Thursday, May 21, 2015

Why Driverless Vehicles Are Inevitable, and Why We Care About This
by David P. Carlisle

For quite a while, driverless vehicles have been in the news almost daily. Now we hear that Google has perfected its self-driving car, and that driverless vehicles will be commonplace inside the next five years. This is very important to everybody in our industry, as well as to consumers. Safety and cost are the two big benefits to vehicle owners and drivers. Driverless vehicles will crash less, which means fewer injuries and fatalities, and, inevitably, lower insurance premiums.

For the industry, fewer totaled vehicles will take a bite out of vehicle replacement sales. Lower collision rates will take a bite out of collision parts and labor sales. The driverless car will profoundly change the industry. So, yes, we care about it.

In fact, this innovative “product” is almost fully baked and ready to go. As a successful prototype, we already “have” it. But, do we “want” it??? Is our nation’s legal and regulatory apparatus ready and willing to accommodate this new technology ?

I think those changes will be made. Here are six good reasons why the driverless vehicle is inevitable.
  1. It’s not that big of a deal for our highways to accommodate driverless vehicles. In the U.S. we have approximately 4 million miles of roads. About 3% of those lane miles are devoted to interstates/freeways/expressways, but that 3% also carries about 30% of all vehicle miles traveled. We predict driverless vehicles will probably be using these high-capacity roadways.
  2. We are running out of highway capacity. Our current population of 325 million has grown 14% since 2000, and will grow another 4% by 2020. But, our highways certainly haven’t grown 14% since 2000. In other words an increasing population is being serviced by a highly constricted highway system now operating over capacity. That’s a big problem.
  3. Furthermore, a highway’s carrying capacity is not a smooth linear progression. We’ve all experienced this. You are traveling steadily down a busy interstate, and suddenly see a police car on the side of the road flashing like a Christmas tree. Everybody slows down, rubber-necks, and what was OK traffic becomes a parking lot. This chain reaction – slow human response time coupled with the human capacity for distraction – screws things up. Let the machine drive and the humans gawk, as is their nature. The driverless car would have a very significant, positive, impact on highway capacity.
  4. Boomers are aging. Right now Baby Boomers, the 50 and 60-somethings, represent a tad more than 27% of the U.S. population. By 2020 Boomers will still account for around 20% of the population, but they’ll be slower and their reaction times more retarded. The adverse impact on highway capacity and safety won’t be trivial. Instead of a bunch of young NASCAR drivers, we will have 14% more older drivers with typical declines in vision, judgment, and response time . Yuk. Hmm… if a Toyota can parallel park itself better than a 20-something can, who knows how much a machine can improve on the driving of a 70-year-old Boomer?
  5. Driverless is more green. The energy crisis has melded into an environmental global warming crisis, and it is environmentally irresponsible not to try to reduce fossil fuel consumption. Driverless vehicles, especially in trucking, can take a huge chunk out of fuel consumption through platooning and by taking advantage of vehicular drafting. This works for cars, too. Here, again, machine beats man.
  6. Truck “Platooning” saves lots of money. Imagine a convoy of seven trucks. Typical cost of operation is a little more than $1 a mile for a long-haul vehicle – so this convoy costs about $7 a mile to operate. Around 20% of that cost is for fuel, but fuel consumption can benefit from drafting – maybe we can save 20% of the fuel cost with this. ($1.40 per mile in fuel cost for the seven trucks goes down by $0.28 – a 4% drop in total operating cost.) Labor is about 30% of the operating cost. Typically, labor would account for a bit more than $2.10 of the $7 a mile. But, if we “platoon”, we only need one driver in the lead. So, we save $1.80 of the $2.10 truck driver expense, or another 26% of the total cost. This is serious, compelling, money.
Bottom line: It is a very safe bet that we will see driverless vehicles somewhere on the road inside the next five years.

