Using banner programs for better profitability
No one said it would be easy. Running an independent business in Canada has never been a lead-pipe cinch, but in the automotive service sector, the challenges are even tougher. Payables, receivables, marketing, personnel, administration, in fact every difficult aspect of Canadian business is magnified in our part of the economy. Having trouble keeping up? Looking for a new growth direction? Banner programs are one option for businesses looking to protect what they’ve built, or move to the next level.
What’s a banner program? It can be anything from a loose agreement to source parts and use branded signage to a comprehensive package to provide everything from letterhead to employee training.
“A banner program should be evaluated upon the net overall benefits gained versus its marginal costs”, says Karen Barkin, marketing coordinator for Bestbuy Distributors Ltd. (Best Auto). “This assessment should be based upon understanding your desired target market, your current and prospective customers, the stage of your enterprise and the potential for growth.”
Often there’s no single business type or management style that drives the decision to join a banner. The “menu” of services offered to member businesses is long, and many owners elect to choose from a buffet that includes everything from private credit cards to exclusive equipment leasing.
A relatively new issue that’s getting more serious in a hurry is insurance. According to Kevin Patterson, marketing manager for Auto Sense Auto Parts (Auto Logic Service Expert), “it’s hard to find right now. Many operations have been receiving phone calls from their insurance companies telling them that they’re no longer underwriting their insurance policy. We’ve all had to scramble to try to find insurance companies that will do coverage for the automotive industry.” Do banners give members an advantage when sourcing insurance? “Definitely”, declares Patterson, adding, ‘we have there companies to choose from so they can compare to their existing guys. It’s an additional inducement to join. If you talk to anyone in the industry, independent or not, insurance is a major issue.”
Another important factor in both survival and growth, banner or independent, is training. All major banner programs offer both technical and management training programs and most have a troubleshooting hotline. Banners may run training in-house, or flow an outside training program through their operations. Either form is valuable. Troubleshooting help is generally a separate function, although there are exceptions. One is Uni-Select, according to Pierre Desmarchais, national manager for development and installer programs for the firm’s Uni-Pro and The Specialist banners: “We use a program that’s an extension of our training program. People don’t call with a specific problem; they call with a problem in solving the problem. We try to find out why the technician isn’t able to fix it for himself.”
Desmarchais is adamant about the need for comprehensive training as key to survival, whether part of a banner family or not. “It’s a most important thing. Most of the people quitting programs, and I don’t mean just our program, aren’t going to something else, they’re closing their shops. They just can’t make it; it’s as simple as that. They need training as owners, as technicians and in human resources to keep people in their shops. It’s not just a question of salary.”
Sometimes getting the work isn’t as difficult as getting paid for the job. If your customer base or market area is cash-strapped, private credit cards are another option offered by some banners. According to Glenn Crewe, marketing manager, Bumper to Bumper (1 Stop Service/ASC), “we offer a financing program. Some use them, some don’t; there’s a big demand for it.” That big demand would seem to fly in the face of media reports about strong economic growth, but many shops see a familiar problem, says Crewe: “It’s a last resort thing. A customer blows a motor and needs his car, and money is short, so it’s definitely a last resort. It’s a higher-rate card. It helps the installer because they get their money up front.”
Computers and integrated software is essential for a modern business, and shops moving into modern systems for the first time, or upgrading from an early system can find the choice difficult, especially given the “high stakes” nature of the purchase. Here also banner programs can offer expertise that’s difficult to find, expensive, or both from an independent’s perspective. Does the banner help at the front end of the computer decision?
“I think it does”, states Bob Bobert, coordinator for AutoValue Certified Service. “There are so many service providers for computer hardware and software. When a banner gets involved, there’s a lot of research that happens before they approve one or more. Frankly, there’s no one single best suggestion, so they recommend three or four. They will be the Cadillac systems among those available out there. In our case, the people that checked out our systems have numerous service centres working with the programs.”
While well managed independents can be as profitable as any business in the aftermarket, banners have one appeal that stands out: Presence. Using the power of a familiar brand usually means a marketing and merchandising approach that includes advertising, an area where banners generally excel. Best Auto’s Karen Barkin explains: “If you intend on investing in co-op advertising, you should first consider its incremental costs and try to pre-determine where the new business will be generated from. Will this advertising investment actually lead to greater traffic, more ringing phones, and actual cash register sales? An analogy here is Yellow Pages and whether this investment is productive. According to Bain & Company, it will cost the average business at least 150% more to attract targeted business through advertising, yet only 50% in marketing cost to secure and retain existing customers. Knowledge about your target market is key for success in evaluating direct marketing. A program can be very effective for independent repair centres if the target audience is properly selected with the right motivating literature. Direct marketing can do considerably more to address and look after existing customers and capture some new ones along the way. DM can actually help build key seasonal business. An independent should keep a database of existing customers and actually map out the geographic area from which they draw customers.”
Some banners, including Best Auto, have in-house teams to prepare advertising materials, simplifying the task for owners without previous advertising experience.
Do you need to belong to a banner to succeed? Probably not; many independents do well entirely on their own. If you’re looking for a turnkey package of services that go beyond your current capabilities, however, banner programs can offer one-stop shopping for enterprising operators. SSGM
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