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29/08/2012
THE COST OF NOT CHANGING

It is a question that could also be put to tyre specialists: what is the cost of not changing?
With a consumer market deep in crisis, something we all know about, and an automotive market that is having incredible problems, the only car and spare parts sector that seems to be surviving is that of tyres. The latest data indicate that sell out is stable and more or less the same as last year.
Obviously, this is an average, like Trilussa’s statistical chicken. Some people are better off, some are worse off. As always. So why is it that some people win and others lose?
A few months ago I repeated several times that “we are what we were”, meaning that what we achieve today is the result of what we put into our work and profession in previous years. So those who did their sowing well will reap more than those who did not.
But the customer market always moves faster than internal changes and innovations. They are pursued but always too late. Then there are those who wait, having cultivated “pious hopes”.
But what is the cost of not changing?
Here are some concrete examples.
Customer loyalty has changed significantly over the years. But only some tyre specialists make use of Customer Relationship Management (CRM), a system that has a database for managing customer contacts and reminders. I talked about it at length and in depth in last year’s articles. A lot has changed since then. Competition from by dealerships has become even more aggressive. They have to recoup margins and tyre services are very appetizing. Many of them offer winter and summer tyres, their prices are the same as the tyre specialists’, they don’t charge for services or storage simply in order to increase the yearly visits to their workshops. They are prepared not to make a profit, knowing that the other services they offer have significant margins. Just this week, a large dealership was offering four tyres for the price of two. Another sends out reminders with appointments for seasonal changeovers twice a year. The dealerships’ share has begun to rise … and for obvious reasons. What is the cost of not changing? How many customers are being lost? How many customers pack specialists’ shops over a few weeks? How many customers go elsewhere and get more reliable answers and services? So, what is the cost of not changing? On the other hand, how much would it cost to change, to make good use of CRM that performs a large number of functions automatically?  I think it would cost a lot less for many of you.
Another example.
Specialization or diversification. Stay “firm and pure” or offer customers what everyone refers to nowadays as “additionals”. An additional is a service or product offered in addition to those requested by the customer. Regular customers are a prerequisite for this. Beginning with the banal - additives, disinfectants, lubricants - products with a retail price of about twenty euros and a mark-up 50%. If you had 5,000 customers you would make € 50,000 a year. In off seasons, you could offer car interior cleaning using specific equipment; before the start of the summer you could do a hundred by appointment and with margins of € 30 you would make € 3,000. All year round, and with specific equipment, you could offer anti-particulate filter cleaning at 60,000 km, or the annual replacement of mats, even non-original. For example, one of my customers sells thousands of rubber mats for the winter. Another customer found a consumer credit supplier solely for individuals, not VAT linked, and he does not lose customers for the costs of substitution. Promptness, customer satisfaction, immediate payments. And I’ve left out underbody work, scheduled servicing, inspections, external washing, and so on.
Why not change? What does it cost not to change? In this case, nothing. It’s a matter of lost revenues, lost margins and, perhaps, laziness. Investments are limited and they yield a lot.
More.
Let’s talk about local actions. Many of you spend a percentage of your revenues on local communication and promotion, often with the support of your suppliers. It costs a few thousand euros, depending on dimension and structure. The majority is conventional  - mail shots, postcards, local newspapers and magazines, cinema, radio, some TV – but there are also events and sponsoring.
Customers change, they are independent and aware, they investigate different channels to find out about and approach a purchase. Luckily, there are loyal customers but, above all, there are new customers to be won. Nowadays, it is the latter who are increasingly less interested in conventional media. They use the web. They surf, gather information, evaluate products, services, retailers, prices. 71% of Italians use the Internet at least once a day. 12% of Italians have begun to use a credit card for their online purchases. They are mainly young people, but there are also office workers and, stimulated by their children and grandchildren, also the elderly. Buying involves different channels.
There are two strategic actions that you can and must take: create maximum loyalty among the customers you have, losing as few as possible, and acquire new customers through the web. What would it cost you to do it? What would it cost you not to do it? It all comes down to choice: good nearsightedness or, at the same time, attempt to see what’s in the distance, thinking about the years ahead.
Create loyalty and attract new customers. Create margins immediately and imagine the margins of tomorrow.
So, why not change?

Cesare Soresina
c.soresina@pr3consulting.it

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