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The role of a product support salesman is complex and varied. To list some of the tasks is simple, but putting the whole package into the field with a qualified salesman is a bit trickier.

His role is comprised of:

• Promoting the products of various manufacturers.
• Understanding the policies, procedures and methods at the dealership.
• Being a source of technical advice regarding machine operations.
• Understanding the features and benefits of parts.

To some people it is a defensive role. To others it is offensive. On the defensive side, we must constantly protect the dealership’s market share in parts and labor. On the offensive side, we need to increase sales to each and every one of the customers.

If we look at the parts side of the business we must divide it into a series of commodities, including:

• Hardware
• Bearings
• Filters and fluids
• Seals and packings
• Electrical parts
• Hydraulic hoses and fittings
• Engine parts
• Transmission parts
• Hydraulic systems parts
• Ground-engaging tools
• Undercarriage

Now we come to a difficult question. Many observers in our industry feel that the dealerships control their own parts market. They feel the dealer holds more – and in many cases much more – than half of the available market. In reality we have many challenges. In each of the families of parts listed above there are specialists, very capable competitors. Now I’m sorry to sound so blunt, but I don’t believe you control the majority share of the parts business in any of these commodities. Do you? There might be a few, but clearly there are very significant competitors in each of these areas. This is not a criticism – it represents a terrific opportunity.

Moving over to the service side of the business we see an even more challenging market. The maintenance services provided on our equipment equate to roughly half of the labor hours available. The customer, in this case, is our most significant competitor. Based on surveys that I have conducted over the past 10 years, dealerships perform less than 10% of these services. On the repair side of the business, the remaining 50%, I have not found a case in which the dealership has more than half of this action. So our opportunities for increasing the service business is equally large.

Defining A Territory

One of the old debates (mentioned in the first article in this series) is: Is it the shingle or the salesman that sells?

The most appropriate way to eliminate any doubt is to establish a clear territory. This means that we will limit the number of customers that each parts and service salesman covers. As I’ve argued in a previous article on market segmentation, it is clear – very clear – that the rep can handle only a limited number of customers. This number of customers is higher in an urban setting than it is in a rural setting. That is due to the travel time component.

Generally, we would not be too far off to suggest that the number is somewhere between 100-150 customers. So, to start with, let us slice and dice your territory. Can you split your customers up by county? This is where I would suggest that you start. Then, within each county, run a report in descending parts sales order. Then run another one in descending service sales order. Using these two reports you will quickly determine which customers you need to have covered by a parts and service salesman. You know the geography, so you know the travel conditions and time involved. Consequently, you can choose how many customers to assign to each PSSR.

Many of you have thousands of customers. Needless to say, the cost of covering each of these customers is an issue that cannot be overlooked. The contact that your dealership currently has with the marketplace comes from equipment salesmen, in some cases a rental salesman, your parts counter and telephone sales force, your service departments, direct mail and advertising and some others. The product support sales force is an extremely important aspect of this coverage.

If, as I have suggested, a product support salesman should have a territory limited to no more than 150 customers, there will be many customers that you cannot afford to cover in person. For this reason we must be careful how we set up territories.

Surveys I have performed reveal that less than 10% of your customers provide more than 80% of your parts and service business. A dealer who has 3,000 customers would require the parts and service salesman to cover 300 of them. That would require two product support salesmen.

You, of course, would have to perform your own specific review. How many customers do you have? What percentage of these customers gives you more than 80% of your parts business? How many customers does this represent? Now do the same thing for the service business. How many customers does this represent? From these answers you will know how many product support salesmen you will require in your territory.

Next you must look at the geography. How do you organize these customers in a way that makes sense? It is not simply a matter of dividing up the customers into territories for coverage. You need to separate the customers according to their needs. Are there needs in your territory to cover specialized markets? For instance, mining industry customers have different needs than quarries. Similarly, large general contractors have different needs than landscapers. The territories must be viewed to satisfy these individual requirements.

A salesman who is assigned to the territory with a heavy concentration in mining, for instance, has totally different coverage needs than one that contains contractors.

“Par” For The Course

Within your coverage model, you must make decisions regarding the call frequency. It used to be called a “par.” Many computer systems have a call reporting subsystem. Within this call reporting system a par can be established for each account. While this is very basic it isn’t a bad place to start. Also, there are several contact management systems on the market. Goldmine and ACT are two examples. These packages allow a PSSR to keep an electronic record of each call and have a structure in place that allows him to plan future calls. This is a much more effective and helpful approach to covering a market.

So there’s a start for you. Look at the total number of customers that you have in your territory. Arrive at the number of accounts, for parts and service, which provide you with at least 80% of your parts and service business. Study these customers. Separate them into territories that can reasonably be covered by salesmen. Set up standards for coverage in your particular dealership. Establish a system that will allow both the company and the salesman to manage the customer coverage. Many details, yet reasonably simple. At the end of this exercise you will know how many territories you have for parts and service salesmen. Once you have made the assignment, total up the sales for both parts and service.

This will give you the current parts and service sales volume of your dealership’s entire region. And that is the starting line for the PSSR.

How Do You Pay For This?

Once you know how many salesmen you need to have, the critical question surfaces: What is it going to cost? We first have an interesting decision. Is this sales function going to have a salary, or is it going to be commission only? Perhaps we need a combination of the two.

