Radio Broadcast (May 1929-Apr 1930)

RADIO BROADCAST In addition to those dealers who have not discovered the true cost of providing good service there is another class, probably the largest, who have discovered that good service costs a lot of money, but who are of the opinion that their customers will not pay for good service and that free service must be given in order to satisfy them. This type of dealer usually makes one of two mistakes, both of which are equally disastrous. One is giving a great deal of free service in an attempt to keep customer good will and charging this expense to sales, at the same time trying to keep the cost of the service as low as possible by hiring inex X pensive servicemen. The other course which is often followed by the dealer who is afraid to charge an honest rate for good service is to perform only the very minimum of free service which is necessary during the guarantee period and attempting to reduce the cost by hiring inexperienced high school boys for the purpose. The fact that every dealer must learn in order to be successful is that the public is willing to pay for good service at a rate which will permit the dealer to make a profit, but when they pay a high price for service they demand the best, i.e., the customer must be more than satisfied. However, before discussing the way in which to make a service department pay, the mistakes made by the two types of dealers described above will be considered. In the first place it has been proved again and again that it is not possible to reduce the cost of service by hiring inexpensive, inexperienced men; more competent men earn their higher wages by doing the job well the first time and reducing repeat calls to a minimum. Secondly, the dealer who gives a great deal of free service increases his overhead to such an extent that it becomes nearly as great, and in some cases greater, than the gross profit on a sale, so that the net profit either shrinks to very small proportions or disappears entirely. On the other hand, the dealer who performs only the minimum service necessary during and after the free guarantee period experiences a large loss of customer good will with the result that the business does not grow or the cost of getting the large number of replacement customers runs the overhead up to a prohibitive degree. Making Service an Asset The ways in which service can be made a very real asset, from all standpoints, to every dealer, may be grouped under three general headings. First, the rendering of good service. Since we have been harping on this particular subject in What Does Service Labor Cost? (Average per man of eight men over period of two years; Pay— $42.10 per week X 52 (weeks) Insurance — Workmen's Compensation, Public Liability, Automobile Contingent Liability, and Fidelity Bond Total Cost, per year: Number of days in year Number of days of absence — Sundays and Holidays, vacations, sickness, Saturdays in July and August, and miscellaneous Total working days; Total working hours — 281 (days) X 8 (hours) Labor Cost, per working hour— 2274.68 (dollars) divided by 2248 (hours) Charge to customer for labor, per hour Inefficiency of labor — time lost out of each working hour because of wide fluctuation of service work, and other causes, 11 per cent, of $2.50 Maximum charge against customer for working hour "Free calls," and no-charge return calls made for all reasons, 24 per cent, of $2,225 Actual income from labor, per working hour Cost of labor, per working hour Gross Margin on labor Gross Margin percentage $2189.20 per year 85.48 V jf^^j -if " S Radio Broadcast for the past eight months, this phase should be given some well-earned rest, and we shall simply review the subject by mentioning a few of the high spots. Good service requires high-class personnel, both outside and inside. That means the employing of only grade A servicemen, as rated by some members of the F.R.T.A. and by the Radio Service Managers Association in New York, except that lower grade men may be used successfully for installing receivers under proper supervision. It requires a contented personnel, deeply imbued with personal interest in success of the primary objective of satisfying the customers of the organization. It requires promptness in rendering service, the best outside and inside equipment available, complete and carefully kept records, and intelligent experienced management. Secondly, the cost of giving such service must be ti accurately and constantly known. We shall discuss that anon. Thirdly, when per year good service has been developed, and its cost has " " been definitely determined, " « then free service must be rigorously limited to ninety days, or less; customers must be made to understand the service guarantee thoroughly before they purchase the set, all service performed after the free period must be charged for at a rate which is a mark-up of not less than 150 per cent, of the cost, or in other words, two and one-half times the cost, and all accessories and parts sold on service calls must be sold at ^ I list prices. All of that sounds ~\ rather idealistic and not ^ ' i ^ very practical, doesn't it? ■*C / > ' every bit of it is prac *"* * tical, and can be put into practice by every single dealer in the United States who is not yet making the most of his service possibilities. The proof of the goodness of a pudding is in the eating of it. The proof of the practical value of the three essentials of service outlined above is the fact that they are all a part of the policy of the most successful radio dealers in the country, and the additional fact that no dealers in the country who have disregarded those three fundamentals of good business — which were learned by other industries before radio broadcasting existed — have been able to make a lasting success! Cost Accounting There are a great many different items which enter into the cost of performing service. If all the expenses relating to service are not kept separate from sales and other expense accounts then no way exists of ascertaining accurately the cost (Concluded on page 60) 2274.68 365 84 281 2248 $1.01 2.50 0.275 2.225 0.535 1.690 1.01 0.68 40.2% 4/ • NOVEMBER 1 9 2 9 • • 19