Vendor Newsmaker Q&A: Rick Stermole

What do you think are the biggest technological challenges in the automotive service and aftermarket sectors?

I'd say it's the affordability of the technology that's out there today. There is a wealth of solutions that can make their business so much more profitable and bring more vehicles through the door each day. However, so many shops just can't afford the solutions. Some truly amazing technology is available, but unaffordable for so many locations.

The challenge would be to make these products affordable, or to figure out a pricing structure where a customer can be appropriately billed based on usage of equipment. A few vendors have tried that, but I have never seen it take hold to any great degree.

How has your customer base responded to the R.O. Mobile product? How accepting have they been of the general idea of using bar code scanners for inventory management?

That has created a lot of sales for our core product. Many customers have shied away from adopting IT, though, because it's one of those examples of a pricey solution. In our minds it's not that expensive when you take a look at what's out there, but to a shop, especially small shop, they do bump up against that cost barrier. But we have sold a lot of our products because people like the idea that we have an option that they can grow into in the future.

How has Progressive approached that problem of affordability?

On the software side, we provide a building-block approach. You can buy some components now and add on additional pieces in future, so you never outgrow our system. We have a lot of different plans as far as purchases and leases, and we're going to step into world of subscription services in 2009.

On the hardware side, we've seen a lot of those prices come down. We've worked with a lot of our partners to make some of these products more affordable, but there is a limit. With some of the really cool technology like the mobile solution, the single unit by itself isn't expensive, but by the time you get a wireless network and install it, it does get kind of pricey. Fortunately, all of these things continue to come down each year. It will still continue to be difficult for a smaller shop to take full advantage of all of the solutions that are out there, though.

What sort of changes have you seen among your customers in the way they communicate with their parts suppliers?

Our Smart eCat interface provides electronic connectivity through a single interface. We appeal to a customer base that either wants better connectivity than their current system offers, or they want to get into connectivity. We see that as being big for our company.

Our the jobbers and distributors keeping up in terms of providing that kind of connectivity?

It appears that the bulk of the parts stores out there are offering multiple ways of connecting. The certainly are moving more toward that type of seamless connection from the point-of-sale system. But virtually all of them now have some type of Web page, where somebody can order parts regardless of the POS. We've seen part centers go both ways. People that never had Web pages now do, and people that had Web pages are offering connectivity as well. Very few of the big players out there don't have something like that.

Are there improvements in e-catalog technology that you think would benefit the aftermarket?

Yes. There is a wide chasm that exists between what the end user (the repair shop) wants versus what the parts store wants. Both sides have a tendency to tap dance around the issue, because nobody wants to offend anybody.

The parts store wants to have a very tight relation with the customer, and be able to control that user experience beyond just ordering parts. The want to offer repair information, product knowledge, all the value-added information that would make someone a loyal customer, and they would like to do that through their interface, because it would bring customers to that parts store for all of their solutions. It makes sense to lock in that customer.

However, most repair facilities realize that even their best suppliers can only supply 70 to 80 percent of their needs, and many repair facilities have gotten very cost conscious as the economy declined, and consequently they are much more into price shopping today.

What we hear from repair facilities is they prefer a single user experience that would allow them to query and see many different parts stores. The benefit to repair shop is that it gives them the ability to compare products one against the other based on availability and price, without having to learn everyone's different system. It's easier to teach, more efficient for the repair facility, and doesn't lock them in so tightly with a single supplier. Those are two very different needs, but both sides need each other. Where this is all going to end up a few years from now, it's hard to say.

What sort of additions to R.O. Writer can we expect to see in 2009?

We are in an early adopter phase, which is our terminology for beta, of our newest release. We anticipate in going to full release of our newest version in January.

We now have Smart Price Pricing and Smart Labor Pricing. What these do is give you a lot more flexibility in how you are going to price out your parts and labor. There has been a trend in the industry to go toward matrix pricing for product, but one of the problems with matrix pricing is if you truly have price levels, you end up with steps. There is a lost profit area in the step range. We have come up with something we call linear pricing, which sets a curve based on how much you want to mark up a part versus what the cost of part is. It smoothes out that transition.

Another trend that's out there is pricing labor, which is progressively marked up based on the number of hours. Rather than just taking a labor guide and saying, "I'm going to bump all labor times by 5%," they progressively bump up labor times again against a curve, based on the number of hours. The greater the number of hours, the greater the mark up. We now have that ability as well. You can use straight flat rate, you can do a straight bump, or you can use the Smart Labor Pricing feature, which will allow you to move labor based on labor times. It's something that I'm seeing more and more on discussion Web sites, so we wanted to be ahead of curve and offer it to customers as well.

We're also adding additional connectivity to more partners. We see that as a big portion of what we do.