Toyota is reaping the benefits of keeping its dealers happy. The latest J D Power Asia-Pacific 2012 India Dealer Satisfaction with Automotive Manufacturers Study ranks Toyota highest in overall satisfaction for a second consecutive year with a score of 913. Hyundai ranks second with a score of 878, followed by Maruti Suzuki (858 points).
The 2012 study is based on responses from 583 dealer principals or dealership general managers located in more than 208 cities throughout India. It was conducted in association with the Federation of Automobile Dealers Associations (FADA) and fielded between February and March 2012.
As per the findings, vehicle dealers in India are managing the risks of a slowdown in the automotive market by increasingly diversifying their sources of revenue. The study finds that dealers in India are expecting to generate 34 percent of their revenue through sales activities such as parts and accessories as well as automobile insurance and commissions on loans, which represents an increase from approximately 22 percent in 2011. Moreover, dealer satisfaction with the working relationship with auto manufacturers is higher among those who expect a greater proportion of income from diversified sources.
Toyota's strong performance
Toyota banks on keeping satisfaction levels high across both customer and dealer parameters and that single-minded focus has paid off. Last year's winner has won again.
According to MohitArora, executive director at J D Power Asia Pacific, Singapore, "There are two main reasons for Toyota’s strong performance. The first lies in Toyota’s strength in building trust with its dealers. It is highly competent in creating partnerships and collaboration, which is the key in building mutual trust between the dealers and the OEM."
"In our study, Toyota had the best score in the industry across all nine factors that contribute to dealer satisfaction with OEM. In particular, Toyota has improved by 23 index points with the largest improvement on Vehicle Ordering and Delivery. This is a result of the reduction in waiting period and improved delivery of key models like the Etios.
The second lies in the fact that Toyota dealers identify themselves with the high quality of Toyota products. 100 percent of the Toyota dealers interviewed reported that they are “pleased/ delighted” with Toyota’s vehicle reliability and dependability. In carrying products of high quality, it gives them the confidence and the pride to represent the brand," says Arora.
Now in its second year, the study measures dealer satisfaction with vehicle manufacturers or importers and identifies dealer attitudes regarding the automotive sales business. The latest study finds that overall dealer satisfaction with automotive manufacturers averages 820 points on a 1,000-point scale in 2012, up from 749 points in 2011. Overall satisfaction has improved across all nine factors, with the largest improvement occurring in support from the manufacturer, which is also the most influential factor.
Dealers looking to diversify risks
Arora adds, "The growth rate of passenger-car sales in India this year has been the slowest since the 2008-09 fiscal year, when sales were impacted due to the global financial crisis. With fewer retail sales and subsequently lower revenue from service within warranty, dealerships are looking at additional sources of income to diversify their business risks.”
Arora remarks that dealers rely on automakers’ support in generating additional revenue through these sources, which is important in maintaining their viability and further strengthens the dealer-manufacturer working relationship.
Dealers who indicate their experience in vehicle ordering was “better than expected” are notably more satisfied with their respective manufacturers than are dealers who have a less satisfying ordering experience. Dealers’ satisfaction with the timeliness of vehicle delivery improved the most among all attributes in the study in 2012, as the proportion of dealers who indicate they are “delighted” (providing a score of 10 on a 10-point scale) with this attribute has doubled from 2011. Additionally, more than one-half of the dealers surveyed for the 2012 study indicate automakers invoice vehicles on the same day of order placement, compared with approximately one-third of dealers in 2011. Nearly 80 percent of dealers say they are able to track the real-time delivery status of vehicles, which also allows them to track delays and changes in the delivery status.
“Automobile manufacturers in India strive to minimise dealer dissatisfaction due to delay in vehicle delivery by reducing supply constraints and improving communication about any eventual delays,” said Arora. “Not only are the dealers more satisfied with the order and delivery of vehicles, but also they seem to appreciate being better informed about any eventual delays or changes in the delivery status. Having a more informed and satisfied dealer network in turn aids manufacturers in enhancing customer relations and boosting sales.”
INTERVIEW WITH SANDEEP SINGH, DMD (MARKETING), TOYOTA KIRLOSKAR MOTOR
Toyota has topped the study for the second consecutive year. What do you attribute this performance to?
Toyota believes in a long- term relationship with all its stakeholders — customers, dealers, vendors, suppliers and employees.
Our relationship with dealers is not just transactional; we jointly work towards the business objectives. Apart from supporting them in achieving sales and service targets, we support their operations by identifying and removing non-productive activities (muda) and help them continuously improve their operation.
One of the visible examples is Express Maintenance bays at all our dealerships wherein all Periodic Maintenance can be completed in 60 minutes. This improves customer convenience and the bay productivity, generating profits. We also provide the necessary tools and resources to help them improve their efficiency.
We have a strong belief in our dealer partners and share Toyota’s long-term vision with them. We also take their inputs and feedbacks as they are closest to our customers.
We provide our customers a one-stop solution for all — 3S: Sales, Service and Spare Parts.
In the changing business environment, how does Toyota play a role in ensuring dealers’ investments reap returns?
The key is to have the expectation right both from manufacturer and investing partner. Toyota has been prudent in expanding our dealer network. We give the first right of refusal for expansion to our performing dealers. Even with new partners, we spend a lot of time explaining them the expected return on investment and having their buy-ins before initiating any project.
We also control our Dealer Partner investments through having Toyota Facility Standards in-line with expected business returns. We encourage them to focus on the manpower and their skill levels and also on the infrastructure.
Is attracting new dealers a more challenging task than before?
In a rapidly growing market with every manufacturer increasing production capacity, attracting new ‘good’ dealers is expected to be challenging. However, we have a strong database of candidates interested in becoming a Toyota dealer and it keeps growing. We have hardly ever advertised for a new dealer.
