Wednesday, September 23, 2009

Why Go to a Dealer or Distributor for Service?

VW recently sent me a document that one of their dealers thumb-tacked to the wall to remind customers why dealer service is the best choice. The file was called “Assurance.” It got me thinking. I really liked it.

My mother never really knew what I did for a living, but she did know it had something to do with cars. My mother-in-law described me to family as an “efficiency expert.” She pretty much nailed it. Mostly people think I know a lot about cars, tractors, excavators, and trucks (all of which are parked at our farm), so I frequently get asked about where to get service. My personal fleet needs a lot of service, so I use my 25 years in the aftermarket to make intelligent choices. I always choose a dealer/distributor (let’s just call them “dealers”), because there really is no intelligent debate that supports using non-dealer service. Why?

Here’s what I tell my friends – I work down the list and they see the light after only a few points (I must admit that OEMs rarely tell the story this way). This is all a variation around a theme of trust/value/cost/convenience.

  1. Dealer Customers Have Incredible Leverage. I have incredible leverage when I go to a dealer. Why? Because they measure every aspect of my satisfaction with the experience. If I am less than satisfied with the dealer service, heads roll, both at the dealership and up the OEM food chain. I get calls. If, after these calls, I still am not satisfied, I can call the field sales office and they will stir the pot. Still not happy? I can call the big shots and, well, I really never have to go that far. Customers have incredible leverage with dealers, leverage they do not have with the independents. If I’m not happy with Sammy’s Service Senter and I call, I get to talk to his cousin. Not happy at Midas? Well, that’s like not being happy with Microsoft – who knows, I might get to talk to someone from a call center who is incredibly polite, and powerless.
  2. Dealers Really Are the Lowest Cost Choice. It is an old wives’ and nuns’ tale that you could catch STDs from public toilets. Those same nuns and old wives also said dealers are higher cost than independent shops. Our company surveys tens of thousands of customers each year, and we can’t find proof that dealers cost more when looked at from a truly level playing field. It looks like a toss-up. Independents generally have lower labor rates than dealers, but since their technicians have less brand-specific and OEM-driven training, not to mention fewer and older tools, and less sophisticated diagnostic capabilities, they need more hours to accomplish the maintenance or repair work. Well, that’s a wash if there ever was one. Independents typically “double net” parts, so they wind up making more on parts than dealers do … and the parts are from who-knows-where.
  3. Who Knows What Parts Quality Independents Use? Parts used by independents can be like Chinese dog food – who knows what the quality really is, and poor quality can kill. Americans are in love with quality. Stuff used to fall apart within a year or so – first with malignant cancerous rust, then the mechanical parts started failing. I could write a book about what has happened to improve quality, but it’s common knowledge. Americans may be in love with quality, but they do not really understand how they make very significant quality choices when they service their vehicles and machinery. I’ve done expert witness work on this. It is impossible to separate cost from quality from trust, but stick with me for a sentence or so. In early 2009, the Automotive Aftermarket Industry Association (AAIA) proudly proclaimed that dealers cost 34% more than independents. Americans were being bilked by over $11 billion annually based on higher dealer costs. If you pay $500 for their report, you find that about 28% of this $11 billion “overcharge” was in brakes and rotors. They used a 2002 Chrysler Sebring and a 2002 VW Jetta for their estimates. For the Chrysler, the AAIA said that independents could do it for $143.40 less than dealers. I took 20 minutes and went to the internet and priced pads and rotors for the Sebring. The best ones were $349.27. The cheapos were $72.48. The spread was $276.79, or twice what you could theoretically save in the AAIA’s bogus survey. How’s that for assurance? When I go to a dealer for this life-sustaining critical repair, the dealer typically specifies highest quality genuine replacement parts – the same quality parts that were in the machine when I bought it. If I want cheap parts, I generally have to plead my case to the dealer. I make the choice on the quality of the part that stops a 4,000 pound (or 40,000 pound) vehicle before I crash into a wall. Who makes the choice at an independent? And, do I trust what they tell me? Do I have any leverage to ensure they tell me the truth? For the 55 combinations of brakes and rotors in the chart above, the merchandising language all proclaimed that they meet manufacture’s specifications. I don’t buy it.
  4. Dealers Have Much More Expertise in Fixing Things. In the last fifteen years, there have been 1,484 fatalities in 30 airline accidents in the U.S. Over the same time period, 562,712 have been killed in motor vehicle accidents. Nobody wants to die in a plane, so we have a legal and regulatory system that makes sure the global aviation fleet is kept in a state of fairly exquisite quality repair. Each bolt used on a passenger jet has its own serial number that can be tracked from cradle to grave. So, in the U.S., you are over 400 times more likely to die in a car than a plane, but we seem to be OK with that. Let’s get back to cars, excavators, tractors, and trucks. Independents can use cheap parts and cheap techs to replace your brakes … that could stop you from crashing into a wall at 75 mph … and we seem to be OK with that. OEMs have massive training programs for their dealers. OEMs have incredible capabilities in helping diagnose problems – they squeeze all possible insights from fleet failures that are systematically documented by their extended enterprise. OEMs have robust communications systems between them and their dealers to detect problems and help get problems fixed right the first time. Dealers are the specialists. If you have numbness in your fingers, a bad headache, and sharp pain in your back, do you go to a chiropractor?
  5. Convenience Is an Over-rated Concept in Machine Repair. Sure, it’s nice to have a repair shop that’s close by. But convenience is more than a short drive. It’s about alternative transportation (or loaner equipment) while your vehicle is being repaired. It’s about having your repair completed when expected. It’s about not having to return to the repair shop to get the problem fixed, again. Even more important in the hierarchy, convenience considerations are (a) will they fix it? (b) are they even capable of fixing it? (c) is it really possible to make sure that I am not getting taken advantage of, and, (d) do I have any leverage in the maintenance or repair experience to express my displeasure and have this heard? Much of the reason we see incompetence in our society is due to convenience – close, easy, cheap, and fast – this does not always add up to “good.” Adding up a + b + c + d usually leads to a dealer. That’s pretty convenient. Close and fast does not always equal good.

  6. Trust Is a Missouri Concept. Show me. It is the net result of all of the above.

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