Wednesday, August 12, 2009

I Coulda Been a Contender!

Great movie with a great line, Brando pleads that he “coulda been a contender” just if the fight had not been fixed. I think about this when I look at masses of data (for some OEMs) that just don’t all add up to market success; “success” defined as whole goods sales gains, parts sales growth, high customer retention, high repurchase loyalty … these sorts of successes. These companies should be contenders, just if …

So, I started to look at contenders – there’s a bunch of them – and ask, “What’s preventing them from glory?”

Let’s just talk concepts and numbers and avoid using names, unless I need to make a point (and when I do use names they may or may not be “contenders”). Here’s how I define the group of “contenders.”
  • They are doing well in a subset of a bunch of published surveys – Consumer Reports, JD Power, the usual suspects. So, they have demonstrated to recognized authorities that they are bell-ringers in quality, dependability, reliability, and all that important stuff to inquisitive shoppers who buy Consumer Reports.
  • Overall, they are doing pretty well in the North American Service Parts Conference (NASPC) surveys – parts managers and service managers.
  • When we look deep into their processes, they are leaders in service parts productivity and quality.
  • So, based on leading indicators of success, they all look like contenders. But, when we look at the key metrics that these indicators are leading to, things like sales and service retention ratios, they are not in the leadership group.
We can drown in the data with this exercise, because there are a lot of “contenders” in the group, and the data is not consistent regarding strategic hits and misses. But, here’s what I’ve learned so far.

#1. Consumers have long memories regarding product quality, and one or two years of good news will not cure the disease. Bad brand recognition is like a virus; once it starts to spread it travels far, deep, and fast. Several OEMs have suffered from this and continue to do battle with customer attitudes, fueled by journalists’ poison pens. Simple things work best here. Now that most of the horrendous product quality chasms are behind us, I am not so sure that fighting the engineering battle over diminutive quality gains is better than sloganizing where you want your customers to perceive you to be. “If you can find a better car, buy it.” “Quality is Job Number 1.” Everybody can understand this. It’s all about street fighting, where simple intimidation (call it “messaging”) is more effective than a big knife. Looking at what separates leaders from contenders, I see contenders gravitating towards controllable scientific solutions rather than immersing themselves into the psychology of the buyer. What’s even more interesting is that the psychology of the buyer is all about science – just a different sort of science. It is called Marketing. Marketing is all about differentiating in the minds of the consumer, and it really has little sense of gentlemanly etiquette. When the product can no longer be effectively differentiated by scientists using surveys, tear-downs, and statistics, it’s time for dirty street fighting. Selling 16.5 million units a year of motor vehicles created a marketing civility that resembled Britain’s House of Lords. A market stretching to 10 million units puts us all in the House of Commons, with different rules and conventions.

#2. Investment is a differentiator. Only a mother could love this radar chart. What I did was shade the “contenders” with dark and light blue. This way we can map their personalities … somewhat. The black and gray lines represent other OEMs – big, medium, and small. The dark blue tends to show higher performance in areas of productivity (e.g., high repair orders per technician), and lower performance in areas of investment (e.g., UIOs per service bay). Of course, all this sort of investment is really retailer investment, not OEM investment. But, it is investment to which customers react. All this relates to the inherent strength of the dealer body, and the quality of their OEM “trainers” – market representation, dealer training, sales involvement, … things like this. Importers have tended to show more areas of strength on this chart due to leaner retail networks, and the Big 3 should continue to improve as they lean out their dealer networks. So, there are “forces of change” out there causing a migration toward higher retailer service investment, of higher quality. Don’t know if it is sustainable for all migrators. This migration has a price tag; contenders either don’t ante up or try to finesse the costs of entry.

#3. Program focus. Looking at the NASOF and NASPC data, I see that our contenders are generally extremely logical. Many prefer to pay for headline type of performance – when dealers rack up the right sort of survey scores and achieve other critical performance numbers, they get rewarded. Dealers notice this and generally like it. This is the most confusing differentiator and rings truest with what Brando was getting at in the movie. If that fight hadn’t been fixed, he could have been a contender. Why pay for indirect hits, like high satisfaction scores, when the surveys are gamed and scores don’t mean anything? Why not be creative and reward with co-op investment in the dealership infrastructure, rather than put cash directly into the dealer’s pocket? Why not focus on direct hits, like parts dollar sales growth, customer pay RO growth, high technician retention? Beyond the sales programs, this program focus seems to encompass investment shifts that save money by avoiding the human touch. Less hands-on training, less technical support, long telephone wait times. OEMs adopt programs that save money … but are they really effective in delivering dealer and customer requirements? Is it possible that they are the result of someone checking the box?

In a nutshell, the contenders seem to do most everything right. They embrace good practices and good processes throughout their enterprises. But, they seem to miss the mark on great in some key areas.
Like great marketing that could differentiate their brand in the eyes of the consumer … vs. great merchandising that capitalizes on a tactical opportunity.
Like great retailer enterprises that deliver up what the customer really is looking for … vs. high efficiency little dealer service factories that fit someone’s conception of a pocketbook
And like great support systems that coddle customers … vs. completely logical programs that reflect the genius of merchandising engineers nurtured in an economists’ laboratory
What makes Toyota and Honda “great” (neither are “contenders”)? It’s the little things (with big costs) that we can’t put numbers on. And, with the strategic changes happening at GM and Chrysler (with Ford out in front), there will be a rebirth of competition in the US market like never seen. All you marketing gurus – those who are left – better get those thinking caps on, because the game is about to change again. The street fight is going to get a lot tougher.

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