Af­ter-sales ser­vice pri­or­i­tized Slump in sales prompts search for new rev­enue

China Daily (Hong Kong) - - MOTORING - By LI FANGFANG li­fang­fang@chi­nadaily.com.cn

Over­all sat­is­fac­tion with af­ter-sales ser­vice at au­tho­rized deal­er­ships in China is on the de­cline in 2013 largely due to ris­ing cus­tomer ex­pec­ta­tions, ac­cord­ing to a JD Power study.

The JD Power Asia-Pa­cific 2013 China Cus­tomer Ser­vice In­dex Study re­leased last week found that over­all cus­tomer sat­is­fac­tion with af­ter- sales ser­vice in China has dropped to 815 on a 1,000-point scale in 2013 from 832 in 2012, the first drop in re­cent years, driven largely by a de­cline in sat­is­fac­tion with do­mes­tic, Ja­panese and Euro­pean brands.

Cus­tomer sat­is­fac­tion with do­mes­tic brands de­clined by 31 points to 751 in 2013, and sat­is­fac­tion with Ja­panese brands dropped from 860 in 2012 to 831 this year.

The rat­ing of Euro­pean brands de­creased by 17 points to 832, while US brands achieved an aver­age score of 851, a 1-point de­crease from 2012.

Only South Korean brands col­lec­tively showed im­prove­ment in cus­tomer sat­is­fac­tion, with a year-on-year in­crease of 13 points to 874.

The de­cline in sat­is­fac­tion is at­trib­uted to a sig­nif­i­cant in­crease in cus­tomer ex­pec­ta­tions about the ser­vice ex­pe­ri­ence, ac­cord­ing to the mar­ket­ing in­for­ma­tion ser­vices com­pany.

“The com­pet­i­tive land­scape con­tin­ues to be ag­gres­sive, driven by prod­uct pro­lif­er­a­tion and ris­ing cus­tomer ex­pec­ta­tions, mak­ing it im­per­a­tive for man­u­fac­tur­ers and deal­er­ships alike to de­velop points of dif­fer­en­ti­a­tion on de­liv­er­ing a su­pe­rior cus­tomer ex­pe­ri­ence in af­ter-sales ser­vice,” said Tony Zhou, di­rec­tor of au­to­mo­tive re­search at JD Power China, Shang­hai.

“The in­dus­try should also be at­tuned to macroe­co­nomic dy­nam­ics and be ag­ile in adapt­ing dealer- ser­vice pro­cesses and stan­dards in re­sponse to the chang­ing busi­ness en­vi­ron­ment.”

The lat­est statis­tics from the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers show that China de­liv­ered 8.66 mil­lion pas­sen­ger ve­hi­cles in to­tal in the first half, up 13.8 per­cent year on year.

“De­spite ag­gres­sive dealer net­work ex­pan­sion, the in­crease in the num­ber of ve­hi­cles has put im­mense pres­sure on ca­pac­ity at dealer ser­vice de­part­ments,” said Zhou.

Profit cen­ter

He noted that cus­tomer loy­alty is par­tic­u­larly im­por­tant be­cause af­ter-sales ser­vice is a sig­nif­i­cant profit cen­ter for deal­er­ships.

Af­ter-sales ser­vice ac­counted for 50 per­cent of over­all dealer prof­its so far this year, an in­crease from 44 per­cent in 2012, ac­cord­ing to the JD Power Asia Pa­cific 2012 Dealer At­ti­tude Study.

“And profit from new ve­hi­cle sales de­clined to 33 per­cent, mean­ing that deal­ers should change their op­er­a­tional fo­cus from sales to af­ter-sales ser­vice,” said Mei Songlin, vice-pres­i­dent and man­ag­ing di­rec­tor of JD Power China, Shang­hai.

The JD Power 2013 study found cus­tomer sat­is­fac­tion with af­ter-sales ex­pe­ri­ence has a di­rect im­pact on dealer ser­vice vol­ume.

Ser­vice vol­ume among deal­ers with high cus­tomer sat­is­fac­tion — 831 points or more — av­er­ages 14,692 ser­vice vis­its per year per deal­er­ship, com­pared with 11,224 vis­its among those with low sat­is­fac­tion — 773 points and fewer.

“And we found that the deal­ers with higher cus­tomer sat­is­fac­tion earned 14 per­cent more profit than those with low cus­tomer sat­is­fac­tion,” Mei said.

e im­por­tance of ser­vice is clear, said Charles Mills, vi­cepres­i­dent for global re­tail ex­pe­ri­ences with JD Power China, Shang­hai.

