Standardized Freight and Orphan Consumer Pushback
In speaking with a dealer, recently he posed the idea of asking manufacturers to hold back a percentage of each RV sale that would be sent to the dealer in the consumer’s home area where the RV is registered. The “hold back” would serve as an incentive for the home dealer to give the consumer the same level of service of that consumer who buys directly from the home dealer. The hold back could be a set monetary sum like $2,000 or $3,000 or it could be a percentage of the wholesale invoice price.
Apparently this topic was broached in the dealer’s 20 group and all agreed that this would be a good way overcome the dissatisfaction many orphan consumers feel when they attempt to get service and would ultimately benefit the whole industry.
This idea, to me, may be a good one but it also raises a lot of questions. I’ll leave it up to readers to discuss whether this idea has merit. The first question in my mind is how would snowbirds fit into this equation? Would the hold back be split between the two dealers where the RV spends the most time? Is this the ultimate solution?
Another related issue to this, is the topic of standardized freight. The freight of RV delivery tends to skew the margins dealers make on an RV based on their distance from the manufacturer. Consumers can often get a better deal from a dealer who is located closer to the manufacturer. And even if the dealer doesn’t pass the savings on to the consumer, the dealer comes out ahead on margin. I’ve heard several heated debates on whether standardized freight is a good idea or not. Most dealers located close to the manufacturer of the brands they carry think this is a terrible idea and most dealers who are located far away would love to see it because they think standardized freight would level the playing field and discourage consumers from traveling to dealers located close to the manufacturer to get a better deal. Do you think standardizing freight would help solve the disparity? In my mind, it probably wouldn’t solve the problem entirely because dealers would still put their customers ahead of orphan dealers.
Another related issue would be the difference in price larger dealers and buying groups pay for the same RV as other dealerships. When a company like FreedomRoads can buy at a lower price based on volume, they immediately have an advantage because they can either offer lower prices but still make the same margin or they can keep the difference and be more profitable. This may contribute to orphan dealers also but the network FreedomRoads has created tends to offset the orphan consumer problem. That may not necessarily be true for very large dealership that may also see an invoice savings by buying on volume but do not have the network FreedomRoads has established. Of course there options for those dealers as well with Route 66 and ReDex.
To me these issues seem to be symptoms of the same problem. Dealers are not compensated for warranty work at a level where the warranty work is profitable. Double the rates that manufacturers pay for warranty and suddenly everybody wants to do service because there is a margin that makes it worthwhile. The consumer gets timely service and suddenly consumer satisfaction rates go through the roof.
So there’s the topic of the day. Let’s hear what you think about these issues.
November 17th, 2008 at 3:56 pm
It seems to me that if the dealership was running a smart business and turning a profit in their service department, they would welcome the customer with open arms irregardless of where they bought it. In an age where most invoices are published online, and the customers demand that the dealers make zero profit by online shopping to death, the dealer that sold it made virtually no profit anyway. My service and parts departments are supposed to turn a healthy profit, so why would the manufacturer then hold back money and give it to the servicing dealer, therefore dictating where the customer has to go for service. Likewise, with RV owners living in their units, registering in Montana to skip the taxes, what address will the manufacturer use for the holdback? Their homebase, their Southern winter address, their daughter’s house where they spend the month of July, or the Montana LLC address??? In my opinion it is the responsibility of every dealership to turn a profit, be competitive, and provide good service. It’s not the manufacturer’s responsibility to pay for hurt feelings when a dealer loses a customer because of a rude salesman, his poor reputation, absurd overhead, or his beach house in Tahiti. Sorry to be so bold, but I am bothered by the mentality that the manufacturer should be held responsibile for a dealer’s lack of business sense. They build it, and it is our responsibility to turn a profit. We hold the cards. What we do with the opportunity is another story.
November 5th, 2008 at 11:13 am
Well, I’ve been out of the business for fifteen years now but see the same problems still talked about. I have always said…All warranty work should be customer pay! Yes, customer pays the bill at the repairing dealer. The customer then simply sends that bill to the manufacturer for reimbursement. End result…dealer who repairs gets a fair rate for the work done…any dealer can fix…dealers will compete for the work and (this is the part I like) the manufacturer either builds in better quality controls or pays the fair market price or risks setting of the retail customer who will be quick to spread the word that manafacturer “so and so” does not pay warranty claims. I liked that idea twenty years ago and I like it now.
November 3rd, 2008 at 2:50 pm
I have to take sides with Dennis, though I can only speak to issues concerning Warranty. The poor economy is affecting all of us, this is true, however, we are still blazing away with sales. One of the symptoms of the slowing economy has been the Manufacturer’s downgrading warranty. I only do Warranty for my dealership, and I am watching Flat Rate Codes go to zero, or the Mfg’r is requiring pictures or other requirements that they did not have before.
