1% Increase in Income Equals 2.6% Reduction in Expenses
Guest writer Ron Wilson dives into the financial management scene with this week’s blog: 1% Increase in Income Equals 2.6% Reduction in Expenses. He even touches upon something Ron Slee mentions frequently: the downside of discounts.
During complicated economic times businesses tighten up on expenses, spending, and accounts receivable.
Rafi Mohammed, in his book “The 1% Windfall” provides an additional effort that can assist in meeting the needed changes to the bottom line.
Basically, the concept revolves around increasing income by 1%, without increasing the cost of sales, or reducing direct expenses.
The example below shows that a 1% increase in sales (without impacting cost of sales or direct expense) equals a 2.6% reduction of direct expenses. Apply your organization/department gross profit and pretax percentage to see the impact it has on your own organization.
We have all been through the difficult experience of reducing direct expenses, and it can be very painful.
Here are a few examples that can help to make a positive impact on sales without adjusting the direct expenses areas.
Current Status of Discount Programs– often discount programs are provided to customers based on a request from a salesperson. No doubt the programs may have been needed at a specific point in time, but a review of discount programs may show discounts being given that are not providing the expected increase in sales. Often the OEM provides some type of shared discount program over a specific timeframe. It is important to verify customers’ discounts reflect the OEM’s current program. An OEM may discontinue a rebate program and the dealer may not have applied the same changes and unintentionally may be caring the full burden of the discount being provided to the customer.
Effectiveness of Discount Programs-Verify the discounts are providing the expected results, which is usually increased volume, or expanded use of other products and services within the dealership. If the discount program was not effective, a different approach may need to be reviewed with the sales representative.
Below is a handy website that shows the impact discounting has on gross profits.
The example below applies to a 10% discount on $1 million in sales. Sales need to increase 20% to make up the same dollars.
https://www.growthforce.com/blog/how-giving-discounts-can-destroy-your-business-profits
This can be a great tool to share with the sales representatives when discussing providing a customer with a discount. What can be expected in increase volume over time?
Providing Repair Options can offset the discount a customer is wanting on a component rebuild, for example. Rebuild options providing a “good-better-best” offering can accomplishing the customers rebuild needs within a specific price range. The variable rebuild options allows the dealer to rebuild a component that meets the level of rebuild needed by the customer within a selected price range. The repair options eliminate the “discount” of a full rebuild while providing a price based on the level of rebuild needed by the customer.
Value Based Pricing requires understanding the customers’ needs and priorities. For example, a customer is focused on reducing the hazards/injuries related to changing ground engaging tools (GET) on a piece of mining equipment. Promoting reduction of the number of GET changes will contribute to reducing the hazards as well as downtime to complete the GET change out. It may not always be about the dollars and cents.
When developing value statements your existing customers can be a great resource to find out what value you bring. Ask your customer to explain the real value of your offer. This will provide a view of their perspective, while building relationships with customers and at the same time it gives you a chance to learn an incredible amount of invaluable information.
Below is an example of a value statement that has identified four areas of importance to the customer. This information was taken from an ESCO GET (Ground Engaging Tool) promotional piece. As can be seen there is no discussion about “discounts,” the discussion is related to “value add” offerings:
Increased Machine Availability
- Superior alloys and optimized system profile result in longer-lasting components
- Simple, intuitive locks provide safer, faster parts replacement.
- Reliability and wear life unmatched in the industry keeps machines operating with minimal downtime.
Lower Maintenance Costs
- Proprietary alloy, increased lip protection and large bearing areas extend operating intervals.
- Longer lasting and more dependable G.E.T. reduces planned and unplanned service events.
- Quick and easy parts replacements by fewer crew members, with no hot work required.
- Shrouds and adapters are engineered to protect more of the Nemisys lip leading edge, extending the service life between lip rebuilds by up to 70%
- Improved wear metal placement increases shroud life by up to 30%
Lower Total Parts Expense
- Longer lasting and more dependable G.E.T. results in fewer parts purchased versus competitors.
- Fewer parts purchased reduces mine site inventory to ship, stock and manage.
Improved Safety
- Keep your crew away from crusher maintenance through superior locking systems that keep teeth and shrouds on the lip.
