Last year, SSGM’s analysis of the 2009 J.D. Power and Associates Canadian Customer Commitment Index Study found the recession, feeling by many to be in full-swing, was taking a toll on vehicle maintenance spending across Canada. J.D. Power reported annual spending on vehicle maintenance and repair had fallen to $856 from the previous year’s figure of $920.
This year’s report finds that the effects of the recession continuing to impact the aftermarket. J.D. Power finds consumer-reported average annual expenditures on vehicle maintenance and repairs decreased to $9.8 billion in 2010 from $11.2 billion in 2009. This decline came as a result of owners of vehicles aged four- to seven-years holding back on maintenance spending.
Where is the decline? Why the decline?
When J.D. Power crunched the numbers further from the 14,500 Canadian respondents, it found the drop in spending could be pinned on two factors: a fall in the average amount spent by a vehicle owner per service visit to an independent and a decrease in the number of service visits, most acutely seen in vehicles four- to seven-year old. To put those findings into perspective, the study found per service dollars spent averaged $287 in 2010 compared to $352 in 2009, or a drop of $65 dollars. While $65 does not sound like a significant amount of money, spread over time and vehicles, this $65 dollars quickly adds up to lost revenue and profit for individual shops and the industry as a whole.
Why the decrease? Certainly, the recession is one reason. During tough economic times, consumers will cut back on discretionary spending, forgoing such things as family vacations to purchases of iPods and other electronic gadgets. Automotive maintenance and repair is no different. For many vehicle owners who are now watching family budgets closely, unless the work recommended by the technician and service writer is safety-related they may, and often do, forego that work in order to save money.
What should be more concerning to Canadian independents is this trend may be indicative of more troubling changes in the aftermarket.
“The more concerning part of this is whether there is a more systemic lengthening out of the service window,” said Ryan Robinson, director of the Canadian automotive practice at J.D. Power and Associates. “A lot of OEMs have been educating customers that they do not need to service the vehicle that often anymore.”
According to Robinson, technologies and designs have improved, leading to vehicles lasting longer, fewer parts needing to be frequently replaced; and advances in filter technologies and motor oils have extended the drain interval between oil changes. This has meant a decline in the number of service visits owners of today’s vehicles will make to a shop. To continue to generate decent revenues from these longer service intervals, OEMs have begun to pack more service work into the scheduled service intervals.
“The problem with that approach is once you start bundling more types of service into the event, the money you are asking consumers to spend per event increases,” Robinson said. “Consumers will start to believe that servicing their vehicles is becoming more expensive and they may start pulling back on some service work, on such services that are not mandatory or required.”
Robinson added the fallout of this is the damage it causes to customer relationships. The J.D. Power and Associates study finds once more that independents score very high in customer loyalty and return visits compared with other nationally-known service operations and dealer-based service operations. This year, Certigard (Petro-Canada) took the top-spot in the survey, with OK Tire and NAPA Autopro coming in the top-five. The study also pointed out once more the strong relationship between customer satisfaction and customer loyalty:
“Among customers of brands with the highest levels of overall satisfaction, nearly 80 per cent indicate they ‘definitely will’ return to the service facility for work they will pay for (outside the scope of their vehicle warranty). In contrast, among customers of less-satisfying brands, only 45 per cent say the same.”
By trying to pack in more services into a single visit it has the effect of making it harder for the service writer and technician to educate that customer on necessary work and regular maintenance, and dampening customer satisfaction and loyalty. Each time the service writer or technician tries to educate the customer, it is frustrated by the customer seeing only a high price-tag and thinking about ways to take the business to someplace cheaper. It is not a formula for long-term profitability or success.
“It is something that we have been talking to the entire industry about for a long time,” Robinson said. “If you educate the customer – and you do it right – the customer comes away with the perception that you have given them helpful advice. Not only are you accessing more dollars in the day, but you are accessing higher retention levels down the road.”
Certigard puts the focus on the customer, shop practices
John Watt, national manager with Certigard (Petro-Canada) pointed to his company’s efforts at tying customer satisfaction and business processes that helps drive profitability and customer loyalty to its network of service providers of Canada.
For some years, along with studying carefully the annual J.D. Power and Associates survey, Certigard has been using Vertex Consultants to track customer satisfaction and loyalty. The Vertex surveys focus on the first-time customer to Certigard as this customer likely has had dealings with another service provider and is able to compare the service he or she has received at Certigard to what the service experience was like previously with another independent service shop or a nationally-branded shop.
Watt said what is looked for in the survey is very specific: service items that translate into high customer satisfaction results and which can be acted upon and improved by every shop.
“We are talking about fundamentals of the business,” Watt continued. “These include such questions as whether inspections were performed, how was that inspection communicated to the customer, and all of those fundamentals are then cross-referenced to the average cost of the transaction, for example. Questions such as ‘Is your car cleaner or dirtier after the transaction?’ may seem trivial, but we have found that such things are very important to developing customer satisfaction.”
Watt believes that by focusing on those fundamentals in every Certigard shop in Canada, and sharing customer feedback results so shops can take action on them to improve customer communications and relations, has helped in not only placing Certigard in the top position this year, and earlier in 1995, but to having consistently placed its service operations annually in the top-five of the J.D. Power and Associates survey for some time. The company’s internal survey also reinforced what J.D. Power’s survey has repeatedly pointed to as the key for long-time customer loyalty and shop profitability: honest communications with customers.
“The number one criteria used by customers is the sentiment of honesty,” said Watt. “If you are not communicating in such a way that gives choice to the customer and that communication is clear, that sentiment of honesty does not come through.”
Watt is a firm believer in the Motorist Assurance Program (MAP) in helping foster better customer communications and making it easier for the technician to educate the customer and to help the customer make an informed choice as to the work needed on the vehicle
“The car needs what it needs,” Watt said. “(The car) does not know what is happening in the economy, that it is down, the dollar is strong or someone has been laid-off. If something is worn, then it has to be replaced.”
Watt’s remark is echoed in a recent AIA study on the aftermarket, produced with DesRosier Automotive Consultants Inc. The 2009 study titled “Hidden Potential Unmasked” found Canadian vehicles four- to 12-years-old are being underserviced by an average of $239 every time that vehicle is taken to a service provider. Drilling down further, the study found that $28.47 billion in potential demand was available in 2008, while the actual performed services in 2008 were valued at $18.14 billion. A little over $10 billion was left untapped.
Watt said that to tap into this unrealized pool of revenue it is important to develop and build on customer relationships and independents need to focus their energies on the business processes that help make those relations work.
“We find a lot of the “mom-and-pop” independent repair shops, two-bay garages, are some of the best out there,” added J.D. Power and Associates’ Robinson. “You don’t have to go further than seeing how these two-bay garages are doing at building and maintaining personal relationships.”