What are the factors that could help increase car sales for leading vehicle manufacturers (VMs) in India? What makes customers buy a particular brand or be loyal to the same brand time and again? Some reasons include cost of the car, brand image, fuel efficiency, car makers’ reputation, car design etc. Can the after-sales service experience help sell more cars or make owners stay loyal to a brand for long? The answer seems to be ‘yes’ according to Indian customers.
In the recently concluded Frost & Sullivan Customer Insights Report, “Passenger Vehicle Service Pattern in India,” customers spread across 14 cities, including tier 1 and tier 2 cities, were asked to rate the importance of several factors based on which they select a particular brand of car. More than 60 per cent of the customers rated after-sales service experience as a very important factor for buying a particular brand of car.
As the chart indicates, customers rated the after-sales service experience along with fuel efficiency, quality, and cost of the car as the most important purchase criteria. One customer from Delhi who owns a midsised car said he would refuse to buy from a particular brand again, unless it improved its after-sales service experience.
Organised independent service stations — a force to reckon with
Even though manufacturers are focusing and doing all they can to keep their customers happy, the after-sales service experience leaves much to be desired. This is one of the major reasons why customers shift to either organised independent service stations such as My TVS, Mahindra First Choice, or local independent service stations in their neighbourhood for their servicing needs immediately after the free service period with their carmaker is over. According to the “Passenger Vehicle Service Pattern in India” report, about 57 per cent of the customers take their cars to local service stations (LSCs) after their free service period is over, whereas only 39 per cent of the customers continue servicing their cars with the authorised service stations (ASC).
As after-sales service and spare parts sales are key revenue streams for any VM, this trend does not augur well for long-term revenue maximisation. Considering that more than half of their customer base switches over to independent service stations moving away from ASCs, VMs are only left with less than 40 per cent of their overall customer base to cater to. Organised independent service stations have just about 4 per cent share in the market, which reflects the relative size of their presence in major Indian cities. The organised independent service stations are growing at a rapid pace in major Indian cities and VMs have to ensure that they don’t lose more market share to them in the long run.
Organised independent service channel and ASCs — room for both to coexist
After-sales experience gives important word-of-mouth publicity for a brand as whole and hence can either make or break reputations in India. This is one of the reasons why there seems to be an additional thrust on after-sales service by carmakers now. Hyundai wants to have 1,000 workshops by 2013, with an additional focus on metros. Ford opened about 45 new sales and service centers across the country, with more than 90 centers having quick service initiative process where the routine service is performed in less than 90 minutes. This is the way forward.
Organised multi-brand players need to scale up fast if they have to tap into greater number of customers and the existing network size cannot possibly justify investments and growth in this market. This is why some of the players in this segment are looking at moving from company-owned-and-operated mode to company-owned-and-franchise-operated mode. But, this has its pitfalls too, for example, until the brand is well-established, franchising can dilute customer experience. The franchises need to replicate the same customer experience. But, considering that 70 per cent of the customers currently service their cars in LSCs, they have a tremendous opportunity to have their share of pie.
Getting it right
The study reveals that some of the most important reasons for customers discontinuing from ASCs is the high cost associated with servicing cars there and the better quality of work at LSCs. VMs should look at focusing on bringing transparency to pricing as well as improve the overall quality of service and timeliness to ensure customer satisfaction. They should also look at extended warranty at an affordable cost to make it a habit for customers to visit ASCs. As after-sales service experience also plays an important role in repeat business and word-of-mouth marketing, it is paramount for VMs to understand the disenfranchisement of the customers in detail and strategise to ensure that ASCs cater to customers on a long-term basis.
The author is vice-president, automotive & transportation Practice, Frost & Sullivan, South Asia, Middle East and North Africa