Q How is your dealership working toward creating a sustainable balance between precision service revenue and hardware sales?
Conklin: “We have three guidelines for balancing hardware and service solutions. First and foremost, we treat our customers as a partner/consultant type relationship. We don’t want the relationship to revolve around all of the negativity associated with getting a service bill in the customer’s mind. We want to be viewed as an asset, not an expense.
“Second, we set up annual preseason inspections on all of our precision equipment. So prior to harvest we’ll go through a ‘precision harvest inspection,’ instead of the typical combine inspection most OEM equipment dealers do. We check their fluid sensors, the moisture sensors, their software and make sure the systems are calibrated and ready to go. The same thing goes for planters and sprayers. If there’s any hardware that needs to be replaced, that costs extra, but we’re finding out before they get to the field.
“The third guideline is that we partner with them on their data. Information needs to be available to prove the value on their hardware and the upkeep required. If we can show the customer the value of the hardware through the data, then we’re going to be able to generate service to maintain that hardware.
“Our answer for balancing hardware and service is to make them work for each other synergistically. We aim for a 70/30 split of hardware and service revenue, however that is a hard goal to achieve sometimes.”
McCullough: “Precision service revenue is hard for us to quantify. I’m the sales guy, but I also do some of the service work. When we sell a component at list price, my pitch to the customer is, anytime you have a problem and need help getting a monitor cleared or installing software updates, I’ll come help for free. For me, this is an investment in gaining face time with the customer, which can benefit future sales.
“When it’s a situation where I need to send a service tech out because there’s a hydraulic problem or something wrong with the hardware that needs to be remedied, then there is a cost associated with that as service time. That cost comes after the diagnosis, though. I do a lot of the troubleshooting for free as part of the sale price of the hardware.
“If we just send our techs out right away, the tech could spend 6 hours logging into support and doing different things to the tractor to find out why it’s not working, but it’s hard to charge a customer for that time.
“The other option I offer during my sales pitch is that I can give a discount on the hardware, but when they need support, we will charge them and bill them for the minutes we spend working on their equipment. If I’m on the phone with a customer for 10 minutes, I’d be sending him a bill. I’ve yet to have a customer choose the second option.”
Hlavinka: “An equipment dealership is a three-legged stool. We have to create the mentality that if we have a great hardware year, that’s extra revenue, but having a great service year allows us to maintain diversity.
“After we sell hardware, we try to maintain them on the service side. We want to keep them pleased with the equipment while it’s under warranty so that once the warranty is up and the operator has become dependent on the technology, we can continue to serve them and get some billable hours in. That’s largely where our service revenue comes from.
“This year, we’ll probably finish with 65-70% of our revenue coming from hardware sales and 30% coming from service. When we first got into precision farming, our revenue was 95% hardware sales and 5% service. But, we include installations in our sales numbers, so depending on how we do our accounting, the numbers may be slightly skewed because some service is hiding in the sales numbers.”
Pfitzer: “John Deere has basically told us that they recognize that AMS hardware sales alone won’t float the boat for the entire department — it’s just not enough margin.
“That being said, there’s a recognition within the dealership that we’re not just selling hardware, we’re selling agronomic tools and solutions. If we’re going to be in the black as a department, we really need to focus on developing robust service around the technology and hardware we sell.
“We currently have an employee doing an internship with a local agronomic service provider who services a lot of the same customers as the dealership. Our guy is getting his certified crop advisor status through the state of Colorado and we plan for him to be our staff agronomist, not to take the place of the agronomists in the field, but to be our trusted advisor to bridge the gap between service providers and the technology we offer. He will be able to describe what we do with prescriptions and things like that to customers.”
