Genuinely loyal
Editor’s note: Joel Lieberman is manager, customer research, and Joyce Henk is customer satisfaction coordinator, at General Motors Corporation, Detroit. Derek Allen is vice president, director of research, and Janet Edmison is vice president, at Market Probe, Inc., a Milwaukee research firm.
Many manufacturers distribute their products indirectly to consumers through direct accounts. Although some of this is changing with the rapid integration of e-commerce into consumer purchase behavior, durable goods like kitchen appliances and automobiles continue to reach consumers through intermediary businesses like appliance stores and vehicle dealerships, respectively.
Manufacturers, interested in better understanding consumer purchase behavior, have sponsored consumer studies for many years to better understand their attitudes and opinions. In the 1980s, customer satisfaction studies became the “in” thing in research circles, and many market research companies started to advertise themselves as specialists in customer satisfaction.
In the 1990s, concepts of loyalty and customer retention made inroads into the lexicon of consumer research. The gospel of loyalty and retention spread because research clearly showed that loyalty and enthusiasm are more positively related to repurchase than satisfaction, and it costs more to gain customers than to retain them.
Companies have spent significant portions of their research dollars on consumer loyalty and customer retention studies to keep their customers and learn what it takes to cut into their competitors’ customer base.
Accordingly, channel loyalty studies have taken a backseat to consumer studies in the minds of many manufacturers. In terms of push-vs.-pull marketing strategies, manufacturers are betting that consumer influence will help pull sales through distribution channels.
General Motors Service Parts Operations (SPO) has traditionally focused its efforts on its direct accounts: parts departments at GM dealerships (through its GM Parts Sales organization) and warehouse distributors (through its ACDelco Sales channel). Historically, GM dealerships have represented the largest part of total revenue at SPO. They remain key to SPO’s mission of providing “The Right Parts at the Right Time at the Right Price” to support new vehicle sales through consumers’ overall service experience.
Because dealers can purchase parts from suppliers other than SPO, it is in SPO’s best interest to provide great service. Accordingly, SPO initiated satisfaction studies in the mid-1980s to measure and monitor satisfaction of parts managers with SPO support. With the increased focus of customer loyalty research, SPO conducted a study of GM dealership loyalty in the spring of 2000.
Methodology
Parts managers from four major metropolitan areas (three U.S. sites and one Canadian location) were interviewed in group settings (i.e., parts club meetings) in March and April. Because of the nature and sensitivity of these discussions, other GM personnel (e.g., sales, warehousing, etc.) were excluded from these meetings. These meetings were facilitated, moderated and managed by members of SPO’s customer research team with assistance of SPO’s satisfaction research vendor, Market Probe, Inc.
A funnel approach was used to solicit information about dealer loyalty. The topic was introduced with the generic perspective:
“What do you think loyalty is, in general? Describe your feelings related to loyalty.”
Discussion then moved through the high-level corporate view:
“What about loyalty to GM? What does it mean? How does it feel?”
Finally, parts managers were asked to focus on the specific:
“What does loyalty to SPO mean to you as a parts manager? When you experience feelings of loyalty to SPO, what lies behind those feelings? What is it about the relationship between you and SPO that keeps you coming back? Give an example of your loyalty to SPO, especially one where you had a choice to go elsewhere.”
Parts managers were then asked what choices they had in sourcing parts and what were the key drivers of that behavior. At the end of the meeting, parts managers were asked to indicate the top three reasons why they chose to purchase automotive parts from sources other than SPO.
Follow-up telephone interviews with several parts managers were conducted to identify what other loyalty issues, if any, existed.
Because larger dealerships tend to frequent parts club meetings, additional research was conducted on smaller dealerships in more rural locations to ensure that all dealer segments were included in the study. Parts managers from these smaller dealerships were then interviewed by telephone to determine if their sourcing profile on the average differed from the profile of larger dealerships.
Finally, to answer the question about appropriate sub-issues surrounding loyalty, 24 loyalty questions were developed from this research and posed to 100 GM parts managers during further telephone interviews. Responses were then factor analyzed to determine which questions were salient to dealer loyalty.
Findings
The key elements of loyalty to a parts supplier are rooted in both emotional and practical considerations as follows:
- the practical “hard” issues (parts availability, order response time [ORT], hassle-free returns, and competitive pricing) and,
- the “soft” issues (two-way trust, and feeling valued as a customer).
Other issues that affect loyalty to a parts supplier include: quality; communications; service; relationships; consistency; empowerment; empathy; credit terms.
Parts managers clearly have strong emotional ties to the “mother corporation” and these ties unquestionably drive a strong sense of loyalty to SPO. However, the extent to which these emotional ties impact on intent to purchase parts from SPO varies from parts manager to manager and is less likely to play as strong a role in purchase intent as more practical considerations such as parts availability and speedy delivery.
Importantly, parts managers make it clear that, all things being equal, they prefer to buy from SPO, recognizing the superior quality of the parts, and responding to their customers’ desire for Genuine GM or ACDelco parts.
As one parts manager said: “I try to buy as much as I can [from SPO]. People want Genuine GM – the brand name…I wouldn’t want to go somewhere that’s not Genuine.”
The bottom line is that most parts managers define loyalty to SPO in the context of loyalty to their customers. To the degree that they can respond to customer demand for quality parts and quick turnaround, the dealer will purchase from SPO. However, when parts availability and ORT problems occur, most parts managers will, with little hesitation, turn to other sources. They give SPO little latitude because their customers are very demanding and will, with little hesitation, go elsewhere for parts and service. And they face their customers every day.
Factor analysis of the 24 loyalty questions developed from the qualitative research above resulted in the factors shown in the boxes below (with factor loadings indicated in parenthesis).
Based on these results, the following 10 key loyalty attributes were identified:
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2. As long as I buy GM Parts, it doesn’t matter to me whether I get them directly from SPO or not.
3. If SPO responded quickly enough to allow me to serve my customers’ needs, I would give them all my business.
4. If SPO could match insurance company pricing requirements on collision parts, I would purchase more of them from SPO.
5. SPO makes me feel like a valued customer.
6. If SPO could provide accessories on time, I would purchase more of them from SPO.
7. Non-GM suppliers represent an attractive alternative to SPO.
8. I’d rather wait an extra day for a part from SPO than buy from an outside supplier.
9. Even though I’d prefer to do business with SPO, sometimes I’m forced to purchase parts from other suppliers.
10. I am loyal to my customers, not my parts supplier(s).
Following completion of the fall wave, these 10 statements will be reviewed and regression analysis will be used to further reduce the number of salient loyalty questions.
Summary
A multi-phased study of dealership loyalty in the automotive parts aftermarket was conducted to determine why customers choose to purchase from SPO and its competition. SPO customers clearly indicated that they prefer to purchase from SPO, but will not hesitate to purchase from other parts sources when problems with SPO parts availability and delivery occur. The overriding principle is that dealers first loyalty is to their customers.
From these findings, a set of loyalty questions was developed and inserted into an existing satisfaction tracking study to help SPO monitor its efforts in providing the best service to keep their dealers loyal.