Executive Summary from AED’s Product Support Opportunities Handbook
The third edition of AED’s Product Support Opportunities Handbook (PSOH) is designed to help dealerships perform a number of activities related to the parts and service business in their territory. The report is based upon a survey among equipment owners, which AED has conducted every five years – this enables us to view trends in customer preferences over a period of time. We can view buying habits of our customers and their purchasing ratios. We can see which supply sources they use for many different categories of parts and labor – and why. This is powerful information by itself, but used in conjunction with some of the other material in the handbook, it provides an inestimable value to you, the dealer.
We begin the PSOH with most of the market survey results. (We break out results about detailed labor and parts market share in the back section of the report.)
Also in the second section, we provide a model for you to calculate your market opportunities for parts and service. This market opportunity can be viewed as the overall parts and labor market potential for the dealership’s territory. One of the obstacles to management of a parts or service business is that we usually have no idea of the size and scope of the marketplace. This challenge is overcome by applying this market potential model. Is it perfect? No, but it is a remarkably close representation to the truth. I would not want to have to be perfect and waiting for perfection rather than having a workable model against which we can measure our performance.
Over the years, market coverage in the parts and service world has been a particular passion of mine. I don’t believe that we cover our markets, our customers, with any degree of certainty. To this end, I believe in market segmentation and that we need to “touch” our customers as often as possible. Currently, most dealers leave some 50 percent of their customers without any direct, personal contact from year to year. We will provide simple, market-proven methods to employ for covering your customers properly in your marketplace.
Finally, as noted, we review market capture rates, which is the politically correct term for market share. The survey this year has delved more deeply into this area and there is valuable insight to be gained by reviewing the survey materials and the market share sectors in this handbook. The groups traditionally served by Associated Equipment Distributors include heavy equipment dealers, light industrial dealers, compact equipment dealers and general line equipment dealers. There has been much material presented to AED members over the years regarding the equipment area. Over the past decade or so, more material has been presented regarding parts and service, as these two business sectors have become and continue to be even more critical to the success of the dealership.
There are many tools available for dealers to determine how they are doing relative to their competitors in the sale of new and used equipment. This handbook is aimed at helping dealerships determine their actual market potential for parts and service so they can establish programs and strategies to obtain more of the available market.
Obtaining more of your market share has become increasingly important as we see most markets across North America becoming rather static, not growing as rapidly as they once did. Of course, there are exceptions – consider the oil and gas industries. But the common thread to the market we see in 2013 and beyond is: If you are going to increase your sales, you will do so by obtaining business from customers that your competitors have been enjoying.
Customers are much more capable business partners these days than ever before and are more knowledgeable about the products and services available to them. Obviously, the availability of information for them has never been greater. Dealers have information available online, and, as we all know, the Internet has no boundaries. Manufacturers have also provided a great deal of information through their Intranet and Internet portals. This will continue. Buyers will be much more discerning and savvy purchasers in the future.
Dealerships, as well, must become more skilled at evaluating market opportunities and matching these opportunities with appropriate and necessary products and services. You simply cannot make good decisions on what is required in the marketplace without good market intelligence and proper marketing information. Market intelligence is typically obtained through customer surveys and information obtained from the field sales force. Marketing information is obtained from facts regarding the customers in the territory.
The key element in any business is the working machine population. There is an old saying, “If you don’t know your working machine population, you don’t know your business.” This has always been true in the parts and service business. Now more than ever, it is a critical component in the success of your dealership.
The working machine population needs to be obtained and maintained – not just brands the dealership sells but all of the competitive brands.
During the past 10 years, there has been more effort on the part of many manufacturers and dealers to sell parts and service to more than just their brand of equipment. This has been very true for undercarriage, ground-engaging tools (GET) and maintenance services. This trend will continue.
Specialty manufacturers have always sold products such as bearings, hardware, seals, packings, etc., across brands. As parts manufacturers continue to consolidate, this trend also will continue and accelerate.
The working machine population needs to be obtained by make, model and serial number. This is the basic information. We should also know the number of hours that each machine works in a year. We could refine this by making a determination of the type of work that is done and the working conditions, but we will leave that to a later time and document.
If we know how many hours a machine works per year we can make good estimates as to the parts and labor the machine consumes in a year. This handbook provides you with tools and models you can use to make a determination of the overall size of the parts and labor market in which you compete. Armed with these tools and good information, you’ll be able to determine where the opportunities exist and what you want to do about them.
by Ron Slee
About CED Magazine
Construction Equipment Distribution is published by Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada.
With CED, content is king. No fluff, no advertorials – CED just gives AED members what they want to read: business information, industry and association news, plus fresh, original and useful feature articles that they share with their management teams. Our subjects range from rental, product support, sales strategy and customer service to technology, construction markets and legislation – and much more.