If your company is like most in this business, your sales are down this year. Business seems to be off in all major segments — trucks, trailers, equipment.
Given how strong our industry has been over the past few years, it's easy to be unprepared for anything other than nonstop growth. Yet all but the most neo of the neophytes among us know that ours is a very cyclical business. It's a lot like the weather. If you don't like it now (or even if you do), wait a little while, and it will change. For better or worse.
So where are we right now? Bud Reitnouer, president of Reitnouer Trailers, had a succinct way of summarizing current market conditions. In our story “Weathering the storm” (see Page 28), he describes the market as being somewhere between 2001 and 2006. In other words, these aren't the best of times, and they aren't the worst.
Some sage once said, “No one is totally worthless. You can always serve as a bad example.” In much the same way, even downturns can be advantageous if we can learn from them.
So we grabbed a handful of Trailer/Body Builders issues that were published during the bottom of the last downturn (2002) in search of some lessons we might apply to today's market conditions. Here are a few things we came across:
- espect the power of your market
Ultimately we are responsible for our success and failure, but basic market conditions sure can help get us there. Taking all the credit for our growth can be particularly dangerous when we are riding an up market on the way to prosperity. At the depth of our last downturn in 2002, we quoted a trailer dealer who was looking back at the good times the industry had enjoyed a few years earlier. He offered this advice: “Don't mistake a bull market for brains.”
- Take advantage of your strength
If your company is financially solid, a downturn provides an opportunity to strengthen your position in the market. Perhaps the most prominent example of gains being made during the last downturn involved Great Dane Trailers. The trailer manufacturer was North America's second-largest producer of trailers in 2002. By the time the downturn was over, Great Dane had acquired (by our count) four trailer manufacturing plants from two of its competitors and obtained a fifth facility from another competitor in 2004 after market conditions were already improving.
- Respect the power of your customers' memory
When the sales aren't there, when you don't make your number, when the money isn't coming in like you thought that it would (but expenses keep piling up), what do you do? Where do you cut? One of our story sources warned against cutting anything that significantly impacts your ability to serve your customer. If you do, expect the customer to remember.
- How quickly companies forget
A successful trailer dealer we visited in 2002 vowed not to practice “cut and run” marketing, promising instead to “stay the course.” We work hard to get our company name established in the minds of customers. Yet for many companies, the first thing cut is the marketing budget. Stopping the marketing program may not have the same immediate, dramatic effect as not paying the light bill, but the consequences eventually show up.
- No silver bullets
Carefully analyze the effects of special marketing programs — your programs or those of others. Truck manufacturers in particular came up with a number of creative ways to jump-start sales. Some of these ideas, such as guaranteed residuals, led to market convulsions the last time the market turned down. Others, such as 0% financing, were unsustainable. What can you do for your customers that is fundamentally sound for the long term?
- Finding your niche
As was the case during the last time we went through something like this, not everything turns down in a downturn. Trucks, truck trailers, and even light-duty trailers that are sold to the construction industry are being hit particularly hard right now, but other segments such as tanks are performing exceptionally well. This isn't to say that we should all begin manufacturing tanks, but is there some area perhaps marginally related to your primary business that you could expand?
- Back to basics
What really moves the market? The last downturn was awash in events, real and imagined, that suppressed demand for trucks and trailers. Y2K was a nonevent that had a profound effect on the economy. The events of September 11 were catastrophic, but the economy itself soon performed as if nothing had happened. What factors are the real drivers of demand for trucks and trailers, and what can we do to capitalize on those factors?
Customers buy because they need to, and they generally need to because their business is improving. Based on the American Trucking Associations' Truck Tonnage Index, trailer customers hauled more freight in July, the first month-to-month increase since March. It may be too early to tell if this downturn is over, but it isn't too late to learn from it.