Debbie Frakes from Winsby talks about engagement and market coverage in the equipment market and the impact on customer retention.

It's kind of strange. You're just outside Chicago?

And I'm just outside Honolulu, and it's bright sunshine day where you're at, and it's always sunshine here.

I love Chicago, actually, except in the winter. I'm not a cold-weather person anymore.

Tell me about Winsby and what you do within your team. It's intriguing to me.

Yeah, exactly. So you get data files every month?

And you run it through systems and algorithms and come up with a series of reports?

It's remarkable. I don't believe. that the dealers are particularly engaged. I'm going to use that terminology, engaged with their customers. The equipment salesmen typically have to go out and find deals. The parts department, the phone rings or somebody walks in. I don't know very many parts departments that call out. Same thing's true for the service department. For the most part, it's also true for rental. So how... I guess what that means is that you're providing triggers to your customers, you're the dealers, the business to business piece for them to engage with their customers.

So what triggers do you use for the customer satisfaction survey, the satisfaction with people that you call? You can't call everybody in a month. What's the trigger that you use? Is it a buying pattern change?

Yeah. The customer grouping.

just like randomly.

What are the main reasons customers are, what are they saying that the dealers should do better? What do they want them to do better than they're currently doing? Like, I think that's one of the things that you ask, right?

There's nothing, there's no major theme.

It gets personal.

It really is a relationship business, isn't it?

course. We're people first, right?

The fact that it's so random is confusing to me. Although I suppose it's a reflection of the fact that everybody does things just about the same way. The business systems that people use are pretty much delivering the same thing.

And so it becomes almost a routine that the customer has been trained, no matter what brand they go to, it would be the same series of questions.

Now, retention is something else that you folks focus on.

What are the major reasons you're finding before we define it? What are the major reasons you're finding for customers defecting, leaving? Are there any commonalities there?

It's amazing to me. One of the things that I found over the years and has been written a lot about is sometimes customers defect, even if it is strictly an impression that the employee didn't care or didn't do the work. An impression, not an actual fact. And that always brings me back to defining customer satisfaction, the difference between the expectation of what they want before they get it and the perception of what they got after it's done. As dealers, we don't know any of that. And that's essentially what you're trying to... test with those calls.

No, it's almost like they're embarrassed about it. Yet, they'll share it with all their friends.

That's another truth about business. We might not know that somebody left us, but everybody that that guy knows or gal knows knows that they left us. Yeah. The statistic is they'll tell 11 people for every one bad experience. It's some number like that. It's obscene. It's serious.

Yeah, typically they don't. It's a really strange phenomenon, Debbie. People don't want to hear about your successes. Yeah. But they'll listen all day long to your failures.

It makes them feel better about themselves that you're struggling. You know, I feel a little better about myself because you're struggling. Damn.

So with the customer, the dealer then calls people that you recommend, or do they at random go through those reports themselves and call?

Do they, does the dealer call you back and tell you what, or do you follow up on those?

Why would a dealer not engage you to do this work? Do they think they know how to do this themselves?

Does it start that? That high, Debbie, when a client signs up with you and you start the surveys and you start the analysis, does it instantly start at 20 or does it have to grow?

Yeah. It's, it's, it's, it's intriguing. I don't know data analytics and corporate databases and, and. data warehousing and all of the stuff that goes with it. Everybody's got all manner of voluminous historical files.

Yep. Yep. We did in the years that I was involved with the AAD, every five years, they would do a customer survey and Randall Publishing and some of the other houses got involved with them. What was particularly interesting to me is the defection rate in the service department was 15% per year.

Most of the large customers have their own mechanics. Yeah. They don't deal with the dealers in the first place.

Most of the small customer, the owner-operator, the one-to-three machine guy, do their own work. So it's the pool in the middle. I'm going to call it the unwashed brethren, you know, that it's very hard to statistically measure that.

Yet life cycle statistics today, we know what the consumption is going to be in parts and service over the lifetime of the machine. We know what the effect of life is of the machine. Right. Dealers still don't manage territories that way.

is bizarre. And then back, I don't know, this is maybe 30 years ago, a company called Equipment Data Associates, and I think Randall Publishing has since purchased them. They started with UCC filings

would send it out. And they did it by county. And you could get 20 years of that, Debbie. And, you know, the name was a bit of a problem because of formatting. But if you bore it into that stuff, again, market coverage and engagement was a serious issue with dealers.

Is there anybody else doing what you do?

Neither am I.

Do you do specials at all or are you just communicating?

Yes. Yeah, and now with telematics and sensors all over the place, we get early warning on what we need to do. Stop that machine because you're going to blow the engine.

So just communicating with the customer, explaining or exposing or reviewing what the dealer does without any specific hook, program, benefit. campaign, nothing. It provokes more business.

