Redress for service advisor responsiveness and its impact on customer satisfaction a mazda vietnam report

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --- Huynh Nhat Tan REDRESS FOR SERVICE ADVISOR RESPONSIVENESS AND ITS IMPACT ON CUSTOMER SATISFACTION: A MAZ

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Huynh Nhat Tan

REDRESS FOR SERVICE ADVISOR RESPONSIVENESS AND ITS IMPACT ON

CUSTOMER SATISFACTION:

A MAZDA VIETNAM REPORT

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City - Year: 2020

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Huynh Nhat Tan

REDRESS FOR SERVICE ADVISOR RESPONSIVENESS AND ITS IMPACT ON

CUSTOMER SATISFACTION:

A MAZDA VIETNAM REPORT

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: ………

Ho Chi Minh City – Year: 2020

Redress for Service Advisor Responsiveness and Its Impact on Customer Satisfaction:

A Mazda Vietnam Report

Contents:

I Introduction

Based on the data results of Vietnam Automobile Manufacturers' Association (VAMA) Sales Figures, till the end of 2018, Mazda car ownership has exceeded 100 thousand units, and sales of the new car increase rapidly every year at the speed of tens of thousands of vehicles The automotive after-sales service market is about four times ahead of the market, particularly in the USA, this digit is more than five times a year (Sellitto et al, 2010) In fact, the after-sales service income accounts for 60 percent to 70 percent of the entire automotive industry chain's overall profits Automotive after-sales service can be said to be the most reliable benefit in the automotive industry chain In our 3S market, the ratio of new cars and old cars is 4:6, where an old car's average profit rate is above 12.0%, which is far higher than the new car's 3.5%

In 2016 - 2018, Mazda Vietnam put more attention to the sales number, but lack the commitment to after-sales service and do not have the thought of serving clients in full Some automotive after-sales service providers pay more attention to the benefit created by changing automobile parts while offering service to car owners, but not start from the prospective customer, carefully analyzing faults and reasons and recommending a random change of auto parts, Whilst users take advice without understanding the car's practical health situation, their legitimate rights and interests were damaged (Ramaswamy, 2000) But after-sales service has now become more and more important in doing business The after-sale service department, however, did not closely track the growth of the times as well as the progress of the customer demand layer On the other hand, since there are various car manufacturers, there are other suppliers for the corresponding after-sales service for the vehicle, and the trend mixed with good and bad is inevitable

Revenue

(Unit: USD) 2017 Target of 2018 Actual 2018

Customers Under-Warranty 26,012,903.23 28,614,193.55 31,475,612.90 Customer Expired-Warranty 49,548,387.10 54,503,225.81 44,692,645.16 Casual Customer 24,774,193.55 27,251,612.90 28,614,193.55 Total 100,335,483.87 110,369,032.26 104,782,451.61

Mazda Vietnam Revenue of Service Department in 2018

According to purchasing behaviors, customers can be categorized into three groups as above, including Customers Under Warranty (CUW), Customer Expired Warranty (CEW), and Casual Customer (CC) In 2017, Mazda Vietnam achieved around 100 million USD as the revenue

of the service department Among them, CEW contributed the largest proposition with 49 million USD, accounted for 49 percent CUW achieved 26 percent and the rest came from CC In 2018, Mazda Vietnam had expanded the authorized network, raising its total number of the service center

to 40 Chairman’s ambition was to place an authorized center in every province in Vietnam by

2020 However, the revenue of 2018 recorded a sharp decline by 5% despite upgrading the facility

or increasing the number of workshops

Number of customers 2017 2018

Based on the final report of the service department, among many factors which affected revenue, there has been a dramatic reduction in the actual number of customer, compared with target plan, especially segment for customer expired warranty In 2017, the total number of CEW was 230,400 units, but in 2018, the number was lower by 12%, compared with the same period of last year This affected heavily to the profit of the after-sales service department because CEW was the most important consumer channel of Mazda Vietnam

