Each year I make dozens of presentations to senior industry executives and car dealers. Most of these are "forward looking." I peer into my "crystal ball" and forecast changes and industry trends. For this reason, many in the industry refer to me as Canada's automotive "guru" ... and no, I do not sit on top of my desk meditating in the lotus position. What I do is study reams and reams of industry data, consumer surveys and other information in an effort to interpret from the data what the automotive future may hold.

Through many years of making such analyses, I have come to believe strongly that customer satisfaction is critical to automotive success. And I do not mean just "generally positive" customer satisfaction. Rather, I mean what one of my clients refers to as, "Top Box" Satisfaction.

But, I take this precept even further. I also believe it is the role of the consumer to be as demanding as possible with their car dealer. Only "tough love" works. Despite my dozens of presentations and hundreds of other presentations by leading experts in the field, most car dealers still do not "get it". Even with all the rhetoric over the last decade, customer satisfaction at the dealership generally has not improved. Indeed, in some areas it has declined. It is somewhat like the errant teenager who doesn't understand the importance of going to school, being responsible in life, being dedicated and working hard, or staying away from drugs.

Often, the more a parent talks to them on these issues the less good it does in motivating them to change. One of the more successful approaches for most such teenagers is called "tough love". I think it is about time more consumers took a "tough love" approach to the automotive sector. If we analysts can't get through to the retailers then maybe, just maybe, if consumers packed-up their business and took it elsewhere, then the industry would be more responsive.

At no time in the history of our industry has the consumer had more power. Vehicles are so well built that consumers do not need to purchase them as often. They have a 'choice' as to whether to repurchase at any given time. If they don't get 'top box' satisfaction, then most can simply not buy because they know their current vehicle will last a long time and they can make do in the short term. In addition, the longer life of vehicles means they will undergo more repairs, service and maintenance. This is where the profit is in the industry, so by withholding their service business, consumers can exercise more power.

The consumer will choose where repair and maintenance will be performed. Qualitatively, the choices in the marketplace are getting better and better and quantitatively there is also more choice. There are 3,200 car dealers in Canada, but more than 20,000 other outlets where a consumer can go for repairs and service and upwards to 10,000 outlets they can go to for purchase of a used vehicle. In addition, the Internet is slowly emerging as a viable medium for purchasing a new or used vehicle. It already has put consumers in the driver's seat on price negotiation as well as giving consumers access to better information about vehicles. Independent used-car dealers are slowly cleaning up their act and are becoming much more professional. Fierce competition amongst financial institutions has yielded dozens of ways for consumers to finance their purchases. The industry has to understand the power of the consumer and that the car dealers are no longer in control. The consumer is going to win this battle.

This explosion of choice provides leverage. I believe that consumers should flex their muscles and use their power. Indeed I believe they have an obligation to use their power.

The rewards for those in the industry that provide "Top Box" Satisfaction can be significant. The average transaction price of a new vehicle is close to $30,000. For a used vehicle it is about $15,000. Consumers who experience "Top Box" Satisfaction are very loyal to their dealers with both their new vehicle purchases and their used vehicle purchases.

Close to 70 percent of consumers repurchase the same make of vehicle if they experience "Top Box" Satisfaction with their dealer. This drops by about three-fold to only about 30 percent if the consumer is only "generally" satisfied and it drops to only about 15 percent for those consumers who are dissatisfied. Come on consumers! Understand how powerful you are in the marketplace. It is interesting to see that dealers play a more important role with repurchase loyalty than the vehicle itself, although satisfaction with the vehicle is also important. Only about 60 percent of new vehicle buyers and 33 percent of used vehicle buyers repurchase the same brand if they have "Top Box" Satisfaction with their vehicle. A similar drop-off occurs with consumers who are generally satisfied and dissatisfied with their vehicle.

This tells me that a really good car dealer can do a lot to overcome a consumer's dissatisfaction with a problem vehicle. It also tells me that consumers are inherently loyal. It is the dealer coming up short from a satisfaction perspective who forces the consumer to be disloyal.

"Top Box" Satisfaction also extends into the back of the dealership and is a large factor in determining who the customer will choose to do the maintenance and repairs on a vehicle. Close to 70 percent of consumers have their maintenance performed at a dealer if they experience "Top Box" Satisfaction with their dealer. This drops to about 40 percent for those dissatisfied with their dealer. Similar to repurchase loyalty, satisfaction with the vehicle is less important than satisfaction with the dealer. However, consumers who are satisfied with their vehicle are still more loyal on maintenance work than those that are not satisfied.

"Top Box" satisfaction is also very important in determining who does a vehicle's oil change. If a consumer is completely satisfied they have 61 percent of their oil changes performed at their dealership. If they are not satisfied this drops in half. Again, satisfaction with the dealer is more important than satisfaction with the vehicle.

Oil change business is critical for success in the book end of a dealership. If a dealer does the oil change they also get 9.5 percent of other maintenance and repairs. If a generalist does the oil change, this drops to only nine percent of maintenance and repairs. A vehicle requires $12-15,000 in repairs over its lifetime. With "Top Box" satisfaction most of this work will be done at the dealership. Gross profit in the service department averages close to 70 percent, which means that over the life of a vehicle a dealer would earn $7-10,000 in profits. They barely make $1,500 selling the vehicle. You would think that the service profits would motivate dealers to provide "Top Box" satisfaction. Sadly, in many cases it does not.

What all this information means is that only dealers who absolutely delight their customers from a satisfaction perspective can expect their customers to reward them with more business. It also tells us that because dealers are in the front line they can make up for a lot of the "sins" of the vehicle companies whose products they sell.

Most important, it tells us that consumers are truly in the power position in this industry and they should exercise this power. "Tough love" works in the auto industry just as well as it does with teenagers.

Dennis DesRosiers is president of DesRosiers Automotive Consultants (DAC), Canada's leading automotive sector consulting firm, and the only strategic consulting group in the country focusing exclusively on automotive issues. Services provided by DAC include strategic consulting, consumer market research, and automotive information services.


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