As a Central-Pennsylvania site-prep contractor, Barry Schlouch learned that price competition might make you cheaper, but after a certain point it doesn’t make you any better.
So when he and Schlouch Inc.’s chief operating officer Don Swasing wanted to encourage their Cat dealer, Giles & Ransome, to help bring honest innovation to the contractor’s equipment operation, they called meetings with the vendor that had two rules: 1) bring a $100,000 idea (one that could return $100k to Schlouch’s bottom line); and 2) the only idea you can’t suggest is cutting prices.
“When you start with the price, it locks out a lot of ideas. They try to figure out how to get you to buy based on a number,” Schlouch says. “It has the potential to block discussion of solutions that are a completely different model than what they’re already pricing. We’re trying to get their creativity. At some point we gotta get to the price, but we don’t start there.”
It’s a practice that has kept conversations focused on long-term value for the contractor. Schlouch’s $100,000-idea meetings have resulted in investments in hybrid excavators that are on pace to reduce ownership and operating costs of 80,000-lb. hoes by 5%, and replacing a 10-ft. asphalt paver with an 8 footer to do the same work at more than 10% lower cost.
The idea has evolved over time to include releasing the vendor from having to deal with one of the typical deal’s other creativity-choking boundaries.
“We have a capital budget for what we’re going to spend on equipment early in the year, and we let the vendors know early what we’re going to spend and generally what kind of equipment we’re considering to give them a chance to get creative,” Schlouch says. “That’s pretty enticing, compared to, ‘Hey I need an excavator. What’s your best price?’
“Instead, we’re saying, ‘Is there a better way we should be looking at investing this money?’”
The shared vision that has grown from the effort of changing the way Schlouch works with Giles & Ransome has not only made the contractor more competitive, but important benefits have accrued to the dealer. They've earned desired margins on every deal, and maintained or increased market share.
Rewards on both sides of the table have fueled creativity that has taken the process to new heights.
"We've discovered opportunities that I'm sure will be million-dollar ideas as a result of coming together as one team," says Swasing.