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Last week I found myself at the centre of an interesting juxtaposition on this site's home page.
Business Car ran an interview in which I said that fleets were again starting to factor service quality into their buying decisions, rather than purely looking at price.
However, my viewpoint appeared to be flatly contradicted by the results of BC's online poll last week, which asked readers to state the most important factor when choosing a leasing company.
Price got twice as many votes as service.
Well, I am always ready to stand up and be counted in the court of public opinion. And, in truth, I would be very surprised if we ever reach the point where the average fleet doesn't have price at the top of its checklist when looking for a vehicle supplier. Afterall, price is a hygiene factor.
The fact is, the vast majority of UK fleets have fewer than 25 vehicles. It's not that small fleets don't care about service quality. They do, of course. But when you only turn over half a dozen cars per year, you stand to gain more from chasing cheaper prices than you risk losing through suffering the costs of less-than-perfect service.
The costs of poor service are many and various with, I'd guess, inaccurate, inefficient and incomplete billing, and delays and mistakes in ordering cars at the top of most customers' lists.
Another service-related cost that easily goes unacknowledged is restricted product choice. The further up the fleet size ladder you are, the greater the number and sophistication of 'additional' services (such as daily rental, maintenance, accident and risk management and mileage capture) you need. There are significant financial and administrative benefits to be had if you can use a single supplier to provide integrated delivery and billing for these functions.
The quality of account management and advice also becomes more critical as fleet sizes rise. Shifts in taxation, fuel costs or working patterns (falling annual mileages, for instance) can quickly render current funding strategies and vehicle policies obsolete. The cost of persisting with inefficient fleet policies is enormous, but an alert, proactive and motivated funding partner will step in to prevent problems arising in the first place.
At the heart of this issue is the fact that price and cost are two separate things. Low prices do not automatically guarantee low costs. In fact, relentlessly driving suppliers to scrape the barrel on margins often does more harm than good. I like the joke that the Dark Ages were simply the Roman Empire - but at a really competitive price.
To paraphrase a well-known military saying, punitive pricing precludes productive proactive partnerships. In today's increasingly complex fleet operating environment, collaboration is the most rewarding route to real long term benefits.
The phrase that best encapsulates the difference between price and cost is 'good value'. To some extent, competitive pricing is a given in today's fleet market: what matters is what you get for your money. Is it a rock-bottom offering for a rock-bottom price? Or a well-rounded proposition that delivers a good deal more, even though it might carry a slightly higher price tag?
Judging by the fact that more than 25% of voters in the Business Car reader survey plumped for 'service' as the key criteria for choosing a leasing company, a respectable proportion of companies do feel confident that they can strike that balance.
I'll buy that.
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