Market Coverage

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Being all things to all people has long been impossible. Yet many dealers continue to operate without a strategy for market coverage and as a result continue to do what they have always done. Treat everyone the same, until that special customer has a problem.

To make matters worse for our customers – somewhere in the 1980’s resulting from the huge run up in interest rates, enacted by the Paul Volcker Federal Reserve, dealers made the decision that they didn’t have enough money to provide face to face market coverage. So they cut back on the number of salesmen in the field.

The intent was to reduce sales costs, read market coverage costs, but it meant something else. It meant that the decisions made on market coverage were made by a salesman not by the company. The salesmen were confronted with a time limit – they could only work so many hours. This left them with the decision of who to visit and who to ignore. I remember an old story about a dealership hiring a salesman. He visited with the Sales Manager on first day on the job and was given a customer list, the keys to a vehicle and the boss pointed at the door saying – “here is a list of your customers, your vehicle is parked outside the door, there is the door – see you.” I am sure this is fictitious aren’t you?

The trouble is we have not done a very good job of determining a market coverage strategy. It is all about market segmentation. You need to determine which of your customers you want to have a salesman touch in the field and unfortunately, due to costs, you have to decide who you don’t want to have assigned to a salesman. This can only be done with a proper and complete market segmentation plan – more on that in a future blog. The time is now.

Points to Ponder v1.1

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One of the advantages there is to travel is the ability to have time to read. In my cross country voyage yesterday I had a good chance to catch up on some of my late reading. One point came out that I really enjoyed.

“Social Cohesion at the risk of Truth” this is a quote from Jeff Bezos of Amazon fame.

I think it is amazing in its clarity. Ignoring the world around you, not implementing changes necessary, risks the truth. For some time, in my consulting life, there has is a constant. People are anxious, nervous, or just downright stubborn, when it comes to making the changes necessary. These changes might be required to improve customer service. They might be necessary to “save” the Company financially. They might be necessary for a whole host of solid rational sound reasons. Yet they are often approached with less than an excited mien. The status quo is much safer. This social cohesion – the comfort of everyone involved in many cases outweighs the needs to make change. The time is now.

Points to Ponder v1.0

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When I was a little person we had an elder from the church that we went to by the name of Tony Doxsey. He took an interest in my family and was a wonderful man. He was sophisticated, incredibly well-mannered and an entrepreneur. He owned and operated an Interior Decorating/Design business. So you can imagine the impeccable taste he must have had.

He used to tell me all kinds of things – little words of wisdom. One year he gave me a little pamphlet called “The Ten Commandments of Business.” I would like to share just one of them with you today.

“Be happy in your work…or…. work and be happy. You have no choice you MUST work.

I have remembered that for over fifty years now and it has become a habit. I feel good when I work hard and it makes me happy. And I am truly blessed because I am happy in my work. I hope the same is true for you. The time is now.

Service Management – Unit I March 21st & 22nd, 2012

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The “New” Quest Service Management – Unit I

What it looks like when it is Right

A more professional, productive and profitable Service Operation is necessary for the distributors in the Capitals Goods Industries to be successful. To assist in the development of this Service Management team we have designed a new series of training courses aimed at enhancing the skills of those charged with this responsibility. The “New Quest Service Management Level I” consists of 4 elements presented during a two day seminar.

The Principles of Management

The Basic Principles of Management – what we call the Pursuit of Performance: Planning, Organizing and Control; Job Descriptions and Responsibilities, Performance Standards and Targets – what it looks like when it is right; Employee counseling with praise and constructive criticism in Personnel Management; Time Management to set yourself free; The Business of Change and how to overcome resistance to change; How to survive in spite of ourselves.

Introduction to Accounting & Finance for Service Personnel

Understand Financial Statements from the Service Department Perspective.  Clear and understandable definitions of the main financial terminology a supervisor/manager must have. Learn the Dealership Financial Fitness Model; and Profitability Pyramid. Asset Management and the value of Return On Assets. Pricing and Return on Capital Employed (ROCE) Discover new truths about the famous “Discount” and the consequences of it on the customer and the business.

The Operational and Process Foundation

Balancing Labor and Skills Availability with Customer Service: Work Order Process Management; simplification is not just a nice word it is very possible in this clear exposure of the flow and needs of a service management job function. The impossible made understandable. Completion Dates and Meeting Them. Unleash your true power of knowledge by learning about flat rating and shop floor scheduling.

It’s All about Customers

Satisfying everyone’s requirements and developing relationships: “Inspections” to ensure Machine Reliability, Technical knowledge and advice. How you should use price as a marketing tool; variable labor rates and their application. Value added selling; and the value of Customer Retention. Surveys to develop satisfied customers for life: Customer Profiles and all the background required to make customers your apostles.

