Strength in numbers

23 April 2008

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. It is this strategic aspect that we will consider in the concluding part of the article next month.

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:

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