Your mother was wrong!

April 1, 2007
IN 2000, Ryan Mathews and Fred Crawford began research with the intention of writing a simple white paper on how businesses and customers relate to each

IN 2000, Ryan Mathews and Fred Crawford began research with the intention of writing a simple white paper on how businesses and customers relate to each other.

They interviewed 5000 people, quickly discovering that they were wrong when they assumed that what customers wanted was self-evident: the best product at the lowest price. Mathews and Crawford found another 5000 people, but got the same result.

They went on to do the same research in 14 countries. After surveying over 80,000 people, the results were the same across all industries.

They wrote a book, The Myth of Excellence: Why Great Companies Never Try to Be the Best at Everything.

“It goes back to your mother,” Mathews says. “The truth is, your mom was wrong: You're not going to be as good at math as English. You're better at some things than you are others.

“But businesses pretend it's not true. They pretend they are good at everything. What group of people knows that's not true? Your customers. You tell them, ‘We're the friendliest parts people in town. We won't be undersold. We have the highest quality parts.’ It's not true.

“If I'm a customer and I'm talking to a bunch of companies and everybody's telling me, ‘I'm the best at everything,’ are any of these businesses differentiated? So how am I supposed to make a choice? If it's all true, the lowest price would beat everything. But most people don't want lowest price. Not really.

“Price is the thing every business thinks it knows best. Why is that? Because we confuse price with accounting. We think, ‘Well, I paid this much for it, sold it for this, made this much profit. Therefore I understand pricing.’ Nah. Being the best does not give you the right to charge the highest price. The 80,000-plus people we surveyed think all prices are inherently dishonest. If you tell them you're giving them a good deal, do they believe you? No. They think your price should be competitive but if it's too good a price, there's something wrong. So the first thing in pricing is to be honest — full disclosure, no hidden fees, no add-ons.”

Based on the book and its methodology, the National Truck Equipment Association (NTEA) adopted a survey instrument to better reflect the unique nature and needs of the work truck and trailer industry.

In 2004, the NTEA surveyed 347 fleets and 176 dealers — the largest study of its kind ever conducted in the truck equipment industry — to explore why they do business with their truck equipment suppliers. Two years later, the NTEA conducted a second survey of 76 fleets and 102 truck dealers.

Based on the findings, the NTEA developed its own program, “Closing the Gap: How to Win (and Keep) Customers Through Competitive Differentiation.” It's intended to help business owners better understand, measure, manage, and improve customer service across their entire operation. Using this resource, distributors and manufacturers can develop strategies to move closer to their customers and truly understand their needs in order to deliver solutions and maximum value.

“Based on the survey results, we really believed there was a need in the industry for companies to take better care of customers, to know what customers are looking for and how to improve your performance,” NTEA executive director Jim Carney says.

Says Mathews, “What's the gap? The gap is really the measure of perception. It's trying to find out what your customers feel and how they think. It's not necessarily a measure of what's real or true. You might say, ‘What use is that?’ But I ask you, ‘Which is more important: What a customer thinks is true or what is actually true?’ What he thinks. Because that's how they make their buying decisions.

“The results of this study would surprise many of you. It's a real wakeup call. It helps you align your company. In 100% of the cases working with this methodology, the owner of the company is running one company, the employees are working for another company, and often customers are buying from a third company that neither of first two groups understand. Take the results of the study and figure out how to allocate resources better. The bottom line of the study is, if you have to invest some place, you wouldn't invest in price marketing. You'd invest in people. You're overfunding some efforts and underfunding some efforts that would add to better service or customer experience.”

Following Mathews' methodology, the NTEA reduced all commercial transactions into five core elements:

  • Price

    The cost and cost impression of a good or service.

  • Product

    What you're offering for sale, including services.

  • Access

    The ability of a customer to find and easily use a good and/or service.

  • Service

    The quality and level you deliver.

  • Experience

    How you feel as a customer as a result of doing business with a company.

“Our idea is simple,” Mathews says. “Don't try to be the best in each of these areas. Great companies, we discovered, were absolutely dominant in one of these areas; were better than most of their competitors in a second area; and just met the competitive market in the other three areas.

“Competitive differentiation is the only acceptable strategy in markets where every company looks the same. If everybody thinks that customer is mostly concerned with price, what will happen? Everybody will compete on the basis of price. And the industry will be destroyed. Your margins will go away. Customers won't necessarily be better served.”

In the NTEA's survey, dealers and fleets were asked to address the five core elements of a commercial transaction by responding to several components of each attribute. They were asked to rate the performance of each component when dealing with a body and equipment supplier. Then they were asked to rate the performance of their truck equipment supplier.

