Introduction
This article deals with the issue of service marketing. The subject of the article is in a case study format. Sullivan Ford Auto World has been selected as the particular case whose operations will be scrutinized and the issues it faces would be analyzed. Additionally, subsequent to the analysis this article would make an attempt to resolve those issues and chalk out a strategy which would help the business to gain a strong foothold.
Sullivan Ford Auto World is located at an important suburban highway intersection, at the corner of the Wilson Avenue and Route 78. The business was started in 1983, with the initiator of the business Walter Sullivan acquiring a small Ford dealership and naming it Sullivan’s Auto World. The business grew considerably in size and in 1999 Walter purchased the site at which the business is currently located. It is worthwhile to be mentioned here that in the process of doing so Walter Sullivan also acquired considerable amounts of debts. The acquired site had a 30 year old dealership with existing service and repair bays and a showroom.
Walter had renovated the front end, i.e., the showroom and given it completely new looks but had retained the service area in its existing state. This was not surprising given that Walter focused his business very much on sales and it could be said that he considered that services and repair operations play a second fiddle to sales initiatives in his line of business. (Ong & Stoll 2007)
Walter Sullivan was an accomplished showman and a skillful entrepreneur with a popular repute. Promotional initiatives had a major role to play during his time. He introduced discounts and took various other measures to ensure a healthy sales volume. Subsequent to his recent and sudden demise Carol Sullivan-Diaz, the eldest amongst the three Sullivan daughters, took over the business as she, according to the bank, was the executor of the Sullivan estate.
Carol, who had completed her bachelor’s degree in economics and also acquired an MBA degree, was pursuing a career in health care management at the age of 28 when she was thrust upon the responsibilities of managing her father’s possessions.
The business operated in both the sales and service sector, which are traditionally known as the front-end and the back-end of the business respectively. Both new as well as old cars were sold at the outlet with a most new car dealings involving trading in of an old vehicle. The front end of the business employed a sales manager, seven salespersons, and an office supervisor along with a secretary. However, one of the salespersons had already provided a termination notice and was due to leave soon.
The service division was staffed with a service manager, a parts supervisor, nice technicians or mechanics in addition to two service writers. The Sullivan girls often served as service writers on a temporary basis when one of the service writers was unwell or took leave for some other reasons. Carol Sullivan-Diaz had served in that position in the past and presently her younger sisters took up the job when required. (Goerzen 2008)
The Service division was not perceptible from the main road as the view was obstructed by the state-of-the-art showroom. Even though the outwardly appearance of this division was old, shabby and greasy, the internal state was quite up to the mark with requisite modern equipments installed which were properly maintained. The operating capacity of the services and repair bay was sufficient given its present workload. However, a greater workload would need the employing of few more technicians or mechanics to be dealt with efficiently.
Current Issues Faced By the Management
In the recent 18 month the business has not been operating pretty well. The financial conditions of the dealings have been on a constant decline throughout the first two quarters of the current fiscal year. The sales volume of new cars has also undergone a sturdy descent partly due to rising interest rates in the industry. Profit margins have been narrowed accounted for by the ongoing promotional initiatives and other measures taken to clear the stocks of new cars.
Mounting fuel prices and future sales projections in the industry are also not quite encouraging for the economic prospect of the business. Service returns, in addition, appear to be in a disoriented shape. Overall, the business is treading in the red and unless drastic measures are taken, the situation threatens to decline further which would eventually lead to the collapse of the business.
By current national standards, Sullivan Ford Auto World was placed at the bottom end of medium-scale dealerships. As per the latest economic records of the business, the financial income of the dealership stood at $26.6 million from the sales division and $2.9 million from the services and repairs section. This was significantly lower than the previous year figures where the revenues totaled to $30.5 million and $3.6 million from the sales and services division respectively.
Industry norms asserted that contribution margins, formally known as departmental selling gross, should roughly stand at 5.5 percent of sales revenues and approximately 25 percent of service revenues. As the business’ financial statements indicated, selling gross numbers were recorded at 4.6 percent and 24 percent from the sales and services divisions respectively, (Goerzen 2008) which were lower in comparison to previous year records and were inadequate in order to meet the fixed cost demands of the business undertakings. To further complicate matters, Sullivan Auto World was lagging two months in schedule for the property mortgage payments which the business owed to the bank.
Another important indicator of the issues which the management faces is the customer surveys carried out by a research firm entrusted with the responsibility to gather customer feedback by the Ford authorities. All acquirers of any new Ford product were sent a feedback form via mail within 30 days of the date of making the purchase. The questionnaires were prepared in a manner which enabled them to judge customer satisfaction with respect to the selling dealer, quality of purchase experience and the seller’s attitude along with the customer’s opinion about the product and the manufacturer. (Ong & Stoll 2007)
The survey particularly inquired whether or not the customer was guided on issues dealing with post sales services and if they had been introduced to the service department of the dealer. In addition, a follow up feedback form was mailed to the customer. In this questionnaire they were asked to rate the dealer on it service quality with specific enquiry about issues such as approach of service personnel and quality of service job performed. Overall it judged the overall customer satisfaction with respect to post sales service. (Eden & Molot 2006)
The dealership received standard ratings in the first survey in spite of one significant hitch. The survey results indicated that customers were properly informed about post sales service procedures. However, only a handful customer section agreed to the assertion that they were introduced to the service facility of the dealer. Nevertheless, the more worrying issues were raised by the nine month survey findings.
