Thursday, April 23, 2009

The Metrics of Satisfaction & Success … or, If “Love Stinks” and You “Can’t Buy Me Love”, Well, Maybe You Should Try Something Different – Tom Parish

This week’s blog returns to our “love” series. As a quick reminder, the general thesis of those earlier blogs was that the real goal of our entire brand building effort was love. We want our customers to love us – our product, our service, our brand.

Inducing love gives us some breathing room in the event that we screw up a bit – if your significant other is truly in love, and you…forget a birthday, buy an inappropriate gift, or some other minor mistake, hopefully that love will make them give you a pass. If you really aren’t in love, just about anything – say choosing the wrong fork for eating a salad – can get you in trouble.

So, how do you know if your significant other is in love? Or at least interested? What is the right metric? I don’t think it is stretching the analogy to say that the ultimate metric for love is whether they stick with you. It is loyalty. After the first date, do you really want to know how “satisfied” they were with the date (ignoring the obvious double entendre)? No! You want to know whether they will go out with you again.

It is the same way with cars, trucks, dozers, and tractors. Ultimately, do we care how “satisfied” our customers are? Or do we care whether they will come back to spend money on our products again? Whether those products are service, parts (retention and service share) or new vehicles (repurchase loyalty). Loyalty is it – the definitive outcome metric. At the end of the day, we do not care about anything else.

If this is true, shouldn’t we all be measuring loyalty directly? Many are, but many are not, and there are difficulties in measuring loyalty. On the vehicle side, there are questions around whether to measure it at the individual, household or vehicle level, whether it should count if you don’t sell the type of product your departing customer bought, etc. On the service side, some are at least measuring visits and defining “loyal” to be a certain number of visits over a certain period of time. However, the challenge is that does not really measure service share, and it is hard to argue that a service customer is loyal if you only get 20% of their service business. So yes, there are difficulties, but most can be overcome – and in any case, the fact that it is hard is no excuse not to do it. We’re talking about love, right?

If loyalty is the ultimate outcome metric, what should we be measuring as interim or process metrics? What are the leading indicators for loyalty that we want to measure and act on to ensure we are working on the right things to improve loyalty?

Today, almost everyone uses customer satisfaction (sales satisfaction or service satisfaction) as their primary interim or process metric. Customer satisfaction is seen as the primary proxy for what will keep customers loyal to a brand. This seems to make sense on the surface – the theory being that happy customers will come back to buy more of our products. The problem with this is that what makes customers likely to return goes far beyond good treatment at the dealership. For some customers, product quality (IQS or reliability) will have a greater impact on loyalty than how well they are treated at the dealership. In fact, our analysis shows that IQS correlates better to service loyalty than service satisfaction (CSI) does. These differences in owner characteristics (not to mention differences in vehicle population, dealer network, price point, etc.) make it impossible to say that a single lever – customer satisfaction – is the only lever that you want to pull to ensure customers come back. We may all have the same outcome metric – loyalty – but that does not mean we want to all focus on the same interim/process metric.

To illustrate, let me offer another analogy. Baseball. Every team in baseball has the same ultimate outcome metric – number of wins. Before Moneyball popularized the statistical approaches used by Billy Beane and others to analyze player performance, most people looked at just the basic interim/process metrics. These were the standard stats – ERA for pitchers, batting average, homers and RBIs for hitters. With popularization of Moneyball type stats, people started looking at a multitude of other statistics – on base percentage (OBP), batting average with runners in scoring position (BA/RISP) – don’t you just love these acronyms! This plethora of statistics allowed managers to evaluate specific types of performance and target players that perform well in the areas that are most important to their particular strategy.

That is the real key – tying metrics to strategy. In baseball, strategy is influenced by the environment (if you have a park with a 400 foot fence you are going to go for speed and defense – if you are at Fenway with a 315 foot left field fence you are likely to go for homerun hitters) and it is influenced by current personnel (if you have Manny Ramierez you may not want to base your strategy on defense and base running). Everyone’s situation is different, so their strategy will be different, so their metrics should be different too.

