Known by the company they keep

In a market which has, since some time, been seeing dwindling passenger car sales, cut-throat competition and rising inventories, vehicle manufacturers are using every trick in the marketing book to woo buyers. A critical component in the sales process is their authorised dealerships which, for many customers, is the point of contact for new car purchase. Briefly put, total satisfaction is what most dealers and companies seek but not many achieve. It also brings into focus the relationship a dealer has with a manufacturer; a satisfied dealer will in turn translate into satisfied customers which mean increased sales for a carmaker.

The recently released TNS Automotive Dealer Satisfaction Study 2008 seeks to measure the extent to which companies keep their dealers satisfied. Japanese carmaker Toyota tops the automotive industry with its dealers being the most satisfied in India. Conducted every two years, the bi-annual study sees Toyota reclaim the top spot this year having won it before in 2004. Mahindra & Mahindra had beaten it to the top spot in 2006.

This year’s overall dealer satisfaction score of 74 is seven points lower than in 2006. This, according to TNS, reflects the rising expectations of dealers combined with a decline in performance by the automotive industry in meeting these needs in the midst of an economic downturn. Most of the major manufacturers saw their scores decline over the 2006 study; Toyota however dramatically improved its score and ranking this year, while Maruti Suzuki also jumped in the rankings. The study also measured the satisfaction of dealers with the profitability of their business; here again Toyota and Maruti Suzuki stand out as the only companies with improved performances over 2006.

According to Sandeep Singh, deputy managing director, Toyota Kirloskar Motors, “We are delighted to see the results of the TNS Study. We believe our dealer partner is next only to our customer in terms of importance, and are happy to see that our dealers have rated us so highly.”

He added: “We always prioritise our operations from our dealers’ perspective and believe that the partnership with our dealers is for a lifetime. We always ensure our network expansion policies do not affect the viability of existing dealers. We also discuss company objectives with them and mutually agree on the targets. We support them in their sales initiatives, operations, efficiency improvement and human resource improvement. Finally, we have a very transparent and objective system of rewarding and recognising our dealer partners, including partners for future growth, which is based on the basic philosophy of mutual trust and mutual growth.”

Echoing the same sentiment, Michael Boneham, managing director, Ford India said: “The results of the study are overwhelming and encouraging for Ford India and are a considerable improvement in our ranking over previous years. We acknowledge dealers as partners in our business and respect their opinion and take their feedback seriously.”

Driving dealer commitment

Profitability is not the only parameter that drives commitment from dealers. ‘Fairness in dealings’ ranks among the biggest drivers of dealer satisfaction and ranges from ‘fairness in network expansion’ to ‘fairness in model allocation’. Another big motivator is the product portfolio in terms of latest and internationally available models. Dealers also expect a more participative style of management and expect the manufacturer to be open to their suggestions and set targets based on a realistic understanding of local market conditions.

Dealers have rated manufacturers rather poorly on basic processes like ‘informing dealers in case of delays in delivery of cars’, ‘back order for spare parts’ and ‘advertisements in local language and electronic media.’

The study also reveals that aside from the obvious economic considerations, car dealers also consider the manufacturer’s reputation before deciding to partner with the company. In fact this is a key factor with 56 percent of the dealers surveyed stating that they choose a particular manufacturer because it is a prestigious brand or a market leader.

Car dealers are an interesting mix of traditional businessmen and first-time entrants, with 60 percent of them either inheriting the business or having diversified into it. For the remaining 40 percent, it was their first business which was started themselves.

Dealers expect manufacturers to provide them with guidance and support in improving their business performance, with TNS claiming that an improved performance in this area by manufacturers can contribute to a relatively greater improvement in dealer commitment. Among the specific measures that dealers have sought are ‘effectiveness of sales and service promotions.’

It is almost intuitive to expect that a satisfied dealer will drive satisfaction among customers. However, another intuitive thought is that a satisfied dealer may also be a complacent dealer and not care much about his customers. Yet another view is that satisfied customers mean profitable dealership operations and hence a satisfied dealer.

The counter point is that satisfying a customer means high costs, which will leave a dealer dissatisfied. On analysing the customer satisfaction data and dealer satisfaction data for the same period, TNS found that statistically there is a correlation of just 0.49 between the two. This essentially means that dealer satisfaction and customer satisfaction move together in only half the cases, which is not too bad and is proof that a relationship does exist between the two.

Customer satisfaction is therefore dependent on the correct and proper implementation of various processes at the dealerships. However, some of these processes are directly linked with the processes at the manufacturers end. Hence, if these processes are well implemented by the manufacturer, the dealer is satisfied and can also satisfy the customer.

The data also reveals that there are manufacturer processes, which both dealers and customers rate in tandem. If the dealers rate them highly, so do customers and vice- versa.

For example, if dealers rate the quality of the cars manufactured as very high then customers also feel the same way. Also if dealers feel that the condition of cars at the time of delivery is very good, then customers also feel that cars are delivered without any problems. Clearly, if the cars are not delivered in a good condition to the dealers, they in turn will also not be able to deliver problem-free cars to customers. On the communication front, if dealers agree that the quality of brochures is very good, then the customers usually contend that availability of product information is very good.

There are some areas where dealers are tough on manufacturers in terms of their evaluation whereas customers are relatively lenient. By demanding a high performance in these areas, the dealers are able to drive customer satisfaction. One of these areas is the availability of spare parts, where dealers rate manufacturers very poorly, whereas customers rate them as average.

Dealers also feel that manufacturers are extremely poor in terms of communicating delays in delivery, but customer’s rate dealers as ‘average’ in delivering on time. Dealers feel that the sales promotion schemes run by manufacturers are not effective, but at the same time customers rate them as ‘average’ in terms of providing a good deal.

However, there are some areas like training where dealers don’t understand customer expectations too well and accordingly their expectations from manufacturers are low. This results in a lower performance from manufacturers, which subsequently results in low customer satisfaction. In the case of training, dealers rate manufacturers high in areas like support, relevance and frequency. This is true of sales as well as aftersales service training and the only contentious issue is the cost, with which they are unhappy. However, TNS feels that dealers need to understand that training can provide critical inputs, which can improve customer satisfaction.

On the sales front, TNS believes that dealers need to demand training on competing models and how to effectively demonstrate their own models. These are the two major areas of dissatisfaction among customers. In the area of aftersales service, they need to demand diagnostic skill training, because the biggest customer dissatisfaction is the inability to fix the problem the first time itself and the quality of repair and service. Apart from that, they should demand soft skills training in the area of service for the same reason.