Rising cost pressure, profit margins that are getting thinner and the increasing cost of infrastructure are also some of the contributing factors.
Has Toyota increased the dealer margin of its products over the last year?
We would like to refrain from giving numbers. However, as mentioned earlier, our main focus is manpower, skill levels and infrastructure which if improved upon leads to better efficiency and profitability.
INTERVIEW WITH ARVIND SAXENA, DIRECTOR (MARKETING & SALES), HYUNDAI MOTOR INDIA
How does Hyundai work towards ensuring profitable returns for its dealers?
Hyundai Motor India Ltd (HMIL) is the country’s second largest car manufacturer and the largest passenger car exporter. We have a vast dealer network of 346 dealers and around 800 service points across India.
HMIL has dealer-friendly policies which ensure profitability of their investments. Also, we give more opportunities to our current dealers to expand through new dealerships , service and sales branches and rural sales and service outlets. This ensures dealers' interest and return in business with us.
HMIL has the biggest advantage of a full line-up of cars from compact to premium cars. The mix of cars and variants cater to the growing demand, and this helps the dealer sell more cars and ensure returns.
Is attracting new dealers becoming more challenging than before?
Adding dealers to HMIL's growing network was never a challenge owing to our brand’s reputation. HMIL’s position in the Indian market is getting stronger. We have a strong network of 346 dealers which we plan to bolster in the coming years.
Hyundai has jumped two spots in this year’s study. What would you attribute the performance to?
We attribute the performance primarily to the 4 Ps — Products, Policies, People and Profitability.
Which are the key sources of additional revenue that are helping dealers mitigate the risks of a slowdown?
Hyundai facilitates its dealers to generate more business opportunities by offering reinvestment in additional sales and service outlets. This encourages dealers to re-invest in the business resulting in additional revenues which expands and strengthens our dealership network.
How does Hyundai keep its dealers motivated?
Dealers are the integral part of the Hyundai family. Various programmes are conducted for them and for their next generation (son or daughter) to understand the business and company values.
Every year various activities are conducted such as annual meets, overseas trips and training programmes. Hyundai also provides special management programmes for the dealers in reputed institutions such as IIMs. Furthermore, various awards are given to the best-selling dealers.
Has Hyundai increased margins for its dealers?
HMIL maintains one of the best margins in the industry.
INTERVIEW WITH MOHIT ARORA, EXECUTIVE DIRECTOR, J D POWER ASIA PACIFIC, SINGAPORE
Toyota has topped the study for the second year running and also increased its points rating from 890 in 2011 to 913 in 2012. What are the reasons for this?
There are two main reasons for Toyota’s strong performance. The first lies in Toyota’s strength in building trust with its dealers. It is highly competent in creating partnerships and collaboration, whaich is the key in building mutual trust between the dealers and the OEM.
In our study, Toyota had the best score in the industry across all nine factors that contribute to dealer satisfaction with OEM. In particular, Toyota has improved by 23 index points with the largest improvement on Vehicle Ordering and Delivery. This is a result of the reduction in waiting period and improved delivery of key models like the Etios.
The second lies in the fact that Toyota dealers identify themselves with the high quality of Toyota products.
100 percent of the Toyota dealers interviewed reported that they are “pleased/ delighted” with Toyota’s vehicle reliability and dependability.
In carrying products of high quality, it gives them the confidence and the pride to represent the brand.
While Hyundai has jumped two spots (from 4th to 2nd), Chevrolet has dropped from (from 2nd to 4th), and Maruti and Ford have maintained their third and fifth places respectively. What are the takeaways of their performance in 2012?
Hyundai’s improvement is largely driven by the dealers, indicating that they are receiving much stronger support from the OEMs both in terms of Sales and Marketing as well as Financial Activities.
Meanwhile, Chevrolet has also overall improved its performance last year but it’s just that that other manufacturers have outpaced their efforts in improving dealer-OEM relationship especially in the area of Sales and Marketing Support.
Is there a disparity in level of satisfaction in different regions of the country?
While there is little difference between North, South and West, dealers in the East continue to be less satisfied with their principals on all nine factors — most notably on sales and marketing activities followed by vehicle ordering and delivery.
This is largely due to the fact that for most OEMs, the eastern region contributes to a smaller share of their overall business. In addition, logistically it is farthest from the manufacturing units which presents logistical challenges.
Which company offers the best margins to its dealers?
Dealer margin varies widely across models, segments and nameplates. On an average, dealer margins in India are reported to be around three percent of the vehicle retail price.
Which are the key parameters in which dealer satisfaction is most likely to be impacted?
Support provided by OEM is the single largest contributing factor to overall satisfaction (around 21.1 percent). Support consists of support on financial issues, guidance provided to achieve targets, to understand customer needs/ requirements, management openness to direct input in decision making, concern on ensuring dealer’s viability etc.
What more can OEMs do to keep their dealers satisfied? What is your five-point agenda for OEMs to keep their dealers motivated?
The five main attributes driving dealers’ satisfaction with manufacturers are:
• Prompt delivery of parts
• Vehicle reliability/ dependability
• Management’s concern on ensuring dealer’s viability
• Management’s openness to direct input
• Usefulness of (OEM) support to customers needs/ requirements
Together these five attributes contribute to 25 percent of a dealer’s satisfaction with the OEM. Dealers would like manufacturers to work on the following top areas.
• Improve dealer viability
• Introduce new/ more marketable products
• Improve incentive programs
• Be more responsive to the end-customer needs
• Improve advertising support
Is J D Power planning to cover two-wheelers in the survey?
In the current study we have only interviewed passenger car dealerships. The issue is under consideration.
SUMANTRA BAROOAH