This “New Quest Service Management Level I” provides a broad base introduction to Service Management for the 21st Century. It is intended for Service Lead hands, Instore Sales Lead hands, Supervisors, Managers and Executives. The material covers all management and operational disciplines of a Professional Service Manager.

Parts Management – Unit I March 19th – 20th, 2012

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The “New” Quest Parts Management – Unit I

What it looks like when it is Right

 A more professional, productive and profitable Parts Operation is necessary for the distributors in the Capitals Goods Industries to be successful. To assist in the development of this Parts Management team we have designed a new series of training courses aimed at enhancing the skills of those charged with this responsibility. The “New Quest Parts Management Unit I” consists of 4 elements presented during a two day seminar.

The Principles of Management

The Basic Principles of Management – what we call the Pursuit of Performance: Planning, Organizing and Control; Job Descriptions and Responsibilities, Performance Standards and Targets – what it looks like when it is right; Employee counseling with praise and constructive criticism in Personnel Management; Time Management to set yourself free; The Business of Change and how to overcome resistance to change; How to survive in spite of ourselves.

Introduction to Accounting & Finance for Parts Personnel

Understand Financial Statements from the Parts Department Perspective.  Clear and understandable definitions of the main financial terminology a supervisor/manager must have. Learn the Dealership Financial Fitness Model; and Profitability Pyramid. Asset Management and the value of Return On Assets. Pricing and Return on Capital Employed (ROCE) Discover new truths about the famous “Discount” and the consequences of it on the customer and the business.

The Operational and Process Foundation

Balancing Inventory Requirements with Customer Service: The impossible made understandable. Order Points and Order Quantities; Lead Times and the EOQ; Order Cost and Carrying Cost. Unleash your true power of knowledge by learning the theory of Inventory Control in all its glory. In physical distribution – the job everyone thinks they can do is easy but no one wants to do: Storage systems, transportation logistics; Shipping & Receiving; Parts Office, Sales Counter and Instore Merchandising Design and Layout that makes sense.

It’s All about Customers

Satisfying everyone’s requirements and developing relationships: “Up Selling”, Product knowledge, Features & Benefits selling, and effective telephone techniques. How you should use price as a marketing tool. Instore displays and merchandising; Value added selling; and the value of Customer Retention. Surveys to develop satisfied customers for life: Customer Profiles and all the background required to make customers your apostles.

This “New Quest Parts Management Unit I” provides a broad base introduction to Parts Management for the 21st Century. It is intended for Parts Lead hands, Instore Sales Lead hands, Supervisors, Managers and Executives. The material covers all of the management and operational disciplines required of a Professional Parts Manager.

I HATE DISCOUNTS

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The people that know me and have worked with me in any capacity of the past forty plus years know that I HATE DISCOUNTS.

I know you have to offer some special pricing every now and again. However, too many people just change the price on an item in a transaction and that leaves a bad impression in the mind of the customer. Oh I get it. The customer feels good about getting a reduced price. Until, that is, they think about it. Sooner or later they begin to understand that if you changed the price on that item one time, without requiring anything more from the customer – well your price must have been too high.

If you have to change a price you must change something else in the transaction in order to justify the reduction in the price. Increase the quantity. Place it on a stock order and have the customer wait for it – anything that makes sense.

Why do I HATE DISCOUNTS??

Well look at this example from a typical service department…

Sell Price              100         Discounted         90

Cost Price              35                                     35

Gross Profit            65                                     55

Expenses               40                                     40

Net Income            25                                     15

A 10% discount on the selling price becomes a 15% reduction in the gross profit and a 40% reduction in the operating profit. I HATE DISCOUNTS.

I know you have to make adjustments from time to time. It is important that everyone understand the implication of a small discount in selling price. It becomes huge at the operating net income line. The time is now.

Updating the Add to stock blog from yesterday

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Yesterday we had difficulty in format for the table of probabilities. With this update we hope we can clear up any misunderstandings. The first column is the time between the last two calls of a part number. The second column is the probability of a sale in the coming twelve month period of time.

  • Time between Calls        Probability of 1 Call
  • 3 Mths                                  98%
  • 4 Mths                                  95%
  • 5 Mths                                  91%
  • 6 Mths                                  87%
  • 7 Mths                                  82%
  • 8 Mths                                  78%
  • 9 Mths                                  74%
  • 10 Mths                                70%
  • 11 Mths                                66%
  • 12 Mths                                64%
  • 15 Mths                                56%
  • 18 Mths                                49%

The above percentages represent the probability of AT LEAST one call in the coming twelve months. This should give you more help in determining when to add a part to stock. The time is now.

