Who is guilty of trying to be all things to all customers?
Well, maybe we shouldnt try to be.
Soon, the Motor & Equipment Manufacturers Association (MEMA) will release a study commissioned to examine our industrys excess inventory dilemma. Counterman magazine supported this comprehensive study, which was conducted by Northwood University and supported by the Automotive Aftermarket Industry Association (AAIA), the Automotive Warehouse Distributors Association (AWDA) and the Specialty Equipment Market Association (SEMA). In next months issue, we will elaborate what is currently taking place to manage excess inventory.
In a recent interview with those who conducted the study, something very interesting caught my attention. It had to do with the psychology behind the concept of differentiation, which is really at the very core of what this study set out to reveal.
During the very early stages of the study’s preparation, a team of scholars at Northwood felt that there was more to the excess inventory dilemma than the usual suspects: parts proliferation, using inventory to gain market share and excessive returns. Instead, the study sought to not only analyze these standard habits, but more importantly, to try to reveal the psychology behind these inefficient practices. Thats where things got interesting.
It has become clear that the psychology of aftermarket competition lies at the core of our inability to effectively and efficiently manage our inventories. To illustrate, lets talk about the concept of differentiation.
Our industry is unique, right? Just about every industry is populated by those who believe their industries are unique. Yet most grapple with the same types of problems and challenges faced by the automotive aftermarket.
In other words, no one is unique in feeling unique. What every industry has in common is the need for company and product differentiation. Thats where the psychological barriers come into play.
The best example of differentiation is Southwest Airlines. The entire airline industry is losing money, except Southwest Airlines. Southwest uses an entirely different cost structure than the norm in the airline industry. By doing so, they must turn their backs on certain customers. However, because they are focused, they are able to put together a set of activities that much more efficiently satisfies the needs of their core customers. In other words, they make money.
Lets apply that to a prevailing practice in our industry: Trying to serve the needs of every customer, whether they be DIY or wholesale. Certainly, youre focused if your mix is 80/20 in favor of either customer type, right? Well, apparently not. Southwest completely turns its back on a certain type of customer who demands certain types of services and conditions. Theyre happy to do so, and they make no apologies. Southwest would love to serve those other types of customers, but only under Southwests own terms and conditions – not the customers.
Who out there is guilty of trying to be all things to all customers? Were all guilty.
You certainly cant argue with the success of OReilly and their 50/50 mix. Nor can you argue the success of Southwest. And, what about the psychology behind it all?
Who will be the first to say, "I dont need your business since you dont fit my organizations prototype customer I’m set up to serve?"