“I miss cotton,” says Larry Sitzman. “We really enjoyed serving the cotton industry for a lot of years.” But today, cotton, which was once called “white gold,” has become insignificant in California’s Central Valley, one of the most diverse agricultural regions in the U.S., if not the world. Kern Machinery, where Sitzman is the general sales manager, hasn’t sold a cotton picker in more than 10 years.

Its near disappearance from the region underscores the transformation that Kern Machinery has had to undergo to keep up with the cropping changes taking place in its sales territory, which includes Kern and part of Tulare Counties. According to Sitzman, they have transitioned from open field crops, like cotton, hay and potatoes two decades ago, to more intensive agriculture in the area involving 20 major crops, including citrus, grapes, almonds and pistachios, that bring in $7 billion worth of revenue annually.

With more than 30 years with the 4-store John Deere dealership group, Sitzman has been witness to the most significant shifts that have shaped and re-shaped agriculture in the Central Valley. Along with it, Kern Machinery has had to adapt its sales efforts at a rapid clip to align with the needs of a new breed of farmer. “The transition from open field to permanent crops has come quickly and it has brought a whole slew of new opportunities — and lots of challenges,” Sitzman says.

To meet the changing equipment requirements that the cropping transitions have created has caused Kern Machinery to look beyond their major supplier, John Deere, for product innovations, to fill the specialized needs of California farmers. “We want to be the leader in the industry, so we’ve aligned ourselves with all the best vendors. This allows us to drive all the specialty equipment innovations that our customers require,” says Sitzman.

That push to be a leader means much more than just selling for Kern Machinery’s salespeople. It means focusing on customer needs and doing whatever it takes to meet those needs and help solve their biggest challenges.

Catering to Suppliers

A breakdown in Kern Machinery’s annual sales is evidence of the diversity of agriculture in the Central Valley. In 2014, 40% of the dealership’s new wholegoods sales came from John Deere ag and commercial and consumer equipment. Another 40% was derived from sales of “other” wholegoods, or specialized equipment — from nut harvesters to orchard sprayers. Most of the remainder comes from rental revenues and sales of rental equipment.

As a result of the interdependence between the dealership and its specialty equipment suppliers, Kern Machinery has developed close and, in some cases, exclusive relationships with several of its shortline contractors. “Because we have a large county of high value specialty crops, we contribute significantly to their manufacturing capacity,” says Sitzman.

“We have 10 major vendors that we work with, 11 including Deere, and for the most part we have exclusive marketing rights with them. When you have the kind of relationship with your specialty equipment suppliers that you would typically have with you primary vendor, expectations change. It’s no longer only about what they can do for us. It’s also what we can do for them.

“We put ourselves in a position where we have to fulfill their expectations, their goals and their objectives,” he says. “It’s very important that we know what these are, so during our year-end review, where we set goals and objectives for the coming year, we provide them with a forecast, much like what we do for Deere. This gets us all on the same page as far as what’s going down for the next quarter or the next 2 quarters.”

He adds that the dealership values “vendor” satisfaction on the same level as “customer” satisfaction. “We don’t have a metric for this, but we should have one.”

The real value of maintaining such close relationships with key suppliers is that it keeps both parties in tune with customer needs. “When you have the pulse of the market, you can plan,” says Sitzman. “We align ourselves with companies that are visionary and companies that provide solutions, not just me-too products.”

From deep tillage tools to innovative spraying systems and specialized tractor cabs, Sitzman says Kern Machinery has a history for working with its equipment suppliers to develop innovative products. “We find problems, and then we go find a solution,” he says, and finding problems comes from constant customer communication, largely through the dealership’s sales force and from customer interaction. (See “Product Development Ties Customers to Kern Machinery”)

Selling to the ‘Corporates’

Kern Machinery’s approach to “problem solving” has played well with many of the dealership’s corporate customers. “We deal with a lot of corporates,” says Sitzman. “Many really big producers have become a major part of our business. We have the largest almond grower, the largest table grape grower, the largest carrot grower and one of the largest pistachio growers operating in Kern County. So, we have to understand what they’re doing.”

