Redefining the Value Chain

Dec. 1, 1999
Over the past several years, the diamond blade rental business has been redefined, and many industry suppliers have been caught off guard by new specifications,

Over the past several years, the diamond blade rental business has been redefined, and many industry suppliers have been caught off guard by new specifications, price points and marketing opportunities. And just as suppliers must embrace change, rental centers must recognize changes in the value chain as they relate to customer service and satisfaction.

Diamond blades have traditionally represented a significant source of profit and revenue - rental centers can nearly triple their return on investment with every rental. While many diamond blade rentals carry a minimum charge, this is normally surpassed once the cutting begins.

Today, as rental businesses look to create customer loyalty, product profit margins alone can no longer measure success. After all, a product's profitability does not reflect the profits generated by maintaining and cultivating a long-term customer. These changes represent a significant departure from business-as-usual for most rental companies.

Manufacturers of diamond blades continue to improve their specifications, and it is those changes that can truly benefit the customer. It is important to remember that a rental is a starting point from which the potential for a customer to purchase the product is fostered. Many diamond blades carried for rental and sale are more specific than required for the jobs normally associated with the average rental. This is a carry-over from the days when specific blades were required for the cutting of specific materials. Carrying a wide variety of blades makes them costly to inventory.

Today's diamond blades are, generally, designed to cut a variety of materials. For example, dry concrete blades will also cut wet material, and asphalt blades will cut green concrete and even abrasive brick.

Understanding the general ability of diamond blades allows rental centers to inventory blades that cut several ways. Manufacturers can help rental companies reduce their inventory by more than a third by showing how a single blade can perform with different materials.

Some jobs do require specific blades designed for cutting specific materials. However, most blade manufacturers keep these blades in stock and make them available for overnight delivery. It may be cheaper to have a blade shipped overnight than to stock it in hopes that a customer will request it. However, by partnering with suppliers, you can react immediately to a customer's need without carrying excessive stock.

Rental centers can provide a value-added service by working with diamond blade manufacturers to find the best mix of products to meet all the cutting needs of their customer base. However, first it is critical to understand and define your customer base and the equipment that you carry to support it. Stocking high-performance blades makes little sense if your inventory includes only 8- to 13-horsepower saws.

Manufacturers of diamond blades are also in the best position to provide the necessary training, application information and marketing support materials to make sure that the right blade is provided to the customer. Easy reference materials can be used at the counter to specify the right blade and are critical when the base of knowledge for products at the counter is limited.

Also, manufacturers should continue to provide the necessary training to solidify a positive rental or sale of a diamond blade. Many manufacturers offer in-store training classes at their location. These opportunities to educate employees will ensure that they take ownership in the product.

A complete review of a rental center's inventory is necessary to be certain that the right blades are in stock for every cutting requirement. Getting the product mix right is critical to increasing rentals. When possible, rental centers should stock multipurpose blades that can be used either wet or dry. These will make certain that inventories turn more frequently and provide greater flexibility in application.

Manufacturers can also provide market price inputs. Rental centers should be aware of the right price points. Also, if you lose customers, you should look to see what products they are renting or purchasing if they have taken their business elsewhere. This opportunity is a new way to explore your customer's buying habits and to attract those dollars that are going to others by having the product available in your location. The focus should always be to develop your customer base and ensure that you are not losing revenue and profits because of a narrowly focused approach.

Using this approach for specifying the right products also requires that rental companies look closely at the marketing of the product. Key to any sale is ensuring that the customer can obtain the product again if the need arises for the same type of blade.

Information permanently marked on the blade, such as the specification and the phone number of the rental company, will ensure that long after the blade is worn out, the customer will know what to order. This information should be located inside the collar/flange area. Also, a color key can help to provide a visual presentation of the application for those counter people who are not familiar with manufacturers' specifications. This color-coding should be tied into marketing information that can easily be referenced at the counter or on the package.

Counter sales are also an untapped opportunity that provide a significant way to increase sales to customers who use diamond blades. The placement of bulk packs or display racks at the counter can generate sales of a small-diameter diamond blade or diamond cup wheel. This approach is similar to that used at the grocery checkout lanes to entice customers to purchase additional items. This too is a means to increase the average ticket transaction and sales at the counter. Customers looking to rent other products may be convinced to purchase by the proper placement of products at the checkout counter.

Last in the value chain is that you must define your warranty policy with your manufacturers. The proper time to address warranty issues is not when an unhappy customer is standing in front of your counter. Your policy should be clearly stated to your employees and should reflect a company-wide commitment to handling the customer and his purchase or rental appropriately, and to guarantee that the customer walks away with the feeling that his concerns and needs have been addressed. It is important to work with manufacturers to ensure that problems are handled in a way that will support long-term customer relations.

While many of these changes in the value chain are a shift from the traditional way products are offered in rental centers, they provide the opportunity to further garner a customer's confidence and develop buying habits that will lead to healthy margins. This broadened view of the value chain is being driven by the dynamics of the market and the needs of customers who rely on rental centers for more than just the rental of products.