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Sales & Distribution Of "Crossover" Utility Vehicles:
Consumer Vs. Commercial Buyers

Published: 8/1/2014 Author: Stephen Metzger, Managing Director, Small Vehicle Resource, LLC Category: Marketing
One of the paradoxes of utility vehicles, whether light portage and transport (LPT) or heavier duty off-road types, is that they appeal to both consumer (private individual user) and commercial (including the government sector) markets. This "crossover" aspect within the universe of potential customers presents a challenge to manufacturers and their network of distributors and dealers. In addition, the internet is playing a more important role in the sales and distribution process.
To the golf car dealer it often means getting serious (possibly for the first time) about the need to attract the commercial customer. For the power sports dealer, the same sort of issue arises. In both instances it is a matter of dealing with "non-traditional" customers for which the dealer has not been trained, and for which dealership resources are not geared to address.
A quick qualification: We are speaking of dealers in general, who have been selling primarily to individual consumers. These make up the majority of golf car and powersports dealerships, but a good number of dealerships have extended their reach into the commercial market and could be called "crossover" dealers.
What Are the Differentiating Factors?
Perhaps the most significant factors which differentiate the consumer and commercial markets are: 1) the commercial customer is much less likely to be a walk-in, unsolicited buyer, as compared with the individual buyer; and 2) the commercial buyer is more likely to be interested in a multi-unit purchase, while the individual consumer focuses on a single unit. These differences have significant implications for the direction of dealership activity and for relations with the manufacturer.
Manufacturers have a mature history of dealing directly with multi-unit purchase customers. Golf car manufacturers, for example, invariably deal directly with golf course sales and leases. The fact that most golf cars used on golf courses are under lease contracts further involves the centralized supply source of a manufacturer in that every three years or so a full fleet of leased golf cars is replaced by another. This may involve 100 to 150 units, half going onto the course and half coming off. The latter must be recycled and redistributed into various channels. Manufacturers are well-situated to handle this issue. And, servicing in this segment often is performed by employees (or private contractors).
With regard to manufacturer-dealer relationships, the act of bringing on new, relatively unfamiliar inventory and appealing to a new set of customers strongly suggests the need for manufacturer investment in training and promotional incentives. A dealer, almost as a reflex, will favor his or her traditional line in terms of sales effort. Getting a dealer to allocate sufficient resources to, say, a line of gas-powered utility vehicles (where his past—and present—forte has been, and is, electric power) will probably require incentives.
Parts supply and floor financing may also require adjustments. In sum, there may be many adjustments required to bring the dealer up to speed in a new product line and customer base.
Three Basic Sales and Distribution Organizations for the Commercial Market
Small, task-oriented vehicle companies employ three basic types or organizations in addressing the commercial market:
  • Centralized: Sales and service activities operate out of a single location, or multiple locations spread out on a regional basis;
  • Decentralized: Essentially built on an existing dealer network, upgraded in various ways to sell and service in the commercial arena
  • Hybrid: Consists of a centralized, corporate sales organization, but relies on local dealers for service.
Of course, there are variations of these basic types, and even within a single company there may be elements of two or three of the basis types, depending on subsegments of the commercial market. E-Z-GO Textron, for example, when it revamped the Cushman line, harnessed the strength of local dealers which were essentially selling, renting, and/or leasing mobile construction equipment and in some cases, warehouse and material handling gear. At the same time, in addressing the commercial side of golf course market, vehicles are sold directly from the factory, usually as a complement to the golf car sale, with factory-trained mechanics/technicians doing the servicing for the most part.
Centralized sales are most pronounced in the government segment. One of the reasons for this is that many state governments have centralized purchasing agencies which engage manufacturers
New Markets Open Up for Dealers in Consumer and Commercial Markets
While there is a growing concentration on the non-golf commercial and government market, local dealers are seeing new opportunities in their consumer and commercial businesses. These includes sales of LSVs or a slight grade below, PTVs, personal transportation vehicles. (Our latest outlook for LSVs may be found in our upcoming study on the state of the STOV marketplace, Fall 2014. You can contact us directly for further information.) LSVs—the E-Z-GO 2Five is a good example—are breaking away from the rigid price point competition that surrounded golf cars, and to some extent still influences industry executives. The 2Five's rakish profile, AC motor, and a host of accessories mimicking on-road vehicles, has been selling well, from all indications and garnering better dealer margins.
Adoption of the electronic fuel injection has now reached the golf car-type vehicle market with first Yamaha and now Club Car adopting EFI introducing a full line of models with this type of engine. EFI technology has been widely used in off-road UTV and recreational vehicles for several years at this point, but its use in golf car-type vehicles is new and a major development in this segment of the market.
Local and regional college and university campuses, as well as corporate campuses and warehouse complexes offer important opportunities for dealers to extend their markets. At the same time, however, the sales approach and customer care will undergo considerable modification from the walk-in customer. In future columns, I will describe some of the dealerships that have successfully crossed over to the commercial market.
Use of Internet in Widening the Local Market and Expanding Sales
One of the important findings in the market research that my company, Small Vehicle Resource, LLC (SVR), has uncovered is growing use of the internet by customers, both commercial and consumer. More and more dealers have found that customers they come in contact with have gone to the internet to do some preliminary research and come armed with more product information than ever before. The benefit to the dealer is immediately apparent: a potential customer who has done his research comes into the dealership virtually as a qualified lead. Far from displacing the salesman at the dealership, the internet brings to him someone who is much more likely to follow through with a purchase, than the relatively uninformed who is simply "exploring the possibilities". Moreover, the myth that the internet encourages bottom fishing (for the lowest possible price) is just that, a myth. If anything characterizes the STOV marketplace it is that cost/benefit tradeoffs are a major part of the buying decision, thus justifying in the buyer's mind the willingness to pay a higher price for a needed benefit.
With respect to the internet, websites like this one enhance the purchaser's ability to research and compare small, task-oriented vehicles. Here the potential buyer can also access the website's dealer directory and get in touch with a dealer in his area. Dealers can improve their opportunities to attract buyers by getting preferred positioning on the dealer list and submitting more detailed information, as well as current inventory, on their own dealer page. (Note to dealers: If you do not find your dealership listed here, you can add yourself to our directory.)
Tip O'Neil's oft-quoted axiom, "all politics are local", applies to a significant extent in the STOV market, even though it could be argued that many corporate strategies emphasize a centralized sales effort. And the reason for this is that the service function is in many cases going to be local, and add to that, local inventory must be on hand for invited walk-throughs or on-site demonstrations. It is also true that a well-run service and parts operation is a great enhancement to the prospects for future sales.
All this does suggest that the local dealer will become much more a manager of resources and skilled manpower than the do-everything gearhead guru of old (although they are great to have around).
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