Is ‘Dealer Loyalty’ the New ‘Brand Loyalty?’Dealers weigh in on loyalty, and say it depends on a combined effort from both dealers and manufacturers.
Kim Schmidt, Managing Editor
Farmers are saying they are more brand loyal today than they were 5 years ago (see “Farmers Still Loyal to Their Brand” on p. 38), but the dealers Farm Equipment spoke with painted a somewhat different picture. A number of dealers pointed out that equipment has become more evenly matched across brands and it’s getting harder to differentiate.
“There is definitely less brand loyalty because the machines are much more competitive and performance is equal across brands,” says Kenny Bergmann of S&H Farm Supply in Lockwood, Mo.
The majority (64.3%) of dealers Farm Equipment polled say brand loyalty has declined, but perhaps that decline is starting to level out. When we asked the same question 3 years ago, a whopping 90% of dealers told us they were seeing less brand loyalty vs. 5 years earlier.
What’s driving the change ranges from rising prices to a new generation of buyers coming into the industry to a more global economy with greater competition.
“We think brand loyalty is decreasing in general mostly due to the realization of the worldwide economy, the realization that competition is good and keeps traditionalists from becoming complacent,” says Arnie Knoener, owner of Maple Lawn Equipment, Elkhart Lake, Wis.
Randy Jacobson of Premier Equipment in Huron, S.D., points out that any type of loyalty is a good thing. “I feel our brand loyalty is about the same as it was 5 years ago. Anytime you can have loyalty, whether it is brand, dealership or personnel, it is a good thing,” he says.
Brand Loyalty — Good or Bad?
There was less of a consensus among dealers on whether or not the decline in brand loyalty is good or bad. Of those who say loyalty is declining, 45.4% view it as a positive trend, compared to 54% who saw the trend as positive 3 years ago.
“This is good in that we have opportunities to convert new customers, but this is also driving margins down,” says Brian Carpenter, general manager of Champlain Valley Equipment in Middlebury, Vt.
Some dealers view less brand loyalty as a challenge to become better as a dealer and service provider. “We don’t see it as a bad trend; we see it as a challenge to continue honing our skills and providing solutions that are of value to our customers,” say Clayton Camp of Kern Machinery in Bakersfield, Calif.
Darren Nickel of Greenvalley Equipment in Altona, Manitoba, has had a similar experience. “It is good for us in that we become sharper, more aware dealers that don’t take customers for granted,” he says.
However, he argues decreasing brand loyalty can be bad. “Lost business is more costly to re-achieve than to maintain,” he says.
Rob Rosztoczy of Stotz Equipment, Avondale, Ariz., put it best: “Good or bad, it’s a trend we need to adapt to.”
A New Kind of Loyalty
A number of dealers say that loyalty to the dealer is becoming increasingly important, and for some customers it could be more important than brand loyalty. “I think dealer loyalty is as big, or bigger, than brand loyalty,” says Steve Brown, Everson Farm Equipment, Everson, Wash. “Customers want to know they’ll be taken care of, whether it be parts on the shelf or a service department they can count on.”
David Colvin of Lowe & Young Inc., Wooster, Ohio, says they are seeing less loyalty to the brand and more to the dealership “as it is becoming the new ‘brand.’”
Dealers were asked, hypothetically if your OEM contract were to expire and you were immediately asked to carry a rival brand from your same location, what percent of your farm customers would change brands and stay with you rather than driving to the next closest inline dealer? Nearly all the dealers who responded predicted they would retain the majority of their customer base in this instance.
“This would depend on if we managed to acquire another mainline. Supposing that is true, then we’d expect to retain 70% of our customer base,” Carpenter says. “With the reduction in single-brand farms in our area, the customers typically prefer a dealership location (convenience) or personnel (relationships). If they are happy, they will stay so long as the quality, pricing structure and experience is not changed.”
Jacobson agrees relationships make the difference. “At least 75% would consider switching brands on their next purchase and buy from us. We feel very strongly that who you buy from is more important that what brand you purchase. People like to deal with dealerships and dealership personnel because they have a good relationship with them and know they’ll do their best to take care of them after the sale.”
Tim Brannon of B&G Equipment Inc. in Paris, Tenn., recently dealt with this type of situation, with a mostly positive outcome. “When we recently dropped a major line we retained a vast majority of the business from owners of that brand and feel they will buy our product in the future,” he says.
However, there were some dealers who were less optimistic. “I think the number of customers that would switch would be very low. I strongly believe that the dealer/manufacturer bond is extremely intertwined. They go hand in hand, so if we were to move away from our current major line, it would be a tough road ahead of us,” says Mark Foster, Birkey’s Farm Store, Bloomington, Ill.
While Camp thinks his dealership could sway most of its customers to stick with them, he recognizes that it is really a partnership between the dealer and manufacturer. “Both members of this partnership need to provide value; one can’t totally overcome the sins of the other in the customers’ eyes. We know the industry and our customer needs, so I believe we’d keep most of our customers, but would lose some to features of the line we just left,” he says.
