Retailers in all industries understand that if they could pre-sell everything on their shelves or have customers order months earlier than they needed a product, business would be a whole lot more enjoyable. Ag equipment dealers say they've been trying to do just that for years, but until recently, farmers had little or no reason to plan major equipment purchases out more than 2 or 3 months in advance — if that.
It looks like this past year may have changed all that.
"Customers have been used to buying on their terms for years," says Foster of Birkey's Farm Stores. "They have been able to get most anything they wanted in a timely enough fashion that has not been a concern of theirs. No doubt, the recent upsurge in demand has changed that and while some customers have not fully adjusted to this, most are aware of the situation and know that they need to adapt if they want to purchase equipment in these times," he says.
Vacin Inc.'s Vavrina, adds, "Prior to this year, the primary customer benefit to ordering early was being able to get the best discount/incentive available. "In today's environment, the primary benefit is availability."
Most dealers attribute a "consumer" mindset to the difficulty they have in successfully selling early order programs. "Many don't believe it's their job to order early. Instead, they think it's our job to stock heavier," says Todd Channell of Farmers Equipment. "It will be an educational process to change this."
Anthony Clark, president of Clark Farm Equipment, Gilbertown, Ala., sees the jolt that farmers felt in 2008 as providing the impetus for change.
"I believe the situation will improve as more customers realize that you may not be able to stop by the 'tractor place' and get exactly what you need," he says.
But Mitchell of Mobile Ag & Industrial Supply thinks it will take more than 1-2 years of equipment shortages to get their attention.
"All types of customers are tough in this area; however, farmers resist change more than anyone. I think it will take a long period of short supply to open their eyes."
Meth of Colorado Equipment agrees. "They've had easy availability to equipment for so long that this is going to take more then just this year to change customer buying habits."
Changing the Dealer's Mindset
But some dealers acknowledge that changing the customer's mindset about early orders may be easier if they take a hard look at their own.
Bill Hawkins, Ag Pro Companies, Stuttgart, Ark., believes this just might be the case. "Are customers slow to change or are we poor marketers of early orders?" he asks. "Market conditions and prices are forcing all of us to reassess how we view early orders."
For example, Suchomski admits that he keeps "a lot more inventory than any of the neighboring dealers" Why? "It's never been easy for me to sell out of a basket or from a piece of literature," he answers.
Several dealers indicate that they believe that the current equipment shortage will probably last a year or two before the industry rights the ship. Mead of Deems Equipment is one that sees normalcy returning in the near term — or sooner if something unforeseen occurs.
"After this year's availability issue, and with orders already being planned for 2009, I can see this trend staying consistent for at least another year or two," says. But I still think that one bad crop year in the Corn Belt region could slow things down in a hurry, and decrease demand, causing equipment availability to get back to normal."
Miller of Trigreen warns that even if "normal" returns to the ag machinery industry, business as he's known it has likely changed permanently. He maintains that, "Changing the culture of both the dealer and the customer needs to be part of the process" because pre-selling has already become the real way of life for both retailers and growers.
EOPs are the 'New Reality'
For all the challenges they present, most dealers understand that EOPs are the wave of the future. Whether they like it or not, they are the new reality for buying and selling ag machinery. Impulse buying will not disappear, but for purchasing larger, more sophisticated equipment, it will be discouraged. Sales efforts will be directed to pre-selling for the dealer and pre-planning for the farmer.
Foster describes the direction in which Birkey's Farm Stores is heading.
"We, as well as our major supplier will continue promoting pre-sell programs as the best time to purchase and lock in not only the best pricing but the availability as well. When our customers purchase seed, chemicals, fertilizer and other inputs, those companies promote the fact that the earlier these items are purchased, the better the offerings will be. In the farm equipment business, we are slowly transitioning into this same mode of operation. Our customers now look to us more as consultants that are aware of their purchase intentions and rely on us to make them aware of the proper timing."
Challenges for equipment retailers in emphasizing this approach will remain, says Paul Bader of Bader & Sons. "We have been coaching our bigger customers for years about buying early to get the best deal," he says. "This is nothing new to them or us. But for the smaller farmers, this will be a big change."
But the biggest change may come inside the dealerships themselves and their approach to selling.
