Are industrial equipment OEMs primed to capitalise on the digitalisation of commercial channels and e-commerce?
We explore the topic further with industry leading chief marketing officer, Michael Plummer.
Michael Plummer, a dynamic marketing strategist, rose through the ranks to become Worldwide Marketing Director at JCB before leaving in 2020 to form New Era Marketing Services, a digital marketing company serving clients on three continents. Michael graduated from the University of Leeds in 1996 with a Bachelor of Arts degree with Honors in Economics & Management. Two years later, he earned a CIM Postgraduate Diploma in Marketing and went on to be named a Fellow of the Chartered Institute of Marketing in 2016.
At JCB, Michael managed an in-house design agency, a worldwide events team and global marketing communications. He directed JCB’s “Customer-First” digital and CRM teams, established sponsoring partnerships with Formula One racing teams, and developed the JCB Golf & Country Club. In 2016, Michael and his team built a global website that generated £200 million in revenue and record profits. Today, he represents industry-leading clients in the construction, agriculture, machine tools, aggregates and utilities markets.
Callum Sarsfield: How is digitalisation impacting the industrial equipment sector?
Michael Plummer: Digitalisation will be the future of the industrial equipment sector. The COVID-19 pandemic has just accelerated its rise. In fact, it has created six years of acceleration in just six months. Digitalisation is not new. Twenty years ago, when I was working for Komatsu, they launched telematics as a standard feature and had autonomous dump trucks in operation. There has just been a general lack of focus and investment in digitalisation until now.
I believe digitalisation will impact the industrial equipment sector in five ways:
- The way customers purchase machines.
- More technology in machines—both the human-machine-interface (HMI) and connectivity with customers.
- Improvements in manufacturing—from digitalisation to a connected supply chain.
- Improved machine performance, with reduced downtime, from telematics.
- A change in the way the industry operates; for example, with smart construction sites, factories or farms, and customers wanting to own machinery on different terms based on their usage.
‘Today, only 25 percent of Gen Z customers buy online, but 59 percent believe all shopping will occur online within the next 10 years.’
Callum Sarsfield: What does this mean for future market competitiveness?
Michael Plummer: Traditional competition has been about having the best machine and a good dealer network. In the future, brands will have to focus much more on creating the best digital experience, with many purchases taking place online. Dealers will have to shift the focus of their business. When a customer owns a fleet of machines, the digital information he receives will be a key driver to loyalty. The best brands will find ways to embed their data in customer businesses and create a new type of customer loyalty.
Before long, comparison websites will become a reality. Digital disruption generally occurs when a wall exists between the manufacturer and the customer. Websites like carwow make it easier for the customer to buy a car and get a better deal. The industrial equipment market has been slow to adapt to this new technology. Look for changes to be driven by the next generation of customers. These price-comparison sites will become a reality before long. Today, only 25 percent of Gen Z customers buy online, but 59 percent believe all shopping will occur online within the next 10 years.
‘The COVID-19 pandemic created digital acceleration – 10 years of ecommerce growth occurred in just 90 days.’
Callum Sarsfield: What are the major factors driving digital globalisation?
Michael Plummer: The COVID-19 pandemic created digital acceleration. At the height of the pandemic, for example, 10 years of ecommerce growth occurred in just 90 days. This was just a general shift in customer preferences. When customers drive to work, they compare the digital experience in their car with the experience in their fleet of machines. They can go on an App and check the car’s operating efficiency and overall performance. Customers will expect this functionality to be standard.
Focusing on the way customers purchase a machine, one moment they are making a ‘one-click’ purchase on Amazon and the next moment they are on a manufacturer’s website for industrial equipment. Customers today are better informed than ever. They are doing more research than ever before. It is easy to find information at the touch of a button.
Digitalisation is becoming the next normal.
Callum Sarsfield: How are leading industrial equipment organisations leveraging digital transformation for future success? How are marketing functions changing to capitalise on this?
Michael Plummer: In terms of machines, some good progress has been made: Caterpillar’s ‘Age of Smart Iron,’ Komatsu’s ‘Smart Construction,’ and John Deere’s ‘Future of Farming.’
‘Tesla’s direct-to-customer model shows what is possible; it takes a fresh approach to commercialisation.’
However, when it comes to the customer purchase, there is a significant way to go. Comparing my earlier example of Amazon’s ‘one-click-experience’ to the online purchase experience of any manufacturer of industrial equipment, most websites are still just online brochures. At best, the customer may be asked for a quote request and then have a painful delay whilst their enquiry is passed to a dealer who will reply in their own timeframe. In contrast, Tesla’s direct-to-customer model shows what is possible; it takes a fresh approach. The initial sale is handled by the manufacturer, which means for industrial equipment, the dealer must focus now on installation and service.
In terms of marketing, budgets for all manufacturers have been weighted heavily to traditional marketing, which includes vastly expensive exhibitions, whilst the customer purchase experience online has been neglected. When I was Worldwide Marketing Director at JCB, we were the only major manufacturer to move away from expensive shows and invest in digital marketing. There needs to be a change in mindset from CEOs that digital marketing teams are the super dealer of the future. Plus, a change from CMOs to drive towards ‘performance marketing’ with its focus on demand generation, rather than focusing on ‘brand marketing.’
