Marketplace
Friday, June 17, 2005
Two articles with different subject matters also share one common theme. Increased customer service directly influences the happiness of customers and an increased number.
"Dealers Dilemma" , by Norihiko Shirouzu &
"Abercrombie & Fitch Tries to Be Less Haughty, More Nice", by Stephanie Kang
"Dealers Dilemma" with a cartoon by Gary Clement depicts a large GMC and Pontiac dealership next to a Nissan storefront. Mr. Clement draws not a single customer in the expansive GMC showroom, the sole salesman asleep and spiderwebs growing on the 'G' of GMC. The Nissan showroom is much smaller but is full of engaged customers.
The article discusses the overcapacity for floor space at the dealerships selling GM product lines and the undercapacity for Asian autos. In short, GM sales are down but the showrooms are built to sustain large inventories, while the Nissan, Toyota, and Honda showrooms are too small for the demand.
Toyota sees their sales climbing very fast and this is effecting not only the sales (they could be selling more units) but it is also effecting all the activities post sale such as service, repairs and body shop. Customers are even telling Toyota there are not enough parking spaces at the dealerships. Toyota is doing something about these issues. They are pushing the dealerships for expansion, "...hiring of more sales and service workers, boosting the number of service bays, increasing spare parts storage, and building larger showrooms and parking and display areas." Toyota is concerned about customer service, so they are adding bodies. If they do this successfully, there products are already popular, they just need to get buyers into them. Sales will inevitably increase. Toyota is focusing on customer service to increase sales. GM is focusing on how to keep from losing more sales to Toyota. Asian automakers are in good shape for the near future.
The Abercrombie article also is discussing a customer service issue. Abercrombie attempted to go too lean with staffing in the last couple seasons and customers advised coporate, the sales staff did not seem to care. Abercrombie started turning sales around (per article;19% increase in sales, and 38% rise in net income for fiscal quarter ended April 30) after a number of changes. One was the addition of Bob Singer as president and COO.
"Mr Singer turned his focus not on the merchandise mix but on the store experience, starting with customer service. When he arrived at Abercrombie, some customer-service fundamentals were lacking: There simjply weren't enough people working in the stores, for example, he says. "
Now there are greeters at the front of each Abercrombie store...and posted in every section of the sales floor...Mr Singer has brought ina vice president of training for stores. Increased training has reduced 'shrink' or the amount of lost or stolen merchandise."
Both Toyota and Abercrombie realize they can only do more and sell more with the same resources for so long. The importance for any customer service driven business (name one which is not) is to keep the level of service exceptional and smiling customers. Toyota and Abercrombie executives know happy customers will return.
So Abercrombie took the risk, gambled with investing profits into more staff and training and their payoff was green well above their investment. Toyota is now beginning this cycle. If they make it happen, the sales and profits will increase. Market share will grow.
For any business and any Adam Smith fan, leaner and is usually better. However when the curve for lean meets up with diminishing returns, it may be time to add employees.
It really is all about profit. However to get the profits, the customers must return. They will only return with a positive past experience. It looks like a built-in check and balance in the free market.
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