The rapport the dealership has managed to develop with these giants of California agriculture is paying dividends. “They’ve become dependent on us too,” Sitzman says. “They’re now coming to us and saying, ‘Hey, we’re making changes and we need you to support us,’ or ‘We need your help, let’s plan together.’ And that’s a beautiful thing when you can sit down with them on that basis. It has been unbelievable, and I can’t tell you how many times our corporate customers come in and say, ‘Here’s my problem, give me a solution.’”

None of this means that the dealership doesn’t need to continually sell these customers. “There are different layers of management with the corporates,” Sitzman explains. “They all have foremen, ranch mangers or purchasing managers, and they’re all influencers. We intentionally develop relationships with every one of them.”

He says it’s not untypical to meet with a grower’s purchasing committee, which often includes the manager, at least two purchasing agents and probably the manager of farm operations, to discuss purchasing plans. “They’ve got budgets and know what they are going to spend coming in and they know what they are going to buy: ‘We’ll take 6 of those, or 10 or 15 of these and some of those sprayers.’ That’s all they’re going to buy for the first 6 months of the year, but will come back in 4 months to review what they will need for the remainder of the year.”

Sitzman says the most sophisticated of the dealership’s corporate customers work from a set replacement schedule. “They know when their assets start costing them money. A lot of times they don’t even do a trade-in and will take their used equipment directly to auction. In some cases, we’ll take the trade and because most farming operations here run 12 months a year and sometimes 24 hours a day, that equipment is pretty much used up. We’ll just take it to an auction. We believe we get the best price that way, and we’re fine with that.”

He says the dealership has at least a dozen corporate customers that operate this way, but he adds, “It doesn’t mean we’re exclusive. They will entertain bids from competitive equipment to keep us honest. If we do our job properly, we’ll usually get the sale.”

With what’s at stake with the dealership’s corporate clients, constant contact is absolutely essential. With so much to gain, “Some of our sales representatives only have 2 or 3 accounts today,” says Sitzman.

#1 Metric: Customer Satisfaction

While he pays close attention to the standard dealership metrics, like net operating return on sales, return on assets and market share, Sitzman says the one he scrutinizes most closely is customer satisfaction. “We rely heavily on the customer experience survey results.”

Sales department performance meetings are held twice a month so all Kern Machinery managers are current on financial progress. He says that asset turnover is getting a lot of attention these days because of the high cost of equipment. “We’re around 1.7 but my goal is 2.5,” says Sitzman.

On a day-to-day basis, it’s customer satisfaction that counts. In the past he would keep tabs on customer sentiment by asking his salespeople if their customers were happy with the equipment. “They’d say, ‘Yeah, he likes the product.’ So we were fat, dumb and happy.”

That’s not the case anymore, he says. “Customer expectations are much higher today because the value of the purchase has increased so much. Today everybody’s on their toes, from the salesperson to the parts counter person to the service technician. We’ve gotten it through to them that when that customer comes in he is judging us and we need to please him. Today, in addition to the surveys that Deere conducts, we make sure that when our salespeople follow up with our customers they ask four vital questions: Are you happy with your purchase? Is it doing what you intended for it to do? Is there anything else we can do to help you? Would you be willing to recommend us to your neighbor?”

And follow-up calls are face-to-face. “It’s feet on the ground,” says Sitzman. “You might say this is a company philosophy: The more feet on the ground, the more opportunity we have to serve the customer.”

Deere’s survey results can also provide helpful feedback. More often than not the dealership has discovered that the customer’s dealer experience score far exceeds that of the product experience. “We thought it was surprising because usually a customer will judge us and say, ‘I’m going to give you bad marks because of the product.’ Today, we’re finding that’s not what’s happening. This tells me my salesmen are doing what they’re supposed to do.”

In addition, he monitors the amount of quoting that’s taking place every week. “I don’t produce a formal report on this, but I’m in close contact with my sales managers. I also watch the amount of dollars in preseason orders, because with our permanent crops, a lot of our farmers have evolved to a point where they order early. Then we are able to give the orders to the vendors so they can schedule manufacturing to meet delivery requirements.

For example, Sitzman explains, by late October or early November he’s able to forecast sales for the next year. “We’ll pretty well have it laid out if we’re going to be up or down 10% or 20%, or if sales are going to be flat. We monitor this very closely.”