- Safer installation and removal with integrated pry points and compatibility with the ESCO SecureLift™ system
Best of Both Worlds
1% increase in Sales Without increasing Cost of Sales to Improve the Bottomline: It would be unrealist to think the 1% increase model is the only option. No doubt there needs to be a combination of both direct expense management and reviewing the pricing models and programs currently in place. Below are some pros and cons that will show the importance of combining the two:
Advantages of the 1% Increase in Sales to Improve the Bottom Line:
- Incremental growth may seem small but overall can have an enormous impact on the bottom line.
- Growth in the business comes from income growth, not from reducing expenses.
Disadvantages of the 1% increase in Sales to improve the Bottom Line:
- The 1% increase is not guaranteed and takes time to implement. Reviewing and developing impactful value statements takes time and resources to research, understand, and develop.
- Takes time to implement, communicate, and evaluate the results of the changes implemented.
Reducing Direct Expenses to Improve the Bottomline:
- Has an immediate impact depending on how drastic the effort?
- May improve efficiencies through improvement/streamlining processes.
- Requires a focus on the core business and focus on what is important.
The best Solution is a Blending of the Two:
Take some time to review the various recommendations provided in “The1% Windfall”, while reviewing the rest of your key performance indicators, to provide a balanced improvement to the overall financial results.
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A Tabletop Exercise: A Survey Within a Survey
A Tabletop Exercise: A Survey Within a Survey
Guest writer David Jensen continues to make observations from rural New Mexico with “A Tabletop Exercise: A Survey Within a Survey.”
As a first responder in the Fire Service, a firefighter learns the value of a tabletop exercise. An actual tabletop containing several buckets of sand provides the platform for creating a simulation of a wildfire incident. We survey any number of data points (weather, topography, fire behavior) to build a simulation. The simulation only comes to life when you match the data points with a small relevant set of behavioral questions. The questions form the tabletop exercise. The choices presented on the tabletop are neither right nor wrong. The questions do require a behavioral answer. In effect we are conducting a survey within a survey. When you conduct the tabletop exercise, the data points (survey 1) translate into actual behavior (survey 2) on the ground during the fire simulation. The exercise allows you to drill down to the decision-making tree of the Incident Commander. The survey within the survey.
As an HR Professional, I again experienced the importance of a tabletop exercise built on behavioral questions. As an example, a key HR deliverable was a location-wide employee satisfaction survey. The initial data collection was outsourced to an independent collection service. The extensive surveys covered many aspects of employee satisfaction ranging from pay and benefits to the choices in the vending machines in the breakroom. Upon completion of the survey, the collection service would provide a vast amount of data. The data dump was not the end of the process, it was the start. After reviewing the data, a tabletop exercise would be assembled to be used during the follow up with small group employee meetings.
The tabletop questions would provide an assessment of the motivation and the concerns of the small group. The survey within the survey. The tabletop was the link between data and behavior. The issue regarding choices in the vending machine may really be about a manager’s unacceptable behavior.
The tabletop exercise with a few relevant behavioral questions can be applied to a variety of data collection efforts. Our legal system is a discovery phase leading to a court room tabletop exercise. The foundation of effective job interviewing is asking performance and behavioral questions drawn from a resume. The survey within the survey. The value of a 360 supervisory assessment comes to life when you follow up with an effective tabletop exercise with the supervisor receiving behavioral coaching. Paper and pencil inventories concerning personality, values or ethics become useful when followed up with and validated by a tabletop exercise. Again, a survey within a survey.
In some circumstances, a short concise tabletop exercise may stand in place of extensive and expensive data collection. The right set of relevant questions can identify trends that will point you in a direction. Recently, I developed a tabletop exercise that asks a small number of behavioral questions. The possible answers trended towards an experience-based solution or an option-based solution. The provided choices were neither right nor wrong. How participants responded was then matched to data on individual participant success in one-to-one customer communication and customer retention. A survey within a survey.
Bottom-line; in this era of super computers and AI, a few relevant questions presented using a tabletop exercise in a person-to-person encounter should not be overlooked, it should be embraced. It is the person-to-person conversation found in the tabletop exercise that translates data into behavior.
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Combat the Mid-Year Slump
Combat the Mid-Year Slump
Guest writer Jennifer Albright is back this week, with practical words on how we can all combat the mid-year slump.
