Vol. 1 No. 2

The days of the white elephant hunts are gone and so is the volume of contractors and material producers standing in line to buy new equipment.

There remain a handful of healthy niche markets, product lines and geographic regions, but the traditional “bread and butter” high-volume markets across the U.S., such as residential and commercial construction, concrete, excavation/earthmoving, asphalt, rental and forestry, have for the most part suffered serious declines. Offsetting these markets are those tied to energy, assisted living, public works, mining, medical, utility, underground construction and green-driven opportunities.

North American and European manufacturers selling into the U.S. must now contend with an even stronger challenge from the new wave of low-price OEM manufacturers from China, India, Russia, Brazil and Eastern Europe as they begin to take hold around the world and especially in North America. 

Price Opens Door To New Equipment Wave
With construction and fuel costs rapidly rising and the market continuing to soften, price becomes even more attractive. As a result, companies such as China’s two largest heavy equipment manufacturers are aggressively pursuing the North American market as we speak. These are Zoomlion and XCMG. Others are quickly following, or as in SANY’s case, have taken major local commitment steps in a relatively short period of time. 

Price is their yellow brick road into the U.S. market as it has been for them in Latin America over the past five years or so. And it has been proven, as with the Japanese and Korean manufacturers in the late 1980s, that extremely favorable pricing can help contractors re-prioritize their traditional purchasing criteria and/or discount the value of many important “must-have” performance features and benefits.

Price Buyer Numbers Climb
In fact, traditionally within the U.S. market BMG estimates that approximately 30% of the contractors—large and small—have always based their buying decisions primarily on price. These contractors typically view their equipment asset management program in the shortest view possible. Can they expense new equipment over one job, two jobs, one year or two years? Can they rent or lease their light and heavy equipment? These contractors typically under value advanced technology and minimize the importance of long-term performance, ergonomics, advanced safety features, and timely service and parts support since they expect to turn that equipment over as quickly as possible.

Given the condition of the U.S. construction market today, BMG believes that 30% is rapidly climbing and could reach as high as 50% or more as contractors struggle to balance rising costs in either a very competitive bidding environment or living within the contracts they were awarded before fuel, steel, tires and raw material prices began skyrocketing. Supporting this fact is the level of discounting employed today by U.S. manufacturers.

Two Critical Landscape Changes
Now let’s bring this home. There is probably no better time in recent history for the Chinese, Indian, Asian, Russian, Brazilian and Eastern European manufacturers to make their move into North America. And, without a doubt the traditional independent sales channels know this and are beginning to capitalize on this as quickly as possible. 

Case in point.  Zoomlion, the second largest heavy equipment manufacturer with a long list of very diverse equipment, inked a deal in January with U.S. crane dealer Lewis Equipment Company to represent them throughout North and South America in wheeled, mobile and crawler cranes. As a master distributor, Lewis Equipment is setting up eight to 10 dealers in their territory to supply local markets. The company also represents China’s Yongmao tower cranes and Hercules construction hoists manufactured by China’s GJJ.

Lewis Equipment is not alone. Independent equipment dealers are certainly gravitating to representing these low-price manufacturers while simultaneously selling major brands. These brands typically sell to the top half of the contractor base—those who value technology, performance and support. Given the shrinkage in the size of this group and its reduced appetite for new equipment, success and quite possibly survival requires serving both levels of contractors. This dual-brand, high-low price dealer strategy is occurring at a faster pace than many people may realize. And, it is occurring throughout all types of equipment—large, small and light and even includes heavy processing equipment with major wear issues that are used in road building, aggregate production and mining.

In addition to this major sales channel shift, many U.S.-based manufacturers that sell primarily on a price advantage are either now or will soon be caught in the middle. Can they survive long-term by providing enough value added to carve out a customer base among those contractors that will be drawn to the new wave of lower priced competition?  We all probably agree that even with 100% outsourcing it would still be swimming upstream. That could easily explain why some major conglomerates that spent years acquiring troubled companies and competing on price are now selling off those companies and focusing on their premium brand product lines.

The market may eventually be divided between premium manufacturers and low-price suppliers from countries with distinct labor advantages and government export incentives. It is looking more likely as well that we will see master distributors and dealers offering both premium and discount brands simultaneously much like what we see today with the automotive dealership model.

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Expanding into new markets, finding new opportunities or just growing your business requires well-synchronized sales teams and sales channels. The level at which a manufacturer communicates and shares information with its sales channels can have a major effect on how well it does, especially in an unstable market. In a recent e-survey conducted by Industrial Group Performance of more than 500 manufacturers and dealers, results were gathered about what can happen when a lack of information is shared in working relationships. These problems have a much bigger impact on the profitability of manufacturers and dealers than most people realize. The study showed that while information is available, simple access needs are not met.   

