been held harmless as there is no precise authoritative measurement by which this is reported. It is an opinion. That means that we don’t have a high standard of market capture rate against which we are measuring the performance of the parts and service departments. That is about to change. With the advent of machine telematics some years ago we can now track the hours of each machine and start to evaluate parts and service consumption rates across machine models and applications. This will be a great advance as we will finally know on which machines we are losing the product support business and on which type of products and services. This will be a tremendous change and opportunity for everyone in the parts and service business. I look forward to his type of challenge, shouldn’t you? 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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Can we make a difference

The transition to team management while still encouraging curiosity is struggling as management doesn’t know how to encourage risk taking without contradicting the work of the team.

The story of the ages is that people will take risks when they have less to lose and be risk averse when they have a lot to lose. How to break through this paradigm will be a challenge.

To lower parts inventories while improving customer availability.

To guarantee completion dates on repairs while embracing employee satisfaction.

To retain customers while payment patterns change.

All of these challenges exist because we have been rather timid over the past years to tackle changes necessary in a meaningful manner. Now is the time.

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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…