During a presentation on "Creating Marketing Alliances," David H. Eisenberg, president and CEO of Chief Auto Parts, pointed out that retailers and manufacturers will benefit from sales productivity, inventory level and distribution expenses if they maintain solid relationships with each other.

Eisenberg was the keynote speaker at Aftermarket Business' Second Annual "Partnering for Profits" Symposium, held May 12 in Chicago. The seminar focused on power-marketing and merchandising strategies for aftermarket marketing, merchandising, sales, advertising and promotion executives.

Eisenberg suggested that the aftermarket is behind when it comes to alliances, which became strong in other industries in the late '80s and early '90s. During the early '80s, Eisenberg said "productivity" was the buzzword being used.

"Then we hit the wall again," noted Eisenberg. "Consumers wanted more value for less." Then came the late Sam Walton, Eisenberg pointed out. The former CEO of WalMart had the idea to form partnerships with vendors. Eisenberg outlined three objectives that retailers and manufacturers need to practice to increase sales productivity: optimize product mix; improve promotion effectiveness; and design effective pricing strategy.

David Eisenberg, CEO of Chief Auto Parts, stressed solid relationships between retailers and manufacturers.

Such objectives will lead to increased sales revenue and gross margin, increased effectiveness of promotions and accuracy of promotion forecasting, among other things, Eisenberg pointed out.

"How do we get a bigger bang for the buck," he asked. "You have to test different mediums. The one-size-fits-all-promotion approach doesn't work. You need to get down to the target market. Manufacturer and retailer have to work together to do that. The fallout is increased profitability."

Eisenberg added that planograms play an important part in the procedure.

"I think we need to make great strides in the planogram mix to give the customers what they want to buy," he said. "[Planogramming] is the most fundamental thing you need to do. It's like having a cash register in your store."

Eisenberg outlined two objectives needed to better inventory levels, including optimizing supplier's inventory investment, and optimizing retailer's store and distribution center inventory.

These objectives will lead to smoother production levels, effective inventory controls, improved inventory turns and prevent the occurrence of shipping errors, he said.

Also, Eisenberg said decreased freight costs and the ability to reduce excess returns to the supplier are important objectives in maintaining distribution expenses. Such thinking will lead to several benefits, including increased cash flow and providing the opportunity to sell product rather than return it to the supplier.

Eisenberg noted that friendship and trust need to play roles in alliances. Then, goals need to be defined with a mutual cooperation.

"What do you want to accomplish? It's more than just driving sales," Eisenberg said. "You want to take the cost out of the business."

Overall, Eisenberg admitted the process isn't easy.

"But it's well worth the time, energy and effort," he added.

Music to the Aftermarket's Ears?

Stephen J. Alexander, president of Automotive In-Store Marketing, Pittsburgh, spoke on "In-Store Marketing...The Last Marketing Frontier." Alexander compared a retail store's environment to a theatrical forum: the store is the stage; the manager and store's employees comprise the crew; and the products are the actors.

An aspect of in-store marketing is place-based media, Alexander pointed out. Place-based media is when someone pays money to get advertising placed in a store.

"If used effectively, we can create the impetus or motivational factors that will drive powerful purchasing-decision influence," Alexander said. "Place-based media is a place where you can get very close to a consumer. It's a place that represents the epitome of narrow-cast advertising."

He added that place-based media has assumed an ever-increasing role in retail today. In his presentation, he said there are a variety of in-store place-based medium programs. He focused on one aspect of the place-based media world -- business music.

Alexander claimed that 65 percent of aftermarket consumers make unplanned impulse purchases. In tying in place-based media, he said that four of the primary elements of success in a retail-sales environment can be influenced by business music, including the improvement of customer mood, length of time spent in the store by a customer, the perception of customer service rises, and the amount of money spent per visit increases.

One system of business music used in the retail arena is AutoLink, owned by Muzak® Corp. Alexander said the system is in more than 20,000 retail locations in the United States, but none of them automotive retailers. AutoLink consists of satellite-delivered music and audio ads. A store's sound system repeats them every half hour. Each ad lasts 15 seconds.

"We've earned the reputation for being 10 to 15 years behind the curve," Alexander said, "But the aftermarket is not asleep at the switch."

Alexander said one automotive retailer tested the AutoLink system and came away with positive results and increases in sales for the products tested.

"The objective in the automotive aftermarket ultimately is to build a national network of satellite-receiving stores so that they comprise a network," Alexander said.

Frank McGonagle, president of Brenton Marketing Services, Swansea, MA, added his input on electronic media in a television format. McGonagle is the creator of The Shadetree Mechanic, a new weekly television show designed to reach DIYers.

McGonagle recalled the first time he watched television. There were only three channels.

"What's going on today? Most of you have cable and most of you have between 30 and 60 channels coming into your living room," he said.

McGonagle said television is in the midst of new technology that can help those in the aftermarket. McGonagle showed a video that detailed the use of fiber-optic cable, which will lead to changes in business, schools and homes.

He pointed out there are millions of consumers who want to learn more about vehicle care. Through new technology in television, they will be able to do so. McGonagle added that The Shadetree Mechanic is the start of something big to come in the near future.

