When luxury car manufacturer Audi launched its new A-series in the United Kingdom in 1995, sales were spectacular. By 1999, Audi sold 40,000 cars in the United Kingdom; by 2002, more than 65,000 were sold, and 40% were to repeat customers -- a growth rate of almost 60%.
How did Audi manage such growth? The story starts in 1996, when Audi's research uncovered that it ranked dead last among luxury makes in the United Kingdom on traditional measures of owner satisfaction and loyalty.
To sustain the successful launch of the A-class sedan, senior management understood that this dismal ranking would have to be reversed -- so it developed an ambitious plan to reinvent Audi UK from the ground up. The results have been nothing short of stunning. In fact, Audi's success offers a model of how to drive growth and engineer a dramatic turnaround by creating a superior customer experience for companies in any industry.
Satisfying the customer is not enough
Audi's research revealed this important finding: Although Audi customers were pleased with their vehicles overall, they were far from happy with their customer experience at Audi dealers, particularly when their vehicles needed service. It seemed as if each of the 130 "Audi Centre" dealerships operated independently. If the proud owner of a new Audi, motoring from London to the Lake District for a holiday, found his or her car in need of service, the next Audi Centre would likely not have the same hours as his or her local one. Nor would it necessarily offer the same services or even uphold the commitments that were promised with the purchase of the car. Consistency was practically nonexistent. David Ovenden, Audi's head of customer service, saw that for customers, "service by chance" was the norm.
For Audi UK, it was time to stop, back up, and change directions.
Audi realized that creating consistent service across its network of franchised dealerships was key to establishing a dependable brand experience for its customers. So Audi UK launched its "Service by Design" program in January 2000.
The program wasn't complicated, and it didn't take intensive study or preparation. But it did require consistency and a focus on crucial areas that would build a customer's emotional engagement.
In Phase One, Audi Centres worked to deliver the "basics" -- the minimum services that customers expect from their dealers -- consistently. Audi crystallized these into a published brand promise, Service by Design, that gave dealerships a clear set of procedures or guidelines that employees could understand and implement.
When The Gallup Organization began working with Audi in 2000, the aim was to track how well franchisees (the Audi Centres) met the brand promise on these basics:
- A customer could call and set up an appointment within five days.
- All customers would be offered alternate transportation, and courtesy cars would be fueled and insured by the Audi Centre.
- When an owner picked up his or her car, it would be washed, vacuumed, and in pristine condition.
- Customers would not be charged for work that was not preauthorized.
- All customers would receive an itemized invoice.
The company reinforced the importance of keeping the brand promise by tying substantial bonuses to each Audi Centre's customer service ratings. Gallup interviewed 60 customers per dealership per quarter, reporting rolling results monthly. This allowed each Audi Centre to compare its performance to that achieved by other centres across the network.
The bonuses were fundamental to ensure accountability at the dealership level -- where crucial inconsistency problems had been identified.
The process worked.
- In 2000, 71% of customers across the Audi network reported that their dealerships had met all the published brand promises -- the "Service by Design Basics."
- Just two years later, 87% of UK customers reported perfect delivery of the Basics.
Perception is everything
Once its dealers had the Basics down, Audi shifted its focus to building customer engagement. In Phase Two, the strategy moved to humanizing the customer relationship -- from taking care of cars to taking care of the people who drove them.
A second measure was developed to reflect the new emphasis: the Service by Design ("SbD") Loyalty metric.
While original Basics metrics were process measures, the new SbD Loyalty metric measured how dealerships influenced the customer experience. Customers' perceptions were increasingly important. Across the network, each customer interaction -- the "customer experience" -- began to be viewed in terms of that perception. The Basics, for instance, included a "yes/no" measure of whether a car was washed and vacuumed before it was returned to its owner -- a process measure. The SbD Loyalty metric, in contrast, provided a more comprehensive assessment of the entire customer experience and the customers' reactions to it.
Audi had long tracked a measure of "Quality of Work." This rating was originally intended to gauge the technical abilities in each dealership's workshop. Gallup consultants noted that this was in fact a higher level outcome measure. "It is an overall measure," says James Court-Smith, Gallup's consultant on the account, "and it reflects whether customers feel that the dealership takes pride in its work, and whether it appears to care about its customers."
When Gallup consultants delved into the elements that drove an Audi customer's perception of the Quality of Work, they discovered that communication and managing customer expectations were key to delighting Audi customers. First, customers must feel that the dealership's service personnel had taken the time to properly understand their requirements -- communication that happens when a car is checked in. Customers must also feel that they knew what work had been done to their cars and whether further work was recommended -- communication that occurs when the car is returned to the customer.
