A reliance on marketing, cross-selling, and validating its performance with customers and employees ensures Marco’s sustainable growth.
Top: Previous Page: CJ and Frank Cannata celebrate with Marco’s Steve Gau (left) and Jeff Gau the morning after Marco’s successful Technology Tradeshow at Mystic Lake Center in Prior Lake, MN.
CJ Cannata (center), Steve Gau (left), and Konica Minolta’s Senior Vice President of Channel Sales Laura Blackmer share a laugh while working the floor of Marco’s Technology Tradeshow.
Anyone in this industry interested in learning how to market their dealership and build strong, long-lasting customer and employee relationships could take a few lessons from Marco in St. Cloud, Minnesota. The dealership, one of the largest in the country, is led by CEO Jeff Gau and his brother Steve Gau, president of Marco’s copier division.
When we reached out to Steve, a member of our dealer advisory board, about scheduling a visit to the company, he suggested we attend Marco’s third annual user conference in September at Mystic Lake Event Center in Prior Lake, Minnesota. Unlike our other dealer tour visits, where we visited the company headquarters, this visit took place where the event was held. This educational, networking, and social event, which Jeff described as a technology trade show, is similar to the manufacturer dealer meetings we attend throughout the year and offers customers an opportunity to learn about the wide array of products and services Marco offers. More than 800 of Marco’s customers attended this year’s event, taking advantage of the opportunities to interact with and listen to presentations from the company’s technology partners, including HP, Konica Minolta, Lexmark, and Sharp.
We asked Jeff how Marco convinces so many customers to travel to Minnesota to attend this event. He stressed the appeal of the venue, the entertainment element, and most importantly, the ability to deliver good content, particularly information that appeals to IT decision makers. The show also reinforces existing customer relationships.
The event featured multiple breakout sessions, many facilitated by Marco’s manufacturers and vendors that take pride in the content of their presentations, according to Jeff. Marco’s technology partners also help the company fund the event. This year’s event, including a concert by REO Speedwagon, had a price tag of more than $550,000 with about one-fifth of that bill being paid by Marco.
According to Steve, the sizeable financial investment that Marco and its partners make for an event of this nature pays dividends. He estimated the return on investment from last year’s event was more than $3 million. The company methodically tracks who was invited, who attended, and subsequently what was purchased over the next 12 to 24 months. Some of those purchases are net new business and some are tied to the technology show as those companies hadn’t made purchases before.
Despite the many responsibilities involved with hosting an event of this magnitude, Jeff and Steve still found time to sit down with us and share their story the day after the concert and the post-show socializing that went on way into the night.
Rooted in IT
Marco’s roots trace back to 1973 when Gary Marsden and Dave Marquardt (whose last names inspired the “Mar” in Marco) opened a small typewriter shop in St. Cloud. Four decades later, the company is now one of the top five technology providers in the nation, serving customers nationally with offices in Minnesota, Wisconsin, North Dakota, South Dakota, Iowa, Illinois, Nebraska, and Missouri.”¯Marco has 1,180 employees and revenues of $321 million. It serves 33,000 customers with 50% of its total revenues recurring.
Unlike many of the other dealers we have visited on our tours, Marco’s business mix evolution took a different path. The company went from selling typewriters to IT services before it began selling copiers. This line of growth is why Marco is able to position itself as an IT company in the copier business, rather than a copier company that offers IT. The decision to add copiers was driven by Marco’s IT customers that wanted the dealership’s expertise to ensure they were making the right technology decisions.
The decision to sell copiers was a wise one and has contributed to unlocking new opportunities and growth. Today, 45% of Marco’s revenues come from IT, and 55% from imaging. Eight percent ($12.7 million) of imaging revenue is from production print.
Steve expects Marco’s IT revenues will soon exceed imaging revenues.
“Although we still do a lot of [IT] project business and there’s a tremendous focus on the recurring piece, if we’ve done it right in IT, that should surpass copiers in 24 months,” he said.
Much of Marco’s growth””a combination of organic and acquisitions””has taken place over the past 15 years. It took Marco 39 years to become a $100 million dealership. Three years later, it had another $100 million growth spurt, and 18 months later, it grew another $100 million. Revenues for 2018 are expected to be in the $350 to $375 million range. Marco’s acquisition by the private equity firm Norwest Equity Partners in 2015 has also helped accelerate growth. But Marco isn’t finished growing.
“I think we can grow $100 million next year,” observed Jeff, referencing the additional business the recent acquisition of Phillips Office Solutions will bring to Marco as it expands its reach into Pennsylvania, Maryland, and Washington D.C.
“If we execute well on this, the money will flow like it’s never flowed before from our private equity firm,” said Steve with a smile. “If we blow it, next year when you interview us, Jeff and I may not be here.”
Marco is one of the most acquisitive dealerships in the U.S., acquiring horizontally and growing vertically. Whenever it acquires a traditional copier dealer, it adds IT services to that dealer’s services offerings, creating new growth opportunities.
PULL QUOTE: Marco is one of the most acquisitive dealerships in the U.S., acquiring horizontally and growing vertically. Whenever it acquires a traditional copier dealer, it adds IT services to that dealer’s services offerings, creating new growth opportunities.
