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Category Management: How it Impacts the Aftermarket

By Dave Caracci

The race is on to learn as much as possible about the aftermarket's new customers. Is your store ready to adapt?

Are you ready for the new generation of customers? The market had better be: An examination of U.S. Census Bureau statistics shows that in the past five years the number of female Gen-Xers and Gen-Yers of driving age grew by 33 percent; in the next five years, the number will grow by another 53 percent! Is it likely that a white male Baby Boomer aftermarket executive will know what products or services will please a 24-year-old female driver? Not hardly!

During the '60s, '70s and early '80s, approximately 80 million Baby Boomers in the U.S. reached the motor vehicle ownership age. As a result, the automotive aftermarket exploded, and by the mid-'80s, it seemed as if the U.S. was destined to have an auto parts store at every intersection.

By the mid '80s, the next generation, the so-called Generation X, reached driving age. When Gen-Xers came in for vehicle repairs or aftermarket parts, they had different expectations than their Boomer parents. Research painted Gen-Xers as being distrustful of advertising, finding brands meaningless. Unlike their Boomer parents, Gen-Xers were not afraid to try something new, sometimes even if the part had an unknown "generic" name. They wanted different things, and the people working in the auto parts stores heard new requests and demands from them.

Business in the late '80s and early '90s was pretty good. In fact, Boomer middle managers had evolved into aftermarket owners or top management. But, by 1999, all of the Gen-Xers had reached driving age, with nearly 53 million licensed and owning vehicles. Added to that was the next generation, the Generation Y, with almost 20 million having reached driving age by the turn of the century. That's about 73 million vehicle owners that don't think or act like the previous generation - and they are headed for your parts store today!

These new aftermarket customers are not different simply because of age. Tiffany Vasilchik of the Faith Popcorn Brain Reserve pointed out at the 2005 Global Automotive Aftermarket Symposium, "A third of the population today is black, Asian, Hispanic or other (race). Sixteen percent of the population will be of Spanish descent or Latino by 2015, most of whom are from Mexico. Chinese is the third most commonly spoken language." This cultural issue is really beginning to affect the brand strategies of both vehicle manufacturers and auto parts firms.

The OEs certainly understand this. While speaking at the 2005 Global Automotive Aftermarket Symposium, Jim Press, executive vice president of Toyota Motor Sales USA, pointed out this opportunity for sales growth: 64 million people will get their first driver's license during the next 10 years. Every one of them will need vehicle service, maintenance and repair. Every one of them will need the support and services of an auto parts store. You must ensure that your business is ready to cater to their unique needs and tastes.

This generation gap is a problem for any aftermarketer who will be making decisions based mostly on decades of aftermarket experience selling to their Boomer peers. However, success is guaranteed for those companies that identify and meet the needs of the Gen-X and Gen-Y motorist.

Building systems and developing research methods to learn what these new customers want may seem like an extremely long and difficult process for the aftermarket. Add in the multi-cultural and gender differences, and it seems like an impossible task. But, in closer examination, we realize that many of the processes and methods have already been developed by the consumer goods industry.

Gen Y may just be entering vehicle ownership, but marketers have two decades of research on their habits. To meet Gen Y needs, as well as cultural and gender differences, marketers in consumer goods developed research processes, methods and sources to figure out the new and growing customer base. The Boomer executives in consumer goods used quantitative and qualitative research data, successfully growing sales and profits by meeting the new Gen Y wants and needs.

Actually, consumers are supplying more data to the consumer goods marketers every day, every time a bar code is scanned at Wal-Mart, or a shirt is purchased at Kaufmann's by credit card, or a warranty card is completed on a Web site. This same research data collection is often taking place as you scan a bar code at your parts store today.

