By Mike Esposito, President and CEO of Auto/Mate Dealership Systems

This article appeared in the December issue of Ward’s Auto.

 

Customer satisfaction and customer loyalty are two different things. The Customer Satisfaction Index (CSI) scores that many dealerships and manufacturers rely on as a Key Performance Indicator (KPI) do not really have much to do with building loyalty. Customers can be loyal to a company and have an unsatisfactory experience, or they can have a very satisfactory experience without being loyal to the company.

 

I believe the CSI surveys should be phased out and replaced with something else; and here are a few reasons why:

 

1) The surveys are too long. In today’s rushed world, every minute is precious. It’s long been suspected that the people who are most likely to reply to surveys are the ones who are disgruntled, skewing scores lower than they should be. To get a substantial response rate, a survey should be only a few questions and should take no more than a couple minutes to respond.

 

2) Sales and service people game the system. Because manufacturers tie financial incentives to the CSI survey, the focus becomes on how to get a good CSI score rather than how to deliver genuinely great customer service that will build loyal customers. It’s similar to how our education system is focused on test scores. Instead of teaching our kids how to develop good study habits, they teach them how to pass the test. It’s too tempting and financially rewarding for sales and service employees to ‘coach’ customers on the importance of giving a ‘highly satisfied’ rating when they receive the all-important survey.

 

3) Customers game the system. There are many car-buying advice blogs out there, and so a lot of customers know how important the CSI survey is to dealership sales and service people. They then use this information to negotiate a better deal: “if you give me this, then I’ll give you an excellent survey rating.”

 

4) If a factory wants to add a point in a dealer’s market area or terminate a dealer, in support of its legal argument that it should be allowed to do so, the factory points to a low CSI score to argue that the dealer isn’t adequately serving the market.  In these circumstances, millions of dollars are often at stake.

 

5) Many new tech companies sell a product to the dealership with the carrot that using their product will enhance CSI. I am not aware of any product or technology that can provide a genuinely great customer experience. Only people can provide a great customer experience. I worry that in some dealerships, employees are now trying to “appease the technology” rather than trying to appease the customer.

 

6) Poor CSI scores focus attention in the wrong direction. Often, it’s the salespeople and/or service advisors who get in the most trouble when the CSI scores are low. Yet, the survey asks questions about things that are completely out of the employees’ control, such as how clean the restrooms are, or about a product feature designed by the manufacturer. If CSI scores get too low, sometimes pay levels get reduced, which most certainly leads to reduced morale. The best customer satisfaction levels are achieved by having happy employees, not angry, resentful employees. It’s counter-intuitive.

 

For these reasons I believe that CSI scores are not a true measure of customer satisfaction. Apparently, some manufacturers are also taking notice of the survey’s flaws. According to a January 2013 Automotive News article, Hyundai and Chrysler have both eliminated big CSI payments for dealers, and Chrysler has also eliminated penalties associated with lower CSI scores.

 

The Link Between Loyalty and Revenue

 

There is good reason for wanting to track and improve loyalty. According to a 2012 study by Maritz Marketing, the average dealership would be able to generate an additional $106,315 in gross profit by improving the customer experience. And J.D. Power & Associates 2013 U.S. Customer Service Index (CSI) study found a direct correlation between service satisfaction and loyalty.

Among vehicle owners who are “delighted,” 96% say they “definitely will” return to the dealer service department for service and 59% say they “definitely will” purchase or lease their next vehicle from the same brand.

 

A Better Measure…..

The Net Promoter Score’s, or NPS® purpose is to evaluate customer loyalty to the company. It does not measure customer satisfaction per se. The ability to measure customer loyalty is a more effective methodology to determine the likelihood that the customer will buy again, talk up the company and resist market pressure to defect to a competitor.

 

So how do I find out what my NPS score is, you ask? The methodology is based on the fundamental perspective that every company’s customers can be divided into three categories: Promoters, Passives, and Detractors. It asks one simple question: “How likely is it that you would recommend [your company] to a friend or colleague?”

 

Customers respond on a 0-to-10 point rating scale and are categorized as follows:

 

• Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling growth.
• Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
• Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

 

To calculate your company’s NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors.

 

For example:

 

You have 100 surveys returned

• 50% of them score you as a 9 or 10
• 20% of then score you as an 8 or 7
• 30% of them score you as a 6 or below.

 

In this situation your NPS would be 20 (50%- 30%)

 

Asking one question greatly increases the response rates. There is no simpler survey than that. However you may want to expand it by asking one or two other questions. For instance, if a customer scores you an 8 you may want to ask one question: What do we need to do for you to score us a 10?” If a customer scores you a 6 or below you may want to ask two or three questions as to what caused them to give you this score. The survey can be sent right after the transaction, so if there is “detractor” who had a poor customer experience, the dealer can take immediate action. It’s also simple, so the focus can be on employees, process and customer service; not on the “score.”

 

Studies have shown companies that achieve long-term, profitable growth have an NPS score twice as high as other companies. Most businesses average an NPS of around 5-10, but extremely profitable companies such as Apple and Harley Davidson have scores in the 50-80 range. The same studies show that companies with a negative NPS (more detractors than promoters) are more likely to suffer stagnant growth or go out of business.

 

What do you think of CSI as a Key Performance Indicator (KPI) for customer satisfaction? Do you think replacing with the Net Promoter Score (NPS) is a good idea? How do you measure customer loyalty?