Growth has not been the result of acquisitions alone.
“We’re owned by a finance company, and to some degree, they keep score,” explained Jeff. “Revenue by itself is great, but you can’t grow your way through acquisitions to become a successful company. That doesn’t work, so half of our growth is organic and half acquisitions.”
The organic piece is especially important. Here, Jeff emphasized the importance of cross-selling IT services and copiers.
“That’s organic growth,” he noted. As an example, he used the company’s acquisition of two copier dealers in Detroit. These were solely copier dealers; however, after Marco acquired them, they were able to offer customers IT services. That strategy leads to organic growth, selling customers, as Jeff said, “more stuff.”
There’s also an emphasis on sustainable growth.
“Sustainable is when every market grows,” said Jeff. “Unsustainable is when you keep spending money to buy [stuff]. That’s costly. If you can manage your growth, you create jobs in every market you buy.”
Key to driving organic and sustainable growth is having the resources to invest in additional personnel.
“Most organizations that grow organically add a sales rep,” explained Jeff. “We do that too, but we also add IT sales people in the copier markets we buy. The mix is really important. It’s sustainable and builds a mutual fund of technology inside our company so we have resiliency.”
According to Jeff, managed services is resilient, while project-based IT is suspect because that business can be more volatile. But as he noted, Marco has to engage in project-based IT, since it allows the company to gain relevance with the IT decision-makers, as does offering a diverse range of products and services.
“You go into an IT department and install a unified communication system for $10 million and when it comes to [selling them] something they don’t like, and guess what IT people don’t like copiers, they’ll buy from you by default,” said Jeff.
Targeted Marketing
Marco’s technology show this year offered evidence on how the company’s marketing and brand-building efforts contribute to the company’s growth. The dealership excels in this area and devotes significant resources””14 people across the company””into building its brand using social media. Marco’s way of marketing isn’t about having its name on billboards or in sports stadiums, although the company does have some relationships with local sports teams.
“That’s ego marketing,” said Steve. “No one has ever bought a copier because they saw [a dealer’s name] on the board.”
The company doesn’t even have a copier showroom or a demo room.
“If they don’t know what a copier is, they’re probably not a good prospect,” observed Jeff. “But if you went into our NOC [network operating center], you’d see about 100 or so people in there handling about 30,000 calls a month in real time. It’s a real, live showcase because our facility is part of our marketing.”
The technology show certainly reinforces the Marco brand and has also been instrumental in raising the number of “likes” the company has on Facebook to more than 12,000.
“We like bringing customers and prospects into a venue where we know they’re there to look at our stuff,” said Jeff. “We have their mindshare that day.”
Between events such as the technology show and social media marketing, the goal is to drive more eyeballs to its website, bring more employees in the front door, and keep more customers. And it’s clearly working, as Marco has 92.6% customer retention.
“That’s marketing,” said Jeff who writes a bi-weekly blog for the company’s website. “It’s surveying and reporting, it’s validating and promoting, it’s getting eyeballs in non-traditional ways.”
Monthly customer surveys are a key element to Marco’s continued success. Each month, the company mails 500 12-question surveys to customers. The response rate is 81%. Marco has been doing this since 1994. According to Jeff, the most important question in the survey is, “If you had the opportunity, would you recommend us?”
About 91% of survey respondents say yes. If the response is anything less than a yes, the dealership follows up with that customer.
The survey helps validate Marco’s performance.
“When you have that kind of a proof statement, part of what marketing does is help validate what others claim,” observed Jeff. “Everybody claims to have the best service, but nobody can prove it. I buy these companies who say they have great service, a great culture, we’re a mini Marco. No, you’re not. it’s just your sales rep yacking about it.”
The company even surveys its own employees to gauge how it’s doing as an employer, asking such questions as, do you trust your supervisor? Does leadership have a good eye for the future? Are they a good role model? What do you like best and least about Marco? What would you change about Marco?
All results are categorized, an internal team reviews the responses, and if necessary, corrective actions are set in motion.
“It validates we’re doing a good job as a place to work,” added Jeff.
The goal is satisfied customers and happy employees.
“If you can prove those two things, you’ve gone a long way in building an enterprise that’s sustainable,” said Jeff. “It allows us to attract young people and keep people. It’s selfish as hell, but we want to attract the best people.”
Spending time with Jeff and Steve and observing the company’s employees, business partners, and customers at Marco’s technology show vividly showcased the commitment the company has made in building strong customer and employee relationships. With diverse product offerings, its strategic acquisitions, and prudent approach to growth, Marco has built a sustainable business””a business with a footprint that continues to expand nationally.
“You get the picture,” concluded Jeff. “we are diversified, we’re very profitable, we put on good events, and we love the industry.”
REO Speedwagon closes Marco’s Technology Tradeshow with a private concert, showcasing its greatest hits and fan favorites.
Sharp CEO Mike Marusic (left) and Jeff Gau take a breather during the REO Speedwagon concert outside Sharp’s private suite.
Access Related Content
Visit the www.thecannatareport.com. To become a subscriber, visit www.thecannatareport.com/register or contact cjcannata@cannatareport.com directly. Bulk subscription rates are also available.
