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From the Desk of Dave Kanicki: Brand Purity Raising Its Ugly Head: March 4, 2014

From the Desk of Dave Kanicki

Brand Purity Raising Its Ugly Head

March 4, 2014

Just about the time that “dealer” or “brand” purity appeared to have become a non-issue for farm equipment dealers, it is once again raising its ugly head.

According to Case IH dealers who attended the firm’s February dealer meeting in Florida, company execs made it clear that it expects (demands) that its retailers dump several of the biggest and best known specialty equipment makers’ products. You can read about some of the details in this issue of E-Watch.

I say it had become a bit of a non-issue because, according to Farm Equipment’s annual Dealer Business Trends & Outlook survey, dealer purity efforts by manufacturers had dropped from #6 on dealers’ list of biggest concerns in 2007 to #15 by 2012. It has stayed at that spot ever since.

Now, whether or not a company can coerce its dealers to drop other equipment lines is not the question here — because we all know that if the majors want to badly enough, they’ll figure out a way to do it, whether or not it hurts their dealers — I think the bigger question is why.

This is a stupid question, right? After all it’s obvious why the majors want their dealers to carry only their brand. Stupid or not, the fact of the matter is dealer purity not only hurts their dealers — the people who are their direct connection with their customers — but it also stifles competition, which is the driving force behind innovation.

As much as the major farm equipment manufacturers want us to believe they are the innovators in this industry, there are very few people who know anything about ag machinery who won’t agree that “true” innovation comes from the shortlines.

Without the shortlines, the majors would be stuck copying from each other and then arguing who came up with the idea first.

Instead, they now “borrow” the best ideas from their smaller competitors who survive and thrive by bringing cutting edge products to market on a regular basis. Differentiation is the hallmark of the most innovative specialty equipment manufacturers. The majors seem to differentiate themselves by painting their equipment a different color.

Furthermore, as astute businessmen, dealers don’t carry products that their customers don’t want. If their major suppliers were capable of providing every product their customers want and need — and they were as good or better than that of the shortline — I’m pretty sure that most dealers would be content to carry only one line of equipment.

As our survey of farmers’ level of brand loyalty demonstrated, (see “Farmers Still Loyal to Their Brands,” Farm Equipment, January 2014) most farmers would also like to buy only their preferred color of ag machinery. But they don’t because they want the best for their operation and the best equipment often comes from a shortline manufacturer.

As dealers have told us time and again, if they didn’t carry shortlines, they would never be able to get farmers loyal to another brand of equipment into their dealerships. Often, it’s products from a specialty equipment maker that attracts those potential “conquest sales” into the competitive dealer’s store. Once they walk in, a rapport can be established and the dealer has a shot of turning a conversation into a relationship.

I believe if it weren’t for the competition from the shortlines, we would not see the major equipment manufacturers investing in new product development at the level they are today. You see, shortline equipment makers must believe that customers always come first. The majors can say it, but the real question is do they believe it?

Dave Kanicki
Executive Editor

Farm Equipment
dkanicki@lesspub.com

 

 

 

 

  

 

COMMENTS: 5
Brand Purity
Posted from: Lyman Dellinger, 3/6/14 at 8:09 AM CST
The following is from a management card I carried for many years while working in the AG Industry Wholesale world.
It was given to me by a coworker that clearly understood the Ag Retail Dealership business model.
Dealership Performance Guidelines ---- Sales Mix (% of sales)
a. New Primary Brand Specific Ag Equipment 30-40%
b. New Non - Brand Specific Equipment 16-22%
c. Used Equipment 14- 20%
d. Other ( IE Construction) Equipment 10- 20 %
e. Rental 1-5%
f. Parts 16 - 22%
g. Service 7 - 10%
It would seem that item b runs counter to the brand purity thought process but has been proven to be needed in the retail business model. Items c,d,e,f, & g all need to work together with items a & b to maintain a viable business in the cyclic Ag Industry.
Good competition never hurt anybody and assures the customer a better product choice and promotes technology growth.
Purity
Posted from: kevin, 3/6/14 at 7:45 AM CST
We do our best to carry what we can of the major, but we are slow to react to new items from them for a reason. Time comes when the major decides to drop a complete line causing headaches for parts and service down the road. Like Deere and snowmobiles, 4 wheelers, etc. Also Case IH and New Holland like compact tractors. Another big item is the major only supplies attachments to fit current production machines, but what about aged units needing loaders and such. We as dealers have to keep shortlines afloat for the good of our customers and for the good of our sales force. If we have built a following for a short line after many years and the major decides they demand a piece of the pie, sorry Charlie. We won't waste 10 or 20 years building something for you to crash causing bad feelings from parts, service, and customers. Brand purity is all your eggs in one basket - never a good business decision.
comments were 'bright' not 'rusty'
Posted from: tim, 3/5/14 at 2:03 PM CST
Robert Ratliff the past CEO of Agco once told the dealers "we view the market as the line up of Sears "Good-Better-Best" or Walmart's selection of vacuum cleaners from various brands. If we build the product and price it properly - it will root out the competition and earn its rightful place in the business plan of our dealers - that is our responsibilty. The products we are close on we request dealer loyalty to support our growth".
brand purity
Posted from: Doug Easterlund, 3/4/14 at 4:46 PM CST
My told me about being involved with this in the 1940's. He had to testify in a law suit that Minnesota Implemnt Association had brought against John Deere. I am sorry I do not remember the details, but this is an on going problem that does not go away.
Dealer Purity
Posted from: rusty fowler, 3/4/14 at 12:14 PM CST
Hi Dave.
This brings up an old recollection, not something I am too proud of. It must have been in the early 80s, not sure exactly. There was a young, aggressive, full of piss and vinegar Regional Sales Manager for IH making a talk to a large group of dealers. He was speaking in a derrogatory and confrontational manner to the dealers about competitive lines in their dealerships referring to them as "Rainbow Dealers" instead of pure IH dealers. That upstart young sales manager was me. In these later years it is hard for me to believe that I could have been so arrogant and naive. With several years of "come uppance" behind me I came to see that the true force that drives this great AG business is the end user. Major line company executives pushing the company line on brand purity are just following orders, some doing it with relish, others not so much. What was recently said by one executive is simply what other execs with other companies are thinking without saying it. This is normal corporate behavior driven by corporate strategists who have become disconnected from the end user and think only in self serving terms on behalf of the Company. But that is their call to duty. The very idea of brand purity has been and will always be with us, something akin to crabgrass in a nice lawn. The effects are kept in check by the end users. They will decide what they want to buy and they will buy it where it can be found. The sabre rattling and thinly veiled purity efforts, spoken and unspoken, by the majors these days is being driven by their financial strength and their perception of their contract strength. In addition they are using the very positive and forceful driver of dealer consolidation as a prime opportunity to enforce self serving policies including brand purity. This is the same song from the past, just a new verse. When the dust clears and our business and distribution channels finally fall back in their rationalized structures,a busines as usual MO, the impact of brand purity efforts will again fall into a more normal state of dormancy until the next outbreak of crabgrass, some years down the road.

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