Ford Motor Company: Dealer Sales and Services

Services Marketing | Group 4

Bisoyi Khetra Vasi | Meghana Kavali | Preetham Krishna | Mridul Maheshwari | Priyasha Priyal |
Jasleen Kaur

23-09-2017 1
 Case Analysis and Customers Preferences
Change in Customers Preferences

Automotive Industry:
Automotive products become more complex and technology intensive due to maturity in the sector
Hence, there is shift in customers involvement in the repair and involvement with technology associated with Automobiles
Product quality is less of purchase motivation discriminator and customer satisfaction requirements intensify
Service marketing environment will become more complex and competitive

Ford:
Ford claimed that auto industry in the United States was changing
Difference between products and technology -> less of a factor in customer purchase decisions
Differences in distribution and service would become a major factor in customer purchase process
This analysis was supported by a report published by JD Power and Associates

Changes in Ford Dealership and Services domains:

A selected group of executive worked to enhance the existing distribution system (5400 existing independent US Ford dealers)
Majority of the customers complaints are with the larger dealers
Ford executives focusses their efforts on problems of larger dealers, since smaller ones seemed to do a better job

Customer and Dealers during Sales (vs)

6 Channels of Automotive Service Ford Dealerships &
Customer and Dealers during Services Recommendations
Industry QCP Program
=> Identify problem areas &
Change in pattern in the channels
Con. behavior
 Customers vs. Dealers Sales
Customers during Sales
Bargaining: The most significant cause of dissatisfaction among
customers revolved around negotiated prices
Unresponsive Salespeople: Salespeople who were unresponsive and
didnt listen to customers needs
High pressure sales tactics by salespeople: Salespeoples attempt to
sell add-ons and options that customers didnt want
Talking about a deal before the customer decided to buy
Splitting a husband and wife to work on each separately
Fast talking without giving the customer time to think or ask
questions
New customers were more likely to use dealerships for service
Traded their used vehicles to dealers and
Financed new and used vehicles through sales outlets
Customers understood that the dealers gave personalized attention in
the purchase process
Most customers would prefer to buy cars the way they did for other
goods
Dealers during Sales
Most dealers view sales as important component and services as a
necessary evil
Dealers paid their sales staff on a commission basis, some paid a small
salary plus commission
Slow introduction of new models and short term profit maximization for
shareholders by the company
Decline in profits: Reason for decrease in dealers profits has been the
increase in floor plan costs
Dealers bought new vehicle from Ford at a whole sale price and resold
them for a profit at a gross margin of 12%
No vehicle was produced by Ford unless it was ordered by a dealer
Shortages in dealer orders could force temporary plant closures
The number of vehicles sold by each individual dealers ranged from 15
to 3500 per year averaging app. 700
Dealers new vehicle dept. provided fianc and insurance and made a
significant contribution to the profit of the dept.
 Customers vs. Dealers - Services
Customers during Services
Customers had four major complaints about dealer service
Impersonal and Uncaring:
Needless waiting and not getting to meet the actual mechanic
Contrast between treatment in showroom and service area
Incompetent (low quality of service work)
Mechanics worked at a dealership to get experience to move on
Not a good value for the price
Expensive compared to other service alternatives.
Minor work done at the dealership was perceived to be economical
Same hourly rate was charged for any problem (simple or complex)
Out of touch with customers time constraints
Dealer service was open during daytimes and closed during weekends
Service as a profit canter generated an average loss of over 3.5% of revenues
High cost of technologically sophisticated Led to Huge loss in
equipment for servicing complex products Service Dept.
Some dealers lured customers in with low car prices but couldnt properly
service the vehicles after sale
Dealers during Services
Dealers think that the customer expectations had become too high
Impatient customers:
Customers expect cars to be fixed instantly
Not meeting customer needs: Inspite of huge inventory, dealers are not
even close to every part that a customer might need
Dealer complete repair and sends it without regard to quality of repair
Advantage of building layout (improve traffic flow and cut waiting time):
New dealers have advantage with physical layout of their buildings
Compensation: Ford Service Rep. trying to implement incentives for service
technicians to avoid inconsistencies in the services
Most dealers are reluctant to change their compensation system.
Steady rise in Units in Operation (UIO)
Two major constraints: without similar increase in Service Stalls
Service Technician availability
Shortage of skilled and qualified
Service Stalls technicians had driven wages up
Parts Dept. generated consistent profits over 8 pretax on parts sales
Automotive Service Industry: Ford

Six Competitive Channels of Ford Fords three conclusions about consumer behaviour
Channel Share (increase Customers would travel long distances to locate what they considered to be an
or decrease) acceptable deal
New Car Dealers Increased Even if mistreated, customers would buy a new vehicle from a dealership if they
could take immediate delivery
Service Stations Dropped
Many customers would rather shop when a dealership was closed to avoid being
Independent Garages Increased hassled by high-pressure salespeople
Department/Discount stores Increased

Chain/specialty stores Increased

Do-it-yourselfers Dropped
Ford Motor Company: Dealership
Dealership Trends

Year Outlets Vehicle sales/outlet

Ford dealership were independently owned franchises. Ford sold no
1955 8933 255
cars to end users directly as all sales went through dealers
1988 5427 696
Company provided significant financing (inventory, customer purchase,
capital improvement) through Ford Credit
No franchise fee; no termination date. Rights were granted till the Industry level outlets as well as Ford outlets dropped
by ~39%
dealer was alive, performed satisfactorily & wanted to own franchise Vehicle sales/outlet increased by 173% for Ford
Ford treated its dealers as partners & involved them in decision making
Dealer Council was often given proprietary information & assisted in
strategy decisions Emergence of mega-dealers or individuals who held
numerous franchises of same or competing makes

