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					Vehicle Service Trends and Outlook:
          Research Report

  Research Sponsored by Global
    Automotive Aftermarket
          Symposium
                  By
        H. Lee “Buck” Mathews
  Professor of Marketing and Logistics
       The Ohio State University
               614-292-2700              1
Preliminary Notes and Information

  Research   Methodology
   – 46 Research Projects Reviewed
   – 62 Interviews with Industry Executives and
     Installers
   – Complete copy of the research data and slides
     available @
   – www.cob.ohio-state.edu/~mathewsh



                                                 2
       Research Questions
1) Where are consumers who have purchased
   cars in the past five years planning to have
   their cars repaired after the warranty has
   expired?
     a) What service trends can be predicted?
     b) How rapidly are these trends changing?

2) What are the strengths and weaknesses of
   car dealers and how can the aftermarket
   service providers and suppliers react?
                                                 3
          Research Questions
3) What is the impact of extended warranties
   and extended maintenance agreements?

4) What are both the new car dealers and
   aftermarket repair facilities (and their
   suppliers) doing to get new customers?

5) Is there a difference in consumer attitudes
   toward maintenance and repair work?
                                                 4
Basic Findings and Conclusions
 Cautious optimism about future growth of
  aftermarket.

 Automobile   dealers have an advantage with
  warranty and extended warranty programs. May
  be their biggest strength and weakness.

 Opportunities  of aftermarket providers focus upon
  specialized, economic service providers, large
  enough for technology and cost advantages.

                                                 5
Understanding Market Segments
   is the Key to the Future
Identify the market segment.
Growth and market potential of segment.
Develop a strategy toward high potential
   segments.
Possible strategies for aftermarket
    providers.


                                            6
After the warranty period, where
    will service be provided?
Aftermarket vs. automobile dealers
 (80%/20% split)

        OPPORTUNITY?




                                      7
      Interview Comments

Dealers are earning a greater share of the
 out of warranty business than in the past

Mostly in the aftermarket, most data
 shows that these cars are being serviced in
 the traditional aftermarket. But as new
 used car dealerships open up this may be
 changing.

                                          8
     Interview Comments
Aftermarket absolutely, probably
 about 80%, this is the bread and
 butter of the independent repair shop.




                                     9
      Installer Comments
Unless there is a sincere effort to
 train technicians in electronics and
 have automotive manufacturers share
 their knowledge with independents
 my answer would be the auto
 dealership organizations will service
 the higher tech vehicles.

                                    10
       Installer Comments
Auto technicians are becoming scarce --
 The public needs to understand that the
 price of repairs to fix these technical
 wonders we call cars is escalating faster
 each year. Either we have to reverse
 technology to a more primitive vehicle
 such as in the 50s - 70s or the industry will
 collapse with no mechanics to service
 them.

                                           11
Trends in Vehicle Repair




                           12
Trends In Vehicle Repair
 Makeup of Other 37%




                           13
Strengths of Automobile Dealers




                              14
Weaknesses of Automobile Dealers




                              15
Weaknesses of Automobile Dealers
             Other

                 Warranty Work
                 Honesty
                 Value
                 Hours of
                  Operation



                              16
What are automobile dealers
doing to earn customer trust?




                                17
Other Ways Automobile Dealers are
         Earning Trust

 Excellent          Reduced
  Customer            Costs/Warranty
  Communications     Certification
 Follow Up           Standards
  Programs           Good Sales
 Initial Contact     Experiences
 Up Front Rates


                                       18
Increasing Market Share for the
          Aftermarket




                                  19
        Other Ways to Increase
          Aftermarket Share
   Expand Hours
   More Marketing
   Improve Turn Around
    Time
   Early Contact
   Research Location
   Certification
   Expand Working
    Capital
   Better Technology


                                 20
Aftermarket Programs




                       21
Other Aftermarket Programs
 Increasing          Sales and Service
  Communications       Training
 Management          Saturday Hours
  Training            Increasing
 Public Relations     Locations
 Focusing on
  Customer
  Satisfaction


                                       22
Impact of Extended
   Warranties
Demographics Influencing Customer
        Service Choice




                                24
Other Demographic Variables
 Gender       Race
 Religion     Attitude
               Quality   of Work




                                    25
Customer Service Factors




                           26
Important Customer Service Variables




                                       27
Customer Satisfaction Auto Dealers
    Variables According to Future of the
     U.S. Automotive Service Industry
               (1996-2006)
Convenience……………………………….           23%
Previous Good Experience……………..    21.1%
Reputation………………………………….           11..6%
Price…………………………………………              9.7%
Promotion/Discount………………………        6.4%
Recommendation…………………………           6.4%
No Waiting………………………………….           4.6%
Friend/Relative Works There……………   3.1%
Dependable Service………………………        1.1%
Could Not Do Myself……………………        .8%
Trust Them……………………………….            .8%
Other Reason…………………………….           11.00%




                                            29
Why Individuals Engage in DIY
       Source: Aftermarket Business




                                      30
What Jobs DIYers are Doing




                             31
DIY Activities by Age Group
       Source: Aftermarket Business




                                      32
DIY Activity By Income
   Source: Aftermarket Business




                                  33
   Maintenance Vs. Repair
 New  Meanings
 A Segment Variable
 Implications




                            34
Future Trends and Implications




                                 35
                                                                        * What markets/customers do we serve profitably?
                                                                      ** What do we do really well?
                                                                     *** What the market demands we do well?
                                                                     **** What is important to measure our progress?

