Monday, November 17, 2014

Hey, Maybe Being Good Is Great
by David P. Carlisle

We have been measuring parts manager satisfaction for about a decade now. We do it on a global basis for some OEMs, and pretty much have the entire North American auto market covered. In other words, our measurements represent nearly all automotive OEMs. Lately, the leader in U.S. overall parts manager satisfaction has been an Asian OEM that is noted for blistering excellence. Our satisfaction survey is not a public beauty contest, so we cannot share the names with you. But, we can share insights. And a fundamental, driving question:

So what?

Or, what’s so good about being a satisfaction leader?

The same OEM that is the perennial leader in U.S. parts manager satisfaction not only leads in overall satisfaction, but leads in many individual categories of parts manager satisfaction: order processing system, collision wholesale, parts availability, accessories.

And pricing satisfaction.

Most folks familiar with parts pricing find it intriguing and, at the same time, baffling. How do you effectively price 150,000 parts? How do you know whether you are too high or too low? How can you effectively measure pricing elasticity? (OK, you can’t.) How do you price to “competitive levels” when most of your parts are somewhat captive? See, these questions are both intriguing and baffling.

To be an effective parts pricer, you must listen to the market. This goes beyond the math and science – you listen to dealers. If they complain a lot, relative to the competition, you’ve got a problem. If they do not, you might have an opportunity.

The parts manager survey reflects the market. It is nothing more than a listening device. So, what are the dealers telling this best-in-class OEM? Up and down the line, dealers are saying that they are doing well. They might be saying (probably are saying) that, given how well things are going, “We are pretty happy with your parts pricing.”

Let’s consider parts sales for a big auto OEM – $2 billion in sales each year is pretty close to the median for these companies. Let’s assume that annual CPI parts pricing fetches you 3-4% of added sales; call it 3.5%. Next, let’s make a safe assumption that being number one in parts manager satisfaction will allow you to get 4.5% instead of the typical 3.5%. This is a very safe assumption. So, what’s the 1% worth? $20,000,000 annually. Twenty million. Twenty million that can be partially invested in processes and programs that will make life for dealers better. Like improvements to your order processing system, improved collision wholesale, higher parts availability, and more effective accessories.

Bottom Line: Parts manager satisfaction is not a beauty contest. It is the market speaking to us all. It is the market speaking to you. If you listen, you might find that it’s worth it.

Monday, November 10, 2014

Luxury Owners Don’t Want To Pay For The Palace
by Benedict Ko

We recently hosted a focus group with luxury vehicle owners who told us about their service experiences at both dealer and non-dealer service locations. What we learned about luxury owners and their decision-making process was surprising.

When I think of luxury owners, I think of people who are willing to pay more. They are willing and able to buy a first class seat, even though an economy seat performs the same function. They buy a name brand suit, when a no-name suit might look just as good. And, they are willing to pay for the luxury and comfort of a BMW or Mercedes-Benz, when a non-luxury car will perform the same functions for a lot less money. So, you’d think that when it comes to repairing that luxury vehicle, they’d also be willing to spend more right?

The answer: not exactly. Through our focus group, we discovered that luxury owners can be just as price sensitive as non-luxury owners when it comes to maintenance and repairs. In particular, the luxury owners we spoke with are sensitive to the perception of higher cost, regardless of the added comfort and convenience associated with it.

“…service advisors, managers, fancy this [and that]; you don’t think you’re gonna pay for it?

This luxury vehicle owner says what many of us are thinking when we enter a luxurious looking place: “This is going to be expensive!” He suggests that the independent shop will be cheaper because the overhead should be lower without all the “fancy”.

Being viewed as the more expensive option is a difficult issue to combat for dealers and the OEM. Customers are paying for higher quality parts and service from a dealer. However, dealers, especially luxury dealers, should be aware that communicating high quality service and products to the consumer can sometimes be overdone and cross the threshold into excess. Consumers, luxury or not, are price sensitive enough to shy away from spending their hard earned money on excess. At the end of the day, luxury and non-luxury vehicle owners are looking for value. Relative to the competition, they want to get what they pay for, and not all the “fancy”. Focusing on providing value through better service processes and pricing are keys to capturing market share. Luxury owners are not any more interested in paying extra for the palace than anyone else.

The Bottom Line: Perception matters. Too much “fancy” at dealerships can drive customers to the aftermarket, in luxury and non-luxury segments. Focusing on the value proposition, including price and service, can win back these customers. Excess glitter and glam might just drive them away.