Again, same thing with cars, trucks, dozers, and tractors. Everyone has the same ultimate outcome metric – loyalty. But everyone’s starting point is different. Different volume levels. Different UIO. Different dealer body. Different owner characteristics (Saab owners “love” their vehicles for the quirky engineering while Honda owners “love” their vehicles for the bullet-proof reliability. Luxury brand owners will tend to be more influenced by convenience issues than cost, while volume brand owners also want convenience, but will likely trade off some of that for lower cost.). The starting points are different. Therefore, the strategies are different. Therefore everyone’s interim or process metrics – and the targets for those metrics – should be different.

For example, Lexus is one brand that probably should focus on customer satisfaction, because it is a core element of their brand. But Porsche? Whether a Porsche owner returns to the brand is surely driven more by product execution – whether they love the car – than it is by customer treatment. So they should be looking at metrics regarding vehicle quality. Metrics follow strategy.

Let’s look at parts pricing strategy. In general, we argue that dealer satisfaction with parts pricing is one area where you can be too high. Very high dealer satisfaction with pricing can mean you are leaving money on the table. Too low is probably not good either. In most cases there is a “golden zone” in the middle and that is where most brands should target to be. However, in the case of a highly value-focused brand, they may need to target extremely high dealer satisfaction with pricing. If everything about the brand is aimed at perceived value for the customer, parts pricing needs to be consistent with that positioning – and if parts are priced to provide value, dealers will likely be highly satisfied with that pricing. Again, metrics (and targets) follow strategy.

Just like the Moneyball statistics, because of the huge range of potential starting points, and therefore strategies, we need a range of metrics that are used as the primary interim or process metric. The diagram below is a simple representation of the highest level potential influences. Each of those boxes could be drilled down into their own more detailed influences – each of which would have their own key metrics.

I don’t mean to imply that you are not all doing this already. Most are and are doing it well. But the key is to keep your eye on the ultimate goal – loyalty. If you are not measuring it today, start doing so. It is less important that everyone measure it the same way than that everyone measures it. Period. Do not put too much focus on customer satisfaction to the exclusion of other process measures that are more relevant to what your specific organization needs to do to improve performance in that ultimate goal – achieving loyal customers that come back and spend their hard earned money with you.

Wednesday, April 15, 2009

“The Weakest Link” or Why Supplier Management Is (Still) Important - by Stephan Brackertz


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In economic times like these, where do we invest our supply chain resources (or what’s left of them)? Clearly, we will want to invest them where we get the most “bang-for-the-buck.” That is, where we get the most result in a dollar-for-dollar comparison of investment options.

When we compare our options on what to tackle next in the supply chain, it is important not to lose the perspective on the total supply chain. OEMs can spend a lot of time on optimizing their own network, but neglect the interfaces to the remaining value chain, for example suppliers and dealers.

The Weakest Link

Any Formula One mechanic will know that engine power is only as good as how much of it you can actually get on the road. At a certain point, it is better to spend that extra hour of mechanic time on tires, tuning and aerodynamics rather than on the engine itself. The engine in this example is our internal network which we may have tuned quite a bit. Maybe it’s worth spending some mechanic hours on things like supplier management? At this point, the weakest link in your race car set up may very well be how you handle suppliers.

While every OEM already handles suppliers in one way or another, the benefits of doing supplier management well are enormous. This needs to be pointed out explicitly, because the voices inside the organization may tell us that supplier management is already being taken care of, that it is not an issue. I suggest that you challenge these voices. This will be especially worthwhile where supplier management programs are weak, or where supplier relations are currently handled single-handedly by your [Global] Purchasing Group.