To clarify the declining trend in customer numbers, several in-depth interviews were conducted randomly at authorized Mazda service centers to better understand the cause of the decline in customers Through several interviews, apart from opinions such as the overload of the Mazda Centers or the location of the Mazda service center was too far from the unauthorized stores, there were two main reasons, firstly, the cost of maintenance of Mazda dealers was more expensive than unauthorized stores Secondly, the services offered by the authorized center (including cost, customer service) are not adequately competitive when opposed to outside competitors Furthermore, many customers who are using Mazda services, said they are

dissatisfied with the service quality which they experience when they bring their car to Mazda for repair and maintenance Customer satisfaction and quality of service were two of several topics in the literature about services marketing that has had diversity of academic research for decades Therefore, many studies have highlighted quality of service as a significant factor in satisfaction

of customer, which affect customer loyalty (Ilias and Panagiotis, 2010) Consequently, if a business offers the quality of service that fits or exceeds the needs of customers, the potential outcome would be consumer satisfaction and loyalty According to Schiffman et al (2012), the quality of service was one of many factors that can have impacts on customer loyalty or defects to

a rival For an automotive service company, Kandampully (1998) argued that long-term goal is ultimately measured by its possibility to enlarge and manage a broad and loyal client database through the quality of service and customer loyalty

When organizations offer low quality of service, it adversely affects both the consumer and the business (Sivadas, 2000) In general, consumers who encounter a poor quality of service at a single business are intended to not come back in the future as a client In addition, loss of revenue due to low customer satisfaction can seriously harm a company's image and even threaten the company's ability to remain in business (Sivadas, 2000) Several studies suggest that satisfaction

of the customer is an essential requirement for customer relationships with a product, making it necessary to concentrate on customer satisfaction to build and sustain customer retention (Bruhn

2009, p 66 ff.) herefore, these findings indicate that the satisfaction of the customer's expired warranty should be the priority to be addressed to sustain the customer and attract a new future customer In the automobile service area, Izogo and Ogba (2015) noted that one of the essential factors for attracting and maintaining loyal customers was service quality

If a consumer is satisfied with the level of service quality that is being offered, this builds confidence; the happy customer may come back and suggest the service center to others as well

An online survey to investigate the impact of the quality of service on customer satisfaction at approved automotive service centers had been conducted to resolve this issue The study examined which service quality components in this sector are most valued by clients Therefore, following those arguments, the object of this study includes two main ideas First, the paper discusses the core problem and the possible causes that triggered a downward trend in customer satisfaction within the after-sales services sector of the Mazda Vietnam automotive industry Furthermore, the

paper seeks to propose which dimensions of service quality that have impacts on customer satisfaction and loyalty for improvement strategies relevant to possible triggers This study is expected to clarify and propose strategic responses to improve the quality of service, and thus enable them to fulfill and improve customer loyalty

Meanwhile, in both the manufacturing and service industries, service quality is an essential element, and the phenomenal development in the service sector encourages much research about service quality more appealing in the industry Based on the steady economic growth, the trend in after-sales services for automobiles is shifting appropriately Izogo (2013) expected an increase in demand for after-sales automotive services due to the shifting trend from manual to automatic gearbox with more complicated systems due to rapid technological advances Improving quality

of service is the main point to the competitive advantage according to Etemad-Sajadi and Rizzuto (2013) Consequently, Taap et al ( 2011) had previously argued that many companies have considered carefully about controlling competitive advantages by assessing their performance from the customer's point of view by launching main improvement projects because poor service quality leads to lose customers, so that, it costs much more expense expense to attract new customers

According to Vietnam Automobile Manufacturers' Association (VAMA, 2018), compared

to previous year, the four-wheeler passenger vehicles (PV) segment has stable growth; in 2018, approximately 460,000 units were sold in Vietnam, and this result was expected to rise by 10 percent yearly (VAMA, 2018) With the rising in the manufacturer of four-wheeled vehicles, there has been strong growth in the Vietnam automotive spare parts and the after-sales service market over the last decade The auto service industry in Vietnam can be classified into two groups: organized and unorganized The organized sector can also be called an integrated single-brand and multi-brand organization PV manufacturers create structured single-brand service centers or authorized centers to please their customer by providing dedicated, thoughtful and professional services Customers typically can not know whether actions needs to be done or not to deal with their current vehicle situation We need to rely on professional experts to clarify and find solutions for us For example, some essential components must be replaced periodly, such as brake or tire,

because those components need to be in perfect conditions for safety driving, however, from customers perpective, replacement of spare parts which have not any scratchs is unnecessary and expensive As this may reflect the lesser awareness that the consumer has regarding service process, it could be an evidence of cheating by the service prpvider Another basic example is the replacement of lubricating oil which is suggested to be replaced after a period of time or a regular distance Many customers responded that the lubricant or engine oil was replaced, although they thought that the quality of the oil was still good