Tuesday, November 4, 2014

A Look Across the Ocean – Tailored Service Offerings Are On the Rise In Europe
by Michael Lohfink

It's no secret that the automotive service business is extremely attractive for OEMs, authorized dealers, and independent service providers. In 2013, the total European Aftermarket was around EUR 196B in parts and labor (including VAT) – authorized dealers were able to capture roughly EUR 78B of that pie (Datamonitor).

Service is of crucial importance for the customer’s overall brand experience and is an important driver of customer satisfaction. Over time, service involves numerous vital customer touch points, each of which represents an opportunity for OEMs to earn the loyalty of their customers. This is when customers decide to return to the dealership for their next service or for the purchase of their next car – or not. Our recent consumer sentiment survey shows that a customer who is very satisfied with the service s/he received is 66% more likely to return to the dealership for service than a customer who had a neutral service experience. Likewise, a customer who is very satisfied with the service s/he received is 36% more likely to purchase a vehicle from the same brand than a customer who had a neutral service experience. (2014 Carlisle Consumer Sentiment Survey).

Over the last couple decades, OEMs have constantly expanded and differentiated their sales channels for new vehicles to reach ever-shrinking target groups. They’ve introduced new vehicle classes and unlocked new customer groups. This is where service has a lot of catching up to do. So far, most OEMs have tended to lump all service customers together. That is, if a customer buys a premium car for more than EUR 75,000, it is likely that s/he receives the same service as a customer who buys an economy car for EUR 15,000. Service customer touch points offer valuable opportunities for an OEM to identify individual needs and develop offerings tailored to meet those needs. The goal is to boost those customers’ satisfaction and maintain their loyalty.

OEMs have to understand that their customers will project the positive experience they have from buying a new vehicle onto Aftersales. The individual support that they received when they bought their car is what they will demand later on when they need their car serviced. And here, OEMs have to meet the expectations of numerous small target groups if they wish to increase service satisfaction and keep the customers over the long term.

Discussions during this year’s European Parts Benchmark Senior Executive Focus Day in Frankfurt, Germany, showed that some OEMs have realized this trend. They’ve started to react by offering services that are tailored to the distinct needs of individual customer groups. The ultimate goal for these OEMs is to provide each customer with a distinctive – and memorable – service experience.

Here are some examples of what two German Luxury OEMs are currently doing to individualize their offerings.

Mercedes Benz

The OEM’s long-term goal is to make each visit to the dealership an "individual service experience." Initial pilots have kicked off in England, Germany and the U.S. Each pilot dealership focuses on three clearly defined service formats which make it possible to easily tailor services to the particular needs of different customers:
  • Relax or Ride – Customers can wait for their vehicle at the dealership in a lounge with Wi-Fi, desktop computers, television, toys for the kids and refreshments, or they can take a shuttle service to any nearby destination.
  • Door to door – An employee of the dealership picks up the customer’s car and returns it when the work is complete.
  • Drop and Drive – Customers receive a courtesy vehicle for the time theirs is being serviced.
These options allow customers to tailor their own service experience to satisfy their own needs depending on the level of convenience they prefer or their budget.


Aside from segmenting its customer base by vehicle age, the German Luxury OEM has already launched initiatives to address the preferences of different customer groups. One example is the "BMW Excellence Club" that is exclusively offered in Germany. Here, only customers buying a BMW 7 Series sedan can become members of this club. Those members benefit from premium driver training, special sporting and cultural events, and exclusive offers. For example, upon request, BMW offers a service appointment guarantee within 48 hours, which is not available to drivers of other BMW models.

What’s more, BMW recently introduced “Service while you fly” from select airports in the UK. Here’s how it works:
  • A service customer leaves their car in the designated VIP parking area and checks-in with a concierge.
  • While they are away on vacation or a business trip, their vehicle will be serviced at the local dealership and will be ready for them when they return.
  • Bookings can be done online or over the phone, and payment authorization is managed electronically. This reduces customers’ waiting times and increases convenience.
These are only a few ways OEMs are trying to “spruce up” the good, old, service world by offering services that are specifically designed to appeal to individual target groups. And even though no official results have been reported yet, chances are that these programs will positively affect service satisfaction, ultimately increasing service retention and overall profits.

Bottom line

To succeed in the Aftermarket, OEMs must carefully listen to their customers, and give them the goods and services they really want. This goal must be clear from beginning to end – from the way the strategy is designed, to the services offered, and how dealers communicate with customers. Micro-marketing services tailored to each individual customer would be the ideal solution. If done correctly, attractive service offers that are feasible and profitable for OEMs will increase both service satisfaction and service retention.