After sales service in marketing channel: Case study Honda Vietnam company

Besides product quality, good customer service organization and management is key for business success. However, it lacks a systematic analysis on the automobile distribution management. This research, therefore, focus on customer service policy of Honda Vietnam company and suggest recommendation on better customer service improvement decisions, which will help the company to stabilize and compete in the new phase of development.

AFTER SALES SERVICE IN MARKETING CHANNEL: CASE STUDY HONDA VIETNAM COMPANY Assoc.Prof.Vu Tri Dzung vtdung@cfvg.org CFVG Tran Viet Ha hatv@neu.edu.vn NEU Le Viet Cuong pr_lv_cuong@honda.com.vn Honda Vietnam Abstract Founded in 1996, Honda Vietnam is a joint venture between Honda Motor (Japan), Asian Honda Motor (Thailand) Co., Ltd and Vietnam General Motors Corporation Main products of Honda Vietnam include motorcycles and cars After nearly 20 years in Vietnam, Honda Vietnam has constantly developed and become one of the leading companies in motorcycle production and automobile manufacturers in Vietnam Besides product quality, good customer service organization and management is key for business success However, it lacks a systematic analysis on the automobile distribution management This research, therefore, focus on customer service policy of Honda Vietnam company and suggest recommendation on better customer service improvement decisions, which will help the company to stabilize and compete in the new phase of development Keywords: Automotive industry, Honda Vietnam, Marketing channel, Service quality Introduction The automotive market of Vietnam is still estimated undersized with the over 20% growth pattern and more Vietnamese clients with intention to buy a car This context reveals the prospective future for foreign investment and assembling operations to break through the barriers for Vietnamese market penetration Today, there are 14 OEM (Original Equipment Manufacturers) brands with local passenger car production in Viet Nam, even though only 244,914 units were sold in 2015 Up to now, the market has not fulfilled car makers‘ expectations and the sales volume of individual brands is fairly limited by international comparison (Martin SCHRÖDER, 2017) In 2018, the import tax on cars of less than 16 seats will be 0% for vehicles imported from the Asian region Vietnam automobile market has encountered many difficulties, the competition gets fiercer than ever with more discount and promotion campaigns by the car manufacturers such as Toyota, Honda, Mazda, and Hyundai (Honda Motor Vietnam Co., Ltd, 2016) In such a competitive context, product quality is not enough Organization and management of customer service become critically important Hence, automotive companies started to measure the value of their customers in seeking to increase their profit 905 (Hawkes, 2000; Kim et al., 2006; Verhoef and Donkers, 2001) The customer value has been described as the difference between the benefits acquired from targeted customers for the sake of the enterprise and the burden costs in attracting and serving customers (Juehling et al., 2010; Kotler, 2000) As a result, establishing continuous and developing connections with customers will be positively cultivated in the return of investment, customer retention and even enhancing the brand image In this regard, accomplishing high customer satisfaction level requires producing high quality of products (Hendricks and Singhal, 1997) Therefore, the research on customer service policy of Honda Vietnam Company to make better decisions on customer service improvement is essential for the company to stabilize and compete in the new phase of development Research method This article uses documents as a qualitative data source in research and discusses document analysis procedure in the context of actual research experiences The application of document analysis to a grounded theory study is illustrated We use secondary data: Statistics, reports from various sources: General Statistics Office of Vietnam, data from departments of Honda Vietnam Company, data from Minister of Trade and Industry and VAMA… This article also uses the case study method It is an empirical inquiry that investigates a phenomenon within its real-life context The Honda Philosophy consists of Fundamental Beliefs (including "Respect for the Individual" and "The Three Joys"), the Company Principle, and Management Policies Driven by its dreams and reflecting its values, Honda will continue take on challenges to share joys and excitement with customers and communities around the world to strive to become a company serving well the society To enhance customer satisfaction, Honda Vietnam conducts customer satisfaction surveys in some product segments in Vietnam such as: motorcycles and automobiles Results from the surveys are fed back to the departments involved to work out practical suggestions for improving daily performance Result Overview of business situation of Honda Vietnam