THE REFORMATION OF THE CONSTRUCTION EQUIPMENT INDUSTRY
PART ONE – Building Your Own Brand (BYOB)
OVERVIEW
“Building Your Own Brand” (BYOB) is a pillar of maintaining performance, productivity, market value and optimizing ROI for equipment assets. In the absence of an established brand and reputation (real or perceived), the prospect of achieving maximum returns on resale is diminished. This conversation is the first in a series of commentaries regarding “The Reformation of the Constructions Equipment Industry” – and focuses on actions equipment owners can take in response to a rapidly evolving market…
One year ago, the frequency of calls began to increase – voices of concern and distress at the malaise in construction equipment secondary markets – “how is your business?” Tones reminiscent of the housing market collapse and recession of 2007-2009. In an industry built on grit and egos, rugged individualism and hard work, it’s common for equipment owners to believe they can “gut it out”, when confronted with adversity – for the most part, in their experience, always have. What happens when they cannot, regardless of the reason or who they are?
To be clear, the concept of “equipment ownership”, has evolved over the last dozen years – a classic paradigm shift. While actual “ownership” was historically dominated by General Contractors (GC), Mines, Municipalities, OEM Dealer & Independent Rental Fleets – the landscape has changed. Leases have become the “quasi-ownership norm” of choice for several reasons: 1) month-to-month costs are far-less expensive than renting when coupled with the confidence of a solid projects pipeline; 2) leases offer limited financial liability on a manageable time-horizon, usually measured in two-year commitments; 3) CFO’s enjoy flexibility in accounting and options to extend usage to match project requirements.
In my observation there is a direct correlation between the dominance of equipment leasing and the recent and steady upsurge of “commodity-based” digital platforms in the marketplace: legacy titans, regional staples, new and rebranded online platforms – all responding to market demand with expanded services, competitive fee structures, claims of convenience and compliance with legal norms (auctioneers) associated with repossessions, disputes, court judgements, etc.
Today, the “Lessors” – commonly OEM Financial Divisions, Banking Conglomerates (Citi, GE, WF +) and an array of Rural Banks and Credit Unions – are the institutions “holding the paper” and legally the true equipment owners with a specific time horizon for earning revenue, followed by liquidation via sale into secondary markets -> rinse and repeat. While financiers are the new “dominant owner-class”, the end-user can usually exercise a buyout option (rarely used) based on the loan residual and/or current Fair Market Value (FMV). Financier Lessors prefer outsourcing operational management (maintenance, repairs, inspections, resale) of equipment assets, a difficult proposition considering the increasing volume of assets on their books. Intermittent market-makers currently fill the void, “Building Their Brands” with third-party equipment assets and digital content. Because “Financier Lessors” generally lack marketing infrastructure, brand recognition (BYOB), competent staff and efficiency to achieve maximum returns on resale – below average net proceeds are common and will remain an issue until an industry-wide reformation gains traction.