Reasons to Switch
Of the top five factors to cause a farmer to switch brands cited in our recent survey, three of them relate back to the dealer — better parts availability, better dealer repair/service and product specialists at the dealership.
Colvin credits the decision by a farmer to switch brands to a poor experience with the parts and/or service departments at the dealership. He also says part of it has to do with the personality of the customer. The willingness of the customer to try something different, with different motivators involved, can also lead to him changing brands.
“A rival brand, no matter how entrenched it is with a particular customer, can be undone by difficulty in acquiring parts or a bad service experience. We’ve redoubled our efforts to make those things a non-issue for customer retention as well as a selling feature for our sales force that we have parts and we have service,” Tom Wood of Champlain Valley Equipment in Berlin, Vt., says. “We try and make the customers — potential and current — see that we don’t put the cart before the horse. You cannot grow sales without parts and service.”
Foster says the combination of what the manufacturer and dealership have to offer is what converts a customer. The manufacturer can offer product innovation and the dealer offers superior service. “The ability to exhibit support in both parts and service from the dealership and major line, and being able to provide the entire package, which not only includes price but financing, warranty, productivity and re-sell value,” can convert a customer, he says.
And of course, there are the incentives from the manufacturer to switch, as Brannon mentions. “The few large farmers we do have are very demanding — and reasonably so. They are constantly being hit with special incentives from other colors to totally switch out rolling stock,” he says.
Time and again dealers say that parts and service is what keeps current customers and sways new customers their way. “Obviously if the dealer can’t handle the majority of the parts/service issues, then the blame lies with them. Also, when it comes to salesmanship, this is a shared area by both the dealer and the manufacturer and they both need to be very involved in the process,” says Foster.
Knoener says they demonstrate their integrity to customers by “showing them our superior service and willingness to perform service ‘over and above’ the dealership’s” reputation.
Dealers also accept the blame for losing customers. “If we take them for granted, they move on,” says Richard Miller, Trigreen Equipment, Murfreesboro, Tenn.
Carpenter agrees. “Often it may be taking the customer for granted — not calling on the customer enough to show you value their business; not being sensitive to pricing pressures; not demonstrating when the competition does; etc.”
Likewise, the manufacturer can be just as responsible for gaining — or losing — customers. On the positive side, the product innovation or parts distribution network from the manufacturer is often what causes a customer to switch colors.
Making product specialists available to the dealers is also a big help. “Case IH, New Holland, Kuhn/Knight, CNH Capital and Claas all have various product specialists that are available by appointment to assist with sales. We use this by taking them to the farm to evaluate the needs and offer the best solution,” says Gene Saville of Lamb & Webster in Springville, N.Y.
Birkey’s Farm Store leverages their OEM product specialists to sell the customer. “We try hard to focus on innovation and how our major line can make customers more productive and profitable. If you arm yourself with all the resources available to you, it can be done. We utilize our supplier’s people to assist us in this area and they are very valuable,” says Foster.
On the other hand, sometimes a manufacturer simply doesn’t have what the farmer needs. “In some instances, the major lines do not have the solution for the customer. Sometimes that is hard for the manufacturer to swallow, but it’s the truth,” says Colvin.
“Manufacturers don’t always offer the correct tools for the farmer to accomplish their task,”says Saville. “Dealers offer the machines that the manufacturers build, and with quotas and market share, they have to sell what is produced. Manufacturers and dealers both need to try to understand needs and wants of a variety of customers, do our best to match a machine to the task and then support that machine with parts and service.”
Changes in product design or manufacturer policy can also influence a farmer’s decision to switch brands.
“There are many circumstances in which manufacturer changes affect our sales, like removing the engine from our three twine balers, and going with PTO balers only,” says Dave Ott, Fallon Welding and Fabrication, Fallon, Nev.
Jacobson says the case for the switch originates with a problem from the manufacturer. “I feel the blame is more often on the major line manufacturer and a problem that they’ve had with a certain model of equipment,” he says. “Sometimes the move to another brand is because of a dealership/people problem, but more often than not, it is a problem with how their OEM handled a warranty claim or something along this line. Or the farmer purchased a piece of equipment that was a constant drain of dollars in parts or continually in the shop for service work.”
Product defects and deficiencies can be a headache for the customer and dealer alike, as one dealer added.
“Some manufacturers have priced dealer margins so low that it is difficult to survive if their product has to be supported because of manufacturing defects and deficiencies,” he says. “Because warranty reimbursement is under priced, it is cheaper to send problems to the field and have the dealer fix it than fix it before the unit leaves the plant.
“When you see 5,000-hour bumper-to-bumper warranties without a time limit, you know quality has been built into the manufacturing process. Yes, I know that that quality would be a restraint on new unit sales. The price of such warranty is partially included in sale pricing, but the dollars charged is an admission of poor design.”
Regardless of where the blame rests, when a dealer converts a customer to a new color the goal should be gaining a customer for life, Nickel says. “Hopefully, the dealer approached the sale with the long-term objective of creating a customer for life and not just a ‘trophy’ for the month.
“I see a trend today where OEMs are putting too much emphasis on new sales volumes and it seems as though dealers are trying to win deals vs. developing customer relations with excellent business models.”