Volume 9, Issue 2 - March/April/May 2007

High Anxiety 
Conference Spurs Talk of Branding and Consolidation

What scares Dan Wilson? You’d think anxiety over the recent Safelite/Belron merger keeps Safelite’s president up at night. But it doesn’t. Instead, it’s the potential of a well-run, independent auto glass business.

When talking about the way Cindy Rowe Auto Glass in Harrisburg, Pa., brands its business, Wilson acknowledged this apprehension. “What Cindy Rowe has done scares me,” he said.

Wilson’s moment of candor came during one of two in-depth panel discussions at the National Auto Glass Conference in Orlando, Fla. The first featured executives from some of the industry’s largest companies, and the other focused on customer expectation but ended up being a frank exchange on industry expectations between attendees and Chris Umble of LYNX Services and Bob Bischoff of State Farm Insurance.

The senior executive panel had been set up before Belron acquired Safelite and included the top executive of both companies. Participants were Rich Harrison, chief executive officer, Belron, Dan Wilson, president, Safelite, Mark Dawson, president, Glass Doctor, and Dave Taylor, chief operating officer and secretary/treasurer, Cindy Rowe Auto Glass.

Taylor spoke first about how to create a brand and specifically how Cindy Rowe did this.

He explained that Cindy Rowe started in 1980 by purchasing a small full-service business that was going broke. Today, Cindy Rowe has a 42-percent brand recognition in its market according to a study while its largest competitor has 2 percent. He credited this success to two things: It emphasized windshield repair, which was new, and the business was given a human face—Cindy Rowe. 

Wilson said that he would like to see increased profit in the industry, particularly in repair. Taylor said that if his company didn’t do repair its profitability would be significantly lower.

“Once you build a strong brand, it’s hard for someone to come in and fight that,” said Wes Topping, who moderated the panel.

“Branding makes the phone ring,” Harrison added. 

It’s also a never-ending process.

“Your customers form an opinion of you from the time they start looking for someone to do the job until it is done,” said Dawson. “You’re always branding.”

Branding wasn’t the only topic the executives wanted to tackle, though.

Consolidation Trends
Harrison spoke about industry consolidation and how it’s affecting the industry on many levels. 

He pointed out that the manufacturers have struggled and there has been migration to production offshore. At the wholesale level, there has been a slow but steady consolidation to get market share. 

At the retail level, he emphasized that there is still fragmentation and room for consolidation. “What is driving consolidation?” Harrison asked. “We’ve seen general price pressure which has put pressure on profitability ... This has made business owners more willing to sell and buyers more willing to buy.”

Looking ahead, Harrison said there will be more consolidation in the wholesale segment and the retail segment will remain fragmented. “We may see a slowdown in the pace of consolidation,” he said. “That is because of depressed profit levels which will make some consolidations less attractive.” 

Wilson said technology has enabled Safelite to go to a more mobile operation. “A third of our operation comes out of our Internet and a third out of our mobile,” he said. Wilson said that e-mail has become the method for collecting customer comment and that currently an e-mail address is being obtained for about 65 percent of customers. “This is the new way of communicating,” he said.

Most recently, Wilson said that the company has been utilizing wireless technology. A pilot program has been underway for more than a year where techs use a Blackberry for in-field transactions. “It has taken much longer than I had thought, but we are getting very close to rolling it out,” he said. “One day I think we will take the order on the Internet and go all the way to getting the information to the tech without any paper or human intervention.”

Dawson said that Glass Doctor continues to see a shift to the Internet from the yellow pages. He also told attendees that the change to cash transactions is going to continue and the labor pool is shrinking. 

He said that because consumers are looking to save money and taking higher deductibles, “By 2010, 70 percent of our market will be cash. That’s huge. Glass Doctor has focused on building our brand nationwide,” he said.

Talking about cash versus insurance pricing, Wilson said that he listens to cash calls every day. “There is some very ugly pricing in the market and the insurance companies know that,” he said. “I encourage everyone to be responsible. We’re trying to be responsible.” 

Whose Expectations?
The customer expectations session turned into a discussion about what happens in the real world collides with the theoretical information often presented in seminars. 

