When John Deere dealership group Midwest Machinery expanded with the 2022 acquisition of SEMA Equipment and Frontier Ag & Turf, it gave the company the opportunity to take stock of processes and look for improvements. Cory Ziegler, used equipment manager for Midwest Machinery, says the 3 organizations had different levels of sophistication when it came to pricing used equipment. Two had very well-established centralized pricing processes with good reasons for doing so, while the other took a different approach. 

“The ownership places a lot of value in having location managers be able to make decisions and do things quickly and seem fairly small, like we're an intimate part of the community,” Ziegler says. “ When you started looking at the financials, there were also some very compelling reasons why we needed to have some consistency in pricing. You can't have 3 twin-sister combines that are $40,000 apart.”

That’s when Ziegler became part of the dealership’s 2.5-person centralized pricing team — 2 full-time members of which Ziegler is one and a third person who is also responsible for managing shortlines. Ziegler shared his experiences and tips during his presentation at the 2023 Dealership Minds Summit.

Key Team Responsibilities

Ziegler says the pricing team’s first order of business is doing initial pricing for a piece of equipment, saying “it's a real waste of money when you don't have it right from day one.” 

Next, he says the team focuses on accuracy in reconditioning. “Oh my gosh, was there a whole divergence in reconditioning policies and expectations,” he adds.

The team also notes that not every machine should be treated the same way. That led it to creating individualized marketing plans. “When you're looking at a 10-year-old tractor, 5-year-old tractor or 1-year-old tractor, they're going to have different reconditioning needs,” Ziegler says. “And maybe the marketing plan — not everything needs to stay in inventory for 12 months. There might be some inventory that is fast-tracked to the wholesale side and goes to some of our inside sales folks to wholesale out immediately.” 

He adds that other activities are also tailored for the specific machine. “Is it going to go through and get a full detail? Is it going to get a headliner?”

One challenge the pricing team faces is the dynamic marketplace and its effect on equipment pricing. As a result, Ziegler says the team works hard to stay on top of pricing opportunities and repricing accordingly. 

“Every time there's a manufacturer price increase, like everybody, you put money in the bank, you ride the wave,” he says. “Now we're riding things back down. But we’re continuously trying to maximize every month that machine is in inventory, making sure to the greatest extent possible that there's a dedicated team making sure it is priced right when you look at it on the market.”

The pricing team also works on equipment acquisition — evaluating opportunities and looking at making qualitative improvements in the equipment mix. “When there are opportunities to bring in something, even with inventories growing like they are now, there are still some things that make sense to take advantage of,” Ziegler says. “And that may allow you to liquidate some less-desirable stuff.” 

Added Value

The pricing team adds additional value to the dealership, as well, Ziegler says. One way is by helping manage risk, which sometimes means taking a certain amount of flack. 

“At times, you're going to be the one who's accused of predicting 10 out of the last 2 ag economic downturns, but somebody's got to be watching out for icebergs,” he says. “That's what we do. And we feel that with this, by looking at all of the incoming evaluations, we can react more quickly, and we're more forward-looking rather than pushing the easy button and looking at all the overpriced stuff on TractorHouse.com that hasn't sold.”

The team also has the goal of optimizing balance and margin-to-turn, which Ziegler says is about knowing where you can get it and where you can't. “Not everything is going to be priced with the same temperature, if you will: red, yellow or green,” he says. “Certain things are going to be hot, and certain things are going to be cooler. And then consequently, their pricing strategies internally within the dealership aren't going to be the same.”

Opportunities to Fail

According to Ziegler, the equipment prices coupled with their complexity makes it easy for the pricing team to not only be wrong, but wrong in a significant way. “The John Deere 4440 used to have 12 different option codes,” he says. “Now that same size tractor, I think there's about 48. It'll make your head spin in a hurry how differently some of these tractors can be specked — low, medium and high. The opportunity to be wrong is very significant. 

“Looking at 20 large ag units a week — which is pretty easily done in our system — if you're wrong by $5,000 on either the reconditioning estimate or just market valuation, you’re off $5 million in a hurry.” 

To mitigate that, Ziegler says the pricing team still asks location managers and salespeople to contribute numbers to the discussion. “We don't want just automatons out there delivering a centralized number,” he adds. “We very much want the salesperson to be invested and understand where the number is coming from.”

Not Compulsory Yet

Ziegler says Midwest Machinery’s centralized pricing approach isn’t completely compulsory. Every salesperson isn’t required to buy into it, although he adds the company is moving more toward it. 

“As part of their account plan, in order for the salesperson to be insulated from market move-downs — normal depreciation inventory write-downs — he or she has to have the pricing team's valuation from the point of that machine being loaded,” he says. “Without that, they are at risk as far as inventory write-downs. There's a bit of a carrot-and-stick philosophy right now. We're erring a little heavier on the carrot side, but we may have to bring out the stick every now and then.”