And suddenly…we’ve entered the second half of the year. In January many of us are full of New Year, New Me attitude and full of energy in anticipation of everything they’re going to accomplish in the coming year. But somehow by the time we reach July it’s more of a “how did we get here so quickly?” type feeling. A “where has the time gone, year-end is going to be here before you know it” vibe. A lot of my colleagues have expressed feeling burned out and overwhelmed.
So, what can we do to get back to where we were – full of hope and looking forward to the year ahead? Here are a few things I do to change my outlook when the summer slump hits.
Take a vacation! Seriously. Even if you can’t leave town, taking some time off can-do wonders for the mind and body. Get some rest. Catch up on whatever random chores you’ve been meaning to do. Binge Ted Lasso and sit on the sofa with the good snacks. Work in the garden, play with the kids, plan some date nights with your other half, spend time with friends. Whatever serves to help you reset and relax. Don’t pretend you don’t have time.
Pull out the strategic plan you so excitedly put together back in December/January. How have things been going? Is there a task that you’ve been putting off that can be revisited? Do January’s goals still align with today’s priorities? For me, it can be easy to get bogged down in the everyday grind so special projects can fall by the wayside if I’m not making a conscious effort to get them done. But on the flip side I’m also a list person so being able to check things off brings a ridiculous amount of joy. I tend to take the snowball approach – finish the smallest tasks first, then use that momentum and feeling of accomplishment to attack more significant projects.
If you find that you haven’t had the time to deal with anything on your 2023 plan, that’s okay – there’s still time. Put a weekly or monthly reminder in your calendar or schedule a recurring meeting to give yourself time to focus on these tasks. If you’re easily distracted, the structure of a scheduled meeting can help to ensure that you put in the time and energy to get these things done.
For tasks that you have completed, have you been measuring progress? Too often we check items off a list, never to be thought of again. If you’ve implemented a new system, are you using the data to create value? If you’ve negotiated new supplier contracts, have you measured cost savings or efficiency to ensure that what you’ve put in place is having the intended effect? Survey your folks to see if the initiatives you’ve put in place are solving the challenges, you’d set out to solve. Fine tune where you can – this not only builds trust within your team and shows that you’re listening and care about their input, but it ensures that you’re getting the most value for your efforts for the long haul.
Finally, sing your praises! Too often no one knows what we’ve accomplished unless we tell them. Why wait until your next performance evaluation? Sharing your wins gives you positive free press and opens a dialog with your colleagues where you can find new initiatives that need attention or ways to make what you’ve accomplished even better. It can also prevent duplication of efforts; if others don’t know what you’ve done, they may be trying to address the same challenges and inadvertently waste time that could be better spent elsewhere. In turn, this is a great way to generate some much-needed motivation and re-gain momentum to finish out the year strong.
To sum up, this can be a challenging time of year, but it doesn’t have to be. Take a break if you need one. Revisit what you said you were going to accomplish and see how you’re measuring up. Measure results and talk to your colleagues to make sure that what you’ve done is hitting the mark or adjusting as needed. And finally, be sure to share what you’re doing.
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The Role of SaaS Platforms in the DMS World for Heavy Equipment Dealers
The Role of SaaS Platforms in the DMS World for Heavy Equipment Dealers
This week, we are introducing you to a new guest writer, Greg Grady, with his inaugural blog post “The Role of SaaS Platforms in the DMS World for Heavy Equipment Dealers.” Greg Grady has served as the Chief Revenue Officer at Texada Software since January of 2023. Greg has led commercial teams in the heavy equipment, construction and building materials software industries for nearly 20 years. His experience includes working with leading industry-specific SaaS and ERP/DMS software providers worldwide. Greg is an avid NC State fan and lives in Raleigh, NC with his wife Jennifer and twins, Graham & Parker…and Mavis the dog.
Introduction:
In the modern digital era, the utilization of Software-as-a-Service (SaaS) platforms has advanced various industries, including the management of heavy equipment dealerships and rental companies. Dealer Management Systems (DMS) have played a pivotal role in efficiently managing the operations of heavy equipment dealerships for decades. What we are seeing from the leading companies in the space now is the marriage of SaaS platforms with DMS to enhance the overall functionality and productivity of dealers, ultimately increasing dealership profits.
