In addition to surveying farmers, dealers were called to share their perceptions on brand loyalty, and similar to Farm Equipment’s 2014 results on the same topic, dealers and farmers disagreed more often than not on the level of customer loyalty to a specific manufacturer.
While 75% of the total farmers polled by Farm Equipment believed they were “brand loyal” year-after-year in 2017, most of the 30-plus dealerships that responded to an e-mail questionnaire across the U.S. and Canada thought otherwise of their customers. Nearly two thirds of dealers (62.5%) perceived a dip in brand loyalty over the past 5 years, while another 24% believe it stayed the same. Just 14.5% of dealers suggested an increase in brand loyalty in that span. The overall responses were similar to Farm Equipment’s 2014 results for the same question, when 64.3% of dealers perceived a drop in brand loyalty, which differed starkly from the 2011 results (90% of dealerships claimed less brand loyalty).
Less Perceived Loyalty: A Positive or Negative Trend?
As for how this perceived decrease in loyalty bodes for the business of dealerships, the number of dealers who found the trend to be overall positive (36.4%) dropped slightly from 2014 (45.4%) and even further down from 2011 (54.%). Perhaps some of this dip can be credited to the number of dealers who viewed the trend as circumstantially good or bad (also 36.4%) depending on a dealership’s situation and ability to capitalize on what is believed to be an elevated fluidity with customers.
For those who believe the positivity of the trend depends on the scenario, it often came down to the dealership’s confidence in the manufacturer or tendencies of the customer base.
“It seems totally dependent on quality and price,” says Precision Farming Specialist Chris Dahms of Roberts Farm Equipment. “It’s not a bad trend as long as manufacturers produce better quality products because of it.”
Speaking similarly about circumstantial benefit, David Sax, operations manager at Heuer Sons Implement, notes his dealership has garnered unprecedented customers due to the decrease in brand loyalty, but fears most of it is based on pricing advantages. It’s a trend, Sax notes, that could unintentionally warrant a less-than-preferred reputation.
- Having the best equipment or parts availability in the industry can mean little to the customer if they don’t feel like a genuine effort has been made to understand their needs or be a priority to the dealership.
- Taking a price-driven, bottom line approach can reap short-term benefits, but it typically attracts the type of customer that is likely to jump from offer to offer with no sense of loyalty to a particular dealership.
- Unless it’s a major structural issue, most dealers agree that customer losses tend to start and end with dealership errors and not the manufacturer, be it through service ineptitude or taking customers for granted.
- In the event of a manufacturer switch, the number of dealerships supremely confident in keeping the majority of their customers is relatively equal to the number that are convinced they will lose most of them.
“I believe it is a double-edge sword, as we are getting business that we never got before but only for the reason of being the cheap dealer on the block,” he says. “I don’t like to be known as the low man in our area. We want the customer base to realize we have good product and aftersales support.”
Shane Townsend, corporate customer relations manager of Young’s Equipment, shared a similar sentiment on unforseen customer opportunities of the alleged loyalty drop. On the other hand, he couldn’t help but acknowledge the simultaneous threat of the situation as well.
“If the customer feels we have a better product, there is less emotional attachment to their current brand and that helps us switch them,” he says. “On the other hand, it also makes them more likely to leave if they are dissatisfied without products or service.”
Those who believe the trend is an overall negative situation (27.2%) fear that most decisions will be made strictly on the pricing side, perpetuating an environment of disloyalty for brands where service departments can’t meet their full potential. Note on p. 22 that pricing ranked 5th on the list of top 12 reasons farmers switch brands.
“It seems to come down to best lease price on the bigger units,” says Don Aberle, Titan outlet store manager & used equipment manager at Titan Machinery. “It’s a bad trend as margins will continue to be pressured and good long term ‘service’ relationships, which lead to better overall dealership margins, will continue to decline.”
Jon Castongia, general manager at Castongia’s Inc., agrees that price is a major player when customers ultimately decide to switch colors, in addition to customers exhibiting a “grass is always greener at another dealership” mentality. In due time, though, Castongia maintains hope that any customers lost for these reasons eventually return due to the quality of their service.
As for how influential these factors are, Castongia believes the state of the economy can play a role.
“Most of the time they come back to us when they find that no dealer or product is perfect and didn’t perform as they had hoped,” he says. “When money is free flowing like it was 5 years ago, customers may have a tendency to wander and experiment. As things get tighter, my hope is that they ‘find their way home.’”
With what dealers believe to be higher customer fluidity than ever before, dealerships are constantly calculating the best methods to get farmers to switch brands. Unsurprisingly, promoting superior service led the way (80.9%), as dealerships strive to position themselves as dealer-first, brand-second in the mind of the customer.
