Mid Market Strategies

As Trip Forman steps away from his role as one of the board trustees of the National Truck Equipment Association, he says that he feels confident that his message has been heard. Forman, president of Lubbock-based Pick Up Pals, a truck equipment distributor that serves the needs of many West Texas residents, also feels confident that he has helped his industry by following his own advice.

“There will always be a place for the truck equipment distributor,” says Forman. “Nevertheless, survival depends on their ability to stay focused on their real customers, market correctly to those identified as their customers, and price their products and services correctly.” Forman has been focusing on those key efforts. And for his business, it seems to be a continuing recipe for success.

Pick Up Pals has grown steadily since the Formans purchased the business in 1982. Forman believes that following his business principles has been an important factor in the distributor's growth. He also believes that Lubbock's steady economic growth during that time has been an impressive factor in the development of the business.

“We were able to go through a short learning curve, get our business practices in place, and then have the luxury of being geographically in an area that has experienced some strong growth.”

Defining the Customer

“As a body and accessory distributor, we've had to take a long look at identifying our customers, and we made some big adjustments to how we run the business based on what we found.”

Forman found that his business had gotten in the practice of supplying bodies and truck accessories to other retailers, such as automotive dealerships that sold light-duty chassis cabs and some medium-duty chassis. “That always left us in the position of purposely trying to be the lowest cost provider — to another retailer,” says Forman. “That's like putting your business on a very low calorie diet. Eventually you starve your business to death.”

Forman says that although it brought about a difficult period in the company's financial health, business became substantially stronger after the company began marketing to the end-user.

“We just realized that our customers weren't truck dealerships. It's death to a distributor when one of their sales associates says to a commercial customer, ‘Oh sure, we can put a little toolbox behind the cab.’ Then they call us and purchase the cheapest toolbox available even though we advise them it's not spec'd for the job. Then to make it worse, they put it on the truck, tell the customer that it's our product, and we will warranty it. If the product is too light for their application, then I end up arguing with the end-user over what they believe is a warranty issue.”

Forman realizes that the dealerships were trying to bundle their product with his. “I don't have a problem with the idea of one-point shopping for the customer. But when it makes us look bad because the end-user didn't have the right equipment to begin with, then the act of bundling the product hasn't done him a service. And in some cases, the customer might pay more for our products that were resold to him than if he would have just purchased what he needed from us in the first place.

“It's easy to keep selling your product through the same sales channels that you have historically had. But that might not be what's in the best interest for the business. By thinking about who your customer really is — then the business can be adjusted to follow the best course of action for the business.”

Forman says that one of the most important aspects of the success of Pick Up Pals has been the identification of the real customer for his mix of products. But Forman isn't the only business executive to put this philosophy forward.

Sam Geist, a nationally known consultant and professional speaker, as well as a former CEO of a successful nationally operated sporting goods chain, drives home the same question that Forman wrestled with — who is our real customer? Forman, a follower of Geist business philosophy, was active in the selection of Geist to be one of the general session speakers at this year's NTEA annual convention in Baltimore, Maryland.

Geist provides an example that, according to Forman, is exemplary of the situation that truck equipment distributors deal with on a daily basis: McDonald's realized that it sells hamburgers, fries, and cokes, as do most of its competitors. McDonald's management looked to find a competitive advantage. After deciding that they couldn't — or shouldn't — change their product, McDonald's discovered a competitive advantage by redefining their real customers.

McDonald's decided that children were the real customers for their product. Geist uses the example that if a child says to his parents, ‘Let's go get a hamburger, fries, and coke,’ the parent will decide on who is the lowest cost provider. After McDonald's really discovered its customers, the company decided to bundle products together in such a way that ensured the real customers would make the decision as to where to get the products that they demanded. By bundling the hamburger, fries, and cokes with a small toy and calling the package a Happy Meal, it induced the real customer to go directly to a McDonald's. This takes the burger, fries, and coke products out of the picture as pure price-variant commodities and bundles those three items, plus the toy, into an exclusive product known as a Happy Meal.

Forman stresses that identifying customers, and making a business decision concerning the profitability of servicing them, was an important step in the successful transformation of Pick Up Pals.

Reaching the Customer

Defining the customer is only part of a successful equipment distributorship. Reaching them through marketing efforts is the other part.

“We focus on pull-through marketing rather than push-through efforts,” says Forman. “You can almost visualize this as pulling the customer or end-user to us, rather than trying to focus on figuratively pushing our product through middle-men to our customers.

“Lubbock is a town where we can pretty well get directly in front of the real users of the product. They may not be the folks that write the check. In some cases, they could be in San Antonio or Houston, but we want to focus on the guys who use the product here. We want to show our products to them.”

