Episode 21: Using Artificial Intelligence and Being Innovative in Marketing with Elgin Fastener Group
Adam Honig: So there’s no, “Hey, Alexa, where are my fasteners?” As I say that, I’m worried something’s going to happen in my house. So, I got to be careful when I say that.
Joe Shoemaker: Well, my speaker just went off when you said that.
Adam Honig: Hello and welcome to Make it. Move it. Sell it. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving, and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today. Instead, today we’re talking with Joe Shoemaker, the VP of Marketing at the Elgin Fastener Group. Welcome to the podcast, Joe.
Joe Shoemaker: Thanks, Adam. A pleasure to be with you.
Adam Honig: Yeah. Thanks so much for joining us. Let’s just start tactical for a minute let’s talk about fasteners. I get the sense that everything would fall apart if it wasn’t for fasteners, but maybe you could just tell the folks at home here a little bit about what they are, who buys them, what your customers are like, and so on.
Joe Shoemaker: Fasteners are a critical part of mostly everything that’s manufactured from the eyeglasses that you happen to be wearing to the chair that you’re sitting in, and a number of instruments and technologies that go on beyond that. At EFG, we manufacture specialty fasteners. And the difference between that and something that you might walk down the aisle of a home center and see is the minute that you need something to be a little bit different, whether that’s length or diameter or coding, et cetera, you would come to someone like EFG who can build a fastener to your print.
Adam Honig: You make fasteners to order essentially.
Joe Shoemaker: Yeah. And there are a number of characteristics and physical attributes that have to be factored in to make those properly for our end customer. And we service both OEM folks as well as larger distributors who ultimately then sell to OEMs.
Adam Honig: Gotcha. And I was reading that the market for fasteners is about $86 billion internationally. Does that sound right?
Joe Shoemaker: Yeah, it does. It’s amazing. They’re used in things that you probably overlook every day and don’t realize. But in the global market, we play in a subset, which would be the North American market. And even then there are three big buckets. There’s automotive, aerospace, and industrial. We service primarily the industrial market. We do have some entryways into automotive with some of our key customers, but that’s mostly for secondary things like roof racks on a car, et cetera. Not critical engine components.
Adam Honig: Gotcha. It’s really interesting. $86 billion jumped out at me because that’s the size of the CRM software market too. I always think that’s big. And fasteners, you guys got us beat by a little bit. Probably growing at about the same rate.
Joe Shoemaker: Right. The big difference is we have to sell millions and billions to realize significant revenue, versus a software package, et cetera.
Adam Honig: It’s true. And when we sell new licenses software, we just turn them on. You guys actually have to make something. So, it’s different.
Joe Shoemaker: I don’t know how much you know about fastener manufacturing, but everything starts as a coil of wire. No matter what the end product is, if you can envision a spool of thread just being very much larger and being wire, that’s where everything starts at.
Adam Honig: Oh, yeah. I was in the factory of one of our customers that makes electrical conduit and they start with those big spools and get it down to the right width and encase it in plastic and do whatever with it. So, it sounds familiar.
Joe Shoemaker: Exactly. And the folks that work on those pieces of equipment are part scientists and part artists because there’s a nuance in working on some of that equipment that’s decades and decades old.
Adam Honig: Let’s take the conversation up a little bit. Let’s talk a little bit about the strategy at EFG. You guys are making things to order, so it’s a lot more specific than the commodity part of the business, but how do you differentiate the company?
Joe Shoemaker: Our ability to service our customer base through the widest product offering of specialty fasteners and also licensed fasteners. So, you’ve heard of things like Phillips or Torx. We’re able to manufacture those under a license for our customers, which is really important. We also offer blended sourcing and that allows us to offer the lowest total cost of ownership to our customer base. Customers that would maybe formally be sourcing things globally or from an Asian market can now source through us and will handle all the logistics, and all the quality control. When there’s a demand spike and a product is stuck on the water, we can turn on our machines and meet that demand spike with domestic made production. The last pillar of our stool from a value prop is our ability to do all of that with industry-leading quality and customer support. Our cost of poor quality is less than 1 ½%. And what that means for our customers is they can be sure that they have guaranteed uptime, so that they’re not losing revenue because they’re waiting on a small screw that’s holding up through production process.
Adam Honig: Yeah, I’ve heard a lot of horror stories about manufacturing lines being down for lack of all kinds of components. Hopefully, a lot of that is behind us at this point. Let’s go to the manufacturing location for a second. Is most of your manufacturing in the US? Or is it split between here and abroad?
Joe Shoemaker: We do all of our manufacturing domestically in one of seven different locations, largely in the Midwest. But we have contract manufacturing with some Asian sources to offer a blended model for those customers that so desire. An overwhelming majority of what we do is domestically made.
