Issue link: http://read.dmtmag.com/i/114548
Aftermarket Market Capture Rates Are we stuck in a rut or settling for inferior levels of product support revenue? By Ron Slee For decades we have been given a pass on our performance in the market when we consider Parts and Service. There is not a universally accepted market share calculator. This means that parts and service management is given a pass on performance. I understand that market share today is more about opinion than science but let me wade into the middle of it and make some suggestions about our performance. I don't think there are many OEM-authorized dealers that obtain 40 percent or more of their parts market share. Similarly I don't think there are many OEM-authorized dealers that obtain 15 percent or more of their labor market share. I am open to debate on this but I feel I am on very solid ground. If we assume that I am close, then we have a truly unbelievable opportunity for revenue growth in both departments. So let's do some rough arithmetic and talk about the profit opportunity. Over the next three years, if you increase your parts business by 20 percent above your currently projected growth you can calculate for your business what that would mean in the gross profit area. How much does the gross profit increase? Now go through the same exercise on the service business. How much does the gross profit increase? Add the two numbers together and that is the gross profit opportunity. Now look at your equipment business. What is the gross margin from the sale of new and used equipment? From that percentage you can calculate the sales revenue that would be required to generate the same gross profit as highlighted above. Now here is the magic question: How likely do you think it is that you can increase your equipment sales by that amount? I agree with you that it is not very likely. Don't forget, though, that I don't want you to change your determination and successes in equipment sales. I want you to grow those sales as much as you can. However, I hope this is a call to arms for you. We need to become much more adept and aggressive in the pursuit of our parts and service business. We need to act on a series of things. Market coverage n Touch, phone or in person, every customer who purchases parts and service annually n Have a purpose for each touch More product support sales people n Strive to have the same number of parts and service sales people as equipment sales people n Develop purchase goals for each assigned customer n Maintain 100 percent retention of each assigned customer Use the telephone to sell n Assign the customers that do not have coverage from a parts and service sales person to an "instore" employee Customer retention n Call every customer after each parts and service and rental transaction n Call every customer with a change in buying habits Create the maintenance business n Get serious about this half of the labor business n Create a separate department for maintenance n Assign a manager to maintenance – someone whose life depends on the success of maintenance Enhance in-store merchandising n Create "retail:" stores rather than equipment dealer branches n We are in the retail business – aren't we? Create a "mobile hardware" sales business n If competitors can have a "box" truck deliver nuts and bolts to our customers (sometimes even our service department) why can't we? Review fast-moving convenience stores n Look at the success of NAPA stores n Look at the distribution of your customer jobs and business locations n How convenient are we to those locations? Install and comprehensively use a CRM system n We need to be able to look at every contact we have had and what we talked about n This means every communication we have with the customer There is obviously much more that could be listed here. But every item on this list has three attributes in common: n Each will take a lot of work. n Each will increase sales revenue. n Each OEM-authorized dealer can improve their performance on every single item. So, will we continue to be in the rut and settle, or will we act? The time is now. Ron Slee (ron@rjslee.com) is the founder of R.J. Slee & Associates, Rancho Mirage, Calif., celebrating more than 30 years in business in the United States, a consulting firm that specializes in dealership operations. Ron also operates Quest Learning Centers, a company that provides training services specializing in product support, and Insight (M&R) Institute, a company that operates and facilitates "Dealer Twenty" Groups. Follow Ron on Twitter: @RonSlee; and read his blog at learningwithoutscars.com. March 2013 | Construction Equipment Distribution | www.cedmag.com | 55 55_aftermarket_KP.indd 55 2/28/13 10:46 AM