There’s no doubt that the ag market is changing. Whether it’s growing use of equipment leases, farms consolidating, farmers retiring, “new” buyers turning to used equipment, or some other trend, every dealer is facing a different market than they have in years past.
David Parker, executive vice president of FLM+ and a keynote speaker at the Versatile Dealer meeting in February in San Antonio, encourages you to ask yourself these 3 questions: What? So What? Now What? “What’s going on in the marketplace? The ‘So What’ is what are the implications of some of these trends? What does that mean we need to do in our dealerships to face those changes, those issues, those trends that are going on in the marketplace. And then the ‘Now What’ — what do we need to do?” he says.
“No matter what kind of business you are, you do always need to think about your limitations. We can’t do everything. One of the things I always tell folks in planning is you can do anything, but you can’t do everything. So you have to think about where you start. You really do need to think about what you can do and maybe what you can’t do.”
Identify the Trends
Parker encourages dealers to go through the exercise of identifying the trends they are seeing in their local markets, both positive and negative, that are going to impact their business in the next 3-5 years. As listed above, some trends currently impacting the farm equipment market are more customers leasing equipment, particularly younger buyers; lower commodity prices; more retirement at the farmgate and farm consolidation; new buyers becoming used buyers; and other manufacturers dropping their prices.
David Parker is an executive vice president of FLM+. He has spent his entire 35-year career helping individuals and organizations improve their performance. Before joining FLM+, he was an original management team member of ABG/Adayana. Specializing in strategic planning, sales and marketing, financial management, value-based solutions and branding initiatives, his focus is on the people side of the business. Parker is a nationally known speaker and facilitator, having delivered over 3,000 presentations, workshops and planning sessions for small, large and Fortune 500 companies. His focus is on the entire agribusiness value chain with a special emphasis on ag retail.
One trend, Parker says, will have the biggest impact on farm equipment dealers. “Across North America, absolutely the biggest impact for all for us at every level of the value chain is that there are fewer customers who by definition are larger. Because that control is in fewer hands, we actually have more competition, not less,” he says.
Parker says with the shrinking market it’s essential that dealers have a full-time and dedicated focused selling system. “Not only is it to grow the business but mostly it’s because there are fewer and fewer folks to sell to. If we see them once a month or once every 3 months and our competitors see them once every 3 weeks in some way, shape or form, frankly they have a better chance. It doesn’t mean it’s going to work, but they got a better chance, it’s just that simple,” he says.
The number Dow-DuPont is using as it relates to farm consolidation is 75% of the farmland in North America is being farmed by 12% of the farmers. The consolidation in the marketplace is what Parker calls a market reality. “For the U.S. it’s projected that 91 million acres of farm ground out of roughly 900 million acres is going to change hands in the 5 years from 2015-19,” he says. “But the real challenge is who’s working the ground, right? Who’s going to have the control of the ground. So consequently, who’s going to be buying equipment to farm the ground? This becomes the issue. I know a particular dealer in your space that makes sales call in Delaware, even though his dealership is in Nebraska. Why? Because that’s where the guy who’s farming it is coming from, that’s where his headquarters is located. Just a little 100,000-plus acre farm, and, it has 130 landlords. If you ask him, ‘What do you do?’ He’ll tell you landlord management is his job.”
But, if you can take something off that customer’s plate and make his life easier because you understand his equipment needs and his business, you will add incredible value in addition to your equipment, Parker explains. He also adds that looking at the trends impacting your market isn’t about good or bad, it’s about reality. “We can debate all day if it’s good that we’re getting consolidated. That’s not for us to debate. It is what it is,” he says.
“We can debate all day if it’s good that we’re getting consolidated. That’s not for us to debate. It is what it is…”
This exercise is something dealers should repeat with their staff. “That’s what good professional dealer managers do; they think about where the market is headed, where is it going to be,” Parker says.
Once you’ve identified the market trends your business is facing, you need to tackle them head on. “Confront reality. Think about the market as it is, the world as it is, not as you want it to be. Do what must be done, not what you’d like to do,” Parker says.
Regardless of your market conditions, standing still is not an option. Parker says, “Growth is not an option. That is your mantra to live by in 2018 through 2023. Staying the same is death. Are your costs going to remain the same? Probably not. And this is true for every business. Think about your competitors and what you see them doing. They certainly believe this to be true as well. Would you agree? Now there may be an exception here or there, but those folks are usually not super long for this world.
But how do you grow? Parker says there are only a few choices. First, sell more to the customers you already have. And that means not only selling more wholegoods, but also sell more parts and service. “You absolutely have to take a more holistic approach to the customer,” he says. “Think of it this way. The more you sell them, the more they need you, and the harder it will be to throw you over.” The other choice is to identify and cultivate new customers.
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• Best Practices for Success in a Competitive Space
In order to grow, as a dealer you must have a profitable annual growth goal. You need to have an idea of what success looks like. “If you don’t know where you’re going, how are you going to know how to get there? I deliberately said profitable growth. You get to decide what that number is. But I’m very sincere about what you expect this business to look like at the end of 2018, the end of 2019, the end of 2020 and beyond. One of the things that I can assure you is your competitor [brands], and their dealers, have specific metrics they’re shooting for. I’m going to encourage you to state your objective. Where do we want to take this business,” Parker explains.