 Mission                  Prioritize & Valuate
                                                                                  ORDER QUALIFIERS
                                                                                  ORDER WINNERS


                            Internal                                                       Business
              Market                                                      Segment
 Vision       Potential
                            Strengths     Competitors   Competitors
                                                                          Strategy
                                                                                             Plan
                           Weaknesses



 Step1        Step 2       Step 3         Step 4         Step 5             Step 6            Step 7           Step 8

Current                                                  Key                Bus
             Segment      SWOT           Core                                                Score-
Situation                                               Success             Unit                             Evaluate
Overview     Analysis*    Analysis      Comps**         Factors***        Strategy          card****



 Base Line    Company      External                                      Functional
                                           Ours          Ours                              Ongoing
 Feedback     Strength      O/T                                           Strategy         Strategy
                                                                                         Development


Questionn-
                             Prioritize & Valuate
  aire
     Start
      Market Segment Competitive Strategy

                                                                 Frontal Attack
Is their an opportunity and        Do you have a competitive
                                                                          •Product
     can you compete?                     advantage?
                                                                          •Reputation




                                                                 Flanking Attack
                                       Can you change or
                                                                         •New Values
                                       Expand the buying
                                                                         •Services
                                           Criteria?
                                                                         •Products
                                                                         •Reputation




                                   Can you find a profitable      Fragment Attack
                              No   Subset of the opportunity?            •Beachhead
                                                                         •Coexist




                                     Do you have a position       Defend
                                    In the market to protect?               •Insolate
                                                                            •Isolate




                                                                  Develop
                                    Is this an opportunity for              •Invest
                                         Future business?                   •Delay
          Stop
            DEVELOPING COMPETITIVE
                 ADVANTAGE
    Company
                       Match what we are good at with           Customer
Identify strengths,
                                                               Identify target
   weaknesses,
                                                                 segments
  KSF’s, & Core       Segments that value our capabilities
   competency
                                 Competition
What do we need                                              Which problems do
                       Identify competitors’ threats and
 to be good at to                                             customers seek
                                 opportunities
deliver what the                                               solutions to?
customers want?         What are competitors good at?
                                                             Which benefits do
                             Their target segments           customers seek?

 Develop and exploit                                     Concentrate on
   differentiation                                       segments with
                                                      competitive advantage
                                                                      38
H. Lee Mathews is a Professor of Marketing and Past Chairman of the Marketing Faculty at both The Ohio State University and
Pennsylvania State University. He has been named Outstanding Professor of the Year by the MBA Classes of 1989,1990,1992, and 1993.
In 1994, he received The Pace Setters Award for the Outstanding Graduate Professor at The Ohio State University; in 1997 he received the
Sigma Chi Award for outstanding teaching. The alumni of Ohio State University have nominated him as a distinguished teacher. Professor
Mathews teaches business strategy formulation, industrial marketing, consumer and retail trends, business plan implementation, and sales
management in the MBA program at Ohio State.

                 His consulting and research experiences have focused on a broad range of strategic problems including industrial market
strategic planning, sales management, market intelligence, financial planning, and product procurement and marketing. He has conducted
and translated market research information into strategic plans for many companies and organizations such as IBM, Lennox Industries, and
Abbott Labs.

                 Dr. Mathews has developed a unique approach to business planning that focuses on strategy formulation and
implementation. This process capitalizes on SWOT, PEST, and Matrix Analysis as tools to develop implementable strategic plans. Recent
clients include Cardone, Hillyard, BFGoodrich Aerospace, AT&T, Hill’s Pet Foods (Division of Colgate), Metatec, Victoria’s Secret,
Mannington Mills, McKesson, AlphaGraphics, Cardinal Health, and Johnson and Johnson.

                  One special interest area is B-to-B marketing, distribution and sales management. Dr. Mathews has been an active
researcher, writer, and consultant for over 25 years. In the areas of sales, marketing strategy, and financial management, he as worked as a
consultant to both large and small distributors. Recent clients include The Butler Company, Limited Distribution, CIBA, Industrial
Distributors, J.J. Haines, Huttig Sash and Door, and IBM Wholesale Market Segment Owners. Another special interest area is bank and
finance organization marketing. He has worked with Mellon Bank in the marketing strategy for credit cards, and with Bank of America in
the marketing of financial services. He is a speaker at the Academy of Financial Executives Summer program at Ohio State and teaches
sessions on finance for non-financial executives for many organizations. He is the academic director of the NAW Executive Program run
each summer at The Ohio State University, and director of the American Wholesale Automotive Distributors Program at Ohio State
University

               Dr. Mathews has worked extensively in executive education programs. Through Ohio State University, he has taught in
summer programs since 1977, and in extensive programs focused on distribution. He is a member of the University of Michigan Executive
Education Faculty.
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