After years of development, the aftermarket of construction machinery has finally entered people’s field of vision. At the annual meetings of manufacturers and agents, aftermarket has become the most frequently mentioned word. It seems that the aftermarket will not show corporate leadership without mentioning the aftermarket. Human strategic vision.
In the past few years, the market has experienced a sharp decline. Every manufacturer and agent is eagerly looking forward to improving the aftermarket. However, they found that the aftermarket seems to be a "false proposition" (see the author's article "Aftermarket is really just A "false proposition?"), because the main force in the aftermarket is the old equipment that has passed the warranty period. The main job is to deal with those old customers. In recent years, the company only focuses on selling new equipment, entertaining new customers, and quality assurance. After the end of the period, 80% of the old customers were lost. Without old customers and old equipment, where does the aftermarket start?
Therefore, when manufacturers and agents finally focused their attention on the after-market, they were disappointed to find that the slogan of "free service for life", limited service resources and continuously increasing prices of accessories made their after-market deliveries. , And lost, only a small part of the customers within the warranty period are still in their hands for the time being. The high rate of customer churn has made the aftermarket a "false proposition", because the service products and solutions provided by agents cannot meet the needs of customers.
Elephants, rabbits and ants in the back market
On May 17, 2019, at the China Construction Machinery Aftermarket Thousand Talents Summit in Changsha, Mr. Xue Xiaoping gave a speech on "The Game Between Elephants and Ants", vividly comparing manufacturers and agents to elephants, supplying domestic parts The businessmen are likened to rabbits, and the parts shops, repair shops and backpackers in society are likened to ants. Elephants, rabbits, and ants are the players in the aftermarket, competing for the cake of the aftermarket together.
Unexpectedly, the elephant, which seems to be strong and in absolute advantage, lost to the weak rabbits and ants in the aftermarket competition. Each device was sold by the elephant to the user, and they also served as the customer. Provided the service within the warranty period, it is said that the customer is theirs, but the elephant only accounts for 20% of the after-market share, but the seemingly weak rabbit and ant have grabbed 80% of the after-market. Why is this happening?
There is only one answer: Ant and Rabbit provide products that meet user needs, while Elephant does not. On the surface, Chinese customers are very price-sensitive and do not want to use original parts, but why would customers prefer to buy fakes than original parts? You know, 20 years ago, customers would rather spend more to buy imported equipment. The reason is that if customers use original parts for repairs and maintenance, they will not be able to make money, and the quality of domestic parts is getting better and better.
Elephants fight price wars in the complete machine market in order to increase the sales of equipment. As a result, there is an oversupply of equipment and the competition among customers becomes more intense. Fuel prices have risen and labor costs have risen, but equipment rents have been falling. Why? Because the market supply and demand balance has been broken, the industry ecosystem has gone wrong.
The rent is getting lower and lower, customers can only reduce maintenance and repair costs, otherwise they will not be able to make money and survive. Equipment prices are getting lower and lower, making repairs to old equipment less valuable. On the contrary, old parts dismantled and refurbished from old equipment have become a new source of parts, which makes high-priced original parts even more unpopular. The elephants who are busy with the whole machine market do not care about the loss of out-of-guarantee customers to rabbits and ants. For a long time, they have never looked down on this very price-sensitive market.
Rabbits, ants and elephants are not competitors
In 2016, during a market visit, I once met the foreign service minister of a well-known company. When he heard that I was doing Internet post-marketing services on the "Starting" platform, he had the following interesting conversation.
Minister: "I know your platform, you are our competitors!"
I asked: "Why do you treat us as a competitor?"
The minister replied: "Because you sell auxiliary factory parts."
I asked: "The market is so bad now, if customers use original parts for maintenance and repair, can they still make money?"
There was no answer.
I asked again: "72% of the customers who started operations are customers whose agents have already lost. We have helped you restore lost customers and help them tide over difficulties. You actually regard us as competitors. Is this kind of thinking? OUT (out of date)?"
The minister looked at me in surprise and did not speak.
I went on to say: "Customer needs are divided into levels. Customers have the right to choose the accessories they want. They will never buy original chassis parts and bucket teeth, but prefer to buy original engine parts. Original parts are also provided with sub-factory parts. This mode of operation attracts more customers. It does sell a lot of sub-factory parts, but it also helps you sell more original parts, but you say that we are competitors. Don’t you think it’s absurd?"
The minister was speechless.