Parker suggests dealers do the following exercise and to involve others at the dealership. Complete this sentence. “We will be successful in 2018 if …” Take it one step further and ask, “We will be successful in 2023 if …” He also recommends dealers ask this exact question to their farm customers because it could reveal issues that weren’t on your radar.
Parker shares this anecdote. “I was with a salesperson making a call and we asked the customer a version of that question. And here was the farmer’s response: ‘Well it all depends on the Shane factor.’ I don’t know about you, but what the heck’s a Shane? Shane was his kid! His kid was a freshman in college. He said, ‘You tell me if Shane is coming back to the farm?’ Of course the sales guy said, ‘Ah, I don’t know, you’re his dad, what do you think?’ They were running about 3,500 acres. He said, ‘If Shane comes home, at minimum I think this farm’s going to be 6,000 acres. If Shane doesn’t come home, it’s going to 1,500 in a heartbeat because I ain’t working that hard.’”
Questions to Consider When Evaluating Your Place in the Market
- What market influences are going to most impact your business’s success?
- What are the strategies that we need to employ to help us prepare for some of the emerging opportunities in the marketplace?
- In what ways are we vulnerable and who are we vulnerable to? Is it somebody else’s leasing program? Is it somebody else that’s really aggressive on the sales side at the dealership level?
- How can we add value or remain relevant and how do we leverage our best assets? What is our core asset? What are the things that we are absolutely best at? What are we really good at and how can we do more of it?
Parker adds that what successful means will vary from dealer to dealer and customer to customer, but you have got to ask the question. Once you know what your growth goals are, you need to determine what your strategies for that growth and success are. They can be broad strategies, Parker says. Strategies could include improving communication, both internally and with customers, growing your employees, expanding your product portfolio, diversifying the business, among others.
“One strategy could be to build good customer rapport. What that really means is having a very specific set of targeted customers that you will deliberately spend time with. This isn’t everyone. It’s that targeted set of customers that you can spend enough time with so you have the time to build the rapport.”
Parker suggests dealers ask themselves which current accounts and or/prospects are going to be critical to their success over the next 3 years. “As you look at your own personal market, what farm operations and businesses are going to be critical to your success over the next 3 years. Write them down, and there should be at least 5. There’s no limit, but at least 5. If you can’t name them, you just found a growth strategy challenge,” he says. “You may well have some great customers that you want to protect, because I guarantee they’re your competitors’ targets. And who of your competitors’ businesses do you want to make sure that you go after in a positive and profitable way. This is strategy folks, this is about intentional growth, who’s going to help us get there.”
After identifying the customers that will be critical to your growth, Parker says to write down what their total spend in the equipment space could be. That number should include wholegoods, parts and service.
Differentiate the Business
With a shrinking marketplace, dealers need to ask themselves, “How do we show up differently in the marketplace?” A long-standing definition of the differential advantage, according to Philip Kotler, marketing author and consultant and the S.C. Johnson Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University, is “A benefit or set of benefits that meaningfully and favorably distinguishes you from your competition.” To that definition Parker adds “and for which they will pay.”
“It’s cool to be different, but it’s really only cool if they’ll pay you for it. Fair statement? So differentiation. What makes you different in a very crowded market, because as a producer, as a customer, I frankly have a lot of choices in North America for horsepower. You got a lot of places, a lot of colors, a lot of different types of dealers that I can get equipment from,” he says.
Parker lists 7 ways dealers are trying to differentiate themselves. Look at the list and see which one or which combination of them best fits your dealership.
- Best Quality
- Best Service
- Best Value
- Best People
- Most Customizable
- Most Convenient
- Most Advanced Technology
With all brands of equipment becoming increasingly equal in terms of quality and options, one of these really doesn’t separate you from the pack any more. Best service is a differentiator a lot of dealers are using in the marketplace currently.
“In doing strategy work with various dealers of various sizes and types, I have yet to run into a dealer in 38 years that says, ‘You know frankly our service is pretty crappy.’ Then I go out in the marketplace and talk to customers and find out that maybe they should have a sign up saying don’t come here because our service is pretty crappy,” Parker says. “But everybody says no, that ours is the best service. My only comment in bringing that to you is this: if you believe that you can win in the service space, tell me why you’re different.
“As you look at your own personal market, what farm operations and businesses are going to be critical to your success over the next 3 years?…”
“What’s different about your service. Is it the quality of your technicians? Is it the quality of your diagnostics? What makes you different and better? Is it the amount of parts that you have available, is it your location, whatever it might be, you need to tell me why. Please don’t just hang your hat on “we’ve got really good service,” because you’ll sound just like everybody else. What we’re talking about is differentiation.”
Parker also says nearly everyone will say their people set them apart. And while in his experience it’s not always true, he urges dealers to keep investing in their staff and training them. “Make sure they are outpacing the knowledge of the customer base,” he says.
Finally, after you reflect on where you are as a business, what your strengths are and what sets you apart, Parker says to ask yourself, “What do we aspire to do?”
“That’s what the best organizations do. They think about what they could be. I want you to ask yourself, how do we collectively show up differently in the marketplace?”