I. Understanding SaaS Platforms:
SaaS platforms refer to cloud-based software solutions accessible over the internet, eliminating the need for costly infrastructure, which requires heavy lifting from the dealer’s IT department. These platforms provide businesses with the flexibility to access applications and services from any device with an internet connection. SaaS platforms typically incorporate mission-critical features such as data storage, advanced analytics, collaboration tools, and automated processes. SaaS solutions in the space are generally specialized, industry-specific solutions like CRM & Quoting, Field Service, Business Intelligence (BI), rental, and e-Commerce systems delivered on modern architected platforms and leverage data from the core DMS. These systems are acutely focused on the high margin departments of a dealership and provide functionality which typically surpasses that of the traditional DMS applications offering similar modules.
II. Dealer Management Systems (DMS):
Dealer Management Systems are comprehensive software solutions designed to manage the various aspects of heavy equipment dealers and rental companies, including inventory management, sales, service, and parts management. DMS platforms work well at streamlining core operations, increasing efficiency, and improving customer satisfaction by integrating multiple functions into one centralized system and dataset.
III. Integration of SaaS Platforms with DMS:
Enhanced Data Management: SaaS platforms allow heavy equipment dealers to manage large volumes of data generated by DMS effectively. The cloud-based approach of SaaS platforms ensures data accessibility, enhanced security, and fluid scalability. Through seamless integration, SaaS platforms can handle “anywhere you need it” data analytics, reporting, and accurate forecasting, enabling dealerships to make informed decisions based on real-time insights.
Mobility and Accessibility: SaaS platforms enable dealers and rental companies to access critical system functionalities from anywhere, using various devices. This ensures sales representatives, service technicians, and other personnel can retrieve essential information on the go, improving response times and customer service. Additionally, remote access to DMS data via SaaS platforms facilitates collaboration and communication among different departments within the dealership, creating a transparent operation.
IV. Benefits of SaaS-DMS Integration for Heavy Equipment Companies:
Cost-effectiveness: SaaS platforms eliminate the need for heavy upfront investments in hardware and software installations, reducing overall IT costs. Additionally, the pay-as-you-go model allows dealerships to only pay for the services they require, enhancing the ROI.
Improved Efficiency: Integrating SaaS platforms with DMS streamlines processes, reduces manual work, data synching issues and enhances overall operational efficiency. Automated workflows, real-time data updates, and centralized information enable faster decision-making and smoother operations.
Enhanced Customer Service: SaaS-DMS integration enables heavy equipment dealers to provide superior customer service through improved response times, accurate data, and personalized interactions. Dealerships can track customer interactions and preferences, allowing them to offer tailored services and build long-term customer relationships. This modern paradigm allows forward-thinking dealers and rental companies to become incredibly “sticky” for their customers.
Conclusion:
SaaS platforms have become integral to the functioning of DMS in the heavy equipment industry. The seamless integration of these platforms allows the DMS to do what it does best, act as the system of record, and the SaaS applications to exploit every business opportunity via optimized workflows in the key departments that drive every dealership and rental business. As heavy equipment dealerships continue to embrace digital transformation, the integration of SaaS platforms with DMS will play a crucial role in their success in the ever-evolving business landscape.
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Open Eyes on the Road
Open Eyes on the Road
Guest writer Andy Fanter takes us through the drive he made today in his blog post, “Open Eyes on the Road.” There are hopeful signs everywhere.
I want to tell you about the 100-mile drive on US HWY 56 I made today, Marion to Great Bend, went through McPherson population 14 000, and ending in Great Bend population 14.500. You may have heard of McPherson, home of McPherson College with largest endowment for a college at $1.5 billion. It is known for old car restoration. Great Bend, if you are a duck hunter or bird watcher, is famous for Cheyenne Bottoms and thirty miles south Quivira National Wildlife Refuge.
Here is the summary of construction that I saw today: new building McPherson College, new RV park, new pipeline at natural gas facility, finishing of a 30 acre pond, two major concrete parking lot projects, new Starbucks, new Wendy’s, miles of pavement work on 56, a new hospital, two building demolition jobs, a 5000 square foot slab waiting for a building. This is what I saw today in nowhere—not Wichita or KC or the Topeka-Lawrence-KC corridor.
