RTM: Why did John Deere want to look beyond its dealer network?

DJ:  Our research showed that consumers admired the John Deere brand, but that only 40% ever considered buying a yard or garden lawn mower from us.  We were reaching what we call "the pro-sumer" segment – consumers who want to buy products with a professional specification, but we weren’t reaching the everyday lawn tractor customers. In particular, we weren’t doing a very good job reaching women.

RTM:  I noticed that on your website product shots of your yard tractors often have women riding them. Are they a big buying group?

CP: Yes. Our research tells us that women influence about  80% of purchases.

DJ:  If you look at yard or garden care as a construction project, you find that a man does  the labour, but the general contractor is a woman!  And don’t forget that many households in the USA are now single parent mothers. They are independent and, often, want to do the work themselves. They don’t want to depend on service providers.

RTM: So, clearly, you needed to move into the mass market ….

DJ: Yes. We always joke that we have a great dealer network - cleverly hidden all over America!  We have 3,200 in the USA, of whom 1,500 also sell agricultural products. There are relationships with John Deere which go back a century – they are  very close and very valuable.

So unlike many of our competitors, we didn’t want to abandon our dealer network and move consumers to large retail.  Honda did this and it lost a lot of outdoor power equipment sales as a result.

We have adopted the same approach with the internet. You can go online in the USA and buy certain tractors direct from John Deere, but they are all delivered and sold by a local dealer. We wanted to keep them in the loop.

“We have a great dealer network - cleverly hidden all over America!”

RTM: So why The Home Depot and how does it work?

DJ: Initially, we went through several mass retailers and then we found there was an opportunity to be a proprietary partner with The Home Depot DIY chain.  Using just The Home Depot means that the reach isn’t as good, but The Home Depot gives the brand a tremendous push because it knows it is the only mass retailer selling what is a very strong brand.  The Home Depot only sells the 100 series, our entry-level range whilst our dealers can sell the entire range of John Deere equipment, including the 100 series.  Each Home Depot store is linked to a local dealer who carries out servicing and a pre-sales inspection. The dealer’s plate goes on the tractor.

RTM: So what were the benefits of all this?

DJ:  Simple. The Home Depot got an exclusive on a powerful brand with great technical backing.  For example, the pre-sales inspection by a competent dealer mechanic means our return rates are in the low single digits. Previously, The Home Depot had purchased from another supplier and had found return rates were well into the double digits. 

Our dealers have also benefited.  It has generated sales and extra income. For example, since we have sold products through The Home Depot, dealer sales of John Deere consumer products have also increased.  That is partly because The Home Depot alliance strengthens awareness of John Deere, but also because pro-sumers, who want a more powerful model, will be more likely to track us down after seeing the models at The Home Depot.

Our dealers are able to place contact information directly on the machines sold and follow-up with customers after the purchase. The dealer gets income for every machine they set up at The Home Depot.

RTM: There must have been troubles along the way? I imagine there are still John Deere dealers who don’t much like the idea of a big retailer selling John Deere, even if it is only entry level.

DJ: Initially, we had to tackle a lot of resistance and, yes, there are some John Deere dealers who still don’t like the idea much. But there are many more who think it is great and those dealers have really benefited from the arrangement.

RTM: So how did you tackle that resistance?

DJ: We had numerous discussions with our dealer advisory council which we use almost like a focus group and which represents all the different types of John Deere dealerships in the USA.  We suggested that we could make it a mass retail product only, and they said: ‘No, we would prefer to be involved.’ So we then piloted it with about a dozen dealers, and we garnered testimonials from the pilot dealers to show the rest of the network that the concept worked.

CP: In some cases, very much so. The average farmer knows precisely what horse power machine he wants when he goes into the dealership.  But, if you were to ask the average consumer about horse power, you would get a very odd look!  They want solutions to problems.

It is more about cup-holders than carburettors!  And it has taken us 30 years to put cup-holders on all our products!  Many agricultural salespeople find it a really difficult transition to make. Yet many of our dealerships have gone from selling 70% agricultural to 70% yard and leisure in the last decade, as the suburbs have swallowed rural hinterlands.

“For consumers it really matters what the store looks like.”

RTM: So you need to help the dealers reach this new market. How do you do that?

CP: Our consumer research showed that for consumers it really matters what the store looks like.  The farmers don’t notice, they make a bee-line for what they want and then get out. But consumers are used to malls!  They have told us that, with some dealers, they just don’t feel they have been invited in.

You know the four Ps of marketing – price, place, product and promotion?  We know that even if you have the right products, at the right price and with the right promotions, everything will come to naught unless the place is right.

So we have just come up with a new retail format and store lay out which makes the dealership a more welcoming and less intimidating place.  It is a very flexible format that we can adapt according to the dealer’s business mix and to the fact that most of those who sell only to the consumer have to sell several different brands to create enough sales.

RTM: How are you introducing this and who gets to pay for it?

CP: We have paid for the initial design, but it is up to the dealer to take the plunge on this. We have to convince them – they are not franchises.   We are pioneering it with eight dealers.  It is too early in the process to see the impact on sales, but we are expecting dealers to have a significant lift from changing the retail experience for consumers. We will use testimonials from these dealers to launch the programme to the other dealers.

We are also encouraging dealers to sell more to women. We held clinics for women last year where we invited them to come in and learn about lawn care and all the different attachments. Dealers advertised on local radio, in newspapers and did some mailings. We were very pleased and surprised by the response.  They are very interested in coming in and trying it out themselves and feeling that they were using the equipment in the right way.

Finally, we help a lot with sales training. But we do find that some of the salespeople who are used to selling to farmers just aren’t ready to make the jump to consumers. Some dealers tell us they do better bringing in totally new sales people.  Retention remains a big issue and we hope the new format will make the dealerships a more pleasant place to work.

RTM: Cheryl, your role really involves working closely with the dealer network. How do you do that? And how is the dealer network changing?

CP: At least three times a year, I take to the road for a week and go visiting. I have just come back from seeing seven dealers. Frankly, it is the only way to keep in touch with the real world!

We are seeing consolidation now in the dealer network. Some 15-20 years ago they were almost all single stores. Now, they often own 3 to 5 stores and we expect that trend to continue. Frankly, we like it. You get a change of philosophy – they manage their dealership like a business and less like people who run a dealership because it is where they want to go to work everyday.

“Women influence about 80% of purchases.”

RTM: How much will they share data and insights?

CP: There is a wonderful dealer organisation which shares a lot.  Whilst they won’t reveal bottom line profits, they generally like to share and help each other out.  We collect financial data on a monthly basis which enables them to compare how they are doing with their peer group who have similar sales levels.

RTM: So it is all about relationships?

CP: Yes…  building long-term relationships.  We feel it is important to work in concert with the dealers, piloting schemes and using testimonials, rather than simply telling them how things will be.

Secondly, we believe very strongly in the power of consumer research and all our recent initiatives have been based on that. It is what guides us.

Take aways

John Deere builds trust with its dealers by working with them closely and patiently.

Thanks to indepth consumer research, John Deere has good insights into what its consumers want

The company actively goes out and meets its dealer network