OEM Financial Divisions – the bulk of the “Financier Lessor” class – routinely experience delays in processing off-lease equipment for resale when “predictable conflicts” arise as leases end and reconciliation of “condition clauses” versus actual “returned condition” is required. These conflicts arise when maintenance and repairs on leased machines are sidelined by “End-User Lessees” during the final phase of the lease. Financier Lessors may require the inclusion of “Total Maintenance & Repair” (TM&R) contracts offered by OEM Dealers (Service Departments) within their lease documents, but those costs are often considered prohibitive by End-User Lessees, who balk & commit to maintaining the equipment themselves. Competent OEM Lessors mandate third-party inspections be performed approximately sixty (60) days prior to end-of-lease dates, allowing them to prepare for what’s just ahead. While OEM Dealers (executors of the OEM Financier lease docs) have no direct financial liability as machines are returned, they do have potential issues as they navigate, manage and mediate the reconciliation of equipment condition…consider the details –
1) For the End-User Lessee, the OEM Dealer is the “face of the brand”, for the equipment and disagreements about who eventually pays for “deficiencies” defined in the lease condition clauses – often resulting in customer threats to take their business elsewhere
2) OEM Dealer Service Departments (in most cases) would execute the work they quote (based on the pre-return inspections) to bring the equipment into compliance with lease condition clauses
3) A machine with unsettled disputes is parked on the OEM Dealer Yards (often for months, free of charge) awaiting resolution as the OEM Financial Division Lessor strives to be “made whole” on their asset and greenlighted to resell at a price based on the “residual value” calculation, a major component of the original estimated revenue stream – assets in financial purgatory are not a good look on an OEM Dealer Yard
4) Saddled with condition deficiencies, groups of machines “in-dispute” are often relegated to “sale at auction” by the OEM Financial Division “Lessor” (recall the legal recourse issue) – subjecting themselves & the OEM Dealer to sales results that could damage future retail sales opportunities of their OEM branded equipment
The collateral damage that can be done to an OEM Dealer’s reputation and brand is wildly unpredictable – all while never actually owning lease assets. Because the popularity of leasing is driven by customers, demand remains strong and does offer the OEM Dealer the benefit of improved market share in their territories. Expect little change in the near term.
Accurate as described, the scenario above is not exclusive to OEM Lessors, but highlighted first to demonstrate the vulnerability of a specific brand to this convoluted and inefficient process. Non-OEM Financier Lessors are exposed to the same off-lease delay scenario but generally apathetic to the OEM brand, ultimately providing more leverage to demand strict compliance to the “condition clauses” defined by their lease – they simply follow their End-User Lessee to the next OEM brand allegiance. The off-lease process model is flawed for all involved – a proverbial “elephant in the room” – which must be addressed throughout the industry, with a customer-centric focus.
Two distinct activities are in-play when an organization employs BYOB as strategy locally, at a distance, within the construction industry and on projects via asset management activities: 1) SHARING THE STORY, and 2) LIFECYCLES & TRADING IN EQUIPMENT ASSETS. Both should be considered “mission critical” regardless of business climate…as each complements the other creating rich organizational synergies. For example, if an equipment owner is listing their surplus equipment for sale on digital platforms pointing to their website, the traffic generated by potential buyers would inherently produce more “views” and surfing through the organization’s web pages -> BYOB -> possibly energizing a future employee, a contract for work or another quantifiable benefit. The discussion will focus on maximization of value, uptime and ROI of equipment assets from acquisition and utilization, through sale and transfer to future owners.
SHARING THE STORY – involves everything from signage & identifiers on equipment, vehicles, brick & mortar facilities and jobsites, hardhat decals, business cards, company logos and apparel -> to digital and social media, public outreach & recognition, association memberships & participation, advancement and hiring of employees, job postings, completed projects, etc. While enterprise success in execution and results vary, a holistic approach is key.
“Building Your Own Brand” (BYOB) in the public arena typically involves broadcasting the presence, reputation, ability to serve, mission statement and prowess of an organization, including but not limited to -> comprehensive value to the communities served, volunteerism and altruism (outreach, giving back), employee contentment and disposition, support of families, innovation and professional challenge, distribution of earnings, wages, industry leadership, skills development, peer ranking and perceived viability going forward. Observing trends over the last 5-10 years, it is clear “SHARING THE STORY” has become a more common and frequent activity in the construction industry, rightly so…backing it up matters! Allowing the public to share, witness and weigh the portrayal and messaging versus actual deeds can endear them to the organization, create synergies, sense of communal pride – even soften a blow when a reputation is challenged.