Category Management

Lori Buss, director of marketing/sales services for Nielsen Software & Systems, Irving, TX, discussed the importance of proper category management. Buss pointed out that the Changing face of retail today requires key marketers to think local and act global."

The object of category management, Buss pointed out, is to "manage product categories as business units and customize them on a store-by-store basis to satisfy customer needs."

Buss reviewed five steps of the category management process: reviewing the category; targeting consumers; planning merchandise; implementing strategy; and evaluating results.

"Before implementing category management, retailers and manufacturers have to understand what the image of their organizations is and develop marketing strategies in support of them," Buss said.

She pointed out that category management is a blend of information, technology and software application. Category management challenges retailers and manufacturers to redesign their organization so they can effectively form mutual beneficial strategies and share the market intelligence they have in order to succeed.

Buss said the key things to consider are "what items to carry, in what quantity, at what prices, in what stores, with what shelf space and with what promotions and what locations in store."

"Managing those categories as separate business units gives you the ability to differentiate yourself while still enabling you to execute against that common corporate strategy," Buss said, adding that those practicing category management also have to develop market-share goals.

Keeping with the theme of the seminar, Buss pointed out that retailers and manufacturers cannot accomplish successful category management programs by themselves. They have to work together.

It's a pretty big job, and if [a retailer] doesn't share with a manufacturer exactly what it expects and where it wants to be and let the manufacturer share its knowledge about the category and the trends that are coming, it will be a much more difficult challenge to achieve."

Supermarket Trends

Daniel J. Raftery, vice president of Willard Bishop Consulting, Barrington, IL, gave a presentation on "EDLP: A Close Look at Supermarket Trends," which studied trends in supermarket everyday low-price (EDLP) practices and how the concept is changing the way products "go to market," especially the aftermarket.

Raftery talked about how manufacturers are working with retailers to develop an everyday level cost (EDLC) response that provides a cost-reduction solution for multiple segments of the industry. He pointed out that EDLP has to do with retailers, and EDLC has to do with manufacturers.

He pointed out that there are concerns dealing with EDLC. He said manufacturer promotional monies have become an important part of many companies' "inside margin" and that there are fears about promotional monies diminishing or going away in significant amounts.

"If EDLP comes to the auto parts industry, you can expect to have the same kind of thing," Raftery said.

But there is good news, he pointed out.

"You won't see all manufacturers rushing to the concept of everyday level cost," Raftery added. "First off, some products need to have promotion in order for them to sell. Some manufacturers will be able to use the EDLC and some won't. The ones that do will also have to continue to use promotion."

Events Marketing

Michael S. Hedge, president of the Hedge & Company, Inc., Spouthfield, MI, focused on "Sponsorship and Events Marketing." Hedge pointed out that the special events industry has enjoyed explosive growth in the last decade, increasing from nearly $850 million in sponsorship in 1985 to more than $3.7 billion 1993.

"We're entering an era that is going to be exciting," Hedge said.

There are several reasons marketers get involved with sporting events, especially motorsports for those in the aftermarket, Hedge said. The reasons include: increased awareness; identification with a particular lifestyle; to differentiate product from competitors; to demonstrate commitment to community and ethnic groups; to entertain key clients; merchandising opportunities; to shape or reinforce the public's perception of a product's attributes; and to impact the bottom line.

For those considering events marketing, Hedge said certain questions have to be asked, such as:

• What is the objective?
• Does the event fit?
• How will it benefit customers, products and image?
• Is there enough time?
• Is the expertise available internally to do the job right?
• How will the program be evaluated when its done?

Who's Buying and Why?

Tom Berger, manager of Direct Communications, Inc., Des Moines, IA, pointed out that the new way of conducting market research lets retailers know who's buying their products and why in his presentation on "Market Intelligence."

"Market Intelligence enables the aftermarket to `know the consumer' and develop a database of consumers that use your goods and services," Berger said.

He also said there are six things retailers and manufacturers need to know when it comes to market research:

• They must know their customers.
• They must know what's on their customers' minds.
• They must find out where their customers live.
• They must find out when their customers purchase goods. (During what times of the year?)
• They must find out why they buy. (What is their purchasing behavior?)
• They must find out how to reach them and concentrate efforts from a media standpoint.
• They must find out how to reach them and concentrate efforts from a media standpoint.

"Our marketing efforts are going to be much more effective if they are consumer driven as opposed to being profit driven," Berger told attendees.

How should this information be acquired? Berger suggested five ideas, including telephone solicitations, surveys, coupon offers, giveaways and contests and questionnaires.

Berger pointed out that there are seven deadly sins of database marketing:

• ignorance;
• inadequate planning;
• insufficient data;
• extraneous information;
• lack of integration;
• limited application; and
• failure to communicate.

COPYRIGHT NOTICE:"Reprinted with permission from Aftermarket Business, July, 1993, page 28. Copyright by Advanstar Communications, Inc. Advanstar Communications, Inc. retains all rights to this material." To subscribe to Aftermarket Business, call 1-218-723-9477 or email fulfill@superfill.com.