People play a very key role in both the car buying and servicing processes dependent on the level of service and customer interaction involved. Critical incidents as Bitner, Booms and Tetreault (1990) define them are, “specific interactions between customers and service firm employees that are especially satisfying or especially dissatisfying”. Taking this into consideration the use of people is a key marketing tool affecting customer satisfaction. Within the car selling division, Sullivan’s may identify a critical point as the pre-sales period where, the advice given at the “front end” by one of the seven sales people will have a very direct effect upon the choice made by the customer. If the choice is guided by this advice and as a result the customer’s needs are better fulfilled, then the result will be greater customer satisfaction. To manage this critical point with the marketing of people, Sullivan’s must ensure the correct training is undertaken or employees hold certain customer service skills and knowledge. Skills needed in the service department for certain individuals such as mechanics will be different from those in the position of service writers. I will discuss this in further depth in question three.
People (employees) at Sullivan’s can also develop positive relationships with customers. This is beneficial not only as it increases commitment to the garage, especially relevant when considering the servicing of vehicles, but can be important in word of mouth marketing. Again the differing skills needed in the two departments, such as knowledge of products when selling cars and skills of the mechanics in servicing them, would be carefully considered.
Linked to the concepts used for product and promotion, Physical Evidence becomes paramount when trying to communicate the services available. In addition to the cars themselves for example, Sullivan’s have a “handsome, high-ceilinged showroom” and “geraniums graced the flowerbeds outside the showroom entrance”. This approach draws connotations to a positive service nature. The cars can be marketed more easily for their physical evidence with “each polished to a high sheen” and being put on show. Due to the decreased tangibility of the “back end” of the operation it is harder for a customer to judge the service and therefore marketing the service with greater physical evidence is necessary. To achieve this identifying and reducing the risk customers experience during the buying process, due to this lack of tangibility is important. A method that may be employed by an Automobile dealer to reduce this perceived risk is to offer safeguards in the service department adapted to the situation and type of work carried out. The service department would also rely a great deal more, as previously mentioned, on word of mouth advertising to reduce risk.
Certain processes, such as the process of buying the car, would be considered by Sullivan’s. They may wish, through the use of their staff, to market a positive process for example, the time it takes for an advisor to consult with you being minimal. When considering the service department in this context, waiting time would be a much more significant factor and ensuring this is kept to a minimum would be vital. This principle presents the concept of a gap model, Figure 7, (which I will develop in answering question two) representing a “shortfall between expectation of service level and perception of actual service delivery” (Palmer, 2001). By studying the gap between what the management believe is the time a customer is willing to wait for a car to be repaired and the time the customer is willing to wait, a cause of customer dissatisfaction can be determined. This gap can be managed by research in the way of questionnaires for example, and in turn using people (greater employee training) to reduce it and increase customer satisfaction. The degree to which this gap should be reduced may be determined by understanding zones of tolerance, developed by Zeithaml et al (1993). This identifies minimum acceptable service levels and desired service level. The space in between is the zone of tolerance. This should be considered in both departments and as mentioned with the example of waiting time, different parts of the marketing mix employed to the appropriate levels.
When considering the marketing mix as a whole an automobile dealer should consider the consumers evaluation of alternatives and dependant upon their preferences the marketing mix can be altered. Figure 2 and 3 shows my choice set of evaluation criteria for car buying and car servicing respectively. These “multiple attribute matrix” include five factors I would use to evaluate my alternatives. The key for Sullivan’s will be not only to ensure they meet these criteria but to make consumers aware they can using a combination of the marketing mix and ensuring varied customer preference is considered. Using my preferences, an automobile dealer should promote their range of vehicles at the “front end” and the value of their service with respect to the cost/quality aspect at the “back end”.
In conclusion it is clear that the difference in service orientation has a direct consequence upon the manner in which the marketing mix is employed. In this context it’s clear the original four P’s are more applicable as you move up the “goods and service continuum” toward “pure goods”” whilst the extra three P’s (of the extended marketing mix) are more applicable as you move towards “pure services”. As both the service offerings are fairly central in the continuum a balanced mix of all the seven P’s is necessary to successfully market the service offer, albeit adapted slightly in each purchase area.
