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Apr. 6, 2009 – Measuring the customer experience

April 6, 2009
Filed under Features

Driving CSI, repeat business paying off

By Neil Pascale
Editor
FARIBAULT, Minn. — To the repeat customer, what happens after the sale at J&J Powersports may not be the biggest difference in the Yamaha dealership compared to a year ago.
After all, the single-brand store, which is tucked on the side of an interstate highway southwest of Minneapolis, made a significant move last year, more than doubling its size in a new, more modern facility.
But the difference in the predelivery— how much time the staff now takes in going over a new vehicle with a customer — clearly has made an impression as referrals are noticeably up, says brothers Joe and Jake Portinga, the Js behind the 24,000-square-foot dealership.
The change in J&J’s predelivery process is a byproduct of Pro Yamaha, an OEM program that seeks to raise customer satisfaction and dealer profitability levels in equal proportions. The program, now in its second full year, rewards dealers for meeting customer satisfaction objectives that drive repeat business, says Dave Park, Yamaha Motor Corp. U.S.A.’s dealer development manager.
The program, a major Yamaha initiative, has led to changes in dealership business practices, according to Pro Yamaha dealers interviewed by Powersports Business. It also has resulted in improved business. Park says dealers that have qualified for the program by meeting different objectives have seen higher sales — both in parts and accessories and new units — and increased penetration for Yamaha’s extended service contracts this year compared to Yamaha dealers who have not qualified for the program.
“The industry is obviously down but what we’re seeing is Pro Yamaha dealers are outperforming non-Pro Yamaha dealers,” Park said.

Pro Yamaha
The concept was simple: Meet customer satisfaction goals determined by Yamaha as key to driving repeat business and qualify for dealership rewards, some financial, some less measurable but equally enticing. Some of the dealership objectives included attaining a certain Customer Satisfaction Index (CSI) score, holding a certain number of dealership events per year and taking online and on-site service and sales training classes and then updating those on an annual basis. The program has three levels, allowing dealers to be involved with it depending upon the number of objectives they wish to meet.
“This matches the type of dealership we want to be. So it was a no-brainer,” Joe Portinga said of the Pro Yamaha program, which the dealership immediately got involved with when it was announced at the Yamaha national dealer show in the summer of 2007.
At that time, the small, rural dealership had a CSI score slightly higher than 92, the minimum score required to qualify for the program. J&J’s CSI score has steadily increased — it’s now north of 94 — as it implemented the Pro Yamaha program and refined its customer communications, especially in terms of what happens after the sale of a new unit.
“We didn’t do a good job,” Joe Portinga said of the store’s prior process. “We had it in our mindset that (the new unit sale) was the end of our relationship.”
Rather than wait until the customer returns to the store following the new unit sale to re-establish the relationship, J&J now will call new unit buyers a week to two weeks after the sale — before they fill out the CSI survey — to discuss the new unit and any potential issues that might have arisen. “Now it’s really important to talk to our customers and say, ‘Hey, if we didn’t do everything up to your standard, we need to know,’” Jake Portinga said.
The dealership also paid more attention to its predelivery process, an item customers had identified in CSI surveys as something that could be improved on. J&J used a training course on predelivery methods that is part of the Pro Yamaha program to improve its process.
“Slow it down,” Joe Portinga said of the predelivery process. “This is a person who might never have been on a bike before. You have to take the time to show them that the V-Star 1100 has an internal oil filter that the pipe needs to come off (when you service it), which is probably why you’ll want our guys to do it.”

