About 18 months ago, the top concern keeping dealers awake at night was product availability and the supply chain. According to feedback from the dealership groups comprising the Farm Equipment Dealer 100, interest rates are now at the top of the list. In his presentation at the 2023 Dealership Minds Summit, Zach Hetterick, CEO of executive coaching firm Harvesting Potential and member of the Machinery Advisors Consortium (MAC), says dealers will have to develop their sales teams to be successful in that environment.
“Obviously, interest rates will continue to affect how we value our used equipment,” he says. “It'll affect our income statements, and then ultimately it'll affect the producer at the farm gate level. So we want to talk about how we'll develop our salespeople to deal with that.”
Hetterick notes the industry has not seen interest rates at their current levels in about 15 years, meaning many salespeople will be unprepared to effectively deal with them. In fact, they probably have the wrong mindset.
“The past 5-10 years, we focused on figuring out the pricing, and then we've made finance an afterthought,” he says. “ Going forward, we're going to have to figure out how we're going to finance it and cashflow the customer, and make the pricing the second tier.”
Hetterick cites 3 areas of focus in coaching a sales team to excel in a high-interest-rate environment: the information they need to gather about prospects, creative financing options and cost-of-production pricing. “With the price increases and the inflation that we've seen, it's easier to digest things in little pieces than it is to eat the whole thing whole,” he says. “So we're going to break things down into digestible pieces that maybe will relate to a producer.”
This article will address the first of those 3 focus areas: gathering the right information about prospects.
Profiling Prospects Differently
Hetterick says in a high-interest-rate environment, dealers must do more due diligence about prospects than they are accustomed to. That’s because they will have to profile prospects differently.
“Traditionally, when I was a dealer, we talked about our customers in terms of As, Bs and Cs, key accounts, multi-unit customers, used buyers — we’d use these very general terms to describe our customers,” Hetterick says. “We have to teach our salespeople to go into the nuances of customers and think a little bit deeper.”
While customers can be segmented into any number of profiles — “There’s probably 15 you could identify,” Hetterick says — he recommends using 5 particular profiles as examples when coaching sales professionals:
- Pride of ownership customers
- Customers open to new ideas
- Those for whom machinery is a means of production
- Those who see machinery as an expense
- Customers loyal to a single brand or dealer
According to Hetterick, the first group — customers proud of their machines — love their equipment so much they generally have more than they need. “They probably carry more equity than they need, and that’s a segment all its own. They’re proud to own their equipment, they want to continually trade, and there’s a lot of pieces you can pull out of that customer that can move you forward.”
Customers who are open to new ideas are those you might be able to talk to about using extended waivers or fixed rates or things outside of the standard rate contract they’re used to. “But they also may look into a lease or a finance lease where they buy it out at the end,” Hetterick says.
To describe prospects for whom machinery is simply a means of production, Hetterick uses dairy producers as an example. “They think cows first. Their machinery would be their robotic milking parlors. If you ask them about their equipment, they would talk about their milking system before they would actually talk about their farm equipment. They probably have a mixed fleet, and their equipment is a nuance to produce milk.” Hetterick explains that for these customers, equipment is more about making their lives easier — or in the case of dairy farmers, producing more milk — than other concerns, such as the cost of the product.
Customers who see machinery as an expense are those, Hetterick says, who don't want to carry any equity in their expense — or any equity in their equipment. “They want to drive everything down to the cost of production. They’re not afraid to shop you, and they just want to know, What’s it going to cost me?’”
For the final profile — customers loyal to a brand or dealership — it’s all about where they see value being added. “When you’ve got customers who are loyal to one brand, they might shop multiple dealers,” Hetterick says. “But then you also have customers who are loyal to one dealer. The value in that is very intrinsic, and it allows you to have the ability to pull a lot of information that you’ll be able to use as we turn these profiles into action.”
Information that Motivates
While Hetterick calls these 5 groups “customer profiles,” he explains that they actually address the drivers behind why each group makes a purchase. “Really they’re the motivators,” he says. “What are some of the motivators we can pull out of that customer that would trip them to make a purchase?”
Once a salesperson has effectively profiled their customer, they can begin to gather the kind of information that will help them motivate the customer to buy based upon what motivates them. “Because very few customers float between dealerships — you traditionally do business with people who you've done business with — you have a tremendous amount of information at your disposal,” Hetterick says, adding that gathering the necessary information is more challenging with new prospects.
Among current customers, for example, salespeople generally have access to the customer’s current payoff amount. “You can do a quick calculation and talk to your used equipment manager about what equity or negative equity you see going forward,” Hetterick says. “And you can do this all preliminarily in a meeting with the customer. Even though you haven’t evaluated the trade yet, you can directionally see what kind of position you’re in.”
Another piece of information the salesperson can access is the customer’s next payment date, which lets them know where the customer is in their payment cycle. Knowing the warranty expiration date is important with customers who see equipment as an expense, Hetterick says, because they like to mitigate risk.
“And last but not least, the current payment amount, which is probably one of the key pieces of all this information,” Hetterick says, adding that it can give the salesperson the nudge they need to present a deal to a customer. “I remember sitting at a sales meeting with my team and my sales directors, and we were talking about how we were going to move some high-dollar used equipment in 2015 and 2016. And the lights started going off, and one of them went and started pulling some files, and he is saying, ‘Hey, if I look at this deal, and I lay this one on top of it …’ He realized he wasn’t as far apart from where the customer was as he thought he was, and it gave him the courage to go out and put some numbers in front of customers.”
Having this information allows salespeople to think more creatively about the opportunities they already have available. Hetterick often does an exercise with dealers called, “Using Your Population as an Opportunity,” to introduce salespeople to this mindset. He asks the dealership to provide him with information about several different pieces of used equipment they have in inventory. For each unit, the dealership identifies the model year, how many years the customer has owned it and how many hours per year they’re averaging on it. Then he challenges the dealer to find a scenario with one of the units that would work with one of the customer profiles.
“The Magnum up on the left,” he says, referring to the Case IH Magnum tractor he is using as an example during his DMS presentation, “has one payment at $44,000 and no warranty. And 3 payments of $64,000 on that 9RX down on the bottom. What do I know about that? That means that if you do quick math, that bottom right — if he owes roughly $180,000 on that unit — he's got a pretty decent equity position. He's been paying the price increases, and there's an opportunity to put something in front of him to move a piece of equipment.”
While Hetterick acknowledges one missing piece of information in his example is interest rates, “the point is that for every one of these customers there is the ability to put an option in front of. And use this to teach situational awareness and challenge your salespeople to say, ‘Here's the scenario. Which lever should we pull to put a deal in front of this, and what could trip this customer?’”
He adds that every piece of equipment in a dealer’s population is an opportunity. “We just discount them, and we don't have the courage necessarily to go out and put it in front of a customer.”
Part 2: Creative Financing Options
