Friday, January 31, 2014

Let’s Talk About Service - The Heavy Equipment Edition

How well do you know your dealers’ service drive?
  • How many units in operation are retained by each dealer?
  • What are customer pay sales for parts and labor per repair order or UIO?
  • How satisfied are your customers?
  • How productive is your service drive?
  • How effective is your service drive marketing?
Based on a recent Heavy Equipment Service Focus Day, it seems that the answer to many of these questions is “I don’t know, but I sure would love to” – at least for five Heavy Equipment OEMs who took the first step toward a North America Heavy Equipment Service Benchmark.

We looked at which key service drive metrics would have the greatest impact, and how hard the data would be to collect. As you’ll see below, a key challenge is the lack of accurate Unit-in-Operation data and UIO-to-owner linkage. And that’s only one piece of the puzzle. Here’s a quick overview of the metrics discussed:

Let’s take a step back. For the last five years, Carlisle’s North America Service Benchmark (NASB) has been an extraordinary forum for automobile OEMs to:
  • Promote continuous improvement in Service Operations. By benchmarking leading industry practices, the participants develop unique insights, and they also create action-oriented benchmark metrics to measure and improve company performance. When industry peers get together this way, they can solve tough day-to-day problems.
  • Increase the effectiveness of their retail service channel to better compete against the independent aftermarket.
  • Identify opportunities to improve and grow the business;, which will make dealers and OEMs more profitable.
This year’s session identified 925 unique metrics across categories such as customer retention, sales, satisfaction, capacity, marketing, quality, and productivity. We focused on the threat chains pose, and how to utilize maintenance plans and package pricing as a competitive advantage.

Apart from the NASB, Carlisle has conducted surveys (in both the automotive and heavy truck segments) to learn more about service technicians and service advisors. We launched MyGuy, a website that puts our research into the hands of service advisors and OEMs, and showcases how best practices at the dealership relate to market share. The website contains tips from top-performing dealers, focus group clips to highlight the customer’s voice, as well as a weekly blog to synthesize our findings.

Speaking of which, how well do you know your technicians and service advisors/writers – you know, those people who are your customers’ main point of contact?
  • What’s their average age?
  • What percentage is male vs. female?
  • What’s their educational and professional background?
  • Are they certified and if so, to what level?
  • How long have they been with your dealers?
  • Do you provide role profiles and/or recruiting support to help your dealers get and retain the right people?

The picture we got in Chicago when five OEMs from both the agriculture and construction industries met was pretty bleak – only a couple of these OEMs tracked any attributes of their service advisors/writers or technicians. If we don’t know them, can we be confident that our customers experience the service we want them to have?

I doubt it.

Our participants doubted it too.

So, what can we do as an industry? For one thing, we can get smart about our service drive: What do we measure to assess success? How can we get the data? What can we discover from the work that’s already been done in the automotive and heavy truck industries? What topics move our industry? Which topics should we discuss in a collaborative forum? How can we give our customers the service drive they expect and deserve? Here’s what we learned in Chicago:
  1. The participants have an appetite to learn more about the Heavy Equipment-specific data and challenges in the service drive.
  2. Getting this data might not be easy or quick or perfect, for that matter, the first time around.
  3. This is why we should start now – as a group that will grow and learn and benefit from this effort together.
Bottom Line: Let’s get serious about our service drive for Heavy Equipment OEMs – what to measure, how to measure it, how to improve it. Let’s start now. Give Gene Metheny a call at 314.324.4395 if you’d like to learn more.