I saw several trucks with a variety of machines in both directions. I saw more windmill parts heading to sites. I saw everything from a CAT scraper to a wheeled skid steer. I also saw six reasonably new RVs for sale in people’s yards—it looks like the toys from 2020 got expensive to keep, and people got too busy to use them. The weather up until now has been great for the outdoors in Kansas.
What does this mean to the dealer, the personnel, and the manufacturer—-everywhere is busy, nowhere included. You cannot forget your smaller, more rural accounts. I am seeing billions of dollars per week on the construction sites about big jobs in big places. My drive today confirmed the construction industry is busy, record high busy. It should continue with infrastructure dollars, CHIP plants, and EV plants. I saw smaller plants announced near the Ford Blue Facility near Memphis. Buying a home to be built or under construction is now easier than buying a house in the US. The builders are doing well, buying more land, land that will need machines now and through 2024 and beyond—only 2 to 4 million houses short in the US.
I doubt the major manufacturers can catch up during this cycle, but that is not an excuse to quit trying.
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1% Increase in Income Equals 2.6% Reduction in Expenses
1% Increase in Income Equals 2.6% Reduction in Expenses
Guest writer Ron Wilson dives into the financial management scene with this week’s blog: 1% Increase in Income Equals 2.6% Reduction in Expenses. He even touches upon something Ron Slee mentions frequently: the downside of discounts.
During complicated economic times businesses tighten up on expenses, spending, and accounts receivable.
Rafi Mohammed, in his book “The 1% Windfall” provides an additional effort that can assist in meeting the needed changes to the bottom line.
Basically, the concept revolves around increasing income by 1%, without increasing the cost of sales, or reducing direct expenses.
The example below shows that a 1% increase in sales (without impacting cost of sales or direct expense) equals a 2.6% reduction of direct expenses. Apply your organization/department gross profit and pretax percentage to see the impact it has on your own organization.
We have all been through the difficult experience of reducing direct expenses, and it can be very painful.
Here are a few examples that can help to make a positive impact on sales without adjusting the direct expenses areas.
Current Status of Discount Programs– often discount programs are provided to customers based on a request from a salesperson. No doubt the programs may have been needed at a specific point in time, but a review of discount programs may show discounts being given that are not providing the expected increase in sales. Often the OEM provides some type of shared discount program over a specific timeframe. It is important to verify customers’ discounts reflect the OEM’s current program. An OEM may discontinue a rebate program and the dealer may not have applied the same changes and unintentionally may be caring the full burden of the discount being provided to the customer.
Effectiveness of Discount Programs-Verify the discounts are providing the expected results, which is usually increased volume, or expanded use of other products and services within the dealership. If the discount program was not effective, a different approach may need to be reviewed with the sales representative.
Below is a handy website that shows the impact discounting has on gross profits.
The example below applies to a 10% discount on $1 million in sales. Sales need to increase 20% to make up the same dollars.
https://www.growthforce.com/blog/how-giving-discounts-can-destroy-your-business-profits
This can be a great tool to share with the sales representatives when discussing providing a customer with a discount. What can be expected in increase volume over time?
Providing Repair Options can offset the discount a customer is wanting on a component rebuild, for example. Rebuild options providing a “good-better-best” offering can accomplishing the customers rebuild needs within a specific price range. The variable rebuild options allows the dealer to rebuild a component that meets the level of rebuild needed by the customer within a selected price range. The repair options eliminate the “discount” of a full rebuild while providing a price based on the level of rebuild needed by the customer.
Value Based Pricing requires understanding the customers’ needs and priorities. For example, a customer is focused on reducing the hazards/injuries related to changing ground engaging tools (GET) on a piece of mining equipment. Promoting reduction of the number of GET changes will contribute to reducing the hazards as well as downtime to complete the GET change out. It may not always be about the dollars and cents.
When developing value statements your existing customers can be a great resource to find out what value you bring. Ask your customer to explain the real value of your offer. This will provide a view of their perspective, while building relationships with customers and at the same time it gives you a chance to learn an incredible amount of invaluable information.
