What Does the J.D. Power and Associates Report Mean For You?

Last month it was announced that Tirecraft Auto Centers ranked highest amongst vehicle service providers in Canada, according to the J.D. Power and Associates 2007 Canadian Customer Commitment Index Study. The study, now in its 10th year, measures the service satisfaction and loyalty of owners of two- to 12-year-old vehicles. Overall customer satisfaction with their vehicle service provider is determined by examining five key factors: appointment/check-in, service advisor, work quality, after service and customer orientation. While Tirecraft Auto Centers ranked highest with an index score of 905 on a 1,000-point scale, the survey also showed positive results for other aftermarket outlets, with Mr. Muffler (884) and Autopro (883), all fairing very well. In fact, as an overall industry entity, independent repair shops again scored very well, coming in with 881 points.

That said, the picture was certainly not as rosy this year as it was last time, as the dealerships have once again managed to make inroads into fortress aftermarket.

On the surface the raw numbers seem innocuous enough, and on the whole, an affirmation of the aftermarket’s claims of customer service superiority. Unfortunately, the numbers only tell a small part of the story, and what can easily be overlooked in a rosy reading of this study, are some fairly dire warning signs. What follows here then is a look into what those numbers mean for the independent service business, and an insight into where this tumultuous market is headed.

What’s in a percentage point?

As reported this year, the new car dealers managed to shave another 1.3 per cent of market share from the aftermarket. While not a total rebuke of aftermarket efforts, the overall trend of market share erosion on the aftermarket side of the service coin now certainly demands some attention.

Looking back on the past six years of the study, while dealerships gained share in the vehicle service market at the expense of aftermarket facilities from 2001 to 2005, they experienced a slight decrease in market share in 2006. However, in 2007, dealerships once again gained share in terms of the volume of service visits (up 1.3 per cent) and in consumer expenditures (up 2.4 per cent).

What ought to trouble the independent service business is that the market share gain for dealers primarily came from owners of four- to seven-year-old and eight- to 12-year-old vehicles, as opposed to owners whose vehicles are still within the warranty coverage period. Traditionally the sole bastions of the aftermarket, dealers are beginning to realize the revenue potential of these customers and are aggressively pursuing their business. Who can blame them? With more than 13 million vehicles within the two- to 12-year-old segment, owners of these vehicles-who spend an average of $850 per year on service and repairs-account for an $11 billion market. In last year’s article on this report, a J.D. Power research manager told us that “OEMs are worried about the overall decline in sales, and the dealers are hurting, so the service business is going to be the new battle ground.” It looks like the battle has begun.

Normally, a one per cent loss in service opportunities could be sloughed-off as being part of the natural ebb and flow of the service business, and something that will be recouped at some point. While that may have been the case in the past, the overall trend appears to be tilting in favour of the dealerships. In fact, since the year 2000, new car dealers have consistently increased their service opportunities across the board, going from 42-51 per cent in the four-seven year-old bracket, and from 17-23 per cent in the eight-12-year-old market. While arrested in 2006, these increases have otherwise been constant and relentless.

In pure dollars, the situation becomes even starker. Using the estimated $9 billion annual value of the Canadian automotive service business for cars that fall between four- and 12-years-old, a slow but steady erosion of 1.2 per cent per year multiplied over the past seven years translates into the net loss of some $750,000,000. That’s what’s in a percentage point.

Where can independents fight back?

Thankfully, the report is not all dire for the after-market, and it does also point to some favourable customer opinions that speak to some very real successes. The overall satisfaction score of 881 aside, the report confirms that consumers in the market value what independents as a rule, do well, namely personal attention, and positive customer experience.

In terms of the new dealership battle front, not all manufacturers have been successful, and this could help point service providers in the direction of some low hanging fruit.

“While it is interesting to see dealers targeting this more lucrative, yet challenging, older-vehicle segment, not all franchises have proved successful in increasing market share,” said Charles Schade, senior director, research for J.D. Power & Associates. “Ford Motor Company, Chrysler and General Motors franchises received the most significant increases, which could be the result of service initiatives undertaken to protect dealership revenue in the face of declining new-vehicle sales. In contrast, as their fixed operations capacity struggles to keep up with their aggressive gains in new-vehicle sales, fast-growing Japanese franchises have been losing share among ‘in-warranty’ owners.”

What this section of the report indicates, is that while some Asian nameplates have done exceedingly well for their respective dealers, they have done a little too well. By outpacing their own dealer infrastructure, they have left customers clamoring for service they simply do not have the capacity to perform. Such business models will, likely drive these customers into the open arms of the aftermarket, from which they are unlikely to return to the dealer.

Another place independents should be looking in terms of improving their overall customer experience (and hopefully bottom line) is in pre- and post-service attention. According to the research, Canadians who chose to bring their car into an aftermarket service provider, do so for some very consistent and predictable reasons, usually revolving around some kind of personal touch. In fact, a full 63 per cent of respondents who take their car to an independent do so because of either a previous good experience, or because they have a personal level of trust with the technicians doing the work.

Independent service providers have an advantage when it comes to personal relationships with their customers.

Compared to vastly different results for the dealerships, and an almost entirely cash driven motivation for the mass merchants, independents seem to have a rather unique ability to personally reach their clients.

Perhaps the most vital aspect of this personalized touch is the initial greeting. While a timely hello may not seem to affect your business either in the positive or the negative, the research shows otherwise.

As can be seen by the graph, the time it takes your service writer to greet the client has an immense impact on how well a customer will rate his / her experience. Greet them immediately and their overall impression is much more likely to be very high, but leave them waiting for more than five minutes, and you’ve lost so much customer satisfaction value, that they’ll probably never return. Similar results were reported in terms of follow-up efforts. Shops that undertook a conscientious program of follow-up calls and customer support scored significantly higher than those who did not.

“Customer engagement is critical and the process is simple to establish,” said Schade, who also commented on the significance of the high scores given to those shops that carried out such a policy. “Canadians don’t tend to be particularly excited about anything, so for a Canadian to score you as a 10 for anything, it’s really something significant.”

What the research shows, is that there
is a golden ?customer satisfaction opportunity which can be exploited if owners chose to take advantage of it. And how important is that customer satisfaction to the continued ?success of your shop? According to the research, it’s absolutely critical.

A positive customer experience is and will remain vitally important to the continued success of your shop. With dealerships working as hard as they are to wrestle customers from the aftermarket, or simply stopping them from entering it in the first place, independent shops need to be doing everything they can in terms of creating that positive customer experience. The most effective way to do this seems to be by exceeding that client’s service expectations. By ensuring that it is a satisfied customer that leaves your shop, you are investing in perhaps the most valuable brand marketing possible. At the current bleed rate of over a full percentage point per year, independent shops need to audit their customer service practices sooner rather than later and hopefully start reversing that ominous market share trend.

Note: The 2007 Canadian Customer Commitment Index Study is based on responses from 18,962 owners of two- to 12-year-old vehicles. Owners were surveyed in November 2006 and April 2007.