A potpourri – RER, RPN, RM and some important lessons from Reading, Pa.
BY BRIAN ALM, EDITOR
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It occurred to me once again, at the
A.R.A. show in February, how fortunate this industry is
to have three major magazines serve it exclusively and
well, but taking quite different approaches. Rental
Equipment Register has followed the industry with a keen
news sense and intelligent commentaries for 45 years.
Rental Product News brings a full showcase of neatly
digested product information to your desk each month.
And Rental Management, the business-management magazine
of the industry and the official publication of the
American Rental Association, focuses on a broad range of
subjects and issues in order to help rental businesses
worldwide manage for success.
We are all competitors, yet we are
all colleagues: we differ in our approaches, but we are
of one mind regarding the dignity of what we do, because
we are dedicated to the rental industry and to the
people in it. Our readers may see only the competition.
But this competition is what guarantees you three
professional, high-quality magazines, each with a unique
voice and a specific contribution to this industry.
“Dan Vokorokos, our sales manager,
came from the hotel business. They rent beds, we rent
equipment — it’s really parallel,” says Nancy
Marshall, owner of Reading Rentals in Reading, Pa., who’s
the subject of this month’s cover story. “Really,
very parallel industries, if you conceive of it
properly.”
Hotel rooms and coring drills? Think
about it. As we have said many times before, nobody
really wants to rent a drill — what the customer wants
is a hole. Hotels are renting comfort — clean, cozy,
safe shelter. You are renting the end of a problem or
the beginning of an opportunity. You are renting the
result somebody hoped for and was glad to find, just as
you are glad to find a VACANCY sign and a clean, flat
bed with crisp, cool sheets after driving for 14 hours
and finding yourself in Eagle Butte, S.D., too exhausted
to go on.
The content of these industries is
different, but the form is the same — if you conceive
of it properly. Solving somebody’s problem. Making
life better for somebody. The differences in content can
bring some new thought and strength into the business,
like making a stronger alloy by putting carbon in the
steel. One way to gain that advantage is to find good
people from other industries who can add strength to the
alloy.
Shopping outside the rental industry
may help alleviate the problem of finding good people,
too.
Another lesson from the Nancy
Marshall story. A customer years ago got tired of having
people borrow his tools, so he put up a sign: “The guy
that rents tools is at Reading Rentals,” and posted
the address. It brought in so much business that Ron
Marshall, Nancy’s late husband, had similar signs made
and put them up all over Reading. Some are still there.
What does this tell us? One customer was happy with
Reading Rentals and unhappy with nuisance, and that one
customer brought in others. The business grew
accordingly. But what if that one customer had been
unhappy with Reading Rentals?
To repeat last month’s editorial,
people come to you the first time for what you have.
They come back the second time because of how they were
treated. Make a difference to each one who comes in,
Nancy Marshall believes.
She is not a seasoned rental veteran
with an MBA; she’s an elementary schoolteacher and
housewife who stepped in and learned from scratch when
her husband died and left the business in her hands. She
is inventing as she goes, learning from experience what
is important and correcting course until it works. This
is not the route to success for the faint of heart. This
is the route for those with native intelligence and
courage — those with the guts to try and fail and try
again. And for those who are patient enough, and wise
enough, to learn that success comes in small, determined
steps and faithful persistence.
Last month I talked about share of
customer. Now let’s move on to market share. It’s
not easy to figure out, because you don’t have access
to your competitors’ books and you don’t know the
volume of the entire market.
But you can figure out whether your
own company is gaining or losing market share: you
simply keep track of the revenues you are getting from
new accounts and see if they are going up. You may not
know what share of the entire market you have, but you
know if your new-customer revenues are going up, you are
taking business away from somebody else — market share
is increasing. The same method goes for share of
customer: if your existing-customer revenues are going
up, you are gaining share of customer. All this takes is
keeping track of new vs. existing account activity. You
can calculate it:
-
Sales to
new customers divided by net revenues is the
new-customer sales ratio; this calculation shows
gains in market share.
-
Sales to
existing customers divided by net revenues is the
existing-customer sales ratio; this shows gains in
share of customer.
Now, if your market share is going
up, you may be inclined to celebrate. But wait just a
moment before popping open the bubbly. You also need to
consider the quality of that market share. Good market
share is earned market share. You can gain market share
simply by price-cutting, but that is not the same thing.
If you try to “buy” market share with price, sooner
or later you can’t cut prices any more and either you
go belly-up or your customers find somebody who still is
willing or able to price even lower. Building market
share based on pricing is ultimately a no-win game,
because the customers who are attracted by it are apt to
be fickle. When they see a better deal, off they go. You’ve
bought only temporary attention with your low prices.
Meanwhile, your margins have eroded.
So you build loyalty — with
customer service, quality and breadth of inventory —
and if you see those new accounts increasing, and you’re
not wooing those people with low rates, and those
customers become consistent accounts, you know you’re
on the right track. Then you move them to the
existing-customer column and track them in
share-of-customer terms, and keep going after new
accounts to put in the share-of-market column. Word will
get around from those converts who are now yours —
especially if you make sure the word gets around. “Marketing”
is not just advertising; it is putting your good name on
every action you take and making sure people know it’s
all true.
Add the gains in market share and
share of customer together and you get the volume growth
of your business. That won’t tell you how your bottom
line is doing — that’s a matter of cost control as
well as revenue generation — but if the quality of
your revenue growth is good, chances are you are
attending to the other key performance factors,
too. |
