Issue link: http://read.dmtmag.com/i/184881
Management ("Keeping A Stern Eye on Sales" continued from page 40) margins recently is the added cost that exhaust emission control equipment brings to the table. Interim Tier 4 has driven up the price of new equipment, and next year Tier 4 Final will do the same thing. "The market will not allow you to recover all of your costs," Stern said. "There have been steps along the way, mandated by the Clean Air Act, that Deere and others have to comply with. They've added to the cost of equipment being sold at retail. All that research and development has been brought to the cost of new equipment, whether it's from Deere or other manufacturers." Not surprising, those added costs for the latest equipment have driven up the demand for less expensive used equipment. "Customers know that Final Tier 4 is coming," Stern said. "They know there will be considerable increases in price. And they're seeking out Tier 3 product – used equipment as a substitute for buying new – to avoid that increase in pricing. There is less and less Tier 3 equipment available, and that adds value to that particular With five stores covering northern Illinois and five stores spread over 68 counties in Indiana and three Michigan counties, West Side Tractor Sales is one of the most successful heavy equipment distributors in the Midwest. the company is a distributor for John Deere Construction and Forestry and in late 2010 acquired Holt Equipment Co. in Indiana – West Side has since doubled the number of its sales people. level of engine emissions. And there has become a shortage of supply of certain used equipment." Emissions controls costs are also driving the demand for rental equipment, Stern says. Another factor driving the rental market upward is that since the recession, many contractors have reinvented themselves and have diversified into newer lines of work. "Rental has become red-hot in the industry, and it has almost become an animal of its own," Stern said. "It has changed the landscape over the past couple of decades. Most companies like West Side have used rental as a means to a sale. But now rental has become more of a short-term response for the contractor as he tries to sort out his own business model. For instance, the guy that dug basements during the housing boom has had to find some other work or he would be out of business. So he'll rent equipment until he feels comfortable about the diversification he's trying to make in his own business model." We asked if Stern was seeing a lower level of rental conversions to sales. "I would say right now that the conversion rate at the end of the year is still very good," he said. "Absolutely we convert a lot of rentals to sales." Approach to Hiring When hiring new sales people, West Side asks candidates to take a personality assessment offered by a third party service called Caliper Corp. The company offers an assessment that measures a sales candidate's answers to questions against a profile that is largely geared to people in the construction equipment industry. "There are many skill sets that a person needs to bring to a job, but Caliper measures their Ego-Strength," Stern explained. "That is their ability to persuade someone to buy from them versus somebody else. Caliper has done a nice job of helping us. They do a wonderful job for the industry." The Caliper test shows where a candidate's weaknesses are as well as their strengths. "They measure a lot of different qualities, but they're really looking for an individual that has an Ego Strength that can take that rejection. A lot of people can't handle rejection very well," Stern continued. "It's not necessarily money. Yes, that's a big part of it. But if that person doesn't enjoy convincing a person to buy from him or her over another competitor, it doesn't work for very long. Fortunately, I was recommended by the assessment," he added. "Customer at Risk" John Deere and its distributors use a concept called "customer at risk." The idea comes into play when, for example, West Side is in danger of losing a customer to a competitor. "It could come over a number of different reasons," Stern said. "An example of a customer at risk could come through a service dispute. It's possible that a customer doesn't really feel satisfied with a settlement that was reached." If a customer is identified as being at risk, Stern says Deere and West Side both rally their respective management people to invite the customer to participate in meetings. "We want to give that customer the feeling that we are taking care of them," he said. "There is a concept we promote called a Value Proposition. The three portions of that proposition are concepts adopted from Deere: productivity, uptime and low operating cost of the equipment." Uptime is a very important part of that formula. When a machine goes down, West Side strives to do everything possible to put the customer back to work with that machine. "If there is a disagreement over the settlement, we get OEM management, distributor management involved, above the sales person level," Stern said. "West Side is not interested in just that one sale. We want to sell people for a lifetime, if we can." Stern says West Side has extended the customer-at-risk concept to "product at risk." In that scenario, the distributor might identify a product that was sold to a customer, who is not buying it again. "They'll buy other products around that 42 | www.cedmag.com | Construction Equipment Distribution | October 2013 40_Tom_Stern_Feature_KP.indd 42 9/27/13 1:58 PM