Thursday, November 12, 2009

Blog 52: Why Do Dealers Stray?

We just completed the 2009 Parts Manager Survey (over 8,500 dealers participated with a 54% response rate) and were able to probe into areas we’ve always had some questions about. One area we always wonder about is, “why do dealers stray?” Why do they go to the independent aftermarket rather than buying all of their parts from their OE?

For the past 20 years I have heard “pricing” in response to that question. Not true. When we plot Parts Manager satisfaction with pricing versus purchase loyalty (% of purchases from their OE) we find no correlation. Once we strip out two outliers, where the purchase data is not apples-to-apples, we see a pretty-much flat line – so purchase dis-loyalty is driven by something other than pricing. Hmm, I wonder if everybody knows this.

But, we know that dealers stray. Where do they go? This is interesting. We asked dealers to name their top two non-OEM suppliers. I will describe these suppliers, but not name them, since the NASPC survey group already got all the gory details.

“Other” came out on top. A monster jobber group was second, and “Nobody” was third.

These three answers provide the clue as to why dealers stray. Smaller import dealers tended to say “Nobody” simply because nobody – no nearby jobber – stocked many of their parts. This is because those makes have smaller UIO counts, which do not attract the attention of the IAM. Larger importers and domestics had smaller “Nobody” responses simply because ample supply of their parts is available in the aftermarket.

“Other” is an interesting choice – it really means that a dealer tended to use jobbers that were nearby and/or familiar to them (“Joe’s Jobber”) and were either a) not affiliated with a recognizable program group, or b) the parts manger simply did not know the affiliation of that jobber. Or, it means that the dealer did not think about a “brand”, they thought about the relationship. They buy from “Joe” down the street, and they either do not know or do not care what program group “Joe” is associated with. In many cases this may be because “Joe’s” association has changed (he used to be independent, but recently became a CarQuest jobber) or it may be that the program group association is transparent to existing customers. While “Other” seems to be a big slice of the pie, it really is not. “Other” is more likely a collection of local accessory suppliers, bulk oil, and local jobbers. After reading almost 500 verbatim dealer comments on this one, there is no lurking monster out there.

So far, I have just interpolated the data. For the top three IAM suppliers we asked dealers to rate various aspects of their service relative to the OEM. Hey, it’s a recession and dealers are down and out. It is the kind of environment that you think would make dealers unkind. So, they were not just blowing smoke. Just looking at the big jobber monster, it is not “better” than the OEM in any area – it never got more than 50% of the vote. However, it shines in two areas: OTD (order-to-delivery time) and returns. These are not surprising. When a dealer needs a part, a jobber is only minutes away. Dealers have an immediate need that they get filled within hours, if not minutes, and they can return almost everything without penalties. Who wouldn’t like that?

So, why do dealers stray? First off, it is not about pricing. They stray because local jobbers just might have a critical part, delivered within minutes, while the vehicle is still on the lift and the repair can be performed immediately. Also, sometimes it’s not the OEM parts manager who makes the choice. Many service advisors let the customer decide and consequently, it is often the customer who strays rather than the dealer.
Mr. Customer, I can order the part from the manufacturer – and it will be here tomorrow and we can install it the following day. Or we can get it from a local supplier this morning – this can be installed this afternoon and you can pick up the car on your way home from work. Which would you prefer?
Outside the OEM, dealers are not particularly IAM brand loyal – the “Other” choices tell us this. They tend to go to close by jobbers who they have a relationship with.

Bottom Line: It’s all about OTD. This gives us a lot to think about as our dealer networks are collapsing. Let me leave you with a few thoughts on this one.
  • Hint: The best OTD to the repair is from the dealer’s parts room bin. RIM really is an OTD strategy. It is more important than all the political mud it sometimes stirs up.
  • D2D is an OTD strategy, too.
  • It is important for OEMs to figure out if their dealers are straying for reasons other than OTD – if so, then their share losses are inexcusable.
  • For importers, it’s pretty important to understand if they are straying at all – the “Nobody” patterns are pretty telling.

No comments: