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There's profit in customer service

The theme of the spring conference, “dealers are dead”, is a recurrent one. Each time it reappears, the rumours of demise are found to be premature - with some reservations. So it is this time. Dealers must emulate successful retailers in other sectors, make good use of technology, work to retain customers and stop giving away profit opportunities. Carmakers are not well suited to retailing and no-one can see a “category killer” way of shifting metal waiting in the wings for the right moment.

So the dealer is not dead. There is, however, a strong consensus that the traditional dealer will have a much smaller share of the market because of forthcoming block exem-ption changes and carmakers increasingly dealing directly with larger customers and muscling in on other profit opportunities.

It is difficult to see the real basis for this consensus. There has been plenty of time for Goliath to see off David in the style of the supermarket and the corner shop, but it has not happened yet. The carmakers, with the possible exception of DaimlerChrysler, seem more interested in joint ventures or control via property ownership than in cutting out the traditional dealer. This is logical, since control can be exercised without the cost of full ownership. In the financial services market, the real competition is for the allegiance of, not the removal of, the dealer, who still represents one of the most effective parts of the sales force. The challenge for the carmaker is to provide product and service bundles that are attractive to sell.

The key element is the customer and how that customer is dealt with. Increasingly, the customer element is being linked with the staff element - it takes the right people to gain customers loyalty. This is hardly rocket science. Recurring themes of customer service surveys and CRM seminars include:

  • A direct link between higher profits and good customer service

  • A direct link between good customer service and employee satisfaction

  • A direct link between employee satisfaction and employee loyalty

It is clear from regular findings of the AM100 survey that the smaller groups can make better margins than the larger groups and have lower staff turnover. It is fair to say that the smaller groups maintain a higher level of customer service. Is there a better reason to predict survival?

Nothing however stays the same and complacency may be the real enemy. Technology increasingly permits larger organisations to act like a collection of smaller enterprises, without the loss of control that would normally follow.

Disciplined use of the right information can be a substitute for individuality and flair. However disciplined, imaginative use of the right information will win every time. Provided the smaller enterprise can keep up with the amount of investment in people and technology is required to remain competitive, then the dealer is not dead.

The sting in the tail also comes from the AM100 survey. While productivity in the rest of industry and in retailing has risen considerably in the last 10 years, productivity in car retailing has risen more slowly.

Why the unimpressive performance? If you believe all you hear, this industry is pre-eminent in customer service. Perhaps those in power are trying to measure the wrong things. Most CSI programmes give the impression of being a complicated game, not necessarily directed at the benefit of the customer. And why have CSI programmes anyway? Good customer service leads to good profits. That should be incentive enough.

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