Another perspective
Jasper, Ind., at a population of 13,000-plus and
120 miles southwest of Indianapolis, is hardly a sprawling urban area. So to get 125-150 powersports enthusiasts into a dealership at one time is no small feat, something dealership owner Keith Obermeyer is well aware of. Yet he’s done it twice with winter-time events thanks to Yamaha’s Hot Winter Nights promotional event and additional co-op funding available with the Pro Yamaha program.
“That was a big thing when they announced Pro Yamaha was the events because I just really wasn’t that good at events,” said Obermeyer, whose 14,000-square-foot dealership is one of the more than 100 Pro Yamaha stores currently in the United States.
“We did quite a bit before Pro Yamaha,” Obermeyer said of the program’s objectives. “It was an easy transition for us, but it creates a common goal for everybody in the dealership, which I think is the biggest benefit.”
That common goal: Improving customer satisfaction.
Before the program started, Obermeyer says he was likely the only one at the store that would review the dealership’s CSI scores. “If there
wasn’t something that was quite right, I would print it out and take it to the appropriate department and we would have a discussion about it and contact the customer,” he said.
Now, that process is much different.
“Everybody in the dealership is tuned in” to CSI scores, Obermeyer said. “Everybody looks every day at our CSI to see if any new surveys have come in. They read them. They now take the initiative to, if there is an issue, make sure it’s solved or clarified. There’s just more emphasis put on customer satisfaction.”
The same can be said for training. Obermeyer called the dealership’s previous sales training as “fairly lacking” as it consisted mainly of product specifications and model comparisons that Obermeyer would distribute from any Yamaha events he attended. Now the online classes, a result of Yamaha Motor University’s efforts, provide a more consistent and reliable training source.

More events
Bill Vickery, longtime owner of one of the largest Yamaha volume dealerships in Colorado, was one of the dealers the OEM first approached about the Pro Yamaha concept.
“From our standpoint, I agreed with their program,” Vickery said. “We’ve always had a huge repeat business and I think that is because of CSI. Of course we’ve been in business for
40 years, so that doesn’t hurt.”
What Vickery really likes about the program is how its co-op and marketing incentives allow dealerships to hold more events. Vickery Motorsports of Denver traditionally holds a couple of motocross and snowmobile movie nights per year. Last year, however, the dealership had six such movie nights. More recently the dealership was preparing for a Daytona race party. Getting Yamaha to fund such events in the past through its traditional co-op program “would have been virtually impossible,” Vickery said. “Now it’s simple,” he said. “So I think that side (of the Pro Yamaha program) is really good.”

Rewards
Pro Yamaha has three different levels dealers can attain so the return on investment differs according to what level is reached. For Joe Portinga and J&J Powersports of Faribault, Minn., the dealership achieved a “specialist” ranking, the highest level. Without taking into account any additional new unit business the new customer satisfaction efforts have generated, Portinga estimates the Pro Yamaha-based rewards totaled more than $30,000 for J&J in 2008.
Most of that total is due to the amount of aged accessory inventory the dealership is now allowed to return to Yamaha. Yamaha dealers on average are allowed to return 2 percent of their aged parts inventory per year. Specialist Pro Yamaha dealers, however, can not only return a higher percentage of parts — 5 percent — but also 5 percent of their accessories. That latter category represents a huge opportunity for J&J. In 2008, the store’s accessory returns exceeded $20,000. That is a huge difference from years past when J&J’s aged inventory returns to Yamaha totaled less than $1,000.
Joe Portinga also notes J&J has profited from the Pro Yamaha program by taking advantage of its marketing fund, which allows dealer to get up to 100 percent return on investment on different projects, from training expenses to facility improvements. Also because the Minnesota dealership has at least one technician that has attended separate, week-long training events, the store now has access to two service department benefits. First the dealership can self-authorize a higher amount of warranty work — up to $1,500, or twice that of a regular Yamaha dealer — and it has access to a special tech hotline that provides quicker access to Yamaha officials.
“It’s giving us pretty good rewards for business practices that we needed to do anyway,” Joe Portinga said, adding, “even if you didn’t get any rewards for it, we would be more profitable by doing all of these things.”

