Mystery of Missing Customers

WHAT SHOULD work-order process management look like?

From beginning to end — communicating with the customer, the inspection process, job segmentation, job scheduling, assignment of work, management and supervision of the work, the process of ordering parts, special tools and tooling, service reports, the closing of the job and invoicing, and tying them together with a phone call — the focus should be on providing the ultimate in service.

“Service is the driver — the key element of a dealership, a distributor, a business,” said Ron Slee, president of RJ Slee & Associates in Rancho Mirage, California, in “Shop Management — Best Practices and Customer Relations.”

“It's the only thing you have left that you can use to differentiate yourself in the marketplace — one of the few things you do that can't be outsourced. Labor's not going to be challenged by the Internet. But it is challenged by management. The hardest job to fill at the distributor level today is that of a good service manager.

“What do your customers think of you? Do you ask? Or do you draw conclusions on what you perceive they want?”

According to surveys Slee has performed, they say they choose a source of supply according to price (21%), responsiveness (11%), convenience (9%), and quality (5%). He said that is no big surprise, but added, “They get pretty blunt about things.” He said that in a five-year period, 44% went somewhere else.

“Ignorance is not knowing what to do,” he said. “Stupidity is knowing what to do and not doing it. Mark Twain said, ‘Insanity is continuing to do what you've always done, expecting different results.’ No longer can you choose to hide behind ignorance. Most of us know what we need to do — we're just choosing not to do it. The action verb there is choice. If we keep this up another five to 10 years, we won't have any customers left.

“A lot of dealers tell me, ‘It's OK. How many did I acquire every year?’ Well, sooner or later you're going to run out of prospects. Everybody in the industrial distribution world is starting to take on the Japanese stance, which is: ‘Once I've embraced you as a customer, you're mine for your life.’ More and more people are doing things that will make it very difficult to displace their customers and bring them back to you.”

The wisdom of Cheers

Slee said he believes it's all about customer satisfaction. Do a company's systems help? He compared it to the old Cheers show on TV: Everybody wants to go to a place where they know your name.

“Do we have skills?” he asked. “Do we regularly test them? How many have employees who can't read or write? How supportive are we? What do we do as management to help the mechanic and the people getting parts? What do customers want? When they walk into your store, is it like walking into a Harley-Davidson superstore? What do customers need? Do we really want to satisfy customers? How many of you have been out to see the customer at their place of business in the past month? How many have read a business book in the past three months? The information that's available to us doubles every five years. How the heck do we keep up?

“We don't seem to be doing a very good job at it when nearly half of the customers that were doing business with us in 1997 are no longer doing business with us in 2001. We all have systems, manual and mechanical. We all train people at the dealer and at the OEM. We all care. In fact, we spend a lot of money doing it. Yet our systems are really inefficient.”

Slee's survey asked the respondents to rate how the dealer did in various categories. The results:

In technical knowledge (good or average), the dealer received 67%, while other sources received 80%. In responsiveness, the dealer received 71% to the other sources' 70%. In quality of work, the dealer received 74% to the other sources' 80%.

“Does this blow your mind?” he asked. “The sample size was 540 customers. That's large enough to put this into a very narrow margin-of-error range. That's not a good picture, is it?”

He said price is important only when all other aspects of the transaction are the same. Yet if the customer perception is that dealers are all the same, then they are on a price field of play.

“If that is the case, we will lose every time,” he said. “Somebody will always come up with a lower price. It is then only about your hourly labor rate.

“Before we can come to any solution, we have to start determining what our strategy's going to be. What do we want the service department to be in the dealership? At the moment, it has the largest number of employees, the smallest percentage of your dealership's total sales, the largest gross profit, and the lowest market share. It has management that the dealership doesn't understand. It has salesmen making promises for you.”

Find an advantage

Slee said market segmentation is a key. You want to find a different advantage that satisfies a customer's needs, but that can't be done for 9,000 individual customers, so you have to group them based on similar needs, wants, and expectations.

“This is aimed at customer satisfaction,” he said. “We must find a differential advantage that satisfies customer needs better than the competition and make this advantage sustainable over time.

“If you read any book written in America in the last three to five years on customer service, everybody's going to say the same thing. It's gotten so bad that customers have stopped complaining. I want to be able to create a different advantage that's sustainable over time. Not all customers were created as equals. We need to personalize our customer service delivery systems so that each customer feels as if they are special.”