Yeah.

Another question is crafted, how it's delivered, the content of the email, all of that stuff's critically important.

Oh, I don't want to talk to him. I remember the last time I talked to him. Oh, boy, that was bad news. So how do you attract customers? How do you get an account, a new account?

Is it also the customer or is it just the dealers? Do any customers come back and move towards you and say, hey, wait a second?

And typically from a, you know, how long have you had clients? How long do they stay with you? Is it indefinite?

Has that changed over the life of Winsby? Are more people outsourcing, quote, marketing?

And in other words, the dealer doesn't want to outsource because they feel they'll lose control of it.

Well, marketing is something, you know, too many people think marketing is brochures and trade shows.

That's not what marketing is at all.

Yeah, it's anything and everything that influences the customers to interact with you.

And, you know, it's the same thing with a lot of, oh, we know how to do that. We've got that under control. We're okay. We don't need your services. And they haven't really, I mean, it's almost. risk averse. They don't want to know what you're going to tell them. They're afraid of the result. Intuitively, they know they're not keeping their customers.

Yeah, that's all part of the continuous improvement process, too.

Yeah, capacity constraints are interesting. You make the comment that, you know, we've got so many factories. We've got so much we can build. Why am I messing around building these things that I don't make very much money on? Why not these things that I'm making money on? And for the most part, as dealers, we don't think that way. You know, as a dealer, the OEM is supposed to provide us everything we want whenever we want it and everything's cool, but they don't understand the constraint the OEM has, the manufacturer or assembler, whatever you want to call it, and vice versa. The OEM doesn't understand the constraints that the dealer is going through.

They're almost diverging rather than converging.

The other thing that seems to be happening, and maybe you can make a comment, a lot of customers are getting bigger. If I use the mining industry, there's maybe 10 organizations on the planet that cover 80,85% of the mines. Valet and Rio Tinto and that crowd of people. And contractors, the same thing's going on. Kiewit and Granite and Martin Marietta and some major, and they're getting bigger and bigger and bigger. So that the capital requirements, the money to support those big customers is becoming huge. So there's a smaller number of dealers. In Canada today, there's two Caterpillar dealers. There used to be 10 when I was there. Oh, wow. In Comatsu, there's one across the country. Deere, there's one across the country, and Volvo, there's two across the country. There's your four major brands.

And that's weird.

And, you know, your finning is now something like $8 billion a year in sales. Maybe they have 20,25% of Caterpillar's business. It gets interesting on how the relationships change. Peter Kiewit was negotiating with Caterpillar on pricing at the dealer level. You know, talk about restraint of trade. In Canada, Caterpillar and Ford made a deal that they would have a fixed price across the country. Of course, that was thrown out because of any trust. In Canada, it's called anti-combines. So serving the middle-sized customers, the big guys are going to be there and pretty much swing a big bat.

But the middle-sized customers, Without tools like you're using, I don't understand how a dealer can cover their market properly.

And yet Steve tells me it's inexpensive as heck to get started. Like $300 for the first store and $100 for every store. Other than that, it's something like that for his?

How is it from the surveys and the B2B work that you do? There's another charge for that, and I don't imagine it's very... It's

Yeah, I'm with you. And does the dealer come back and say, well, we can do that survey cheaper?

So why doesn't everybody use your services?

What's the matter with these folks?

It's something, you know, we deal with a bunch of different people. Foresight Intelligence and Dale Hanna has a texting. Every event that happens on a work order, a text goes to the customer. Or the frequency is determined between the customer and the service department. And what it does is it cuts out the customer calling up and saying, what's the status of my job? Yeah. And not being able to get the guy. So there's a couple of three phone calls. Here's a text. Let's go.

And that's another aspect of the engagement that you're talking about. Alex Kraft with his company, Heave. which is a notification process. A customer says, I'm looking for a machine. A salesman's registered and gets a text or an email that this customer is looking for a machine. There's so much now we can do almost automatically, almost robotically.

And I don't know that, like we're at the front end of a wave here with artificial intelligence and data analytics that's going to be scary. We don't know anything yet.

Data analytics and SEOs with Google, et cetera, and the reviews, Yelp, Dining, all manner of different things. You don't really have. When you're dealing directly with a customer, when you're doing it on behalf of a dealer, that's real. It's not artificial.

And the answers are real. It's not that I've got somebody on the side that's out there as a fake person. It's not a fake news event. It seems to be driving so much of the social media platforms these days.

Well, that starts, yeah, it starts becoming a game of fakes then, you know. That's the argument, you know, that Twitter and Facebook and others have gotten into or WhatsApp or TikTok. And now we're not sure of privacy and cybersecurity becomes a big issue now with all of these things. So if you get data files from dealers, that means you can connect to business systems that the dealers are using?