Want to know what color a product should be to appeal to a specific sub-population? Or how many 24-year-olds would drink lime-flavored cola? No longer do you need to spend several months going market by market, holding expensive in-person focus groups. Today, it is often done less expensively and faster via the Internet. Consumers are participating in Internet chats, interviews and surveys. With groups of 1,000 or more consumers easily contacted and surveyed via the Internet, "old time" marketers continue to be amazed at the consumer research that can be done in a matter of days, or even hours. With the Internet as a tool, data sources and research information continue to be less costly and more readily available. Bill Thompson of International Marketing Research (IMR) said, "Today, there are many cost-effective ways to get answers to both basic and complicated market research questions. Some involve a single source for data collection, while other methods incorporate multiple data sources and collection methods."

Since the association's creation, the Automotive Aftermarket Industry Association (AAIA) has had a group of volunteers working together as the Market Research Committee. The committee commissions, collects and collates aftermarket research creating reports available to aftermarket firms via AAIA. JD Power & Associates' Harold Krivan noted, "The aftermarket continues to be a major opportunity for aggressive and fact-based marketers, but what it takes to be successful is considerably different than what it was 30 years ago. The biggest change is in the composition of the customer base. It is more diverse and its needs reflect this diversity."

Other aftermarket research initiatives began to develop in the late '90s, as many of the past top managers of aftermarket firms, who had grown the business through their experience-based knowledge, began to retire. During those same years, executives from consumer goods firms began joining the aftermarket through various acquisitions and mergers. Those consumer goods folks had experienced the value of quantitative and qualitative consumer research in their previous roles in grocery and big box retailers like Kaufmann's, Borders, etc. These new aftermarket leaders, with no aftermarket experience, knew the power of consumer/installer research data. They had observed firsthand the power of data-based marketing.

Unfortunately, the aftermarket lacked some generally accepted data sources and tools that other industries have used for years. The retailers of clothing, groceries, pharmaceuticals, etc. had supplied detailed sales data (POS) to central collection firms for more than a decade. Reporting and research systems like those in the pharmaceutical industry allowed firms to identify exact market share by brand, by zip code, by prescribing doctor and by month! Imagine the sales, promotional and inventory control possibilities if such information were available to your company.

To help the aftermarket learn more from available data, a group of aftermarket leaders, led by the consumer goods folks, formed another industry committee. Since much of the data collected could be used in a process called "category management," the group today operates as the AAIA Category Management committee.

A common data-based marketing discipline in other industries, category management requires by-part-number (SKU) sales data supplied by major resellers to a central data source. Participating firms purchase and "farm" the data from the central collection source to help identify trends and opportunities. Today, that database exists under the oversight of the AAIA Category Management committee, collected and stored by the NPD Group. It is very likely that the product you scanned across your store's check out counter today is being reported and included in the AAIA Category Management database and will help in marketing and inventory decisions in the future.

While the committee continues to grow and develop the central reporting system of POS data, with some amazing results at participating firms, many other research initiatives and corresponding opportunities are being explored and developed independently by aftermarket firms. NPD, for example, conducts a monthly comprehensive survey of aftermarket consumers. They explore who is buying what products, where and how satisfied they are with the purchase experience.

Considering the generational changes in vehicle owners, as well as cultural issues, IMR's Bill Thompson summed it up well: "Understanding trends and behaviors will ultimately help aftermarket companies become more effective, but understanding the consumer motivators will help them capture more of their existing market and visualize new, emerging opportunities." Many of the new packages, products or merchandising methods arriving in your store today are the result of the new aftermarket consumer research initiatives. And, as they say, 'We ain't seen nothin' yet!"

In future issues, we will review various aftermarket research methods, concepts and sources. We will include some examples of projects and success stories in identifying the needs of the new aftermarket customer.

Dave Caracci has spent the past 29 years as a sales and marketing executive for aftermarket manufacturers such as Dana Corp., ROL Manufacturing and Robert Bosch Corp. Caracci is currently in his second term as chairman of the Automotive Aftermarket Industry Association (AAIA). He has previously served as president of the Automotive Sales Council, chairman of the Engine Repower Council and president of the National Engine Parts Manufacturers Association.

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