This is the thinking logic of many manufacturers. They think that those who sell sub-factory parts are their competitors. They think: if no one in the society sells sub-factory parts, all customers will come to them to buy original parts, regardless of the price. How high. Isn't this naive? I said to him, "I think your thinking is still in the era of monopoly. You don't understand the needs of customers at all, so the market share has been declining."
After this conversation, he became interested in our model, and specially arranged for me to introduce the "starting" operation model at the national agent meeting. One of the important reasons is: "starting" can sell more Original parts.
From the perspective of the industry ecosystem, rabbits and ants are a perfect complement to elephant services. Elephant’s service capabilities can only cover 10% to 20% of market demand. Increasing service resources will make Elephant’s costs beyond making ends meet, and it will be difficult for customers to afford Elephant’s service and accessories prices. Without rabbits and ants, elephant's service would be a disaster, especially in the sluggish market environment, many elephants are facing difficulties and can't take care of themselves. They are simply unable to help customers in the crisis. If customers also go bankrupt in a market downturn, the entire industry will suffer even more damage. It was the rabbit and the ant who helped the elephant to ensure that after the elephant got through the difficulties, their customers were still there.
Out of immediate interests, Elephant has always regarded rabbits and ants as its competitors. Is this notion wise? Elephant's service network has great defects, and it cannot satisfy customers in terms of coverage and timeliness. Why can’t we treat rabbits and ants as our partners? If we put the interests of customers first, elephants must make good use of the social service network in the future.
Establishing a community with a shared future is the only way out
Now the price war is fierce in the industry. Every player is eager to try and gear up. What makes the author difficult to understand is, what is the purpose of losing money to sell equipment? It is easy to understand if the aftermarket can make money back, but the profits of the elephant aftermarket are equally pitiful. .
When working in Germany, I once participated in a sales negotiation. A Chinese diesel engine factory came to purchase an engine test bed. The German once gave a quotation for a "turnkey" project, but the Chinese took the information of a German intermediary company and believed that the equipment could be obtained at two-thirds of the price, so the budget was insufficient. When the Chinese proposed that there was only so much budget, and if they would find another company to buy it without lowering the price, the German replied frankly: "I'm sorry, we can't make it at this price. If you ask someone to buy it, we will be very grateful." Leaving the meeting room.
Many Chinese companies are different. It seems that we have never learned how to say "NO". Although China is the largest single market in the world, there are not many orders in the market. When facing potential customers, Chinese companies are afraid of losing any order. They often want to keep their market share even if they don’t make money. This has led to many today. The painful situation of agents losing money.
The land reform movement in the 1950s gave many people a sense of small peasantry that equals the rich and the poor. They feel unfair when they see that others make more money, but they never see that others are paying more. "Why? "So I would rather not make money yourself than let your competitors make money, but in the end it hurts the ecology of the entire industry. It would be better for the fish to die than to bite the fishing net. The result is a price war, and the profits of every company plunged.
Just imagine, if there is no price war and vicious competition, how much revenue will Chinese companies increase? If companies invest these revenues in new product research and development and after-market development, how much value can they create for customers?
An industry is an ecosystem. Everyone in the industry is responsible for maintaining the ecological environment. Just like OPEC, the Organization of Petroleum Exporting Countries (OPEC), through coordination and unification of member states' oil policies, maintains the stability of international oil market prices. The price war in China's construction machinery industry has disrupted the ecology and price stability of the industry, causing the industry to enter a vicious circle and harming the interests of every practitioner. No profit, no innovation, greed is slowly ruining the future of the industry, this industry is sick!
Lower and lower profits will reduce manufacturers’ research and development costs, and the dream of leading domestic brands in technology will be wiped out. Plagiarism and homogeneity will become more serious. Without profits, agents will not be able to invest in the aftermarket. "Customers create value" is just empty talk; low prices disrupt the balance of market supply and demand, leading to weak rental prices and declining customer revenue; the price of the whole machine is reduced, the need for overhaul is reduced, the market space is reduced, and the oil and water of dismantled parts are higher. Neither the shop nor the repair shop is good news. Under the cover of the nest, are there any eggs?
There is no way out of monopoly. Many elephants only care about the sales of the whole machine and are unwilling to invest in the aftermarket, because increasing service coverage will increase the cost of elephants. Many inputs will not see a return in the short term, and the service network of rabbits and ants is precisely what The best supplement for elephants. Therefore, the establishment of an industrial community of destiny is the only way out for the post-market development. For the benefit of customers, we will break the thinking mode of elephants, ants and rabbits, and re-examine the post-market ecosystem with new thinking. We will open a window. See a new world.