The results suggested that the general level of contentment of the customers in relation to the service facilities of Sullivan Ford Auto World was way below the satisfactory mark. The worst rated aspects of the post sales service were alacrity of receiving the service orders or writing up service requests, expediency of scheduling service job, flexibility of service timings and appearance or looks of the service division. The most disturbing finding of this survey was that majority of the customers were inclined to seek other alternatives rather depending on the Auto World’s service and repair outlet for major or minor repairs or maintenance services. (Eden & Molot 2006)
Causes of the Problems
The primary causes of all the major problems were the operational strategy adopted by the business administration right from the onset of the business venture. Even though it provided some initial boost to the financial position of the business the gradual decline of the business proves that adoption of the supposedly beneficial operational policy was faulty and thus it also proved that the policies were flawed and had several shortcomings.
Walter Sullivan, the originator of Sullivan Ford Auto World was by nature an enigmatic entrepreneur. He inherently had a belief that the primary objective of his business was achieving a healthy sales volume. Thus all his marketing strategies and operational policies were directed towards increasing the sales. Thus, throughout the course of the business, the sales division was enhanced and enriched. Walter believed that when people come to buy cars and drive home with their new possessions they are happy.
But when these customers visit the service section they are always in a sorry state of mind. Thus the services and repairs division had to be contempt with bare necessities and did not receive considerable attention which it needed. Some examples of Walter’s indifference towards the service division can be seen in his decision not to renovate the service facility on the new site of the business and his apathy towards computerizing service writing processes in spite his daughter’s request.
However, it must be understood that the service section is an integral part of the business and perhaps a more strategic division in comparison to the sales division. In the conventional scenario, 60 percent of the contribution margin was attributed to sales and the remaining 40 percent came from services. (Goerzen 2008) However, with rising fuel prices and the decline in the purchase of new cars took its toll on the sales division. With the sales division taking a hit, the business started to decline as the service division was not competent enough to offset the setback in the sales division. It is quite evident that with declining sales the balance is ought to shift towards the service section.
It would be unfair to say that the service section was incompetent on the technical front. The service and repair bays were installed with contemporary modern equipments and had enough technicians. Even though, there could be some minor technical changes, the aspects which crippled the service section were service management issues and the facility design facets.
The decline of the business can be attributed to a large extent to the customer dissatisfaction relating to poor service management. Every dealership is a customer driven enterprise. Thus if customers are not happy with the quality of service of the dealership, the business is bound to take a hit.
Recommendations
In order to initiate a turnaround in the business’ financial prospect one has to approach the issues with a positive frame of mind. The first and foremost initiative that needs to be taken is to paying a considerable level attention to the service and repairs division of the dealership. The operative model of the department has to be restructured. Employing the services of a few more technicians and mechanics would be a move in the forward direction. The design of the service facility should be renovated as a contemporary state-of-the-art service environment is much needed. (Goerzen 2008)
The most important aspect which needs attention is the service writing process. As per survey findings, the customers find it annoying to be held up in that procedure for some amount of time. Thus automation of the service writing process is necessary. This would enable swift execution of the service order receiving process. This would also allow the department to check the availability of resources and facilitate efficient allocation to job orders. (Eden & Molot 2006) This overhaul will also ensure flexibility and convenience of service scheduling and will distribute the workload efficiently amongst the available facilities in the department. Automation will enable the offsetting of attitude constraint of service writing personnel and guarantee smooth implementation of the operative design.
The cohesiveness of the sales and service department should be enhanced and both the divisions must be properly integrated. This would eradicate some of the customer grievances of being unfamiliar with the service facility of the dealership. Periodic organizing of free service camps on particular holidays will help promote the service department of the dealership. This will increase the repute of the department as well as the dealership as a whole. Other promotional initiative may include free service check ups for a limited duration after the completion of the sales procedure. (Ong & Stoll 2007)
The service division of the dealership is a critical area of operations for the dealership. It will play a huge role if the business has to enforce a financial turnaround. The process would require some amount of time and immediate results should not be expected. However, if a overhauled service system is implemented properly the business will undoubtedly reap its benefits in the long term.
Bibliography
Eden, L & Molot, MA 2006, ‘Made in America? the us auto industry’, The International Executive, vol. 38, no. 4, pp. 501-541.
Goerzen, A 2008, ‘Alliance networks and firm performance: The impact of repeated partnerships’, Strategic Management Journal, vol. 28, no. 5, pp. 487-509.
Ong, PM & Stoll, MA 2007, ‘Redlining or risk? A spatial analysis of auto insurance’, Journal of Policy Analysis and Management, vol. 26, no. 4, pp. 811-830.