Is it a direct connection?

Is CDK one of them?

E-Emphasis?

Okay, Steve knows those things, right?

That might be something to have him write about the next time.

The connection with dealer business systems is important. And particularly now, you've got SAP, Oracle, JD Edwards, Infor, they're leaving the property, it seems. Xapt, D-I-S, which is owned by Constellation in Canada. CDK, which has now gone private. E-Emphasis, which is also going private. It's a very small number, and they all do the same thing. They've taken what Alex Schuessler, who was the founder of SmartEquip, was purchased by Richie Brothers. He calls it, they've gone from paper to glass. We've taken a form that we used to fill out by pen or pencil, six parts or whatever. Now we've got it on the screen. It's the same damn format. What if you fill it in with a keyboard? We haven't done anything on process. Does anybody say anything? Any of the customers say anything like that on their surveys? It's hard to work with them. It's cumbersome. It's old fashioned.

So it's almost standard practice. Yeah.

So e-commerce is still a very almost alien side of business, isn't it?

That's kind of weird by itself, isn't it?

We have electronic catalogs. We have electronic. So we have all of the service manuals online. You can see the diagram on there. You can drag and drop your cursor into a shopping cart. I mean, these things are pretty common, yet we don't do it.

Even for our own mechanics, we don't do it.

sure. There's always some.

I'm surprised the customers aren't. responding differently like that. Amazon sells John Deere parts now online.

So I'm waiting for John Deere dealers to start, you know, figuring it out and take, wait a second, I don't want to use, lose that business. Yeah.

Do you ever get into market share type studies for, on behalf of the dealers?

you think it would be beneficial uh debbie if you had an annual report that you sold to people that were The results of what you found over the previous 12 months or quarter, you know, a quarterly update, like a rental industry survey or economic surveys.

Have you ever, have you ever thought to do that?

Yeah, there you go.

One of the things that, you know, we're going through, you know, go back to January of 2020 with the beginning of the pandemic. Some people now are benching it at November 19. But in that 27 months since then, or I guess it's 30 months now, human behavior has changed. Buying patterns have changed. Investment in businesses has changed. Working habits have changed. Work from home has become a controversial issue. With the interest rate changes that we're seeing now with inflation that's going on, we've had business have a model almost since the early 80s when Volcker and Reagan killed inflation. And interest rates have been relatively stable and inflation has been relatively stable for 40 years. People don't know how to deal with what's coming up. They're getting us afraid.

expect tomorrow there'll be another three quarters of a point increase in the federal funds rate. So that'll be one and a half points in 60 days. That's pretty extreme. So it's scaring a lot of people. They're pulling their horns in. We're not going to hire anymore. We're not, you know, I got to reduce the inventory.

Are you hearing any of that type of noise in your service when you're talking to customers?

Is that something you think you should be asking about?

To the customer, is your business more successful, less successful than it was six months ago,12 months ago? Are you buying more now than you did then or whatever? There's some amazing statistics out of the last 30 months. You know, there's $4 trillion more in individual American savings accounts today than there was in January of 2020.

That's part of this income disparity circumstance, isn't it?

But also, you know, some other weird things that go on. I think the survey numbers, I just did something on this a couple of days ago, which is why I remember the number 68% of the people made more money during the pandemic than they did when they were working.

And today we've got something around 11 million job openings and somewhere around four and a half million people that are unemployed and those things. And, you know, there's some really serious changes happening to business. And I don't think dealers are looking at that at all.

And it's almost like they're continuing to do what they've always done. And yet at a time like this, the service departments always get busier.

New equipment isn't replacing old equipment. Old equipment is being repaired so that they can defer buying new equipment.

And you're not seeing any impact of that as yet in your surveys.

Are you seeing more of that in the last six months?

So it's become accepted. It's become accepted. Everybody's in the same boat, right?

Yeah. And, you know, it's interesting. My wife is having some work done on her car and the repair shop placed the order for parts two, three weeks ago. No idea when. Could be months.

And this is, you know, these are major brands. And being somebody who's been in the parts department or parts business most of my life, I don't tolerate that kind of stuff. You know, you can find stuff everywhere, always.

Yeah, it's unbelievable. So, again, the model that the dealers are following for engagement and market coverage hasn't changed. Without you provoking a trigger, without you giving them an email, without you giving them a list of customers that something's different on. Prior to you, they never knew that. They never did that. They never understood it. Fair comment?

The manufacturers you deal with, do they want to engage more with their dealers to try and... get onto that curve?

So it's mostly distribution channel people that you're working with at the OEM level, like packaging folks or finishing. Machine shops and that type of thing.