Adding Parts to Inventory

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Since we started this blog we have written on inventory management three times. Once on variable lead times, once on economic order quantities and once on the only part that matters. They have each received a lot of reads.  Thank you.

Let me introduce a fourth line of attack on managing the inventory – when do you add a part to stock. For years if not decades we have added parts on the basis on two calls in six months or three calls in a year add the part to your stocking inventory. This has been the “norm” since I entered the Industry in 1969. It hasn’t really changed at all. How about we use probability theory in determining when to add a part to stock and yes when to drop a part out of the stock inventory.

  • Time Between Calls        # Calls Last 12 Months                                    Probability of 1 Call
  •                                  0             1             2             3             4             5+
  • 3 Mths                  2%          7%          14%        19%        20%        38%        98%
  • 4 Mths                  5%          15%        22%        22%        17%        19%        95%
  • 5 Mths                  9%          21%        26%        21%        13%        10%        91%
  • 6 Mths                  13%        27%        27%        18%          9%          6%        87%
  • 7 Mths                  18%        31%        26%        15%          6%          4%        82%
  • 8 Mths                  22%        33%        25%        13%          5%          2%        78%
  • 9 Mths                  26%        35%        24%        11%          4%          0%        74%
  • 10 Mths                30%        36%        22%          9%          3%          0%        70%
  • 11 Mths                34%        37%        20%          7%          2%          0%        66%
  • 12 Mths                36%        37%        19%          6%          2%          0%        64%
  • 15 Mths                44%        36%        15%          4%          1%          0%        56%
  • 18 Mths                51%        34%        12%          3%          0%          0%        49%

The above table shows the probabilities of future events based on the time between the last two events.  Take the first line “3 MONTHS”. The columns as headed 0, 1, 2, 3, 4, 5+. That is the number of calls in the coming twelve months. So under 0 is 2%, 7% under 1, 14% under 3 etc. Those represent the probability of the number of calls in the coming twelve months. Si there is a 7% probability that there will be 1 sale in the coming twelve months- or a 20% probability of 4 sales in the coming twelve months.

This is quite a good barometer to use for determining when to add a part to stock. If the last two calls are three months apart there is a 98% probability that you will sell at least one part in the coming year – 87% probability of at least one sale if the last two sales were 6 months apart etc… Don’t you think you should use this type of statistical truth in establishing when you want to add a part to your inventory? The time is now.

A Customer Service Tool

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VoIP – voice over internet protocol. What a name. Well what it does is quite remarkable. This is where your computer drives your phone system. A call comes into your Company and the computer directs the call to the appropriate extension while at the same time it paints your computer screen with the pertinent information from your name and address on the customer. Not only that, it can delivery almost whatever information you want.

“Hello Dave, how are you? Wow, we haven’t spoken since last October, where have you been?”

“Hi Dave, congratulations on your anniversary, how many years has it been?”

“Dave I have been meaning to call you, congratulations on your recent purchase of our “xx” machine.”

I am sure you can imagine various pieces of information that you would like to have displayed before picking up the telephone. There is a machine in the shop, or there is backorder outstanding – pretty critical information that would help you in your discussion with the customer.This is similar to the “Vonage” service that runs through your cable. Contact your dealer business system provider or your telephone system provider and ask what is necessary for you to obtain this type of tool. It will give you a terrific tool for customer service. The time is now.

Facts are awfully stubborn things

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This is a most interesting time, isn’t it? I listened to Jimmy Rogers on CNBC the other night. He was pointing out there is an election this year in the United States, there is one in France. Germany has an election next year. In fact there are 40 governments that will face elections this year. There will be a lot of money spent by the politicians. Yes, they spend our money to get themselves reelected. Sorry to be so cynical.

But 2012 is going to be a good year – one way or another. If we have to show unemployment going down well let’s not look so closely at the shrinking size of the work force;  If the deficits get too large let’s blame it on the recession or the conflicting arguments between one view of the economist Keynes and the rigors of the Austrian school followed by the later Milton Friedman. Politicians will be in the feel good best this political season

The total unit sales in the United States are still less than 50% of what they were at their peak. The customer fleets and rental houses are almost at the complement of units now. So where is the boom going to be coming from in the US? It sure won’t be housing will it? And as long as housing operated with depressed prices the pent up work force movement will not be released.

The only answer is that the market is what the market is and get over it. Get one with it and make the best of it. The happiest people normally DON’T HAVE the best of everything but they do MAKE THE BEST of everything. The time is now.