Wednesday, December 14, 2011

2011 Parts Manager Survey: Executive Summary

After the downs of ’09 and the ups of ’10, the industry hoped that 2011 would be a “back to basics” year. For some, that was the case. However, the earthquake/tsunami that hit Japan in March of this year had a devastating impact on the supply chain for a number of OEMs – especially the Japanese importers.

Even with these challenges, however, the Asian OEMs continue their strong performance in terms of satisfying their Parts Managers. For Overall Satisfaction, Asian brands represent five out of the top seven brands.

Before digging more deeply into the 2011 results, let’s look at performance over a longer time horizon. The chart below shows Overall Satisfaction for the past 8 years – both in terms of “Top Box” (% respondents selecting “Very Satisfied) and “Top 2 Box” (% respondents selecting “Very Satisfied” or “Somewhat Satisfied”). For each metric, it shows both industry average (the bars) and industry best-in-class (the lines). Note that these results are just for U.S. OEMs.


The results are quite interesting. What we see is that industry averages have been improving over time – Top Box has improved by about 13 points, while Top 2 Box has improved by about 8 points. However, best-in-class scores have been relatively flat. What’s the take-away here?

Generally speaking, the gap between the “best in class (BIC)” and “worst in class (WIC)” performance has been shrinking. By leveraging benchmark efforts, such as this survey, to identify BIC performance and then [more importantly] to get behind the numbers to understand the process/policies driving the results, the industry is collectively raising the bar for average OEM parts performance.

You’ll notice above that I used the terms BIC/WIC “performance”, not “OEMs”. That was a conscious decision, as no OEM has figured everything out yet. OEMs with stellar performance in one area do not necessarily do great in other areas. That’s the magic of collaborative benchmarking -- we can get behind the numbers (the “who’s”) to understand the “how’s”, thereby enabling us to pick and choose who to emulate and how.

By the way, why has the BIC score been relatively flat? Quite simply, it is difficult for the high performers to consistently maintain their performance. Supply issues, recalls, IT implementations…even earthquakes all can cause a “best-in-class” performer to stumble for a year. And as we have learned many times over, our customers are quick to judge, but slow to forgive. A one-year stumble in satisfaction may take three years or more to recover from.

So, getting back to our 2011 results -- let’s consider the other categories on the survey. The following chart shows the results for each
of the 19 sections on our survey. It indicates the industry high, low, and average score for the “Overall Satisfaction” question in each section.

There are two important takeaways from this chart. First, note that the industry average is typically much closer to the high than the low score. This means that 1) being “average” may not be that bad, and 2) if you have the low score, you probably need to make some dramatic improvements.

Second, notice that the “supply chain” issues – on the left hand side of the chart (order processing systems, delivery, ship condition, availability, etc.) all have high scores close to 100%. Conversely, the sales/marketing issues on the right hand side of the chart (marketing, wholesale, accessories, training, pricing) have much lower “best in class” scores. Clearly, the industry is doing a better job of meeting our customer’s expectations with respect to supply chain than with sales and marketing issues.

For most categories, the OEM with the biggest gain experienced improvements of 10-20 points – that’s quite a dramatic increase in satisfaction. So, what have some of these companies done to achieve these results? Let’s look at the top two:

In the case of the ship-direct improvement, it seems – no surprise – that it is all about availability. In 2011, this OEM (“OEM 1”) increased their direct-ship availability by over 4 points, from 93.6% to 97.7%.

How did they do this? First, they attacked this from an organizational approach. While they historically had personnel that “chased” parts, OEM 1 instituted a new group in 2011 – Material Flow Coordinators. These folks are tasked with working with suppliers from a strategic level – capacity planning, forecast utilization, collaboration, performance tracking, etc.

In addition, OEM 1 brought “accountability” to the world of ship-direct. While many OEMs have policies linking availability and on-time performance to future business (both service parts and production), most OEMs exclude ship-direct suppliers from this policy. OEM 1 was one such OEM that historically fell into this category.

However, starting in 2011, OEM 1 brought ship-direct suppliers under the umbrella of this program. Now, any ship-direct supplier whose availability drops below 97% is subject to losing future business – both for service parts and production.

