The Importance of Service

With the market suggesting a slow down, now is the time to focus on your service business, or develop one.  

Over the past few months, I’ve been travelling to visit numerous dealers all over the US and Canada. During my visits we tend to have long conversations on the state of the equipment market. Everyone agrees it’s been a challenging time and wild ride. Many have never seen such lofty heights, prices and volumes. Machines were both in demand and hard to get and many have had some of the best years. Rental has been strong and many have preferred to rent than sell or buy. One other thing that everyone has in common is a concern about when the music will slow down or stop.

It’s this unknown future and concern about slowing machine sales that reminded me of my experiences in 2008. In April 2008 I had just joined Terex to help develop the service operations of the new construction equipment group. I was excited to work with my new colleagues and change the organization into a full operating manufacturer.

Yet, no sooner had I started, then the recession (read collapse) happened in the market. Over a few short months some of the group companies saw a drop of up to 85% in sales. At the same time, I kept in contact with past colleagues at other dealers. There I heard the same, machine sales, regardless of make were down significantly. “But”, they said “The shop is really busy”. It turned out that even with a clifflike drop in sales, people were still out working their equipment. Furthermore, as the recession continued, more machines came in for major work in place of replacement.

So here we are again, this time more able to see the economy changing and many dealers are in the same place. Many have not focused over the past years on developing their service business. This could mean activities including, understanding their currently market share, developing service products or changing the type of work their shop is engaged in. It’s understandable why many dealers have not done this. It’s been a busy time of turning around rental machines or prepping sales machines. Plus, technicians are hard to find and not cheap.

Yet there is one statement that we have all heard: “Sales sells the first, Service sells the rest”.

With a slow down likely or imminent, now is a great time to start planning what you can do to develop your service business, support your existing customers and deepen your relationships with customers.

First, understand where you are now. This can be looked at through several traditional metrics but requires some analysis of your business data. Try and find parts and service sales data both by customer and by machine serial number. Group them into behaviors that define your customers. Consider parts sold through parts, and parts through service. Measure the balance of your labor sales, internal, customer pay or other. You can look at sales vs inventory and so many more. By analyzing this data, you should be able to group your customers, understand what machines generate the most revenue and what percentage of the product support market you’re capturing.

Second, consider service and parts volume as a measure of engagement. Just like we talk about digital engagement, after sales volumes are a measure of how involved you are with your customers. If you’re not supporting them who is? If someone else is supporting them, are they in a better position to get equipment rentals or sales when customers have more choice during an economic slowdown?

Third, when you understand the situation, develop parts and service products to match the opportunities you’re seeing. Many of these strategies are tried and true and we all know them, like PM filter kits. Personally, I think one of the best programs is a PM program. Why? Because no one really likes doing them, yet they must be done. PMs also bring value and get you a touch point with customers every 250 or 500 hours. A good PM program also lets you measure how much your customers are using their fleets. Are they continuing to work? Are they busy? Parked? A PM program will give you insight and opportunity to talk to your customer, even when they don’t have any need to buy equipment. During a downturn your sales reps are equipment and fleet managers!

When you do start a PM program here are some rules

Don’t leave it to your customer to call you! Find a method to monitor all the equipment. Many machines have telematics from factory, others can be retrofit with hardware for minimal cost. Include it in the cost. Leaving it to the customer increases the likelihood they never call. You are providing a service, make it full service

If possible, set up hourly based PM programs that charge the customer a per hour rate. Yes, it’s a little more work to run invoices monthly for customers, BUT it builds up a pool of money that will encourage your customer to make sure you do the work. If they pay per service completed, they also have incentive to stop. It also fits their usage, if it’s parked, the PM program costs them no money.
Follow up! Make sure you use inspection software on every service, take pictures, make notes and come back to your customer with what you found. This shows you’re a great business partner and gets you extra work.

Finally, developing your service business has one other really important benefit, it keeps your techs working. One of the worst outcomes of a downturn is losing (through layoffs) the people you need to count on when you get busy again in sales. Developing a service program lets you retain your talent and possibly even pick up some new talent.

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