Customer recovery and retention

Customer service pays.

Consulting firm TARP (Technical Assistance Research Programs), which has counted Chrysler as a client, has proven this repeatedly using numbers and formulas from their research. Even using the most conservative of numbers and formulas, they can show that just about any investment in service is likely to yield a much greater return in sales and profits.

They are not alone, of course. The famous Service and Profit Chain research has not only re-proven this, but has also gone further, and linked it all to employee retention and the factors which increase this. (Hint: money and satisfaction are not necessarily the keys.)

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. 

First tip: read the Society of Consumer Affairs Professionals in Business (SOCAP) study, and fix your phone system.

Second tip: conduct immediate follow-up surveys to get feedback on individuals at the center while the experience is still fresh, instead of waiting several weeks and doing surveys by mail.

Third tip: provide the customer reps with more authority to satisfy the customer.

Fourth tip: allow the reps to pre-qualify 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.

Fifth tip: make the rules clear and consistent. We all know that there are secret warranties; it’s annoying and insulting, especially in the Internet era, to base decisions on what reps think of the customers, or which rep you get.

Out of warranty repairs

We all make mistakes, and Chrysler certainly makes a few. Chrysler has lost many, many customers because of two things – the number of repairs required; and the difficulty of actually getting dealers to do them, made worse by the fact that dealers tend to care more about high-spending customers than entry-level customers (who may spend more a few years down the road).

If you know something will break and it’s your fault, make sure dealers are watching for it and offering to fix it. The Neon head gasket problem, among other things, caused a great deal of ill will. 

On an exception basis, allow people to have repairs done at third-party garages, with limits on compensation (say, 60% of what the company would pay a dealer), similar to HMO “out of network” plans – especially if they’ve already had the work done. Yes, some people will take advantage of this to put one over on the company. Most people will be honest. Provide a replacement-parts option for do-it-yourselfers, with the appropriate warranty-voiding, only-one-chance disclaimers, after they’ve been to the dealer or had the problem verified.

At the dealer level, the Five Star program has some real shortcomings. Chief among these is the fact that the dealers are credentialed by zone reps. Zone reps are close to the dealers. Many treat customers like swine and some will actual tell customers that any problems with the cars are due to the fact that customers are whiners and cheats. For the program to really work, it would need outside certification from a source with integrity – and that wouldn’t have to be a big name outfit.

<h2>Customer recovery</h2>

If Chrysler really wants to increase their sales and revenue, they should consider their current customer base. Many former 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, 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. 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?

<h2>Pilot study</h2>

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,