Volume 8, Issue 2        March/April 2006

 

V i e w  f r o m   t h e   D r i v e r ' s   S e a t                
the retail manager's and owner' perspective



jhorrox@morgancollision.com

When 'Free' is Too Expensive

by Jim Horrox

At a recent budget meeting, my company’s board of directors, after noting my projections for fuel expense, asked me: What can we do to lower that cost? Now understand, these gentlemen are not actively engaged in glass company operations (a good thing), but possess great, broad-base business sense (a very good thing). At the heart of their inquiry, of course, was the issue of providing mobile service, and the margin consumed by doing so: not mobile service in and of itself, but free mobile service. Their objective, unbiased query really got me thinking that as glass service providers, we really do give too much away for free.

“Free is great for grabbing attention and for helping to generate a quick sale, and we have to do it because the competition does; but in the age of AGRSS, consumer awareness, and brand-building for survival, we must charge fairly and consistently to earn a return in 
exchange for the value we are providing.”

No Mobile Fee

Free mobile service was probably an early demonstration to the insurance carriers of just how dumb we could be. The entire cost structure of a glass business is affected by mobile service, and it’s of incredible value to our customers. These same customers have demonstrated over and over they will pay for convenience, even above quality, cleanliness, or safety. Ever wonder how 7-Eleven stays in business? 

Here’s another way to look at it: fuel surcharges. I’m tired of getting notices from manufacturers and suppliers just about monthly advising me that they have no choice but to make their fuel cost problem my fuel cost problem (and if you do the math, I have to believe many of those companies are actually subsidizing other operating expenses with these “surcharges,” however that’s a subject for another article). But do we pass this cost along? We’ve tried it at Stockton Auto Glass, but with very limited success. Finally, I’m sure that many of you know that NAGS provides a service type code (MB) and an actual part number (SMB00500) for mobile service. So why do we just keep giving it away?

Free windshield repair has been a pretty good consumer marketing gimmick while it’s lasted, but recent policy changes among insurance carriers have put this claim on the endangered species list. We all understood that it wasn’t really “free” anyway (try getting a windshield repair for nothing if you don’t have insurance), but I wonder if the imminent customer backlash will have been worth running up the number of repairs performed in the past five years or so. I don’t envy the challenge facing repair-only providers in the near future. Why continue this gimmick?

Supply for Gratis

How about the free supply chain? My good friend and colleague Tom Higginbottom at Mygrant Glass summed it up very well last year. “We’re the only industry to offer such an enormous selection of SKUs, in such a great quantity, so close to the marketplace as to measure availability in terms of minutes and hours, not days...and charge literally nothing for it (availability).” 

The glass part only has value if it’s where it’s needed, when it’s needed; but, again, no provider feels entitled to charge for that value. Why?

I know, free is great for marketing, great for grabbing attention, and great for helping to generate a quick sale. And we have to do it because the competition is doing it. My company is just as guilty as any other. But in the age of AGRSS, consumer awareness, and brand-building for survival, we must charge fairly and consistently to earn a return in exchange for the value we are providing. This demonstrates credibility, and we can’t expect any of our “trading partners” to recognize much less agree with this before we do.

At the end of the day, free is just too expensive for any of us to afford.

Jim Horrox was COO of Stockton Auto Glass until this month when he became COO and director of sales/marketing for The Morgan Group Inc., a privately-held automotive collision company with facilities in northern and central California. He will launch the Central Valley Auto Glass division to support its extensive collision repair operation.


AGRR
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