Alex Kraft covers the opportunities in the world of equipment sales

The customer. I hate those guys. It's really something. They make everything happen for us. Everything. They pay for our kids' education, our clothing, our house, our food, everything. And for the most part, we don't really know who the heck they are. We know their name. We know their address, their phone number. For the most part, unless I've been working with this guy for a long time and have a relationship with him, I don't know how old he is. Is he married? Has he got kids? What are his hobbies? What's he like? Doesn't he like? Does he like me? What does he want from me? Right. That whole customer experience, we kind of seem to have left that at the door. You work the way we want you to work.

They expect too much as well.

Oh, gosh, yes. What the heck do you want that for? What do you need that for? Well, get out of here. It's really, and it's been that way. I started in 1969, just for the record. And it's been that way ever since the beginning of time. We started with territories that were counties. And nobody really knew how many customers were in that territory and how many customers a salesman could look after and what volume we wanted to stop at. And some of the experienced guys, and I'm giving a little, setting the table a little bit. Some of the experienced guys,10,20,30 years, don't tell me how to do this. You know, like you said, the last podcast we had, I sold $15 million last year. I'm okay. Well, quite frankly, he's not going to want to necessarily sell 16 million. It's too much work. He's already got enough money so I can coast a little bit. So with that as the starting point, this customer experience, the needs and wants of the customers, where do we go with that? How do we get traction on getting people to pay attention to that? That's a big question. Just a small question.

That's a big question. You know, I think just keep talking about it. It requires a lot. I think why this is difficult is it requires a lot of self-reflection. And I was talking to a dealer principal a couple of weeks ago. And we all know that the market today is extremely hot. Nobody has any inventory. And this dealer principal was telling me, he's like, you know, we're having a great year. But the problem is, is that our people are walking around like. You know, it's because of what we're doing and we're not doing anything different. And so I think that's the big challenge is that you're right. It requires a lot of self-reflection in order to kind of whiteboard it and say, hey, what is our customer experience today? And I think it will come from challenger brands. It'll come from, you know, OEMs slash dealers that aren't in the top market share position is typically because. If you want to improve and you want to get better, you got to take it from somebody else. And so you got to figure out a different way. Because if everybody does things the same way, the market share will remain the same.

It's rather remarkable. It's Joel Barker, who made famous the word paradigm back in the 80s, I think, said that the market leaders, they don't want to change anything. They've got it figured out. It's the second and third and fourth place people that come. So if you look at our equipment world and you put Caterpillar and Deer together and you add their market share up, you're looking anywhere from 60 to 80 percent, depending on the territory. That doesn't leave a whole heck of a lot for everybody else.

No, it doesn't.

So, you know, the Barker example is, you know, Pepsi is the real thing or Coke is the real thing. Pepsi challenge. And on and on we go and all the way down the line. So here comes, you know, one of the exercises I used to do with dealers is we'd get all, for instance, all the parts people. And we have a session, we spend half an hour to an hour, just write down all the things you think the customer needs and wants from us. No editing, nothing, just make a list. And after we had the list up there, we'd go back and, okay, well, this is kind of the same as that. And we'd group them. And then we'd take. What's the best? What's the biggest need? What's the highest priority? And we'd rank them. So at the end of that session, I got five things that the parts department employees believe that the customers need and want. Month later, next meeting, we'd bring in half a dozen customers, do the same thing in reverse. The customers write down their things. We'd whiteboard that. Not editorializing nothing. And then we'd lump them together and prioritize them and thank everybody and we'd go away. The third session was discussing the differences between those two lists. And I never, ever had, the first time we did this, I never had alignment. After we did this three to four, we did it every quarter. After we did this three or four times, the alignment got very good. And guess what? business got better. It's a real surprise. You know, you satisfy what the customer needs and wants by people who know what they need and want. The customer, that makes the customer happy. That improves the customer experience.

Yes.

And that's a very good. He does the same thing, does it? In an a personal way at a screen level.

Yes, we are completely focused on, we started with. How can we make an easier experience for customers getting quotes for equipment? Because I knew personally how difficult it can be.

