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A Sweet Deal

By Published on .

Car dealers turn on the charm to bring more consumers into the showroom - and keep them coming back.

Back in the early '90s, Pro Chrysler Plymouth Jeep in Denver had the worst customer satisfaction rating of any dealership in the area. "We had a lock on it," says John Schenden, a retired Chrysler salesman who bought a 50 percent stake in the business during its darkest days. "The staff didn't believe they could be any better." Schenden set out to change that attitude. He quizzed employees about what they liked at their workplace - and what they hated. He took down an ugly canopy out front and poured $900,000 into renovating the 26-year-old building (a painter still drops by every six months for touch-ups). A new program was established to reward employees who perform outstanding service. Gradually, sales began to inch up. In 1993, the dealership sold 77 new vehicles a month, on average; by last year, that figure had hit 109. Schenden credits a robust economy, as well as superior products rolling off the assembly line, for helping to boost revenues. And, he adds modestly, there's Pro's level of customer satisfaction. As the company improved service, its customer-satisfaction ratings soared - and all of those happy new-car buyers started referring their friends to the dealer and coming back when it was time to purchase another vehicle. Two-and-a-half years ago, the dealership became the first inductee into Chrysler's Five Star program, a corporate-level initiative that recognizes dealers who excel in customer service. Says Schenden: "The only thing that differentiates us from the other ten Chrysler dealers within 30 minutes of here is how we treat customers."

The makeover at Schenden's dealership underscores how important customer satisfaction has become in the competitive car business. Today, car buyers walk into showrooms armed with information - including the dealer's invoice price - that they have gathered from the Web, their friends, magazines, and elsewhere. "Before, the only option consumers had was to negotiate down from the sticker price," says Brian Walters, senior manager of sales research at J.D. Power & Associates. "Now they have access to the invoice price and can negotiate up. They're asking themselves, `Is it worth paying $500 over the invoice price for the service I'm getting from the dealer?' The dealer has to start justifying his pay based on what value he provides to the customer."

Of course, each consumer may have a different idea of what constitutes valuable service. Some may like it when a salesperson rattles off every option available on the vehicle they're considering, while others may feel that the dealer is pressuring them to buy extras they don't really want. In its Vehicle Shopper Survey, J.D. Power segments new-car buyers into four distinct types: "Highly-involved deal seekers" - 18 percent of all new-car buyers - are competitive, direct, and overwhelmingly male. Not intimidated by dealers or the negotiation process, they think a fun weekend outing is sparring with a sales rep and test driving the latest model on the lot. "Low-involved pragmatists" (24 percent of all buyers) think shopping around for the best deal is a waste of time. They value convenience above all else, and are just as likely to drive a luxury sedan as an economy model. "Relationship seekers" (25 percent) want everyone to recognize them when they walk into the dealership. Often older and more affluent than the typical car buyer, they're also much more loyal to dealers and brands. One out of three shoppers is an "armed unfriendly," a young, educated consumer who places car dealers one notch above the devil. "If they feel even a bit of pressure, or if they sense that the salesperson is not being upfront, they're outta there," Walters says.

The dealer's finance and insurance department is often what consumers dread most when buying a car, says Art Spinella, vice president of CNW Marketing/Researc h in Bandon, Oregon. "Every study we've done shows that people don't dislike talking to salespeople," he says. "What they don't like is the haggling in the F&I department." In CNW's new "Consumers, Cars and the Internet" study, nearly 70 percent of respondents said they would prefer to finance their car online - and avoid the F&I guys altogether. "Dealers aren't afraid of cars being sold online," Spinella says. "What worries them is losing the finance income as customers start to handle the process themselves on the Internet."

Making the F&I process painless is just one of the mandates in DaimlerChrysler's Five Star program, which has a manual "the size of a New York City phone book," says Dennis Fisher, editor of Car Dealer Insider, a weekly newsletter that covers the industry. "If a customer comes in with a complaint about the repair they got done, the manual tells the dealer to do A, B, and C. It's a road map for every service issue." By the end of last year, 2,100 DaimlerChrysler dealers, or 47 percent of the total, were Five Star-certified, says Steven Landry, director of dealer retail strategies for DaimlerChrysler.

Those dealers, Landry adds, represent 65 percent of retail sales, a fact not lost on the U.S. mothership in Detroit. Last fall, the automaker started a massive advertising campaign promoting Five Star dealers, in effect closing the garage door on the rest of DaimlerChrysler's retail outlets. Landry declines to give numbers, but says the campaign cost about the same as one to introduce a new vehicle. In the first eight months of 1999, DaimlerChrysler spent $884 million in advertising, according to Competitive Media Reporting. By summer, DaimlerChrysler will dangle another carrot in front of Five Star dealers - the right to purchase discounted goods and services, everything from office supplies to airline tickets, under its corporate name. The goodies can be taken away, however. Last year, the automaker "decertified" eight dealers who fell out of compliance with Five Star regulations.

Sometimes it doesn't take a corporate edict to effect change on the floor. At one Volvo dealership, says Jeff Maszal, principal consultant at TARP, a research consultancy firm in Arlington, Virginia, managers noticed that roughly 70 percent of the customers who brought in cars to be serviced were women, often with kids in tow. Problem was, there wasn't a toy in sight for children to play with while mom waited for the car. So the dealership stocked the waiting area with toys, installed a TV so kids could watch cartoons, and made sure that rest rooms were clean and bright. "Service and the soft touch really can make a difference," Maszal says. Especially, as dealers like Schenden are learning, to the bottom line.

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