When luxury car manufacturer Audi launched its new A-series in
the United Kingdom in 1995, sales were spectacular. By 1999, Audi
sold 40,000 cars in the United Kingdom; by 2002, more than 65,000
were sold, and 40% were to repeat customers -- a growth rate
of almost 60%.
How did Audi manage such growth? The story starts in 1996, when
Audi’s research uncovered that it ranked dead last among
luxury makes in the United Kingdom on traditional measures of owner
satisfaction and loyalty.
To sustain the successful launch of the A-class sedan, senior
management understood that this dismal ranking would have to be
reversed -- so it developed an ambitious plan to reinvent Audi
UK from the ground up. The results have been nothing short of
stunning. In fact, Audi’s success offers a model of how to
drive growth and engineer a dramatic turnaround by creating a
superior customer experience for companies in any industry.
Satisfying the customer is not enough
Audi’s research revealed this important finding: Although
Audi customers were pleased with their vehicles overall, they were
far from happy with their customer experience at Audi dealers,
particularly when their vehicles needed service. It seemed as if
each of the 130 "Audi Centre" dealerships operated independently.
If the proud owner of a new Audi, motoring from London to the Lake
District for a holiday, found his or her car in need of service,
the next Audi Centre would likely not have the same hours as his or
her local one. Nor would it necessarily offer the same services or
even uphold the commitments that were promised with the purchase of
the car. Consistency was practically nonexistent. David Ovenden,
Audi’s head of customer service, saw that for customers,
"service by chance" was the norm.
For Audi UK, it was time to stop, back up, and change
directions.
Audi realized that creating consistent service across its
network of franchised dealerships was key to establishing a
dependable brand experience for its customers. So Audi UK launched
its "Service by Design" program in January 2000.
The program wasn’t complicated, and it didn’t take
intensive study or preparation. But it did require consistency and
a focus on crucial areas that would build a customer’s
emotional engagement.
In Phase One, Audi Centres worked to deliver the
"basics" -- the minimum services that customers expect
from their dealers -- consistently. Audi crystallized these
into a published brand promise, Service by Design, that gave
dealerships a clear set of procedures or guidelines that employees
could understand and implement.
When The Gallup Organization began working with Audi in 2000,
the aim was to track how well franchisees (the Audi Centres) met
the brand promise on these basics:
- A customer could call and set up an appointment within five
days.
- All customers would be offered alternate transportation, and
courtesy cars would be fueled and insured by the Audi Centre.
- When an owner picked up his or her car, it would be washed,
vacuumed, and in pristine condition.
- Customers would not be charged for work that was not
preauthorized.
- All customers would receive an itemized invoice.
The company reinforced the importance of keeping the brand
promise by tying substantial bonuses to each Audi Centre’s
customer service ratings. Gallup interviewed 60 customers per
dealership per quarter, reporting rolling results monthly. This
allowed each Audi Centre to compare its performance to that
achieved by other centres across the network.
The bonuses were fundamental to ensure accountability at the
dealership level -- where crucial inconsistency problems had been
identified.
The process worked.
- In 2000, 71% of customers across the Audi network reported that
their dealerships had met all the published brand promises --
the "Service by Design Basics."
- Just two years later, 87% of UK customers reported perfect
delivery of the Basics.
Perception is everything
Once its dealers had the Basics down, Audi shifted its focus to
building customer engagement. In Phase Two, the strategy moved to
humanizing the customer relationship -- from taking care of
cars to taking care of the people who drove them.
A second measure was developed to reflect the new emphasis: the
Service by Design ("SbD") Loyalty metric.
While original Basics metrics were process measures, the new SbD
Loyalty metric measured how dealerships influenced the customer
experience. Customers’ perceptions were increasingly
important. Across the network, each customer interaction --
the "customer experience" -- began to be viewed in terms of
that perception. The Basics, for instance, included a "yes/no"
measure of whether a car was washed and vacuumed before it was
returned to its owner -- a process measure. The SbD Loyalty
metric, in contrast, provided a more comprehensive assessment of
the entire customer experience and the customers’ reactions
to it.
Audi had long tracked a measure of "Quality of Work." This
rating was originally intended to gauge the technical abilities in
each dealership’s workshop. Gallup consultants noted that
this was in fact a higher level outcome measure. "It is an overall
measure," says James Court-Smith, Gallup’s consultant on the
account, "and it reflects whether customers feel that the
dealership takes pride in its work, and whether it appears to care
about its customers."
When Gallup consultants delved into the elements that drove an
Audi customer’s perception of the Quality of Work, they
discovered that communication and managing customer expectations
were key to delighting Audi customers. First, customers must feel
that the dealership’s service personnel had taken the time to
properly understand their requirements -- communication that
happens when a car is checked in. Customers must also feel that
they knew what work had been done to their cars and whether further
work was recommended -- communication that occurs when the car
is returned to the customer.