A second important discovery was that if a service problem wasn't fixed the first time, all other efforts to engage customers would likely be wasted. Even here, though, perception is everything -- and setting the right expectations can make all the difference. If a customer has to return for a second visit to correct a problem -- for example, if a part must be ordered -- it doesn't matter as much that the customer has to return, it matters more whether the customer had expected a second visit.
Managing expectations doesn't require a huge monetary investment or an expensive customer relationship management (CRM) system, but it does demand attentive staff members at every customer touchpoint. For Audi, the upshot is this: When a customer checks in a car for service and asks for a problem to be corrected while it is in the workshop, the staff members know they must manage that expectation by telling the customer that the problem will be investigated and diagnosed that day. But a part may need to be ordered, and a second visit may be required to correct the problem.
In Phase Two, Audi highlighted the human dimension of the customer experience. Managing expectations and communicating, and staff friendliness and courtesy were core components, along with the dealership's ability to keep the service schedule they had promised the customer -- a crucial element of the brand promise.
Audi's focus on managing expectations and good communication at every customer touchpoint ensured that the Service by Design program aligned customer service efforts in each dealership. It gave these businesses a common language and a common goal -- improving the customer experience -- that centered on how each interaction influenced customer perceptions.
For dealers, this meant "owning" their customers' perceptions and making them a priority. Dealers had to shift their emphasis from merely washing and vacuuming cars to delighting customers with the result of a clean car.
The new emphasis on communication had some practical implications for dealership staff members as they struggled with customers' apparent impatience and desire to get in and out of the dealership as quickly as possible. Many dealerships, in fact, misguidedly prioritized speed over communication.
Research showed that it was vitally important for customers to feel that their needs were properly understood and to know what repairs had been made to their cars. But employees needed to be empowered to request any necessary time up front -- this was the challenge. By forewarning customers at check-in that they would need time at check-out to discuss their cars' service, Audi Centre employees didn't have to struggle to keep their customers' attention during these crucial communications.
Staff members also had to lead the communication at check-in, as most customers don't have extensive technical knowledge and don't necessarily describe car problems accurately or clearly. The Audi Centre staff members were the experts, and they had to take control of the conversation, ask the right questions, and get the information they needed.
"When you are ill and go to the doctor, it's her job to ask you the right questions to diagnose your illness correctly," says Gallup's Court-Smith. "As the patient, it's not your responsibility to go to her with only the relevant symptoms written down in the right order. In the same way, Audi drivers do not necessarily know what 'symptoms' are relevant to their car's problem, nor do they know how to describe these accurately. The Audi Centre staff must ensure that the right questions are asked."
"The secret to better service within a franchised network is keeping the rules simple to follow," says Ovenden. "When a program is easy to explain and understand, and when you can prove that it is in the business interests of franchisees -- that it will contribute directly to their profit margins -- the program will be used."
The remarkable success of Audi's new A-series challenged the capacity of its UK dealership network. But the Service by Design program ensured that the network's focus remained firmly on customers -- and the importance of managing customer expectations.
Although the program initially used financial bonuses to reinforce needed changes, Gallup knew that establishing the business case was key to the program's long-term success. Unless Audi UK could demonstrate to its dealership network that providing a superior customer service experience was a legitimate business interest, no one could realistically expect dealerships to do more than pay lip service to the program.
In 2002, Gallup conducted Business Impact Analysis to establish the linkages between the Service by Design metrics and business performance. And Gallup was able to quantify the return on investment for franchisees. For example, during a 12-month period, higher performing Audi Centres (as measured by the SbD Loyalty metric) returned an aftersales profit margin that was, on average, seven percentage points higher than centres that delivered a lesser customer experience.
Gallup was also able to quantify the powerful linkage between the program and return on investment. From 2000 to 2001, centres that had improved the customer experience increased their profit margins (29%) at more than twice the rate of centres that had not improved (12%). Once again, the SbD Loyalty measure -- the measure of perception, communication, and human interaction -- linked to higher profits. No such return could be established for centres that focused only on the Basics measures -- on the process rather than the customer experience that this creates.
The Service by Design program is being expanded to include another crucial element of the customer interaction: the sales experience. Again, effective communication and excellent staff interactions are emerging as key drivers of customer engagement.
Audi knows that this straightforward formula works. Customers are pleased because they are better cared for. Audi Centres are focusing on the customer experience rather than on processes, and they see this program as an important business tool. Customer relationships -- not just cars -- are running well, and that means a smooth ride for customers and employees alike.