The Light Is Green

Lexus and quality

When Toyota began its Lexus initiative in 1989, their overriding goal was to stress quality and customer satisfaction above all else.

But many of the people who would be tasked to carry out this project, in fact the ones who would be directly in touch with Lexus customers, would not be working directly for the automaker but for dealerships.

The solution was an extremely stringent dealer selection process that focused mainly on the dealer's customer satisfaction performance: out of 1,500 existing Toyota dealerships, only 80 (that's 5 percent) made the cut.

Today Lexus dealers are widely known for providing exemplary customer service. The flip side is that Lexus dealers are by far the most satisfied of all dealer groups according to NADA's annual dealer attitude survey.

Tags: Lexus, Toyota, customer satisfaction, best practices

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How Suzuki generates market

As India's middle class continues to grow, the local car market is going the same way at a fast clip of 15 percent a year. Total sales are expected to jump from 1.3 million in 2006 to 2.1 million in 2010.

Maruti Suzuki is the reigning king of the auto industry in India, owning an amazing 55% of the market.

Not content with their absolute dominance of the Indian car market, they've come up with some innovative ideas to grow the market and thus expand their reach.

Here's what Maruti noticed:

• Many first-time buyers don't know how to drive
• Few women in India drive
• Buying decisions are made by the entire family
• Rural areas are mainly unattended by automakers

Here's what Maruti is doing:

Focus on first-time buyers

35 percent of sales are to first-time buyers. For many of these, a car is an enormous acquisition, so Maruti has learned to treat all customers equal, whether they are buying a high or low-end vehicle.

But here's the more interesting strategy: Maruti sponsors 18 driving schools throughout India, and plan to expand to fifty by March 2008.

Focus on women

More than half of trainees at the driver training schools are female. So Maruti has “lady instructors” to make them more comfortable. Jagdish Khattar, managing director of Maruti Suzuki, says:

"If the wife learns to drive, it won't take long for her to persuade the gentleman to buy a car."

Focus on family

Maruti dealerships are equipped to accommodate buyers in large groups, for example with play areas for children.

Attack rural areas

Indian carmakers mainly focus on urban areas as that is where the money is.

But rural India is home to over 800 million people, with a lower cost of living, and where there are many dual-income families with more disposable income.

Maruti has unleashed salespeople to rural India to target various niches... teachers for example. Last year they visited 30,000 schools and sold 10,000 units.

Ongoing service

There are over 6 million Maruti owners throughout India. Maruti serves them through a huge network of 400 dealerships and 2,400 service shops in 1,100 cities.

They hold free tune-up and service camps that are attended by 450,000 owners a year.

And the end result of all of this?

Maruti not only leads all carmakers in India in sales, they are also ranked #1 by JD Power in customer satisfaction with dealer service (for the past seven years).

Learned of this here.

Tags: customer satisfaction, best practices, automotive, auto industry, automotive industry, India, India auto industry, Suzuki, Maruti, Suzuki Maruti

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Apple lesson in customer care

I am a recent Mac convert, at least at home, and a big fan of the company and their products.

Recently, Apple made many loyal customers unhappy when they cut the price of their cool new iPhone by $200, from $599 to $399.

This is actually a widely known and accepted practice in technology: as soon as a high-demand tech item goes on sale, there is a price premium to be paid. Early adopters know this and buy willingly. Some time later, prices drop.

The thing is, the iPhone's price drop was pretty steep, and happened only a few weeks after the product was launched.

Users were not happy and wrote to Apple in droves. The flip side: Apple's success is based on happy, or rather passionate, customers.

What did Steve Jobs do?

He wrote an open letter to original iPhone customers explaining why Apple did what they did, the long-term effects they are looking for, and apologizing for not taking care of early iPhone customers as well as they could have. And he also gave all early iPhone buyers a $100 credit.

In other words:

1. Acknowledge the mistake.  Even if, as in this case, it wasn't really an error, just an unfortunate situation).
2. Apologize immediately. Explain what happened.
3. If possible, make it up to the customer. I feel this is icing on the cake, as customers will be pleasantly surprised with steps one and two. But if you can also give them something extra, go for it.

If Apple can do this for hundreds of thousands of its customers, it should be pretty easy for small and medium businesses to adopt such a proactive attitude when something goes wrong with their clients. In fact, very easy, as most screw-ups happen just one customer at a time.

Tags: customer satisfaction, branding, Apple, iPhone, Steve Jobs, best practices

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I don't know -> know!

The mayor of a small but flourishing Siberian oil town had a great idea to compel introspection and accountability on his public employees, and hopefully increase their efficiency.

