I attended a meeting with a manufacturing client the other day. It was the standard line review where product managers were seemingly punishing management with an endless barrage of Excel spreadsheets and graphs on product trends. Fighting off the nods, I heard for about the third or fourth time that day a product manager report the migration of sales from his premium line to his value line. It was no earth-shattering news; as I said, I had heard it several times already. Additionally, I had observed this trend for the last several months, if not years, with a variety of different manufacturers. But something different registered when I heard it this time. I made a connection that I hadn’t made before when I considered this phenomenon. And this time it raised a troubling thought.
I have been thinking and writing a lot lately about the renewed emphasis that OE dealers have been placing on the replacement parts business. Last month I wrote about the 2-4-8 reality: a reference to the fact that the typical OE dealership makes a 2-percent net profit on new cars, a 4-percent profit on used cars and an 8-percent profit on parts and service. I suggested that more dealers are being drawn by the profitability of the parts and service business and therefore are placing a greater emphasis on it in their overall marketing efforts.
I also have repeatedly harped that the greater aftermarket has assisted OE dealers with our historic penchant for over-consolidation and bad reference data. Over-consolidation is the practice of “universalization,” designing parts to cover multiple applications (and thus reduce inventory). This practice now is meeting with stiff resistance in the service bay. Couple that with dismal data availability and the result is sending our technicians running to the arms of the dealerships.
But now, thinking about this migration from premium to value lines, I am struck with yet another way we are assisting those other guys at cannibalizing our business. My “blinding flash of the obvious” was our growing tendency to “assume” that price is the primary influencing factor for repair technicians and the tendency for almost everyone in the aftermarket to “lead” with value lines. So-called “value lines” have lesser quality, shorter coverage and are typically more consolidated than premium lines. Just think about your favorite restaurant deciding to focus on lesser cuts of meat, fewer menu choices and smaller portions as a method of retaining your business. Sure they might be able to save you a couple of bucks, but in the end, you’ll probably be looking for someplace else to eat.
As we allow our overall product mix to migrate toward the value lines, we are putting in the hands of our customers a product that, in most cases, doesn’t look and fit exactly like the one he took off the car, is made of lesser quality materials and will not perform quite as well as the original. At the same time, we wonder why more and more of our technicians are returning to the OE dealer for parts.
Virtually every survey and marketing study conducted on technicians’ buying habits that I ever have seen places the attributes of quality and availability ahead of price. If such is the case, why then, are we so paranoid about price? I am aware that there is a disconnect between what someone will tell a researcher and what his actual behavior is; that could go some distance in explaining the dichotomy. But I think the real root of the problem can be found in our poor communications about our products. And it is a problem that is shared equally by both manufacturers and resellers alike.
It starts with the language we use to talk about our products. Most parts manufacturers and resellers offer lower-cost, lower-quality lines as a part of the overall product portfolio. Most refer to them as “value” lines. I take exception with that moniker. It lends too much credibility to these products. In the greater population, value has come to mean “comparable with national brands in quality and content, but lower in cost.” Wal-Mart has been basically the standard bearer on this issue by establishing their “Equate” brand, although there are countless other examples in the marketplace.
I think it would be more appropriate to refer to these lines as “fit for use,” because in most cases, that’s what they are. They are not substitutes for the premier line, they are fit to use in situations where a vehicle is not being maintained, but merely kept on the road. I know I am not going to change the language of the entire market, but if we don’t do something about our mindset on this issue and how we represent these products to our service technicians, we are going to continue to help deliver our customers to the OE dealers.
But it isn’t just about what the line is called. The problem starts with manufacturers who offer ill-conceived fit-for-use lines. By that I mean there may not be enough difference between the lesser lines and the premium lines in terms of features and performance to warrant the price differential. I recall talking with one product manager who, when asked to explain the differences in his lines, hemmed and hawed and delivered an answer that only the engineer who designed the product would have understood. It was patently obvious that had he been standing across the parts counter from a service technician, he couldn’t have sold the premium product over the fit-for-use product to save his life. How on earth can we expect an untrained counterperson to do that? A far more common problem, however, is manufacturers who have differences between their premium and fit-for-use lines, but have failed to communicate those differences to the counterpeople who have to sell them.