Large organizations tend to have established, in-house marketing & messaging activities assigned to Sales Divisions, HR or even C-Suite Executives with ultimate oversight and guidance – executed by staff immersed in company culture. In my experience, the most common “unforced error” at this level is subcontracting “BYOB” to marketing agencies that have little or no experience in the construction industry, organizational culture, and even require written “copy” from company staff to produce ongoing unique content. While nice graphic design and cool drone footage are welcome, exciting and fun to watch…void of compelling “storytelling” by a culturally savvy insider, the frills grow stale and eventually diminish desired impact in the marketplace. Established businesses often outsource missing pieces (i.e. graphic design, digital presence) and utilize an experienced industry consultant to manage & expedite BYOB projects to fruition, just as the contractor would rent machines to fill gaps in equipment packages needed for earthmoving and construction projects. For large organizations the goal of “Building Your Own Brand” (BYOB) should focus on “self-reliance” and driving traffic to their own media platforms, managed by internal staff. Maintaining a limited bench of business consultants and media production contractors is a good strategy for specific needs.
Medium and Small firms are prone to struggle more with “justifying costs” of BYOB, often assigning marketing & messaging activities to staff ill-equipped to take-on more tasks, lacking the skills, interest or time to be effective. Simply “throwing another log on the fire” can be detrimental to those charged with additional responsibilities, and ultimately the organization. None of these challenges change the inherent need to promote the organization in the public domain with adequate investment, talent (in-house or contracted) and ownership’s commitment to the cause. Competent and skilled graphic artists can be contracted or even found as temps via college intern programs. Having knowledgeable personnel dedicated to driving & developing or managing & approving unique messaging content is critical to success. Contracting an outside Project Manager to guide and assist in the initial design and implementation of the required platforms is a good option – very common – when they don’t have the talent and competence internally.
In the “Digital Era” communications platforms are either inexpensive or free, and required by our emerging leaders in the construction industry as future mediums of commercial activity. Organizations choosing to ignore clear trends risk becoming less relevant, less patronized by their customer base and miss potential for growth. Costs associated with “Building Your Own Brand” (BYOB) can be substantial – however, once a website, social media pages and email marketing engines are designed and built, monthly costs are quite reasonable and the technology easy to manage. Once an employee(s) is identified (aptitude) and trained, they usually enjoy their role, become immersed and highly motivated to learn as they liaise with others in the organization: contributing professionally, socially and even financially with new revenue streams.
At this point ownership and management must consider “team building” versus “outsourcing”, and the inherent value of each to the organization. Hiring a consultant to manage the project – initial assessment, design, buildout, training, testing, launch of BYOB platforms & handoff – is ideal, while removing the burden on staff and delivering results on time. In my view, paying a third-party monthly fee into perpetuity to maintain media platforms and manage content is nonsense. As third-party contractors move to their next projects, they naturally become less connected to your company culture and “the daily” – if you like an individual, retain them as a consultant or offer them a position on the team! Developing and maintaining internal ownership is best practice, creates organizational synergies and properly leveraged, will deliver payoffs for the enterprise.
LIFECYCLES & TRADING IN EQUIPMENT ASSETS – considering elements of “Building Your Own Brand” likely exist in some form (webpage, social media) and the relatively low-cost of enhancing or adding platforms – recognizing the value of earning goodwill in the public domain (locally and regionally) is already apparent. “SHARING THE STORY” offers a micro view of the organization and current footprint. Now we consider expanding viewership and geographical reach with the intent of “adding-value” (earned or perceived) to equipment assets by marketing to a larger audience far beyond the home-turf where the core business operates. The most significant and quantifiable payoff of BYOB lies in the discipline of trading (buying and selling) in equipment assets. Consider this…wouldn’t most people expect an industry leader (defined by excellence in execution of their core commercial activity) to maintain quality throughout all aspects of their business? Yes, they would, until or unless they have reason to believe otherwise. Recall the organization has been built on a vision to reach defined goals and deliver quality, rooted in perseverance, grit, rugged individualism and hard work. Adding effective, proactive marketing tools to your BYOB toolbox is the next step.
In my experience, one of the most common and egregious errors equipment owners make is overdependence on marketing platforms which build “their” brands and businesses with the equipment assets and digital content of actual asset owners, while owning none themselves – collecting fees and commissions essentially for project management and marketing. Most equipment owners are very familiar with the costs and lack of control associated with these service providers.
