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Think retailer and act retailer to prosper in the 21st century

Dealers are dead. But don't order the flowers just yet, say speakers at this year's AM Spring Conference. They believe the automotive sales and aftersales industry can look forward to a bright future, despite the threat of major upheaval in the traditional business environment. The secret? Think like retailers, stay close to customers, and encourage staff retention.

Find the key


Aftersales is the key to ongoing profitability for retailers, says Lookers executive chairman and newly-appointed RMI president Fred Maguire. While moves by the European Commission to sever the links between sales and servicing under block exemption reform are likely to encourage independents to become authorised repairers, Maguire believes discarding aftersales - even for cars older than three years - is not an option. “Customers expect it, they are prepared to pay for it and they want the full brand experience,” he says. “Servicing is a dominant buying criteria for customers.” Lookers has developed a service package that targets fast-fit operators like Kwik-Fit by offering main dealer experience with a focus on value. “As an industry we have given away servicing on cars older than three years - we have to take this business back,” says Maguire. He rejects the perception that franchised dealers are more expensive on aftersales than independents, pointing to the group's own research which showed that just 1.3 per cent of customers were put off booking a service with the company because of price. “We can offer all-makes servicing, but can independents afford to invest to match us on equipment, training and customer services? Most can't,” Maguire says. “Our 'customers for life' concept depends on us producing programmes to give staff the belief that they have a job for life and an input into the development of the company.”

Become a destination for the customer


“Retailers must become the destination for the customer, a place of pleasurable transaction. They must be at the core of the automotive business, but if they don't live up to it, pretenders to the throne will come in,” says Graeme Potts, ex-RAC group managing director and former Reg Vardy deputy chief executive.

He believes retailers must become more customer-centric, delivering products and services that car buyers want at the prices they expect. He says there is a need for greater transparency and the elimination of cross-subsidies like sales and servicing.

Potts insists there are no serious challengers to the car - it offers unrivalled flexibility, independence and security over other forms of transport. Cars are brands on wheels and motorists want models that align to their lifestyle needs.

“Customers are under pressure from Government, family and lifestyle - they need multi-modal transport,” says Potts. He believes the new company car taxation rules offer manufacturers and retailers an opportunity to develop new programmes to meet customers' needs rather than “force-feeding” the market with unnecessary schemes.

As a result, says Potts, a new type of all-inclusive 'access' motoring scheme where drivers can swap cars according to their monthly needs is likely to emerge as more company car drivers take the cash option.

The schemes would eliminate hassle by including servicing and repair costs within a monthly fee and enable drivers to exchange cars - from a soft-top during the summer to a 4x4 in winter, for example.

However, retailers should not get sucked in to placing too much emphasis on the new car market. There are people that will never own a new car and just want mobility transport, while others want a 'shopping trolley on wheels' - often a second or third car used for school runs or other low mileage trips.

Don't forget the net

Retailers are losing out on vital business because their staff are focusing on showroom sales and disregarding internet enquiries, says Kevin Turnbull, former Autobytel chairman and Inchcape group director. He says one-third of e-customers are never contacted, handing business to rival dealers or internet specialists.

Turnbull insists the internet is a key retail tool. “If dealers who promise to call the customer within 24 hours of the e-mail request call them within 12 hours, they will double the chance of a sale,” he says. “If they call within six hours, they will double their chances again.”

The internet is making the concept of 'customer relationship management' irrelevant says Turnbull, who believes the process should be viewed as a 'customer managed relationship' as the internet is empowering consumers who are not dependent on visiting a showroom. “They are in control of the relationship, not the retailer,” he adds. “This tends to make them more demanding.”

Research by consultant Forrester shows that more shoppers are using the internet and they are spending more money online across all market sectors. But those who have used the internet for longer have different needs to newcomers - they are just interested in convenience and lower prices, and have no requirement for it to necessarily be an enjoyable experience.

“There is a brand and market share opportunity for those companies who get into e-commerce quickly enough,” says Turnbull. But he warns that manufacturers' “glitzy” TV ads are creating a huge mismatch between the brand image and the retail channel because of poor customer service.

The internet has opened a number of routes to market, but retailers must ensure they do not treat each as a separate part of the business. Consumers usually zigzag in and out of the different channels, obtaining price information online, assessing stock availability from a website and finally making a purchase at the showroom.


Partnership makes sense
Manufacturers and retailers should strengthen their ties in preparation for the proposed block exemption regulations to fend off new entrants, says Ford of Britain chairman Roger Putnam.

“The transition period is when we'll find everyone in the world trying to get in on the act,” says Putnam. “And as past experience has shown, third parties tend to come and go with a lot of people's' money which will not do the reputation of the motor industry any good.”

Putnam believes new entrants would aim to use the existing distribution structure to support them in the medium term until their own activities reduce and finally undermine dealer revenue. But retail networks are the only way to deliver cars, services and parts with the intangibles that deliver the brand and support the ownership experience, he insists.

“Retailing cars is a complex business and there has been scant understanding of the job that dealers do in this respect, particularly by the legislators,” says Putnam.

Ford has a number of joint ventures in the European market, but Putnam concedes that no carmaker can run the distribution structure due to its size, complexity and cost. Customers are likely to become brand junkies - those marques that deliver trust and expertise will take on increasing importance in the minds of customers.

“The manufacturer owns the brand and its heritage, but the retailer delivers the brand experience so this is a shared job and both sides must give it their total focus,” he says.

Keep your customers, and the bottom line will grow Improving customer retention rates can have a real and significant impact on a retailer's bottom line, according to Wendy Jones, chief operating officer at iSky Europe. “Raising retention rates from 90 per cent to 95 per cent can boost pre-tax profits by up to 50 per cent,” she says. “Loyal customers purchase more, pay higher prices and cost less to work with.”

Retailers need to apply “common sense” to their customer relationships or risk wasting thousands of pounds on customer relationship management systems that do not meet their needs. Competitors will not wait around while a dealer spends two years investing and understanding complicated software.

Interaction with the customer enables dealers to reinforce the positive elements of their service and address the negative ones.

Case studies by iSky, which provides customer feedback for manufacturers, reveals that customers who are contacted by dealers at least once a year are 14 per cent more likely to return to the showroom than those who aren't. And the more often they are contacted, the greater the rate of repurchase.

But it's not just about the contact; what's important is the conversation. “The customer needs to believe that this is a natural extension of the dealership's services and that the results will be mined and implemented for future improve,” says Jones. “Get to know the customer, listen and take action.”

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