So let's stop there. The very first question you want to answer is how can we improve the customer experience in getting a quote?

Correct.

Okay. So there's somebody in a dealership anywhere in the world should be thinking about that very thing themselves.

Yes. I thought of it when we were at Flagler and this was, I do, I'm a big believer in this as well. We were not the highest performing dealer for a long time, but that was incredibly valuable for my professional experience because like you said, John Deere Cat makes 60 to 80%. They don't really have to maybe think of many new ideas,

but nobody was

beating our door down at Flagler to buy a vault. Even our existing customers, I felt like we had to scratch a claw for everything. And so we did that internal audit of, all right, if we want to grow our market share, which we have to do, it has to come. What can we put in place? And we actually had implemented some tools internally at Flagler that helped our salesmen be more responsive to customers for quoting, which is ideally what he grew from. Because I would see, so you'll appreciate this, you know, dealers hate CRMs. Yes. And it was always the, that internal struggle, but our quoting system was, you know, part of our CRM system. And when I was elevated to chief operating officer at Flagler, you know, I, I observed, I like to observe. And I saw our sales, too many of our salespeople come in off the road. And they would sit down at computer terminals and they'd be there for hours. I'd go to lunch and they're still there. And I asked them, what are you doing? Quoting this deal. And you get to the point where you're like, okay, if you're quoting a deal, it takes two hours. And it's a normal deal. We have to get you in front of customers because ultimately that's how you make money for the company and for yourself. And we got to the point where we're like, Stop trying to fit that square peg in a round hole. Salesmen don't like CRMs. CRMs are cumbersome. It doesn't do us any good to keep having CRM trainings. They don't like to do it. And so I got with our head of IT at the time and we found a company that builds online forms and we created an app. that we used internally where a salesman could meet with a customer, click the app open. It was very basic. Answer those basic questions, customer, what they want. And then it would come in and we had hired somebody young and they would just take the inflow of basically quote requests from our salesman. And then that person was in our CRM system every day, turning around quotes, sending them back to salesman in a PDF so that they could just be much more responsive to customers. And so, That's kind of where really the idea came from is like, hey, we kind of did something. Could I do it on a grander scale? Because Ron will never believe this, but our salesmen were quoting faster, more responsive. We quoted more machines. We actually grew our market share. Unbelievable.

Pardon the way this is going to sound because it's much more complicated. It's a numbers game. The more people I can see, the more people I can qualify, the more people I can quote, the more people that will buy. The challenge is always, how do I use my time as a salesman more effectively? And as you and I know, you start the first year or so, you're wondering what the heck's going on here. Yes. You get information and experience from other people. You don't know whether that's any good or not, but you listen to it respectfully. And then you come to your own conclusions. And the company gets the results that they want. congratulations, we're going to do a budget for next year. And what do you think? Yeah, three to 5% increase. You know, it's amazing when you really think about the industry that's been around 100. I think Volvo is the oldest manufacturer on the planet, and they're in the 1860s or so they started. So for 150 years, let me call it, we still don't really know what the heck we're doing. Yeah.

And you use that term. It's a numbers game. And it is. And people in this industry are like feel so they they tense up when that it gets mentioned because the natural the response. Well, no, no. It's a relationship business. Yes, it is. Relationships are formed. But it's just an immutable fact that the more quotes you put out. The more customers you see, the more prospecting you do, the more machines you will sell. And I don't know why the industry struggles so much with that phrasing and that terminology. Because the other thing too, the flip side of that is, if you're spending that much more time on each individual customer and deal, you put a tremendous amount of pressure to close all of those damn deals. And what's to prevent, and that's a lot of those internal discussions at the Flagler that we had is that you have to diversify your customer base. Because what happens if Caterpillar wakes up one day and the cat dealer says, you know what? Tired of losing deals to waste management. We are going to bomb our price on the next X amount of waste management deals. What happens then? If you put all your eggs in this small basket, that whole, philosophy.

