Marcellus Buchheit with Wibu Systems
Industrial Talk is onsite at the OMG Quarterly Standards Meeting and chatting with Marcellus Buchheit, President and CEO of Wibu-Systems about “Adapting subscription services to the industrial market for improve customer engagement and solutions.“. Tune in and hear more about the importance of industrial subscription and Marcellus's unique insights on this Industrial Talk.
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MARCELLUS BUCHHEIT'S CONTACT INFORMATION:
Personal LinkedIn: https://www.linkedin.com/in/mabu/
Company LinkedIn: https://www.linkedin.com/company/wibu-systems-usa-inc-/
Company Website: https://www.wibu.com/us/
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Welcome to the industrial talk podcast with Scott Mackenzie. Scott is a passionate industry professional dedicated to transferring cutting edge industry focused innovations and trends while highlighting the men and women who keep the world moving. So put on your hard hat, grab your work boots. And let's get out once
again, thank you very much for joining industrial talk. And thank you very much for your continued support. A platform that is dedicated to industry professionals all around the world because you're bold, brave and you dare greatly. You're changing lives and you're changing the world. We are broadcasting here on site. Yeah, cute one OMG meeting, Reston, Virginia. And again, if you have any interest in any of the things that people are talking about, from a technology perspective, I think you need to go out to omg.org and find out more because your tremendous amount of people who are definitely smarter than me, which is not saying much as now you can slam the door over there. Somebody's trying to be nice and quiet in my intro. Anyway, and and just just find out more because it is an absolutely incredible organization. You've heard him once you've heard him twice. His name is Marcellus. Let's get cracking. How you doing my friend?
Oh, I'm doing great. Yeah. Because
it's always good to see you.
Thank you. Good to see you.
Yeah, well, no,
it is what it is quarter to quarter.
quarter to quarter. It was the next quarter gonna be you know,
yeah. goes into you in Orlando. Oh, see, I can drive.
I can drive that.
I hope we see you again. Yeah.
Well, you know, you know, people in big places. So, again, is this a it's been a good meeting there Marsalis Yeah,
it's it's ASC we talk about trends and all this stuff.
How long have you been a part of this?
that's a little while. That's a That's a? That's an investment of time?
Yeah. Oh, yeah, I've made too much investment. When you see my when, you know, my, our we payment and multiply this with all these meanings are sitting here. That's, it's, you know, it'd be definitely a luxury car.
Yeah. But that's what makes this so special is because you get people like you and others who really sort of, they understand the need, there's an importance in that you guys contribute and you make it a priority. And, and, and you debate and you, you do the things that do truly make that. You know, I don't like doing, but you do it. And I appreciate that. And I think people are unsung heroes. What are we talking about here? Talk to us a little bit about what? What's on your mind?
Yeah, today I talk about the video a different focus. It's not industrial. But this is related. And this is oppa devices. And this is maybe something or goes all one day in the industrial. But it's easier today to start on the consumer side. So I was on the Consumer Electronics Show. And Consumer Electronics Show is also fascinating. You see a lot of consumer products like big trucks from Caterpillar, or big, thick tractors from John Deere, and Evan, definitely electronic products for consumers. But they're still there because they address finally consumer demands. Yeah, like we want to eat. But I don't want to come too far away for small devices. So think about you have all this health lifestyle today. Yeah, everyone is worried about his health. Not everyone, but especially to people who eats responsible stuff, they always worried is that is my blood pressure. Okay, as they have a fitness squad watching all this stuff. So there is a lot of new devices coming on the market, which practically fringe events or fringe results from medical research. Now, you have equipment you use at home every day. And that tells you for example, are you relaxed? Are you nervous? How you get relaxed, all the things? There's so many they always are consumer electronics show? It's endless? Yes. And the problem on that stuff is this product is not a joke product is serious products. So they, they they need a lot of development. They need a lot of research. And they need finally some FDA approval, you can bring it on the market without having a risk you're not using it for and you get sick from that. And that's all cost. And it makes these products very expensive. And expensive product is what the consumer doesn't like they want a cheap, affordable product, especially when there is some technology some usage. They don't even know it works. Yeah. Assume you have a product and there was one who said here's your bed, lay on it when you nervous. It's rattle for five minutes and then you're relaxed. And then to bet is $2,000 to see who is buying It's not so bad when you look deeper, the special bed has no value of $2,000 This is some, some, some, some wreck with some people with some, and then you have some metal system. And when you add together, the first the hardware to put the cost to produce this hardware is about 300. The rest is what I say intellectual cost development, yeah, software approval, and lead to Agile selling. And finally, profit. Yeah, this is all stuff, you have not to bring upfront that you bring this on the market and make into your loss. Yeah, you bring this over time, like a subscription. And so you said, Okay, this bet of $2,000, we sell you for 300, this is our cost. And for the first year, you have to make a subscription card for another $500. And the next year again, and again. And after a couple of years, we get really the $2,000 back. But when the customer is happy again, even more, because we have a win win situation, the customer saves a lot of money as a begin. And over time, you as a producer get more money back at the beginning you would ever see when you sell this 2001 time, you never had any additional money making. So you build like the relationship with this customer and say, Okay, I have to be so good that the first year that my subscription get extended, and next year, my product sucks when the stuff doesn't work, forget it. So we have a much closer relationship to hippie clients.