‘Irrevocable evidence’ for dealers
By Neil Pascale
Editor
A common-sense theory that strong, consistent retail sales practices can lead to improved volume for new unit sales has been proven by more than a year-long survey.
Ducati North America (DNA) dealers who consistently fared well in a retail sales practice survey called the Pied Piper Prospect Satisfaction Index (PSI) turn out to be the brand’s highest-volume dealers, officials say.
Plus, DNA dealers who retailed 10 or more additional new units in 2008 over the previous year saw their PSI scores increase by an average of 2 points. On the other hand, DNA dealers who retailed at least 10 fewer units in 2008 compared to the previous year saw their PSI scores diminish by an average of 3 points.
“There is now irrevocable evidence that there is a link between scoring high on PSIs and developing your business,” said DNA CEO Michael Lock. “You don’t develop the business because you score high on PSI, you develop the business because you’re running the business properly” on which the PSI is one measuring tool.
PSI examines the effectiveness of a dealership’s sales force by looking at 57 different retail practices that combined measure the effectiveness of a consumer’s shopping experience. These practices are measured by shoppers, independent contractors who visit the dealerships and then report their scores to Pied Piper Management Co., a California-based company that conducts similar studies in the RV and auto industries.
The results from the DNA dealer survey do not follow the auto industry, says Fran O’Hagan, president of Pied Piper Management Co.
“In the car world, there is not as direct a relationship between retail sales and PSI,” he said. “In the motorcycle world, not just Ducati, there is absolutely a direct relationship.”
O’Hagan believes the discrepancy could be “in the motorcycle industry it’s less about location and more about the dealership operation than it is in the car world.
“We can’t fool ourselves and say location is not important. Of course it’s important,” he said. “But there is much more variation in the way dealerships are run in powersports, far more variation, and that can overwhelm location (in importance). You can have a great location in powersports and go out of business, whereas in the auto industry it’s possible to limp along whether you’re doing a good job with your operation.”
For DNA, the study’s findings represent a key area of the brand’s attempt at continuing its recent sales growth in North America: Namely, that DNA dealers must provide a quality retail experience to customers new to the brand.
“What we needed to do was to break the link that had been established where successful Ducati dealers were successful because they became supreme experts at speaking Ducati shorthand to a small number of well-heeled enthusiasts,” Lock said. “That was a business model that we had unwittingly created over a decade or more.
“If what we really wanted to do was grow the base of that business in the United States so it could have the same level of market share and success we have in Europe, then what we would have to do is attract customers that were new to the brand. Not necessarily new to motorcycling, but new to the brand. That we suspected even our very good dealers were not geared up to doing. They were not strategically geared to thinking how do we attract and retain new customers?”
Several of the retail sales practices measured by PSI — DNA dealers are shopped once a month — have shown to be key in improving retail sales volume. Some of those include:
Determining how the motorcycle will be used and by whom. DNA dealerships that do this at least 85 percent of the time retail on average 37 percent more units than those who do not.
Ask for contact information. DNA dealerships that accomplish this at least two-thirds of the time retail on average 29 percent more units than those who do not.
Offer test rides. Dealerships who offer these at least 75 percent of the time average selling
43 percent more units than those who do not.
Clearly, more and more of the DNA dealer network is incorporating these and other retail sales practices as the brand scored higher on a consistent basis in 2008 than the previous scoring period, O’Hagan of Pied Piper says. Pied Piper has for the past two years ranked motorcycle brands by their PSI. Last year, Harley-Davidson scored highest followed by Victory and DNA. This year DNA may have closed the gap with Harley-Davidson, O’Hagan says. The 2009 results will be released in May.
O’Hagan notes DNA has treated PSI differently than other manufacturers in that it ties a percentage of its dealer bonuses to how dealers score on a select number of survey questions.
“That’s uncommon,” O’Hagan said. “They run the risk of taking the focus off PSI as a measurement, diagnostic and improvement tool and turning it into something that is managed for the money.”
O’Hagan, however, notes the improvements in the DNA PSI scores go far beyond the questions that decide the dealer bonus. “The fact is the Ducati dealers have improved across the board,” he said.
That’s what Lock points to as the point of the dealer bonus.
“I don’t mind what their initial motivation is,” he said of the bonus plan, noting what’s important is the fact that DNA dealers are increasingly using these retail sales practices to improve the customer’s experience with the brand.
“The customer wants to be able to walk into a Ducati dealership and be dealt with in a professional way,” he said. “That’s what the customer wants.”

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