Let me relate a recent experience I had shopping for a new serpentine belt for my pickup. The counterperson informed me that he had two: one was $8 and the other was $14. When I inquired about the difference, he told me one was national brand and the other was private label. I again asked what the difference was and he replied, “I don’t know, they’re both made by the same company.”
Counterpeople who present product options as, “I’ve got one for $8 and one for $14,” aren’t doing themselves, their customers or their vendors any favors. Neither is, “I don’t know, they’re both made by the same company.” Counterpeople need to be able to speak to issues of material differences, manufacturing differences, performance expectations, product longevity and/or warranty. Too often in the absence of actual facts, assumptions are made. And assumptions are too often wrong.
There are other ways that resellers contribute to the problem. The existence of value lines can be largely attributed to resellers who felt they needed them to attract DIY customers by advertising a low price. That is fine, and in most cases, it is appropriate. The problem occurs when we automatically go to the price line and don’t even attempt to make the case for quality.
Here’s another war story. I was with a major reseller. A discussion was taking place over what new numbers to add to their value line. The buyer had submitted a list of applications he felt needed to be added. Among them was a part for a vehicle application that originally cost over $40,000 and was less than three years old. The manufacturer’s product manager was suggesting not to add that particular coverage to the line, but was getting a lot of push back from the buyer. After some heated debate, the buyer finally disclosed the source of his insistence by saying, “Look, my competitor has coverage for that application in their value line.”
Fighting back the urge to use the immortal words my mother would employ in such a situation — “And I suppose if your friends jumped off a bridge…” — I questioned the logic of blindly emulating the product strategy of a competitor. I suggested that most technicians would think it inappropriate to install anything less than OE equivalent parts on such a vehicle. I went on to say that offering less than equivalent parts would seem to endorse the practice. I finished by suggesting that this was proof that matching the competition wasn’t always the best strategy.
What we need is “appropriate” quality based on the vehicle condition and the customer’s situation. Too often, we have handled the matching of parts with applications the same way public school systems have dealt with kids. In the politically correct, standardized view of public education, if you are a fifth-grader, you are a fifth-grader; and you are treated accordingly. There is no consideration for individual special skills or innate abilities. Genius or dunderhead, the same treatment is given.
In the aftermarket, there needs to be a recognized practice wherein consideration is given to the performance characteristics of the vehicle, its original costs and current status (including age, mileage and physical condition). Additionally, information about the owner needs to be considered, including how long they intend to keep it, who they let drive it and their ability to afford repairs. Then, and only then, can the parts be appropriately selected for the vehicle. The situation is complex and simply can’t be reduced to “one is cheaper, one is more expensive.”
I know that counterpeople have a tough job. Being on the front line in any battle is always a tough place to be. They are the ones who suffer push back when there are problems and take the heat for high prices. OEs don’t have this problem. The fact that the OE’s name is on the box is validation of the contents. We, on the other hand, have to know and be able to communicate it.
We need to start at the manufacturer level with rational product management. There has to be meaningful differences between premium and fit-for-use lines. The price differential between the two lines must be based on performance differences. Buyers must believe there is real value supporting the additional investment in the premium line. We need buyers and product managers to rationally confine the content of fit-for-use lines to applications that make sense. In other words, no more cheap parts for three-year-old Volvos and Cadillacs. Finally, manufacturers and resellers alike must provide counterpeople with enough information to help the technician choose appropriate parts based on the vehicle and the customer’s situation.
If selling to professional technicians is an important part of your business, it is time to step back and consider what you stock and how you sell it. While it may seem the easiest way to go, selling based strictly on price is most often not what technicians want; and they certainly deserve more.
There is a huge difference between passively letting someone buy and proactively suggesting what is appropriate based on facts. Our passivity is actually driving the volume of the cheap stuff. Until we start working harder to proactively sell the appropriate parts based on the circumstances extant, techs will continue to patronize OE dealers — whose parts are always appropriate. And by the way, the aftermarket’s newfound obsession with OE form, fit and function is NOT the panacea that so many think it is. But that is a subject that will have to wait until next month.