Let’s start with a small example: a dealership with sales of $35 million a year. The equipment portion, sales and rentals of equipment, totals $20 million. The remaining $15 million is split 2-to-1 in favor of parts: $10 million in the parts department and $5 million in the service department. The same type of ratios that exist in this hypothetical dealership also exist in your dealership. Somewhere between 55% and 65% of your sales will come from the equipment group. Parts will be roughly twice the size of your service business. So you can perform this same type of calculation for your company based on this example.

Department	Sales in Dollars
Equipment Sales & Rentals	$20,000,000
Parts	$10,000,000
Service	$5,000,000

Remember, it’s 80% of the product support business where you’re going to put your PSSR’s greatest efforts. Eighty percent of the parts business would represent $8 million, while 80% of the service business would be $4 million. The total parts and service business you’d attempt to cover will be $12 million. If the gross margin on your parts business is 25% and the gross margin on your service business is 65%, the gross profit dollar value will be $4.6 million. Further, let’s assume that this dealership requires six product support salesmen. Each territory would contain roughly $2 million worth of business, generating approximately $767,000 of gross profit.

The argument that is normally waged when talking about a sales territory is that it needs to be large in dollar volume, not small. There is a balance that needs to be achieved, but, contrary to that thought, it’s generally the smaller territories that tend to maintain high market shares. This is due in part to the stronger relationships that can be developed between the customer and the salesman.

Product Support Territoties

Category	Total Sales	Total Territory	Territory Gross
Parts	$10 million	$8 million	$2 million
Service	$5 million	$4 million	$2.6 million
Total Dealership	$15 million	$12 million	$46 million
Territory Parts	-	$1.334 million	$334,000
Territory Service	-	$667,000	$434,000
Total Territory	-	$2 million	$768,000

Each salesman – in this illustration there are six – will cost us between $50,000 and $75,000 per year for personnel, vehicles and other operating expenses. This represents somewhere in the neighborhood of 2.5% of sales (at $50,000) or 10% of gross margin (at $75,000). Now before we start making assumptions on the cost ratios, let me say that the commission structures employed will have a strong impact on these ratios. I give you these ratios so you can consider the expense relative to sales as well as gross profit. Check out the ratio of the equipment salesmen to sales and also to gross profit. By themselves, the numbers can easily be misleading. No single measure, by itself, is sufficient to come to conclusions.

Let’s continue through this exercise. The combined gross margins for the parts and service business, from the table above, is 38%. This means that to recover the $50,000-$75,000 of expenses, parts and service sales would need to increase by $131,5000 and $197,250.

If, as your PSSR goes about the business of covering the customers in his territory, you are not seeing increased sales in each territory by at least these amounts, there is something terribly wrong.

Translate the increase into labor. This is an increase of one to two more billed mechanics per territory. This would mean between 30 and 60 more maintenance contracts. This is a fairly reasonable increase expectation, isn’t it?

Market Coverage: Protect What’s Yours, Then Get More

Many of you have product support sales territories that have considerably larger sales volume than the $2 million-per-territory that is outlined in our example. This also makes some dealerships feel more comfortable with the expense ratios, as they will obviously be lower. This is more about market share and market coverage than about a ratio. I would submit to you that the smaller the sales volume is in each territory, the higher the probability that the sales can increase.

There will be some customers whose volume is in the millions by themselves. Suffice it to say that an account of that size would have to be treated differently by a product support sales coverage plan than the more normal-sized customer account. Several different options can be considered for larger accounts: a salaried coverage position, a house account, an account specialist who covers all aspects of the customer’s needs, from equipment right through to product support. No one model will be satisfactory for everyone. But the principle in market coverage is that we must protect what we have and obtain more of what we don’t have.

You’ll also see that if we had 100 customers in this territory, the average sales per customer of parts and service would be $20,000 a year. This should suggest to you that there will be a few very large customers in each territory and more of what I would call medium to small size. So again, the coverage model for the largest customers must be chosen with care.

A chief task for the parts and service sales rep is the ability to demonstrate to the customer how to reduce the owning and operating costs for each machine while protecting the residual value of the equipment. This is most effectively done when the customer chooses to buy parts and service from the dealership. Developing and maintaining a relationship with the customer is critical to selling parts and service. After that you can focus on the operational effectiveness of the equipment.

For the PSSR, the list of equipment owned, machine population, the hours of work per year per machine and the conditions of work are the key bits of information. With this we can calculate what the parts and service potential is for each customer. When we have the potential calculated we can see what our actual share is for each customer. This will allow the rep to determine what business is being lost and ultimately to whom it is being lost. Specific selling then becomes the job.

This might sound like an impossible dream, but the determination of the potential parts and service business is readily available with a bit of work. Without a revenue potential model we can be easily misled.

Knowing your customers, knowing your competitors and knowing your products and services will allow the PSSR to increase sales to each and every account. That is what the job is and that is how we can pay for this function. Increasing sales is the job of the salesman and it develops benefits for both the employee and the company.

Without a product support sales force the future of the dealership is in jeopardy. Parts and service sales is the backbone of the dealership, and it’s the foundation on which your customers depend.