Thursday, May 14, 2015

Why General Motors No Longer Has Parts Warehouses; They Have “Distribution Plants”
by David P. Carlisle

(“I … agree … about the need to do away with the term “warehouse”. To me, the word brings up the image of the last scene in “Raiders of the Lost Ark”…. massive storage of items that rarely move. The whole point of a Parts Distribution Center is to distribute, not store.” Cheryl LeMieux, General Motors)

If you put together a few facts about parts distribution you have to ask an obvious question. Fact #1: General Motors has had the highest parts distribution center network productivity in the industry since 2010. Five straight years of leadership is not a blip. Fact #2: at the same time, they have been in the top 2-4 OEMs in terms of quality – they actually take more pride in quality leadership than productivity leadership. The question: How do they do it?

If you walk through a GM parts “warehouse” and pretend that you know absolutely nothing about parts “warehouses,” you’d swear that you are in a state-of-the-art assembly plant. A really good one at that. Material flows into the “plant” at a near just-in-time rate. The material is processed and staged – we call this “binning”. Ultimately, the material is assembled into custom orders and shipped out to dealers. Just like assembly plants that make vehicles.

This is not a radical process; for the past 20-or-so years Toyota has leveraged the Toyota Production System in its parts facilities. Many other OEMs have codified their manufacturing process strategies and lent this lean toolkit to service parts distribution.

Toyota is justifiably credited with putting “lean” inside the warehouse. They adapted their manufacturing practices to the parts warehouse – key among these was the elimination of “muda” – waste. These adaptations are what I term “Vertical”; that is, lean manufacturing techniques that apply outside a manufacturing plant. This represents a different way of thinking that can have profound results.

Take, for instance, “kaizen” – practice of continuous improvement – another “Vertical” that profoundly changed our industry. Toyota is the undisputed master of lean Verticals.
Time-out: Six Sigma is a good example of an “extreme” lean Vertical. The term "six sigma process" comes from the notion that if one has six standard deviations between the process mean and the nearest specification limit, practically no items will fail to meet specifications. This very simple concept has a cult following. Typically, outside of Toyota, activists/gurus of various individual lean Verticals are messianic in their advocacy, where all else is diminished inside the micro-nuances of process and technique.

Moving through and mastering a complex set of rules, new gurus are coronated with black belts once they make it to the promised land. Novices look upon these extreme Verticals and become dazed and confused. But, they can’t show their confusion, because they’re expected to understand; they are drilled on the utter simplicity of what is, sometimes, a process of Rube Goldberg complexity. When talking with some Six Sigma shops, I’ve identified what seem to be three groups of followers: those who have others do, those who do, and those who just don’t get it. The focus is typically on the individual Six Sigma efforts and not the consolidated total result. Sometimes, it appears that the whole is less than the sum of the parts. Maybe it’s just me.
It is easy to find lean warehousing practices outside Toyota, where you will encounter a broad cross-section of Vertical approaches. Many of these facilities are managed by warehouse managers who have been heavily influenced by Toyota, or that are run at a network level by supply chain executives … who, also, have been heavily influenced by Toyota.

Typically, we see lean Vertical principals applied, independently, at each facility. The logic behind this makes sense, because at the heart of most lean strategies is Kaizen. Continuous improvement begins at the home, and each home is different.

These warehouses generally look clean, uncluttered, simple, no-tech, bright, and efficient. These are very common impressions. However, most of us non-insiders cannot fully grasp the material flow inside an hour’s tour. That’s because the common Vertical lean practices and touch points look different from one facility to another.

But, GM is very different. Instead of borrowing and adapting lean practices from the manufacturing group, GM runs their service parts supply chain like a string of production plants. Charlie Hyndman is the vice president, who grew up in manufacturing (, and has been at the helm of GM’s aftersales supply chain for more than a decade. His entire team performs like a world-class manufacturing team.
This is an important point: because GM runs its parts supply chain like a manufacturing operation, and not as a “borrower” of lean manufacturing Verticals, it is, by definition, more effective. Why? For the same reason that an endless stream of copies of copies inevitably degrades the information. Only the original provides the clarity of the “original” ideas.
GM strips away the mystique, making their lean approaches easier to grasp … and grow. It makes more sense to explain by example.

All of GM’s “template” parts facilities are cookie cutter designs. They have long, wide aisles devoted to the fastest moving parts (approximately 40% of the volume and associated labor). For years the picking path within a bay resembled a typewriter – moved along the top shelf and picked, came back and picked the next shelf down, and finally came back and picked parts from the bottom shelf.