Tuesday, January 21, 2014

Of Facts & Fiction and Quality of Diction

By David P. Carlisle

Last week’s blog was about why someone’s daughter will never go back to a dealer. There is a back story on that one. Our blog-master, Ellen Jortberg sent me the following note:
David, I am about to publish the blog this week which outlines [a] daughter’s experience at a dealership. I realize it is not in my area of expertise, but as one who reads every blog it seems like we have done plenty of dealer bashing. Again, just a random thought, but is there a grander blog thread where this type of blog plays a crucial role. Negativity breeds negativity or so the saying goes I believe. No need for a response – just expressing a thought here on a Friday afternoon. Ellen J
I thought Ellen made a good point, so I forwarded her note on to all our partners. They all agreed with Ellen. But, the train had left the station after we arrived at a consensus decision that dealer-dumping might not be an effective way to change behaviors. We received the following from a subscriber:
I think you guys might be off the mark on this one …. I just pulled the Intellicheck info for this brand and $450, while it seems high, is not out of line with a two-axle full brake service using premium quality parts …. Regardless of source. Agree bait and switch tactics are a painful approach to business, but I can name dozens of brands across many industries that use this approach …
There was more:
  • Assume these blogs get read and passed around organizations and may ultimately get back to someone like me with the question attached …. “Do these guys have any credibility in the market?” [My boss] and I are [among] the few people that understand the quality data and practices at Carlisle, so we can run air cover, but you have to back up all you guys present into the market with facts.
  • Some of Carlisle’s blogs, including this one, come across as “Dealer Bashing” – “whose side are these guys on?” One of the inherent problems with blogs is that they often run from emotion and lack facts, tough for the average consumer to decipher
  • Now that you explained it was a “single axle” repair I can delineate the information a little finer and yes $450 for a single axle is most likely high even at Premium quality levels…. But people [reading] the blog think … my goodness is that for one axle, or a full service?
  • Carlisle professes the reason OEMs/dealers can differentiate themselves is because they maintain the advantage of “Genuine” … Parts, Techs, Equipment, Diagnostics, training, etc. etc., but then when blogs like this come out it appears as if he expects these services to be sold for the lowest cost in the market (Yankee mentality lol).
  • My point is simply to be as factual and content driven as you guys can with these blogs …. It reflects on your brand … I won’t even charge you consulting fees for my response (:
Well, that will wake you up in the morning.

There was a lot of right and wrong in last week’s blog. We were wrong to publish it because it really accomplished nothing. Maybe, the opposite of nothing. Something. If any dealer read this they might walk away angry from the slap-down, and even more inured by reading this blog. We sensed this even before we went to print. It was not about the facts behind the prices, ultimately, it was about the violation of trust. Perhaps the most egregious of our wrongs was in the “diction.” It was written by one with subjective eyes and a master of the pen, but one who could not look beyond this violation of trust. When trust is violated, it seems quite natural to go out and gather facts with a vengeance. Should the facts not support the original emotional conclusion, one tends to just move on, still feeling bruised.

Bottom line: Our client, who took the time to write us, and my partners were correct. Dealer bashing accomplishes nothing. We should have known better. No excuses.

Friday, January 17, 2014

Why My Daughter Will Never Go to a Dealer Again

by Michael Sachs

My daughter is your typical college student – she doesn’t know much about cars and she has almost no money. Her car recently needed brakes, so she found an advertisement for OEM brakes installed at the dealer for $99.95. Great! She went to the dealer to have the work done and ended up having to pay $450 (and that was after the “student discount”). Talk about a bait-and-switch! Granted, she needed to replace the rotors (at least that’s what this dealer told her – who knows for sure?). The rotors cost $60 each, so that only explains a portion of the huge cost increase.

I called the dealer the next day. First, I asked to speak with a service advisor; any service advisor. The man I got on the phone told me, “Oh, I never sell those $99.95 brake pads. The first six I sold all came back with squealing issues.” So, I asked, what brake pads did she get then? “Oh, I’ll have to transfer you to parts.”

The parts person looked up the part number from the RO and said it wasn’t a valid part. Hmmm…. Then he asked for the RO number. “Oh, I see that these pads came from Foreign Auto Parts.” Really!?! No one ever told my daughter about this. Same for the rotors. I asked, “Don’t you have the $99.95 brake pads for this car?” “Well, not always… click…click…click…actually, they do make those pads for this car. We probably didn’t have them in stock.” Yeah, right.

So, my daughter went to the dealer thinking she was getting OEM parts and she ended up with the same parts that any Joe’s garage would use. I’m pretty sure Joe’s garage wouldn’t charge her $450.

So many things went wrong here:
  • Bait-and-switch on the parts and service
  • Non-OEM parts installed at a dealership
  • No communication or choice about parts substitution
  • Ridiculous price for non-genuine parts and service
I am usually an advocate of dealer service, but what can I possibly say to my daughter that would support the dealer’s case?

Bottom Line: My daughter got ripped off. As a result, for the next 60-odd years of car ownership ahead of her, she is unlikely to ever trust a dealer again. From the dealer’s or OEM’s perspective, was that a good tradeoff for the one-time profit on this RO?

Thursday, January 9, 2014

Hey OEM…How About A Hand For The Parts Manager?

It’s not easy being a Parts Manager (PM). Anyone who wants to appreciate this job needs to know what it takes to be one. Just Google “Parts Manager Job Description”. Make sure you’re sitting down when you read it, because a PM needs a skill set like a Swiss Army knife: inventory management, people management, staff training, data analysis, sales, finance, advertising, accounting, knowledge of federal/state/local regulations and, of course, how to operate a forklift. Quite a list, right? Yet, one very important ability needs to be added: strategic thinking.