I’ve always worked under the premise that within the cost of every new, retail unit, there is 2 or 3 percent built-in for warranty claims. Right now, I’m not so sure about that. It is becoming more and more difficult to do Warranty work. We do a fair amount of warranty work on units that we do not sell. You would think that the mfg’r would recognize that and step up, but I am not so sure anymore.
Our customers are our life blood. Our Service customers are our life blood. Regardless of whether or not the manufacturer re-imburses us has no bearing on our high level of service. There is no such thing as a perfect RV/Park Model. Nobody could afford one. Can we all make improvements? Absolutely. And I for one do see the glass as half full.
It is now incumbent upon us, the dealer with good sales activity to really look hard at the lines we carry. We have dropped some lines and added others. We also may have to look at cutting back the amount of warranty work that we do for lines we don’t even represent. Don’t get me wrong, it’s nice knowing that consumers insist on bringing their units to us, even though we didn’t sell it.
The economy is going to improve and things could be alot worse right now. I’m grateful for the sales we have and for the work we are doing. If enough people can get together, from all sides, and discuss the important issues, I’m confident that all of us can prosper. Let’s hear what the consumer says. We should listen to the manufacturer’s and the dealers need to be heard as well. If we all work together, the Family that spends their hard earned money deserve a good quality RV/Park Model with Service behind it.
November 3rd, 2008 at 2:38 pm
The key to fix this problem is to create a true universal warranty that will be honored by all the dealers. This requires manufacturers to pay on time and resonable amounts. Then once that is in place they need to write it into their dealer agreements that the dealer network is to take care of all warranty work in a fair way. Sure there may be a wait but it should be because people are ahead of them not because the dealer is putting them off by placing their own customers in front of them.
If our industry was ran more like the auto industry when it comes to warranty work this issue wouldn’t be here. The issues starts at the top and 90% of this industry seems to care little for their customers. For manufacturers their customers are both thier dealer network and the customers who buy their units.
In all seriousness I’ve never been part of an industry where the manufacturers care so little for the retail customers. A good percentage of the manufacturers remind me of fly by night electronics companies out of china selling Ipod knockoffs.
Until the manufacturers decide it is worth building a true dealer network and paying properly on warranty work we will be left with customers who must choose between a good price and local service. Unless they live close enough to dealers who offer both.
October 31st, 2008 at 8:07 pm
Monaco might have a program to pay the closest dealer, but do they assure that the money is used effectively? Might they be paying the WRONG dealer?
Consider for how long, and at what cost, a coach company strives to build up its brand and gain a premium reputation? Mine spends lots of money sending marketing materials for the next purchase, and trying to sell add-on stuff, without helping assure the coach is actually performing as promised.
What is the expected result of “dumping” the customer right after the sale? This happened last year in one major market due to lousy dealer after-sale service and “tough luck” response from customer service reps.
My closest dealer — not the selling dealer — refused to accept a 2007 diesel-pusher for first year warranty service — said they had no time for MONTHS (aka “get lost”).
My next closest dealer — the only other manufacturer-authorized store in the entire region — took the coach (for WEEKS) but did lame work, only addressed some of the (many) problems, then literally went out of business while the coach was still in the shop.
I called the manufacturer, a waste of my time and their phone bill. They didn’t care that the warranty had months to run but there were no dealers to fix things.
The coach’s problems were a mix of sloppy workmanship and dopey engineering. Combine dumb mistakes with the maker’s lack of interest in helping the customer deal with dealers unwilling/unable to do effective repairs, and it TOTALLY wiped out the manufacturer’s reputation with the many customers affected — quite a subject of conversation at recent RV rallys.
When a “quality manufactuer makes clear that they see no value in helping existing customers, it will be remembered by those FORMER customers next time…
October 31st, 2008 at 6:11 pm
I work for a large dealer. We struggle like other dealers do wondering if we are getting the best deal possible from the manufacturer. We purchased a product several months ago that we would normally stock. We are now competing with other dealers that purchased the same product for 30 -50% less then we did. How are we suppose to compete with this? I need to order several coaches now to replace some units we just sold. I don’t know how much of a discount I should work them for!! If I don’t get enough, I will be in the same trouble I am in with the other product. It is a game of who buys it the cheapest not who sells it the best!! What a shame. We all loose at this game.
As far as warranty service goes, I’m not sure that we want that business anyways. We have to fight to hard to get our money from the manufactures. This too has become a negotiation. It seems that the manufacturer works harder at finding ways to not pay the dealers then they do trying to make it right! Why would I want to do warranty work that I won’t get paid for on a coach that I didn’t sell? While we are fighting these battles the customer is the one that looses. Great Job!!!!
