It will not suffice to have customers that are merely satisfied. An unhappy customer will switch. Unfortunately, a satisfied customer may also switch, on the theory that he could not lose much, and might gain.
—W. Edwards Deming, from the book Out of the Crisis
Though an expert in total quality processes, W. Edwards Deming well understood that it is customer experience—formed by interactions with employees, exposure to a customer-centric enterprise culture, and augmented by systems and processes and supported by a company’s messaging—that creates success.
No matter how trivial it may seem, every experience between your organization and your customers has the power to excite and create loyalty, commitment and advocacy. Unfortunately, each experience also has the potential to create disaffection, disloyalty, anger and even sabotage. You must fully interpret and understand the potential loyalty impact of each experience—as well as the components of each experience—to take prescriptive actions. This is especially true if the experience is identified as a contributor to customer risk and/or loss.
Anyone who owns a vehicle has gone through the often painful and exhausting experiences of purchasing the vehicle and then maintaining it. To me, each of these experiences favorably compares with the anticipation of a trip to the dentist or any interaction with the IRS.
In the movie Fargo, there’s a scene in which an auto buyer is forced to pay more for a car than he has agreed to because the factory “automatically” applied undercoating (a $500 option), even though he had previously specified that he wanted the car without the undercoating. Obviously angry, the buyer nevertheless takes the car but makes it abundantly clear to the dealer that he feels cheated and will never shop there again. And it’s implicit that he will tell everyone he knows to avoid the dealership.
This is an example of how not to manage the customer experience.
On the topic of how to do it right, enter Michael Price. Price is the general manager and executive vice president of Price Automotive Group. Based in New Castle, Delaware, the seven-brand auto dealership chain focuses on optimized customer experiences and redefining what customers think of auto dealers. And it does it at least as well as many better-known, best-in-class outfits such as Nordstrom, Wegman’s, Ritz-Carlton, Starbucks, The Container Store and Southwest Airlines.
What Price has accomplished proves that companies of all types and sizes can optimize the loyalty and commitment of both customers and employees. The achievements of his flagship dealer Price Toyota include:
- Sixty-seven percent repeat or referred business
- Thirteen and a half vehicle sales per representative per month, where the industry standard is 9.5
- Ninety-seven percent of customers with A or B credit scores
This represents real customer commitment to the Price Toyota dealership. Each of these results is significantly above industry norms or standards.
Price’s success is driven by closely monitored process management at each customer life stage. It begins at the prospect stage, and every step is done with the objective of optimizing perceived customer value. The process is built on a solid foundation of insight into customer needs and expectations coupled with flexible, innovative approaches to delivering benefits. Further, and perhaps most importantly, the dealership is able to customize and value-enhance the individual and lifetime experiences of each customer.
Several years ago, the Price dealerships switched to a “one-price” method of vehicle selling, in which the best vehicle price is offered up front. Research on this approach showed Price that customers tend to equate a long, drawn-out vehicle purchase transaction with personal vulnerability and, potentially, unwanted expense. The research also showed that if the purchase process extends beyond two hours, future purchase intent and recommendation likelihood scores decline rapidly (charted in 15-minute increments beyond two hours). In other words, the shorter the transaction time, the greater the customer’s level of trust in the dealership.
Reduced transaction time
To address this, Price has reduced the transaction time for most customers to under two hours. The finance and insurance element has been compressed to less than 25 minutes. As a result, among the more than 75 percent of customers who complete their purchases within two hours, 100 percent plan to repurchase at the dealership; 97 percent plan to service their vehicles there (a desired dealer profit opportunity); and 67 percent have already referred others.
The dealerships offer 15 high-perceived-value benefits to customers, including a 72-hour buy-back/exchange policy; service and parts discounts; no-charge towing; and $300 extra for their Price vehicle at trade-in. But the real differentiators are the approaches that create intangible, emotionally-based relationship value.
Price executives understand that, particularly at the beginning of the customer’s life with the dealership, sales processes—and resulting experiences for buyers—must be designed and aligned to address each customer’s needs.
For example, sales reps are carefully trained to guide customers through the purchase and to offer quick, responsive support. They are on salary rather than commission, so sales pressure is mitigated. The dealership has also defined the critical profit-driving linkage between employee and customer loyalty. Accordingly, special emphasis is placed on making certain that sales reps—and all Price staff—feel that they are part of a team; that they are directly contributing to the dealerships’ successes; and that they are appropriately compensated without having to push customers for each additional dollar. As a result, Price experiences very low employee turnover.
Post-sales communication and service experiences are monitored to identify any potentially neutral or negative situations that need to be stabilized or turned around. Price does some basic predictive churn modeling to help identify when customers will be ready to make the next vehicle purchase, and management actively believes in customer engagement. They provide service reminders and otherwise customize the post-sale communication for each owner. Uniquely, Price is concerned about customer loss and invests in customer win-back. The chain identifies when and why a customer has stopped servicing his or her vehicle at the dealership and has methods in place to re-establish the relationship. Few other dealerships do this.
Trust is at the very heart of understanding how supplier and individual purchase decisions are made. Created and sustained through experience, trust has to be continually earned and reinforced, but it can very quickly disappear if experience is negative.
As Deming concluded:
Profit in a transaction with a customer that comes back voluntarily may be 10 times the profit realized from a customer that responds to advertising and other persuasion.
Simply stated, optimizing customer experiences translates directly to profits.