Alexander Kuzmin, a young businessman who is now mayor of Megion, has banned city employees from saying such phrases as:

• I don't know
• I can't
• What can we do?
• It's not my job
• It's impossible
• I'm having lunch
• There is no money
• I was away/sick/on vacation

Those who disobey "will near the moment of their departure."

Says Kuzmin:

"Town authorities are there to make town residents' life comfortable and prosperous. Town officials must work out mechanisms to solve and remove problems, not to avoid them."

Kuzmin's chief of staff, Anna Borovikova, says discipline has improved:

"Before, it was so easy to say `I don't know.' Now before reporting to the mayor we prepare several proposals on how one or another problem can be solved."

Read it at Yahoo.

Tags: Alexander Kuzmin, Megion, best practices, customer satisfaction

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Chrysler gets life

Chrysler continues to grab headlines, this time with a gutsy move intended to underscore their commitment to quality.

They've now announced a lifetime powertrain warranty for all new vehicle sales in the U.S.

Chrysler's previous powertrain warranty was for three years or 36,000 miles (58,000 km).

This is the now the best warranty in the auto industry.

Both GM and Ford currently offer transferable 5-year powertrain limited warranties; GM for 100,000 miles (161,000 kms), Ford for 60,000 miles (97,000 kms).

Hyundai has been the market leader in this sense. Since 1999, they've had a 10-year, 100,000-mile non-transferable powertrain warranty.

Toyota has a five-year, 60,000-mile warranty for Toyotas, and a six year, 70,000-mile warranty for Lexuses.

The new Chrysler warranty is non-transferable, and owners must get a free powertrain inspection every five years from a certified dealer.

Chrysler had tried a 7-year, 70,000-mile warranty two years ago, but that turned to be too onerous. According to Wards, DaimlerChrysler paid out $6.9 billion in worldwide warranty claims in 2005, way ahead of all other manufacturers, including GM ($4.7 billion) and Ford ($4 billion).

According to Wards:

Chrysler officials trace the genesis of the plan back to its dealers, who recently told executives in Auburn Hills the auto maker’s product quality is the best they've seen in years and its warranty should reflect the improvement.

MSNBC reports that the warranty applies to 88 percent of U.S. sales under the Chrysler, Dodge and Jeep brands, and covers the cost of all parts and labor needed to repair covered powertrain components, engine, transmission and drive system, which happen to be the most expensive repairs in a vehicle.

Tags: Chrysler, Cerberus, automotive, auto industry, automotive industry

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Mazda lesson on how to fix a problem

Here's a lesson from Mazda on how to nip a potentially huge problem in the bud (based on a piece in Automotive News):

• Step 1: See the problem.
• Step 2: Admit the problem. Publicly.
• Step 3: Take quick action to solve the problem. Publicly.

The backstory: In July, a shipper carrying Mazda vehicles went into a 60-degree list in the Pacific and had to be towed to port. Some of the cars were under water, others were dry with little visible signs of damage. Mazda quickly stated that its engineers would evaluate all 4703 cars to determine which to scrap and which to sell through a used-car program. Standard fare.

But then they saw that though their initial solution was logical, it was not a wise one in the long term. I quote from Automotive News:

... given that the provenance of the vehicles might come into doubt in several years' time, Mazda decided to avoid a potential customer-satisfaction nightmare by scrapping all the vehicles.

"We just couldn't take the risk of there being unforeseen issues down the road," said Mazda spokesman Jeremy Barnes.

"There were two camps of potential buyers. One was, 'Where can I get one cheap?' The others were worried they might get one by accident and weren't going to shop Mazda as a result."

What a great move by Mazda! The solution is in the best interest of clients, potential clients, people who weren't potential clients but now may be when they see how Mazda handles problems, and ultimately Mazda itself.

Tags: Mazda, automotive, auto industry, automotive industry

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Worst customer experience ever (Part 3)

A brief recap of my worst customer experience so far, which occurred over 3 visits to a major auto dealership (I'll add a fourth as a special bonus just for you! :) ...

• Part 1 involved arriving a few minutes before opening time and being summarily dismissed (and dissed) by the Parts counter guy.
• Part 2 was a few days later, whereby I waited half an hour without so much as a nod in my direction. But when I left a salesman ran after me and begged me to come back.

The next day, I went back to the dealership, and luckily the guy who had alertly fetched me in the parking lot saw me right away and directed me to an available sales rep.

I sat down and we discussed what I was looking for, then went into specifics about my trade-in. And that's when he hit me with Car Sales Trick #28, asking me what the value of my trade-in was. Obviously, he was hoping for a low figure, and if conversely I high-balled, he'd just go to his industry-standard book of used-car values that everyone in the known universe knows about. Should I have done my homework? Possibly. Still, it seemed like a cheap trick and so I left.