Performance and Service Quality
This section will concentrate on the evaluation and comparison of performance and service quality concerning the two purchasing area’s. The model titled “Link between Service quality, satisfaction and performance” (Figure 4) exemplifies these interconnections. Figure 5 shows the nature of the service production system for Sullivan Ford Auto World and the various interactions between the customers and purchase areas. To evaluate the performance and service quality I will examine this system and identify weaknesses using primarily the “Gap Model”. Types of service quality will also be identified separate issues related to the case. To analyse financial performance, statistics from the case study will be used.
When considering the links identified in Figure 4, it’s clear from the customer’s perspective, long term evaluation of performance creates a perceived service quality. Figure 6 in the appendix presents the five dimensions of service quality identified by Parasuraman et al (1990) and relates them to the two purchasing areas at Sullivan’s. Applying some of the issues in Figure 6 to the “Gap Model will identify certain weaknesses in the operation. Figure 7 presents this Gap Model with a description and in the following paragraphs each gap is considered in numerical order.
In the car sales department of Sullivan’s it’s noted that when a customer wishing to purchase a used would “sometimes be persuaded to buy a new one”. Whilst this could be viewed as a beneficial sales technique it should also be considered as a misunderstanding of what customers want. This could detrimentally affect the likelihood of the customer purchasing a vehicle and lose a potential sale if they feel pressured in any way. Within the service department a gap exists in the understanding of customer expectations with regards to scheduling of service hours. Customers are “required to bring cars in for servicing before 8:30am” and “pick up their cars by 6:00pm on the day the work was completed”. This inflexibility is something customers are not likely to appreciate or expect.
The case identifies little gap between management perception and service quality specification in the car sales department at Sullivan’s. The management here assumedly communicate certain quality specifications through advertising and the case does mention “used vehicles were carefully serviced, with parts replaced as needed….dents and blemishes were removed”. A gap does however exist in the services department with respect to the “car fixed correctly” issue in the reliability dimension in Figure 6, as the rating, evident from customer survey results, was “close to average”. This shows that the service quality specification, in comparison to other Ford dealers, is below average which isn’t the target the management wish to reach.
Another gap (gap 3) exists concerning the servicing of vehicles in relation to the reliability and assurance dimension of service quality. The case states “It was often little things, such as water leaks and wiring problems, that were the most difficult to diagnose and correct, and it might be necessary for the customer to return two or three times before such a problem was resolved”. This would undoubtedly negatively effect a customer’s perception of performance, reducing perceived service quality. It could explain results of surveys suggesting “more than half would use another Ford dealer or “some other place” for maintenance services, such as “oil change, lubrication or tune up, or for minor mechanical and electrical repairs”.
Gap 4 brings the issue of tangibles as a service quality dimension to light. Gronroo’s (1984) two components of service quality are relevant. Whilst the “Technical Quality” (the relatively quantifiable aspects of service) such as the “modern and well maintained equipment” exist the “Functional Quality” which cannot be measured objectively, are not. This includes the “old and greasy” building, the “cramped room with peeling paint” where customers wait and the “ringing telephones” which “frequently interrupted the process”. These “Functional Qualities” detrimentally affect the environment in which the service takes place. Having been only told about the service, “a third had not been introduced to someone in the service department” there could be a large gap between the expectations they develop about the servicing of vehicles, including its environment, and the service delivered to them. There may be a similar gap at the “front end” of the business if the communication via promotions, “radio and television commercials”, is over-emphasised and certain discounts or offers are not as beneficial as first perceived by the potential customer.
Gap 5 may exist as a result of one or a combination of the gaps discussed. This gap between perceived and expected service is clearly represented in the results of the surveys received by Sullivan’s, “30% would use another source for major repairs”. Further the Sales department was recognised as having customers with an overall level of satisfaction standing at “consistently low” despite vehicle ratings being “in line with national averages”. The likelihood of a customer purchasing from Sullivan’s again was also noted as being “a full point below that of buying another Ford product”. The case further identifies worst ratings of customer service in “writing up orders…convenience of service hours” and below average ratings on “the length of time to complete the work and availability of needed parts”.