The results:

Price

Dealer findings: A low price was not the answer to getting their business, and lowest price was not even ranked as “important”; a high importance was placed on a fair price for the specifications and on receiving good value; and in providing fair value for their products, local upfitters and body and equipment manufacturers were seen as not performing to expectations.

The NTEA's observations: “It might be easy to overcome price objections if a good value proposition is presented at the time of the sale (e.g., ‘Yes, our prices are higher than our competition's, but our products and services are far superior. You are actually getting a much better value when you do business with our company.’) Pricing is often a perception issue. The industry needs to do a better job of selling the economic value of its products and services. Economic value is created for customers by improving their performance, reducing their overall costs and/or by reducing their exposure to risk and liability. Try to move away from competing on low price. Position your company in another way.”

Fleet findings: The lowest price was not rated as important or highly important to them; getting good value for the dollar and a fair price are far more important than getting the lowest price; and suppliers were rated as falling far short in meeting price expectations relative to fleets getting a fair price for the specifications or getting a good value for their money.

The NTEA's observations: “All suppliers must find out what their fleet customers consider to be good value. Understanding your customers' views of your company and what you provide to them from an overall transactional perspective would go a long way in helping you understand what the fleet manager considers a good value or fair price. In terms of performance, there are tremendous opportunities for all suppliers to build greater value propositions with fleets. In other words, make sure they know what value you are providing for the price you are charging.”

Product

Dealer findings: Product received the lowest number of importance ratings compared to the other attributes; available inventory, warranties, and technical engineering support were of the highest importance, yet suppliers fell far short of meeting performance expectations in those categories; a local upfitter's ability to customize vehicles was rated as important; overall, industry performance was rated as satisfactory; an increasing importance was placed on warranty policies and procedures from their suppliers (a new finding in the 2006 survey); there was not much concern that upfitters and manufacturers provide a Web site that includes product specifications; and a strong emphasis was not placed on distributors or suppliers tailoring maintenance contracts to fit dealers' needs.

The NTEA's observations: “The product is not king. In other words, the product doesn't make the deal for the dealer. A possible area of competitive differentiation for local upfitters could be their ability to customize vehicles.”

Fleet findings: Product was rated as a very important part of the commercial transaction; the most important product criteria were the range of products and available inventory, reasonable warranty policies and procedures, and good technical/engineering support; it was rated important that truck equipment distributors have innovative products and a full range of products; it was rated highly important for body and equipment manufacturers to have good technical engineering support; respondents working primarily with local upfitters and truck equipment distributors gave the highest performance scores for “has customizing capabilities” and “has innovative products.”

The NTEA's observations: “This is one of the areas in the survey where fleets responded quite differently from dealers. (If you serve both markets, be especially conscious of those differences.) Fleets, unlike dealers, see the product as an important productivity tool and a company asset. Companies with customizing capabilities and/or innovative products could use those attributes as significant selling advantages over their competition.”

Access

Dealer findings: Nearly 100% stated that their ability to easily reach sales people is crucial, yet they perceived this as a major area of concern when local upfitters or body or equipment manufacturers are their main point of contact; ease of placing an order was rated as highly important or important across all points of contact, and only truck body or equipment manufacturers fell short in this area; access to technical and sales information was ranked as highly important or important when dealing with all points of contact, yet this was viewed as an area where all points of contact suffered a lag in performance; access to various brands of bodies/equipment was seen as important, especially when dealing with an upfitter with a bailment pool or a body or equipment manufacturer (this was less likely to be a concern among dealers whose primary point of contact was their local upfitter); having a supplier's physical location nearby or 24/7 access to service was not rated as highly important or important.

The NTEA's observations: “It's probably safe to infer that dealers have high expectations for immediate and personalized service and support.”

Fleet findings: “Easy access to technical and sales information (phone, print, and Web)” and “easy to place an order” were rated of highest importance; easy access to technical and sales information was cited as a major performance gap when dealing with body and equipment manufacturers; nearly 100% of fleets that work primarily with local upfitters/truck equipment distributors rated easy-to-reach sales people as the most important access attribute, yet this was viewed as a major performance gap; ease of placing an order was ranked highly important when the primary supplier is a local truck equipment distributor; it was ranked as important for other suppliers; this was viewed as a major performance gap when dealing with local upfitters/truck equipment distributors.

The NTEA's observations: “Essentially, fleets said, ‘Make it easy for us to do business with you.’”