The link between customer satisfaction and quality of service was the main topic that many research investigated for over decades Sureshchandar (2002) discovered that the satisfaction of customer and quality of service were closely linked Dahiyatet al (2011) and Samen et al ( 2013) all proposed that quality of service was an important factor that contributed to customer satisfaction Kumar (2010) argue that tangibles, empathy, and assurance were essential aspects of customer satisfaction while Mengi (2009) concluded that responsiveness was considered as an important point of customer satisfaction

The growth in demand for the automobile industry in Vietnam recent years has led to the steady development and evolution of the automobile service market Improved service design and delivery can increase customer satisfaction if it results in increased service quality due to the strong link between the two aspects of customer experience (Woodside et al., 1989) There is evidence that customer satisfaction is strongly linked to business profitability and market share Increases

in customer satisfaction can directly lead to more successful businesses — more successful automobile service providers in the case of this study Those literature propose that a customer receive such services as superior standards, he/ she will feel better and be more satisfaction on the company's services It becomes important that businesses need to improve their service quality, including quantity elements and quality elements, to satisfy their customers need It is vital matter because satisfied customers are become more attracted to the company's offers than dissatisfied customers This certainly demonstrates the reason why it is vital to recognize drivers of service quality that afftect to customer satisfaction to advise employers about the situations where changes are required

III 2018 Vietnam Customer Service Index (CSI)

To better understand customer feedback regarding Mazda's quality of service in 2018, the Vietnam Customer Service Index (CSI) survey will be analyzed to find out the key reasons for the quantity reduction of potential consumers Following the result from the 2018 Vietnam Customer Service Index (CSI) survey which was conducted by J.D Power, the data will be analyzed to understand the weaknesses of Mazda Vietnam and find solutions for customer satisfaction improvement

Fieldwork June to December 2018

Survey Area Nationwide

Method Online survey through online panel partners

Respondents Owners of vehicles delivered between June 2013 through December 2017

(i.e 12 ~ 60 months ownership) Vehicle serviced at the authorized dealership between June 2017 through December 2018 (i.e 0 ~ 12 months)

2018 Vietnam Customer Service Index Study (CSI) Outline

2018 Vietnam CSI Factor was structured based on five main factors, including Service Facility, Service Quality, Service Initiation, Vehicle Pickup, and Service Advisor Each factor has different attributes which clarify how customer evaluate the service and different weight which affect to the total customer satisfaction index

Factors Attributes Weight

▪ Total time required to service your vehicle

▪ The thoroughness of maintenance/ repair work performed

▪ Condition of the vehicle on return

24%

Service Initiation

▪ Ease of scheduling service visit

▪ Timeliness of drop-off process

▪ Flexibility to accommodate your schedule

21%

Vehicle Pickup

▪ Timeliness of the pick-up process

▪ Fairness of the charges

▪ Helpfulness of staff at the pick-up

20%

Service Advisor

▪ Courtesy of Service advisor

▪ Responsiveness of service advisor

▪ Thoroughness of explanations

18%

2018 Vietnam CSI Factor Structure

Vietnam CSI Trend 2014 – 2018

In terms of new vehicle sales, the number of new cars sold recorded remarkable growth In

2016, the number of new cars consumed was 164,439 vehicles By 2017, this number increased

dramatically to 400,733 units The uptrend has not stopped there, strong growth momentum took

place in the next year In 2018, the number of new cars was more than 450,000 units Compared

between 2016 and 2018, the number of new cars consumed each year grew by 178% That can be

explained on the basis of solid economic growth in Vietnam over the years Furthermore, the fact

that the price of cars is becoming affordable thanks to government support in economic policies

and taxes is also an benefit that makes it easier and simpler to purchase a vehicle But this also

poses a challenge for car manufacturers or assemblers because customers are becoming

increasingly technologically and technically savvy, as well as demanding more strictly after-sales

service This can be seen Therefore, managing customers with understanding their needs will drive

their satisfaction

CSI Rankings

Mazda (807) ranked sixth, 15 points, and 30 points below the average and the best make,

respectively Kia and Honda also suffered the same situation In Vietnam, Mazda and Kia belong

to one distributor, which is Truong Hai Group If only in terms of sales, Chevrolet, Ford, or

