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"Is our
service price cost-based or market-based?" It's a common question
in many equipment dealerships, but not one they can easily
answer.
The problem
is that we still take a "one-size-fits-all" approach to service
customers. We treat customers the same whether or not they
need help determining what part to order. We have a highly
trained individual, equipped with parts books, microfiche
or computer database, to locate the proper parts. Our computer
system asks who the customer is and begins taking an order
when maybe all the customer wanted to know is the price or
availability of a part.
Does this
sound like your operation? It so, you operate a high-cost
delivery system for all categories of orders. Therefore, you're
a cost-based selling price operator.
Some customers
need technical help. Many more know what they want and don't
want to waste time getting their order placed. Are we responsive
to this type of customer? I don't think so.
There
are at least four customer service delivery systems required
for the parts department. Let's review two of them.
- For
traditional walk-in business, there's the full parts department
stocked with skilled employees. This is matched with the
telephone delivery system, where the same skills and tools
are in use. This is the most expensive delivery system.
- For
customers who know what they want, we could offer a toll-free
number service staffed by employees who know our systems
and possess good keyboard and communication skills. This
costs the dealership less because it involves lower-skilled
employees using fewer tools.
While
many of you are concerned that the Internet is going to force
you to lower the price of parts and service, I haven't heard
much discussion about how you can use technology to lower
your cost of providing parts and service costs.
The toll-free
number service function doesn't require a fully trained and
experienced parts employee. Customers who know what they want
need an employee with excellent telephone and keyboard skills
who knows the dealership's computer system. Such an employee
costs the dealership less than the experienced parts person
does-an important point given that personnel expenses in the
parts department can be 70 percent of total expenses.
If your
experienced parts employee earns $60,000 a year and the employee
staffing the toll-free number earns $40,000 a year, you can
calculate the cost reduction and the appropriate matching
parts price reduction to justify enticing customers to use
this facility wherever possible.
The employees
necessary to perform this function are easier to find and
easier to train. In addition, the job can be performed in
a controlled managed environment or even from the employee's
home.
The following
chart illustrates what your dealership can save by implementing
this approach.
| PARTS
DEPARTMENT EXPENSE REVIEW |
|
|
Current
|
Toll-Free
Number
|
Sales
Branch
|
| Personnel |
$12,000,000
|
$12,000,000
|
0
|
| Operating |
$3,000,000
|
$3,000,000
|
0
|
| Fixed |
$2,500,000
|
$4,000,000
|
$1,500,000
|
| Service |
$1,500,000
|
$4,000,000
|
$2,500,000
|
| Total
Expense |
$19,000,000
|
$23,000,000
|
$4,000,000
|
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The "total"
compared to "current" represents a 12 percent reduction in
total parts department expenses. This means you could offer
a 1.5 to 2 percent price advantage to customers ordering parts
through the toll-free number.
You might
be surprised by how many of your customers would prefer this
kind of delivery system. Obviously, it would benefit you as
well. Are you prepared to provide a delivery system that matches
customers' needs and wants? If not, there is very compelling
evidence that you should.
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