Monday, March 30, 2009

Recession Busters and Low Hanging Fruit

I am re-falling in love with a term I used to hate (but, before that, loved.) Low hanging Fruit. The visuality of this is simply wonderful – imagine yourself as a business unit head and you wander through your cost center halls; you reach out and pluck easy ideas that save you tons of money, or make you tons more revenue. I fell out of love with this term years ago when I discovered that nothing was really that easy. In fact, I started to associate the term with naivety.

A major focus this year at NASPC is “Recession Busters” - beyond the normal awful stuff we have to do to survive in bad times, what are companies doing to grow revenue, cut costs, and improve cash flow? There’s lots going on – CNH is on the move with more arrows in their quiver than ever before. Subaru, Ford, and many others are doing some pretty smart stuff. Our perception of low hanging fruit has changed as a consequence of talking to a dozen or so companies in the past few weeks. It’s not that it’s easy to reach out and grab that apple, rather it’s that we now know how to do it and have dashed barriers that we did not question before.

A few years back Volkswagen surged to best-in-class in terms of productivity – took them a year or so to do. (I’m not saying it was easy, but the pace of change certainly was breathtaking.) That gave us some cause for pause. We look around, and see that Volkswagen is wrestling their way to service-parts leadership in a lot more areas than just warehouse productivity. Doing what they did didn’t fit with my disrespect of that term, low hanging fruit. But, that’s not a bad way of describing how they approach excellence – they do simple things very smartly. Mopar will shock and awe us this year at the NASPC – another example of a company turning on the dime, reaching for, and grabbing that low hanging fruit … with a fair amount of sweat on their brow.

Let me give you a vivid example of this emerging “low hanging fruit” concept. It is really quite logical, but not quite real … yet. Let’s go into some uncharted water for a few minutes. We will talk more about this at the conference.

First, let’s leave for this uncharted water from a familiar port. We’ve proven over the years that there is a remarkable similarity between CE/Ag/HT end customers and automobile customers. CE/Ag/HT customers want “up-time” in their equipment choices, and for decades this has been the holy grail for the segment leaders here. Up-time is synonymous with “reliability” – Toyota and Honda discovered this in the early 1980’s. Lesson: carefully study those CE/Ag/HT guys.

How do customers get information on choices they make? Cars? Easy; they watch TV. Excavators …well, this not so easy. We rarely see excavator commercials on TV or during the Superbowl. What about service and parts, not cars (and not accessories)? Where do customers get their information? Like excavators, the same place we get our news –dealers and the internet. We have lots of proof, but we really don’t need it. Customers go to the internet for education on things that are important to them. More than just go to the internet for information, they first go to OEM websites with surprising frequency.

OK, take it as a fact: customers go to your websites to learn about service and parts.

Next, regardless what segment you are in, what’s important to customers of service and parts? We’ve really nailed this one over the past several years: (1) trust, (2) value, (3) cost, and (4) convenience. That’s pretty much it. Next, what’s important to the OEMs? (5) High service retention. Finally, what’s important to connecting these five things together? (6)Ease and (7) Innovation. It has to be easy for customers to get relevant information … or they will rely on other information sources and common opinions from their cousin Goober.

Recently we evaluated 27 OEM websites according to these criteria – each criterion was weighted differently. Each of the first 5 criteria was scored by us as being either high/medium/low/no. We defined “high” as having “proof” in the website, whereas medium scores were given to OEMs who made specific criteria an area of significant focus. You could even get “low score” points for merely mentioning the criteria. We gave extra points for great innovation and deducted points for making it difficult to find the parts website. Deere and AGCO’s websites provided relevant benchmarks for the measurement criteria and allowed us to gauge our judgment. Now remember, we mentioned that this is uncharted territory, so nobody should feel bad about having a short bar. Automotive OEM websites seem to be generally developed and controlled by proverbial box-checkers. These box-checkers don’t think much about the ownership experience and stuff like that. They want to show product and have things rotate 180 degrees so you can see the headlights one second and taillights the next. Selling parts and the ownership experience falls through the cracks ... at car companies. (By the way, there are lots of best and worst practices in these 27 web sites. Some OEMs have examples of both. Chevrolet and other OEMs aspire for a younger, hipper, owner base. These sorts don’t know or care that General Motors owns Chevrolet. If you go to the Chevrolet web site there is no mention of service and parts. Instead, you are encouraged to sign up for a Yahoo account and then go to a Yahoo hosted - not Chevrolet hosted - owner website. Err, ah, what about my wonderful Gmail account? Nah, pass, why have both? Now, if you do stumble onto the GM website, you can find a link to service and parts, and get a best-in-class proof of why Genuine sheet metal provides a better value. Then you are faced with Clint Eastwood’s “Holy Trinity” Dilemma from Million Dollar Baby … OK, who’s Chevrolet? Now, what about GM Parts? Got it. Now tell me about the Holy Ghost “Goodwrench?”).

Not at CE/Ag/HT. We were not surprised by the cluster of higher scores for these segments. This, indeed, is low hanging fruit of the choicest variety. Customers have a predisposition for talking smack about car dealers in terms of trust, value, cost, and convenience. They use evidence from cousin Goober and Aunt Ethel. Why not? Why not change all that and provide an education for customers where they tend to go to become educated? Change is low-dollar and high value-added. We just need to rewire some thinking – maybe get our ad agencies to provide the right copy on trust, value, cost, and convenience? When you are in uncharted territory, you always need to look at the leader and pack positions. For instance, at the Battle of Trafalgar, you wanted to watch Lord Admiral Nelson’s boat. In this, we look at Deere and the CE/Ag/HT pack positions, and at Mazda and VW. These guys are like Nelson.

More to come in a few weeks as we all sail into some uncharted water and think about what makes some fruit low hanging.

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