I'll be buying my next car from their competitor, a smaller but friendlier shop.

Unfortunately, a week later (still hadn't bought my new car) I was forced to go back to the "bad" dealership, just for a planned service visit (no other shops had availability), but they still managed to surprise me with some silliness...

Part of the service was an oil change. When I went to pick up my car saw they had stuck one of those reminder stickers on the inside of my windshield, but the writing was so faint, just scratches in fact, as to be totally illegible. I asked the technician and he apologized, but the plastic stickers were too slick to take ball-point ink.

I had to laugh! What kind of answer was that? This dealership has been in business for over 20 years, I wonder if this problems dates back to Day 1?

Incredibly, they're the #1 or #2 dealer in a couple of makes, and continue to grow, all of which underscores 3 facts:

1. Many countries in emerging markets have a long way to go regarding customer satisfaction.
2. These countries are still very generous, in the sense that the market accepts vendor behavior that would be inadmissible in major markets.
3. There's a great opportunity for forward-thinking dealers to come in and blow this type of old-schooler out of the water.

Tags: automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers, customer satisfaction

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Worst customer experience ever (Part 2)

Part 1 of my worst customer experience involved arriving a few minutes before opening time at a major auto dealership, and being summarily dismissed (and dissed) by the Parts counter guy.

But, thinking I maybe had overreacted, I went back a few days later, this time making sure to arrive during normal business hours. I got there around 6:30 PM, parked in a paid lot across the street (they don't have client parking), and went in...

... and stood there for exactly 30 minutes without anyone even acknowledging my presence. I timed it. There were several customers ahead of me, and all salespeople were "taken".

I left shaking my head (to myself I hope), paid the parking, and as I was getting into my car saw that a sales guy had run out after me, apologizing and asking me to go back. I said no and left, but decided to go back the next day for a final try...

Tags: auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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Worst customer experience ever (Part 1)

My worst-ever customer experience occurred at an auto dealership. Maybe I'm attuned a little more than normal as we happen to provide software for this industry, but I'll share it with you to see what you think.

No names will be given so as not to offend a potential client. :)

The tale comes in 3 parts as I gave this dealer that many attempts to sell me a car... (would I actually milk 3 posts out of such a trivial and piddling personal incident? You betcha!)

Part 1: Monday morning 8:15 AM

T'was 8:15, just dropped off my 2 boys at school, and since I was looking to change my car, thought I'd stop by the city's largest Brand X dealership a few blocks away. 

I got there and looked through their enormous plate glass window, saw that though they were closed there were some 15 people sitting around a large table, maybe the sales staff doing a beginning-of-day session.

No one took notice of me, no problem, I'll wait, knowing they opened 8:30. I walked over to their Parts shop next door to kill time looking at their amazingly entertaining display. :)

The Parts counter guy saw me and walked towards the door. Great, I'm in, I thought, maybe they have a cappuccino machine while I wait! As he approached, he suddenly flicked out his index finger and pointed at me... strange, eh?

When he reached the glass door he brought his finger to eye-level and tapped on the glass three times right in front of me, then did a 180 and went back to his desk.

Say what?

Oh, I suddenly realized he was showing me the store's Business Hours sign. For a moment I thought he was funning with me, waited a few seconds, but he never looked back at me.

Thanks buddy, I'll be sure to come back soon! I went to the office vowing to never visit that dealership again.

A few days later I was back, maybe I had over-reacted, let's give them a second chance. That'll be Part 2 of my story, coming soon...

Podcast: How successful dealers counteract shrinking margins

Our new podcast is ready, where I talk with Peter Daniel of ADC-Automotive Dealer Consulting about how successful dealers are responding to shrinking margins on auto sales.  

This ties into my post of a few days ago, "Lower margins, what to do".

The podcast runs 15 minutes... here's a brief guide of its content:

1. What dealers can do to offset shrinking margins on sales of new cars
2. Procedures are needed to improve aftersales operations
3. Parts and Service are not "necessary evils"; margins are pretty good!
4. A Dealer Management System (DMS) can help organize Parts and Service
5. Real-world example of good use of Lost Sales reporting
6. Manufacturers are starting to mandate better Fill-rates
7. Real-world example of No Problem Found procedures
8. Real-world example of Greeting policies
9. When do dealers understand the need for processes?
10. What procedures have great impact on bottom line?
11. Consistent policies and procedures help a dealer grow

Click here to listen or download the podcast.

(The really nice music bits in there are by Allison Crowe).