Mitsubishi could not compare to Mazda, however, in terms of customer satisfaction, especially in

the after-sales service, Mazda is facing an extremely serious problem The graph shows that the

gap between Toyota and Chevrolet is very close in positions 1 and 2, similar to Ford and Hyundai

at positions 3 and 4 Typically, place 5 is Mitsubishi, Thus, it can be seen that some small car

manufacturers, despite low sales volume, still pay great attention to customer care, especially

service customers

IV The Existence and Importance of Central Problem

Based on internal data, Mazda Vietnam's sales in 2018 did not rise as set out, reporting a

decline in the "Customer Expressed Warranty" segment in particular According to historical data

review, there is an unequal rise or decrease in the number of customers in each category Based on

the report, the number of customers in the "Customer under warranty" and "Casual Customer"

segments increased by 21 percent and 16 percent in 2018 among 3 customer segments,

respectively The "Customer Expired Warranty" group alone shows a 12 percent decline in

customers in 2018 This leads to a reduction in sales of the "customer expired warranty" group of

customers In comparison, the customer segment "Customer Expired Warranty" is the segment

with the highest proportion based on the profit margin, resulting in a drop in overall after-sales

service revenue compared with projections Based on many research, consumer loyalty, and

customer satisfaction are closely linked This can be deduced from this statement that consumer

satisfaction would decline if they are disappointed with a product or service Mazda Vietnam has

been facing a significant problem with after-sales support customer satisfaction from the survey

findings Specifically, Mazda had very weak performance in 5 main categories, including service

initiation, service consultant, service facility, vehicle pick-up, and service quality, especially in the

category of service consultant

CSI and Factor Scores Comparison

Based on the data, Mazda Vietnam did well on service quality, service facility, and vehicle pick-up process, compared with direct competitors The largest gap between Mazda and best make

is observed on “Vehicle Pick-Up” and “Service Advisor” Vehicle Pick-up and Service Advisor are the two items with the greatest spread Mitsubishi achieved 858 points in Vehicle Pick-up, a difference of 47 points over Mazda (811 points) Mitsubishi leads with 841 points for Service Advisor, far from Mazda with 800 points (41 points gap)

According to the review of Mazda's weakest points relative to the leading position, Mazda had a strong issue with "fairness of charges" first Based on the survey results, Mazda customers feel the expense they have to spend is unfair, and Mazda's standard of service is not commensurate with the amount of money they have spent Next, it's the time to finish the paperwork before the service work, at this stage the customer feels Mazda's procedures time is too long The third is

"service advisor responsiveness," which has one of the biggest differences, being 50 points 4th place is "pick-up staff helpfulness" and 5th place is "service advisor courtesy." All these points can be critical issues leading to lower scores for customer satisfaction

Among Mazda's weaknesses, the element related to "performance of service advisor " is Mazda Vietnam's weakest point compared to leading car manufacturers, by means of survey results If this problem is solved, Mazda Vietnam will make a great contribution to improving customer satisfaction Furthermore, if consumers have a positive experience of service providers,

they tend to be more relaxed in service or more tolerant of minor faults, based on the literature In addition, the closer the relationship between a customer and a service consultant, the degree to which the conversation, status of the vehicle, the history and the usage process is also more fully understood Since then it will not only improve customer satisfaction but also Mazda Vietnam's quality of service

CSI Factor Index Rankings

Analyzing into detail about CSI-related factors, including service initiation, service advisor, service facility, vehicle pick-up, service quality, Mazda did not achieve any targets which were above the industry average, and so far from the top brand Chevrolet is at the top of the table with 831 points in the service initiation, far from Mazda with 796 points In the service facility, Mazda get 813 points, 35 points difference compared with Toyota with 848 points Toyota leads

in Service Quality with 840 points, Mazda achieves 816 points (24 points gap) In general, Mazda underperforms for all factors with two-digits below the average, more particularly on “Service Advisor”, in which the highest score was 841, the average was 823 and Mazda Vietnam got 800 points for this factor

If Mazda Vietnam can effectively enhance the capacity of the service advisor, it can add more resonant value to the after-sales service chain This can only be achieved if we find "the performance of service advisor" to be a central problem, not a factor in the facilities or the reception process

Initial causes and effect map

V Potential cause - Responsiveness

Hart et al ( 1990, p 149) find out that businesses can not afford to lose consumers since the satisfying and retaining a customer is only one fifth compared to finding a new customer According to Gaiardelli (2007), if manufacturing companies focus on after-sales service, they can achieve four times higher product sales and more than three times the original purchase turnover during a given product’s life Sivadas (2000 ) suggested that customer service spending has risen

at a rate of 20 percent per year Sivadas (2000) indicated that low-performance rates can result in unsatisfied customers Quality of service and perceived value from the customer perspective have

a strong connection with each other (Gordon & McDougall, 2000) In this sense, to increase the value of relationship between customer and service provider, it is necessary to improve the quality

of service, especially responsiveness factor

The main duty of a Service Advisor is defined as the frontline employees who interpret the status of their vehicles to customers so that the technician can correctly diagnose and repair problems The SA then translates the actual problem into the language which can be easily understood by the client Interpersonal relationships between service providers and consumers can have direct effect to specific service satisfaction This was proposed by Foster and Cadogan (2000); Guenzi and Pelloni (2004) Guenzi and Pelloni (2004) concluded that if the closeness of the customer-employee relationship is increased, a higher level of satisfaction is predicted

