Product support offers farm equipment dealers the highest gross profit margin if they can do it right. Farm Equipment editors Dave Kanicki and Jack Zemlicka cover how technology is shifting the farm equipment landscape and how dealers can take advantage of equipment support.
For dealers to stand out among the competition in this age of on-demand service, they need to have the tools and technology to provide strong, trusted product support to their customers. Farm Equipment executive editor, Dave Kanicki, and technology editor for Farm Equipment and Precision Farming Dealer, Jack Zemlicka, explain how new trends in service and technology are impacting farm equipment dealers and manufacturers as well as the farmers themselves.
Farm Equipment is a niche publication in agriculture, which primarily serves dealers working with production farmers. Dealers are playing an bigger role in providing a high level of service to keep equipment working: “farmers pay a lot of money for their equipment; they expect it to be running,” said Dave.
While the publication’s main audience is farm equipment dealers, manufacturers also pay close attention to dealer and industry trends highlighted in the magazine: “we help dealers better serve their customers, therefore they’re better serving their manufacturers.”
Under the Lessiter Publications umbrella, Dave and Jack manage Farm Equipment, Precision Farming Dealer and Rural Lifestyle Dealer.
Major Trends Shaping the Farm Industry
During our conversation, Dave and Jack highlighted four major trends shaping the farm equipment industry and dealers’ role in furthering those changes:
1. Consolidation of dealers makes mobile service more important than ever
Over the last 15 years or so, there’s been a gradual trend to consolidate dealers, meaning there are now fewer, but larger dealers than there were in the past. At the same time, farms are getting bigger and they require more service. With both dealers and farms getting larger, the demand for mobile service is more important than ever.
In order to meet growing customer demands, dealers need to have the strategy and technology in place to help diagnose problems remotely and to service equipment more efficiently. According to Dave, this trend is going to continue; dealers will get bigger and have more locations. And, they’re going to be pushing mobile service more and more.
2. Advances in technology shift the relationship between dealer and farmer
Jack, the technology expert at Lessiter Publications, said that as the industry shifts to a more digital platform, equipment will be more technological and farmers will rely on dealers more than ever. Establishing a strong relationship with the farmers they serve is so important for dealers today: “farmers rely on their dealer to be ahead of the curve and guide them through technical issues,” said Jack. “Think of it like a sensor issue on your car. Most people can’t fix that on their own. It’s the same thing with a tractor.” Dealers need to be the go-to people to resolve technical issues in order to maintain customers’ loyalty and business long-term.
And with these demands for technical expertise, finding technicians with the computer savvy to manage more high-tech equipment will be a constant challenge: “we still need our wrench turners, but increasingly technicians need to have technical skills. It’s very hard to find the total package,” they said.
3. Access to big data proves dealer value and supports stronger sales operations
In his Precision Farming Dealer article, “Turning Today’s Precision Tools into Tomorrow’s Profit,” Jack highlights some of the benefits of Big Data to improve dealer service and product offerings: “further connecting the dots between the data collected by hardware and its practical payback for customers could present a broader sales opportunity.”
Access to more data would show customers how their equipment is working for them. Dealers could use that information to prove the value of their products and services, and, in effect, support stronger sales.
4. Product trends like self-diagnostics and telematics make service more proactive
Telematics play another big role in how dealers and farmers engage with their equipment today: “with self-diagnosing technology, tractors can get in touch with the dealer and say, ‘this bearing is overheating; you better get in touch with your customer,’” said Dave. By the time the dealer gets to the jobsite and fixes the potential problem, the farmer might not have any idea there was even a problem with his equipment. Service becomes more proactive since the dealer initiates the service call and explains what the equipment communicated.
This sort of diagnostic technology allows dealers to be proactive about service: “a lot of dealers, especially on the precision side, are excited by the potential of having some of these remote diagnostic tools where they can monitor equipment and say ‘you’re due for service at this time,’” said Jack. “Telematics are emerging, slowly but surely.”
Farm Equipment Dealers’ Opportunity in Mobile Field Service
Farm Equipment editors recently published findings taking into account 40-plus years of data from the annual “Cost of Doing Business” study. In the report, Farm Equipment measured how current industry performance stacks up compared to how it was doing starting in 1970.
The results unwaveringly support service as a way dealers can expand profitability.
In 2014 service only made up 5.4% of dealer revenue mix from sales, a slight decline from the 6.2% it took in 1970.
But, according to the findings, while the overall percentage of revenue from service declined, “dealers’ gross margins from service grew steadily from 1970-2014 and have been in the 60-65% range since 2005.”
To summarize, service today makes up 5.4% of total revenue, but its gross margin is 61%. This is huge! Dave calls attention to these numbers, saying, “dealers are understanding that service is easily the highest value product they sell.”
Imagine if service made up 10% of total revenue sales. At 61% gross margin, that’s a huge increase in overall revenue. Dealers are wising up to the needs of the customers and, according to Dave, “the stage is being set with growing technology solutions for dealers to take advantage of service opportunities if they can do it profitably.”
How Dealers Can Set Themselves Apart by Focusing on Product Support
Dealers are seeing brand loyalty shrinking. It’s difficult today to differentiate yourself through your equipment; if it’s from a major manufacturer, it’s all good. Relationships and the ability to keep equipment up and running is the main differentiator today: “we’ve found that, more than anything, farmers are loyal to a brand if they like the dealer,” said Dave. “The equipment being equal, you have to set yourself apart, and dealers are trying to do that through service.”
Another factor to take into consideration with service is the huge demand for skilled technicians that exists today. With the increasingly technical skills technicians need and the growing challenge to find skilled technicians, dealers don’t want to waste valuable technician time sitting at a desk filling out invoices and paperwork when he could be out there fixing things and billing for it.
That’s where mobile and back office service software comes in. Dealers can use it to streamline and automate the maintenance and repair process to increase the number or billable hours technicians spend in the field: “if you can make it simple and quick for the service tech to invoice a customer while they’re still onsite, you make the whole process a lot simpler and faster,” said Jack. “They need to track time and the work they do in the field on a mobile device, so it doesn’t get to be the end of the day and they have to go back and figure out how much time they spent where and how much to bill, etc.”
How Manufacturers Can Support Dealer Service Initiatives
With such huge potential for equipment dealers to manage strong service programs, it’s in manufacturers’ best interest to help their dealers succeed. In addition to recommending or initiating a unified service management software initiative, manufacturers can help dealers succeed in service by listening and communicating.
According to Jack, with more training on new equipment and technology updates, dealers can stay ahead of the curve, explain new features to customers, and make repairs the first time.
Dave emphasized the importance of manufacturer communication with dealers. Dealers are the ones with boots on the ground. They know what’s happening and what their customers are talking about. To make the most of that valuable knowledge coming straight from the customers, it would behoove manufacturers to establish an organized process to capture dealer notes. This sort of two-way communication improves product over time because manufacturers are paying attention to what dealers tell them customers want.
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