Wednesday, February 10, 2010

Do Not Read This Blog! We’re Talking About Service Retention Again

A favorite pastime of the media is to bash unscrupulous dealers for bilking bambi-eyed customers during vehicle repairs. The real problem isn’t that dealers are generally dishonest; it’s mostly that they are inept at dealing with highly suspicious customers. Folks just love non-dealer repair facilities. What’s the difference? You go to a dealer for a $29 quick lube and get fried when it costs $35. So, next time you go to Jiffy Lube for a $27 quick lube. The guy comes to the waiting room with a bunch of dirty parts looking like he feels sorry for you. You end up spending a hundred and a quarter and still hate the dealer. Next, you go to some social media site and ding ‘em. Try a different Quick Lube next time. Dealer? No way! Go figure. All OEMs want to increase their service retention and many go after this cup of gold with a frenzy of activity. A few years pass. You look back and find that your service retention strategy was really a service detention strategy. Chop chop and start again. Maybe not.

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We’ve been tracking the numbers in Market Watch and it looks like one of the domestics is pulling away from the pack in service parts sales improvement (looking at parts sales per vehicle in operation). Given melting vehicle sales, the only way to do this is to increase service retention (SR). For most other OEMs, tracking SR improvement is like watching glaciers grow. You know what I mean. To make meaningful improvements in SR you need to do a whole bunch of things, and it is nearly impossible to parse out the incremental benefit of each strategy element. The ultimate measurement of success is selling more parts per unit in operation. That can be measured … and, more importantly, understood.

Ok, we’ve talked about that before. We’ve also talked about online social media. Information on the internet impacts how you buy and care for your cars, pickups, Class-8 trucks, tractors, and backhoes. Customers go to the internet for information that they consider to be “independent.” They cull data that influences what they buy, what they think, and how they act. Based on a DriverSide RL Polk white paper (“Service Marketing 2010”), 74% of consumers choose companies and brands based on what others say on-line about their customer service experience. Wow. But, not at all surprising.

Web-sites like DriverSide pose the risk of disintermediation of the vehicle owner from the dealer/distributor/OEM. This is neither good nor bad; it is merely inevitable. Vehicle sales lead generators did this during the dot-com days … until OEMs realized they needed to control dealer sales leads through their own web portals. New social media sites are popping up everywhere – customers can “vote” satisfaction using a simple 1-5 point survey … for health care providers, restaurants, retail stores; you name it. Verbatim comments make the customers’ experiences even more credible. As younger customers move into their vehicle buying/servicing years, social media rankings will become more critical. This group is skilled at using and sharing its collective voice through the internet.
Time out: A lot of our core beliefs are based on OP (Old People) skills and values. This is certainly not the future. Inevitably OPs will cede to YPs (Young People), and web-adept folks will be buying cars, pickups, tractors, combines, heavy trucks, and backhoes. They will service that stuff, too. OEMs need to get their arms around this and control the process through their own web strategies.
Next, let me give you the good news. In preparing the white paper, DriverSide conducted mystery shops at over 200 service providers. They found that dealers were the most professional and most willing to provide exact prices. Half of the independents were rude to callers and most likely to refuse to provide a phone quote.

Hey, this looks like we are already in the promised land!

Not really. Those were just the impressions of the researchers. Customers actually felt quite differently. Service customers seem immune from rudeness and ambiguity, and most believe that the locally owned independent repair centers provide more value than dealers.

In the past, we’ve talked a lot about “Trust, Value, Cost, and Convenience.” Franchised dealers/distributors, unfortunately, have a huge reputational deficit to overcome. Customers expect dealers to be dishonest, and this constantly gets reinforced. OEMs do not do enough to dispel these negative impressions.

Again, the white paper researchers did their homework and the mystery shop data showed that 71% of all repair facilities, independents and dealers alike, over-quoted nationally published repair times. Everybody is guilty of this sin.

But, what did real customers think? They thought dealers were four times more likely to overcharge than the locally owned independent garage. Worse yet, they often felt that the local independent provided higher quality repairs.

