Consumers will spend again, but independents will face increased competition from remaining dealership operations
This year’s annual J.D. Power and Associates Canadian Customer Commitment Index Study, which takes a close look at Canadian’s satisfaction with service operations across the country, has found some interesting, if worrying, trends. These trends will have significant impact on Canadian independent service providers, especially in the next few years as the automotive landscape goes through some dramatic changes.
Canadians hold onto their repair, maintenance dollars
This year’s Canadian Customer Commitment Index interviewed some 14,000 Canadian car owners, with vehicle ages ranging from brand new to 12-years-old. In previous years, Canadians spent a considerable amount on repairing and maintaining their vehicles, with each successive year increasing.
For example, in the J.D. Power survey last year, Canadians with vehicles ranging in age from four-to seven-years spent some $823 in 2007 on vehicle repair and maintenance, and this year J.D. Power reported that in 2008 spending rose to $920. But the global recession and credit crunch has taken its toll. According to this year’s study, “average annual spending on vehicle maintenance and repair services has declined to $856 in 2009.”
Darren Slind, senior director, national leader for client solutions with J.D. Power and Associates in Toronto, says the decline is a natural reaction to worries people have about the overall economy: if you are worried about your job and the economic slowdown, you begin to cut back on discretionary spending, and automotive repair and maintenance is not immune to that same pressure.
But Slind is quick to add he suspects this decline is temporary.
“At some point, in the attempt to save dollars in these difficult economic times, the consumer may be risking the safety of their vehicle,” says Slind. “So it is not a wise decision and we believe some of the (missing) dollars will come back into the market. Not investing in the upkeep and maintenance of your vehicle will cost a lot more.”
Traditionally, the battleground between independents and dealer service operations happens when vehicles enter the three-to four-year ownership mark. This is when most vehicle warranties begin to end and many owners feel they can continue with their dealers’ service operations or safely move to an independent for any maintenance and repair needs. For the last few years, independents have been making headway against the dealership operations. This year, independents account for some 59 per cent of the estimated $11.2 billion annual service market for vehicles between three-and 12-years-old. In 2008, independents had 57 per cent of that market and in 2007, it was 56 per cent.
Two-percentage points may seem like a very small number, but it is some $220 million dollars that flowed to independents away from dealership service operations.
But this is where the story get’s interesting because a fierce battle is now going to happen between the independent and the dealer operations for those millions of dollars, and for the pent-up service dollars that will start flowing once the economy turns around.
Don’t expect dealership operations to go away
This year saw dramatic changes at the three major North American auto makers, with General Motors announcing bankruptcy and re-organizing, shedding some of its vehicle brands and shuttering dealership operations in an effort to overcome declining sales as a result of the credit crisis. The dealership closures by some of the automakers continue to attract a lot of attention, most particularly, by independents that see the closures as an opportunity for increased revenue for themselves. The orphaned car owners, it is assumed, naturally turn to the independents for vehicle repair and maintenance.
Slind warns this may not be the case. He points to an interesting statistic. In the four-to six-year-old age range of vehicles, dealership service operations can maintain nearly 50 per cent of the vehicle service market with very little or no active recruitment of those customers on their part. Now, with the number of dealership service operations being reduced, the remainder will likely aggressively go after the owners of vehicles four-years-old and older who they don’t already have, but will directly target that lucrative group of owners in that critical three-year-old vehicle category who are likely debating either to make a transition to an independent service provider or to stay with the dealership operations now that the vehicle has come off of its warranty.
“I don’t think dealers are going to take this lying down and there will be a concerted effort (and a battle) for that three-year-old car customer,” he says. “The challenge for the dealer is not so much to get those people back, since once the customer has decided to leave the dealership for the majority of their service -and they find a good aftermarket provider they trust and who provides quality and value -it is very difficult for the dealers to get them back. The challenge, instead, will be one of prevention, to deliver such good service and such a great ownership experience, that a higher percentage of those customers, once their vehicle comes off of warranty, decide to stay with the dealership operation.”
So what is it that the dealerships are going to emphasize and what will independents have to counter with?
The key will be striking a balance amongst several key factors that play into customer satisfaction. These can be broken down into the quality of the work, time, aggravation and risk involved. Within those factors are such things as the quality of the interaction the vehicle owner has with the service advisor, the overall impression of the facility to the customer and the willingness to work with the vehicle owner’s schedule. What may be surprising to some is that price, while certainly a factor, is not often a critical factor in keeping people coming back to a service operation, especially if other key factors meet a person’s expectations and demands.
“It is not really so much the dollar they are paying, but can they get an experience that is respectful of their time, both in getting the vehicle in for service and will the vehicle be ready when the service provider says it will be ready. Risk comes down to if the service provider is putting in high-quality parts, is the vehicle fixed right the first time when it is brought in for a repair and how convenient are you to do business with.
Several other interesting findings were when customers were asked how service providers could make their hours of operations more convenient, nearly 40 per cent said extended weekday and evening hours; higher levels of satisfaction were recorded when customers said when the service advisor provided a full explanation up-front for all the work to be done.
“The person at the front desk is the person who will create the impression of trust, value and confidence,” adds Slind. “We know from our data that it is critical to build value even before the car goes into the shop.”
NAPA takes the top spot
As with every year of the study, J.D. Power and Associates names the service provider which scored highest in customer satisfaction amongst Canadian vehicle owners. This year, NAPA Autopro took the top spot, with OK Tire, Pennzoil, Certigard and Jiffy Lube following. On a 1,000-point scale, NAPA Autopro scored 876 with high marks being given by Canadians for service initiation, the quality of the service advisors, the quality of the work provided and vehicle return.
“It was the solid and consistent performance on tackling all the elements involved in producing high customer satisfaction and a winning customer experience that gave them that top spot,” says Slind. He adds NAPA Autopro has over the years invested heavily in technician and customer training, as well as offered in-depth management training and customer retention technologies.
“There is a real culture around creating customer satisfaction.”
David Redinger, owner of Doctor H Honda in Toronto and NAPA Autopro shop says he is not surprised NAPA Autopro grabbed the top spot this year. He cites the company’s commitment to the education of its service operations and investments in customer satisfaction training and business management. As well, he cites the company’s emphasis on doing the job right the first time and using quality parts in all repairs.
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