Professor Peter
Cooke asks whether leasing companies are prepared to give
clients what they need – not just what they want
The economy is in a mess. Credit is scarce. New tax rules
threaten goodness knows what changes in business practice. Parking
tickets are to carry a supplement for victims of crime. The prime
minister wants to solve the world’s problems – but not the economy.
The planet is to be allowed to boil because the US and China both
want to rule the world… alone.
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Is now the time the leasing and vehicle finance
industry should be looking at itself, its clients and its prospects
and asking a simple question: Are we providing our clients with
what they really need?
I have chosen my word carefully – “need”, not “want”.
New tax and disclosure rules – increased
transparency to the unenlightened like me – could force leasing
companies to reveal some of their innermost secrets. One cynic
suggested that it is like taking away the maiden’s bath towel –
it’s pure voyeurism. We are told there are reasons for new rules –
to expose a tiny minority of rogue businesses, to make
inter-business comparisons more transparent, and to make takeovers
easier, some would claim.
Realistically, however, is business only about
cutting costs to the bone to be the cheapest and to maximise
profit, or is it about providing a best value-for-money service to
our clients?
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By GlobalDataWhich brings me back to the original proposition:
the industry is in a state of flux, perhaps revolution. Is now the
time we should be asking ourselves and our clients to think the
unthinkable and review what we provide for their monthly fees – and
ask if it is what they actually need? I do not just mean ‘answering
the phone by the third ring’ or ‘always saying we can help’ – I
mean thinking strategically.
Long-term plans
I have been associated professionally
with the fleet industry for more than four decades.
During that time the principal changes have
virtually all been technological rather than conceptual. Contract
periods and mileages have extended, the range of services offered
has increased and sales consultants seem much younger. However, the
contract hire service being promoted has essentially stayed the
same: provision of a vehicle with a greater or lesser level of
services and service support for a monthly fee, with one eye on the
tax situation and the other on service monitoring.
On the other hand, client business structures have
changed – often radically. Yes, we too have moved to sell
value-added support services, even finance to support our products
and services – but they have also developed their modus
operandi.
They have changed patterns of distribution and
outsourced some activities. Their staff roles have changed:
organisationally, in terms of customer contact; task allocation;
base location; the means they use to stay in touch and support
their clients – all have evolved.
The tax situation as it impacts on us, client
organisations and their employees has changed significantly as well
– and will continue to change, measuring different criteria as the
country moves to a lower carbon economy.
Have we, as an industry, moved forward sufficiently
with the products and services our clients need?
Quite simply, is now the time for the
forward-thinking leasing company to sit down with its clients and
ask an apparently simple but profound question, “What do you need
from us?”
The answer one frequently receives answers a
different question – “what do you want from us?” with the answer to
this easier question as often as not, in effect, “more of the same
at a lower price.”
The business mobility
vision
To return to the original question of
what customers need, the answer might be a little more challenging
as we refine the question to: “What products and services do you
need to become more effective and efficient personal business
mobility-wise?”
Flexibility and developing needs are almost
anathema; they could suggest the ability to turn on and off the
number of vehicles being provided to a client, whether at short
notice or given due warning.
Developing needs could mean buying into the
clients’ ups and downs and strategic developments.
But is it? Are we offering a single set menu when
in reality the client needs choice of short- and longer-term
services? This could be a case where offering a more flexible,
on-off service but within an ongoing contract framework could
cement client relations, protect our business, help our clients –
and our total profitability.
The strategic expectations of business are
changing, and so are our clients. Perhaps a new generic need is
emerging, for less of the same, but rather for more flexibility
with a broader product.
The message, one might suggest, is that future
‘true need’ will be a more flexible service whereby personal
business mobility services can be turned on and off. One could
argue the conventional leasing industry does not have the
flexibility to do that; the service it offers was designed in the
days of continuing, steady employment rather than the emerging,
less stable model of co-operation and project support.
Yes, there will still be a proportion of core,
long-term employees with defined contract hire requirements.
However, a significant, and growing part of the personal business
mobility need may, in future, to be economic, be required
short-term rather than as part of a longer-term commitment –
currently that is not the forte of leasing companies.
The missing phrase, the elephant in the room, is
daily rental. We have a parallel industry to leasing which operates
at the short-term end of the personal mobility industry which,
while it has a close acquaintance with leasing, rarely operates so
that the two provide the client with a seamless service, to fulfil
their real needs.
To rephrase my original question once again, might
one need to give the reluctant client a gentle push with a more
focused question: “Does the client need a flexible personal
mobility service?”
An integrated client offering of conventional
contract hire for a proportion of the fleet, plus a segment which
may be shorter term leasing – for a few months, say – and the daily
rental service as an integral part of the mix may well be the way
ahead.
A true personal business mobility provision package
may well be what the client actually wants, although they may well
feel they do not need it because it could take a fair degree of
re-organisation and management.
But therein lies the potential competitive
advantage. The leasing company that can turn itself into the
personal mobility provision company, or even the personal business
communication company, may be in a strong position
competitively.
From the leasing company’s viewpoint, such a
radical repositioning is more conceptual, and requires a new
mindset plus a little hot technology and a new contract with
clients and prospects. It may also need a new framework within the
leasing organisation in that the real service under offer is a
mixed short- and longer-term one.
From a ‘business wants’ to a ‘business
needs’ model
A ‘business needs’ model as distinct from
a ‘business wants’ model could offer the leasing company a real
competitive advantage – and profit opportunity. What might be
involved in creating such a creature?
Realistically, the requirements of a ‘business
needs’ personal business mobility package can be summarised as in
the box, below left. All of those elements, except perhaps an
overarching contract, already exist.
The challenge is changing client and provider
mindsets to think ‘flexible needs’ not ‘ongoing wants’.
Such a needs-based personal business mobility
system could be provided by a leasing company which also offered
its own daily rental branded service, although that may be more
effectively offered through local daily rental capacity, whether
provided by a small local player or a national provider.
The key issue would be the seamless provision for
the client – their ability to monitor and book rental units at will
within the overall budget.
Some initial conclusions
The current rapidly changing economic,
regulatory and business climate may well be just the environment
for forward-thinking leasing companies to sit down with their
forward thinking clients and ask that simple question: “What are
your organisation’s personal business mobility needs in the
changing environment?”
The answer may be surprising – but providing that
integrated service programme could be the key to a stable, and
profitable, future.
Personal business mobility needs
model*
• Flexible provision of ongoing contract hire
vehicles
• Provision of short-medium term hire
• Integrated booking system for short term vehicle
provision
• Ongoing umbrella contract
• Flexible range of vehicles for hire
• Integrated reporting and accounting system
• Client monitoring/management system
Changing strategic business
requirements*
• Finance and capital conditions have changed;
regulation will get tighter and businesses may become more
volatile.
• Public trust in business and markets has been
damaged. This may impact on ‘perks’ – even if they are necessary
for the job.
• Technology is changing, which may mean businesses
are growing faster but will change more quickly than in the
past.
• Workforces will be restricted to focus on value
added, and this will mean greater flexibility.
• Governance will become more important – it cannot
be outsourced, but audit trails and transparency will be
important.
• Organisation and location will move from
transactional to collaborative structures – again a call for
greater flexibility.
*For illustrative purposes
only
Professor Peter NC Cooke, KPMG Professor of
Automotive Management, University of Buckingham
