Bundling Product Support Offerings

In a time when competition is tough, it is important for the product support vendors to identify and apply different approaches that will continue to add value to the customer, protect the dealership's margin, and continue to grow their product support business.

Bundling product offerings is common in many other industries. We have seen bundling of products in the cable TV and cell phone markets. Both industries have provided the customers additional product offerings in exchange for special pricing.

It is important for the dealership to provide product support offerings in situations that will make it difficult for the competition to compete at an equal level.

An example of bundling product support offerings would be when competing with a vendor that offers only one product offering (filters, batteries, or ground engaging tools- GET, for example).
Linking special pricing to multiple products and services will make it difficult for specific competitors to compete. This approach also provides additional value to the customer, protects market share across various products, and keeps the competition at a distance.

A similar example is providing a service as part of package being quoted. For example, when quoting an undercarriage repair/replacement, including a machine inspection is a service a vendor that only sells undercarriage will find it difficult to compete. The inspection provides value to the customer, provides potential revenue to the dealership, and clearly separates the capabilities of the dealership and the single source supplier.

The typical dealership has many opportunities to provide bundled products and services. The offerings should be customized to meet the specific customer.

Managing Shop Supplies

Managing shop supplies is a critical part of expense control within a Service Department operation.

Shop supplies should be categorized into three areas:
• Supplies used in the disassembly and assembly of a component
• Supplies used in the rebuilding of a component
• Supplies used in the clean-up of the shop

Supplies used in the disassembly and assembly of a component are critical in rebuild quality of the component. The types of supplies that would fall into this category would be degreaser, paint remover, surface conditioning material such as grinding and buffing disc, and drill bits.

Supplies used in the rebuilding of a component would be considered a requirement in the actual rebuilding of the component. The types of supplies that fall into this category would be liquid gasket material, sealant, paint, and hardware.

Supplies used in the clean-up of the shop that fall into this category would be floor clean, cleaning materials used to clean the shop work benches, mops, brooms and shop towel.

The first two categories should be billed directly onto the work order to the customer. These parts should be purchased through the Parts Department that provides the opportunity for the normal parts mark up and profit margin.

Typically the Service Department will earn a smaller margin when charged as part of a shop supplies markup.

The third category should be billed as the shop supplies on the work order as part of a recovery based on a percent of the overall work order.

Very often Service Departments' apply a shop supply charge for all three categories. This method limits the opportunity for the dealership to earn normal parts margin on parts that would typically be charged as part of any rebuild. When this is done the dealership looses out two ways. First, the dealership has lost parts margin, and secondly the customer will very often critic the invoice and adjustments may be made to the work order to address the customer’s concerns.

The net impact is the dealership has lost the opportunity to recover the shop supplies that are typically used during the component rebuild. This is an unnecessary loss of revenue and profit.