So, how do you know if you have a supplier management problem? Do any of these sound familiar?
  • Your suppliers think “on-time” means whenever they get around to shipping
  • You find out that a supplier is late only when you run out of inventory in the warehouse
  • Your supplier requires you to order a minimum of 200 pieces at a time (which was just fine for production), even though you only sell about 30 pieces/year
  • You spend far too much time and cost repacking the parts the supplier ships to you
  • The minute a part goes out of production, piece prices skyrocket and service plummets

If none of the above sounds familiar, pat yourself on the back for being one of the few OEMs that has this portion of their supply chain under control. If however you find yourself nodding, rest assured that you are not alone.

Why do so many of us find ourselves in this position? It usually is a combination of three factors:
  1. We don’t tell the supplier what they have to do to support service parts
  2. We do tell the supplier what to do, but don’t really do much about it if they ignore us
  3. We tell the supplier what to do, we expect them to do it, but we have no way to monitor whether they’re actually following through

How Much Money Are We Talking About?

Our data shows that OEMs with strong supplier management have reaped large benefits on their investment. The dividends come in the form of lower inventory, fewer and shorter backorders, lower supply chain volatility, and higher dealer satisfaction. The dirty little secret here is that the investment doesn’t actually need to be very large to start seeing those dividends!

Let’s look at what moving the needle on supplier management means in dollars and cents. A simple comparison of companies with good supplier management vs. those with poor supplier management is quite revealing. Let’s take one of our conference metrics as a proxy of supplier management: percentage of supplier purchase order lines that were received “on time.” We’ll put companies with 70% on-time performance or more in the “good” bucket, and those with less than 70% on-time in the “poor” bucket. We’ll also agree for a moment not to get tripped up about how companies define the size of the “on time” window (we looked at the companies in the good group and the poor group and our industry knowledge tells us this is a pretty accurate assignment).

Now, the bottom line is in the difference between the “good” group and the “poor” group (see the table):
  • 2.3 fewer months of inventory, measured in months of supply
  • 33% smaller average backorder portfolio
  • 7 day shorter backorder duration


For a company with $1 billion in parts sales at dealer net, this amounts to over $190 million less in inventory. Measured at acquisition cost, and applying a 12% holding cost this amounts to a saving of roughly $11.4 million per year. Not bad at all – in terms of magnitude this is like taking out 10% of your supply chain costs. In addition, a smaller backorder portfolio will lead to fewer lost sales to the aftermarket. It’s a bit squishy to quantify, but for the same $1 billion company, this impact is roughly equal to another $5 million in profits. Overall, our example company would have increased profits by $16.4 million1.

Further, this estimate doesn’t even begin to include incremental costs associated with processing backorders/referrals, repack, excessive min order quantities, etc. All together, we’re looking at increased profits of over $20M for every $1 billion of sales…Given this, why wouldn’t everyone work on supplier management?

We Have Met the Enemy, And It Is Us

Historically, where supplier management has been controlled single-handedly by Purchasing, the result for aftersales has often been disastrous. The typical purchasing “piece price” incentive system is the primary culprit: with the majority of the piece volume flowing to production, Purchasing focuses all of their energy there, in order to show big unit cost savings. As such, we encounter our first problem – “we don’t tell the supplier what to do.”

Unfortunately, aftersales requirements are a whole different animal from production - smaller, less frequent, less predictable volumes, packaging, labeling, minimum order/set-up fee implications, etc. When these issues are not considered up-front by Purchasing, aftersales often pays dearly, in terms of increased costs (labor, transportation, and inventory) and lower service levels (backorders, referrals, etc.).

Even where Purchasing makes a commitment to support aftersales needs, this often amounts to empty words. The classic approach – selecting a new supplier for production and getting them simply to agree to “support service parts” (don’t worry, we’ll come back later and give them the details) – has never worked in our experience. We usually don’t go back to the supplier, and when we do, we have absolutely no leverage. Thus, the “we tell them what to do, but don’t do anything if they ignore us” syndrome.