He told China Daily that 40 per­cent of ve­hi­cle deal­ers in China suf­fered a sig­nif­i­cant deficit last year.

Some 20 per­cent broke even, and an­other 40 per­cent prof­ited.

This is a ma­jor change from three years ear­lier, when only 6 per­cent of deal­ers re­ported losses, he said.

He at­trib­uted the sud­den turn­around to the rapid mar­ket cool-down in the past three years.

“When the de­mand surged in 2009 and 2010, deal­ers could gain huge prof­its from new ve­hi­cle sales, which made them ig­nore the af­ter-sales ser­vice,” said Mills.

“The high ex­pec­ta­tions for the mar­ket made them lose sight of prepa­ra­tion for other value-added ser­vices.

“It’s too late for some deal­ers to start build­ing a profit engine in ser­vices now that new ve­hi­cle sales have sud­denly slowed.”

In the US, deal­ers’ prof­its mainly de­rive from af­ter-sales ser­vice, trade-in ve­hi­cles and in­sur­ance rather than new ve­hi­cle sales, Mills said.

“On aver­age, US deal­ers made 30 per­cent more profit than Chi­nese deal­ers,” he said.

Li Guip­ing, pres­i­dent of Changjiu Group, a Chi­nese ve­hi­cle trader with more than 80 au­tho­rized deal­ers, said that car care busi­ness has been the big­gest con­trib­u­tor to profit in its deal­er­ships.

“China is go­ing to in­tro­duce a car war­ranty pol­icy in Oc­to­ber, sup­port­ing cus­tomers’ rights to re­turn de­fec­tive ve­hi­cles and seek a re­fund or re­place­ment,” said Mei.

“Deal­ers are at the front­line of en­sur­ing a pos­i­tive cus­tomer ex­pe­ri­ence.

“Meet­ing or sur­pass­ing cus­tomer needs is crit­i­cal to mit­i­gat­ing the po­ten­tial ad­verse ef­fect of this new pol­icy on cus­tomer loy­alty and prof­itabil­ity for brands and deal­ers alike.”

Lux­ury brands

For the first time, the ser­vice sat­is­fac­tion study has sep­a­rated lux­ury brands from mass­mar­ket brands.

The ob­jec­tive of the clas­si­fi­ca­tion is to ad­dress the dif­fer­ences in cus­tomer ex­pec­ta­tions re­gard­ing af­ter-sales ser­vice.

Over­all cus­tomer sat­is­fac­tion with af­ter-sales ser­vice among lux­ury brands av­er­aged 849, while mass-mar­ket brands av­er­aged 811.

Audi ranked high­est in the lux­ury seg­ment with a score of 880, BMW ranked sec­ond, and Cadil­lac, third.

Among mass- mar­ket brands, Dongfeng Peu­geot ranked high­est at 882, per­form­ing par­tic­u­larly well in ser­vice ad­vi­sory, ser­vice initiation and ve­hi­cle pick-up.

Fol­low­ing Dongfeng Peu­geot in the rank­ings are Guangqi Honda, which trailed by a point be­hind, and Dongfeng Citroen.

The JD Power ser­vice sat­is­fac­tion study, now in its 13th year, mea­sures sat­is­fac­tion among ve­hi­cle own­ers — af­ter be­tween 12 and 24 months of own­er­ship — when vis­it­ing an au­tho­rized dealer’s ser­vice depart­ment for main­te­nance or re­pair.

The time pe­riod — 12 to 24 months — rep­re­sents a sub­stan­tial por­tion of the ve­hi­cle war­ranty pe­riod.

The study ex­am­ines five fac­tors — ser­vice qual­ity, ser­vice fa­cil­i­ties, ve­hi­cle pick-up, ser­vice ad­vi­sor, and ser­vice initiation.

The study is also based on street in­ter­cepts and face-to­face in­ter­views with 15,370 new ve­hi­cle own­ers who pur­chased their ve­hi­cle be­tween Fe­bru­ary 2011 and May 2012, and ex­am­ines 71 pas­sen­ger ve­hi­cle brands.

The study was fielded be­tween Fe­bru­ary and May 2013 in 43 ma­jor cities in China.

MENG ZHONGDE / FOR CHINA DAILY

Two tech­ni­cians check a car at Bei­jing Hyundai’s deal­er­ship in Hainan prov­ince. Af­ter-sale ser­vice is now the key to do­mes­tic au­tomak­ers’ sus­tain­abil­ity in China, ac­cord­ing to the lat­est re­port from JD Power.

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