To evaluate the performance in more quantifiable terms, the financial information provided in the case highlights some weakness at Sullivan’s. Car sale revenues, in the most recent year, totalled “$26.6 million” down from “$30.5 million the previous year”. This represents a drop of 12.79%. “$2.9 million” revenue was generated from service and parts, down from “$3.6” the previous year. This represents a drop of 19.44%. This clearly shows performance of the service department was significantly worse in the most current year. However considering that “new car sales had declined” in response to a “turndown in the regional economy” and the balance of selling gross was “shifting toward services” the situation of performance in services at Sullivan’s is worse than the figures suggest.
In conclusion on evaluating the performance of each purchase area it is evident that the service division is performing significantly worse than the car sales division. The “Gap Model” has identified problems in each area, however, more can be identified within the services area at Sullivan’s. This could be a result of limited information within the case but the financial information backs the application of the “Gap Model’s” findings.
Recommendations
To approach this question, weaknesses identified in question two, along with financial and market research information provided in the case will be drawn upon. This section of the report will make recommendations concerned with the marketing at Sullivan’s and then evaluate the options available to Carol Sullivan-Diaz and recommend a course of action.
Presented in Figure 8 is a three stage model for a marketing approach based upon incremental improvements. This will involve evaluation at each stage sourced from feedback available through customer surveys. Each stage involves a certain element of risk reduction and the closing of gaps highlighted in question two. I developed the model from Figure 4 whereby improving customer satisfaction in individual transactions will develop an overall perceived performance and in turn enhance perceived service quality. Other models I referred to included the “Gap Model” (Figure 7) and the “5 Dimensions of Service Quality” (Figure 6). I feel these recommended actions are financially feasible as “some funds for future contingencies” are available from the reminding fund provided by “a large insurance policy” on the late Mr. Sullivan’s life.
Stage 1
A staff training programme could be implemented to improve communication between employees and customers. Customer service would be a primary element and especially applicable in the services department where customers were responded to “sharply” or have actually been cut off in telephone conversations. This would help in dealing with abusive customers. With further staff training for mechanics, to help quell the issue of simple problems not being identified, a cause of customer dissatisfaction, aggressive and unhappy customers could be reduced in number. The effect of this staff training should improve performance, enhance customer satisfaction and in turn improve the perceived quality of the operation.
I recommend improvement of tangible cues relating elements of Gap 4, specifically in the service department, due to the intangible nature of the service offerings. Updating the nature of the service environment should improve the perception of quality and reduce risk for the consumer. The “cramped room with peeling paint” where customers wait, could simply be redecorated and maintained. The servicing building “looked old and greasy” so improving this and maintaining a cleaning system to keep its state would be advisable. I also recommend a staff uniform to further improve the appearance of the service department one factor identified as having “worst ratings for service”. Computerising the “service work-order processes” would improve performance in terms of efficiency, one type of performance measurement identified by Palmer (2001). I recommend this as “writing up orders” was another area identified in the customer surveys as a worst rating. “Orders had continued to be hand-written on large yellow sheets, with carbon copies below” and by computerising these orders speed of service can be enhanced whilst protecting important documents against unforeseen circumstances such as fire.
After these improvements have been adopted it would be wise for Carol Sullivan-Diaz to evaluate the success of these changes from the customer surveys delivered to her to ensure they have been effectively employed.
Stage 2
The next stage involves a series of marketing exploits involving both ends of the business to further encourage custom.
I recommend improving flexibility and closing elements of gap one in relation to convenience of scheduling work required, and of service hours. As explained the inflexibility, where customers were required to drop off and then pick up their cars after servicing, was extremely poor. Implementing a service of pick up and delivery of vehicles could be very beneficial or alternatively it would be advisable to offer a replacement car during the period of servicing from a pool of second hand cars. This could be achieved as an extra service at a cost derived from the relative expense of supplying the vehicle (insurance and petrol) or offered as a free service to regular customers.