Online listing services, auctioneers and commodity-based marketing platforms have played critical roles in our industry for decades and added value in the process – no doubt that will continue – but those platforms and services should be considered only enhancements and components of the equipment owner’s resale strategy, not pillars. A common argument is “they have critical mass of potential buyers” (valid) which sounds impressive…but how impressed should you be? How many of those potential buyers are redundant across several well-known platforms? How many of the platform users are truly considering your equipment asset at any given time? After signing-up, how much time and marketing effort will your high-value asset receive once it becomes a data point, part of a larger, homogenous offering? In my experience it is best to utilize only the equipment listing platforms as they tie-in easily to the proprietary website you have built, and where you intend to drive traffic.
Crafting an effective marketing strategy & achieving success includes the creation of esthetically pleasing online listings & posts with quality images, accurate condition and configuration detail – reliable delivery platforms capable of handling high traffic – seamless communication between buyer & seller – responsive and knowledgeable staff available for customer engagement. These are the essentials of “Building Your Own Brand” once the enterprise commits to trading in equipment assets and establishes “buy-in” throughout the organization. For most media services and consultants providing “SHARING THE STORY” support services, the “TRADING IN EQUIPMENT ASSETS” aspect of the business is “beyond scope” primarily due to lack of industry experience. Again, experience dictates the “equipment-owner, end-user”, develop and manage their own daily engagement with potential buyers – outsourcing does not get it done.
The equipment owner with well-maintained equipment inventory, in average or better condition, will employ BYOB to extract a higher return on investments (ROI), redirecting financial outlays back into their enterprise, reaping the rewards of DIY in managing their equipment assets. Be advised -> engaging potential buyers from different time zones requires flexibility and dedication – this is not a “9am-5pm” job responsibility – fortunately, most “first engagements” with potential buyers can be handled quickly on a handheld device. Allow your team players to innovate and perform uniquely within your organization under agreed terms: hybrid schedules, cross-training, remote work, incentives, freedom to create new business and be duly compensated.
Having been directly involved in these specific activities for two (2) decades inside top tier OEM Dealers (CAT, Volvo), the world’s largest equipment auctioneer and now my own brand for over six years – learned what it takes to build successful marketing infrastructure & sell equipment domestically and worldwide. Consider some of the following potential benefits of “Building Your Own Brand” as an equipment owner and entrepreneur ->
- Control and manage your equipment assets, maintaining value and ROI
- Market & Sell equipment on commission for others who do not
have the capacity and skills - Engage in business development leading to new incomes streams
- Become a magnet for pre-Tier-4 equipment (< 2012), sell into
international markets - Offer inspection services to “Financier Lessees” with leased
equipment in your region - Be a compensated storage option for “Financier Lessees” (they pay
their bills) - “Build Your Own Brand”
in markets where you may someday operate - Maintain a keen awareness of market trends allowing proactive
moves before others - Improve your own fleet with situational awareness, picking-off
good deals on equipment - Attract skilled talent into your team from everywhere, keep them
offering opportunity - Develop a team who thrives on professional challenge and
opportunity - Network with industry peers you otherwise may have never known
- Maintain an entry point for new employees to be assessed for
future roles - “Build Your Own Brand”
where you currently operate and fortify organizational strengths - Stay current and innovative as an enterprise, become a leader in
applied technology - Be prepared for the future and ensure enterprise viability
*Look for the next article in this series “THE UPTIME APP”, in a few weeks – addressing issues detailed above and furthering the outlook for the industry, implications, recommendations
Mister Maquinaria LLC – is a version of the marketing engine detailed in this discussion, now in our seventh year. The next phase of our business development is consulting into the “equipment-owner, end-user” space delivering BYOB via Project Management. Our methodology is based on embedding ourselves with the client, at their direction, demonstrating best practice and training client staff with our platforms as models. Clients define their goals, we feedback with ideas and framework. Projects typically range from a few weeks to six months, or more, until agreed goals are achieved.
Contact: Bret Creech, Cell/WhatsApp# +1-813-922-9840
Email: info@mistermaquinaria.com