Engagement with the marketplace and market coverage is something that I think is so critical and we really haven't done anything about it. The salesman's the one. See if this resonates with you. I believe the equipment salesman is the one who determines the success or failure of the equipment dealer. And they do that based on their income needs. If they're making enough money, they slow down on the work. If they're not making enough money, they pick up the work.

Does that make sense from an engagement market coverage perspective?

So everybody's kind of satisfied with their market capture, their market share. Everybody's got to a balance and everybody's peaceful and everything's fine. I don't have somebody coming up like Pepsi-Cola challenging Coke.

In other words, the status quo is good.

That's why Xerox is almost no longer in business. That's why Kodak is almost not in business. That's why IBM doesn't have the laptop computer anymore.

Well, they weren't able to look after that aspect of the business and somebody else bought it and went on. Do you see any more competitors? Are you hearing from customers that you call that they're dealing with somebody other than the dealer more often now than they used to?

The other question that would be good is how much of their business is in interest. How much of their business is in interest? Yeah.

Yeah. How much of their business is in interest? Yeah. How much of their business is in interest? Yeah. How much of their business is in interest?

How much of their business is in interest? Yeah You know, Amazon Prime sells a subscription service. So you get free freight, you get access to television, movies, that kind of stuff. I believe the equipment industry is heading in the same direction, that we're not going to be selling parts, we're not going to be selling an hour of labor, we're not going to sell a machine. We're going to sell a service that will keep the customer profitable digging the hole. or building the road or emptying the quarry or whatever. It's not going to be about the product that we sell anymore. It's going to be the services that we provide. And that's a completely different game.

It's market share and labor, the high watermark, somewhere around 30,35% of the available hours. On to the brands you represent, the average is somewhere between 10% and 15%. That's in North America. Europe, the French Caterpillar dealer 30,35 years ago had one mechanic for every 18 to 20 machines. Oh, wow. They had thousands of technicians. Wow. So the market share was, you know,80 to 90% or higher.

which also means their parts market share is higher because your mechanic is the one that orders the parts rather than the independent. Right. It's interesting to me, although I haven't found a way to change this, but it's interesting to me that we can't get the status quo changed. People are comfortable with what they've done, and that's okay.

I know I don't I don't buy I don't subscribe to that human nature is we're competitive beasts. Otherwise, we'd be rolling around crawling all our lives. We want to stand up and get someplace right as babies. Yeah, don't don't individuals want to do better, improve themselves, improve their lot. It appears that your surveys don't indicate that at all.

Everything's okay. Or I've got a complaint. Look after this. Or, yeah, this was good occasionally.

And just by your interaction with them, business goes up.

It's remarkable. You know, another truth in things is several dealers have made this comment to me because I've been wanting to have higher headcounts in the parts department. And one executive vice president, he said, it's nuts. He said, every time I hire somebody, my sales revenue goes up. I said, isn't that easy? He says, how do you mean? I said, keep hiring until it doesn't go up. He said, well, absolutely.

But isn't it? So that survey saying, hey, we're busy. I couldn't get an answer. But everybody, well, everybody's the same.

I think you provide an unbelievably valuable service that I don't know that people truly appreciate or understand.

I think what you and Steve do is phenomenal for the dealers, and I appreciate it. Anything you want this audience to know that we haven't covered about what you do? Anything we've missed that you think is important?

It's remarkable, isn't it? Content is kind of king.

Yeah. Well, we noticed that with, you know, even the blogs that you and Steve had written for us that, you know, I don't know if it's translated back to you, but our traffic, you know, SEO statistics from Google and those are difficult, but because of labeling. But once you figure out and once you get to a platform or review, just like what you're doing with the dealers, once we get to a platform or review that's relatively stable, we can see what moves things and why. And then just start driving into that particular avenue. And the Internet has changed everything.

I was on it first in 1973.

Yeah, I do remember Smarty Pants just because the guy's name was Ian Sharp. His company was IP Sharp Associates. And when he got out of the business, he sold his business. He sold it to Reuters. He had every stock market in the world and all financial institutions connected on the Internet in 1973.

Well, the speed in those days was 30 baht. And you had in those days, you had to define every position of the print page. So 132 characters had to be defined for every blasted report you wrote. Oh, my God. And then, you know, I was working with Ian. But after he sold it to Reuters, Reuters then sold a piece of the package to Bloomberg. Bloomberg charges $25,000 of terminal for that stuff today. Again, there's the guy that was ahead of the curve. And everything he did was surveys. He only did what the market said they wanted.

Well, it does. You know, just

Somebody wants something, okay, I'll get it for you.

It confuses them, you know, agreeing with them confuses them. It's unbelievable.

Thank you for your time.

I hope you didn't find it too stressful talking with me.

I'd like to thank you, Debbie, very much. And we want to do this again with you at some point. I'd like to thank the audience as well for participating. And I look forward to having you on another Candid Conversation in the near future. 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.