The 20 point accessory improvement exhibited by OEM 2 was a result of a number of new initiatives. First, they implemented a proactive inventory stocking program for newer accessories. Rather than wait for certain demand signals, they set minimum stocking levels for the market to assure representation of stock on any current accessory.

Further, OEM 2 conducted a comprehensive new model year launch of their soft goods product line during the summer. Through this program, they had product available 2-3 months earlier than any launch over the past 10 years.

OEM 2 also began conducting one-on-one merchandising and marketing visits with their dealers to support accessory sales. So far this year, they have already visited about a third of their dealers to discuss how to better sell accessories.

Finally, last year we examined the top drivers of satisfaction for each OEM. We conducted the same analysis this year and found a number of similarities, but some changes as well:
  • Availability continues to be a primary driver for most OEMs. In fact, it seems to have increased in importance.
  • Collision Wholesale support is starting to creep up as a more important driver of satisfaction. Note that Mechanical Wholesale support doesn’t even make the list.
  • Phone support – especially technical phone support – seems to be dropping somewhat in importance. It’s not that this is suddenly not important. Instead, it seems that many OEMs have been focusing and improving their performance in this area.
  • Pricing dropped precipitously in terms of importance. History shows us that as we improve performance to our dealers, their focus on pricing declines.

For more information on Carlisle’s surveys, please contact Harry Hollenberg at hhollenberg@carlisle-co.com.

Note: Spare Thoughts will be on a two week break after this post and we will resume our weekly posts in January 2012.  We wish you and your family a happy and safe holiday season. 

Friday, December 9, 2011

My Guy

by David P. Carlisle


Besides surveying several thousand service customers, in the past six months we’ve held 18 focus groups with these folks. We asked them what they read, how they make decisions, what they think, and where they go. They read electronic media and tend to use their handhelds for this. They rely on advice from friends and family. They go to Yelp and Google to read reviews from strangers. They think dealers are impersonal and expensive. And, they go to “My Guy”, whoever their guy really is, to get their vehicle serviced. They trust their “My Guy” implicitly – see more here . Months of focused research, and it really reduced down to something this simple. In the 90’s I remember how the industry embraced the complexity of dealer operations with multi-million dollar process reengineering and television commercials of actors throwing car keys around the dealership like Harlem Globetrotters. Well that crap sure didn’t work.


Hyundai’s Frank Ferrara, one of my heroes, asked me to talk to a large group of his service managers about “My Guy.” I had to make a choice. Did I go for “all 5s” and feed them some pabulum stirred up for the masses? Or, did I feel lucky? Hit them with the proof behind my very simple story – you know, the charts and raw data. I asked around and was cautioned that dealer groups do not like dense charts with too many small words. They wanted everything digested and bottom-lined. I ignored this advice and took a chance. After the presentation Frank got back to me with this. “As far as your presentation is concerned, as always it was content rich which was difficult for some in the audience to digest in 1 hour. Many, many of the service managers told me they took 6 to 8 pages of notes. This is amazing to me because they are never in the note taking mode.”

One of the service managers asked me to call him back to discuss his take on the evolution of service customers. We spent nearly an hour talking. I learned that dealer service managers are very smart, entrepreneurial, and operate by a very different rulebook. I also learned that I had a lot more to learn. I’m going to be honest with you; any satisfaction score less than “very satisfied” hits me in the gut like a Joe Frazier left hook. The dealers were even more strongly receptive to my message than the others sitting in the room. Dealer service managers get it. They understand evolving customer attitudes and the value of “My Guy.” Because they are there, day in and day out. It is no secret that their world is changing as a consequence of this. They know that it is a huge priority for the OEMs and for their business models. They speak our language…perhaps better than we do.

We do not need to bring out our process mappers and corporate change management guidelines. We don’t need to bring our agencies into the loop. We don’t need to brainstorm more globetrotter trickery to sell ideas that are birthed and launched in the cold vacuum of corporate inner space.

