May 24, 2010 – Change or Perish

Charting an industry evolution.

It has become the mantra of the new marketplace: Change or perish. Change your business to meet the needs of a different, not to mention hesitant, retail consumer or watch your sales dwindle to disastrous levels. So how have industry companies adapted to this new reality? We asked executives from prominent companies from all sectors of the industry to answer that very question.


Mark Blackwell, vice president of motorcycles, Polaris Industries Inc.

Assessing what the market needs and then being able to quickly respond to that seems like Retail 101. But in reality, most OEMs have relied on distribution methods that require monumental retail decisions many months before the peak season even arrives. Polaris Industries has tried to change that operating procedure with a number of its dealers through Max Velocity Program, or MVP.

“While there are many important aspects to MVP, a simple way of thinking about it is getting the right products to the right place, at the right time,” Blackwell said. “This helps our dealers maximize their sales and profits while keeping inventory down, which saves both Polaris and our dealers operating cost.”

Blackwell noted Polaris’ “Mike Jonikas and Steve Menneto led the charge on MVP after benchmarking a top automotive company.”

The program allows dealers to order new units on a much more timely basis than the traditional one or two large orders of the past.

Bob Gurga, assistant vice president, American Honda Motor Co.

American Honda drastically cut its production to reduce and align dealer and Honda inventory to market demand, Gurga says. “Simultaneously, we have continued to enhance to our dealers our monthly order program to best manage inventory,” he said.

Honda’s monthly order program, introduced in 2008, offers more frequent order periods, a shorter delivery window and flexibility of orders to align with retail demand.

Satu Mehta, vice president of sales, Triumph North America

Triumph made a significant change with its marketing plan as the worldwide motorcycle market contracted.


“In order to take advantage of the already existing motorcyclists who were currently in the consideration phase of the ‘purchase funnel,’ we eliminated all of our brand-awareness campaigns and stopped trying to convert non-motorcyclists to Triumph,” Mehta said. “Instead, Triumph focused solely on finding local riders and encouraging them to consider Triumph as their next purchase.”

The marketing change affected the OEM’s co-op plans as well as it demo fleet activities.

“The fleet of demo trucks was rescheduled away from the national rallies and instead sent directly to the dealer locations where customers are twice as likely to buy a motorcycle if they ride it and immediately interact with dealer sales staff,” Mehta said.

Eric Bondy, CEO, KYMCO USA

How do you entice retail interest in a down economy that doesn’t have long-term consequences to the brand? KYMCO USA, the U.S. subsidiary of the Taiwanese OEM, has wrestled with that very issue. Ultimately, Bondy said, the OEM opted against heavy discounts and instead relied on non-cash retail incentives. “We offered free accessories on our two-wheel products with the purchase and created LE models on our four-wheel lines that again offered great value to consumers and great margins to the dealers,” he said.

“It seemed to pay some dividends this past year as we outperformed the industry in both the ATV and scooter category.”

Dealer Service Providers

Karen Braddy, general manager of specialty and heavy truck and equipment, Manheim

Over this year and even into 2011, the auction provider is moving to a more market-centric business model. One of the goals of this change in strategy is to provide dealers with one point of contact that can assist them with all of the company’s products and services.

“Manheim is currently restructuring its existing regions into markets to streamline the sales and marketing approach, increase efficiencies in our outreach to dealers and commercial customers, and more effectively consult with buyers and sellers on the benefits of all of Manheim’s products and services,” Braddy said.

“The restructured sales and marketing group will provide expert guidance on where sellers can maximize the value of their assets at the most appropriate selling locations, and provide a much more comprehensive product offering for our buying customers.”

Jeff Malehorn, CEO, GE Capital, Commercial Distribution Finance

Major unit inventory management has changed dramatically, as “right sizing” became the main task for both dealers and OEMs alike in a shrinking marketplace.

“To address their immediate market problems, we leveraged our Locator/Transfer system to help dealers find and exchange product between dealerships, as opposed to ordering a new unit,” Malehorn said. “The goal was to help efficiently reduce overall inventory pressure. Our experienced account managers also provided training for dealers on how to use data from our online COMS management system to identify and move old units before they became an even bigger problem.”

Ramin Gilbert, account manager, eBay Motors

eBay Motors has made a number of adjustments for its sellers, including price and marketing of powersports vehicles. For the national auction-style format, sellers now pay $50 or $80 depending on the final sale price rather than the previous $95 fee. eBay also launched a new local classified format that gives sellers’ inventory exposure to more buyers in their local area, with the first six listings free.

Responding to customer feedback, eBay also increased its exposure radius, from 100 to 200 miles. “This adds great local reach for sellers, who also have the option of national exposure on eBay Motors,” Gilbert said.

Tad Kilgore, general manager, Traffic Log Pro

The CRM/lead management company has given dealers more program flexibility to offset a drop in business. Dealers can now choose specific Traffic Log Pro modules and not pay for services they don’t use as often. “Since some dealers are cutting back expenses, this has helped new and existing dealers make the decision to keep or implement a lead manager/CRM,” Kilgore said. “This has been a big win for Traffic Log Pro and our dealerships.”

Julia McCarthy, president, Aftercare Service Contracts

For an established company, a recession doesn’t necessarily translate into fewer business opportunities. But for McCarthy and service contract provider Aftercare, it does mean they have to be more prudent about just what they’re willing to invest in.

“We are spending more time researching things before diving in,” she said. “We are much more willing to say ‘thanks but no thanks’ to business opportunities that we don’t feel are a good fit.”


Bill Abshier, general manager, Valley Cycle & Motorsports, Bakersfield, Calif.