To Forman's way of thinking, pull-through marketing is designed to stress the quality of the products distributed by Pick Up Pals. “When we go to the users of the product, we will hear stories about toolbox latches that didn't make it through a year of use. Or they purchased a specific configuration of a service body that they didn't really want — after they had requested another design and they were told that no one manufactures that type of product.

“Although some of the bigger companies are based outside Lubbock, the majority of our customer business is based in Lubbock. We go talk directly to the owner of the plumbing or electrical contractor's business. That's the user we need to satisfy with our knowledge of what's available in the marketplace to help his business.

“In the old days when our product mix was really focused on the accessories business, we would focus on marketing to the truck dealers,” says Forman. “Today we've made it easy for our customer to come over to our location and talk with us. Then we will pick the truck up from the dealer and rig it the way the user wants it.”

Marketing Adjustments

Geist enforces the practice of constantly reviewing a company's marketing program and making adjustments to it. Geist says, “In today's business environment, it's not about selling lemonade, it's about how you sell lemonade.” Geist confirms Forman's decision to recast the company's marketing efforts into a direction that places Pick Up Pals directly in front of the end-user.

Forman says, “My advice to distributors is to remember that just because you and the chassis dealer have the same customer, that doesn't mean you will achieve the goal of satisfying customer needs in the same way. Their desire is to focus on their product, not to do your marketing for you.” Forman adds, “If the customer balks at the price of the completed vehicle, the chopping will come at the expense of the body upfitter.”

Another benefit to pull-through marketing is from the sale of additional items that a distributorship can obtain. Forman uses the example of outfitting a large fleet with ladder racks for their trucks. The customer normally purchased the ladders through another industrial equipment distributor. However, last year the customer decided to have Pick Up Pals source the ladders as part of the entire truck rigging package.

Forman does warn that there are possible downsides to pull-through marketing. “When you focus on dealing directly with the end-user, you are directly putting your reputation on the line. This is especially true when you market to an area the size of Lubbock and the surrounding counties. You have to go beyond their normal expectations when it comes to service and warranty.”

But Forman says that can pay off in the long term. “Those guys will be your best advertising. They will say, ‘We've been doing business with this guy for a long time. He's always shot straight with us. We tell them what we need, they understand us, and they go out and get it.’

“We don't want to be the low cost provider of truck equipment in the Lubbock area,” Forman says. “We tried thatroute. That's just a sure fire way to end up not having a business.”

Pick Up Pals should price the products at a livable margin. Forman says he won't express that margin in terms of a percentage; nevertheless, battling to be the low cost provider of equipment only guarantees failure over the long run of the business.

“Sure, there are some deals that we work pretty hard to get, but we will use every other method available to us other than price,” says Forman. “I believe that it is better to walk away from some deals and let the buyer use a much lower priced product or service provider. In some cases, we will get that buyer on the next order because the other guys didn't sell them equipment that would hold up to the job, or they couldn't provide the buyer with the services that they promised.

“We try to provide a quick and painless way for our retail counter customers to purchase the products that they need. For example, unlike a discount chain that might just have one model of inexpensively priced behind-cab tool boxes, we have three or more levels for the customer to look at,” says Forman. “Customers will come in with a price in mind that they've seen from a discounter, and then they might shop Pick Up Pals. At times, some of those customers buy into the quality level that we offer. In many cases, they never knew they had a chance to do that, although in the past they wanted a different style of box or one with more capacity. We provide the service of choice.

“We don't plan on changing anything about the business, except growing it,” Forman says. “We will expand our product base and we consistently look at what other services we can offer. We're going to do those things based upon what's economically feasible.”

Serving Lubbock

Since Forman's purchase of the business in the early 1980s, things have changed at Pick Up Pals. The early history of the business included a brisk resale business, predominately to auto and truck dealerships around the Lubbock area. The product mix included aftermarket lights, bug shields, bolt together chrome headache racks, floor coverings, and other accessories. Forman operated that style of business for a few years before, as he says, his enlightenment came into effect.

Today Forman looks at the business as two segmented markets-truck accessories and commercial equipment. The retail counter is now the prime mover of the truck accessories, while Forman practices his pull-through marketing plan directly on the end-user.

“We are doing about 20% of our sales as retail, non-fleet type sales,” Forman says. “That has changed dramatically since the business started. We served Lubbock with what was needed in the early days. Our product mix has changed because in some respect, Lubbock has changed.”

From 1990 to 1999, the value of total dollars spent for construction has increased more than 123% in Lubbock. The value of new home construction has increased in excess of 63% during that same time.

“There's no doubt that Lubbock's growth has been a contributing factor to the company's growth,” Forman says. “Pick Up Pals plans to grow with Lubbock. We do a great job at serving this area and if we keep our business principles in mind, I believe we will continue the growth pattern that we have developed.”

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