Company After more than one year since the license was granted, Honda Vietnam has successfully built a factory, dealer network, training programs for sales, service and driver safety for dealers' agents 12,000 10,000 8,000 6,000 4,000 2,000 21,173 2,555 22,977 1,804 27,570 4,593 34,257 6,687 42,569 8,312 53,973 50,000 11,404 30,000 10,000 -10,000 2011 2012 2013 2014 2015 2016 Figure 1: Total number of Honda cars sold in Vietnam (Source: Honda Motor Vietnam Co., Ltd, 2012-2016) 906 70,000 Incoming service at distribution channel in 2015 &2016 In 2015 we reached 126,860 customers using maintenance services, which exceeded the target of 117% In 2016, we reached 202,966 customers using maintenance services, with an exceed of 111% This is result from the effort of the whole nationwide network (Honda Motor Vietnam Co., Ltd , 2016) Figure 2: Honda Service incoming (Source: Honda Motor Vietnam Co., Ltd, 2015-2016) To achieve our strategic goals in 2015 and 2016, we had paralleled our factory operations and promoted the agency's operations For Honda Vietnam, we had reinforced DLRs‘ activity every month, improved PM mobile activities, provided customer training on the importance of PM, took service campaigns For dealers, they had reinforced some activities like conducting PM mobile and internal service campaigns, programming for appointment customers, improving DLR image for better comfort of customers, enhancing daily operation management Customer satisfaction index 2015 & 2016 Honda Vietnam always care about the customer satisfaction index (CSI) We will explain about the customer satisfaction index in 2015 and 2016 to show the efforts of Honda Vietnam and dealers in the system 907 Figure 3: Honda – Customer Satisfaction Index, 2015-2016 (Source: Honda Motor Vietnam Co., Ltd, 2015-2016) The chart of survey result shows that customer satisfaction index when approaching Honda Dealer tend to increase from the second quarter of 2015 and exceeded Honda's target but it had big gap between best Dealer with worst Dealer In 2016, Honda recognized the need to improve its dealerships to reduce the gap between Dealers and increase customer satisfaction Thanks to these actions, the result in 2016 had changed significantly and exceeded the expectation Figure 5: After sale operation: Letter survey Result - Customer satisfaction index (CSI) 2015 & 2016 908 Honda had set specific measuring criteria of customer satisfaction such as: reminder, reception, customer lounge, delivery and quality with a target of 870 points After the analysis, the criteria in 2016 increases compared with 2015 In addition, some criteria had been increased, but not significantly higher than other criteria By evaluating these weak points, we analyzed the weakness to figure out proper solutions to treat them For example, with the weakness of customer lounge, we found that the skill of lounge staff was weak, and we had taken some activities like hospitality training and internal training for new staffs After we took the action, we always check the result and take the picture if necessary Evaluation of Honda service quality in benchmarking with competitors First, we took the primary market analysis between Honda and its competitor The research time was in 2015 and 2016 The content of research was Honda CSI overall, DLR comparison and weak area We used the method of face to face interview with the customers We interviewed 690 customers in 2015 (Honda: 390; Toyota: 180; Mazda: 120) and 750 customers in 2016 (Honda: 450; Toyota: 150; Mazda: 150) We also used our CSI survey process and category ratio like Figure 7: Honda service quality vs competitors (Source: Honda Motor Vietnam Co., Ltd, 2015-2016) With the weakness of DLRs like accessibility, waiting time, payment, quality We already asked DLRs to make countermeasure and follow up monthly with check sheet to make sure improvement We also produced the letter survey every months In 2016 we did some on job training for staffs during visiting DLRs and continued some actions for weak points in 2015 909 Evaluation of Honda service cost with competitors In addition to evaluating service standards, Honda also analyzed the service prices with competitor First, let‘s review about the labor cost between Honda and Toyota from 2014 to 2016 In 2014 the labor cost in Honda was 180.000VND and Toyota was 230.000VND In 2015 the labor cost in Honda was 200.000VND and Toyota was 230.000VND In 2015 the labor cost in Honda was 230.000VND and Toyota was 250.000VND This means that the average labor cost of Honda is always less than the labor cost of Toyota It was equal to 25% in 2016 This made the customer satisfy, because they got the good service with lower price For periodic maintenance (PM) price (PM Part & labor) between Honda versus Toyota, the PM cost of Honda standard is less than Toyota competitor by 12% So, we can say that Honda service price is more attractive than Toyota Customers' rating of service networks over competitors We survey the number of dealers of the main competitors