Let me jump out here real quick. So the Win Win is the fact that it's taking that that bed example. You're saying, Okay, I'm going to I'm going to get it in my house for just the costs 300 Boom, and then I'm going to have a subscription over a period of time. And at the end of that the risk for me as a manufacturer is that I didn't I didn't deliver on a product that met the consumers expectations. So I'm Mote I'm incentivized to try to do everything I can to make that product as good as possible. Correct.
And you do make you build a customer relationship with the customer sent you an email and said, this product sucks. Following things are missing. This stuff doesn't work. Yeah, when you sell this for 2000, they say who cares? This one customer they buy never for me another product anyway, they have already bought $2,000. The only thing what they get from them is a bad review. Who cares. But when you have to extend your subscription, you take this Oh serious because you want this customer is not the only guy who has this problem. So you've worked really hard to make the product better. And then the customer is happy. And hopefully it renews the subscription. When the customer doesn't see any advantage in usage of this product, of course it will not be extended. So you come only with serious products on the market. You don't make a choke product. Yeah, you're not cheap people. You build a serious customer relationship with this subscription.
Why is this an important topic for you? Close the Loop on
it. Yeah, for my that the challenge for the customer is following for the seller for the producer is following. Assume the customer decides not to extend the relationship, just stop payment? Can you still use them to product? Then they say, Oh, I pay one year and I'm done? No, we have to be sure that this product cannot use when the subscription ends, like you have a subscription of a magazine. And when this magazine has a high value, it stops NZD when your subscription stops, you not get like there's all the crappy magazines the next five years make the scene for free. So you need a mechanism that this device can no longer be used. If this product is no longer the subscription renewed. And my company legal systems guarantees that
what what happens if I say hey, I'm not interested in in the product no more. Yeah. So and then I know I've got something that's taking
up room and might have a little bit of step D but how is that product works today. So this this devices are usually very simple from the usage. They have not five buttons and a lot of LEDs like 510 years ago. They all have maybe an on off button. But what they definitely do have a Bluetooth connection to your cell phone. And the cell phone communicates with a cloud service from the manufacturer In this culture, which brings the updates in, maybe it even shares your information of your health system with all other clients, you not exchange it. But you get, for example, the average, how the ID person works, how you if you get all this stuff, and this is all cloud based, so and what our company would extend on that is that these cloud service checks, is there a subscription active Is there a license available, and when this subscription is not renewed, the license would stop. And then the device would get the feedback from the from the from the application in the app, so the app in the cell phone that this device cannot walk anymore. So it's very simple, you have no to return it. Because the production cost is paid, you get at least one year subscription.
So the reality is, is you want you want to be able to make your margins, whatever it is, whatever the price point is, you started out at 2000. Okay, at the end of the year, and then you can re up the subscription. If you don't, it doesn't really matter. Keep keep keep it, but we're gonna shut it down. Because we have the technology and
do not lose money. Because you get your your fixed costs, your physical cost is on the other side, the client cannot cheat you by saying, Oh, I know redo my subscription. I trusted you the product. Yeah, it's it's not like a leased car, you certainly cannot lease the car, do you have no money anymore? And then police come in once we turn the car, you don't have this problem. So it's, it's not? There is no user really? And this isn't this? I mean, you're not get your $2,000 Yeah, but you have always customers, they want return products. They're not happy. And this is always it's always, it's always a headache. Yeah. But when you I think when you real believe that your product helps people. We know we believe you have create happy customers. Yeah, you also convinced that people paid a subscription.
When other use cases can use this with outside of consumers, what are you looking at?
I think the next another step would be selling the same stuff in the industrial world. So you'll have these POCs today, and they're expensive, and they're special hardware and, and there is the software on this is the low cost and all this stuff and why you should pay for that upfront so much money, and you need a loan for that. Yeah. The bank says sorry, you need your own is too high, because you cannot start your whole business. So you really cannot start it. But when you just would pay this upfront cost to AWS to produce this hardware, it would be much cheaper. Give you a good example, where everyone is complaining today. Can health cost cost in hospitals? Yeah. Good statistics. When a hospital buy a new cat scanner, they make by way more unnecessary cat skins, then after five years, because it's a begin they have to vote and they have to say them, they have to give the financial guys because every to the doctor and say Do you know how much we only pay? Do you have? How many? How many CAT scans you made today make a little more? Yeah, because it's not you cannot approve it. But assume a model where we say company like GE sales you to fix hardware of this cat scanner. There's still a lot of money 10 scanners, a lot of hardware and complex things, but the biggest party they is the software, the maintenance does research, the FDA approval all this stuff is the same thing to my device. So you would say you pay maybe attendance of the original cost for the installation. But then for each CAT scan, you actually do you pay a fee to the manufacturer which is much higher, you probably 50% goes to that but you have noticed upfront costs too high. Yeah. And so in the commercial industry and you will have a similar model, but that is more difficult to sell today. I think at the consumer you have this one consumer product you have this one manufacturer to oversee this and say Doc is it's not a commercial product. I have not to talk with the hospital about the pay differently and the consumer is more price sensitive in this case. So it's easier to say
yeah, and and you definitely don't want the headaches and every month you're coming around. How are they what is it? How do I account for that type?