Leo Cyr, NGA, opened the customer expectations session and pointed out that of the people who registered with the METRYX industry services registry and said they were NGA-certified, only 13 percent could be verified. This, he said, points out that while AGRR shops want to present themselves as having qualifications, they often don’t back it up.

Carl Tompkins, representing the Auto Glass Replacement Safety Standard (AGRSS) Council, pointed out that the Standard can enable the industry to promote safety. 

He said its mission will be accomplished when consumers make the priority consideration when choosing a glass shop whether or not it is AGRSS registered. “We provide the benchmark,” he said. “This makes price less important in the decision factor,” he added.

In referring to LYNX’s Chris Umble, Tompkins called him as a “preacher” of safety. Umble said he had never been referred to as a preacher before, but he did feel like he was preaching to the choir because those in attendance are the ones who recognize the importance of safety and the importance of credentials. “You know what is in it for you,” he said.

State Farm’s Bob Bischoff rounded out the discussion and said he appreciated the opportunity to discuss “our mutual customer.”

He emphasized that proper glass installations are a priority and any shop that participates in its Offer and Acceptance program should read the provisions of that agreement because it states exactly what the company expects from AGRR shops. This includes performing all jobs in accordance with AGRSS procedures.

Bischoff said State Farm will pay a fair price for the AGRR work that is done on behalf of its policyholders in a courteous, professional, expeditious manner. He said the company committed substantial resources to its customer satisfaction index program and to correlating how such things as AGRSS registration and other certification programs affect that index.

In the Q&A that followed, Wayne Turner, Glass Technology, Many, La., asked Chris Umble why LYNX did not verify shops’ credentials, despite originally saying it would when the program started in 1993. Umble acknowledged that the network had tried to do that, but LYNX was only a portion of the industry and the verification had not been sustainable.Turner wouldn’t let up, though. He said his business was for sale and one of the primary reasons was that he spent the money to comply with the contract while others weren’t. Yet, LYNX was still giving these other companies business.

Bruce Gates, Gates Brothers Glass Shops, Bellefontaine, Ohio, had more specific quality questions. When his shop found rust after it pulled a windshield and the customer would not pay for that extra, they often go to another shop. He wondered why LYNX pulled the job from his company and gave it to another company that installed the unit over the rust against the AGRSS standard. Umble said that LYNX had no authority in this situation and the responsibility is up to the AGRR shop to do a proper installation. 

Benchmarks
At the meeting in Florida, John Brandt, CEO of the MPI Group, presented highlights of an industry study he conducted.

With new competitors, more consolidations and increased customer expectation based on the raised customer service levels which have come about with the Internet, the business world is changing. All of this, of course, mirrors what is happening in the auto glass business.

Brandt said that more businesses are falling into the commodity trap, and customers have been trained that they will get more value and they don’t care how a company does it, whether by cutting prices or adding more features. “If you are number one and have economies of scale, then cutting price is a good strategy but if you’re not, then it isn’t,” Brandy said.

He provided a profile of survey respondents, which were NGA members. Most respondents had under $5 million in sales, 98 percent are privately held, most of their revenues are in replacement, and the median age of the company is 18 years.

Brandt reported that respondents say they expect strong employment growth this year. He said the median wage is $16.50 an hour. (This compares with $16.75 on the flat glass side, which he also surveyed but did not report on.) Respondents say they give a median of 16 hours per employee of training per year and 1 percent of revenue is spent on training.

In what Brandt called one of the most important aspects of the survey, respondents were asked how many employees have he ability to make decisions. “Having 50 percent and above is a key benchmark. We wanted to identify the top performers and see what they did differently,” he says. “We found that training and empowerment were the keys in this survey.”

He told attendees that a company has to give employees close to customers the ability to make decisions and this means they have to be well trained.

The one statistic that seemed to interest attendees most was the median profit margin: 5.5 percent. Brandt was asked how this compared with other industries, and he said it is comparable but that there were big differences from industry to industry.

Wayne Turner Receives Award
Wayne Turner, co-owner of Glass Technology, Many, La., received the Len Stolk Special Achievement Award at the National Auto Glass Conference at the Omni Resort at Champions Gate in Orlando, Fla.

Turner, who is active in NGA and community affairs, accepted the award in the presence of his wife, Diane, and son and daughter.

AGRR
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