Sept. 1, 2008 – ARGO looks to improve in 2009

By Steve Bauer
Managing Editor
WELCH, Minn. — With the major transition from being a distributor-only company to one that is now dealer-direct, ARGO director of U.S. operations, Joe Klosterman, admits there have been some bumps in the road during 2008.
“Up until last July, we only had 11 customers, which were our group of distributors. So going dealer-direct and adding 140 dealers we had a chance to experience some growing pains, and we certainly did,” he said. “It’s better to have that than have shrinking pains, which no company ever wants.”
Back orders, slow shipments and parts availability have plagued the company since it shifted operations in 2007, but ARGO has committed to industry-leading dealer programs, increased advertising and customer incentives for 2009 and beyond.
One of the biggest challenges ARGO has faced is the fact that not enough dealers are stocking parts for customers, something Klosterman says is vital to the company’s continued success.
“One of the big concerns that our 11 distributors had when we went dealer-direct was that the parts service to the consumer would go down,” he said. “They were right. We need to do a better job of that. They need to stock more parts, and we need to ship them to the dealers faster and at a better cost.”
Parts order volume has increased from 200 per months to 450 this past July, and the number of the company’s U.S. shipping locations has increased from 11 to approximately 140. Klosterman says to prevent future errors in the company’s shipping process, it has hired additional staff to help with its parts operations, and has also gone to great lengths to improve its computer systems to reduce back orders and similar shipment problems. The results of these changes have been encouraging.
“We’re also monitoring our fill rate on a regular basis, and for the month of July we reached a fill rate of 98.5 percent,” he said.
Klosterman acknowledges the changes aren’t going to happen overnight, but said the company is committed to fixing the problems.
“ARGO is a great product, but it’s a high-ticket, niche vehicle meant mostly for hunters,” he said. “We don’t have any new models for this year. Our focus was to add features to the vehicle lineup we already have, add important dealer and customer incentives and overall make our product better than ever.”

Solid numbers in a slow economy
Despite disappointing numbers from several segments of the powersports industry, ARGO has reported impressive growth in both 2007 and 2008, due largely in part to the efforts of its dealers.
“Based on my contacts in the industry, last year ATV sales were down 14 percent. The UTV market was flat vs. the year before. But for ARGO, however, U.S. sales were up 12 percent vs. 2006,” Klosterman said.
Klosterman adds that in his opinion, the ATV industry will slide backward this year another 15 percent, and the UTV segment will still remain flat. ARGO sales, meanwhile, have increased 6.5 percent.
“ARGO (consumers’) household income is $118,000 per year, and although they feel the economic pinch to some degree, they still have the income to purchase our vehicles,” he said.
Klosterman says one of the most important lessons he has learned during his time in the powersports industry is that regardless of the current economic conditions, that things are never as bad — or as good — as they might seem.
“I’ve been in this industry for more than 25 years. I’m not an expert on the economy but I can tell you one thing. I’ve been through three recessions, three economic upturns, eight presidential races and there have always been ups and downs,” he said. “No matter how great the economy is, I can assure you of one thing, it will peak and then start to taper off. We really don’t know if we have bottomed out yet, but we are getting close. And remember this is an election year, and no matter who is elected this November, the economy will start to turn around. This type of turnaround has happened the past eight elections and I predict it will happen again.”
New customer, dealer programs
One of ARGO’s biggest areas of concentration for 2009 and beyond is the commitment to enhance its customer and dealer programs. For example, ARGO customers will now receive up to $800 in free accessories, plus a three-year engine warranty and financing offers like no down payment, no payments or no interest, or optional financing of 6.9 percent.
On the dealer side, ARGO is taking several steps to ensure its dealers don’t pull back on advertising the company’s product.
“Some business owners in times like these are tempted to pull back on their advertising budget, and that’s a huge mistake,” Klosterman said. “This year we are giving dealers up to 3 percent in their co-op fund, which to my knowledge is the most given in this industry.”
Another way Klosterman says its dealers can promote the company’s product is to attend as many consumer shows, demonstrations and parades as possible. To help with the cost associated with these events, the company is offering dealers up to $1,200 for the cost of these shows.
Finally, the company is also giving dealers what Klosterman believes is the longest free flooring in the industry — 180 days.
“We’re also offering ARGO salespeople a $250 bonus for selling our product, which is $50 more than what we offered last year,” he said.
Increased national presence
One initiative ARGO believes is vital to the company’s long-term success is an increased presence on a national scale. To that end, ARGO plans to increase its national ad budget for both print and TV.
“We will be at even more national and consumer trade shows than ever before,” Klosterman said, “and we now have an exclusive partnership with Ducks Unlimited, which will gain us even more national exposure, especially in the hunting segment.”
Klosterman admits that although ARGO is still a small player in the market, the opportunity is there to capitalize on a unique segment of the industry, and the company is fully committed to strengthening its position in the marketplace.
“We’ve had some bumps in the road, but we’re in this for the long haul, and dealers and customers can both expect very innovative products and programs from ARGO in the near future.”