It's always funny world there is sometimes companies they say look, we have to budget this year for the new cat scanner. We have to buy it right now. I don't want just pay 10% Next year we possibly don't have the budget for paying the subscription. Commercially sometimes funny. Yeah.
Don't they do something similar to that like the In the world of farming, so I'm a farmer. I can't combine. I'm not. I'm not. No, I can't buy that combine. There's no possible way. But I need the combine. Yes, do what I need to do. And so they have these unique leasing arrangements?
I think so yeah.
It's the same sort of Yeah. Not only that,
but it's a little different. When you cannot afford your combine subscription or your pay your share. They will return it. Yeah. So you have not this upfront. Another good examples are copying machines. Yeah. You have in the past, you bought the expensive COVID machine after CES? It was old. Yeah, it'd be there was one out or it was, it's a better product available. And then you have all these maintenance costs. Do you have new need new toner, that something breaks? It's a it's a mess. So what's much easier is to have a contract to save up. For each copy, I have not just a one cent for the paper, I have another five, six cents for I pay you a lease. And I have a pay per use model. Yes, yes. And when something doesn't work, the machine already tells the leasing company as they do, they need new toner, the paper is down, this machine doesn't work anymore. And the service is coming and requested. They are already there. Because you have a healthy customer relationship.
I like that creativity. I do. I like the creativity. And I think that that it's it's needed in the marketplace? Because you're absolutely correct. I think that companies in general, individuals, I know that I've I look at a look at a thing. And it's like $2,000, I'm gonna say, well, that's a dream. That's not happening today. That's for doggone Sure. But I do need it. But I you know, it's just not in the budget, whatever it might be. And this is the ability to be able to continue to sort of provide the, the, the equipment, the needed solutions to move forward without just, you know, like, burning a hole in my pocket. And then you know, being miserable for the rest of my life. Yeah.
And you'll enhance the relationship. Yeah. You said, Hey, I need not just volunteer be customer. I need happy customer. They are part of my business.
You have to. Yeah, and I agree with you 100%. I will talk offline because I've had some ideas. And so I just I'll share that with you.
We can have another meeting next quarter. Well, look
at you. Says like he's he's upselling me. He's upselling me addictive. That is the money. All right. You are absolutely you're always a pleasant conversation. I like it a lot. Again, I want to make sure that people get a hold of you. How do they do that? How did they get a hold of you? They're saying I want to talk to
Oh, it's Wibu Systems.com. website. My name is Marcellus Buchheit. And then almost every email I receive about this topic
you just laid the gauntlet down. There it is man in a datum in a datum, he's gonna answer in every single one. You are great. As always, it's always good to see you, my friend. All right, listeners, we're going to have all the contact information for the Marcellus out on industrial talk. Please contact him, please get engaged. Please get involved. Look at omg.org as a great starting place to meet people like Marcellus and others to be able to have conversations that truly are focused in on solving your problem. All right, there it is. That is. That's That's my wisdom for today. All right, we're gonna wrap it up on the inside. Stay tuned, we will be right back.
You're listening to the industrial talk, Podcast Network.
All right, another wonderful conversation delivered by Marcellus. He's also been on industrial talk in the past. So what I'm going to do is I'm going to take this particular conversation, and link his past conversation because you need to reach out to Marcellus because he is his mind never stops. And it's always wonderful when I go to these OMG quarterly meetings, and the opportunity to sort of connect with Marcellus again, offline. It doesn't really matter. He's always got something hammered in his head. And he's just always buzzing and buzzing and a lot of energy coming from Marcellus. Absolutely. All right, I mentioned OMG. Real quick. Go out to omg.org. And the reason you want to do that is because you get people like Marcellus, as well as others who are really focused on solving problems and you need to be a part of that collaboration. Because the world is moving fast. Innovation is happening. And it's just, it's just a good thing. A good thing to be able to just be A part of an organization that is addressing a lot of the changes that are taking place within industry and OMG is definitely the location to making that happen. I mentioned this all the time. Industrial talk is definitely building a platform, a platform, a collaborative platform that highlights and tells your story. I'd like to be able to have that conversation with you. I'd like to be able to just say, hey, go out to industrial talk and say, Scott, I want to talk to you. You'll talk to me, and we'll have a conversation about what you're doing it because we want everybody to succeed and to do that, that. That means we have to have a conversation and you have to deliver solutions. All right. And be bold, be brave, dare greatly get a hat. Get a shirt. They're out there. We're going to have another great conversation coming from OMG shortly so stay tuned.
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