It is clear that the biggest change manufacturers were making in their early-order programs involved starting dates — with several noting that it's earlier than ever before. Several manufacturers are initiating programs 30-60 days earlier to allow producers more time to make decisions this year. For one, AGCO reports that a better understanding the timing of the customer's purchase decision, as well as manufacturing constraints, is driving the timing and length of a program.
Other than an early calendar, other changes being implemented by manufacturers include:
- Increased advertising in advance of pre-sell periods.
- Newly planned dealer conventions as a forum to explain the urgency on pre-sells.
- Freight allowances to reward certain volume orders, and in some cases, free freight on larger orders.
- Increased floor-planning options and delayed payment terms.
- Additional cash discounts.
- Elimination of drop-ship charges on smaller orders.
- Aggressively priced customer financing programs.
- More widespread sharing of production forecasts with dealers and their customers.
- More reasonable order quantity requirements for stocking dealer status.
- Far longer interest-free floor-planning to protect the dealer if a customer later backs out of a deal.
- Additional incentives and terms on models which may see the greatest in-season demand.
"The general strategy guiding our pre-sell programs has not changed significantly over the last 18 months," says Jim Walker, Case IH. "In general, our dealers and their customers should see the best pricing and finance advantages available for retail commitments made during the pre-sell time period, as those preorders are built to a specific customer's specifications. That period generally falls approximately 1 year prior to the anticipated season of use for the product, although that may differ slightly based on the unique requirements of a particular product line.
"What may have changed for the better is our ability to effectively put that strategy into action. We've worked closely with the Case IH North American Dealer Advisory Board to refine our programs to work in the field as intended."
One motif highlighted by manufacturers was that orders with a customer's name on them would be the first to leave their factories. "Moving retails up ahead of non-retailed units is a proactive move we made late last fall," says Greg Brenneman, Great Plains Manufacturing. "Dealers need to order early and most importantly, retail early. Those dealers who are pro-active in pre selling will get their units."
DuraTech also sees traction behind this concept. "We offer a prepay discount where if the product is paid for prior to leaving the plant, the dealer gets an additional discount," says DuraTech's Goehring. "We are seeing more products leaving this way."
Tricky, But Here to Stay
Despite the benefits, not all manufacturers are excited about early-order programs in the current landscape. Demco has not chosen to take orders for the 2009 season at this time, and hasn't yet designed its programs. "We will wait until the last minute to present these programs due to the volatile nature of our input costs. The market is under huge pricing pressures at this time from commodities such as steel, tires, paint, fuel and transportation. If these markets continue to be volatile, it will be difficult to design a program that will encourage early participation."
Still, the market is forcing a change in behavior — of farmers, dealers and manufacturers alike.
"The key issue for us is commitment and it works both ways," says Kuhn North America's Frank O'Brien. "From a manufacturer standpoint, we are trying hard to honor the promised dates given to dealers who are committing by placing orders early, stocking a wider selection of products and soliciting orders from their retail customer base early. These dealer orders take precedence over impulse or unplanned orders received from noncommittal, non-stocking dealers.
"Of course, more advantageous pricing structures, out-of-season cash discounts, longer payment terms for stocked products, and attractive out-of-season retail financing programs are part of the package, and help dealers in their marketing efforts."
- Equipment Supply to Remain Tight All Year
- Early-Order Concept: A 'New Norm' for this Industry
- Dealer Tactics & Approaches That Work
- Climate Bringing Change to Manufacturer Programs (currently reading)