|This article orginally appeared in the Winter 1982 issue of Material Handling Distribution|
John R. Walker
AMS Consulting Company
In “good years,”material handling manufacturers and distributors devote their marketing efforts to the sale of new material handling equipment. However, too many assume the marketing of new lift trucks alone will “automatically” generate parts and service sales and profits.
Unfortunately, it appears that only with the decline of new equipment sales do they shift their marketing priorities to the high profit centers—Parts and Service.
Have they ignored the after-market too long? The automotive manufacturer and dealer long ago gave their parts and service business to the competition. They buried their heads in the sand like ostriches; more and more cars were sold but the after-market was ignored. The automotive dealer is fortunate today if he maintains 15 percent of his after-market service sales.
The automotive industry created much of the competition that exists today for lift truck distributors. The competition recognized the potential parts business of the lift truck industry many years ago, and they set their sights on taking this business away from the lift truck distributors.
The profits are there—all one has to do is examine MHEDA’s DiSC figures for 1982:
- Customer Labor Gross Margin—58.01 percent (MED)
- Customer Parts Gross Margin—33.12 percent (MED).
The profits are evident, but if your volume is declining (more than the economy), then you’ve got to turn your efforts to marketing your after-market services.
Note the use of the word “marketing” rather than selling. Marketing is a total effort and selling is but a part of marketing.
Your distributorship’s survival in the 80’s is dependent on developing your after-market abilities. This means your company and your distributorship must plan in detail your marketing strategies for after-market sales! Here are a few steps to consider:
Know Your Market: The area in which manufacturers and distributors are probably most vulnerable is knowing their market for parts and service sales. Without first knowing your market potential, it is impossible to plan expenditures for inventories, service facilities, training, hiring, advertising and promotions. Surveys of the industry indicate distributors are achieving approximately 80 percent of their after-market sales from only 20 percent of their customers. Yet, distributors are unable to identify these customers in most cases.
If an analysis by the distributor indicates that the parts and service market is $4 million, and the distributor knows his parts and service business is $1 million, he then recognizes his market penetration is 25 percent. At this point the importance of market planning and goal setting in after-market sales becomes evident.
Knowing Your Competition: Next in importance in your market planning is fully knowing your parts and service competition. Your distributorship is involved in a war for survival. How well you do in this war is dependent on how well you know the enemy and his battle techniques. The competition you have in the area of new equipment is miniscule compared to your competition in parts and service. Obviously, the larger your industrial market area, the greater the competition.
Key factors you must know about your competition are their:
- True pricing structure
- Marketing philosophy
- Quality of parts and service
- Integrity and reputation.
Planning…Your Roadmap to Success: Once you know your market and your competition, put your parts and service marketing plan in writing. Look at your plan as a roadmap, which tells you where you are, where you want to go, and most importantly, how you plan to get there. Involve your parts and service managers in this planning. Certainly, if they are going to be asked to achieve definite goals, they must be asked for their input in planning and achieving these goals. Each department involved in after-market sales should develop its own “mini-plan” to dovetail into the master plan.
The After-Market Sales Force: Lack of pre-planning and market knowledge before hiring an after-market services salesperson has been the greatest single factor in the failure of the after-market sales force.
Distributor after distributor has indicated they have found it impossible to measure the results of an after-market sales force. Many proclaim they cannot track the results, some recognize the customer “goodwill” it creates, but goodwill doesn’t do much to your bottom line.
Knowing your parts and service market, its potential and the share you are presently achieving from both your market and your individual customers, allows you to do the following:
- Set goals for your salespeople.
- Measure the performance of your salespeople.
- Compensate your salespeople.
Do your pre-planning before hiring your sales force and you will double your opportunity for success in after-market sales. You’ll be in a position to hire more qualified personnel, to measure their results in 90 to 180 days, to compensate them adequately and, of course, to do a cost analysis of your after-market sales force.
Advertising and Promotion: Consider advertising and promotion to be your “perpetual motion salesman,” the right arm of your after-market services sales program. In reality, it is a form of sales maintenance, fundamentally important in keeping the phone ringing.
Plan your programs and promotions on a month-to-month, quarter-by-quarter basis. Tell the customer the important things about your distributorship which you have always assumed they knew:
- The size of your inventory
- Your level of service to the customer
- The number of qualified mechanics
- The number of service vans
- The size of your rental fleet, etc.
Prepare your direct mail programs, your counter and department promotions. Develop the theory of “related selling” in your parts and service department. Develop parts, service and rental promotions. Let your new customers know all about your dealership! Make the telephone work for you with a hard-hitting “Phone Power” Program. Let your customer know you’re anxious to serve their requirements in the area of after-market services.
Advertising/promotion money is not an expense, but an investment. Effectively used, the money allocated will yield worthwhile dividends—increased sales and profits. If you stop trying to reach and influence your customers today, what makes you think they will remember you tomorrow?
Some distributors may feel the time is not right. Business is lousy, no one is buying. You can’t afford to do it now. The truth is that for dealer survival in the 80s, you can’t afford not to do it now! Each day you procrastinate allows your competition to become more firmly entrenched in your after-market and is a day of lost sales volume and profits.
If you actively solicit your after-market sales, continue doing so. As the market for new equipment returns, continue to emphasize a strong after-market sales program—it is your protection against those “bad times.”
As parts availability and profits increase in the parts department, the profitability and efficiency of the service department also increases. As a result of the efficiency of these two departments, the after-market services reputation of your material handling distributorship improves throughout your market area. Your improved reputation in the area of after-market services increases your sale of new and used lift trucks. An increase in new and used material handling equipment generates increased business for after-market services and this creates a “self- feeding” profit spiral throughout your distributorship.