Know Your Customer
For too long, I believe, recyclers have tried
to be too much, for too many. We have tried to be retail, wholesale,
and everything in between. We have tried to handle too many
parts on too many types of vehicles. We think that anyone that
drives a used car must be our prospect. Although this might
have been ok 10 years ago, when we had 25 percent cost of goods,
and very little competition, it simply doesn't work today in
Customers have too many choices, other than
used. These include new, rebuilt, and even trading in that old
or damaged car on a new or newer car with zero percent financing,
and a payment of just a few hundred dollars per month.
Many years ago, there were several department
stores that mailed one-inch thick catalogs to what seemed like
every person in the U.S. Both companies, Sears and Montgomery
Wards, have folded their catalog divisions, or at least as they
existed. Sears still publishes some catalogs for specialty items
Before you choose your customer niche, consider,
do you want to be the low cost provider (like Kmart), or the
high value provider (like Wal Mart), or the highest quality
and price provider (like Nordstrom's)? You can't be all things
to all people. I prefer the high value formula. No matter which
category you choose or create, it will necessitate saying no
to some customers in other categories.
Are you going to do import or domestic? Or
only a certain make, or many makes but certain years, or certain
products off of those vehicles, like mechanical or collision
parts? After you choose your niche, look at each of your products
and services, and tailor them to that group. For instance, deliveries
may not be important if you are primarily retail. Corrosion
warranties won't be important to mechanical customers. Every
time you are considering a new product line or service, consider
how important or incremental it is to your chosen niche.
Also, spend more time (aim before shoot vs.
shoot then aim) and do a full cost-benefit analysis of any new
product or service you are contemplating. We once asked our
salespersons how we could improve sales and to generate three
ideas in writing. One of the ideas was to do two deliveries
per day in a given area. Now to do this, we would need another
truck and driver, but if it would produce more sales, I was
agreeable. Our Pinnacle system was able to measure exactly the
number of stops daily into the given area, and we went back
and generated reports showing that we were currently making
16.1 stops per day in that area. I then put together a mailing
campaign for that area, and mailed a postcard every week touting
two deliveries per day. Of course the customers liked it, but
the real question was "will they buy more because they like
the additional service?" At the end of 90 days, we remeasured.
The deliveries averaged 16.2 stops at that time (and our average
invoice amount was unchanged). No more double deliveries. This
cost benefit analysis was done before we made the change, and
we decided in advance how to measure the benefit to us. When
possible, try to calculate this in advance. Based on competitive
issues, some markets might need two deliveries. Ours simply
didn't respond, or at least with their wallet.
Next month: "Know your core competency, and
how to improve," tips on building a business plan. Remember,
only you can make BUSINESS GREAT!