Adam Honig: Gotcha. And we’ve been talking with people, I’ve been hearing a trend of more and more production being done in the US though, or at least in North America to avoid the transportation issues as well as who knows what else is going to happen.
Joe Shoemaker: Yes, that’s true. There has always been a question mark around quality when it comes to globally sourced products. But now you layer on top of that, the cost of freight from a container being $3,000 jumping to $20,000 to ship the product. And then you add in the complexity of delivery with delivery schedules being all over the board. It has a lot of companies looking to insource production again back in the states.
Adam Honig: Yeah. I think that trend is definitely going to continue. The challenge that I’ve been hearing from a lot of people is actually the labor side of the equation, in terms of staffing, facilities, whether it’s warehousing or manufacturing or anything like that has been a bit of a challenge.
Joe Shoemaker: Yeah. And we’re not immune, we’ve experienced some of the challenges that many folks in the marketplace have seen from a labor standpoint. From our perspective, it was a very limited window. We’re more limited. So, we’ve come through that tunnel and we’re on the other side and we’re enjoying robust levels of production and staffing. And we continue to hire for key roles even right now.
Adam Honig: Are there any sort of approaches that you’ve taken to the labor market that you feel are unique or interesting for folks? For example, we were talking with somebody on the podcast who was hiring seasonal farm labor to help get everything done because they were like, “Well, during the winter, everybody in Wisconsin or wherever doesn’t have anything to do. So, it’s a great overflow capability for us.” Is there anything interesting like that that you guys do?
Joe Shoemaker: I wish I had some secret sauce for you, but we’ve explored a number of options, as you’ve mentioned, with bringing folks in that maybe were in non-related markets to help out from a labor standpoint. But at the end of the day, it just became, how we could rally around this notion of taking care of our employees. And that put us over the edge because we were competing with not only other fastener companies but non-related ones. There were automotive people, there were manufacturing RVs that were paying a lot of money to direct labor. So, we had to compete with people outside of our industry.
Adam Honig: I’m sure you’re probably competing with Amazon on some level too.
Joe Shoemaker: Exactly. We put a lot of focus and lot of effort into improving our benefits packages, wages, and our work-life balance for our teams. And that has resonated very strongly.
Adam Honig: Speaking about Amazon, what are you hearing from the customer side of things? We’ve been talking with a lot of folks who’ve been saying that customer expectations are being shaped by people like Amazon today. And even though you’re an industrial goods supplier, that people still have expectations of tracking packages, knowing when things are going to arrive, and quality levels, do you feel like that’s going on in your part of the world?
Joe Shoemaker: It’s a great question. We haven’t seen the expectation bar raised to an Amazon level. However, I think that it’s fair to say that as new workers come into the workforce and other ones get promoted, they’re being backfilled by the next generation. There is an expectation in their mind that people should perform in an Amazon way. That’s not to say that we should deliver in 24 hours or deliver in a three-day window. It’s not realistic from a manufacturing perspective, but to have information available at their fingertips, I think is an expectation that we and many others are going to have to meet in the coming future.
Adam Honig: So there’s no “Hey, Alexa, where are my fasteners?” As I say that, I’m worried something’s going to happen in my house. So, I got to be careful when I say that.
Joe Shoemaker: Well, my speaker just went off when you said that. I would think that as of right now, it’s probably not the expectation that that would be the case. But if I put myself in the seat of a consumer, I would want to have access to things like product history, order history, and configuration capability without having to talk to somebody if I should choose not to. All of those things are being worked on at various levels in our industry. And in fact, we are working on a product configurator, which will be delivered at some point here that would give those customers that ability online.
Adam Honig: From an e-commerce perspective, it sounds like this is your first foray into that. Is that true?
Joe Shoemaker: I would say that’s fair. It’s a little non-standard e-commerce. When I think of e-commerce, I think of product category A with a known SKU number that you can put on a shelf. Because everything that we do is custom, it’s not expected that we would have things on the shelf built to a customer’s print, but we should be able to give the customer the ability to configure that online, then we could quickly price it, they can agree to it and we can get it into production. So, e-commerce for us feels a little different than maybe what Amazon would be with a finished product.
Adam Honig: Right. And what about reordering? Is it common that if a customer creates a certain type of fastener that they need and you do a run of a million or 2 million or whatever it is, next year they’re going to be like, “Okay, now I need 6 million,” so they could maybe buy that online?
Joe Shoemaker: That’s the hope. They can look up a previous order with a unique part number tied to that configuration, which dates back to that drawing that they supplied. Then it’s as simple as putting in a request for 20 million more. Then it’s just a function of verifying, the current cost and processing the order.