Instead, Purchasing, Production, and Service Parts must be on the same page, with an integrated supplier approach. Suppliers need to be told both production and service parts requirements before bidding on the work, and should be selected based on their combined proposal. Further, acceptable support to service parts needs to be explicitly described (on-time delivery requirements, acceptable lead times, packaging, out-of-production pricing changes, etc.), with the threat of additional production volume tied to their support of service parts.

Plow Through Superficial Objections

Sounds easy, huh? But not everybody will welcome enthusiasm for improving supplier management. Probe, question, and plow through superficial objections. Big dollars signs are the reward for this as we have seen. It’s natural to hear statements like these from the people that handle supplier relations currently:

“We already have a supplier management program”: The pure existence of a program doesn’t mean a lot. Ask for performance metrics. Compare them to industry benchmarks.

“We must be good because our inventory is low”: Correlation is not causation. Lower inventory is a result of supplier management. But it is not an indicator of good supplier management.

“We don’t have a lot of backorders”: Take a look at backorder duration, long backorder resolution time is more detrimental than backorder quantity.

“We can’t improve performance until we implement the new software”: This is a typical sign of the “waiting for the Messiah” syndrome. Ignore all the reasons why it can’t be done today, ask for at least one option of how it could work today.

Unlearning and Re-Learning

OK, let’s say you get past the hard part and get your company internally aligned to optimize your supplier management process. What’s next? How do we actually work with the supplier to improve their performance?

Sometimes the hardest thing for us folks in the industry is to “unlearn” what we have learned previously. Let’s debunk some myths about supplier management that have been proven wrong by recent experiences in this area. All of the following statements are untrue:
  • You have your suppliers’ undivided attention (It’s actually divided across several customers. The biggest and loudest customer gets the most attention).
  • Suppliers meticulously read and remember all of your OEM communications (They don’t if it’s the typical long winded corporate laundry list).
  • A supplier commitment to a problem resolution date solves the problem (Look at the number of supplier commitments that were subsequently not met).
  • Demanding really small lot sizes from suppliers reduces your costs (It does not, it pushes inventory from you to the supplier, for which you eventually pay somewhere).
  • Threatening a supplier with financial penalties for underperformance works (It does not unless you have the guts to actually live up to your threat).
  • Vendor managed inventory is the ideal situation to move to (This is the flavorful Chupa Chups lolly that 3PLs like to wave around. VMI may be good, it may be bad. It depends on the situation).
  • Supplier performance improvement requires that whiz-bang software from a three letter software company (Not really, there is a lot you can do without software).
  • Improving supplier management requires a lot of investment (It does not, as we will see below).

Do It Now!

So, how can we quickly move the needle on supplier management? Here is some guidance for some immediate quick-and-dirty “do it now!” action…

First, make sure these prerequisites are in place: One prerequisite is clearly designated staff that is assigned to supplier management (yes, supplier management is a full time job). Another prerequisite is to measure supplier performance and make those measured results very visible inside the organization (no matter how discouragingly poor performance may be today). The third pre-requisite is culture. To be successful, your employees must buy into a vision of working with suppliers, not against them.

Second, you should do Pareto analyses. In fact, the Italian economist Vilfredo Pareto got it exactly right by saying that you need to focus on the 20% that lead to 80% of the results. Pareto invented a nice way of graphing key accounts which made him famous. For supplier management, this means focus your time on key suppliers and you will get most of the results. You should do two Pareto analyses: which are your top suppliers in terms of volume? Pick the top 15 suppliers (you will likely have 10-20 large ones). Next, you should Pareto your backorders. Which are the part numbers that are creating the biggest problems with backorders, and which suppliers are responsible for them? Then run these lists up against each other and make a consolidated list of priorities. Assign specific staff to specific suppliers on the list.

Third, work with the suppliers on your list of priorities. Frequently call suppliers and talk about delivery promises, actual performance, and targets missed. This is a version of the “squeaky wheel gets the oil” theory. You would be amazed at how simply more attention can lead to simply more results. For each supplier failure, insist your supplier give you firm commitments on when the issue will be resolved. Keep a dialogue with the supplier on how issues can be resolved and how you can help.

