The Uptime Blog
The big news in automotive isn’t that OEMs are closing dealerships; the big news is how the closed dealerships are responding. Two recent articles from Automotive News highlight the risk faced by OEMs:
- “As dealerships close, online parts retailers step up”
- “From Chrysler to…NAPA?”
Both articles highlight how resourceful businesses are taking advantage of new opportunities and both articles identify a significant risk to OEM profits.
This news indicates that our previous concerns are valid, without a modern aftermarket strategy OEMs are at a severe disadvantage. Since service parts represent a large portion of OEM profits—some say as high as 50%—they desperately want to improve their share of the aftermarket. (Especially with new car sales falling.) But the reports in Automotive News indicate that OEMs are poised to lose aftermarket share to independent parts distributors and repair facilities.
In the first article Tom West, CEO of JC Whitney (a parts retailer), is quoted as saying, “As dealerships close around the country, a lot of people are re-evaluating how they get their car repaired. If you’re confronted by inconvenience, you tend to adopt new habits.” As if to prove the point, the National Automobile Dealers Association reported that even as the average age for cars has been increasing, parts and service revenue fell 2 percent (to $81.84 B) at franchised dealerships last year. It appears that aging cars are being fixed by independent repair facilities (IRF) rather than dealers. In response, West admitted that JC Whitney is shifting toward selling more replacement parts online saying, “Automotive is running 10 years behind in embracing the e-commerce model. I think some dealers have tended to view the Internet as a threat. And, frankly, it’s probably going to be a disruptive force to anybody who’s not in the Internet game.”
Regarding closed dealerships, the second article says, “NAPA, an Atlanta-based nonprofit auto parts association, is thinking big about the opportunity to convert hundreds of dealerships” into NAPA AutoCare Centers. (See Mitigating the Loss of Closed Dealerships.) One former franchise holder, Bill Hahn Jr., says that, “With NAPA service, he can offer everything a customer is used to in a dealership but they can get it 20 to 25 percent cheaper than what a dealership is charging.’”
So with fewer dealers available to sell parts and service cars, what is the OEM to do? Believe it or not, fewer dealers can sell more parts. But they can’t do it without significant help from OEMs. For OEMs to increase aftermarket share, a strategy similar to the Dealer Parts Hub is necessary. After all, if you’re not moving forward you’re probably falling behind.
Last May, CRM Magazine wrote an article about retailing and the Web called, “Selling Out: Have retailers, desperate for survival, abandoned their commitment to the customer experience?” This concerns me because, in my opinion, most B2C companies do a better job using the Web than B2B companies. So if the B2C companies aren’t providing a good customer Web experience, what does that imply for B2B companies?
In the article, David Fry states that, “Some of the strongest online retailers only see 10 percent of their revenues online, he says, but as much as 70 percent of their overall transactions are influenced by their Web sites.” In a sidebar to the article, survey results showed that 52% of retail-consumers used the Web to perform research, gather company info or browse products (as opposed to making a purchase). The same survey reported that for those respondents that wanted to make a purchase but didn’t, 53% listed the reason as an inability to find what they wanted or the usability of the Web site (as opposed to product availability or price).
Perhaps the same statistics apply for B2B customers in the aftermarket; if so, then OEMs could be losing 53% of their potential buyers because of a lousy Web experience. After all, if a buyer needs a part and has trouble finding it on the Web, s/he will likely go to another source that is more user-friendly, or they’ll end up calling the OEM support line for assistance (which costs time, for both the OEM and the customer.)
The idea is one we’ve often repeated: for OEMs to increase sales of aftermarket parts (and improve product support), they have to make it easy for their customers to do business with them, and one of the ways to do that is to give their customers a positive online, Web-based service and parts catalog.
For further reading check out the following recent posts:
You probably already know that Twitter is a service for friends, family, and co-workers to communicate and stay connected through the exchange of quick, frequent answers to one simple question: What are you doing?
There’s a lot of discussion these days in B2B marketing about whether Twitter is catching on in some industry verticals. I’m curious too, so I recently updated the Twitter account I created way back in June of ‘08.