Below is an example of a value statement that has identified four areas of importance to the customer. This information was taken from an ESCO GET (Ground Engaging Tool) promotional piece. As can be seen there is no discussion about “discounts,” the discussion is related to “value add” offerings:
Increased Machine Availability
Lower Maintenance Costs
Lower Total Parts Expense
Improved Safety
Best of Both Worlds
1% increase in Sales Without increasing Cost of Sales to Improve the Bottomline: It would be unrealist to think the 1% increase model is the only option. No doubt there needs to be a combination of both direct expense management and reviewing the pricing models and programs currently in place. Below are some pros and cons that will show the importance of combining the two:
Advantages of the 1% Increase in Sales to Improve the Bottom Line:
Disadvantages of the 1% increase in Sales to improve the Bottom Line:
Reducing Direct Expenses to Improve the Bottomline:
The best Solution is a Blending of the Two:
Take some time to review the various recommendations provided in “The1% Windfall”, while reviewing the rest of your key performance indicators, to provide a balanced improvement to the overall financial results.
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Friday Filosophy v.07.21.2023
Friday Filosophy v.07.21.2023
We are back with a Friday blog post today! Please read some quotable quotes from various authors (our founder Ron Slee included!) in Friday Filosophy v.07.21.2023
Let’s focus on a different direction. We will start this off with what people call “Sleeisms.”
We will continue with quotes from others, just to be well-rounded today:
The Time is Now.
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Employment – Wages – Inflation
Employment – Wages – Inflation
Guest writer Andy Fanter tackles the topic of economics in his blog post for this week: Employment – Wages – Inflation.
A little over halfway through construction machine unit deliveries by state, Ron messaged me about another blog. I have done the big states, and the numbers are up!! The topic for this blog: employment, wages, and inflation—most know general economic stuff is not my favorite, but this will be fun.
Employment: We are in the 3s, unlikely to get much lower, and unlikely to go much higher for years. The construction industry needs people, and if you think Gen Y and Z will suddenly want to operate machinery or tools you will be mistaken. Immigration, we need it for construction, food processing and the restaurant business. If the banks would tighten the lending requirements for restaurants, like they did for housing after the GFC, it would help a little. People from all over the world would enjoy working our “dirty jobs” so they can have a good roof, water, sewer, and low chances for tanks in the streets. Friendly reminder, most of us do not have roots dating back to early America—it is a melting pot. Even agriculture is back up, so getting people from rural America just got tougher!
Wages: Choice is simple: pay people well, treat people well, have some meals and snacks at work or they will leave. Looking back over the last 20 years, you needed to make 3 to 5% to stay ahead of inflation. I know the companies that overwork, underpay, and have more respect for laptop computers. There are ex-employees from those dealers all over the US working at other dealers.
Inflation: Oh yay, natural gas and eggs are way down. Housing and autos, no easier way to say it welcome to “screwedville”. Home prices are not going to make a big drop, not enough inventory. Builders are trying—but back to employment issue. Autos: new inventory is increasing but nowhere near 2019 levels. Used auto prices are dropping some, but how much of that was post-graduation, post wedding season? High interest rates making auto payments $1000+ a month, but this is the 1980s mentality again and new auto sales are on track for 8% to 10% growth. Next few years expect the CPI to be in high 2s, FED would like low 2s, so back to interest rates sitting around 5%. The consumer can make a bigger dent with inflation by going back to the smart phone and shopping for a better price! It worked from 2010 to 2019; it drove the FED and Phillip’s Curve people nuts, good employment, low inflation. Big ticket items, not much change but builders have incentives and so do auto manufacturers.
Tune in later for more.
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The National Groundwater Association
The National Groundwater Association
We at Learning Without Scars are pleased to introduce our newest colleague: the National Groundwater Association. The NGWA was formed in 1948, as the National Well Water Association. This association was founded in order to bring together groundwater professionals, thereby improving methods and standards within their industry.
The mission of the National Groundwater Association is to advance groundwater knowledge and the success of our members through education and outreach; advocacy; cooperation and information exchange; and enhancement of professional practices.
They advocate for the responsible development, management, and use of water resources. One of the cornerstones of their mission and vision is education. As a colleague, we are proud to partner with the NGWA to help them further their goals through education.
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Economic Data and Dealerships
Economic Data and Dealerships
Our new guest writer Andy Fanter joins us at Learning Without Scars with his inaugural blog post: Economic Data and Dealerships. Andy Fanter started Intercast in 1994. The company is a division of Cyclcast, created in 1978 by Dick Fanter. Dick retired in 2019. Andy currently forecasts for over thirty dealers across the US. In his free time, Andy enjoys the stock market and fishing.