Changing the Chemistry

Sitzman says he also pays particular attention to the chemistry between the dealership’s salespeople and its customers, particularly when it comes to the corporates. “We’ve learned that sometimes we need to make salesman-customer changes. Not because there was anything necessarily wrong, but sometimes different personalities just don’t click. The chemistry isn’t there. I’ve done it myself, where I’ve kicked a vendor sales rep out, but later on a new rep comes in and I love him to death and I’m happy to do business with him.”

And if, perchance, he or one of Kern Machinery’s other top managers sense something’s amiss with a customer or the dealership loses an order they believe they should have gotten, there’s no hesitation to request a face-to-face to get at the heart of the issue.

“As I said earlier, it’s boots on the ground and this applies to management as well as sales. We want to talk directly to the customer.” Sitzman says how a customer feels about the business isn’t always in their words, but it’s often in their body language. “If you watch and listen, they’ll show you how they like to be treated.”

Kern Machinery’s upper management pays particular attention to troubled corporate accounts. “We call them ‘conquest accounts,’” Sitzman explains. “It’s those customer relationships that are not warm and friendly, but we definitely want to learn how to serve them properly. So management staff, along with the salesperson, will go out and call on them and ask tough questions like, ‘We know we’re not serving you properly, but we don’t know how. Would you tell us how because we want your business?’”

It’s not unusual for them to involve 3 or 4 people, with Clayton Camp (president and owner), Charlie Moe (aftermarket manager), the salesperson who is assigned the account and Sitzman all involved. “We’ve seen for ourselves this is an effective way of changing relationships with customers because we’re sincere about our intentions. With this approach, we learn so much about what we thought we were doing and what we really should be doing,” he says.

Used & Rentals: Big Difference

Unlike their counterparts in most other regions of North America, used equipment isn’t a significant factor in the sales process for Kern Machinery, but rental equipment is. In 2014, used equipment made up less than 1% of the dealership’s total revenues. Rental equipment, on the other hand, produced slightly more than 5% of total wholegoods revenue.

This, according to Sitzman, is due to the 365 day growing season in the Central Valley where work hours on the equipment add up rapidly. It’s not unusual, he says, for tractors used for tillage to rack up 2,000 hours a year or for a dairy tractor to amass 4,000 hours annually.

“They’re pretty well used up in short order,” Sitzman says. “We get whatever we can get for them. If the operator doesn’t send them off to an auction but wants to trade, we pretty much give them scrap value or whatever an equipment broker would give us. There’s really no negotiating. Doing trades here is pretty simple, and everyone understands this.”

He says he’s aware of the situation in the Midwest and other areas where low hour used equipment has been stacking up on dealers’ lots for the past few years. “I don’t envy those folks back there,” he says.

But rental equipment, most of which is tractors, is an entirely different story in the Central Valley. Sitzman explains that farmers in the region have become increasingly sophisticated in their purchasing. “They know they can’t afford to have a tractor if they’ve got less than 50% utilization per year.” So, in these cases, renting makes more sense.

“Managing the rental fleet is also part of my responsibility as general sales manager,” says Sitzman. “This came about years ago when farmers needed some additional tractors to help them through harvest. They would typically use them for 30-90 days. So we kept some rental units for them and normally they would buy them, but there’s always a few left over. This just kind of expanded to the point where we have a lot — maybe too much — of rental equipment inventory.”

How much is too much?

“We try to keep enough inventory to turn 2-2.5X in order to support primary customer needs,” says Sitzman. “They range from 25 horsepower compacts to 570 horsepower track tractors. Our entire rental fleet is available for sale all of the time. We would like to turn the fleet frequently, or before the equipment hits 5,000 hours, so nothing’s out of warranty. But it doesn’t always happen because we put hours on them so doggone fast.”

It’s not unusual for Kern Machinery to have 50-60% of its rental units at work in the field at any one time.

A Culture of Caring

Sitzman says that Kern Machinery’s unique approach to its vendors and customers is pretty much the same as it is to its employees, and is deep seated in the company’s culture.

He adds that, “This organization tries really hard to please our employees and have the best employees in the business. They go out of their way to support employees, so we don’t have a lot of turnover. When people have left, they hate to do it. They really do. And I believe it shows every time a customer comes in our door.”

His advice to other sales managers is to hire and train their salespeople to develop close personal relationships with all of their accounts. He says dealerships that do this can’t help but be successful, and adds, “Most businesses can’t seem to figure out how to do that.”

More Dealership Minds Profiles February 2016 Issue Contents