Like all facilities, workers at the GM Chicago facility are trained in continuous improvement. Inevitably, they figured out that this method of picking parts was inefficient. If you picked parts up and down, you would save steps and time.

They were correct – moving to the new picking path saved 1,000 steps each shift per worker, and 14 miles of steps per shift across all pickers. This continuous improvement philosophy (call it Kaizen) is deeply embedded in GM’s workforce culture; they do not need ornamentations, or coronations, to internally merchandise this sort of concept.

In isolation this plant would not be remarkable – it’s the result of a typical lean Vertical – Kaizen. What is remarkable is that each of GM’s template parts facilities is “massively parallel.” Each has the same fast-pick aisle configuration, and each employs up-and-down picking. This has enabled GM to replicate the results in the Chicago facility across the entire network. Inside of five weeks.

Perhaps what’s even more remarkable is that GM’s Chicago facility is the 15th most productive parts “warehouse” out of 192 motor vehicle parts warehouses in the Carlisle benchmark database (productivity for just hourly labor; looking at “all in” labor, it is 5th ). GM’s Chicago facility is firmly entrenched in the first quintile – top 20% of all warehouses – where you might not expect there was much more room for improvement.

It took me more than a decade to understand what GM was doing. At the center of my confusion was the term “template warehouses” that they used to label their new parts facilities. I heard this and thought of nouns (things), not verbs (processes). What GM has done is standardize their process “templates” across all of their facilities. They wrap all this inside their “Global Manufacturing System” (GMS).

Time-out: GM’s Global Manufacturing System (GMS) has driven dramatic improvements in safety, quality, productivity, and cost. At its heart is a dynamic, best-practice based approach to manufacturing that engages every level of the organization. As such, the GMS umbrella is used to design comprehensive training programs to teach “lean” to the shop floor: Standardized Operating Sheets (SOS), Job Element Sheets (JES),
and Job Instruction Training (JIT) are the backbone of continuous improvement and sustainability. In the example here of a Job Element Sheet it is easy to see a comprehensive approach to measuring out job steps.
This is critical, because GM designs training programs around shop-floor processes. Process compliance – “management” – is covered by audits. The audits can be either comprehensive or short: ten-minutes.

If everybody is a “black belt” on the shop floor, and nobody can break a stiff 2x4 in half with a leg thrust, then you probably don’t need any nifty labels. That’s what I see in GMS … and what makes it very difficult for others to emulate. GMS has coupled two key lean Verticals (continuous improvement and short lead time) with one organizational principal (people involvement), a centuries- old manufacturing principal (standardization), and a singular driving customer objective (built-in quality). GMS is incredibly logical and simple; possibly too much so to be taken seriously by others struggling to improve, and sustain any gains.
Bottom Line: GMS has no fancy pyramid scheme to coddle the gurus.
It is simple and incredibly easy to understand. Maybe that’s why it works so well in a parts distribution environment. Most firms use a handful of Vertical lean processes to get lagging quintile warehouses to toe the line. That only gets you so far. GMS is focused on standardization, documentation, training and auditing … across all global facilities … with the objective to minimize network variability.

It works. That’s why GM is at the top of the heap in parts distribution … and likely to stay there.

Wednesday, March 11, 2015

Wholesaling With Wormholes
by Brian Steinmetz

Well, they’re not the same wormholes you saw in Interstellar, but these wormholes provide nearly instantaneous direct paths from your parts counter to the customers you are trying to reach. I’m talking about targeted digital wholesale marketing – sending customized email messages directly to the parts purchasing decision-makers at a dealership’s wholesale customers.

For years, automotive dealerships have used targeted digital marketing to reach out to their retail customers (“We were glad to have you in for an oil change last month! Come back for 10% off your next one!”). With some small adjustments, this technique can also serve dealerships that are contacting their wholesale customers (fleets, independent garages, or body shops). Unlike retail customers, individual wholesale customers purchase large volumes of parts, which means wholesale targeted marketing can yield significant returns.

But it needs to be done right. How do you create your strategy?

An effective targeted digital marketing strategy is typically part of a larger customer relationship management (CRM) initiative. However, the digital marketing provides a unique feature: the ability to directly track impact. This tracking takes the form of monitoring delivery rates, open rates, and click-through rates for your marketing initiative as a whole, as well as for each individual customer. Knowing which customers are actually opening the marketing messages will produce a list of hot leads for a counter salesperson to follow up on.