Don’t despair if supplier relationships are handled by purchasing today. There are plenty of ways to make improvements even in this case. You can add a lot of value by going back on already signed contracts to integrate aftersales with an addendum. Believe me, anything caught in the contract will be better than what the supplier quotes you later for things that are not in the contract.

This type of prioritized action will yield results fairly quickly and is a worthwhile task to kick-off internally.

Supplier Management 101

Once we’ve started the quick-and-dirty, however, how do we build something more robust and sustainable? The next steps are to put in place the six pillars of a strong supplier management program. These include:
  • Supplier set-up
  • Proactive management
  • Reactive management
  • Purchasing
  • Supplier cost management
  • System backbone/Infrastructure

Send me an email at sbrackertz@carlisle-co.com if you would like details on these pillars and related best practices.

The Bottom Line

While every OEM does supplier management in one way or another, the benefits of doing supplier management well are enormous. If you are thinking about which activities to tackle of this year, I strongly suggest improving supplier management. Supplier management is often a weak link in your supply chain, its bang-for-buck potential is huge, and a scrappy “do it now!” operation can help you make the rubber hit the road immediately. Simply go to where the “bang-for-the-buck” is.

1 For those readers that will now use “ifs” and “buts” to reduce the magnitude of the estimate in this example, my reply is that we have also not yet added in the value of lower supply chain volatility, dealer satisfaction, and end-customer loyalty.

Wednesday, April 8, 2009

Are Car Dealers Really the Culprit In High Priced Repairs? Nah; Bad Scientists and Special Interest Groups Just Want You to Think So

In a recent press release, AAIA claims that repairs cost 34% more at new car dealers than at independent repair shops. Worse, they state that this blatant gouging by those favorite whipping boys, new car dealers, results in $11.7 billion of excess costs being borne by the poor unsuspecting public.

Wow. Need more detail? Yep; you can get the full report for $400. Otherwise, you have to trust this trade organization (note that this is the same organization currently pushing the pending Motor Vehicle Owners’ Right to Repair Act). We bought the report. My guess is that the purpose of the press release was to poison the water against dealers, and sell the antidote for $400. Otherwise, you’ll just have to take their word for it. Piling on damage to new car dealer reputations by the press release seems to be the intent of the press release – not to mention the side benefit that they get on the Google Top-10 searches for legislator staffs who are examining the merits of this pending legislation. This was a trade association’s version of Swift Boats and the Willy Horton furlough commercial.

To behold the sheer ineptitude of this research is stupefying … no, make that mind-numbing. Let me explain with a very simple example from AAIA’s research. Of the $11.7 billion cost excess, over $3 billion is from front brake pads and rotors. Here’s how they calculated this: they said that the entire multi-billion dollar US market “overcharge” for brakes and rotors could be represented by looking at just two vehicles: a 2002 Chrysler Sebring LX sedan and a 2002 Volkswagen Jetta GL. That’s all you need to do – just look at two cars sold in 2002.

As of a few years ago there were 250,851,833 vehicles on the road in the US. If you were to count the number of make, model, and model year variants associated with this 250 million number, it would be in the thousands. Yet, AAIA thinks all you need are two 2002 model year cars to estimate the differences in front brake repair costs if you take all 250,851,833 vehicles to dealers vs. going to non-dealers. That is preposterous.

For front brake pads and rotors, they had a telephone market research firm (you know, those are the people who call you at home at 6:00 PM, can’t pronounce your name and ask you monotonic questions) call a total of 36 Chrysler and VW dealers (in 6 different cities) to get parts and labor repair estimates for the 2002 Chrysler Sebring LX sedan and a 2002 Volkswagen Jetta GL. They also called 48 non-dealer service installers in these 6 markets to get competitive quotes. They estimated that there are tens of millions of front brake pad and rotor jobs each year. So, they averaged the difference in the 2002 Sebring/Jetta repair estimates from a few dealers and non-dealers and, voila, they came up with a multi-billion-dollar price tag!

