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We’ve spoiled ’em, and they’re still not happy

Contrary to the plaintive cries of several suppliers and distributors, product from China is not our biggest market problem. Spoiled customers are … and we can’t give stuff away fast enough

There is an interesting dynamic developing in the North American economy, both at the consumer level and in business-to-business marketing. Chinese goods have been flooding most markets. And our customers have become terminally spoiled. Note, however, that these are two entirely different stories.

Bill Wade, Wade&Partners

There really are no unserved markets left in the NAFTA sphere, which covers the most powerful economic bloc in the history of man. Sure, we have challenges of wealth distribution and competiveness with other economic forces (most notably South Asia and South America). But most of the current economic imbalance is temporary.

For instance, China will have to address its major pollution problems, not to please some artificial construct like the Kyoto Accord, but because they are literally killing themselves.

The New York Times did a chilling profile on a river system in northeast China that now provides dangerously polluted (some actually poisonous) water to more than 150 million citizens — roughly the equivalent of poisoning the entire Ohio/Mississippi/Missouri river system. It will be tough to continue their violent commercial expansion on this foundation.

“In the automotive aftermarket, effective people are the only source of customer satisfaction innovation, most of which originates at the local branch level.”

Our “developed” country competitors are all paying a manufacturing wage in the $20-$30 range. China will not be able to persist in the $1 range if its infrastructure (and air/water) can’t support its workforce.

Pollution is far from China’s only concern. Their domestic and international banking infrastructure didn’t grow smoothly from communist to capitalist overnight.

So the Chinese are getting a bad rap! Contrary to the plaintive cries of several suppliers and distributors, product from China is not our biggest market problem. Spoiled customers are.

As is the case in other industries, we can’t give stuff away fast enough. Consumers and companies have never had so many real bargains to choose from. Fly coast to coast for $250 … get a marvelous computer setup for $499 … buy a new design wheel seal for less than it cost 15 years ago. And get nearly any service or product where and when you want it — 24x7x365 — no extra charge.

An outfit called the American Customer Satisfaction Index (CSI) has measured the relationship between suppliers and their customers since 1994. Funny thing, products and services that are so good and cheap have failed to positively improve this satisfaction index.

On a scale of 100, overall customer satisfaction topped out at 74.8. Today’s score is 74.4. Want to guess what the scores would look like in our biz with better products, better technology, better convenience? So why the slump in scores?

It’s the constantly rising customer expectations bar, sometimes referred to as the FedEx Paradox. When FedEx started the overnight delivery business, it was a flat out pay-any-price miracle. Today, customers want their (very little) money back if the FedEx guy is five minutes late.

Too many marketers continue to confuse great product or service with delighting customers. Customers have come to expect great quality and bottomless pricing. While both are always mentioned in “why do you buy” surveys, neither factor is a necessary indicator of real satisfaction.

In the automotive aftermarket, effective people are the only source of customer satisfaction innovation, most of which originates at the local branch level.

The reason Amazon can maintain a CSI of 86+ is that it institutionalizes its personal customer relationships from the individual customer to whole classes of customer — and fast. It innovates fearlessly and quickly.

While Walmart is always cheap, its customer satisfaction index rating is only 72. Even Sam Walton’s brainchild can’t find a way to cut the price fast enough to suit today’s relationship-starved consumer. I wonder if Costco’s (csi 83) superior growth isn’t fueled by the fact that their employee turnover is 67 percent less than Walmart’s, thereby providing a much stronger relationship and competent service base.

In the end, distributors are not simply selling product. They are selling ongoing, living relationships with their people. Effective people are the only point of differentiation left in the parts market.

Isn’t it then the most logical choice for increased investment?

Every dollar spent on employee competence creates effectiveness that is nearly impossible for a competitor to duplicate. This is the very definition of sustainable competitive advantage.

And it has nothing to do with products from China.


Bill Wade started Wade&Partners in 2003 as a consultant specializing in worldwide vehicle parts aftermarket and industrial distribution. Previously, he was CEO of Durakon, FAG/INA Bearings, CR Services/SKF. Wade states that he lives in a barn and has taught the finer points of shark fishing (and cooking) to three children and eight grandchildren. He can be reached at bill.wade@wade-partners.com

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