Service

Dealer findings: Responsiveness to requests (e.g., quotes, product information, repair information) was ranked as highly important yet a critical performance gap was reported; prompt and reliable overall customer service and parts availability when needed was rated as highly important regardless of the point of contact, yet a critical performance gap was reported; promotional programs, product and support materials (ad reprints, testimonials, spec sheets, parts manuals, brochures) offered by their various points of contact were seen as secondary in importance to responsiveness; when using local upfitters, dealers value a nearby service location.

The NTEA's observations: “It is essential to note that critical gaps were reported in the highly ranked areas of importance. So there are some very significant opportunities available throughout the industry to service dealer needs by addressing service issues in a more responsive and timely manner. Service is an important attribute in winning a customer's business and more importantly their loyalty. Good service will bring a customer back for repeat business and so it is a critical attribute of a supplier's value proposition. Clearly, if a supplier can maintain that responsiveness expected by the dealer, it is in a good position to win business and maintain customer loyalty. Since dealers value a nearby service location, local upfitters might be able to use this to their advantage when selling against supply channel competitors.”

Fleet findings: Receiving good service is highly important to fleets, yet a high number of major performance gaps were reported across the board; prompt and reliable customer service, responsiveness to requests, having a nearby service location, and Automotive Service Excellence (ASE) certified mechanics were rated highly important or important, but these same criteria were also identified as major performance gaps; the single largest performance gap under the service attribute was for prompt and reliable customer service; for fleets working primarily with body or equipment manufacturers, fast turnaround on maintenance and repairs and the ability to provide troubleshooting on site were of higher importance than among other points of contact, and these same criteria were also seen as major performance gaps.

The NTEA's observations: “Obviously, fleets want to be treated with respect — they want good service. It is the underpinning of winning and keeping their business. Yet suppliers are apparently failing to meet their fleet customers' expectations in many service areas.”

Experience

Dealer findings: Eight of the nine experience criteria were viewed as highly important or important; across the board, 99% to 100% of dealers placed a high level of importance on their upfitters' and suppliers' ability to resolve complaints quickly; likewise, 97% to 100% of dealers responded that receiving the correct product also was critical; lead times that meet dealers' needs were viewed as the largest gap in performance for all points of contact.

The NTEA's observations: “The experience attribute carries significantly more importance to dealers than the other four attributes. Likewise, this is the attribute that offers many opportunities based on perceived lack of performance by industry suppliers. In short, customer experience is a real and sustainable differentiator between competing organizations. If handled well, experience is what bonds customers emotionally with your company, creating a strong, positive association with your company and its brands. For companies wishing to leverage customer experience you must have a complete understanding of how the customer interacts with your company.”

Fleet findings: Three quarters or more rated the criteria under the experience attribute as either highly important or important; quickly and fairly resolving complaints and receiving the correct products were ranked highly important by 97% to 100% of respondents; however, suppliers fell short on fleet expectations for experience, and major performance gaps were reported across the board; having knowledgeable, well-trained sales people and delivering when promised were rated as either highly important or important, and serious gaps were reported here; easy-to-understand product literature was rated as an area of importance, yet it is another area where a gap was reported; lead times that meet fleets' needs were ranked as important — and as a performance gap; partnering effectively on spec'ing and purchasing was ranked as important, but again, industry suppliers fell short of expectations.

The NTEA's observations: “As with the responses from the dealers, fleets resoundingly stated, ‘It's all about the experience!” So, if doing business with your company is not an enjoyable and beneficial experience for your fleet customers, your efforts made in the other transactional attributes may be wasted time and effort. Providing realistic lead times may help to better manage fleet customers’ expectations.”

Mathews' comment: “You can say, ‘Nobody is over there in the square called experience. I'll go there.’ But it has to be authentic. It has to be real. And your customers have to be willing to see you in that role. One problem with Wal-Mart is that they're trying to attract more affluent customers who don't see themselves as Wal-Mart shoppers. Yeah, they've got a good deal on something that is a better quality item than they used to carry, but the kind of people who want to buy it don't want to be caught dead in your store.”

A “Closing the Gap” kit, including complete survey results, an explanation of data, tips, possible tactics, a copy of The Myth of Excellence, and a DVD, costs $99 and is available from the NTEA.

About the Author

Rick Weber | Associate Editor

Rick Weber has been an associate editor for Trailer/Body Builders since February 2000. A national award-winning sportswriter, he covered the Miami Dolphins for the Fort Myers News-Press following service with publications in California and Australia. He is a graduate of Penn State University.