South China Morning Post

Service even more important as sales fall

Service even more important as sales fall

Leaders can capitalize on their loyalty advantage by using maintenance visits to reinforce ties with promoters and win over detractors.

  • min read


Service even more important as sales fall

Passenger car sales on the mainland fell more than 10 per cent last month from a year ago as the economy slowed and consumers became increasingly tight-fisted.

Even as it watches sales of new cars slide, the car industry has a weapon it can use to cushion the impact of the downturn: after-sales service. Carmakers can focus on maintenance and sales of replacement parts to position themselves to pull ahead of the pack when the economy turns around.

For their part, car dealers will have to strengthen their positions fast. They can do this by providing great service to car owners as maintenance will play a bigger part in their profits during the slump.

We surveyed more than 1,800 customers who had bought all the vehicle brands sold in the US, where car sales plunged 37 per cent last month from November last year to hit a 26-year low. Owners were asked to rate, on a scale of zero to 10, how likely they were to recommend their vehicle to a friend or colleague.

By subtracting the percentage of "detractors" who gave scores between zero and 6, from the percentage of "promoters" who gave a score of 9 or 10, we can on a Net Promoter Score (NPS) determine how deep is customers' loyalty to a company.

The survey revealed two important findings. First, promoters are about 10 times more likely than detractors to repurchase or lease a vehicle of the same make or brand as their current one. Second, they are far more likely to recommend their brand to a friend. Each promoter provides about five purchase referrals, while each detractor dissuades two prospective buyers.

For manufacturers that emerged as loyalty leaders—Lexus, Toyota and Honda—the value of promoters was reflected in increased revenues. Indeed, high NPS correlated with healthy new-car sales growth; name plates with lagging scores had flat or declining unit sales.

High among the factors that create promoters is a strong after-sales service experience. The reason is simple: dealer service is the key point of contact with customers at the critical time when most people ponder their next vehicle purchase.

Owners' brand enthusiasm tends to erode as the vehicle ages and the warranty expires. But it is at this point—about four years after the initial sale—that leaders capitalise on their loyalty advantage by using maintenance visits to reinforce ties with promoters and win over detractors. Mainland after-sales service is even more crucial to build nameplate value as it is still a young car market with low brand loyalty.

Excellent service not only reinforces relationships with loyal customers, it can also defuse ill will that causes disaffected customers to bad-mouth the brand. Indeed, brand leaders excel at turning unplanned repair visits—those critical moments on which a customer relationship can hinge—into opportunities to strengthen customer bonds.

While most carmakers aim to ensure the service experience does minimal harm, leaders work to surprise customers with ease and convenience when they expect it least and value it most.

The power of nurturing promoters shows up dramatically in data showing how severe the damage can be when a repair experience does not go well.

Overall, the NPS of loyalty leaders whose vehicles have not needed a repair is a stellar 85. It declines to a respectable 77 when the vehicle needs a mechanic's attention. But among loyalty laggards, an unscheduled shop stop resulted in scores plummeting 29 points to a dismal 19. Owners of those vehicles are angry, and they are going to tell others.

Ultimately, the biggest influence on customer loyalty and affinity for the nameplate is the vehicle's quality. But a bad after-sales experience can erode it just as quickly.

In today's tough economy, carmakers need to rethink how they can win and retain every customer they have.

Serge Hoffmann is a partner at Bain & Co. in Hong Kong and a member of the automotive practice; Nick Palmer is a partner and leader of loyalty practice in Hong Kong; Todd Senturia is a partner in the Los Angeles office.


Ready to talk?

We work with ambitious leaders who want to define the future, not hide from it. Together, we achieve extraordinary outcomes.