In the world of motivational speakers and team builders—the economic data is still important for the construction machinery dealer. I am not a fan of GDP; I rarely discuss it. Employment data lags too much—anything in the fours or lower is good. National retail sales (consumer spending) there is a favorite. Never underestimate the US consumer because we are stupid. Single family housing permits are another great indicator to follow. The current economy is something some of us can remember from long ago: the 1980s. People want stuff now whether it is a home, car, vacation, fishing pole, golf club, shirt, restaurant meal.
The smart phone was great for controlling inflation after the GFC of 2008/2009. Now the smart phone is used to find an item—forget price, who has the item in stock, where is an empty airline seat, 20-ton excavator, car in the color in I want.
The infrastructure dollars are flowing and so are the EV plants and CHIP plants. Not everything is equal in this economy. In the north, Ohio and Indiana are doing well—but this boom is concentrated in the south. From Arizona over to Virginia and down to Florida—that zone is ripping! Texas and Florida account for 30% of the construction activity in the US. There is your competition—not another dealer but losing people and machines to two rapidly growing states.
Everyone is waiting around the Federal Reserve to cut rates: you might be waiting a long time, years. Inflation will slowly drift down into the twos, but the Federal Reserve will likely stay around 5% on Fed Fund Rates. There are not enough single-family homes, 2 to 4 million shorts. Lower mortgage rates would heat up the housing market again. Unemployment is under four, so it is tough to find more labor for homes and nonresidential side of construction in double digit growths. The stock market is having a hot start to 2023. Low rates for a decade caused too many problems.
INTERCAST
Andy Fanter
15 Lois Ln
Marion, KS 66861
MOBILE 316-371-3688
EMAIL: ca******@***il.com
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The 4Ps Marketing Model Hurts Your Dealership
The 4Ps Marketing Model Hurts Your Dealership
Guest writer Roy Lapa turns our traditional wisdom of marketing on its ear by pointing out how the 4Ps of marketing model hurts your dealership.
The persistence of the 4Ps of marketing within heavy equipment dealerships hurts their future. The 4Ps of marketing represent the following elements: price, place (distribution model), promotion, and product. Without jumping into each of the 4Ps, I will focus on the current dealership situation and the respective challenges facing many dealers worldwide. Further, I will turn towards the 7Ps of service marketing which include three essential additional elements: people, process, and physical evidence (service environment). A dealership needs a strategic level transformation to reap the full benefits of the 7Ps service marketing mix.
Current dealership scenario
In analysing 15+ of the largest heavy equipment dealers in Europe, the USA, and Canada, one finds that the vast majority focus their efforts on selling:
Further, most dealers enshrine selling new equipment, making it a top priority. Despite the dealers’ promotional materials, many behave in a way that, unfortunately, assumes parts and service sales will be “captive” once the equipment arrives in their market.
Macro-environment challenges and opportunities for dealers
As most of the world’s major economies transform towards service-based economies, the service sectors will account for anywhere between 40% and 93% of their respective GDP and between 50% and 90% of all new jobs. (Paul) Will we view this as a challenge or opportunity?
Industry opportunities and challenges for dealers
A quick recap of five major trends happening in 2023 (“Five Equipment Dealership Trends That Will Shape 2023”) highlights a deep need for dealers to rapidly transition towards a customer-centric, service-based model.
Introducing the 7Ps service marketing model
To keep it simple, I built an illustration of the 7Ps service marketing model and included some current disruptive examples in the heavy equipment dealership world. The model, introduced in 1981, (Pervaiz) has successfully created sustainable advantages for many organizations (Rebaz et al.).
7Ps service marketing model helps you compete.
Reorient your dealership model to 7Ps service marketing quickly. Customers want strategic and invested end-to-end partners to help them achieve their business goals.
The examples given in the 7Ps service marketing illustration give you some strong examples of how to expand your services beyond the conventional dealership model and consider further vertical and horizontal integration within your primary industry. Though I have not covered the details of transforming your dealership, you have enough examples to get you moving.
Works Cited, Referenced & Non-affiliation.
Paul Patterson. Services Marketing. Pearson Australia, 2015.
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Note, I am not affiliated with or in any way compensated for the companies mentioned within the article.
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