% Average Lacking Specific Information

• 81% do not have access to high-quality industry/market information
• 75% do not have access to high-quality product demand information
• 61% do not have access to high-quality product availability information
• 64% do not have access to product tracking information

Results by Industrial Group Performance

Consider how this level of information can help a sales channel help you. Facilitating information can help stop the guessing-game to critical business decisions such as forecasting and inventory management.

Are You Presenting Information Interactively?
Many dealer portals are designed as a static site, providing information to the dealers. Unfortunately, many manufacturers do not realize the benefits of making this a reciprocal communication site. Much of your field information comes from territory sales managers; this not only takes time on their part, but also requires many steps to get the necessary information to those that need it. With the electronic capabilities available today, the communication process can be much easier. Real-time information can be collected; for example, by utilizing a forum or online surveys allowing engagement of all parties through online group discussions. 

Scenario: Imagine learning about a competitor’s price increase or decrease as soon as it hits the market by reading the online dealer forum. Immediately, you initiate a webinar with all territory managers and discuss the potential impact on your company as it relates to sales, margin and costs. A strategy is created within hours of the announcement and implementation begins, positively affecting the business plan and impact on your business. 

Market demands require effective, real-time communication that is easy to use. Whether you learn of a competitor’s newly launched product or market needs shift due to events beyond your control, utilize a tool that sponsors fast maneuverability in your business and reaches the street quickly.

To foster this type of communication, it’s important to first create the platform, encourage the use of the tools, and also use them empathically until communication becomes a habit in the eyes of your company and dealers. Measure who is using it and understand the demographics. Market the dealer portal to them and be sure that relevant evolving information is provided and not just one-time use information. Once the benefits are experienced, they will feel empowered as messages are being heard and information is gained on both parties’ behalf. 

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All companies have been affected in some way by the downturn in the economy. The biggest question is: how will your company handle the slowdown?

One of the best ways to beat the slowdown is to uncover new opportunities that expand your customer base, such as niche markets, complementary products, possible acquisitions and/or international expansion. Historically, companies that focus outward during hard times have performed better in the long run. Since these companies never lose momentum or key personnel, they are more responsive when demand picks up and can provide better delivery and service.

Evaluating which opportunities are best for the company requires proper research. It is nice to know how big a market is and who the players are, but statistics alone can’t provide a complete picture. The proper research is key to unlocking these new opportunities. Companies need to uncover street-level information for the industry, market or country that tells:

• If it is a mature market and if there is room for another player
• The long-term outlook for the market
• Key emerging trends, products or technologies that will affect the future
• The primary channels used to sell goods and services, and any special requirements needed to be successful within these channels
• The product price points and standard profit margins for companies and dealers in the industry
• Any trade barriers that will stop you from entering the market
• What the competitors may do to maintain their position in the market, and who the best competitors are to take market share from
• What the best market strategy could be

Without the proper research, a company lacks direction and will make decisions based on assumptions and hearsay versus fact. It may spend money entering markets with below-average profit and little market opportunity. Good research helps a company determine how long it will take to become successful in the new industry, market or country, and will help align marketing, sales and the channel—yielding greater profit.

Street-Level Research
True street-level research goes beyond statistics and information received from standard check box or rating surveys, either completed by the field sales team or sales channels. The goal of street-level research is to have open discussions with the dealers, customers and other industry experts—rather then just asking questions. This interaction allows both parties to add to the conversation and provides several deeper levels of information. When done correctly, street-level research not only helps the company understand the industry, market or country, but once completed and analyzed, the path to successful entry becomes clear. 

Here are some ideas of the people that should be contacted when conducting street-level research.

• Dealer principals and sales managers can provide good input on:
• Evaluating the product features and what affects their purchasing decisions
• What sales and financial programs and support it would take for them to successfully carry your products
• What profit margins they need versus what customers are willing to pay for such products or services
• What they feel affects their customer’s buying decisions
• For service and parts-related opportunities, the dealer’s parts and shop manager should be contacted
• Contractors add real-world input to the research since they are the ones using the equipment in the field
• Magazine editors of key industry or country specific publications can provide a good overview and give input on the long-term growth opportunities
• Industry events such as trade shows and conferences provide a good non-threatening way to talk to different industry people to help gain additional information
• If you have any vendors that sell into these industries or to your competitors, they might be able to share current trends and/or problems that are happening in the industry

The people contacted should be a mix of those listed above, and should be from a broad geographical area to help uncover any local or regional differences or preferences.

The most valuable information will come from a well-trained staff that is given clear objectives and parameters in relationship to the industry, your company and its products. They can drill down and ask more valuable questions. Some competitive dealers and customers may not open up to your company’s staff because they are afraid of hurting the relationship with their current supplier. This is when it is good to have a knowledgeable third party conduct the street-level research. All dealers and customers tend to open up more to a third party because they typically feel safer in sharing details and thoughts on sensitive issues.

Once you have conducted street-level research properly, you can be confident that your company has all the information it needs to make a well-informed decision about any new opportunity—and it will know how to enter the industry, market or country successfully. Don’t let the economic slowdown get the best of your company.

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