The transition in customer desires from product/price to experience was a recurring theme at the Convention, one the JD Power presentation reinforced strongly.
Mohit Arora, Regional Vice President, and Loi Truong, Senior Country Manager (Australia), shared statistics that showed customers were increasingly more likely to recommend the purchase dealer, service their vehicle at the purchase dealer, and repurchase from that dealer, the more satisfied they were with their initial experience.
“Customer satisfaction is the gap between performance and expectations. The kind of expectations your customers have, with which they walk into your dealerships, versus the kind of performance that you provide,” Mr Arora told delegates attending the Super Tuesday session.
For most people, buying a car is one of the three most expensive purchases they will make in their lifetime. So while the Dealer is looking to make a sale, the customer is seeking an experience.
Dealers who fail to provide this experience across multiple interactions with the customer end up losing significant potential business.
Only six per cent of those who rated their initial experience as ‘disappointing’ would recommend the purchase dealer to friends. Only 10 per cent of those who were ‘indifferent’ would, but that bloomed to 53 per cent with those rating themselves ‘pleased’, and 90 per cent for those who were ‘delighted’.
It was a similar pattern for the likelihood of servicing their car at the purchase dealer. Just 10 per cent of those ‘disappointed’ with their initial experience said they would, growing to 21 per cent for the ‘indifferent’, 50 per cent for those ‘pleased’, and 80 per cent for the ‘delighted’.
The pattern repeated for repurchase intentions. Just two per cent of those ‘disappointed’ with their initial experience said they would re-purchase from the same dealer. Eleven per cent of the ‘indifferent’ would, 46 per cent of those ‘pleased’, and 84 per cent of the ‘delighted’. The reality is even worse, with virtually zero per cent of those ‘disappointed’ or ‘indifferent’ actually repurchasing from that dealer.
“The chances, the hope, that I will be able to bring this customer back, retain this customer, is all about probability,” Mr Arora said.
The same goes for service. Nine out of 10 service customers who were ‘indifferent’ or worse to their initial service experience, said they would not return for service work they had to pay for. Only 60 per cent of those ‘pleased’ would do so, but 90 per cent of the ‘delighted’ group would.
Australia is one of the most demanding customer bases in the automotive world. Margins for new car sales are falling, making aftermarket sales even more important. Research JD Power conducted in Germany found that 54 per cent of profits came from the aftermarket department.
Mr Truong said Australian authorised dealers struggle to retain aftermarket customers beyond the warranty period. They have found it difficult to offer value and as the cost per service rises as the vehicle ages, customers look elsewhere.
A retention rate of greater than 90 per cent in the first year falls to 70-80 per cent in years 2-5, when vehicles are mostly still under warranty. In the post-warranty period, this falls to 40-50 per cent in years 5-10 and less than 10 per cent thereafter.
Lost aftermarket revenues for the OEM network are huge. In under-warranty vehicles (0-5 years) it is $280 million. In out of warranty vehicles (5-10 years) it is $850 million. For ageing vehicles (10+ years) it is a whopping $1.9 billion. This is even more concerning, with ageing vehicles to increase considerably by 2020.
With 12 per cent of service customers saying they ‘probably or definitely’ would not return to the dealership, the average amount of service spend at risk is $360,000 per dealer per year. Mr Truong posed the question to dealers: would they be prepared to invest the ‘small amount of money’ it would take to win these customers back.
Mr Arora said there are five top reasons Australian customers choose a purchase dealer:
- Best deal/lowest cost – 43 per cent
- Closest dealer – 36 per cent
- Exact model – 35 per cent
- Hassle-free negotiation – 23 per cent
- Dealer reputation – 22 per cent.
Those who chose a dealer based on the ‘value-added reasons’ of negotiation and reputation reported a significantly higher satisfaction rate. The same applied with service customers, with the ‘value-added reasons’ of past experience and reliability showing significantly higher satisfaction rates.
“How many data points do you monitor on a daily basis about the environment in which you are operating?” Mr Arora asked.
“Not looking at the internal sales, not looking at the RO per bay, but in the environment, in the geography in which you operate. How many data points do we see on a daily basis about the environment and not about our own operations?”
He said the typical answer was three to five, but there were far more opportunities.
Delight, don’t frustrate
“What delights, what frustrates – that’s a very important question,” Mr Truong said.
Opportunities exist everywhere within a dealership to either delight or frustrate customers. For example, washing and vacuuming a customer’s car when they bring it in for a service. Doing so achieves a boost of 14 CSI points (out of 1000) from drivers aged under 35, while not doing so saw a negative 57 point result.
Similarly, for drivers aged 36-55, washing and vacuuming provides a 34-point boost, while failing to do so results in a 59 point fall in CSI. For drivers aged 56 and over, washing and vacuuming boosts their satisfaction by 69 points, although not doing so saw just a 5 point drop in satisfaction rating.
Yet dealerships only wash and vacuum serviced cars 32 per cent of the time.
Another area of potential improvement is the use of technology during the vehicle demonstration process, which statistics show have an effect that is counter-intuitive to expectation. Sales people use tablets, DVDs and/or CDs just 4.6 per cent of the time when dealing with customers aged 55 or older, yet older customers who received explanation via this method showed considerably higher rates of satisfaction compared to those under 35.
Other ‘delight or frustrate’ opportunities:
- Providing transport to service customers
- Offering test drive
- Explaining safety features
- Explaining other features.
According to Mr Arora, there are four pillars of service delivery:
- Process definition: targeting fast-changing customer requirements and expectations – aimed at delighting customers
- SOP adherence: motivation, tools, guidance, checks and balances. CSI scores from 2015 showed a strong variance in customer experience across multiple dealers within the same OEM network
- People-related areas that create or impede customer engagement and emotional attachment of customer within dealership or OEM brand
- Attrition, lack of skilled manpower and increasing labour costs
- Cascading of organisational priorities to customer-facing roles
- Availability, training, HR policies, management and motivation
- Network spread catering to growing customer needs
- Physical infrastructure such as dealership facilities (wifi, coffee, children’s play area, etc) for customers who choose to wait. Dealerships offering more than five facilities have delighted customers
- Availability and effective use of technology (DMS, CRM)
- Efficiency (inventory control and management) – high parts on BO, high inventory levels within network (OEM + Dealer)
- Organisational (Dealer/OEM) focus towards customer-centricity and building emotional attachment with customers
- Dealer-OEM relationship and effectiveness of incentive policies.