“We’ve been leveraging aftermarket support like never before, a ‘cradle to the grave’ relationship with well stocked parts depots close to the dealer for backup support,” says Doug Blades, parts manager of Martin Equipment LTD. “Additionally, we have around the clock 24/7, 365 day after hours service with highly trained technicians.”
Emphasizing the comprehensive benefits of a major line brand is an important selling point for Heuer Sons Implement, notes operations manager David Sax. He says farmers will often buy a foreign tractor at a low price, and realize at service time why they were so cheap in the first place.
“We’re not interested in chasing a competitive deal based on price because we’ve found those customers continue that price-shopping mentality and jump from brand to brand...”
— Mark Kreps, RDO Equipment
“We have had many customers that bought these off-brand tractors and had major problems getting parts and service and they come to us to fix or trade in,” he says. “Once we give them a trade-in price way lower than what they paid for it, the customers get mad at us, but it’s because we know parts and service for those parts are lacking. This makes us look bad to the customer, but in reality they made the mistake of buying an off-brand cheap tractor and forgot to think about aftersales service.”
In addition to parts availability and full service assurance, convincing a worthwhile return on investment is another point of emphasis for dealers. This is achieved through multiple avenues, from leveraging the superior quality of their main manufacturer (52%) to flexibility in personalizing financing plans, be it through warranty extensions or cost reductions (38%).
But being overly eager to attract customers with financial enticement can be detrimental to the dealership long term, warns Vice President of Agriculture Sales Mark Kreps of RDO Equipment.
“We’re not interested in chasing a competitive deal based on price because we’ve found those customers continue that price-shopping mentality and jump from brand to brand,” he says. “We first take the time to learn about the customer and what’s important to their operation. Then together, we decide if it’s a good fit.”
The continued rise of social media was also seen as a major contributor to customer fluidity, as dealerships have the opportunity to advertise and showcase their strengths over competitors in a cost-effective, real-time format. As Dan Anderson of Van Wall Equipment puts it, a reputation can be made or lost through a quick series of posts online.
“The internet and social media have made farmers hyper-aware of variations and perceived variations between major brands of farm equipment,” he says. “Salespeople have a tough job selling against social media memes and reputations, so the ability to offer quick, quality service and have parts available during peak seasons is a big deal.”
Entitlement & Complacency Speak Volumes
When dealers reflected on recent customer conversions, 41% of respondents mentioned the customer not being prioritized by the previous dealership as a key factor for the switch. These strained relationships can often be a gradual process over time, especially for expanding, multi-store operations that may lose sight of personal relationships in the process.
A notable example comes from Kreps, citing a recent RDO Equipment conversion with a customer who had worked with his former dealership for 10 years, but began feeling taken for granted.
“Each location was run as an independent store vs. as part of a cohesive group,” Kreps says. “Even to get a part or service, the customer felt limited to the one store only.”
Other times, even an isolated incident that rubs a customer the wrong way can be enough to send a customer packing, regardless of dealer’s track record with service availability.
“When a dealer is able to convert a customer, it is almost always due to the other dealer dropping the ball,” says Kelly Umphrey, general manager of Tulsa New Holland. “We recently picked up a customer simply because he had hay on the ground and the competitive dealer could not get to him in time. We recognized the opportunity, dropped what we were doing and got the deal.”
At the same time, capitalizing on other dealerships’ ineptitude for a conversion doesn’t guarantee that customer for life. One dealership representative, who preferred to remain anonymous, noted their superior on-site tech service as a prime example.
“They never saw the same tech two years in a row, and were always ‘learning’ as they showed up in a pickup truck with a two-drawer toolbox and out-of-tech manual.” The representative says of the customer’s pre-conversion experience. “Our call fees are exorbitant, but our guys show up with a minimum of 5 years experience and an average of 15 years fully equipped with crane, generator, air compressor and laptop with access to our OEM’s complete library of manuals.”
Despite the upgrade, he acknowledges that customers will change their perspective on service if they get used to superior quality over time. The result, the representative says, can include being a victim of one’s own improvements over the last dealer.
“One year after the conversion, they’ll say, ‘My gosh, I can’t believe you got here in less than 2 hours. I’ve never had such fast service,’” he says. “Then by year three they’ll say ‘I called two hours go. Boy, your service really has slacked off lately.’”
The Blame Game
Even world class dealerships have suffered the occasional heartbreak of losing a valued customer or two. While every case is circumstantial, the consensus among respondents was that unless it was a severe issue with manufacturer quality, the majority of reasons for customers taking their business elsewhere falls on the dealership itself.
For Tom Rostoczy, CEO of Stotz Equipment, the best dealerships in the industry are often capable of correcting manufacturer errors unless the error is colossal, and pointing fingers is typically unwarranted.
“Even if the manufacturer caused the problem, sometimes an effective dealer can still overcome their manufacturer’s mistakes,” he says. “The manufacturer is to blame if their mistakes are so egregious that the dealer simply cannot overcome them.”