Issues

Difficulty in cancelling dealership - Only 0.4% US franchises were

Ford could not control its dealers Dealers gained political strengths &
terminated and majority of them were voluntary. Poor performers
formed unions
continued in the system
Dealers compromised on service quality
Decisions of Policy Board in case of any conflict were binding on company
Complaints about unavailability of popular merchandise
but not on dealers
 Initiatives undertaken - QCP Program & CSI
Quality Commitment Performance Program Customer Satisfaction Index
Reasons for the program: CSI Process:
Chrystlers (one of the Big Threes) near collapse in 1980s Conducted by J.D Power every year
Ford marked by financial problems Survey of customer satisfaction with automobiles, sales and service
Decline in product quality, loss of money YOY, loss of touch with process
consumers Answers of questionnaire converted to a score called CSI

QCP Program: Fords performance:

To test levels of customer satisfaction Ford performed poorly wrt competition in 1980s
Ford sent a survey to new vehicle purchasers 30 days and 9 months Fords Lincoln Mercury division was the only representative in the top 16
after purchase 1988 - Ford performed below industry average for 4 consecutive years
Ford sent the local results of the survey to each dealership
Report compared performance of dealers in same size category and
results of top dealers in the group
Dealers not willing to accept
Two major obstacles: changes: complaint of no notification
Goals of the program:
Show dealers where to improve-hero or a bum relative to other dealers Dealers
High dealer nationwide score would bring pride Changing automobile industry,
Automobile Industry pressure on distribution system
Use of QCP Rankings:
Trip to resort for dealers above rating of 6 Other obstacles:
Earlier, low ratings didnt mean a punitive measure, just feedback Dealings with powerful dealers
Talk about terminating worst performing dealers for QCP Slow pace of change in industry due to its size
Problems with QCP: Target for government intervention - employment, dependence of
Too casual, more for PR than promoter of change, long reports other industries (steel, glass & finance)
Slow turnaround time and lag in reports - immediate feedback needed
GAP Model

Gap 1 & Gap 2:

GAP 1
Provider GAP 1: The listening Gap
What does the customer want & whether I know what he wants
CUSTOMER Expected Service appropriately
Customers expect to purchase cars as they purchase other
goods
look at the product, find out fixed price , judge whether its
worth and take purchase decision
COMPAN Company Perceptions of
Salespeople tried to sell a particular car
Y Consumer Expectations
Not listening to what the customers wanted
Customers didnt want the pushed Add-ons

GAP 2
CUSTOMER
Provider GAP 2: The listening Gap
Customer-Driven Not selecting the right service designs and standards
Service Designs and Standards Perceived expensive dealer service : same hour rate for minor
and major servicing
Wrong hours of operation
Slow New car introduction: expectation every two years
Company Perceptions of ( Japanese doing in 36 months)
COMPAN Consumer Expectations
Y
GAP Model

Gap 3 & Gap 4:

GAP 3

CUSTOMER Provider GAP 3: The performance Gap

Service Delivery
Not delivering to service standards
Impersonal and uncaring dealer attitude
needless waiting for services
Customers dont get to meet the mechanic and explain the
Customer-Driven problems
COMPAN
Service Designs and Showroom treatment was personalized and service wasnt
Y
Standards Poor Quality work and perceived poor quality of mechanics

GAP 4

CUSTOMER Provider GAP 4: The Communication GAP

Service Delivery Not matching performance to promises
Fords promise best cars and services were limited only till
purchase of the cars
Increased Fords profits expectations of better services by
External customers
COMPAN However, decreased dealer profits resulted otherwise
Communications to
Y
Customers
Recommendations:

For Improving Service:

Information dissipation to the consumer:

1. Complete expense break up
2. Rate charged for the service should be according to the work performed and not a blanket rate for all problems
3. Increasing complexity of products
Proper dealing with the customers:
1. Hard service standards in terms of waiting time and maximum time for repair
2. Opening the repair shop for some weekends
3. Pick up and/or delivery service for vehicles on weekdays: can charge extra for the same
4. Establishing hard and soft service standards
5. Mystery shopping visits
Recommendations:

For Improving Service:

Ensuring that dealers service customers irrespective of where they have bought the car from
1. Convenient for the customer
2. Company can compensate on the number of cars serviced immaterial of where they were bought from
Responsive feedback mechanism
1. Feedback after 3 months for the warranty period and annually afterwards
Long term relationship with consumers
1. Reminders about preventive care for their vehicles
2. Greeting cards for occasions so that there is a long term relationship with the buyer
3. Updates/news about any modifications that the user can make
Recommendations:

For Improving Distribution:

Communication gap between dealers and the Ford: Focus group incidence
1. Better dealer relationship programmes
2. Assisting in financial management and common goals: ROI v/s ROS
Training of mechanics
1. A ratio of generalists and specialists (estimation through past man-hour records)
2. Differential payment method for the two as the two vary in skill sets
3. Quality based performance standards with quantitative ones - incentives to over-bill customers: Johnson example
Differential programmes for dealers with different sales turnover
Contributing partially in the facility development of dealers: to reduce waiting time for customers
Assisting dealers in inventory management and forecasting to reduce inventory carrying cost, spare part availability
Recommendations:

For Improving Distribution:

Developing a mechanism for detecting the magnitude of repairs required and developing separate processes for treating them
Training of sales force:
1. Need identification and responsiveness towards customers
2. Treating all customers with dignity (women buyers)
3. Training for quoting prices: a ceiling foe the highest and lowest prices
Feedback
1. Quicker feedback
2. Monetary incentives for dealers with exceptional performance
Thank you!