AAIA repeated this methodology for another 9 repair types, each time using a different pair of domestic and foreign vehicles. That’s how they bungled together the rest of the $11.7 billion.

Given the above, we tried to parallel what AAIA did in LA for brakes and rotors, for more vehicles than they used. Our survey produced mixed results, as expected. For example, “Foreign Repair Shops” were responsible for both the highest quote for a 2004 Toyota Camry Sedan LE 2.4L and the lowest quote for a 2002 VW Jetta GL 2.0L. We gave up on the survey because it was hopeless – read on.

By the way, for the statisticians out there, the margin of error to achieve a confidence level of 95%, based on the AAIA sample size of 3 to 4 data points per market/repair “inference” is plus or minus around 50% (this is being generous - source: raosoft.com/samplesize). The bar chart gives an illustration of just how inaccurate the AAIA press release is. Let’s consider their press release statement, “customers in Los Angeles pay as much as 46.8% more at dealerships than independent repair shops …” I assumed a $300 named repair at an independent shop and, to come up with the dealer cost, I used the AAIA press release’s statement that dealers are 46.8% more expensive. However, based on the margin of error, the “real” dealership price could just as easily be $200….$100 cheaper than the independent shop! We’re not saying that’s the truth…we’re just saying we don’t know. And if you do want to know with reasonable confidence, you would need over 300 data points per price estimate, not 3 to 4. This would mean a total sample size of over 40,000 to estimate the repair cost differences for just the 10 vehicles analyzed by AAIA… about 50 times larger than the sample AAIA used.

OK, Lets Just Focus On the Parts Quotes That AAIA Used to “Prove” That Dealers Were Ripping Off Poor Customers By Billions of Dollars.

I just don’t get it. Let me explain some of my confusion. I spent 30 minutes on the internet and had someone (a Principal in my firm) call some installers for quotes on that 2002 Chrysler Sebring (did the same thing for the Jetta and some other vehicles). On the internet I went to brakeworld.com and autopartswarehouse.com and got prices for front brake pads and rotors that fit the 2002 Sebring. There were 11 different front brake pad brand choices and 5 different front brake rotor brand choices. In total, there were 55 front pad/rotor internet combinations that cost between $72.48 and $349.27. (This represents a pure parts cost spread of $276.79, which dwarfs the average dealer/independent cost difference per job for front brake pads and rotors – for both labor and parts – in the AAIA report). These costs are charted in the graphic that has all the red bars. To tell the truth, I could not find any evidence that any of these were “Genuine” replacement parts, nor could I figure out which ones were better than the others. We got 5 telephone parts quotes from LA-based installers – all of which fell within the range of the possible price combinations I got from the internet. All the evidence points to our getting parts cost quotes that reflect “choices” that anybody could get – either at a dealer or at an independent installer. There is certainly no “smoking gun” or foul-play going on. So, I am confused, where is the cost excess here? By the way, when I looked at the AAIA report, LA was the high cost market, brake pads and rotors were the biggest “excess cost” repair category, and the parts price quotes they received were squarely within the chart’s choice set and not very much different than what we have. We did the same thing for the 2002 VW Jetta and came to the same conclusions.

OK, What Is the Truth?