Electronic delivery also allows you to customize messages for different recipients. Your active customers could receive one message, thanking them for their continued business with a 5% discount on product line ABC, while inactive customers that you’re trying to recapture could receive different messages, like a 10% discount on another product line.

“Sounds great. But does it actually work?” Yes, it does. One automotive OEM that employs this wholesale direct digital marketing strategy consistently sees positive outcomes. For every month that these messages have gone out, roughly 7% of their “inactive” wholesale customer base (those that had not purchased parts in 90 days) came back to the dealership for their first parts purchase in a while. Active customers who received these marketing messages became inactive at a lower rate than others. Taking a larger view of the situation and evaluating the OEM’s entire wholesale customer base, the customers who received the messages purchased more parts year-over-year than customers who didn’t receive messages.

Bottom Line: Targeted direct digital marketing to wholesale customers has the potential to yield huge returns on investment, when paired with a well-planned CRM strategy. The ability to deliver to your wholesale customers a tailored message cheaply, quickly, and easily is one that we all can access; we just need to build a plan and then send a ship through the wormhole.

Tuesday, March 3, 2015

Service Lane Technology: Up Close or Impersonal? What Do Consumers Really Want?
by Meredith Collins

Do consumers really want Service Lane Technology? We examined this important question as part of a recent focus day on Service Lane Technology (SLT) solutions. During the day, OEMs and SLT providers discussed where the technology is headed. While researching this topic, we also held a focus group with customers who had been exposed to service lane technology, in order to gauge their perception of it. The general sentiment of this group – which consisted of people in their late thirties and older – was that SLT could be a good thing, but only if the dealership uses it properly. That is, these customers still want their interactions to be personal; they expect a certain level of human connection.

After watching the footage from the focus group many, many times, I realized that these people shared a common idea of what a service experience should be like, and how technology can help provide it. I understood their feelings – yet their concerns didn’t reflect at all how I feel about Service Lane Technology.

For example, they want their Service Advisor to know their name; to know their children’s names. I don’t care if my Service Advisor remembers me. They want hand-written MPIs, as this demonstrates a “personal touch” and “extra attention”. I want an MPI that I can easily read, preferably one printed from a computer and emailed to me. They think it’s rude when their Service Advisor fails to make eye contact, and instead focuses on entering information into his tablet. I don’t care if he’s paying attention to me; I want him to be paying attention to my car.

So, what is driving the difference between my expectations of the service lane and the focus groups’? Why is my view of technology and customer experience so different from theirs? The answer: a generation gap.

Millennials – which I’m going to define as anyone under the age of 30 – have come to view the customer experience very differently from the generations before them.

I think there are two key points here:
  1. Millennials don’t need, or even want, to have a personal connection while in the service lane. We aren’t necessarily looking for the MyGuy experience. Rather, we want our service or repair to be efficient and quick, causing minimal disruption to our lives.
  2. We are also significantly more comfortable with the use of technology. We grew up with it; we don’t remember a time when it didn’t play a significant role in our lives.
With this in mind, I think that SLT is the key to providing millennials with efficient, streamlined service. Think about it: I rely on my smart phone to complete several important tasks every day. I trust it to do my banking, pay my utility bills, order an Uber, repay friends for splitting an Uber, navigate around Boston, etc. These apps aren’t particularly new or revolutionary, but the point is that I actually use them. In fact, I am completely reliant on them. People in earlier generations, however, are less likely to trust the technology to make such important transactions.

This may explain the disconnect between reactions of different groups of consumers in the service lane. Millennials are more comfortable having technology replace old processes. So, not only will millennials trust SLT, we’ll be turned off by the failure to use it.

Our research into SLT has determined that it is undoubtedly the way of the future. Not long from now, every service lane will have some form technology, and the entire service process will flow smoothly from scheduling to check-in, to write-up, through the service itself, and finally post-service. The biggest unknown is how quickly dealers will adopt SLT.

