Come see us at SOLIDWORKS World 2017 from Feb. 5-8 at the Los Angeles Convention Center. We’ll be onsite in the Partner Pavilion providing live demonstrations of Documoto, and our team will be available to answer your questions.
SOLIDWORKS World is a 3-day conference where attendees can learn about the latest technologies and select from more than 200 breakout sessions on topics ranging from design automation and electrical design to simulation and product data management.
Stop by Digabit’s booth (#200) in the Partner Pavilion and learn how to:
Streamline publishing with SOLIDWORKS – Composer – PDM – Documoto
Convert BOMs and illustrations into structured data for search and re-use
Enable online sales using Documoto Cloud Storefront
Over 20 years ago, the Harvard Business Review published a commentary by the CEO of Caterpillar, website Donald Fites. The article is titled, “Make Your Dealers Your Partners,” and it discusses foreign competition, the importance of after-sale service, and the huge role that Caterpillar’s dealers play in maintaining Cat’s market leader position. It’s illuminating to read this decades-old perspective and realize that, with all our technology and the incredible growth of global trade, not that much has changed in the fundamental distribution strategy for heavy equipment OEMs. While some may view these arrangements as antiquated or archaic, there are many good reasons why OEMs choose to maintain traditional dealer networks as their primary distribution channels.
Over the past several years, all the business pundits, management consulting firms, and enterprise software sellers have jumped on the same bandwagon when it comes to the future of B2B sales…
Younger buyers are digital natives, and they want to buy online
Multichannel (or omni-channel) sales are necessary to retain or gain market share
Global competition is commoditizing products of all types at a faster rate
Digabit understands this mentality. Many manufacturers are interested in direct-to-consumer sales, similar to a B2C retail eCommerce environment. It means customers can order any time and anywhere, using any payment method, with a choice of shipping alternatives and other buyer-friendly options.
This idealized business model appears to cut out the traditional roles of distributor and dealer. In the hypothetical model, customers know exactly what they want, and they want to satisfy their needs at the lowest cost, with the least effort.
But for manufacturers of complex, expensive equipment, this “ideal” is a mirage.
Whether a company makes trucks, industrial robotics, or a 200,000-lb. wheel loader, the real world of capital equipment sales and after-sale service and support is a lot messier than the ideal scenario presented in a consulting firm’s strategy recommendation. Some manufacturing verticals still receive huge value from the physical presence of a dealer network.
Benefits for OEMs that build strong dealer relationships
Dealership employees are the OEM’s human face, for everything from warranty management to promotional collaboration. It’s true that everyone gets frustrated with phone support, help desks and impersonal customer service. But we’re clearly not at the point where apps and artificial intelligence can replace those functions…and some people still prefer face-to-face communication.
In spite of the hype about drone delivery and other futuristic fulfillment methods, having a tangible product in inventory within a reasonable driving distance is important to some large equipment owners.
Nobody aside from the OEM knows as much about products and how they’re used as dealers who work with actual owners and operators every day. From providing service and maintenance, to cross- and upselling other OEM products, a great dealer’s product knowledge is still more relevant and accurate than online sources.
Customer loyalty and retention are highly influenced by dealer performance. Rather than being archaic artifacts, dealers provide assurance for buyers who spend millions on equipment. Does anyone want to buy a $1,000 part for a $500,000 machine from an anonymous website? I don’t. That type of sale still requires a level of trust and accountability that you won’t get from slick websites or one-click processes.
In short, the OEM-dealer relationship is neither dead nor dying. The model needs some refinements that are readily achievable by modern technologies. For example, OEMs need better visibility into dealer activity and inventories. And dealers need better communication tools and higher quality product information from OEMs. Technology is poised to tighten and strengthen OEM ties to their distribution channels, rather than alienating—or outright eliminating—their most effective support system.
Most of the companies we work with here at Digabit rely on distributors and dealers to get their products in front of customers. This creates multiple layers between the manufacturer and consumer, leaving OEMs with little direct access to their end users.
As a result, maintaining strong dealer relationships is vital to manufacturing success. If the dealer isn’t happily engaged, the customer is unlikely to be excited about or even interested in the manufacturer’s product.
So how should manufacturers treat dealers in order to ensure that the end user will feel engaged with the brand?
A couple years ago, Gallup aimed to find the answer to strong supplier-distributor relationships, noting that the most effective ones were generally those in which manufacturers treated dealers, not as employees or customers, but as partners.
Let’s look at a few ways manufacturing executives can make that partnership work and optimize dealer performance:
1. Offer Exclusive Territories
Occasionally, manufacturers try to add more and more outlets for their products as a way to fuel growth. Unfortunately, as The Wall Street Journal explained, this strategy often leads to having too many dealers competing against each other for the same customers.
