Remember the disquiet a few years ago when it was revealed that
Dixons made more money from credit and extended warranties than it did
from its sales of hi-fi equipment and white goods.
Well, there’s another part of the business world where there’s something
equally discombobulating going on. Apparently there’s no money to be
made in cars anymore and what profits car manufacturers do make are from
areas such as finance and spare parts.
Against this background, the report last week by the Competition
Commission into car pricing in the UK must be seen as a minor irritant
if not an irrelevance. But the UK market could offer some interesting
lessons for a group of dinosaurs faced with a desperate need to reinvent
Under the conventional model, car manufacturers sell a customer a
high-cost product every few years. They are then out of the picture,
during which time the relationship is essentially dormant. This is how
it stays until the next purchase occasion.
One answer, which some car companies are fumbling their way towards,
lies in changing the nature of the relationship with their customers
from the episodic or occasional to the regular. Daewoo is a case in
It launched in the UK with a funny name, no heritage to speak of, cars
that were rebadged Vauxhall Astras - and a blank piece of paper. Of
necessity, it had to find something else to shout about and the ground
it chose to fight - with considerable success as it turned out - was
customer care and service. Ford also seems to have begun the process of
migrating from manufacturer to service company with the acquisition of
Kwik-Fit, a smart way of extending its relationship with consumers into
something more regular.
As anybody who has used Kwik-Fit can testify, it is a company with a
formidable commitment to customer service. If Ford can graft some of
that culture on to its own, the process of change will be less
But it’s the arrival of mobile phone and internet technology that could
really make a difference. In the US, General Motors has an in-car gizmo
called OnStar, which is both a satellite-linked navigational device and
a hands-free mobile phone that connects to a GM call centre. For a
subscription fee (although GM may give away a year’s sub for free just
to get users hooked), OnStar users can ask GM operators for directions,
to book hotels, restaurants or rearrange appointments. Now GM is adding
voice-activated internet access, thus giving meaning to the phrase
But the real point is that OnStar allows GM to build a daily
relationship with its customers that goes far beyond flogging them a car
every few years. Better than that, the technology allows GM to set up a
series of marketing alliances and new-business opportunities that open
up new revenue streams.
Of course, all this supposes that the car companies can acquire a
service culture. As their behaviour in the UK market shows, they’re
still a long way off.