Valley Cycle & Motorsports has taken advantage of other stores not being able to make it through the economic crisis as single-line dealers, adding Yamaha and KTM to its portfolio.

“We have hired experienced people from these stores and this has brought the business to us,” Abshier said.

The downside of the additions is the extra employee expense, but Abshier says it’s worth the investment to position the dealership for when the market turns around.

“We are able and willing to take this on,” Abshier said, “as we feel that when the economy comes back, we will be sitting in the right spot to be successful.”

Steve Seltzer, president and general manager, Steve Seltzer Honda, Altoona, Pa.

Even companies whose profits have stopped dropping can get into trouble if their costs continue to rise. That’s why Seltzer has become much more focused on expense control, something he says his business addressed way too late in 2009.

“Our gross sales held within 1 percent last year, but I spent too much money,” Seltzer said. “So me, and our entire team, are working hard to reduce expenses where we can.”

He met with his team in February and identified 80 items to be considered for expense reductions. The list featured both big items — reducing new inventory — and little items — eliminating cookies on Saturdays.

Seltzer says he was specifically looking at things the dealership has always done and reconsidering whether the cost is worth the benefit.

At the same time, Seltzer has actually increased the number of salespeople on the floor. And while inventory is down compared to last year, he is careful not to cut too deeply.

“We are still a firm believer in having enough product to sell,” Seltzer said. “If I don’t have salespeople or I don’t have product, it will be a bad year.”

Bill Hearne, owner, Outdoor Motorsports, Spearfish, S.D.

At Outdoor Motorsports, they have responded to today’s market by diversifying its product lines. Instead of just relying on motorcycles and ATVs, they have added trailers, power equipment and other items.

That gives them more to sell, Hearne says, though it also puts more dollars in inventory. The other challenge is it changes product training. Sales reps have to be trained differently and more frequently.

“They might only sell one or two trailers a year,” Hearne said. “Since the new items are typically low volume, sales reps require continuous training to keep their product knowledge up.”

Scott Britt, owner, Britt Motorsports, Wilmington, N.C.

“Yes, the world has changed before us,” Britt said of today’s market, noting he has been discussing that thought with employees since the first of the year. For the most part, he says, he and his staff are building their business back from scratch.

“In the past we held meetings about how to best handle the amount of business,” he said. “Now we work on getting customers in and assuring ourselves they will come back.”

To do that, they have placed an emphasis on finding the customer base that is visiting their stores and asking why they did not buy. Britt says they are asking more questions from the street than ever before to find what will work. As part of that effort, the store has stepped up customer service a notch to ensure every person is assisted and given all the information they request, in order to keep them as customers.

“In my five dealerships, staff has been reduced from 131 to 58, and now everything is everybody’s job,” he said. “Every employee is responsible for every customer.”

Sam Nehme, president, Broward Motorsports, West Palm Beach, Fla.

One opportunity the recession has presented is the ability to gain market share as dealers go out of business. For Broward Motorsports, buying a local competitor also helped consolidate overhead by adding a third location.

Overhead is something Nehme says he has spent more time than usual focusing on since the recession.

“In the heyday, we all simply watched the sales rolling in and weren’t very concerned with our expenses,” he said.

Today, the dealership has consolidated expenses where possible and combined job duties where it could be done without sacrificing customer service.


Mike Kaczkowski, executive vice president, Dowco

“For our branded powersports products we rationalized our branded product lines and focused on the cost side of the business as many did,” said Kaczkowski.

The most important area in the past year was maintaining its R&D efforts.

“We have developed some major products that will be hitting the market this fall,” said Kaczkowski. “These products align with changes in the motorcycle market as customers move from cruisers to touring bikes and more standard models. These products are not cut and sew (Dowco’s legacy product base), and they really show the capabilities of our design team to develop aftermarket accessories that will provide an OEM level of fit and finish and competitive prices to outfit a motorcycle for extended rides.”

In addition to R&D, Dowco’s staffing was evaluated and re-focused to “better support our distribution partners,” Kaczkowski said, “and sales efforts were amped up to increase export sales.”

Dowco also analyzed and concentrated on inventory management as well as “improved product value through cost competitive initiatives,” said Kaczkowski, “and strengthened our supply base to be a stronger company for when the industry begins to realize recovery.”

David Willis, director of marketing, Spectro Oils of America

Every area of Spectro Oils was examined when the tough economic times began taking their toll on businesses, but being a family owned company, layoffs were looked at as a last-ditch tactic, says Willis.

An area Spectro did modify was its private label business, said Willis.

“We looked for new revenue streams by expanding our private label business, both by accepting smaller volume customers and by prospecting across more industries,” he noted and added they also looked at marketing.

“Though accepted wisdom and entrepreneurial spirit urge increased marketing investment to take advantage of a soft market, we decided we were better off maintaining a steady pace,” he said.

Brandon Petersen, national sales manager, Fox Head Inc.

To benefit Fox and its dealers, this past year the company put an emphasis on accommodating its dealers’ needs to ensure its Fox and Shift brands continue to grow, says Petersen. “We are more liberal again on all aspects of the business as we feel the greater portion of our customers have weathered the storm,” he said. “It’s up to us to work closely with them and determine what their needs are so that we can be mutually successful.”

One of the biggest challenges Fox faced last year was getting the dealers to take advantage of the pre-booking option Fox offers. “Dealers were very cautious because of their concern with the stores’ cash flow and the uncertainty they experienced in the latter half of 2008 and 2009,” said Petersen.

“In an effort to reward those dealers who do prebook with us, we are offering incentives to the dealer for the upcoming Fall MX season that are the most aggressive they have ever been with the Shift brand,” he continued. “We are looking at the extra incentives as simply a partnership.”

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