A second important discovery was that if a service problem
wasn’t fixed the first time, all other efforts to engage
customers would likely be wasted. Even here, though, perception is
everything -- and setting the right expectations can make all
the difference. If a customer has to return for a second visit to
correct a problem -- for example, if a part must be
ordered -- it doesn’t matter as much that the customer
has to return, it matters more whether the customer had
expected a second visit.
Managing expectations doesn’t require a huge monetary
investment or an expensive customer relationship management (CRM)
system, but it does demand attentive staff members at every
customer touchpoint. For Audi, the upshot is this: When a customer
checks in a car for service and asks for a problem to be corrected
while it is in the workshop, the staff members know they must
manage that expectation by telling the customer that the problem
will be investigated and diagnosed that day. But a part may need to
be ordered, and a second visit may be required to correct the
problem.
In Phase Two, Audi highlighted the human dimension of the
customer experience. Managing expectations and communicating, and
staff friendliness and courtesy were core components, along with
the dealership’s ability to keep the service schedule they
had promised the customer -- a crucial element of the brand
promise.
Communication counts
Audi’s focus on managing expectations and good
communication at every customer touchpoint ensured that the Service
by Design program aligned customer service efforts in each
dealership. It gave these businesses a common language and a common
goal -- improving the customer experience -- that
centered on how each interaction influenced customer
perceptions.
For dealers, this meant "owning" their customers’
perceptions and making them a priority. Dealers had to shift their
emphasis from merely washing and vacuuming cars to delighting
customers with the result of a clean car.
The new emphasis on communication had some practical
implications for dealership staff members as they struggled with
customers’ apparent impatience and desire to get in and out
of the dealership as quickly as possible. Many dealerships, in
fact, misguidedly prioritized speed over communication.
Research showed that it was vitally important for customers to
feel that their needs were properly understood and to know what
repairs had been made to their cars. But employees needed to be
empowered to request any necessary time up front -- this was
the challenge. By forewarning customers at check-in that they would
need time at check-out to discuss their cars’ service, Audi
Centre employees didn’t have to struggle to keep their
customers’ attention during these crucial communications.
Staff members also had to lead the communication at check-in, as
most customers don’t have extensive technical knowledge and
don’t necessarily describe car problems accurately or
clearly. The Audi Centre staff members were the experts, and they
had to take control of the conversation, ask the right questions,
and get the information they needed.
"When you are ill and go to the doctor, it’s her job to
ask you the right questions to diagnose your illness correctly,"
says Gallup’s Court-Smith. "As the patient, it’s not
your responsibility to go to her with only the relevant symptoms
written down in the right order. In the same way, Audi drivers do
not necessarily know what ‘symptoms’ are relevant to
their car’s problem, nor do they know how to describe these
accurately. The Audi Centre staff must ensure that the right
questions are asked."
"The secret to better service within a franchised network is
keeping the rules simple to follow," says Ovenden. "When a program
is easy to explain and understand, and when you can prove that it
is in the business interests of franchisees -- that it will
contribute directly to their profit margins -- the program
will be used."
Quantifying performance
The remarkable success of Audi’s new A-series challenged
the capacity of its UK dealership network. But the Service by
Design program ensured that the network’s focus remained
firmly on customers -- and the importance of managing customer
expectations.
Although the program initially used financial bonuses to
reinforce needed changes, Gallup knew that establishing the
business case was key to the program’s long-term success.
Unless Audi UK could demonstrate to its dealership network that
providing a superior customer service experience was a legitimate
business interest, no one could realistically expect dealerships to
do more than pay lip service to the program.
In 2002, Gallup conducted Business Impact Analysis to establish
the linkages between the Service by Design metrics and business
performance. And Gallup was able to quantify the return on
investment for franchisees. For example, during a 12-month period,
higher performing Audi Centres (as measured by the SbD Loyalty
metric) returned an aftersales profit margin that was, on average,
seven percentage points higher than centres that delivered a lesser
customer experience.
Gallup was also able to quantify the powerful linkage between
the program and return on investment. From 2000 to 2001, centres
that had improved the customer experience increased their profit
margins (29%) at more than twice the rate of centres that had
not improved (12%). Once again, the SbD Loyalty measure -- the
measure of perception, communication, and human interaction --
linked to higher profits. No such return could be established for
centres that focused only on the Basics measures -- on the
process rather than the customer experience that this creates.
Driving perceptions
The Service by Design program is being expanded to include
another crucial element of the customer interaction: the sales
experience. Again, effective communication and excellent staff
interactions are emerging as key drivers of customer
engagement.
Audi knows that this straightforward formula works. Customers
are pleased because they are better cared for. Audi Centres are
focusing on the customer experience rather than on processes, and
they see this program as an important business tool. Customer
relationships -- not just cars -- are running well, and
that means a smooth ride for customers and employees alike.