Current Issue
Material Handling Wholesaler Cover
March 2018
The explosive growth in the e-commerce market has challenged distribution centers to meet demand. Read the March cover story to learn how to make warehouse logistics - Faster. Smarter. Safer.

Industry News

View Material Handling Wholesaler's profile on LinkedIn

Holes in the boat
Dave Baiocchi
Dave Baiocchi

Do you ever feel like your dealership is predisposed to give things away?   I have felt this way from time to time and despite great effort to avoid it, it seems that the offer of “free” is almost an inevitability.   The excuses why it’s OK to give it away are ubiquitous.

“These guys are a brand new customer”

“This customer is too big”

“This customer is too small”

“We can’t afford to run them off”

“They won’t understand”

“We promised them we would not charge them overtime.”

“The customer thinks it’s under warranty”

“We need to be competitive”

Have I hit a nerve yet? 

In my experience, the service department bears the weight of the dealership’s free lunch program.  Many times this culture is driven from the sales department, which sometimes includes upper management.  When treading on the emotional ground surrounding a recent sale, customer satisfaction can be easily achieved by providing the support only available from the service department.  In an effort to quell any shortfall or missed commitment by the sales department, or to ensure the customer experiences no buyer’s remorse, this support, especially in the early going, is many times included, discounted or otherwise provided pro-bono to the customer in the name of customer relations.  

Time and again, we fail to realize that the problem with a free lunch, is that the customer will again be hungry at dinnertime!  The give-away culture is a damaging force at work in far too many dealerships.  I see this far too often, and I equate the losses incurred from giveaways to holes in the profit boat.   Nothing draws blood more quickly than the knife in one’s own hand.  Contrary to what some may believe, how we handle ourselves with a customer in the early stages of a relationship trains a customer on what they can expect for the long term.  If a little saber rattling results in a substantial discount, don’t expect that customer to ever stop the clatter!

There are methods that can be employed to assist dealers in avoiding this runaway train.  As with any cultural issue, the methods must be adopted at the TOP of the organization, and they must be rigorously enforced.  They are however essential if you want your profitability boat to float for the long term health of the organization.

Method one - sales warranty

When newly delivered equipment breaks down or is otherwise in need of attention, the knee jerk reaction most of the time is to simply open a warranty job.  This is customary and expected, as every piece of new equipment normally comes with some form of OEM warranty.

It’s interesting however how the understanding of warranty is seldom taught to, and therefore seldom embraced by, the sales staff.   Most manufacturers, start the explanation of their warranty with the same word:  LIMITED.   Even the sales guys know that there are things that are not covered, but they do not really seem interested in defining that list for the customer. 

One of the most effective ways to get salesmen to participate in the process of regulating unrecoverable warranty expenses is to give them monetary motivation.   In our dealership, all customer work is billed to either a retail customer work order, an OEM warranty work order, or a sales warranty work order.  If we are providing services that are connected with the delivery of a recent piece of equipment, any non-OEM warranty work is either billed to the customer, or to the sales department.  

This puts the cost burden on the department that many times is so quick to issue free passes.   It’s amazing how quickly salesmen get off the free lunch bus when the expenses connected with post delivery services starts affecting their commission statement.    This is not to say that we don’t assess these expenses after the fact, and move some of the costs to customer policy adjustment.  The exercise however forces the stakeholders to educate themselves about the process, and to commit resources only after considering the possible costs.  It also establishes a default accountability mechanism that accounts for the costs today, and (perhaps) reallocates these expenses later. 

Method two – manufacturer’s warranty acknowledgement

One of the weaknesses in our customer engagement process is that as an industry we do a poor job of positioning ourselves for the maximum benefit of the dealership on the very day a piece of equipment is being delivered.  With each unit put into service, there will be a trail of money that follows.  We must put ourselves in the best position to retain these opportunities.  Not only is there money to be made, but there is also a unique opportunity to prevent losses, by eliminating unnecessary expenses.

There is a cultural paradigm in this country that applies to this process.

“If I don’t TELL you, then you don’t have to pay”

It’s the unwritten rule of the American marketplace.  Large ticket items by their nature carry a set of customer expectations that need to be managed in order to be truly successful.  Especially in the days following delivery, anything that may go wrong is automatically assumed as being warrantable.  If the rules and policies concerning warranty are not addressed specifically with a customer, you can rest assured that the customer will use the “You didn’t tell me” gambit to avoid paying any of these costs. 

We can mitigate the damage to the dealership in covering non-warrantable repairs by simply ensuring that the warranty is not only explained in detail, but that the customer signs an acknowledgement stating that the warranty terms and conditions were clarified and understood.   Once our dealership made this acknowledgement part of our seven step delivery process, the number of customer issues after delivery reduced dramatically. 

Method three – administrative training

Many of the issues that put holes in the boat start in service administration.  Dispatchers, expeditor’s, and schedulers, are the first line of defense when it comes to managing expectations.  Many of these employees are classified as clerical, but in many ways the image of your company, and its reputation for customer service lies in the hands of these very important employees. 

Being a dispatcher can be a thankless job.   Nobody ever calls to say thank you.  Every phone call presents another problem.  Needs must be assessed and prioritized.  The customer’s urgency is always palpable and at times is accompanied by hostility or desperation.   In the heat of the moment, if we are not careful, we many times end up allowing the emotional distress of the moment to distract us from our SOP, and this is where training and solid policy can prevent the dealership from experiencing a financial loss.

  • Are your dispatchers trained?
  • Do they collect the appropriate data, every time the same way?
  • Are they instructed on how to prioritize “machine down” and respond properly to customer urgency?
  • Do they understand the warranty on all of the equipment you sell?
  • Do they have scripted responses to common customer questions and complaints?
  • Do you have policies in place and are dispatchers trained on ascertaining customer credit standing, and applying appropriate customer labor rates?
  • Do they know and do they properly inform the customer in regard to overtime charges, travel time and other fees?

Once again, it’s much more difficult, if not impossible, to manage customer expectations on the back side of the issue.  Giving your administration crew the information and tools they need to engage this process confidently, and in advance, serves to prevent those pesky leaks from ever forming in your boat. 

There will always be occasions where departments must work together in order to satisfy the needs of the customer.  There are plenty of opportunities however to make better, and more intentional decisions.  This can be done by employing adequate education and training.  Your people deserve to have the tools and policies in place to assertively clarify their positions.  Your efforts to establish interdepartmental accountability inside the dealership will pay hefty dividends, and keep the inside of that boat nice and dry. 

This is not a simple, or painless process…..but accountability seldom is.   So, patch the holes in your boat and keep on sailing!

Dave Baiocchi is the president of Resonant Dealer Services LLC.  He has spent 33 years in the equipment business as a sales manager, aftermarket director and dealer principal.  Dave now consults with dealerships nationwide to establish and enhance best practices, especially in the area of aftermarket development and performance.  E-mail to contact Dave.