Up to this point, they’ve been slow to make changes, as there is pushback from service departments that are comfortable with the way things are. I argue, however, that SLT adoption needs to be a priority for dealers. More and more millennials are becoming car owners and are choosing where to service their cars. Even though the older customer base may hesitate to trust technology in the service lane, an increasing customer population will expect it.

Bottom Line: The next generation of customers is here. We want dealers to have technology solutions in the service lane to make the time we spend there more streamlined and efficient. Lack of technology may mean lack of our business.

Tuesday, February 24, 2015

Is Driving Becoming “Passengering”?
by Ilia Gorelov

In-vehicle infotainment systems, autonomous vehicles, and Uber: What do these all have in common? They’re technologies and trends that are converging, slowly turning driving into “passengering”. What’s “passengering”? Well, it’s being a passenger: going from point A to point B, but not piloting yourself. We’re all slowly becoming passengers.

There are three elements contributing to this trend:
  1. The human need to remain “connected”, now being facilitated by our vehicles and making driving an inconvenience
  2. Our vehicles’ increasing ability to take over basic driver inputs like braking and steering, diminishing the role of the driver
  3. The rapid growth of on-demand taxi and ride-sharing services from providers like Uber which are providing increasingly cost-effective substitutes for driving
Let’s explore #1. People, with the help of technology, are slowly overcoming a challenge that has existed since the dawn of civilization: boredom (Link Here). We increasingly feel the need to remain connected and consume information. Waiting for a ride? Check your Facebook. On a boring conference call? Read your email. On a bad date? Tweet about it while he/she is in the bathroom. Multi-tasking has taken on a whole new meaning. Why not multi-task in the car?

Vehicles are becoming cogs in an ever-connected world, linking drivers to their cellphones. In many vehicles, we can now use voice commands to read and respond to emails/text messages, make calls, pull up directions, manage and play music, and get other information like news, weather, or traffic conditions. These features are useful and conveniently accessed through our vehicles – and they’re a safer alternative to using a phone while driving. But what’s the impact on the actual act of driving? Well, it’s almost becoming a secondary function. It’s an inconvenience. Why drive, or be bored, when you can spend this time doing other productive things? What if we didn’t have to drive?

This brings us to point #2. Autonomous cars are slowly becoming a reality. Many new vehicles now come equipped with features that can manage basic driving inputs: adaptive cruise control, radar-based brake assist, and intelligent parking systems, to name a few. Autonomous test cars have already been “piloted” on public roads in the U.S. and Europe. Further, in 2014 the U.S. Department of Transportation announced that it will begin taking steps to enable vehicle-to-vehicle (V2V) communication technology for light vehicles. V2V communication can help take today’s autonomous vehicle technology to the next level. Though we’re still years, if not decades, away from a world in which autonomous vehicles rule the road, we’re seeing that slowly but surely, the role of the driver is being diminished. Just take one look at the airline industry to see where we might be heading.

Finally, let’s look at point #3. There’s this new thing called the “sharing economy” in which “regular” people provide services or rent property to other “regular” people. If you’re going on vacation, you no longer have to stay in a hotel – you can rent someone’s apartment on Airbnb. If you don’t have time to run some errands, hire a TaskRabbit to do them for you. Need a ride? Call an Uber. Ride/car sharing is the fastest growing segment of this new economy. There are just so many vehicles on the road and they spend most of their lives parked somewhere.

So what the heck does Uber have to do with driving becoming passengering? Well, for one, services like Uber (UberX, specifically) provide a real, cost-effective alternative to car ownership, especially in urban areas. I own a car in Boston, but frequently use UberX to avoid the inconvenience of getting stuck behind the wheel in traffic, looking for parking, etc. When I look at the blue Uber coverage map of Boston, I begin to question whether utilizing UberX could actually be financially advantageous to owning my own car (after all, coverage extends well beyond Carlisle’s Concord offices). In fact, imagine that blue area expanding out from Uber’s 250+ cities across the world. How far can we really go in an Uber? Could I visit family in New Jersey by simply hopping in various Ubers across the eastern seaboard? Could I go cross-country? Sounds like an interesting idea for a documentary.