According to the data, there were three attributes related to the performance of the service advisor

▪ Courtesy of service advisor

▪ Responsiveness of service advisor

▪ Thoroughness of explanations

As the table below, which showed weak points among many CSI attributes,

“responsiveness” and “courtesy” were the top five weakest points considering relative importance That means, in order of importance, the improvement must be focusing on “Responsiveness of service advisor” and “Courtesy of service advisor” Other attributes as “Fairness of the charges”,

“Timeliness of drop-off process” or “Helpfulness of staff at pick-up” would not be relevant to this study

CSI Attribute Performance – Weak Points

Between the 17 KPI belongs to 5 key factors: service facility, service price, service

counselor, service initiation, vehicle pick-up, 9 of them that Mazda scores are very bad compared

to competitors in the same market, sorted by degree of impact on the CSI

The possible causes will be listed below:

1 The dealer offered free meals

2 Dealer offered television

3 Service Advisor checked vehicle work after service has been completed

4 Copy of the service form received before work has started

5 Service Advisor repeated requests to ensure that everything has been understood

6 Service Advisor repeated back requests to make sure all was understood

7 Service center returned old spare parts

8 Time is taken to finish paperwork within 10 min

9 Service length less than 2 hours on the same day

For the 9 negatively performing KPIs, 2 were service stations, 3 were service consultants,

1 was service quality, 1 was service quality, and 2 were car pickups Depending on the degree of

viability, facilities-based considerations are not sufficient, because they are very closely related to

construction The initiation and vehicle pick-up variables are directly linked to the workshop system overload, and possibly only one solution is to increase repair capability or construct more workshops for operation

In definition, “Responsiveness of service advisor” is defined as the speed and quality of a service advisor reacting to requests of customers Meanwhile, “Courtesy of service advisor” refers

to a variety of informal or formal behaviors demonstrated by a service advisor that affect a customer's experience Each attribute had different procedures that the service advisor must follow strictly and assure that all customers will be treated as the same

Factor Attributes KPIs

Service

Advisor

Courtesy 1 Customers did not wait to speak to the service advisor

2 Service advisors greet customers when they arrive at the service center and direct them to an available mechanic Responsiveness 1 The service advisor performed the multi-point inspection

on the vehicle

2 The service advisor consulted with mechanics about necessary repairs and possible alternatives to expensive work

3 Service advisors provide customers with a copy of service form before work began

4 Service advisor repeated back requests to make sure all was understood

5 Service advisor managed and oversee the service center’s workflow - called customers for keeping informed of the work progress

6 The service advisor informed customers of changes in service or to let them know their vehicle is ready for pick-

up

7 The service advisor provided a cost estimate for the next visit

KPI Performance - Summary

The summary above showed detailed KPI of each factor that had an effect on the CSI Index and how well Mazda Vietnam performed, compared with others Focusing on the “Service Advisors” (SAs) factor, the green color was demonstrated for good performance Mazda Vietnam

performed quite well for “Courtesy of service advisor”, for example, on “Did not wait to speak to

service advisor”, “Service Advisor had sufficient technical knowledge”, the scores were far better than the average of the market

However, for other important KPI, Mazda Vietnam had underperformed such as “SAs reviewed work done on the vehicle after service completed”, “Copy of service form provided

before work has begun”, “Service Advisor repeated back requests to make sure all was

understood” The scores were worse than the competitive average and far more behind the best

make as the table below The result showed that 12% of customers stated that the service advisor did not repeat back requests to make sure all was understood 10% of customers did not receive a copy of the service form provided before work has begun 85% of customers said that the service advisor reviewed work done on the vehicle after service completed There was a statistically

significant difference between the customers and the service provider in the expectations of

responsiveness In conclusion, “Responsiveness of service advisor” must be considered as

potential causes

No Factor Attribute KPI Mazda

Vietnam

Market Average

Best Make

1

Service

Advisor Responsiveness

SAs repeated back requests to make

2 Copy of service form provided before