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Tips to Chrysler: Customer Retention and Recovery

"Tips to Chrysler" is a regular feature in which we propose obvious and credible actions which can increase Chrysler's sales and/or cut their costs, and hope against hope that someone at Chrysler is listening.

Customer service pays.

That's a point TARP's* John Goodman, a prolific writer and speaker, makes over and over again. What's perhaps most interesting is the way he does it - with numbers and formulas from his own research. He can quickly show that, even using the most conservative of numbers and formulas, any investment in service is likely to yield a much greater return in sales and profits.

One of TARP's early findings was the fact that a dissatisfied customer is likely to tell an average of about ten people about their experience. They also found that when customers did have problems which were fixed rapidly and with an appropriate attitude, they were more likely to be loyal to the company than customers with no problems at all!

Another of TARP's findings was that most customers do not complain to the company - they complain to their friends. That makes customer recovery (which we'll discuss later) and proactive service essential.

Unfortunately, while Chrysler has tried to improve their quality - both in the cars and in the dealerships - they have run into a large number of barriers. Let's see if we can provide some tips at each level.

The customer center

The first problem with the American customer center is the phone system. Back in 1998, SOCAP published a customer contact study (TARP actually did the research). It showed what an incoming phone system should do, and what it should not do. We'll just refer you to that study and to TARP itself, while saying that, in essence, Chrysler's phone system seems to be designed primarily to annoy and turn away customers.

  • First tip: read the Society of Consumer Affairs Professionals in Business (SOCAP) study, and fix your phone system.
  • Second tip: hire more people, train them better, and have more information on tap.
  • Third tip: conduct immediate follow-up surveys, via phone and via e-mail (of course one must ask for e-mail addresses to do this), to get feedback on individuals at the center while the experience is still fresh, instead of waiting several weeks and doing surveys by mail.
  • Fourth tip: provide the customer reps with more authority to satisfy the customer.
  • Fifth tip: allow the reps to pre-quality customers for out-of-warranty repairs, instead of having an annoying cycle of taking cars to the dealer, asking for the work to be done under warranty, getting turned down, then calling the reps, then speaking to (or going to) the dealer again.
  • Sixth tip: make the rules clear and consistent. We all know that there are secret warranties on things like Neon head gaskets.

Out of warranty repairs

We all make mistakes, and Chrysler certainly makes a few. The Neon is a classic example of a car that came out too early. We have no doubt that Chrysler lost many, many customers because of two things - the number of repairs each early Neon required; and the difficulty of actually getting recalcitrant dealers to do them, made worse by the fact that dealers tend to care more about highly-profitable customers than entry-level customers (who, though, often become highly profitable a few years down the road).

  • First tip: if you know something will break, send a note to customers to let them know about the secret warranty. The Neon head gasket problem, among other things, caused a great deal of ill will. If all customers had received a post card informing them that Chrysler would fix these for free, or for a deductible, they would probably have a much better feeling about Chrysler.
  • Second tip: allow people to have out-of-warranty repairs (such as head gaskets) done at third-party garages, with limits on compensation (say, 80% of what the company would pay a dealer). Most dealers are still harder to deal with than local mechanics, and most dealer mechanics, we regret to say, seem less qualified than the guy at the corner garage. Also provide a replacement-parts option for do-it-yourselfers, with the appropriate warranty-voiding, only-one-chance disclaimers.
  • Third tip: 100,000 mile warranties, standard, on transmissions if 7176 fluid is used, and documented. 100,000 mile warranties on head gaskets, standard. These are parts that should not fail. Besides, why should Hyundai have a better warranty than Dodge?

Dealers

At the dealer level, while the Five Star program is no doubt effective (it's hard to tell, since the company won't release any meaningful data to us), it has some real shortcomings. Chief among these is the fact that the dealers are credentialed by zone reps. Yes, the zone reps do switch off, which helps a bit, but zone reps are close to the dealers. When we've dealt with zone reps, we've found that most of the ones in our local zone treat customers like swine. One gets the idea that any problems with the cars are due to the fact that customers are whiners and cheats. (Oddly, while customers get a chance to rate dealer service on surveys, we don't know of any surveys covering zone reps!). For the program to really work, it would need outside certification - like Ford's copycat program, which uses J.D. Power.

Likewise, this program is fine for increasing the number of excellent dealers, but what happens to the poor dealers - especially that troublesome category of high-volume, high-complaint dealers? We don't know, but it doesn't seem like the company is willing to offend them. Chrysler's reaction to price-gouging on the PT Cruiser seemed like all talk, no action. If that's not true, we have yet to hear anything from inside the company to disprove it.

Customer recovery - the essential step

If Chrysler really wants to increase their sales and revenue, they should consider their current customer base. Many former Chrysler and Dodge owners are disgusted with the company, often for something done by a local dealer which can easily be fixed by the company. The best sales move Chrysler could make right now is to call each of their many, many customers and find out whether they plan to get another Chrysler, Dodge, Plymouth, or Jeep, and if not, why not - then start working on eliminating those obstacles. Yes, this will cost hundreds of thousands of dollars in labor, phone bills, head gaskets, and transmissions. It will also bring in many more hundreds of thousands of dollars in sales, at a time when they are needed most.

Do we have numbers? No, but Schmalansee Associates, another consulting firm, does. They presented the results of a real project two years ago at a major conference. A huge number of "former" customers came back to the company - and many current customers increased their "wallet share."

Sure, money is tight over at Chrysler. So maybe they should send out a post card survey first, then call the people who respond and say they won't buy another Chrysler, Dodge, Jeep, or Plymouth. The result won't just be feedback on what the company needs to do better; it will be many more customers, if they do the job right. And doing the job right means having an empowered individual or team at the other end of the phone or post card who will follow through on complaints and resolve them quickly.**

This tip requires more resources than any we've suggested so far - but it also has the highest payoff. It needs to be done - now. Will you get the ball rolling?

Pilot study

Suppose you are working with Chrysler, and you want to show how effective customer recovery can be, but don't have a large budget to work with, and can't convince your leaders to try it. Consider simply fishing for dissatisfied customers on the newsgroup (rec.autos.makers.chrysler), and on allpar's forums (particularly tech support and minivans). If you can contact a few of those customers, solve their problems, and gain present or future sales from them, you'll have some good ammunition.

If you work at Chrysler, or know someone who does, can you pass this along to them?

http://www.allpar.com/ed/tips/recovery.html

* Technical Assistance Research Programs, a consulting firm

** This should be easier than it is. We worked with people in customer service to try to proactively resolve complaints, and found that they simply disappeared after committing to work with us. No complaints seem to have been resolved, and we gave up the effort.

Written by write-at-allpar-com. For more information on customer service, click here or visit the TARP web site.

1. How to sell Neons - now - and with minimal investment May 2001
2. How to save lots of money on repairs, while increasing your reputation for quality June 6, 2001
4. How to increase customer retention and bring back "lost" customers July 2001
5. How to regain the faith and loyalty of enthusiastic boosters and customers August 2002
6. How to avoid incentives and still sell more cars September 2002

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