It's been a fact of life through my generational career. When you look back in history, and it's important to do that in my mind, and you go to the pre-World War II,1938 and earlier, I think there were 11 companies that manufactured tractors in the United States. And essentially, All 11 were kind of plus or minus five points of market share across the year. 1946 comes around and Caterpillar is 30 to 50 percent bigger than everybody else at the end of the war. Caterpillar strategically got the tank contracts and got the undercarriage contracts. So every GI that was out there working in the Corps of Engineers or all of the work in building, et cetera, was trained with CAD equipment. and they come back. Okay, so there's a disruption. And then we come forward in the 60s. All of a sudden, the families of equipment that's available in a dealership, it's no longer just a tractor. Now it's a loader. It's an excavator. It's a loader backhoe, blah, blah, blah. All of a sudden, we didn't have time to look after any of it very well. So we needed one process that all of this stuff can go through. Well, the guy that's buying a skid steer is very different than the guy that's buying an excavator. You approach them differently. They need different things. They need different information. And if I'm going to be a one size fits all guy, which most of us have become, I'm only going to get what they're going to give me. Not what I deserve, not what I earn, but what they're going to give me. I hate being dependent on somebody else for my success. And I think everybody does for that matter. We're all control freaks at our soul. How can we overcome that? God knows. But if we use the excuse of the customer, the reason I believe the reason that sales and salespeople don't want that to be the driving force and why CRM is a problem, they don't want to be hung up on performance. Parts and servers, we're lucky. We don't have market share calculators. We're given a pass. The equipment salesman in his territory, I mean, we know to the fourth death one place how they did. Yes. And I've got a whip in my cupboard if you don't do well enough. And as a matter of fact, I got two or three of them. They get stronger as your performance goes down. That's kind of the way that we've managed the salesman, isn't it?

Absolutely. And that's you've touched on. We are afraid of talking performance. And there's so much there. That's why it's so critical to really try to understand how is our customer experience? What do customers... I read a great book recently. It's by Clayton Christians. Let me grab it. And I think you would love it. You basically touched on all of it.

Clayton's a, I'm a big fan of Clayton. He's an unbelievably special man.

It's the jobs theory. I don't have it in my briefcase.

Yeah, don't worry about it. I know what it is. Clayton, Clayton was a, he's an amazing person with a couple of PhDs and completely disparate subject matter. And on top of being a wonderful mind, he's a hell of a teacher and communicator. So make, make your point. What was he?

It's understanding what job the customer is hiring your product to do. And it is different based on the type of customers, right? Almost. So when we started Heath, what I came to understand pretty early on is who our target customer was contractor wise. And it was a compact equipment buy. Well, why is that? And it's because those are the customers that traditionally don't have established relationships with dealers. They don't buy on a certain frequency to where they're getting salespeople to call on them all the time. A lot of them are owner operators. And so they don't respond well to the, hey, show up on the job site. Well, I have a crew of three and we're in a trench. I don't have time to get out of the trench for you to ask me. Did I go fishing this weekend? Do I like Gator football? And hey, do you need anything? No, I'm working. And so those customers are hiring Heave because they're working every day and it's also hard for salespeople to reach them. They don't have an office location the majority of the time. They list their house address. So they're hiring us. And I call all those customers as well when they place an order. And most of them, eight out of 10 say, you know, I called such and such dealer like three times and no one will call me back. They're hiring us. They're hiring Heave because they can't get a hold of it. They don't. And here's the numbers game too, is that in Tampa, the Tampa area, there's almost 4,000. Customers who have bought a compact machine in the last two years in the four counties surrounding Tampa, we had two salesmen covering that area at Flagler. Maybe Kat has six, but still, how do you stay in front of 4,000 customers of that few? So I understood that dealers and salespeople are hiring Heave as an alternative to cold call. So understanding the job that people are hiring is so important. And dealers have to better understand what is the job that a contractor hires us for. And Archer Western, a huge company, is hiring us for a different job than the smaller landscaping contractor. And that is a very necessary analysis. And it's strategy, too, to go through that exercise.

