OPINION: MILLS ON ... CAR COMPANIES AND SERVICE RELATIONSHIPS

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.

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

themselves.



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

point.



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

painful.



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

v-commerce.



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.



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