October 31st, 2008 at 3:49 pm
It looks like Sherry and RV Dixie have different opinions but I really like how they both stated their positions on this. It’s great to see dealers state their positions and clearly explain why they have the opinion they do. Thanks for contributing everyone.
October 31st, 2008 at 1:46 pm
The holdback idea is a bad one. Why would anyone want to let the manufacturer hang onto extra money until you sell a unit. Just think how much that could add up to. Jayco has a great incentive program to make sure their customers are looked after. They pay a premium to dealers who service customers from outside of their area. As for unit pricing, year-end rebates or goal rebates could work. No matter what size your dealership is you are rewarded based on goals and budgets that are directly related to your size and volume. For example, if you increased your purchases by 10% you would get a year-end rebate. Doesn’t matter what your volume is, it’a all relative. This would also encourage dealers to concentrate on carrying only a few mfg’s product and doing a great job, rather than trying to carry everybody’s product. I don’t think freight is an issue. The dealer has to give the customer a good reason to want to shop at home and they will. The customer wants quality. So you need to understand what quality is… meeting the customer’s needs. If you don’t take the time to understand the customer’s needs, you’ll never be able to keep the customer at your dealership. The 10% of customers that buy on price only usually aren’t worth having as customers anyway. The customer’s that are the happiest are those that pay a fair price which leaves the dealer able to service them well and don’t hesitate to goodwill things now & then.
Just my 2 cents on the topic.
October 30th, 2008 at 2:37 pm
The only way to level the playing field is to eliminate discounts other than in a pre-determined manner on an annual basis. In other words wholesale pricing based on annual volume either in the form of a year end rebate or in anticipated tier pricing. This would eliminate the problem with two equal size dealers 80 miles apart paying different prices for the same product because one of them bought an end of the month yard unit. Equalized freight is an excellent idea and should be utilized. The auto manufacturers have used this system for years and it has worked for them. Manufacturers will make a little money on some deliveries and lose on others. If done properly it should balance out. If all of these things were implemented it would go a long way in keeping the customer from traveling half way across the country to purchase and solve most the service problems.
October 30th, 2008 at 12:30 pm
“Downhill from Florida to Oregon” Hehehe!
This is a messy issue but it seems to me that it flows to the manufacturers to solve the orphan problem. They are the common denominator and ultimately it is in their interest to provide a consistent and reliable product.
October 30th, 2008 at 11:14 am
Gosh: What do you think is wrong with the industry? If the manufacturers would put an average destination charge on all units maybe the local dealers around the country that are not next to the factory could be more competitive.(ie:Florida customer running to Oregon)Sorry close buy dealers.
Regarding service every Toyota,Ford,GM,Mercedes etc.owner can have those products serviced anywhere in the country. Not the RV owner though. Unless the RV has a problem at home you are up a tree. Funny I thought we were supposed to travel the country in our RV’s.
The new generation of RV owners (Under 60 Yrs young) won’t put up with the service and purchasing experience us old guys have put up with for years.
Regarding volume pricing most every other industry follows that business plan and is a reward for high sales and good service.
Start thinking CUSTOMER value.Todays buyers are not the same as days begone. Think Sams Club and Costco and E-bay.
October 29th, 2008 at 4:52 pm
Monaco does this [sort of] with the “Franchise For The Future” program. They pay a dealer - presumably the one closest to an elegible customer - $1,000.00 to do the first one year service. It’s certainly an incentive to bring a unit into the service dept regardless of where the unit was purchased. It seems to work.
On the fraight subject - the unit still has to be transported after the sale is consumated. If a customer from Florida buys a unit from a dealer in Oregon, he has to get to Oregon to get the thing and unless he hitch-hikes - it’ll cost him. Then he has to bring it home and although it is downhill from Oregon to Florida, he will still be required to purchase fuel. This simply needs to be pointed out to prospective customers.
October 29th, 2008 at 3:39 pm
Disclaimer- I don’t work for a dealer, so I have not had to deal with the OEM warranty labrynth, but I would think that the manufacturer actually paying a fair rate, and paying in a reasonable amount of time would go a long way towards dealers being willing to service “foreign” customers. Reimbursements of pennies on the dollar, 90 or more days down the road provide small incentive.
October 29th, 2008 at 3:16 pm
Manufacturers are causing this problem and until they decide to fix it it’s not going to go away. The large dealers always think they deserve a better price than the little guy’s and the manufacturer always caves in.
As far as the customer service, this economy will fix that real fast, as past history tells us the dealers with the best customer service thrive best in tough time’s