The truth is that getting true apples-to-apples comparisons is nearly impossible. In 2007 we surveyed customers, who had dealer service vs. independent service, to ask them questions related to cost of their recent repair. We focused on 3 brands. We concluded that total RO costs were just about a wash … simply because it is nearly impossible to compare independent repairs to dealer repairs. AAIA’s 2002 Chrysler Sebring is a good example of this – we know that there are at least 55 possible combinations (probably several thousand) of parts that can be used in the repair … which combination reflects a “choice” based on judgment, cost, profit, and concern for quality. The realities of comparing dealer to aftermarket service are extremely complicated – but to get the true answer you need to deal with that complication. Here’s a real world example from two weeks ago. A friend takes her Range Rover to the dealer for a lube/oil/filter and 30,000 mile service – all covered under the warranty. Dealer calls her up and says that she needs brake pads and rotors … for $1,400. The dealer’s labor rate is posted at over $100 an hour. She calls me and asks what she should do. I said, give me a minute. I called Midas and gave them all the vehicle information; they said that they could do it for between $300 and $550 – said to bring it over for an exact estimate. Called friend back and said to “just say no” to the dealer for the brake service. Next day she dropped off the Rover at Midas. It took Midas 4 hours to call her back and say that to replace the pads would be $650. Also, they said the rotors were awfully close to being shot – we could replace them for another $1,000 - $1,200. Boy, at $1,800 or so for Midas, the Range Rover dealer looked pretty good at $1,400 – even at $100 or so an hour for labor. What happened here? Let me generalize seven things:
  1. Lots of choices. There are a lot of choices to make when getting a repair – at the very least you have 55 parts alternatives for the 2002 Chrysler Sebring LX sedan’s front brakes and rotors. This can impact your cost by at least $276.79 (high cost of $349.27 to low cost of $72.48.) Worse than having at least 55 choices, there is no way other than “trust” to figure out which is best for you. Complicated, but true.

  2. Trust. Speaking of “trust,” given the choice between a dealer and independent why would we trust the independent more to make the right choices for us? The dealer generally uses Genuine parts that are the same parts used to build your car, parts that are practically pampered from cradle to grave. Their technicians are trained constantly at great cost. They have made incredible enterprise investments in tools and diagnostic capabilities. They have incredible warranties. The manufacturer surveys their dealers to death and comes down hard for anything less than total satisfaction. OEMs and dealers spend millions of dollars on “goodwill” where the costumer is simply assumed to be always right. They give you free transportation and coffee. Contrast all this to what you get at Sammy’s Gas and Repair, where the toilets are cleaned once a month. Complicated, but true.

  3. Genuine parts and the labor cost “myth”. Even though the published dealer labor rates are higher than the independents’, the dealer technicians are better trained, have more factory support, use Genuine parts that fit perfectly, hence require fewer labor hours. Complicated, but true.

  4. Independents “low-ball.” Service independents are experts at low-balling telephone quotes, because they are using rules of thumb and want to bring you in for a more exact estimate. And, when they do get specific, generally they specify cheaper will-fit non-Genuine parts. For example, when we called LA independent repair providers for parts quotes on the front pads and rotors for the 2002 VW Jetta GL, we got one quote for $255 and another quote for $69.95. Complicated, but true.

  5. Quality. We all see JD Power scores advertised to show differences in vehicle quality – this spiraling quality improvement trend has been going on for 26 years. “Genuine” parts are all part of the industry’s quality improvement process. People have such an intense focus on vehicle quality, and are willing to spend thousands more for this quality when they buy. When they go for repairs, most assume they are getting “Genuine” parts and are unpleasantly surprised when they don’t get Genuine, and really don’t get a cheaper price. Complicated, but true.

  6. The trouble with technology. Dealers are hindered by their technology and have a fairly unrefined telephone sales process. They get a call for a quote, and go right to their on-line system that specifies a flat rate labor cost and Genuine parts. The parts that your car was made with. It takes them about 30 seconds to tell you exactly what it will cost .. assuming you want original equipment quality. That’s what you said you wanted when you bought your car; why should the dealer ask, “sorry, but, do you want me to use cheap non-Genuine parts that I can get from the auto parts store a few minutes away?” That would make them consistent with the independents. Complicated, but true.

  7. Complicated, but true. Given all of the above, dealers are not more expensive than independent repair choices. They represent the best value, the most trusting environment, the highest quality, but pretty much the simplest and most unrefined of all possible sales processes.



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