It's fundamental marketing, actually. It's market segmentation. It was perfect there, Alex, that you identified the skid steer market as your greatest opportunity to start. And if you look at the profile of a skid steer owner, he typically is the owner operator. He replaced a shovel. The first time Bobcat buyer has never bought a machine before, typically. It's a brand recognition business. Caterpillar tried hard to displace Bobcat. They didn't really make a dent. They had their traditional customers that I want to have one source of supply, so I'll buy the skid steer from you as well. But then to simplify the process, okay, I don't know what to buy. It's, well, I'm going to buy a Kleenex. The brand skid steer is Bobcat, so deeply embedded in everybody's mind. OK, nobody really knows about the Caterpillar, John Deere. Oh, Volvo left that market. You know, the whatever the heck it might be. It's it's so market segmentation is critical, isn't it? It is.

And it's and it's deeper than like and this is something I would love to explore, maybe further conversations or further article is that. Marketing is so surface level in the dealership world today. It basically is, well, hey, let's just pay money to show up on the first page. It's not understanding. Yes, brand recognition and name and awareness of your name is important. But if you don't have the capability to interact with customers. And to respond quickly to what their needs are, it's all a kind of a waste. You know, markets that understand, like we talked about, understanding why they would rent or buy from you, what their needs are. You know, that's all very critical.

The part of marketing, and yes, please, you know, if that's something that excites you, let's get a blog over to us. Marketing, from my perspective. And the way that I teach it is marketing is the tool that explains and exposes anything and everything that we do to get the customer to buy. And in my view, it starts with market segmentation and that's size and industry. You know, the number of machines they have, the kinds of machines they have, the parts relationship, the service relationship, how they pay their bill, blah, blah, blah. And then establishing a territory. I don't think we have a clue. If we don't use segmentation, which very few people do, and by the way, that skid steer example, the Bobcat dealer in that area maintained a 50% market share until he ran into the financial difficulties in 2008. And Rick's a good guy, but Melrose knew how to do it. And everybody tried to copy that type of circumstance, not realizing that the closer parallel, Alex, in my opinion, for the skid steer is the car dealer, not the equipment dealer. A lot of these guys go on the weekend and kick the tire. It's, you know, so yeah, marketing is a huge subject. So yeah, here's my internet presence. Here's my webpage. I look like everybody else. Congratulations. When this started back in the 80s and we had storefronts from different dealers, they almost all looked alike. And then the next thing they had is what I call the Seinfeld, the yada, yada, yada. These are all the things that we're proud of. Hey, wow, look at this. Look how good we are. And like you say, I don't even know who the salesmen are.

Correct. And it's so funny. I have yet to find a dealer, either an ad or a website or wherever. That has every dealer says they're the best in service. Award winning, industry leading. We're the best in service. And our machines are the most efficient. We burn the less fuel. It's like it's all the same. It's impossible to stand out now. But it's not. Here's why you should embrace new ideas, because if everybody's doing this and it's all the same, then if you're. Now is the time to explore some different things. Let's explore an easier way for our customers to get quotes or order equipment from us. Let's explore some technology to make the service experience. Can customers easily schedule service online on our website? Or can they text parts orders? Now is the time. Take advantage of everyone just talking about the same stuff.

the Internet of Things, IOTS and SAS and other, we have many, many applications that answer just about all the questions that an owner of a machine would have or an operator of a machine would have. But we haven't integrated them. So we got a bunch of silos that, you know, I got to get up and look over the wall before I can get to the place of seeing this. However, We are at the place, as Metz Kramer says, I should have the data in my system that says customer George bought a machine in 2016. It now has 13,000 hours on it, and it's costing him this much per hour. It's time that a salesman gives him a visit. Every dealer on the planet has that data. I don't know a handful that are using data that way.

Yeah, there's a problem, I think, because every dealer has 12 different systems. And everybody tries to do this, like, all right, well, I've got to download that into Excel. And then I've got to do all this manual effort to get the information to a point that I can actually act on. You give a great example of Mets, where it's like, if anybody's bought a car in the last three years. Like you're, you get a text message at some point where the dealer's like, Hey, we'll give you X amount of value and we'll reduce your payment. If you just buy a brand new one, you know, they're all, they've all created this funnel and it's automatic where they're trying. It's this life cycle of, all right, if we can. help get him out of it one year into a brand new. Now we have a used car that we can sell for higher margin. We have this population that buys used and it's just this machine. And equipment dealers don't have the machine going. Everything is silos. Everything is five different systems and they can't act on the information.

