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JCL · #19 06-02-2011, 01:43 AM

I spent 20+ years working in a dealer environment (not BMW). We sold a relatively high quality product, that was at a higher price point than most of the competition. The best success (in a variety of markets) was consistently achieved when we were able to provide a high quality service that matched the original product quality, in other words, live up to the original brand promise through the value added part we brought to the table. That was the operating model for our customer service business.

Every now and then a dealer of this product somewhere in the world would get in financial trouble, and sometimes the manufacturer took over the dealership. It was often a failure, since the manufacturer knew all about building the product, but not much about direct customer service processes. The dealers tended to be better at that. At the same time, to be honest, we didn't know much about building the product. BMW has found itself in this same situation; in my home town, BMW took over a struggling dealership and ran it as a factory store, and that was the one we all stayed away from due to a poorer customer experience. Whenever anybody asked why that store was so bad, we all said, "yeah, it's the factory store, what do you expect?"

I think BMWNA is somewhat stuck with its dealers. I suspect they would like to have more control, but I don't think they really have much control at all. But what are they going to do? Fire them all? They do run some serious survey programs, and promote pay based on customer feedback, but that is still indirect. BMW Canada seems to have a different situation. They have fewer dealerships, generally higher standards, and fund it through correspondingly higher new vehicle sales prices (as a percentage of MSRP). If you walk into a BMW store here and ask about invoice vs MSRP, they won't even have a conversation about it. It is very different than the US, in my experience.

McDonalds is a great example of a process-oriented organization. They don't sell food as much as they sell consistency. And that is driven by well-defined processes. Nobody gets to come up with their own idea of a better way to make fries. If you don't play by McDonalds franchise rules, they have lots of ways of promoting your cooperation. I had a daughter work there, she ended up as a trainer at a few restaurants, and I was very impressed with their development program. The food wasn't good, but the consistency was incredible.

I think that BMW knew that the service delivered by their dealer network was a problem (in North America) years ago, and that is why they came up with pre-paid service bundled in new car prices. It was simply a way of trying to drive consistency into service practices. Expensive dealer service stopped being a reason not to buy a new BMW, as it used to be.

I don't think the sales revenues you are estimating will ever provide great customer experiences. Would that be about a 4% GP? That is a supermarket margin, and I don't expect my supermarket to have product expertise, loaners, warranty service, and so on. Get up to a 10% margin, and you will find dealerships that can invest in customer experience.

I don't think you should stop expecting great service. But I think that discussing the motivations and business models of the different parties involved may help you find that better service sooner. Because, frankly, too many current dealers don't seem to care.

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