But the UK’s largest contract hire supplier believes that outlook is misplaced: fleet sales can help dealers hit their bonus, while the aftersales business is highly profitably.
Lex Vehicle Leasing introduced a new customer service index in 2004 after consultation with some of its 1,000 One-Call dealers. Its aim was to guarantee a consistent level of service throughout the UK for its customers, with key performance indicators covering areas such as collection/delivery, courtesy cars and valeting.
Two years on and LVL’s CSI results have leap to 75-80%. Its next step is an incentives scheme to be introduced over the next year. “We want to motivate dealers and get them to share best practice,” says Paul Kerrigan, LVL aftersales manager.
He has appointed a number of independent repairers to the network “to test the waters”. They account for around 20% of business and it has been a successful trial – of the top 10 performers last year, five were independents. The policy has particular benefits in London where many Mercedes A-class and C-class cars are being channelled through independents to reduce the waiting times.
Despite a 10% reduction in customer complaints last year (the company received around 500 per month), the CSI scores identify a number of areas to improve throughout the network. Worst KPIs are for the wash and vac service, with many companies not valeting the car, and documentation that informs the customer about the work carried out.
“The wash and vac is the icing on the cake. If the customer complains, it turns into a confidence thing – they wonder what else hasn’t been done. So do we,” says Kerrigan. “We’re educating the dealer by introducing a link on the One-Call system that automatically prints out the work that’s been done and shows what hasn’t.”
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LVL operates a fleet of 178,000 cars and vans (including the 40,000 cars acquired with the takeover of the HSBC fleet). It buys around 40,000 vehicles a year from its retail suppliers and will this year spend more than £40m carrying out around 300,000 services and repairs. The company recently adopted the Epyx 1Link electronic invoice system, which means retailers are paid within seven days instead of 30.
“Dealers need the volume, which is why it’s important not to over-expand the network, although we do have gaps for a few more to join. They have surplus capacity to fill in the workshop and this is good, profitable business to have,” says Kerrigan.
“But service times have fallen as schedules increase, so we have to put more vehicles into the dealerships for them to stay still on turnover.”
The profile of LVL’s expanding fleet (targets are 10% organic growth each year) has fundamentally changed over the past 10 years. Vauxhall and Ford no longer dominate: premium makes like BMW and Audi are now taking a larger slice. Consequently, the profile of the retail network has also altered.
LVL buys cars from 130 dealerships at 60 groups: its strategy is to have as few dealers as possible without affecting lead times. It operates a bidding system based on availability (the price has already been set by LVL) and measures delivery process, lead times and customer feedback.
“We suspend dealers that are not hitting the targets,” says Mark Connor, LVL vehicle supply manager. “Now dealers are aware of the standards, they are usually achieving them – we do not sack many.”
Revenue for dealers is based on volume and service retention; they do not earn at the front end, aside from hitting manufacturer sales bonus targets. “We need a competitive discount that is better than other leasing companies, but it’s also about achieving a balance,” Connor says. Those discounts are negotiated quarterly.
LVL is keen to work more closely with the dealer suppliers and organizes regional meetings to hear their views and perspectives about the relationship. With the CSI programme, the company has a clear network benchmark, which enables it to dispense positive feedback to retailers.
“It’s easy to tar all leasing companies with the same brush, but Lex is unique,” says Kerrigan. “One-Call costs a lot to run but it is an important tool. We direct sales and aftersales business to dealers because we are a one-stop shop and we handle the process via our call centre.”
And Connor adds: “That means dealers get the volume for turnover and meet their bonus targets.”