For a more dealer-friendly – and, ultimately, manufacturer-friendly – approach, offer your existing dealers larger, exclusive territories in exchange for greater promotion and display of your products. This might require cutting off weaker dealers so that you can focus your energy on high performers and ensure the market isn’t oversaturated or too competitive.
2. Improve Training Resources
While manufacturers have limited control over their dealers’ management policies, they can share best sales practices and training resources for a mutually beneficial relationship. Since the dealer’s salespeople serve as the OEM’s brand ambassadors, training can be a critical tool in helping dealers attract and retain top talent, turning their sales force into brand champions.
Motivated and well-trained dealers are better equipped to help customers understand the advantages and unique performance qualities of manufacturer’s equipment.
3. Setup One-on-One Support
To truly build and deepen manufacturer-dealer relationships, it’s helpful to have a point person. Arctic Cat, for example, promises its dealers a high degree of personal attention from a dedicated District Sales Manager and back it up with a 24-hour response guarantee.
Not only can field sales representatives maintain regular communication with dealers and keep them informed of new products and resources, but dealers will have the added benefit of knowing exactly who to contact with questions or feedback.
4. Help with Repairs
When products break, dealers need instantaneous access to part and repair information. By providing a centralized, electronic portal of repair manuals, instructional videos, maintenance advice, and parts information, OEMs can help dealers service their customers’ equipment quickly and efficiently.
Simply making these resources readily available will increase dealer productivity and profits and generate high customer satisfaction.
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While the aftermarket used to be an afterthought, leading OEMs have started to recognize the effect of parts sales on their overall financial health.
Not only are these sales less cyclical, but also they also frequently generate more profit and revenue than original equipment sales. According to Industry Week, sales from spare parts comprise 40% to 60% of total manufacturer revenues.
This is no surprise, considering American businesses and consumers spend approximately $1 trillion every year on assets they already own.
But the challenge – and it’s a formidable one – lies in devising and adapting a spare parts sales plan to ensure your dealers and customers buy OEM parts to help maximize profit margins.
Let’s go through a few of the ways you can drive growth, encourage customer retention and create a competitive advantage with your aftermarket strategy.
It’s All About Loyalty
As we’ve mentioned before, success in the aftermarket depends primarily on catering to your established base of customers. Delivering impeccable customer service and emphasizing the values you share with your customers are surefire methods to build customer loyalty.
Maintaining your customer base also depends on the durability of your original equipment. Every equipment replacement is an opportunity to lose your customers to a competitor.
On the other side of the coin, however, Sheila Brennan, program manager for Smart Service and Aftermarket Strategies at IDC Manufacturing Insights, cautions that “OEM executives must keep in mind that increased reliability of equipment is a double-edged sword when it comes to customer intimacy. Fewer service events mean fewer opportunities to create brand loyalty and form a customer relationship.”
For your aftermarket strategy to work, you have to find the middle ground between unreliable and over-durable. Providing extended service warranties and discounted equipment upgrades can help reduce the likelihood that customers will switch to competitors.
Lock In Your Customers
Third-party aftermarket parts suppliers will almost always win when it comes to price, so OEMs have to give customers a compelling reason to go with their parts. While this can come in the form of greater quality assurance or a better service experience, the most foolproof way to ensure customers will choose your part over the competitor’s is to give them no other option.
Patented part designs, service expertise, convenient replacement kits or warranties are all proactive offerings that lock customers into your aftermarket. You are supplying something they simply can’t get anywhere else.
Predictive analytics company Forio offers the basic example of a patented three-prong stapler and staples. While the original product – the stapler – itself may not have a huge market, in order to derive any value from it, every customer will also need to buy a few boxes of three-prong staples on a repeat basis. Over time, sales of staples will far surpass sales of staplers.
The Importance of Technology
To manage and grow aftermarket parts sales effectively, manufacturing executives have to put the proper tools in place.
Warren Smith, global industry director at Infor, suggests that you utilize fast, agile technology that is specialized for the equipment industry. “It will need to span the entire lifecycle of the equipment, from manufacture to aftermarket service, in one integrated solution.”
Incorporating manufacturing-specific products like Documoto into your aftermarket mix empowers dealers and customers to make real-time decisions based on accurate information and order the spare parts they need in a fast, convenient and electronic way. This enhances expert technical support and delivers unprecedented value to your customers, boosting spare part sales and driving repeat business.
Learn more about using Documoto as an integral solution for aftermarket parts sales.
At Digabit, we spend a lot of time talking to our customers, and I’ve found that one of the main reasons manufacturers love Documoto is that it creates a rich aftermarket experience for their customers and their dealers.
Manufacturers use our solution to enhance coordination between their warehouses and dealers, update and distribute accurate parts information in a timely manner, and, above all, give their customers an easy way to identify and order the right part. READ MORE