The University of Toyota’s School of Retail Professional Development (SRPD) looked at several approaches when it wanted to step up its cost-recovery approach. One strategy was to create a plan that substantially increased the number of students in each of its more than 2,100 classes held annually around the country. The math was simple: More students at $295 each per class with little additional cost equaled a big gain. At the time, March 2003, SRPD was teaching or coaching nearly 25,000 staff or retail dealer “students” from the ranks of Toyota, Lexus and Scion. It came out to about 11 students per class. The goal was to increase that number to 15.
The first thing the team did, led by Brian Campana, Sales and Marketing manager, was create a plan and then travel the country making in-person presentations to Toyota’s 12 regional offices. “The regions are the gatekeepers,” Campana said. “We communicated with them the details of the program we came up with and how it was a win-win for everyone. We explained what we wanted to do, how we wanted to increase attendance and how they could benefit from it, not only with more educated dealership employees, but with rebates back to them.”
The monetary reward system was a strong incentive for the regions. But before the earnings could be counted, SRPD had to create a measurement system by region. This system kept track of all the students attending. The ultimate goal: Each region had to hit a minimum of 15 students in each class. For a sales-oriented company, it was a piece of cake—a mere four-person increase per class. With more than 2,100 classes held each year, an additional four students could add up to considerable incremental recovery—roughly $2 million. The only additional cost per student was a $30 lunch and $45 in materials.
SRPD estimated that it could expand classroom size to as many as 27 students without loss of educational quality. Beyond 27 students, quality would degrade. So, the group instituted a plan where the regions were penalized for filling the classes beyond the 27-student limit.
It was the “share the wealth” program that really made the plan work. If classes had 15 or more students, SPRD paid a reward. If there were less than 15, the regions paid SRPD. Those regions that achieved or exceeded their student enrollment goals received (and still receive) rebates, which they could do with as they pleased, including giving dealer incentives, throwing dealer recognition events or sponsoring more education.
With the contest in place, the competitive spirit kicked in among the different regions. The results were extraordinary. All SRPD had to do was communicate the results monthly. Some regions earned more than $100,000 in the first year. That got everyone’s attention. Communication throughout the program was the key to success. SRPD presented the program in a way that made sense and was easy for the regions to get behind. They saw monthly reports, which regions were doing what and how this added greatly to the program.
After tracking and rewards, the third component of the program was to create a way to allow regions to deliver small-size classes to the rural outlying markets without fear of hurting their rebate status. The answer was to average attendance over a 90-day period. For example, if the Kansas City region wanted to hold a class in Des Moines with only seven students, it would make sure that it also held a corresponding class in a metro area with 23 students. The average of 15 students would put the region in a rebate situation.
Results were beyond expectations. Last year, the program saw a per-class student increase of eight additional students, or nearly 20 students per class. It translated to 19,125 more students in total last year at $295 each. It meant $5.6 million incremental revenue dollars to SRPD. The incremental cost for student lunches and materials was $1.4 million. In the end, SRPD recovered more than $4 million beyond forecast.
The organization learned something along the way, too. More millions were coming in than expected, but it’s not about the recovery gain, it’s about being able to offer more to customers for less. As a result, SRPD recently lowered the price of courses to dealers to $265 and $195 for all sales-related personnel. The extra income also went to many unfunded SRPD development projects and toward the launching of the new University of Toyota Online Web-based e-learning system.
Cost-recovery-consciousness is spreading, too. Last year, total aggregate cost recovery for SRPD was 60 percent. This year, the goal is more than 80 percent. Next year, the bar will be even higher. The bottom line is simple to figure. With extra income coming in from the recovery stream, SRPD has a business model that delivers as much education and training as anyone wants. In the past, the organization was always parsing scarce resources. Now, it can say yes to whatever quantity customers want in training. That’s a major change, and that makes the program worth doing.
Bob Zeinstra is associate dean for the School of Retail Professional Development at University of Toyota. Bob can be reached at firstname.lastname@example.org.Filed under: Measurement, Technology