‘New talent is needed in industrial equipment marketing teams—people who have experienced digital transformation.’
There are parallels to Fast Moving Consumer Goods (FMCG) brands. It wasn’t long ago that Adidas talked about their website becoming their largest retail outlet. Now, first-party data, programmatic marketing and a digital first approach drives their sales. This is just one example that is highly relevant in an industrial machine context.
New talent is needed in industrial equipment marketing teams—people who have experienced digital transformation. The long-standing marketing head, who has done this the same way for the last decade, is unlikely going to lead a large-scale transformation that will need to involve multiple departments across global organisations.
‘Nearly $2 trillion is spent annually on the top 100 marketplaces. Consumers are seeking solutions, not brands.’
Callum Sarsfield: How is this evolving revenue streams for the future? Do you foresee a complete overhaul of traditional commercial models and go-to-market strategy?
Michael Plummer: The go-to-market strategy will change; it is just a matter of timing. It is also a question of whether it will be done by the industry or whether a disruptive innovator will come in-between the manufacturer and the customer. The global trend today is for marketplaces to dominate brands. Nearly $2 trillion is spent annually on the top 100 marketplaces. Consumers are seeking solutions, not brands.
Many industrial equipment organisations operating their businesses in silos for Europe, Americas and Asia need to take a global approach quickly or be left behind. The used equipment and online auction businesses show that this model is already relevant for customers—it is just a matter of who will win the race.
Virtual selling is a reality for 2021, and this will cause further digital acceleration. The large manufacturers need to create a break-away innovation group with the ability to work on quick trials and succeed or fail fast. They must be able to get a trial live in four weeks and then determine how to scale it if it is working. They need to operate like a digital start-up—with a fast pace followed by a ‘test-measure-scale’ approach.
In terms of revenue streams, customers may look to have different ownership models, based on their utilisation. We have already started to see some early signs of this in the automotive industry in the United States. Or, in the Uber model, customers no longer want to pay for a car, they just want to pay for the trip. This could open up a whole new market for micro users of industrial equipment. The winner will be the customer. The customer just wants simplicity, and whoever delivers this will succeed.
‘I believe we will witness more change in the industrial sector over the next five years than we have seen in the last 50 years.’
Callum Sarsfield: In a world of soaring global digital innovation and transformation, what is the next normal and future potential for the industrial equipment sector?
Michael Plummer: I believe we will witness more change in the sector over the next five years than we have seen in the last 50 years. Digital will be the accelerator with online purchasing, connected machines, new enablers like 5G, and artificial intelligence driving this innovation.
Focusing on how customers buy machines, brands need to look at the total digital landscape. A recent global survey indicated 84 percent of future customers will shop online more frequently when the pandemic ends. Brands need to look beyond their website and consider their total online presence: on Google, social media, Apps and so on. Selling via Amazon, Google Shopping, eBay and Facebook could complement their traditional dealer network. One in two customers gets the information they need from Google without even visiting another website.
‘A ‘mobile-first’ approach is key. Google made it clear that this is the direction that they wanted in mid-2019 and many companies have yet to adapt.’
Lockdowns and travel bans have forced traditional customers online. Many organisations will be looking at a direct-to-consumer model for the first time. Many brands will have to review their full digital landscape. Will their CRM strategy support the next norm? A ‘mobile-first’ approach is key. Google made it clear that this is the direction that they wanted in mid-2019 and many companies have yet to adapt. When I started in the industry, the iPhone hadn’t been invented—now Apple is worth more than the total FTSE 100. A mobile-first approach is the future.
There is a rapid shift from customers, they are demanding speed and efficiency. We are in the world of ‘now’ – customers have information at their fingertips, and they expect a response ‘now,’ not between 9 and 5. We are moving to a world of always open, with businesses available around the clock.
The digital customer experience will be key to future success. Brands need to think how they can personalise their experience. For example, how will they deal with trade-ins? Customers will probably want human interaction as this shift takes place, but initially this may just be an online or video chat with an expert.
‘30 percent more customers have purchased online and they won’t all go back to the traditional way of doing business.’
This is the biggest shift that the industrial equipment manufacturers have seen in their sales operations in decades. Many customers who never purchased online before the pandemic are buying online now. In general, 30 percent more customers have purchased online and they won’t all go back to the traditional way of doing business. Overall, there has been a three-times shift in customer preferences to digital from traditional for interactions with business-to-business companies.
Brands must adapt or risk becoming irrelevant.
New Era Marketing Services is a new digital agency and the brainchild of Michael Plummer – the former Worldwide Marketing Director of construction giant JCB. At JCB Michael oversaw a digital transformation, switching from traditional marketing to digital marketing and helping JCB become a Top 20 Super brand for the first time in its history. http://www.neweramarketing.co.uk
Interview series for Pullmann in Focus led by Callum Sarsfield, Partner at Pullmann Global | April 14, 2021