Bottom Line: We need to directly involve our dealer service managers in the architecture of becoming “My Guys” and better competing in the market for service customers. We need to de-brand the basic processes simply because there is such incredible movement across the brands by the folks who make it happen. If we want to throw keys around the dealership we need to understand that inside one year that same cast of characters might now be a Chevy guy throwing to a Ford guy, who tosses to a Toyota guy, who dunks it to a Hyundai guy, who lays it up to a BMW gal. We intend to launch a My Guy summit in the spring of 2012 that will consist of the top three service managers from a selection of multiple franchises. For three days, we will take them through the data and then figure out what to do…that works and is sustainable. No key tosses; just focusing on the keys to success in our brave new world. How to become and stay “My Guy.”

We will accommodate a maximum of seven sponsoring brands with the My Guy Summit. Beyond these sponsoring brands, we will solicit the best of the best dealer service managers outside the sponsor group. We intend to permit strategic suppliers as sponsors. The summit will be a dealer-only crowd with no sponsoring corporate observers present. All sponsors get the full-unexpurgated results in whatever form they need to make change. If you are interested, please contact Robert Desel - rdesel@carlisle-co.com.

Friday, December 2, 2011

Musings: A Tale of Seven Cities - by David Carlisle

Make that seven OEMs. We collect tons of data on parts and service performance for dozens of OEMs here, in Europe, South America, Africa, Australia, and Asia. Let’s just focus on seven OEMs where we have monthly Market Watch (“MW”) parts sales data, Parts Manager (“PM”) satisfaction data, Service Manager (“SM”) satisfaction data, and JD Power CSI data. I normalized the data based on high and low scores for each data line item, and used a bit of dead reckoning for representing JD Power data at an OEM level. This is in the chart below. There is no single equation that relates all the data to a key performance metric – in this case, change in sales per 5 year UIO for 2011 vs. 2010 – call this “sales per UIO”. What emerges are seven different stories.




The Basics is all about an OEM who is very focused on availability satisfaction – getting the parts to the point of sale – perhaps at the expense of returns policies and pricing. Sales per UIO for the past year is just short of mid-pack, but last year was better than most due to brilliant digital strategies. Dealer purchase loyalty is lackluster, but not surprising given returns satisfaction. The messages here are consistency over time, point of sale availability, and being at the leading edge in digital strategies. These are the basics, and it is difficult to argue with this sort of strategy.

Nailing the Top is all about significant improvements to sales per UIO this year as a consequence of a broad focus on point of sale availability and customer retention. This is a company that takes metrics seriously and has a more traditional focus on customer retention that comes from field organization touch-points. Couple this with progressive terms and conditions and fairly brilliant digital strategies and you start to sell some parts. The big question is, will all this be enough in 2013-2015 when the sweet spot of customer pay UIO starts to sour?

Blessed 4Ps is all about great people, products, prices, and policies. Just having the first two puts you in a leadership position, where you don’t have to worry very much. Purchase loyalty is, not surprisingly, on the low side, mostly due to the relatively sparse dealer network that hampers dealer-to-dealer wholesale support.

Know Thy Place is all about the power of the brand and the respect within an organization of their brand. Respect is the key word here.

Rocky IV is all about attitude and aggressiveness. It’s Rocky butting up against that enormous Russian fighter. And winning. It is all about the power of leadership and the focus of an organization.

At the Limit is the story of a great and mature brand, great product, but, ultimately, the lack of resources. Here, there is very little difference between this “city” and “Nailing the Top” (they know what to do across a broad spectrum) and Rocky IV (really smart leadership and some stunning talent). There really is no reason for the low normalized positions in purchase loyalty and sales per UIO.

Need the Green is the story of a comer. Corporate has their sights set very high, great brand getting stronger, great product, very smart leadership, scrappy talent, and empowered. Empowered to nail the key stepping stone metrics. Normalized sales per UIO is at the bottom of the group simply because they did not falter during the recession – kept going strong with a consistent strategy and consistent investments. They need the green to get where they are going.

Bottom line: The efficacy of our business strategies cannot be tested with a universal equation populated with standardized variables. Rather, the variables themselves tell a story. And, it is pretty important to understand your story, because circumstances might change, …or, you might need to change. What do I see in this chart? I see “power”: brand, product, people, leadership, programs, measurement, attitude, and aggressiveness. I see “threats”: resources, investment capital, and commitment. And, I see “strategies”: digital, point of sale availability, pricing, and terms & conditions.