So how do these 3 trends tie together? Well, imagine a world in which a fleet of connected, autonomous “Ubers”, immediately available upon request, take you anywhere you want to go. As soon as you get in, your phone and personal preferences are synced with the connected vehicle and you’re alerted to the weather, traffic conditions, breaking news, incoming emails, schedule for the day, etc. You only pay for the time/distance travelled, or maybe you buy a “family travel plan”. Even as a self-proclaimed car guy, this sounds pretty convenient, efficient, and appealing. Maybe passengering isn’t so bad. Maybe I don’t even need to own a car. Well, maybe a Z06 for some weekend fun…

Bottom Line: As vehicles become more connected and autonomous, driving is taking a back-seat (literally) and the role of the driver is diminishing. Further, readily available and cost-effective ride sharing services are providing real substitutes to driving. Combine all of these trends and one day we’ll all be passengers.

Thursday, February 19, 2015

Managing Customer Service Satisfaction Is Easy: Make Them an Offer They Can’t Refuse
by David P. Carlisle

Customer service satisfaction is a subject with which we are all very familiar. So familiar, in fact, that we tend not to pay any attention to it, because we’ve seen it all. There’s nothing new.

Well, maybe we are wrong.

I, too, was a jaded been-there-done-that kind of guy until a few weeks ago, when I received a letter from my pickup truck dealer.

I had previously dinged this dealer in a survey when they tried to sell me an air filter double-netted to around $135 retail. The service manager called me up at 7:00 in the morning with hurt in his voice. He apologized, and we remained friends. That was over a year ago.

About a month ago, my daughter took the pickup in for routine service. The service advisor sold her a radiator flush – she accepted, because she trusts this dealership. Then, a few days after the service, I got a barrage of service satisfaction emails. I gave my dealer perfect scores and checked the box that it was OK to share with my dealer, but I commented on my dissatisfaction with the radiator flush. I was honest in saying that I was not satisfied, but knew that the imperfect scores I should have given would have proven overly traumatic to my dealer.

I never heard anything back from the OEM or dealer about my dissatisfaction. Hey, I gave it a shot.

Then, a few weeks ago, I received an offer that I could not refuse: my dealer paid for compliance. They sent me a $25 gift card as a token of appreciation for my “complete” satisfaction.

Let’s Take a Step Back:

I am used to:
  • “Stamps” on my repair order asking me for perfect scores.
  • My service advisor begging for perfect scores and telling me that his income would significantly suffer if they were to get anything but perfect scores.
  • An elderly woman calling me after my service appointment, reading from a script, and asking me if I was less than completely satisfied.
  • The letter from my service manager asking me to call him if I was not completely satisfied.
  • Filling out the dealers’ separate satisfaction survey that seemed designed to encourage score perfection.
  • Finally, getting a manufacturers survey at the end of all this.
  • And, of course, being positive that all this interference simply spoils the soup, rendering the satisfaction survey stupid.
However, I am not used to getting a gift card for $25 in appreciation of my deceit.
To me, the gift card was spot on. I do not have to be bribed to come back to my servicing dealer, but the $25 tells me that he is trying—really hard—to make the factory happy. My dealer’s service manager also wants me to be happy with his operation – he takes great pride in it, but he knows that he really cannot sustain perfection. The $25 is his way of “winking,” and thanking me for “perfect scores.” And, it has nothing at all to do with actual perfect satisfaction.

Bottom Line: The lesson here is that the millions of dollars OEMs spend on what seems to be completely bogus satisfaction surveys actually can make a difference. It is not about the scores themselves — we all know these are useless; it is about things like my dealer’s incredible act of creativity. My dealer chose to thank me for playing the game, rather than simply urging me to lie. Through this interaction, we winked back at one another. As a result of this, our relationship has been humanized, and I am still loyal. Well done.

Wednesday, February 11, 2015

Luxury Owners; No, They Just Seem To Be Difficult
by David P. Carlisle

We conduct a lot of owner survey research where people tell us about themselves by checking certain boxes. “How satisfied are you with Brand-X’s dealer experience?” They check one of five boxes, ranging from “Very Dissatisfied” to “Very Satisfied.” “Why are you dissatisfied?” They check one to three things off a list. We tabulate the results and profile cluster of dealers. But, still we wonder. Toyota teaches the “Five Why’s” as part of their Lean training. Ask “why” five times and you will usually get at what’s really going on. You can’t do that in a static survey. That’s why we have a focus group facility in our offices.

