Customer care is becoming increasingly important for automotive manufacturers, and as a result, they are starting to become more involved in the after-sales and service sector. Not only does this make for better customer relationships with dealers and improve brand loyalty, but it provides a lucrative and steady source of revenue to balance the cyclicality of the new car market. Megatrends spoke with three top Ford executives about the company’s own efforts in the service segment and its ambitions for the future.
Quick and easy… and lucrative
Ford started to make significant moves into the service sector about 20 years ago, said Toney, with a focus on quick and easy maintenance and repair. “We wanted to improve the overall ownership experience by providing our customers with a fast and efficient maintenance service at dealerships across the world. It helps us connect with the customers in a way that fits in with their fast-paced lifestyle,” said Toney.
The first store, called Rapid Fit, emerged in the UK in 1993 and was the inspiration for the now expansive Quick Lane Tire and Auto Center network in the US, which launched in 1997. Quick Lane centres offer routine vehicle maintenance like oil and filter changes, brake repair, tyre replacement and general light repair services – no appointment necessary. A service takes between 30 and 45 minutes – any jobs requiring more intensive work are relocated to a different service shop. All vehicle makes and models are serviced, not just Ford.
The business has benefited from the trend of longer ownership – drivers are now keeping their cars for longer, giving service providers an even more important role. “We are seeing ten-plus years for cars on the road in both Europe and the US,” said Toney. This has been driven both by recession concerns by buyers, hesitant to make big purchases in a background of economic uncertainty, and by improvements in technology. “Cars can run better for longer. With people taking good care of their cars, there’s no reason for them not to be durable and lasting.”
Notably, the Quick Lane service has proven effective in not only retaining Ford customers, but bringing in new ones. Don Cape, Global Quick Lane Business Manager, noted: “Our Quick Lane dealers continue to retain and capture conquest owners at a higher rate than our non-Quick Lane dealers. If you give customers the service the way they want it and they have a good experience, they will come back. We’ve seen year over year, our Quick Lane dealers continue to perform better. That’s one of the reasons we at Ford are so bullish in support of Quick Lane.”
As a network, non-Ford vehicles account for about 25% of the services carried out at Quick Lane centres. However, at some dealers this can reach up to 80%. The potential for conquest sales in such an instance is huge: “That Quick Lane dealer has those customers coming in that he can market a new car to. That’s a big advantage to our dealer network,” said Cape.
Involvement in the service side of things also provides a constant revenue stream compared to the more cyclical car market. A recent study from McKinsey, ‘Innovating Auto Retail’, found that less than 20% of dealer margin in the US came from new car sales – the remaining margin came from services and parts and used car sales.
Cape explained: “It’s very similar to our dealership fixed operations business, which is very stable. It’s a great revenue source for that dealership and Quick Lane is no different. Our dealer operators say it gives them another revenue stream so they can manage their cash flow. Every day they have couple thousand dollars of revenue that they’re taking in. It’s a very stable business, unlike maybe the new car market that can be cyclical.”
In early February, Ford opened its 700th Quick Lane centre in the US, located in Texas. Last year, the business reported record sales of nearly US$800m. Expansion is also under way in Europe, where there are three facilities in operation in the UK, with two more coming up. By the end of the year, Ford plans to add 25 more sites to the UK. Unlike the US facilities, these UK locations and any future European ones will also offer official annual vehicle check services.
Elsewhere, centres are also operated in the Middle East, Central American/Caribbean, Asia Pacific, Canada and South America. In the next three years, Ford is aiming for a total of 1,000 locations globally. “That’s our goal,” confirmed Massimo Pasanisi, Executive Director, Operations for Customer Service, Ford of Europe. “We’re adding 50 to 75 per year globally.”
That’s a substantial growth outlook for a company previously heavily focussed on the sales end of the business. “It’s just a successful context that works in every market,” said Toney. “The whole ‘easy in, easy out’ for service is in demand. And we’re meeting that demand.”
While the company is optimistic of the opportunities that lie ahead, Toney admits there are certain challenges to future growth and profitability: “The challenges will be the same we always face – making sure there’s a right business proposition for the customer, for the dealer and for Ford.”
For instance, expansion plans in expensive, urban cities like London pose a challenge. “When you get into places like London with limited space, then the cost of acquiring property is always a consideration. One of the things we’re doing as a global team is to have a flexible approach to facilitate a Quick Lane outlet,” explained Toney.
There is also the likelihood of new players appearing on the scene. Where Ford has had such success, others may wish to try their hand as well. “There’s intense competition presently,” said Toney. “We expect other OEMs will try to do the same thing that we’re doing. Frankly, that’s the way of the world. We embrace competition. It’s all about how you treat your customer that’s important.”
Both product and service provider
Gradually, Ford as a brand is developing as both a service and a product provider. “We see the brand developing very nicely where we’re going to be providing a full family of vehicles, smart sales and service programmes and investing in the communities that we serve all across the world,” said Toney. “We see everything coming together very nicely in terms of retention and development of those customers.”
The McKinsey retail study also highlights the importance of a strong synergy between OEMs and their dealer network. The study’s authors note: “OEMs will continue to require a strong dealer network – to serve as local brand ambassadors and provide cus¬tomers with high-quality vehicle maintenance and service in a convenient location.”
As the market evolves, Toney remains open to evolving with it. So far, the focus at the Quick Lane locations has been on areas like tyres and brakes, but this could change as vehicles take on increasing levels of electronics. In the future, Toney conceded that an expansion into new areas was possible, provided it was kept to a basic level.
Overall, Toney remains optimistic on Ford’s investment in the service side. “Selling the car is just the beginning. Retaining customers is about how well we take care of them in the service side,” said Toney. “It allows us to compete with our competition, who actually do this quite well. We’re trying to outperform them, and we’re doing a nice job of it.”