Strength in numbers: marketing techniques of US rental giants

19 June 2008

Ellen Steck, president of Chicago Pneumatic Compressors and Pneumatic in North America.

Ellen Steck, president of Chicago Pneumatic Compressors and Pneumatic in North America.

Three of the biggest US rental companies – United Rentals, RSC and Volvo Rents - are using sophisticated customer benchmarking techniques to measure how they are performing. Lucy M Peterson reports.

Nick Mavrick is a man on a mission for Volvo Rents. The franchise arm of Volvo Construction Equipment North America has grown its customer base by a hefty 50% per annum for the past five years, according to company reports, but Mr Mavrick, vice president of global marketing for Volvo Rents, is focused on the numbers behind the numbers.

“We know that 16% of our customers do 89% of our business at Volvo Rents, and those 16% transact with us more than 10 times a year,” he says. “When we profiled our customer base very early on, we found that to them, great customer service meant being treated individually. The rental business is really an outsource business, so smaller companies who are constrained for capital need lots of flexibility. Every situation is different.”

Mr Mavrick believes that the emergence of the core Volvo Rents customer can be traced in part to rental industry consolidation. “A decade ago you had entrepreneur serving entrepreneur in this business. Then terrific rental operations were bought up by public companies, and while they retained many good customers, the change in business dynamic created some defections. Our research identified a market opportunity to tailor our operations to the customer who values the kind of flexibility typical of a privately owned business.

“We’ve done the homework and we know a lot about our customer base. On average, they have between 25 and 99 employees; 62% of them are in construction. And what they really appreciate is dealing with other local owners like themselves. We saw an opening in the market to be a premium service provider to this profile, and that’s where we allocate our marketing budget. Today we spend over 80% of our marketing dollars on 16% to 20% of our base, and we do that to create the right kind of experience for them.”

That experience, says Mr Mavrick, hinges on a pervasive “one-on-one-ship” manifested by everything from a midnight delivery run to allowing an employee unscheduled time off. It’s an approach that seems to dovetail with independent ownership, but what about the large public companies with vast, company-owned networks? North America’s two largest industry players, United Rentals and RSC Equipment Rentals, are data-centric in their own right – although interestingly, all three companies use very different benchmarking techniques to tap into their customers.

Linking data to dollars

For United Rentals, “our goal is to make customer satisfaction as quantifiable as possible,” says Elise Arsenault, vice president of marketing for the market leader. “In 2004 we conducted baseline research using random surveying and found that only 30% of our customers defined themselves as price shoppers on a regular basis. They were much more motivated by service than price; within service their responses pointed to certain attributes: dependability, consistency and confidence in the experience.

“The findings also confirmed our empirical observation that roughly a third of our customer base was giving us 75% or more of their business,” continues Ms Arsenault. “We saw an opportunity to pursue a greater share of wallet from customers who used us as a secondary or tertiary supplier.”

In 2005 United Rentals intensified its research with a master study aimed at leveraging the customer experience. The firm that carried out the study, brand strategist Lippincott Mercer, found that United Rentals’ share of wallet had climbed to more than 50% in the intervening period between the two studies – approximately twice that of its competitors on average. Nevertheless, “we knew that we had a significant opportunity to increase share,” says Ms Arsenault. “The study identified 18 ‘touchpoints’ in the customer experience. From there, we focused on six that our customers felt were the most important.”

While the company declines to identify the specifics of its strategy, “it is a matrix between brand perception, experience touchpoints and rental share of wallet,” explains Ms Arsenault. “Our research was very successful in drilling into each touchpoint to spot the difference in perceptions – for example, between a National Account and a local contractor at the same service point in the transaction. We’re a big company with a lot of diversity in our customer base. It’s important for us to look at the customer experience from every angle.”

While United Rentals benchmarks the nuances, and Volvo Rents pursues its profiled customers, RSC Equipment Rental has taken its research in a completely different direction: the Net Promoter Score (NPS). Ellen Steck, vice president of marketing for RSC, recalls the first time she read about the concept famously pioneered by Fred Reichheld. “He took the position that most surveys are simply too complex, and he posed the question, what if people asked just one question: How likely is it that your customers would refer a friend or a colleague to your company? And instantly that meant something to us.

“We had become frustrated with our measurement methods up to that point because we were constantly getting customer satisfaction results in the nines and tens on a scale of ten. Frankly, it wasn’t very meaningful. We knew there was room for improvement, but the challenge was in identifying exactly where the areas for improvement resided. This was in 2005, before the NPS concept attained high visibility in the business world. It was invigorating to be the first adopter in our industry.

“We contracted with an Arizona-based research group to make calls to our customers and ask them the ultimate question: ‘How willing would you be to refer RSC to a friend?’ If they answered a nine or ten (on a scale of ten), that meant they were promoters; a seven or eight was neutral; and if they ranked it one to six they were classified as detractors.”

The company went live with NPS research in early 2005 and the payoff was quick in coming, says Ms Steck. “Almost immediately we had a way of gauging where the customer preferences were falling. It was so much more useful to us then using averages. We then took it a step further and added a few more questions.” To keep the research fresh, RSC sends all closed contracts with a specified rental value to its third party research firm within three days of contract termination. Potential respondents are chosen using a calculated random scale that aims to complete about five surveys per branch per month.

“Our research partner tracks the responses and enters them into a user interface so that we can share the results with our branches. A branch manager can go into the system and see exactly what customers are saying about RSC in his or her market area – anonymously of course, and in aggregate,” Ms Steck explains.

She estimates that the program generates about 23000 completed surveys per year for RSC. “This survey count provides us with a statistically valid sampling at the company level, where we have a 99% confidence interval. We’ve taken net promoter scores very seriously as an organisation. It has been an extraordinary experience to gather truly actionable data. It’s helped us get away from the law of averages.”

