Listed here are some articles from the world's leading media who chose the industry experts at J.D. Power Asia Pacific as a source of information on Asia's car markets.
Catering to Consumers is the Right Recipe for Automotive Dealers
By Geoff Broderick
Vice president and general manager
J.D. Power & Associates Asia Pacific Operations
While China’s automotive market is the largest in the world, it may also be the most difficult to manage. Whereas automotive markets in the United States and Europe have had decades to evolve and adapt to changes in the market environment, China’s auto market has had to adapt to lightening fast changes all in the blink of an eye.
Early in the evolution of the automotive industry, auto manufacturers realized that building cars, and selling cars, are two very different pursuits. For starters, the complexities of manufacturing a vehicle are enormous. It requires vehicle and parts designers; product, process and certification engineers; hundreds of parts suppliers; expensive tooling; thousands of assembly workers; an assembly plant; and enormous capital expenditure to start the process, with no promise of profit in return. Then, once the manufacture of a new vehicle was finally completed, the finished product still had to be marketed and sold to consumers spread out over vast distances, in large cities and small towns, sometimes separated by thousands of kilometers.
Early on, auto executives quickly learned that trying to organize both the manufacture, and sale, of a large number of vehicles proved too complex—and too financially risky—of an undertaking for a single company. A solution was needed. That solution came with the creation of the first the franchised automotive dealership in Pennsylvania, USA in 1898. Automakers discovered that while they focused on what they did best—engineering and building vehicles—dealers could pursue what they do best, selling and servicing vehicles in their local communities.
Since the creation of the first franchised dealer, the automotive dealer system has flourished. While selling cars to consumers may not be as technical as building a car, the business is no less complex. As a result, dealer principals are considered among the hardest-working, enterprising, and most forward-looking of business people. If there is any equivalent to “survival of the fittest” in the business world, it might just be automotive retailing.
From that first dealership in 1898 until around 1996, the process of selling a car had not changed significantly. However, the advent of the internet has changed the process significantly. Prior to the Internet, all of the power in the seller-buyer relationship resided with the dealer. But since the introduction of the Internet, the consumer has become greatly empowered, and in many cases, is more informed about the product than the salespeople working inside the dealership. Furthermore, today, consumers no longer simply purchase a piece of motorized machinery called a car. Instead, consumers really are buying an advanced combination of computer and transportation device, wrapped in a stylish package of metal, plastic, glass and rubber. As a result, it’s a tall order for Chinese dealers to sell a highly technical product to an informed and discerning consumer—especially when that consumer has nearly 400 vehicle models from which to choose.
So how does a dealer make the business work? It sounds simple: Sell to the consumer in the manner that a consumer wants to be sold. Unfortunately there is no “one size fits all” consumer. Some consumers love the thrill of negotiating a deal, while others would rather go to the dentist than haggle over the purchase of a car. Yet, there is one thing that is universal to all consumers; everyone loves to drive their brand new car off the dealer’s lot.
Based on J.D. Power’s experience working with automotive retailers in countries around the world, the most successful dealers will cater to the customer’s preferences, while trying to make the entire purchase process as pleasurable as the moment the consumer takes the keys to his or her new vehicle. Customer satisfaction with the sales process is critical. But, it is not satisfaction for satisfaction’s sake. A dealer wants satisfied shoppers, no doubt, but a satisfied buyer is more important. To start off right, dealers need to determine a consumer’s expectations up front and tailor the experience, within limits, to the consumer’s needs. If done properly, the car-shopping prospect will turn into a customer, and the consumer’s satisfaction can lead to long-term loyalty, a critical element to the long-term success of a dealership.
Although service quality can vary widely across industries, 5 star hotels in China and major Chinese airlines, provide some of the best service in the world when compared to their global counterparts Their success is predicated on an intense focus on the customer experience, and training of staff to deliver that experience in a consistent manner. If these service and product industries can do it, there is no reason that it cannot be done in the automotive retailing business in China.
According to the J.D. Power & Associates 2011 China Sales Satisfaction Index Study, since 2004, the industry has significantly improved customer satisfaction from a score of 790 to 847 on a 1,000 point scale.
From a business perspective, it pays to deliver customer satisfaction. Dealers with higher satisfaction than their peers tend to be more profitable on a per-vehicle sold basis (4.4%) and sell more cars per month (5%). Over the course of a year, this can significantly bolster the bottom line profits of a dealer. More important to the dealer, however, is long term business from their car buyers. Repeat customers are frequently what make a businesses profitable and sustainable.
As reported in the J.D. Power & Associates 2012 China Dealer Attitude Study, 20% of dealers reported a loss, which was an increase from 6% in 2010. The recent market slowdown, of course, is one contributor to the decline. In addition, competition in China’s market is driving down new-vehicle pricing, which compresses dealer margins. As competition continues to intensify, dealers will need to rely on service business and today’s nascent used car sales and vehicle financing businesses as core contributors to their revenue and profits. For a dealer to gain, and retain this service business, the dealership’s consumers must have a good sales experience, as this experience builds long-term loyalty, and positive word-of-mouth referrals.
Catering to the consumer starts from the moment a consumer walks into the showroom, until follow-up after the sale. At times, entering a dealer showroom can be an awkward moment, as the consumer waits to meet a sales associate. But a pleasant and thoughtful greeting from the dealership sales associate can set the tone for the entire experience. For example, during the greeting portion of the sales process, a sales associate needs to ask targeted questions to understand the customer’s requirements, so he or she can steer the process in a direction preferred by the customer.
Similar to an Apple store “Genius” sales associate, it’s important for an auto dealership sales associate to be a product expert (and preferably an auto enthusiast) even more so than being a salesperson. Telling stories to explain features and benefits related to a customer’s primary interests, and then demonstrating those features and benefits during a test drive can significantly improve sales close percentage rates and build desired customer loyalty. Increasing sales close rates from the industry estimate of 10% to 15%, as is commonly achieved in the U.S. auto market, can translate into much higher revenue for dealers in China.
Of course, some consumers believe that there priority is to obtain the best deal (i.e., lowest price) when buying a car or service. That is a natural thought. But taking a holistic view of the seller-buyer relationship, it frequently, may be in the best interest of the consumer to allow the dealer to make a reasonable profit. Like a good friend, a profitable dealer will more often than not be looking out for the best interest of his loyal customers. This should ultimately result in a better overall ownership experience for the customer, and the introduction to the dealer friends and acquaintances of satisfied customers.
What can consumers do to help make their shopping process a better experience? Auto shoppers can start with research on the Internet. Build a consideration list of favorite vehicles, and narrow this down to a few front-runners. Then visit your dealer prepared with product information, your vehicle requirements, and your target budget. Be open in your conversations, and view your chosen dealer as a partner who wants to help you select a vehicle that best suits your needs. Working as partners looking out for each other creates the conditions for a long and mutually-beneficial relationship.