And we do not have the... the Chrysler, Lee Iacocca, who's going to bring us a Mustang, or the Eon Musk, who's going to bring us the electric car,

or

DeLorean, who's going to mess up the whole world, who's going to lead us to the promised land. We don't have any disruptors that are out there making a huge impact. In the manufacture of vehicles, yes, Musk has made a huge dent. Through government subsidies. It's kind of interesting. Take those subsidies away. It's a different story. And we need that with the customer experience. We aren't getting it. But part of that is we're comfortable where we are. It's that $15 million salesman. The owners of most of the dealerships out there today are making more money than they ever dreamt they would make.

Yeah, that's the problem. And I think that's where the dollars involved. is creates this environment. And like, I used to see it all the time where, cause like we were a Volvo house. So articulated haulers were our big product. It's a recognized market leader from the customer side. Volvo trucks are, if not the best, you know, top two or whatever. And so it was like a major attitude change at Flagler where it's like, Hey, just because somebody had 5 million in sales, doesn't mean he did a better job than the guy who had 2 million sales. Because if the one guy with 5 million just sold 10 trucks and the guy who did 2.5 million sold 60 machines, a compact, he covered his territory better. So the dollars involved, I think, lend to that status quo, that you're not pushing to improve. Because yeah, you could cover, Six months of inactivity with one deal.

It's intriguing and it opens up so many doors to a room that, you know, one of the doors is how we pay them. Maybe we should pay everybody a salary, you know, versus a commission. You know, it comes back to everything, yet the point that comes backwards always is the way that you describe it. It's the customer experience. And we have not got sufficient focus on that. And I, you know, at times I always characterize myself as I'm like a mule in a tin barn making a lot of noise. Not, you know, a lot of people can hear me, but how many are doing something about it? I thank you very much. I think this has been a very helpful discussion for everybody, forcing people to reevaluate that customer experience. What do they need and want and how good a job do we do in satisfying that? Is that kind of a good place to end on this one?

Yeah, I think so. And it's, I think the other thing to mention about it too, Ron, is when you go to customers and you ask them about their experience with you and you try to kick things around and you actually do something different, they really appreciate it.

Oh, absolutely.

You know, so everything is there. It's just, can we get enough people to try to do something different? And just because somebody buys something for you doesn't mean they're satisfied.

No, that's exactly right. One of the things that I've always said is, you know, our customers are the whole thing. It's everything and anything that we ever wanted to get, they provide. But there's a responsibility we have to make sure that they get what they need. And it's not providing a machine. It's providing a tool that digs a hole or a trench or whatever it might be. It's not the machine. It's how we support the machine. It's what we do to keep them happy.

Right. And I'll give you rental as a great example. I could rent a machine to you and it looks great. We just invoiced $10,000 of revenue because you rented the machine for me. What I don't know, what we don't know as a dealer was I might have been your fifth call. Because the first four guys didn't have it. Does that mean that I, but no, if I give you a great experience, if I show time after time that when you call me, I immediately respond. We get the machine out there by the end of the day. Or, you know, if you called me on a Friday, we got it out there so you can start work first thing Monday. That's what matters. Like that, that is an excellent experience as to why you're going to rent for me again. And it's not because of necessarily a rate or anything else, but it's that's why you have to care and why you have to focus more time on what is our customers experience? Do they do they enjoy dealing with us or is it a pain? You know, do you know, are they only dealing with us because the other guys couldn't supply it?

Alex, thank you very much. I think this has been a very informational. Very informative discussion. And I'd like to thank our audience for tuning in and listening to us again for another candid conversation. I look forward to seeing you in the near future. Mahalo. Thank you for listening to our podcast. We appreciate your support. Should you have any thoughts or comments, please don't hesitate to contact us at www. learningwithoutscars. com. The time is now. Mahalo.