Depressing, but we’ve heard this before.
Time out: Let’s summarize what we know about dealer service:
  1. There’s no apples-to-apples evidence that proves dealers are more expensive than IRFs (independent repair facilities). To the contrary, we’ve seen evidence showing dealers are less expensive in things like scheduled maintenance.
  2. Dealers generally have higher labor rates than IRFs and proudly boast this on their repair orders so that customers have proof that dealers are gougers and more expensive. Hey, techs cost more than plumbers, and I’d change my plumber if I could find a good one that was cheaper.
  3. Dealers generally have lower repair parts costs than IRFs – customers have little or no point of reference for these costs, because they don’t even know what the parts are for in the first place. So, who cares?
  4. Customers are loyal to their channel choices. If they are dealer-loyal; they love their dealer. If they love their IRF, well, they love the whole family of independent garages that are within 15 miles of where they live.
  5. Everybody knows dealers cost more. People do not let the facts get in the way of common knowledge. The myth needs to be un-learned, and nobody’s doing much about that.
  6. IRFs are owned and run by the little guy – generally accessible, often personable, and usually hard-working. The underdog. Americans love this.
  7. Making a local IRF successful is the proud accomplishment of some go-getter entrepreneur. To Americans this is admirable. We will give an entrepreneur the benefit of the doubt.
  8. Americans cut no slack for dealers. Maybe that’s because memories of our last dealer visit involve an F&I guy pushing us to buy clearcoat and an aftermarket remote starter for our newly purchased car.
Fixing service retention at most OEMs requires a new end-to-end strategy that recognizes that much of the problem lies with the ends. Here, the means justify new ends. On one end we have the dealer/distributor service advisor who is just following the blueprint, packaged so nicely by corporate. Flap A gets inserted into slot B – remember the Chrysler 5-Star key tosses? Great commercial. We see this in the whitepaper’s researcher comments. Dealers stick to the script and do a professional job on the phone. The big problem is that the script is wrong for the competitive environment and for a customer-base predisposed to dealer distrust.

On the other end is the OEMs’ social media strategy. We have simplistically tried to assess just the educational content of OEM websites in prior blogs. The scale spans from 0 to 160, with median scores at 80. Social media implications for our industry are a lot more complex than the scores we assigned. But, it’s a start.
Time out: DriverSide’s whitepaper is just saying stuff we already know.
  1. DriverSide’s white paper clearly shows that customers have negative impressions of dealers/distributors. This confirms prior knowledge.
  2. But, we know that many of these impressions do not represent the facts.
  3. So, if we need customer impressions to change, then somebody’s got to take responsibility for this.
  4. And, it won’t be the independent aftermarket.

Because of the enormity of the challenge associated with improving SR, OEMs have responded with a barrage of initiatives. Doing a PDCA (plan, do, check, act) is pretty complicated and would result in a document that looks like Obama’s 2,000-page health care bill. Something like that can’t be legislated in Washington or in typical OEM management bureaucracies.

Bottom Line: OK, so what’s the 10-point program for transitioning from a Service Detention strategy to a Service Retention strategy?
  1. Before you start, you need to embrace the killer metric for success –increased parts sales per relevant unit in operation . If you sell more parts per unit of fleet, it means that you will sell more service. If you sell more service, that means more customers are coming back. Only satisfied customers come back, and they are the ones who will buy more whole goods.
  2. You need an integrated approach for managing all post-whole-goods-sale customer touches: parts, service, Telematics, sales, e-fulfillment. By the way, Ford is the industry benchmark here; they’ve quite brilliantly tucked all these touches under the President of Ford’s Customer Service Division (FCSD).
  3. You need to sell the right stuff that customers need and want: tires, brakes, batteries, state inspections, service contracts, quick lube, … stuff like that.
  4. You need service advisors who get it and can compete with local independent providers. They do not need to be just as good. They need to be better to overcome the customer predisposition to dealer incompetence.
  5. You need to train service advisors to follow the customer, not to follow some one-size-fits-all artificial prescriptive policy. They will need a healthy dose of un-learning.
  6. You need to understand your dealer capabilities and focus your efforts on dealers who can make a difference and want to, but don’t get it.
  7. You need to measure dealer progress in such a way that you can be both prescriptive and surgical with help and remediation.
  8. You need to beef up your field staff’s time spent in service operations. They will need to be trained.
  9. You need to get the most brilliant e-marketing executive that money can buy, because “once you build it, they will not come.” You will need to hold hands with customers and help them un-learn some common knowledge, and then lead them to an electronic promised land. You need an integrated strategy to capture, connect, and close … for selling service, for selling parts, for selling service contracts, for selling information and education.
  10. You need to manage success from one point of contact, rather than a dozen disconnected initiatives that get lost over time, or lost in the shuffle.

At this year’s NASPC we will have two sessions devoted to e-fulfillment. Make sure someone’s there.

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