Adam Honig: Yeah, that makes sense. We could just add an extra zero to it. So every time they order, it just goes up by a factor of 10. I’ll make a note. Let’s talk about marketing for a minute. You’re the VP of marketing for this fastener company, not an industry known for innovation and marketing. Tell me about some of the interesting things you guys are doing in the space.
Joe Shoemaker: It’s very difficult to stand out through a traditional sense. There are not a lot of publications that cater to this market. In fact, there are three. Google AdWords and things online are nice, and we certainly do those. Social media for us has become very big. It’s big for a few reasons. Because not a lot of folks on our space are active in it, and we try to be very active in it, putting out posts a couple of times a day, every day of the week. We try to make those a little bit fun, certainly engaging, and informative. We rally around the concept of how now wow, educational, informational, something that’s going to throw them or surprise them. That has served us well. Our following has grown, and our interaction has grown. And frankly, our level of top-line funnel inquiries has grown. What we’re finding from both our web presence and our social media presence is that we get inroads at the top of the funnel for more nebulous kind of, “Hey, help me understand what you do and how you can help me” conversations, and very actionable bottom of the funnel, “I have an immediate need for part number 123, quantity of a million, give me a price.” Those get turned around very quickly with our quoting team and we’re able to win new business. We see digital, whether it’s online or social, as being a very strong differentiator for us in the marketplace.
Adam Honig: The thing about digital though is that not only are you trying to capture the attention of your potential buyers, but you’re competing with everybody. You’re competing with McDonald’s, Coca-Cola, and stuff like that. So how do you break through that landscape to get people to pay attention to you?
Joe Shoemaker: We’ve got very specific language. We’ve got very relatable content. For the people that are searching for our kind of product or service, I don’t think that we compete with McDonald’s as much as I would love to. We’re carving out awareness for our brand through the content that we generate. There’s an acronym in sales of, ‘Always be closing’, ABC. And in marketing, it’s ABE, ‘Always be educating’. We put that out from a content standpoint to build trust and create awareness. And I think that that’s endeared us too. Our new customer counts have risen year over year. We have seven product categories and our cross-brand sales hit record levels last year. That’s really tied to our ability to educate our customer base because largely they came in on one platform and they had one need. But once we got them into the fold, we were able to talk to them, educate them, and entice them to expand their buy with us or share a wallet. And digital is the way we’ve done that.
Adam Honig: Talking with a lot of people in manufacturing, it seems like building relationships with customers is super important. Do you see this strategy as enhancing the relationship with them?
Joe Shoemaker: I think so. I think your example of Amazon earlier is a great one. I’ve never talked to an Amazon employee. I’ve said hi to the driver and given them a tip, but from a deciding-to-order standpoint, never had a conversation with them. But I have strong brand loyalty to Amazon and their entire relationship with me is digital, over my phone, or my pc. I think the better we become at building those relationships by listening to what our customers say is important and delivering the content and the tools that they need or that they want to be more effective in their communication with us, that will build loyalty, trust, and hopefully, that will lead to continued business.
Adam Honig: I once did have a conversation with somebody at Amazon. You can find an 800 number to call them. I don’t remember exactly what the circumstance was, but some order went really awry and I’m like, I’m going to call them. I got the number and spoke to a perfectly pleasant lady and got everything resolved, but it was super weird. It felt like this shouldn’t be happening.
Joe Shoemaker: Like they’ve done everything else wrong that you have to call somebody now.
Adam Honig: Exactly. Speaking about digital and relationships, I want to spend a little bit of time talking about AI. We’re obviously an AI company. We’re spending a lot of time with it ourselves. But I’m really interested from a manufacturing and industrial company perspective, what’s your perspective on all of this AI that has suddenly become very present for everybody?
Joe Shoemaker: It has exploded. My birthday happens to be on November 30th, the same day that ChatGPT launched. Initially, I didn’t think much of it. Two weeks into it, enough people had been talking about it, that I checked it out and I am all in. I believe AI could be game-changing. There’s a lot of concern in the marketing community about whether it will replace marketers and whether it will render obsolete roles that exist today. I don’t know if I subscribe to that, I look at AI as a very powerful tool that in the hands of a capable user can be magnitudes of capability above what they’re doing today. AI is a tool in the same way as a paintbrush is a tool. But if you give me a paintbrush, you’re not going to get a Picasso out of me. It has to be utilized in the right way. And the people that can develop the right skill sets from a prompt generation standpoint to get the most out of the tool are the ones who are going to elevate themselves and leapfrog the competition.
Adam Honig: I completely agree with you. I think that a lot of the low-value things that we just have to do in marketing can be done easily. And that gives us more time to focus on the more exciting stuff too. But I do wonder in a world where the machine can write great copy for you all the time, are we going to be more editors than writers? And if we’re going to be more editors, do we need less people doing stuff too then?
