Pragmatic Optimism – is that an Oxymoron? By Ron Slee
Article Date: 10-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.
Good news: You can get that parts market share up again, and the secret is in the right balance of personnel to keep customers happy.
“Woe is me,” is a common mood out there, isn’t it.
But enough already!
Staff reductions and pay cuts have hit most of us. You may say it is unavoidable, yet we now have too much work being done by too few people trying to serve our customers and keep them happy. I think it is time to think of our customers and our employees and continue to provide the cheerful, experienced, knowledgeable staff to please and satisfy our customers. I think we have gone too far in some places and perhaps not far enough in others.
I am a pragmatic person, yet I am optimistic. There is always a way out of the dilemma, and usually it’s by applying some good old fashioned practices and principles. If we lose our customers now because we don’t have enough talented people to answer their questions and satisfy their needs, what good did the staff reductions and pay cuts do for us? It just starts us on a deeper spiral.
Begin by having the correct number of customer service personnel in the parts department. It is really quite simple: The usual metric of expense to sales for personnel in the parts department is 7 percent. Even if we go to a number as high as 10 percent of sales it can work.
How many people do you have in the parts department? What is the sales per employee standard that we need to measure ourselves against? The old measure was $600,000 parts sales per employee per rolling 12 months. That worked with an average payroll cost in the parts department of $42,000. Please note that this is an average, and you need to do your own calculation. Do it, and please make sure that you have sufficient personnel in the parts department to service the customers.
Another very important thing: The sales in the parts department all have to be at retail prices for this metric to apply. If you discount parts internally, then obviously the sale per employee metric goes down. If you don’t recognize this truth then you are making the choice to hurt your customers by not providing the level of service and satisfaction that will keep them coming back to you, which can be measured by customer retention. It also is reflected in our market capture rate, which is shamefully low.
There is the pragmatist in me. Now let’s talk about the optimist. With the correct number of personnel I am going to require that parts personnel reach out to our customers. Pick up the telephone and talk to them or get in the vehicle and go visit them. I will place a small wager with you that most of the hard working people on the counters and telephones have never been to visit a customer. Similarly, more than 50 percent of the parts managers never leave their parts departments.
Recently, the volume of parts sales has decreased. In many dealerships it is in the range of 10 percent. This is tough but easily corrected. It just takes some work. Think about your market capture rate. Can you increase it by 10 percent? Of course you can. Some of you are shaking your heads, saying that you have a strong market capture rate. Perhaps you do and if that is true, I send you my congratulations.
But let us review further. For hardware, nuts, bolts, screws, and lock washers you might have a 5 percent market capture rate; filters and fluids you have less than 15 percent; hose and fittings less than 25 percent; bearings less than 30 percent; electrical, depending on supplier, less than 40 percent; and I could go on.
There has been no time in recent history when more people are struggling to survive and are competing for every nickel of business than now. Do you want to leave the competitive field of play when everyone is coming out and getting on the field? I don’t think so.
If you have cut back the number of people so far that those who are left cannot compete in the market, then the end is near. Check out your facts and numbers of personnel serving your market. Get it right, then get it going.
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