All three companies are quick to point out that data collection and benchmarking are merely preludes to a strategy. At RSC, “our goal is reference-ability,” explains Ellen Steck, vice president of marketing. “When you hit this mark, customers become an extension of your sales force. The increases we’ve seen in our net promoter score since the program’s inception seem to have been consistent with the increases in our company’s revenue and profitability.” RSC’s NPS score is currently in the 60s, Ms Steck says, “while the average US company, by [NPS pioneer] Fred Reichheld’s estimation, has an NPS of around 15%.”

For United Rentals, the focus is on benchmarking internal progress at each of the company’s key customer touchpoints, as identified by its research. “We measure the efficiency of several touchpoints internally on a regular basis,” says Elise Arsenault, UR’s vice president of marketing. “We know that efficiency equals satisfaction, and satisfaction instills confidence in our brand. For example, we have metrics related to the inside sales rep function – not just productivity measures, but communication competencies.

“Are they capturing all the right information up front, is it being properly keyed into the contract? Our prior research gave us very specific data about what customers consider optimal service, and a lot of it relates to the use of their time. We isolated six dimensions of the inside sales rep role and indexed them against share of wallet [the proportion of a customer’s total spending on rental that they capture]. The process has informed our hiring procedures and training programs, among other operations.

“While the data is essential, some of the ad hoc comments gleaned through research are equally as enlightening,” Ms Arsenault continues. She cites a third research study completed by the company in mid-2007. “Some of the comments expressed about rental companies in general made it clear that smaller contractors often feel underappreciated by our industry,” she says. “United Rentals has always stressed consistent delivery of our service standards to every customer, large or small – so that was a point in our favor. It goes directly to customer retention, where we do very well.”

Other initiatives implemented by United Rentals include a centralised Customer Care Center that handled more than 300000 calls last year, and planned new technologies for outside sales representatives. The company is also acting on relationship-building opportunities identified in its research.

“Our URdata online account management software has a significant upside for our customers and our company,” notes Ms Arsenault. “It’s free to customers, and people who use it really love it. Our research confirmed that we had very high satisfaction with URdata, but very low awareness: many customers didn’t realise it was available. Those that did use it showed big swings in awareness of specific functionality: for example, 89% were using URdata to track equipment online, but only 18% knew that the software offers online bill-pay. We’ve seen a 12% increase in URdata users since we began the push for greater awareness; it’s a good start.”

Manageable universe

Benchmarking has been embedded in the Volvo Rents culture as well, says Nick Mavrick, the company’s vice president of global marketing, with a unique methodology to harness it for franchisees. “We have a marketing budget that gets sliced and diced and pushed out to the stores to focus 80% of the dollars on the 20% of the market that fits our profile. It starts with the Volvo brand and translates to the customer experience. The perception of ‘Volvo’ has accrued over 200 years of brand stewardship: be nice people, care for the environment, care for the customer, create a safe and pleasant experience.”

Volvo Rents believes so strongly in the power of data that “we feel we can pick our customers before they can pick us,” says Mr Mavrick. “We structure our local marketing plans around events rather than postcard mailings or magazine ads. We’re sticking to our game plan, positioning the local owner as the hero, which means more cookouts, more free coffee, more making sure that our operations know who their best customers are, from the manager to the driver to the yard worker. We’re doing more regional customer events, taking people hunting, fishing, to NASCAR races.”

To determine whether a plan is working, Volvo Rents tracks top line growth as well as growth within the target segments of what they call their ‘loyalist customers’ – customers who reflect and appreciate the Volvo philosophy of service. While bonding may be low-tech over a barbeque grill, the company uses high-tech methods to cement the process. Franchisees are able to reward top customers via the Internet by isolating target customers within their database and merging those names with turnkey gift selections using proprietary pick-and-ship software. The company says that in North America, its revenue success rate with loyalists and future loyalists has consistently outpaced growth from its base overall.

The strategy gives equal weight to nurturing existing loyalists and mining for new customers that fit the Volvo Rents profile. “I was visiting one of our owners recently, a multi-store operation with 5,000 customers, and 171 of them generate 70% of the revenues,” says Mavrick. “You want to make sure you’re really marketing to those folks to make them feel valued. Then there are the next 107 people on the list: can we make them feel really special? Can we engender loyalty and ultimately earn more of their business?”

While Volvo Rents allocates marketing capital directly to the franchise businesses, the corporate office is effectively controlling the strategy. “We provide oversight, but our owners are given the tools to take action,” explains Mavrick. “We have a system with a terrific graphical interface, where a salesperson in the field or the store can click a few buttons and quickly identify their best customers, their next best customers, and prospects or clones who look like their best customers or their next best customers.”

The system analyzes the store’s customers on the one hand, and on the other, matches Volvo Rents’ ideal profile against a demographic database for that store’s market area. The focus is on three attributes: top line revenues, frequency of transactions and reputation. The result, says Mavrick, is a relatively narrow slice of prospects that have the ability to create high-impact revenue growth. Volvo Rents then measures the success of that impact with the same metrics used to shape the profile.

“We’ve reduced the universe down to a handful of very actionable, quantifiable customers,” says Mavrick. “We don’t want impossible relationships that we can’t sustain. We’re going after a slice of the market that is profitable for both sides in the transaction. Our customers share the same values with us, the same approach to business, the same emphasis on reputation. It may not show up on a spreadsheet exactly that way, but it’s there. The answers are always in the data.”

=== THE AUTHOR ===

The author: Lucy Peterson is president and owner of Balboni Associates, Inc. and its press distribution division, IndustryWire. The company is a longstanding US supplier of market communication and consultancy services to rental and related industries. E-mail: lpeterson@balboniassociates.com

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