|
What is
it that really makes the sale -- the shingle or the person?
Of course
the shingle does sell a bit. There is power in a brand. But
I will vigorously submit that if you look at the record for
the construction equipment industry for market share for parts
and labor, you come to the conclusion that we must have a
product support sales force. A sales force that can lead us
through the dilemmas we confront and take us where we need
to go.
If you
think that the shingle sells and you do not use Product Support
Sales Reps (PSSRs) or whatever you want to call them, then
check out your market share and answer this question: Is your
share of the parts and service market what you think it should
be?
Those
of you who follow my columns and articles have seen a consistent
thread in all of them. Parts and service is critical to the
success of the dealership. It is a very significant part,
if not the most significant, of the barrier of entry to your
market. Yet it is one that typically you do not do well at
protecting or improving on. Without a product support sales
force you are vulnerable!
Even
with a highly professional and well-managed sales force, that
might not be the end of the story. You could still be in trouble.
Let me ask some simple questions.
What does
a PSSR do? Who does he/she cover? How many customers can he/she
handle? What are the things that he/she sells? Does he/she
deliver parts? How does he/she get paid? I warned you that
they would be simple questions. I didn't suggest that the
answers would be simple.
Over the
next three issues of this magazine, we will cover most of
the salient aspects of the outside sales function required
for parts and service.
How do
you pay for this sales function? Can you afford to have such
a job in your dealership? I believe that not only should you
have this job function but that, in fact, you must. If you
have less than 50% of the available parts market for the lines
that you represent, or less than 50% of the labor hours applied
to the equipment with the lines that you represent, then you
have not protected the marketplace properly. And I promise
I am being very gentle when I suggest 50%. Most of you have
less than 5% of the available labor market and less than 25%
of the available parts market.
IN
THE BEGINNING
Back in the 1960s we started seeing a position in dealerships
that sold parts. This group of people basically sold commodities.
Undercarriage and ground-engaging (conditioning) tools primarily.
But it was a parts sales function. Hardware, bearings, filters,
etc. These were the areas of the parts business where it was
felt that there was the most competition.
From a
dealer perspective this was also the set of commodities that
represented a very low gross margin of profit. They also had
a very difficult demand pattern for which to stock parts.
The sales force was paid, typically, a salary without any
commission. This was, after all, a job in the parts department.
The individuals reported to the parts manager. They delivered
parts to customers. The job was viewed more as a convenience
to customers; also it made it more difficult for a competitive
salesmen to displace the dealer for a specific piece of machinery.
And, quite frankly, it worked.
The first
brand of equipment, or group of dealers, to start this position
was Caterpillar. But it quickly spread to the larger more
sophisticated dealers across the country and around the world.
This was
the beginning. But the beginning lasted a long time. This
was a glorified delivery position if you really dug beneath
the surface. A public relations, feel-good empathetic person
-- in essence, a delivery person with technical parts knowledge.
Eventually dealership owners started questioning the expense
of the position, and that precipitated the introduction of
commission programs.
The first
commission programs were very restrictive and very control-oriented.
The PSSR would be paid a commission on any work for which
a quotation existed for the parts being sold.
This became
a game. There were hundreds and hundreds of customers, and
the PSSR had no chance of covering all of them. But the salesperson
felt that if he worked the customer on a particular commodity
he was entitled to compensation on the sale, even if it didn't
occur then but sometime down the road. And, more often than
not, he was right. So the sales people started getting notification
from the counter staff or others of a sale and then wrote
up a quote. What would you have done? This was their income.
So very
early in the history of selling parts and service the salespeople
and the dealerships were struggling with the value of the
function.
PARTS
AND SERVICE MANAGEMENT 101
The parts department and the service department have the most
customer contact, generate the most paperwork for sales and
purchase orders, employ the largest number of employees in
the dealership and generate the most net operating income
of any other group in the business.
They have
a very difficult challenge. The management people in parts
and service have normally been put in their jobs because they
were the best at all of the aspects of the operational job.
In the early years this had nothing whatsoever to do with
selling. The pressure on the job was to provide 100% absorption
of all of the expenses of the business. And that was a difficult
task in most dealerships.
Along
comes the parts and service sales function, and the managers
were thrust into a new arena. Very rarely was the operationally
skilled manager a good manager of sales people. As many of
you know this is a difficult group of salespeople to supervise.
Operational management methods do not translate into good
sales management methods.
Yet the
operational managers recognized that they were losing more
and more business to competitors or, in trade jargon, the
"gyppos."
And then
something new was rising to the surface of parts and service
management's consciousness. Customer labor sales were in serious
decline.
The dealers
were overloaded, somewhat a similar situation as today - but
for different reasons and with different results. The product
lines offered through manufacturers broadened. The start-up
quality of this equipment was not as good as it could have
been, and warranty failures were taking time in the shop.
The salesmen were having successes selling this new equipment,
and the workload in the shop to prepare new equipment for
delivery was brutal.
Also over
a couple of decades we had business slowdowns and recessions
that caused dealerships to let go a large number of mechanics.