I have just begun to tweet. At this point it matters little what I tweet, since I have a whopping list of three followers, one of whom follows me only because I follow him. And he probably follows me just out of curiosity about who is following him; after all, my line of work is not related to his—he’s a park ranger in Africa tweeting about his job protecting wild animals from poachers. (Perhaps my tweets are not as exciting as his, but if you want to follow me, my Twitter handle is “EnigmaJoy.”)
Although it’s fun to track an African ranger who is tracking animals and poachers, my main goal is to find tweets about the industries that Enigma serves: namely complex equipment aftermarket service/support and aviation MRO. Obviously some people in our industries are on Twitter, but two questions remain: is there a groundswell of Twitter activity around the aftermarket? And would our customers and prospects follow our Tweets? While Twitter is catching on like wildfire in some industries, we don’t yet know if it would be useful for our audience.
For example, I searched on “MRO,” but so many tweets showed up in the results that it was virtually impossible to sift through them all (and precious few of the tweets were relevant to aviation MRO). In contrast, my search on “aftermarket service” yielded almost zero results.
Common sense tells me that B2B followers probably want only tweets that provide useful information. An example might be a news announcement, or comments made while attending an industry trade show. The potential benefits are significant: surely it would be helpful to tune into the latest aftermarket news and trends, not only from some official news source or trade publication but from your peers in the industry, in almost-real time.
My colleagues and I at Enigma would like to know if our audience has hopped on the Twitter bandwagon. If one of us Enigma staffers were to start Tweeting about the aftermarket, would you listen? One way to find out is to poll our audience. So, if you don’t mind, please take a few moments to fill out this simple, four-question survey.
I’ll publish the results in a future blog post (and on our Twitter account, “EnigmaCorporate“) to share what we find; stay tuned!
P.S. Wikipedia has some interesting facts about Twitter and its many uses (scroll down to see “Usage in 2009″).
Can an effective aftermarket strategy affect new product sales? I would argue that yes, indeed it can. In my opinion one of the most overlooked and undervalued aspects of providing a first-class aftermarket environment is the strong relationship and brand recognition it enables companies to build with their customers throughout the service life of a product, which in many industries can be as long as 15-20 years. The aftermarket provides companies with a perfect venue to make a positive impression and build customer loyalty.
All too often the aftermarket is an afterthought; some companies don’t consider the effects a poor aftermarket experience can have on a customer’s opinion of them and their products. Every aftermarket interaction offers a tremendous opportunity for an OEM to quickly and efficiently assist the customer and improve the customer’s perception of the organization. Yet many OEM customers experience the following scenario in trying to identify a part and complete an order:
A mission-critical piece of equipment that a customer purchased from your company goes down. The customer needs to get the equipment running again and reviews the service information included with the equipment at the time of purchase. But the service information is out of date, so the customer reaches out to your company to get the updated service and part information to make the necessary repairs in a timely manner.
The customer either cannot find or decides it is too difficult to locate the part and service information as it is offered (or not offered) via the web. So the customer calls your customer support center and is placed on hold for 15-20 minutes, waiting to speak with a customer support representative (that’s if they are calling between the hours of 8am and 5pm, when the customer support center is open.) They then sit through a 45-minute process of having the customer support representative identify and order the correct part, which might reach the customer by the following day, at best.
As you review your current aftermarket strategy ask yourself the following questions, which will give you some insight into your customers’ experience:
- Is updated parts and service information readily available for your customers via the web?
- Can your customers easily identify the parts they need and, via self service, place an order?
- Are customers required to contact a customer service representative to order parts?
- If a customer service representative is required to order parts are they available 24 x 7?
- What is the average wait time to speak with a customer service representative?
If your company’s process is anywhere close to the process I outlined above, how eager will your customer be to purchase a new piece of equipment from your company in the future? My guess is that they won’t be very eager to do so. A bad aftermarket experience will decrease the odds that the customer will buy a new piece of equipment from that OEM; do you agree or disagree? I’d like to hear your thoughts on this, so please feel free to comment.