Toyota's service network has 46 dealers nationwide, Mazda's service network has 39 dealers, meanwhile Honda has only 19 dealers nationwide That means Toyota has more advantages about the network compared with other Japan companies and Honda is the weakest With that challenge, Honda will open more dealers to deal with competitors In 2017 we have 19 dealers nationwide We will increase the dealer in the coming years: 28 dealers in 2018, 38 dealers in 2019 and 46 dealers in 2020 to compete with other companies Evaluation of customers' expectation and Honda's level of meeting For the standard service procedure, it includes steps: reminder, appointment, reception, estimation, while waiting, final check, delivery and follow up There were 8/8 items that customers satisfy with Honda and there were 3/8 items that customers not satisfy with Toyota That means Honda operation is better than Toyota However, CSI of Honda was a little bit lower than Toyota due to:  Dealer network of Toyota is larger than Honda‘s (Toyota 46 DLRs, Honda 19 DLRs)  Repair quality of Toyota is little bit better than Honda‘s Therefore, Honda will consider on following items to beat competitors  Opening more dealers in provinces to widen dealer network  Recruiting manpower of HVN instructor to enhance advance training activity In service for customer, we take categories such as facility, customer care and utility to compare with Toyota With each category, we give out the max items and count the percentage Honda in facility gets 100% but Toyota only get 73% Customer care: Honda: 83 %; Toyota: 50%; Utility: Honda: 90%; Toyota: 60% So, we can see that Honda take care of customer better than Toyota 910 Discussion and Conclusion In conclusion, although with the efforts in improving the network, quality of service as well as development of agent system, Honda has achieved encouraging results, it remains main issues that need to improve Weak point remained in almost service process, profit in network was negative and network for service was very small comparing with competitors When finding the issues, we took the discussion to find out the root causes for these issues and countermeasure for these First, weak point remained in almost service process We defined that there were main root causes We did not have standard for field staffs following up the service network KPI management did not have standard and the dealers controlled themselves Repair quality was low comparing with competitors It did not have clear check sheet before delivering The process service did not control as standard Honda factory had weak support for network For these root cause, we discussed to find out the suitable countermeasures to enhance service process control Second, profit in the network was negative We found the root cause as follow: we lack knowledge for the network staffs and it did not adjust the price yearly And the solution is to improve after sale profit, to train for the network staff knowledge of business, to consider about adjusting the price yearly Third, network for service was very small comparing with competitors Reviewing process for qualify the candidate for building the service network and reviewing the standard to set up service network were the main root causes for the issue Our action plan for this is to prepare for open network, to assure the repair quality by focusing on final check before delivery, to make standard for building new service network From above detailed analysis, the main weaknesses are service process, after sale profit and low network in comparison with competitors Based on those, there are propositions to deal with these issues for improved service activities, which will increase the operation profit and cope with on the Vietnamese Market during 2017-2020 (The summary of weaknesses and solutions are presented in the table To facilitate a process-oriented perspective, waste-free After Sales Service should already be considered in the After-Sales Service planning In the field of service planning, the development and documentation of service processes (process visualization and definition, reporting guidelines, process descriptions and repair instructions or process managers), technical instructions and drawings, development of country-specific guidelines, provisioning of spare parts or spare parts pricing are carried out, to provide After Sales Service employees with necessary tools and instructions for solving customer problems To get the CSI No 1, countermeasures should be taken strictly Each solution has important criteria We must work hard and stick to it with periodic inspections to find out the root causes and provide timely solutions 911 Figure 8: Summary main weak point and proposal First solution: Enhance control of service process Company should enhance the service process control PDCA process application in service controlling the KPI system help to evaluate the effect of the process How to supply high service quality for customer is a big question for any automobile firms The first