Case 4: Build With Brands
Car comes in for service. It’s 7 in the morning, and you’re working through your first real cup of coffee for the day.
Customer is complaining that his brakes "seem to be scraping" and the front-end is "squishy." You brush off the customer’s command of vehicle technology, finish the work order, get the customer’s John Hancock, thank the customer for his business and tell him you’ll call when you find the problem.
It’s just another morning, like thousands before.
Except it doesn’t have to be. Sure, the coffee’s only going to be so good, and customers could always be less descriptive with their diagnostic assessments. Paperwork is paperwork – no work order, no work.
The big change potential lies in what happens after the customer leaves, and once you determine the root cause of the "scraping" and the "squishy."
Do you just get unbranded white box parts, like always, mark them up, install them and hope they hold up?
Or do you go the more image-building and profitable route and order branded parts?
"One thing I always preach is that successful brands are able to form a relationship with the user," said Brian Tarnacki, director of brand marketing for Federal-Mogul Corp. "And that means there’s trust in that brand that has built up over time, and the user and consumer can have confidence in that brand because there’s a knowledge level of quality and consistency in it. Those two things are basically unknowns when you’re dealing with white box parts – you never know what you’re getting in the box."
Vehicle owners form relationships with their tire dealers much like people do with their favored brands of soft drink, potato chips, and so on, he said. They choose those brands because they like the product, understand what they’re getting and are confident that the brand will deliver what they are accustomed to. This all makes them feel comfortable in their decision-making.
"They have confidence they’re going to receive quality service and parts from that tire dealer, and obviously branded parts play an important role in that equation," Tarnacki said.
Risk With No Reward
Then there’s the obvious downside – comebacks. "By using non-brand parts you run a higher risk of comebacks, and that ends up having a reverse effect on profitability," Tarnacki reminds. The added costs the dealer has to absorb – bay time, technician time, new parts, and the resulting lost shop time – make comebacks financially brutal on any service operation.
"Comebacks cost and that pretty much defeats the reason why some guys use white box products in the first place," he said.
Generally, branded replacement parts also come with a manufacturer’s warranty, protecting both the tire dealer and the customer in the event something goes wrong with the product – a major plus white box parts can’t deliver.
"Your premium branded products tend to have better warranties than the entry level branded and especially the white box type products, and that’s part of the value package that comes with buying a premium branded products," Tarnacki said.
And one bad part can easily mean one bad comeback experience, with that one angry customer telling everyone he knows about his miserable experience. "You can lose a customer for life, and potential future customers due to negative word of mouth. Friends ask, ‘Hey, where did you get your tires or where did you get your alignment done.’ You want them to say, ‘Oh, I went to Joe’s, and they did a great job.’
"But you’d hate to have someone say, ‘Yeah I went to that Joe’s place and I ended up having to go back because it was still making noise and the part broke.’ They end up telling two friends, and those friends tell others, and pretty soon everyone knows."
Tarnacki said the industry’s trend toward branded aftermarket parts has grown stronger – and appears to be getting even better. "Especially at times like this with a challenging marketplace, I think a lot of people are risk-adverse. Branded products are a great way to avoid risk because you’re getting this known commodity, something you trust, something you believe in, something you know, and something you know won’t come back."
And with the consumer-level marketing support parts makers are putting behind their products, selling customers on a recognized product brand has gotten easier.
"Consumers really do see a difference," he said. "We try to have technically differentiated products with our premium brands, so they’re going to perform better, they’re going to be designed and manufactured better. So the customer choosing that level of brand ends up with better performance and durability and quality.
"If it’s a truly differentiated product that has value to the customer, I think the technician is going to be more apt to use that familiarity and value with their customers. That’s where things like POP displays and materials come in handy, and the training and other sales-oriented things we like to provide with our branded products," he said.
"A lot of times, just by having those materials in the shop, the consumer sees them, sees brands they recognize, and that just builds their confidence in the shop," Tarnacki said.
"As hard as we work to build consumer recognition of our brands with advertising and our racing program and other activities, the consumer may not always be as familiar as the technicians is with the brand, but at least they have some level of awareness which helps build confidence."
Earn Greater Yields
Sure, white box parts are cost less for the dealer, and many feel this allows them to earn higher profits. But the reality is 30% of a higher number yields a greater return – and without the fear that the part will return attached to a customer complaint.
If you’re marking up your vehicle parts 50%, on a $50 white box part that’s a return of just $25. That same 50% mark-up produces a greater return on the slightly higher priced branded parts. Plus, the higher profit rate on branded parts gives you some additional wiggle room if you need to meet a major price objection; you can give the customer "a break" while still retaining a good margin and gross profit.
Now, not every customer is a candidate for branded parts. A rotting 1978 Caprice probably isn’t a potential.
But even older vehicles, depending on their use and the customer, would be best served by name brand replacement parts. Retirees who take good care of their cars and can’t afford large, unexpected repair bills. Young families with limited incomes trying to stretch a couple more years out of their wheels. Even that first-time driver can be a candidate.
You have to judge each case on its merits. But the decisions you make each and every day have a direct impact on your bottom line.