I recently moderated two very different customer groups. One was a group of typical Volvo owners. The other group was from BMW, Mercedes-Benz, Lexus, and Audi. Day and night. The Volvo group was composed of people who had made fairly clear lifestyle choices with safety as their core value.
  1. Why do you own a Volvo? I like it.
  2. Why do you like it? It drives well.
  3. What about it “drives well"? You know, it is the whole experience.
  4. Is there any part of the experience that sets Volvo apart? Sure.
  5. What is it? It is the safest car on the road and I value myself and my family.
Ok, it doesn’t come out exactly like that. But, you always will get to “safety” within the Five Why’s.

With “safety” as a unique core value, Volvo owners are pretty much OK with what’s offered up in the ownership experience. Do they mind waiting for service in the waiting room? No problem. Do they expect a loaner car or alternative transportation? Well, that stuff would be nice (and they do receive it), but they don’t sit and stew over it if it isn’t perfect. They chose Volvo. They get pretty much everything other luxury vehicle owners get, but they do not have the same feeling of entitlement or value dissonance.

That was “day.”

Time Out

Well, the Volvo Focus Group looked pretty good, … but it did not foot to the numbers. We expected higher-than-normal levels of customer retention from Volvo, based on what we heard in the Focus Groups. So, we decided to listen to a different “luxury” owner group that just consisted of BMW, Mercedes, and Audi owners.

Now to “night.”

I sat down with the other “luxury” owner group and frankly expected more from them. Each had spent a lot of money for their brand choice, and brand statement. They were entitled, and nobody’s fools. The following isn’t a direct transcription, but it captures the essence of this group.
  1. What are your expectations for alternative transportation? Just get me out of there as fast as possible. I am too busy to hang around the waiting room of my dealer.
  2. What are your expectations for the waiting room at the dealer? I don’t care about it; I never want to be stuck there.
  3. What do you think about going to your dealer for service outside warranty? You think I’m nuts? I never go back because their charges are exorbitant. I take my car to “my guy” in my town and I trust him.
  4. Why do you think the costs are exorbitant? Just look all around you at one of those ‘palaces.’ You know who’s paying for it? Me! Well, not “me” because I would never consider using them outside warranty.
  5. But, what if you were treated differently? What if the service advisor was also the technician and there was no handoff? I don’t care about that. Hmm. OK, it would be better. But, I’m not going to pay for those palaces!
Time Out

What’s the logic that connects happy Volvo owners with lower service retention to unhappy upper-luxury owners with higher service retention? I suspect that the logic tether that connects all this together is affordability. Volvo owners might stretch more to purchase their vehicles, justifying the stretch not as a brand statement, but as a precious investment in safety. Money is precious to this group and they tend to shop more outside the dealer to stretch their service dollar. Upper-luxury owners, especially those where the volume is at the bottom of the brand chain, love to talk about how much they pay for service, how it is simply outrageous, and how they won’t stand for it after warranty. Those at the top of the brand-chain simply don’t talk much about this sort of stuff … and are not likely candidates for a focus group. But, for all of them, time is more valuable than money. So, they tend to go back more often to their dealer for service simply because it is easiest and quickest.

Bottom Line

If one had struggled to create a beautiful architectural service solution, struggled to hire professional staff, struggled to have a perfect waiting area, and struggled to offer brilliant alternative transportation, … maybe even struggled to go beyond what you expect is expected … and all you heard was this whining … what would you conclude? You might conclude that these customers were difficult. Brats. And, you would be wrong. They just don’t value much the stuff you think they value, and are offering. For them, increasing service retention takes a different kind of currency. For Volvo customers, the “currency” for this barter arrangement seems to be perceived “affordability.” For the upper-luxury customer the realm’s coin seems to be “time.” It might just be that simple.

One Last Thought

I do not think it is uncommon to build a world that customers don’t want to live in. Ex-K-Mart shoppers don’t think much about all the work that went into their K-Mart shopping experience. They just don’t value it or like it. So, they go to Wal-Mart or Target where they get what they value. Lesson? Understand what your customers value and give it to them. Don’t dress up what you value and think it represents a fundamental truth.