Specifically, there is market opportunity.

“It's really simple and basic,” he said. “It's based on the product — the trucks, the vans, the tractors, whatever it is you're selling. And it's predicated on how many hours of use they have each year and the work conditions they have. Because there is a predetermined consumption of parts and service per operating hour of any piece of capital equipment.”

He said there should be customer groupings based on:

Product ownership: small, 1-3 vehicles; medium, 4-12 vehicles; large, 13-24 vehicles; and fleet, 25 or more vehicles.

Parts purchases: A, $48,000 a year and up; B, $12,000-$47,999; C, $2,400-$11,999; and D, $0-$2,399.

Service purchases: A, $20,000 a year and up; B, $6,000-$19,999; C, $1,000-$5,999; and D, $0-$999.

The dollar value of the preceding purchases is split according to a company's own sales distribution. “A” is the top 10%, “B” is the next 15%, “C” is the next 25%, and “D” is the last 50%.

“The bottom 90% is the bread and butter, and nobody's paying attention to it,” he said. “They're going away every year. Even if your customers are 100% satisfied with you, 5% will defect on an annual basis. Sixty percent will stay with you because they have no alternative in their mind. So 60% to 90% are going to stay with you from one year to the next. If 20% leave in a year, I start with 1,000 and have 800 left. In the second year, another 20% leave and I have 640 left. Third year, another 20% and I have 512 left.

“Here comes Mark Twain: I want to continue to do what I have been doing because I still have another 500 customers. But I can still lose. It's a very serious subject. Customer defection is happening as we speak, and nobody at your dealership except five or six of you knows what's going on.”

Share expectations

What is it that these customers want and need? Why not give it to them?

“Customers are telling us the same thing: They want to know how much it's going to cost before the work starts,” he said. “How many of you give it to them? The other thing they want to know: When am I going to be able to pick it up and take it home? How many of you give completion dates on your work?

“I'd suggest you give a penalty. Tell them to pick it up Tuesday at noon for $2,500 plus parts. And if it's not ready, it's a $100 penalty for every half day I'm late. And don't tell me this baloney about, ‘I can't be sure I'm going to get the parts.’ It has nothing to do with the parts department. It has everything to do with your ability to schedule labor. Why? Tell me what your labor backlog is. If nothing else comes in from today forward, how long does it take before you run out of labor for your mechanics? Not only do we have large backlogs as the economy gets stronger, but we also get tired. But don't ever get into the circumstance where the market around you is delivering at a better rate than you.”

He asked the attendees to think about management requirements. Are there clear structures and methods in how things are done? Are the systems helping? Are there skilled and trained people? Proper facilities and tooling? Standards and measures?

“One of the things I complain about a lot in management training is that every single one of these people tells me that if they had more time, everything they did last week they could have done better,” he said. “So I say to them, ‘Tell me what it looks like when it's right. Who told you what a good performance looks like? How do you measure labor and billing efficiency?”

He said the goals and objectives should be to: perform repairs, rebuilds, and maintenance; operate efficiently and with high quality for customers, internal departments, and suppliers; allow equipment to operate as designed; provide challenging and secure work for talented people; and allow owners to make money.

He described the process: determine repair needs and machine requirements, open work order, confirm inspections, prepare price and time estimates or flat rates, get approval from the customer, put it into a job queue; manage the repair work; do a quality test; close and invoice.

Each step of the process needs to be reviewed and the question asked, “Does this satisfy the needs and wants of the customer?” If the answer is yes, congratulations. If the answer is no, it's time to get to work.

Then verify the performance. Call each customer three to five days after the customer has had a vehicle or component repaired or maintained in the shop. Ask them: Did we do what we said we would? Did we do it in the time we said? Is the vehicle working properly now?

“If you continue to deliver to customers what you've always delivered, you will lose,” he said. “You're losing now. And the hard news is, you're making money. You're happy. Just wait. You think you understand the situation. But what you don't understand is that the situation just changed. Now is the time we should be saving our nickels and dimes because we really need to invest them when the market goes down. It is very difficult to get back a customer you've lost.

“Make the relationship personal. It becomes even more personal if you can visit the customer at their place of business. And don't forget: It is far easier to correct a bad situation than to recapture lost business.”

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