This was particularly true during the early '80s. The dealerships
had trained all these mechanics, and a large number of them
became competitors to the dealers who had let them go.
Whew.
So where does that all lead. It takes us to a very significant
thought. If you control all of the labor on the equipment
lines you represent, you will never have to sell another part.
What do you think? If it is your technicians who repair all
of your equipment, will they order and use parts that are
not recommended by the manufacturer? I don't think so.
SELLING
LABOR IS THE GOAL
This is where it starts to bind. If the opportunity to increase
parts sales is greater on work done by our technicians, as
a parts manager I would tell you that you are limiting me.
The service department does not have enough mechanics to handle
the work they currently receive, and they can't handle any
more. And we have a shortage of skilled mechanics. So how
can you expect me to get more parts sales with that kind of
an environment without going out and selling parts directly
to the customers?
I don't
want to stop the parts-selling function at all. Continue selling
parts. The point I want to make is that the area for the parts
and service sales force to focus on is labor sales.
Maintenance
programs, extended warranty, total maintenance and repair
programs, planned component replacement and many more. Notice
I did not mention a repair. I don't believe that you can sell
a repair. You must sell a program.
So this
takes us full circle to the function of the parts and service
sales force. In the beginning they were parts commodity sales/delivery
people. Now they must become a group of people who are able
to sell service and labor programs.
The particular
problem with this approach is that very few dealers offer
service programs. There is no book containing sales aids or
program descriptions for all of these various programs and,
to make matters worse, the salesmen are all parts-trained
people and typically do not have strong service skills.
So there
you have it. We have a very serious need to sell labor, yet
we do not have a sales force ready and able to sell it.
Not very
many dealers are ready to open the doors and sell labor to
the point of overcapacity. They do not feel that they can
satisfy the needs of the current customers let alone any increased
work load. This is a very serious problem that must be overcome.
And, frankly, the service management at dealerships is not
yet ready to face this problem. The problem that we have at
finding technicians is nothing compared to the problem of
finding business capable service managers.
So what
are dealers supposed to do? Obviously staying in the position
that they are in is not acceptable. Becoming more of a capable
service to the customers is an absolute necessity. The customers
want it. In fact, they demand it, and if your dealership is
not prepared to provide it someone else will.
PRODUCT
SUPPORT SALES
We need to develop a more capable, fully trained and equipped
sales force. This group of people must have a wide variety
of things to sell. Parts, commodities, service programs and
a strong sense of the businesses that our customers are working
within. From mining applications to housing projects, from
quarries to urban infrastructure, from landscaping to road
construction, from dams and major construction projects to
demolition, and many more.
Where
do we find these people? One of the most controversial places
to find these people is within the very department that has
the most severe shortage -- the service department. I have
found this to be very difficult in most dealerships.
I find
that a field service technician with a selling aptitude is
the best and most capable person for the job. Yet it is truly
difficult to have dealers accept that they should take a field
service technician, a man who generates over $100,000 per
year of labor and everything that comes with it, and put him
in the field selling. This is but one illustration of the
difficulties we are faced with in product support selling.
We have the right people in the dealership but only occasionally
will a dealership embrace this solution.
Further
we must also provide a wide array of things to sell. We need
to have profiles of the customers. We need to understand and
have very good understanding of the competitors and what they
offer. In short we must know the market and what it needs.
How do you stand up to the test?
We must
also have good information regarding the purchasing habits
of our customers, their likes and dislikes and we must match
these needs with well-operating customer delivery systems
of our products and services.
But what
choice do we have? In my view none! We either choose to serve
the marketplace or be replaced. It really is that simple.
Once we
realize the stark nature of what we are faced with we are
much more able to come to the right conclusion. Product support
sales is absolutely the most critical aspect of dealership
management heading into the 21st century.
The title
of this article is Product Support Selling: The New Frontier,
but, in reality, it is not a new frontier but a well-worn
trail that we should have been on for some time now. Many
of you are already there.
So this
is a well-understood function in your dealership. If that
is the case this series of articles will provide you with
a review of how to operate this function and, I hope, a series
of new ideas of what needs to be done. If you don't already
operate a product support sales force perhaps this will give
you the motivation you need to get started.
In the
upcoming articles we will cover the various programs that
need to be developed, compensation programs, market coverage
and segmentation ideas, as well as what the financial implications
are for the position itself.
So let's
begin with a common understanding. We must have an effective
product support sales function. This group must be the very
lifeblood of the dealership. These people will sell those
aspects of the business that prompts customers to come back.
They will provide business solutions for our customers. They
will assist the customer in lowering his operating costs and
preserve the residual value of the equipment that they own
and operate.
That is
the mission. If you perform the function well, you will achieve
more success than you thought possible, and you will obtain
a much higher share of the parts and service market. From
that business you will generate all the profit you will need.
And that is a very important byproduct of why you are in business.
Why you
are in business is simple -- you want to provide equipment,
parts and services to your customers. And that requires a
product support sales force.
|