The sales department currently explain “what to do if they (customers) need servicing” however 33% that had been advised were not introduced to someone in the service department. I recommend the introduction of customers to the service department becomes common practice to improve communications and incorporated with staff training, should result in positive relationships being built. This should increase customer satisfaction and have the desired, advantageous effect upon service quality.
The introduction of more safeguards would reduce the risk factor of a potentially intangible service to customers. I recommend this at both the “front” and “back” end of the business. Given the declining car sales situation, perhaps effected considerably by the “turndown in the regional economy” a further reduction in interest payments may encourage greater spending. Ignoring moral obligations the car sales department could offer interest free borrowing for a period of one year or six months without being effected too detrimentally as interest rates remained low. The services department in a bid to attract and retain customers, could work beside the car sale division by offering totally free servicing (no labour costs) to new and used vehicles for a six month period after purchase. Figures may have to be examined but the likelihood of these cars needing attention is slim, new cars are too efficient and used vehicles were “carefully serviced, with parts being replaced as needed” before being put on sale. Other safeguards that could be implemented include test drives for a day on conditions of deposits being supplied and even extended test drives to close the risk gap for customers.
Making more efficient use of advertising and promotion, an idea developed from discussions between Larry Winters and Sullivan-Diaz, would be beneficial. This could be implemented with a little market research into target audiences and drawing on ideas from Figure’s 2 and 3, identifying important factors in customer’s choice preference. On deciding the most important all round factors, covering a variety of customers needs, Sullivan’s could more efficiently target their marketing. For example, my preferences would encourage Sullivan’s to advertise their range of vehicles in the car sales department and promote their service department as well balanced where cost and quality are concerned.
Stage 3
After evaluation of the effectiveness of the implemented schemes through customer surveys and financial reports, I recommend Sullivan’s responds appropriately. If for example a greater demand exists in the service department, they can use “their sufficient capacity to handle more repair work” by employing an extra mechanic. If customer retention has improved they may wish also to reduce their advertising budget and allow for word of mouth advertising to replace it. In terms of marketing Sullivan’s as a whole, the framework emphasises the importance of interlinking the two departments with the marketing mix, especially encouraging customers who buy cars to use the service department for their maintenance needs.
There are many influences to consider when evaluating the options available to Sullivan-Diaz. I would recommend a turn-around before a sale is made as I feel it is a feasible option and would significantly increase the businesses value before a sale. This however, involves a high degree of marketing and with a qualification in economics this may not be feasible under the management of Sullivan-Diaz. The approach I would suggest involves employing Larry Winters a “leading sales rep” who “showed strong managerial capabilities” as the general manager. The recommendation is also based on the fact Sullivan-Diaz only has two weeks remaining of her leave from her main employment, and whilst she is willing to take more time out I feel management would better be left to Mr.Fiskell. It should also be considered that “neither she, (Sullivan-Diaz) nor her other family members were interested in making a career of running the dealership”. After my proposed turnaround, for this reason, I would recommend a sale of the business.
Word Count excluding title page, contents and quotes: 3289
References
Kotler. Armstrong, Saunders and Wong., 1999, Principles of Services Marketing. Third Ed. England: McGraw-Hill.
Palmer. A., 2001, Principles of Services Marketing. Forth Ed.,. England: McGraw-Hill.
Shostock,G.L., 1977, “Breaking free from product marketing”, Journal of Marketing, 41 (2), 73-80
Booms and Bitner., 1981, Principles of Services Marketing. Third Ed. England: McGraw-Hill.
Christopher, Payne and Ballantyne., 1991, Principles of Services Marketing. Forth Ed. England: McGraw-Hill.
Bitner, Booms and Tetreault., 1990, Principles of Services Marketing. Third Ed. England: McGraw-Hill.
Parasuraman et al., 1990, Principles of Services Marketing. Forth Ed. England: McGraw-Hill.
Zeithaml et al., 1993, Principles of Services Marketing. Third Ed. England: McGraw-Hill.
Gronroo., 1984, Principles of Services Marketing. Third Ed. England: McGraw-Hill.
