Monday, March 7, 2011

Just for Dealers: So, What Can You Do to Survive in a Collapsing Customer Pay Parts Market? - Part 1

When you go to a Six Flags/Disney/Cedar Point or similar amusement park, are you the person clamoring to be in the first car of the roller coaster (so you can be the first to experience that death defying drop and loop-de-loop) or are you the person positioning yourself in line for the last car (so that you can have a few seconds to anticipate your impending doom)?

This is similar to what it’s like to work in a dealership. If you work in variable ops you are the one at the front of the roller coaster – you are the first to experience that drop with little, if any, warning. Exciting, but dangerous. If you work in fixed ops you get a bit more notice. The momentum of vehicles in operation (car parc) gives you a bit of warning about when you are going to die.

Well, consider yourself warned.

Two years ago, vehicle sales went over the point where the track drops precipitously (and may be now starting a slow climb back); but, our service parts roller coaster car is just about to hit that same spot. And trust me, I’ve been on this ride before – it is a nasty plunge.

As we said last week, there’s little we can do to prevent the aftersales parts market from “slimming” down. Moving from 16-plus million vehicle sales years to a painful post-recession recovery that starts us back at 10 to 12 million puts a real dent in the car parc. So, by 2015 we can expect the customer pay parts market to shrink by about 14% and for market competition to significantly increase.

The question is … what actions are you planning to meet that future challenge? Our fixed operations model needs to evolve. There’s no denying it. We’ve got about two years to make this happen.

Get in the Mood for Change – Again!

Sometimes I get solace from simple observations of success. My favorite is the Supersoaker – look in previous blogs for this one. Here’s another: China has become the global manufacturing powerhouse for consumer goods. This is a fairly recent phenomenon. Go to Wal-Mart and buy a big-boxed something for your patio. It’s made in China. Read the directions on how to put it together – terrible, complex, inaccurate, grammatically incorrect, misspelled English. But, it works. We spend hours putting it together and it looks good sitting there next to the grill. Next week we go back to Wal-Mart and buy more big-boxed stuff made in China. China is now a very big deal.

So, what’s the lesson of all this? To paraphrase James Carville (when he was Clinton’s campaign manager), “It’s the price, stupid.” We do not buy stuff from China because it is, like, sooooo great. We buy it because it is “good enough” and the price is right.

Well, aftermarket parts and independent repair facilities are the China of the auto repair business. People go to the aftermarket because it is “good enough” and the price is right. Dealer service is the “high priced spread” -- and that really won’t work anymore. There are simply fewer consumers out there for which the real or perceived higher quality of dealer service will justify a higher price – or at least the perception of higher price.

So what do we do? We will suggest some low-to-no cost retention ideas (for keeping customers we have) in upcoming blogs. This week, let’s look at just a few conquest ideas (for getting customers back from the aftermarket).

First, You Should Thoroughly Understand Why Many of Our “Non-Loyal” Customers Hate Us.

Don’t look much further than price. Think about how much you “love” your plumber. Apologies to any plumbers out there; but, imagine some backwater plumber with a toothless smile, squatting over a toilet with half his butt busting from his JC Penney work pants, constantly on the cell phone with his buddy talking about getting drunk last weekend – and charging you $100 an hour. Makes you crazy. You really don’t know how long it should take to fix your toilet, but you are damn sure that $100 per hour is too much to pay this Jethro Bodine-like character.

Now, compare that to the person who cuts your hair. Looks good, sounds smart, works in a nice place, and it’s not uncommon to be charged a heck of a lot more per hour than your plumber. And you realize that, if you did the math, your stylist is probably making an obscene amount per hour. But you don’t do the math. That is not how you buy haircuts. You buy the end result, and since you like the look you get, you don’t really consider switching to CheapCuts and paying $12 with tip.

What we need to do is be sure that our customers associate us more with your hair stylist and less with your plumber. We want them buying the result (a working vehicle) and not the job. Here are a few things that will move us in that direction:
  • Get rid of your “labor rate” signs in any customer area.
  • Menu price most of your common repairs to include parts and labor – make sure you are competitive for the high volume jobs.
  • Figure out your average “effective labor rate” for a bunch of menu items by simply backing into them assuming full retail for all parts and incidentals. It will be a low number. Now, write this down on a Post it Note and slap it under each Service Advisor’s computer key pad. Tell them to never, ever, divulge the shop’s labor rate. But, if all else fails and they have to quote a rate, they should say, “Like everybody else we have different rates for different skills, but our effective labor rate for most of our work is $X per hour. We think that this is very competitive. And, more than that, very honest.”
  • Merchandise the quality of your parts and your technicians – people want to pay more for heroes, not a Hero. Anybody can make a Hero sandwich. But, everybody wants a Hero made by the Iron Chef – a hero. So, merchandise your people.
  • If you have staff that can’t be merchandised, get rid of them.
  • Find out, really, how your customers feel when they call your service department. Try an experiment. First, call your cell phone provider and try to talk to a human being. Now, hold on to those feelings. Next, call Cabellas and ask for some information on anything. Hold on to those feelings. Now, buy a disposable phone, thinly disguise your voice, and call your service department and ask for a firm quote on new brakes for a recent model vehicle. Which experience is it more like?
Next, You Need to Know Why Formerly Loyal Customers Left You.
They leave you for a bunch of reasons. First is price – but after you’ve done the above you’ve got that one knocked. Beyond price, some dealers are still pretty good at kicking customers out through treatment. It sometimes seems that dealer service operations are based on the Coyote Ugly model (It’s a bar in a John Goodman movie). When asked what they serve, “Jack, Johnny Red, Johnny Black, and Jose; all my favorite men. You can have it any way you like it, as long as it's in a shot glass.” If someone comes in and orders a Dewar’s on the rocks, they get squirted with soda water by a beautiful barmaid. Similarly, if a customer comes back to their dealer for services that are not in the dealer sweet spot (say quick-lube, state inspections, collision repair, etc.) many service departments effectively squirt them with soda water -- and there ain’t no pretty barmaid to take the sting out. You’ve got to stop doing that.

So, how do dealers reverse this?
  • First off, don’t call a slow lane an “express lane.” If you can’t compete with Jiffy Lube on time and convenience, then change what you are doing. Let me save you a ton of money on consulting…..go get your oil changed at a Jiffy Lube and copy what they do. Stuff like customer handling and turnaround time. Buy some stuff for your Express Lane operation with all the money you will save.
  • If you don’t offer state inspections, then offer them. And think about providing them for free to loyal customers. Pack in a more comprehensive free inspection that does not come off like Bernie Madoff selling derivatives. Just be honest and offer to do the stuff that is screwed up on the car or truck. Offer it at a reasonable price – all in, no labor charge split out.
  • If you don’t have a body shop, that’s OK. Find a good independent one and offer your customers valet service in case they have an accident. You could pick them up at the site of the crash and take them where they need to go, make arrangements for repairing their car at the “good body shop”, etc. Make it look like your body shop to your customers. Charge the independent shop a reasonable fee for your valet services and make sure that they don’t charge it back to your customers. If they do, replace them.
These are just a few simple ideas. Trust me, I haven’t even gotten started yet. Tune in next week as we offer another “just for dealers” post that shares low-to-no cost retention ideas for enjoying the roller coaster ride.

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