In Young's view, "Having reliable information about what the customer is buying and being prepared are the most important things when selling a customer equipment that he can't touch or see," he says.
Robinson of Friesen Equipment may best describe the transition between how sales were previously done and what it will take to succeed in pre-selling the early order programs.
"The salesman I replaced after he retired worked in the office 80% of the time. I am on the road 80% of the time finding out what my customers need, supplying them with literature to review, and working up sample quotes for budget and planning purposes. I need to stay in touch and keep them aware of early order programs when they're released. There is a fine line between nagging and being a nuisance and keeping customers interested and informed."
Robinson suggests that whether it's in times of equipment shortages, like today, or when new machines are readily available, pre-selling will be the new norm. "There's no sense complaining because this is the way it is," he says. "Instead of getting frustrated with the changes, manage them and your customer base to work with the new way of doing business."
Pre-Selling: What Works for Dealers
Ag equipment dealers have found what works and doesn't work when pre-selling early order programs. Those surveyed presented a variety of techniques that work for them.
"The biggest advantage to pre-ordering, especially when there is a trade, is to have the new piece in before its next season of use. That gives us time to market the trade-in. We can usually get the customer a higher trade-in value by doing this, so he saves money."
-Paul Bader, Bader & Sons Co., Saint Louis, Mich.
"Customers don't like hearing 'You better order it now because if you don't it may not be available.' We don't do that. All we can do is let them know where we're at with lead times, share some of the challenges we're facing as his dealer and let them know that we stepped up so we can supply their needs. If we're low or out of what he needs, we tell him. We would rather lose an order than a customer for good."
-Jim Collins, GVM West, Bellevue, Ohio
"The most successful approach we've found to pre-ordering when equipment availability is down is avoiding the almost-guaranteed price increase coming from the manufacturers. Knowing that waiting to order could cost 3-5% more on a large, expensive piece of equipment is good motivation for a customer when he's forecasting a year or two ahead of time."
-Darren Mead, Deems Equipment, Nevada, Mo.
"Low-rate interest has been the best way to convey the benefits of pre-orders for us."
-Tom Cavitt, Pettit Machinery, Gainesville, Texas
"Our most successful approach has just been to go to work and communicate the reality of the changing conditions to the customer. That has to be done professionally and deliberately to be successful."
-Bill Hawkins, Ag Pro Companies, Stuttgart, Ark.
"With all the options available on today's tractors and other equipment, pre-ordering is a must in order to have the equipment on hand in a timely manner, with the desired options and to not have to pay for options the customer doesn't want. This keep his costs to a minimum."
-Ken Snow, Snow Tractor, Ayden, N.C.
"By being aggressive with pricing and doing the little things that customers like, such as giving them updates as to when the equipment will be available, is effective."
-Anthony Clark, President/Owner, Clark Farm Equipment Llc, Gilbertown, Ala.
"We showing the customer historically how much more they can save ordering pre-sell vs. waiting for season of use. We also clearly explain when we have to order for them to get it when they need it."
-Todd Channell, GM, Farmers Equipment Inc. Urbana, Ohio
Hobby Farmers Don't Buy Into EOPs
Nearly any dealer that works with rural lifestyle and hobby farm customers can tell you that it's an entirely different ballgame than working with the professional grower. Most agree that it's futile trying to get them to pre-order a piece of equipment and these three Texas dealers advise you to not bother trying.
Unlike the trend to minimize product inventories in the dealerships that primarily deal with professional farmers, these dealers say a significant inventory of tractors and other equipment is essential to this customer base.
"The full-time farmer has always placed early orders knowing that their tractors or equipment will be a special order," says Tom Cavitt, Pettit Machinery, Gainesville, Texas.
"LPO customers are and will continue to be spontaneous buyers, not early-order placers."
"My customers are not long time-planners but impulse buyers," adds Gary Faircloth, Fairway Tractor Sales, Cleveland, Texas. "The dealers with equipment on the lot will sell the product in the hobby farmer market."
Mark Dietz of Dietz Tractor Co., Seguin, Texas, can only add his voice to the choir.
"My customers are weekend or small acreage farmers and ranchers. As compact and utility tractor buyers, they're not going to pre-order equipment. They will always buy when they need it or at the last minute. If they can't see it or get in instantly, they will buy from another dealer."