thing we is to enhance the service process We follow the 8step process as a standard criterion such as: service reminder service appointment car reception repair order job control final inspection delivery follow up On the other hand, we set up the monthly KPI and follow that We come to check and discuss the target with dealers every month Moreover, we assure the repair quality by using the final check sheet which will be printed and handed over to the staffs for controlling purpose After repairing, they must check all the repair parts and sign on the check sheet, which make sure that we can control the repair quality Second solution: Improve after sale profit First, we find out elements that increase service revenue Increasing the number of visit per customer, increasing the revenue per visit, increasing the number of customer are elements to increase after sales profit When we have more profit, we can give better service for customers Second, we use PDCA and monthly KPI to control the target of each dealer, each item in the service process Third, the staffs are trained when they are recruited but they still need to focus on the advance training The training will help the dealer to improve their quality of service Fourth, review the price with competitor and then consideration for yearly price adjustment Third solution: Distribution channel strategy and open network preparation Cost and customer-service improvements are necessary but not sufficient to transform auto retailing channels The full potential of these programs cannot be realized without a 912 reasonable view of the different customer segments that should be targeted; the appropriate mix and level of marketing and distribution functions needed for each segment, and the best portfolio of distribution formats and channels to reach the targets (Evan Hirsh & al 1999) As discussed above, Honda Vietnam currently have less dealer system than its competitors This reduces the majority of CSI and increases the risk of losing customers to use the service at the dealers We have the plan to open network to provinces to satisfy the far customers We have intension to increase the dealers to 46 dealers nationwide in 2020 There are several approaches for the use of Lean Production Systems (LPS) in After Sales Service (Integration of LPS principles into the service planning) LPS allow companies to focus on activities that enhance the value of the product for the customer, by creating value and avoiding waste in the processes Through a successful, sustainable implementation of a Lean Production Systems in a company, they can act more responsibly, faster, closer to the customer and transparently in the market At the same time, productivity, quality and flexibility can be increased and customer-specific services can be manufactured under high-quality standards But most of these approaches are limited to the single implementation of isolated principles, methods and tools (Uwe Dombrowskia , Constantin Malorny, 2017) References Hawkes, V A 2000 The heart of the matter: The challenge of customer lifetime value CRM Forum Resources Hendricks, K B & Singhal, V R 1997 Does implementing an effective TQM program actually improve operating performance? Empirical evidence from firms that have won quality awards Management Science 43(9): 1258-1274 Honda Motor Vietnam Co., Ltd , Dealer Business Management Report, Customer Satisfaction Report, Sales Satisfaction Report, 2015-2016 Juehling, E., Torney, M., Herrmann, C & Droeder, K 2010 Integration of automotive service and technology strategies CIRP Journal of Manufacturing Science and Technology 3(2): 98-106 Kim, S Y., Jung, T S., Suh, E H & Hwang, H S 2006 Customer segmentation and strategy development based on customer lifetime value: A case study Expert Systems with Applications 31(1): 101-107 Kotler, P 2000 Marketing management Upper Saddle River, New Jersey 07458, USA: Prentice-Hall, Inc Martin SCHRÖDER (2017), Viet Nam‘s Automotive Supplier Industry: Development Prospects under Conditions of Free Trade and Global Production Networks Uwe Dombrowskia , Constantin Malorny (2017), Service planning as support process for a Lean After Sales Service, The 9th CIRP IPSS Conference: Circular Perspectives on Product/Service-Systems, www.sciencedirect.com Verhoef, P C & Donkers, B 2001 Predicting customer potential value an application in the insurance industry Decision Support Systems 32(2): 189-199 913 ... of Honda cars sold in Vietnam (Source: Honda Motor Vietnam Co., Ltd, 2012-2016) 906 70,000 Incoming service at distribution channel in 2015 &2016 In 2015 we reached 126,860 customers using maintenance... considered in the After- Sales Service planning In the field of service planning, the development and documentation of service processes (process visualization and definition, reporting guidelines,... every months In 2016 we did some on job training for staffs during visiting DLRs and continued some actions for weak points in 2015 909 Evaluation of Honda service cost with competitors In addition