Aside from being able to improvise like MacGyver, the PM is a critical player who holds the key to the dealership’s success. It’s no secret that parts and service puts the black ink on the dealership’s financial statement. The PM is also key to the OEM’s part sales growth—and some PMs have found a way to do this better than others. In order for OEMs to grow their part sales, they need to help their “man on the inside”, the Parts Manager, learn strategic planning.

The first step toward helping the PM do a better job is to better understand his/her job. Earlier this year, Carlisle conducted a study with nine OEMs to learn more about the PMs in their dealer networks – who they are, what they do, and how they do it. Here’s what we learned:

Who is the typical parts manager?

Typically, a PM is a:
  • Male: Not many women (Only 50 of 1200+ responses)
  • 40 yrs or older: Only 15% were younger than 40
  • Has a high school diploma (~33%) or some college education(~50%)
  • Has over 30 years experience in motor vehicle business and almost half of it at their current dealership
So, what should this mean to an OEM?
  • Most PMs have risen through the ranks, starting as a counterperson, and their comfort zone is likely to be day-to-day operations. Also, as most have been in their line of work for a long time, they probably have a mindset of “I’ve seen it all” and have a set way of doing things.
  • However, all is not lost for an OEM. There are ways they can leverage the wealth of experience that a PM has and encourage them to think about “managing” their parts department operations rather than doing the work themselves.
  • For instance, the OEM’s field force can collaborate with the PM and Dealer Principle to build a simple and actionable annual business plan for the parts department, or the total fixed operations department, that would include:
    • Review of the competition
    • Setting of sales objectives by channel
    • Determining key growth initiatives
    • Determining staffing, inventory and other assets to achieve objectives
    • Quarterly progress reviews
  • For many OEMs, doing this for every dealer may be too intensive, but this can be done for the largest or poorest performing dealers.
What do parts managers do?

Carlisle’s research found that most PMs work over 50 hours per week, with half of that allocated to inventory management and sales. However, PMs at dealerships with higher parts sales spent more time on strategic planning and less time on selling.

So, what should this mean to an OEM?
  • To grow dealer (and OEM) part sales, PMs need to strategize, and think of ways to expand the business. One of the ways OEMs can help is to create incentives or reward parts managers with bonuses when they implement successful selling strategies.
  • In order for PMs to free up more time for strategic activities, they need to ensure that the parts department is staffed with the right set of resources, with the skills to handle their day-to-day responsibilities. OEMs can play a role in this by providing training to the PMs in personnel management, which would include interviewing, training, and developing their parts department personnel.
How do parts managers get compensated?

Most dealers, and typically large dealers, treat the parts department as an independent profit center. As a result, the PMs’ compensation is tied to the profitability of the parts department. Smaller dealerships often consider the combined profits of parts and service departments.

So, what should this mean to an OEM?
  • PMs are less likely to sell the parts that have lower profit margins, such as accessories or wholesale parts.
  • To control costs, PMs may cut down on personnel and man the counter themselves. Instead, they should allocate to others the hands-on jobs and use their time to strategize how to increase business.
  • OEMs can tackle these issues with training programs, by using the OEM’s field force to educate dealers on the benefits of the wholesale business, and by focusing the PMs’ attention on planning.
How do PMs run their parts business and what tools do they mostly use?

  • They typically use ads, promotions, and web presence to market to wholesale customers.
  • Most parts departments are open on Saturdays, except the ones at the smallest dealers.
  • Most parts managers offer multiple deliveries per day to wholesale customers.
However, top performing parts managers do a few other things differently. They:
  • Use web-based ordering tools for both wholesale and retail customers
  • Employ outside part sales reps to grow the business
  • Are more likely to have loyalty programs in place for wholesale customers
So, what should this mean to an OEM?
  • There is wealth of knowledge available amongst the dealer body on how to successfully use a variety of tools to grow the business. The OEMs can help disseminate this knowledge to their dealers through numerous media, such as educational seminars, online programs, newsletters, etc.
  • While the most successful PMs will use all the available tools to grow their sales, PMs at smaller dealers are typically resource constrained. OEMs can assist these dealers by identifying and developing solutions that are simple to use and do not require a significant time investment. For example, an OEM could provide a web platform for their parts department or provide parts marketing assistance.
Bottom Line: Parts Managers have a full plate. They tend to get bogged down with the “doing” of their job instead of spending more of their time thinking of ways to do it better. The OEMs need to step in and come with solutions that will get the PM strategically engaged with what is really important – growing your business.