Joe Shoemaker: I think there’s some truth to that. If you typed something in ChatGPT now and asked it to put together a marketing campaign, would you be satisfied with what you received? There’s still a lot of work to be done and nuancing, refining the information that comes out. I certainly agree that for more transactional tasks, AI will replace that function. But the challenge is to elevate our game. The challenge is to think more strategically and not transactionally. AI will allow us to take that part of our day away perhaps, and let us focus on the bigger picture of how we can make our brands more engaging, more loyal from a customer-based standpoint, and certainly more relevant than the competitors that we’re up against today.
Adam Honig: Are you using this technology in the business today?
Joe Shoemaker: Absolutely. Like most, I have ChatGPT. We’ve also started putting out videos with a product called Synthesia. That’s going fairly well. We have Copy.ai and several other tools that we’re using to help us with social media efforts and just general information. Arming our sales team with better responses for commonly occurring objectives during the sales cycle, AI is a wonderful way of brainstorming those items as well.
Adam Honig: I’ll tell you another use case that I discovered that I was not aware of, but it’s for people who have dyslexia too. A thing like ChatGPT can be a real game changer. We recently introduced a new feature in Spiro where you can just basically give Spiro the gist of an email and it’ll write out a nice, professional email using the same technology behind the ChatGPT. I got a call from one of our users and he was like, “I’ve got dyslexia. I’m 45 years old. I’ve been writing business emails my whole life, but it’s a struggle and I hesitate to do that. I just want to thank you because now, I don’t have to have anxiety about if my writing is going to be bad or if I am going to look dumb to people.” And I never would’ve thought about that. I think there’s a lot of ways that this is going to go and use cases are going to come up that we were like, exactly. Who could have thought it?
Joe Shoemaker: You’re already on the cutting edge of this. Your platform is generating connections and making assessments of data that otherwise would’ve gone undiscovered. You’re blazing trails with this stuff every day. Folks like us are just trying to catch up. We’re running to try to get relevant and you’re setting the bar.
Adam Honig: Well, thank you for that. We try, but for me, it’s the unexpected. Obviously like, oh, Spiro can tell you that this customer isn’t ordering and you should give them a call. Very valuable, but straight down the fairway stuff. These other things like dyslexia that are just coming up, I’m super amazed by it. Maybe because it is a surprise. That’s always a bit of interest to me when things are unknown.
Joe Shoemaker: Give it two days and you’ll discover some new thing that just came out. I haven’t seen anything this rapidly advancing before.
Adam Honig: Well, I’ll tell you what I’m hearing is coming next and this is where it gets crazy. I don’t know if you’re aware, but AI is also really good at writing code. So, our engineers are using AI to help us accelerate product development, which is fantastic. I haven’t been a programmer since the nineties and even I can use it to write great-quality code, which is crazy. But what’s really crazy is the researchers who are training the next generation of AI models to train the next generation of AI models. Once we get to the point where it can be teaching itself things that way, I don’t know what’s going to happen. If you think it’s going fast now, just wait until that happens.
Joe Shoemaker: You’re right. It feels like the matrix.
Adam Honig: A little bit. The good news is even though AI tech is super exciting, it is very limited in its way. Like if you ask ChatGPT to make a value judgment about something, you give it an email and say, “Hey, how important is this email?” Let me tell you, I’ve been trying to get it to give me good responses to that and it’s not doing it. It’s very positive all the time on stuff, so I don’t think it’s going to replace our good judgment, which is probably one of the most important things. Relationships and judgments, I would say, are what keep us all in business.
Joe Shoemaker: I agree.
Adam Honig: Well, Joe, this has been a great conversation. It has been fascinating to hear about, the uses of fasteners and just how you’re thinking about innovation in an industrial context. Because I don’t feel like that gets a lot of attention in the market today. So, this has been really great. I really appreciate you coming on the show.
Joe Shoemaker: My pleasure. Thanks for having me and for forwarding ahead this conversation around marketing and AI.
Adam Honig: Yeah. And as a reminder to our listeners, you can find every episode of the Make It. Move It. Sell It. podcast at spiro.ai/podcast. While you’re thinking about it, maybe it makes sense to subscribe to the show or maybe give us a good rating. Joe, do you think people should give us a good rating if they like the content?
Joe Shoemaker: Of course, they should. Absolutely.
Adam Honig: Share it on social media, just like Joe does with all of his campaigns. Tell your friends, just anybody you got. But it was really great talking with you, Joe, and thank you to everybody for tuning in, and we’re looking forward to speaking with you at the next episode.
Joe Shoemaker: Thank you so much.