Many dealers echoed the same sentiment on manufacturer accountability, including Umphrey.
“I would wager that a change of brand due to the equipment or manufacturer would be less than 10%,” he says.
“I tell my employees, ‘The only thing that matters to customers is what they perceive to be the truth, not what we believe is the truth...”
— David Shephard, Bobcat of Lima
Castongia says the entire scenario of dealer or manufacturer blame is circumstantial. Whether or not the blame is correctly aimed is often irrelevant, he notes.
“Customers all have different pain tolerances, and some do a better job than others of separating what is a product problem and what is a product support problem,” he says. “Others blame the dealer for everything.”
Among the 58% of dealerships that took the self-accountability route in their responses, 63% of them mention taking customers for granted as a top reason for their departure. This can be through facility expansion, which leads to the loss of an environment where farmers feel prioritized, or through new waves of management, by generation or operationally, that simply assume the longtime customers will stick with them with no extra effort to get to know them.
Failure to make the effort on a personal level with customers can also prevents dealerships from exhibiting the necessary authenticity for a long-time relationship. Perhaps Kreps of RDO Equipment put it best, as he claims it’s impossible to be genuine without proper knowledge of the purchaser.
“Sometimes the best way to keep customers is to tell them the other deal is the one they should take,” Kreps says. “The bottom line is too many dealers rely on the brand for each sale and forget that people buy from people.”
Often coinciding with a lack of genuine communication with a customer is a lack of communication throughout the entire sales process. As David Shephard, president of Bobcat of Lima points out, a disconnect between the salesperson and customer on the slightest of details can lose the sale.
“A warranty issue or past sales promise can cause someone to leave a brand or dealership and change to the competition,” he says. “I tell my employees, ‘The only thing that matters to customers is what they perceive to be the truth, not what we believe is the truth.’ That’s why the communication between a dealer and its customers is so important.”
A Test of Confidence
Inviting respondents to the world of hypotheticals, dealers were asked to predict what percentage of their customer base would stick with their dealership if they were to lose their contract with their main manufacturer. Three camps were established with almost equal representation in each group.
The 70% and Higher Group
A respectable 34.7% of respondents believe that 70% or more of their customer base would choose dealership over brand, with a firm belief that the strength of its customer relationships, the need for service quality with increasingly-complex equipment, and the convenience of a nearby relationship overshadow the commitment of a customer to a particular manufacturer.
Mike Gottselig of Webb’s Machinery says, “75% of them would stay because most of our customers love our dealership and understand (and accept) our weaknesses as well, and would continue wanting to do business with us.”
Reflecting similar confidence in dealership-over-manufacturer loyalty was Shephard, noting a consistent relationship between customer and tech can pay dividends as innovations keep shifting the industry.
“I believe that 80% would choose to stay with us and purchase whatever we would represent in the compact equipment business,” Shephard says. “As this equipment gets more and more advanced in technology, farmers and dealers just have to recognize that they really need each other more than ever.”
The 40-60% Group
Most respondents in this category, which accounted for another 34.7% of respondents, listed identical reasons from the more confident group as to why a certain number of their customers would stay. The only significant difference was this group believed the likeliness for farmers to pick brand over everything else was higher.
As Taylor Oakley, store manager of Quality Implement, puts it, service goes a long way, but availability of preferred parts is often the ultimate decision maker for customers.
“Though it would be a substantial transition for customers to move to a competitive brand, I believe our business is built on customer-dealer relationships,” he says. “We try to make sure they feel welcome and served well, but at the end of the day, they would have to travel elsewhere if we could not get the necessary parts needed to repair their equipment.”
Providing a similar response was Brian Matchett, marketing & and development manager at Piako Tractors. While customers must weigh the options of a major transition with the strength of dealer relationships, Matchett also points out that losing an OEM contract often indicates a red flag for a dealership.
“We believe the real number is 50%, as it’s a big ask for a customer to change a brand when its values have been instilled in some customers for generations, despite the relationship with the dealership,” Matchett says. “Generally, this situation only arises when a dealership is not performing and loses the brand to a better performing dealership. In this situation, the number could be 95% customer loss as they will go to the dealership that is motivated and does a good all-around job with the product.”
The 0-30% Group
The smallest representation by a slight margin (30%), these dealerships speak to their perception of high farmer demand. Transitioning to a new manufacturer can spark a strong sense of skepticism in the service-oriented industry of today, says Townsend of Young’s Equipment.
“We would lose roughly 60% from manufacturer loyalty and customers who don’t like the new brand, and then another chunk would go to the rival dealership for their experience level and understanding of the equipment,” he says. “Plus the customers that would be mad at us for losing the original brand, leaving us with 25-30% of our original base.”