Redress for service advisor responsiveness and its impact on customer satisfaction a mazda vietnam report

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Huynh Nhat Tan REDRESS FOR SERVICE ADVISOR RESPONSIVENESS AND ITS IMPACT ON CUSTOMER SATISFACTION: A MAZDA VIETNAM REPORT MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City - Year: 2020 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Huynh Nhat Tan REDRESS FOR SERVICE ADVISOR RESPONSIVENESS AND ITS IMPACT ON CUSTOMER SATISFACTION: A MAZDA VIETNAM REPORT MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: ……………………………………… Ho Chi Minh City – Year: 2020 RESPONSIVENESS OF SERVICE ADVISOR Redress for Service Advisor Responsiveness and Its Impact on Customer Satisfaction: A Mazda Vietnam Report Contents: Introduction Page 2 Service Quality And Customer Satisfaction Page 2018 Vietnam Customer Service Index (CSI) Page The Existence and Importance of Central Problem Page 12 Potential cause – Responsiveness Page 15 Solution and Action Plan Page 20 References Page 23 Appendix Page 31 RESPONSIVENESS OF SERVICE ADVISOR I Introduction Based on the data results of Vietnam Automobile Manufacturers' Association (VAMA) Sales Figures, till the end of 2018, Mazda car ownership has exceeded 100 thousand units, and sales of the new car increase rapidly every year at the speed of tens of thousands of vehicles The automotive after-sales service market is about four times ahead of the market, particularly in the USA, this digit is more than five times a year (Sellitto et al, 2010) In fact, the after-sales service income accounts for 60 percent to 70 percent of the entire automotive industry chain's overall profits Automotive after-sales service can be said to be the most reliable benefit in the automotive industry chain In our 3S market, the ratio of new cars and old cars is 4:6, where an old car's average profit rate is above 12.0%, which is far higher than the new car's 3.5% In 2016 - 2018, Mazda Vietnam put more attention to the sales number, but lack the commitment to after-sales service and not have the thought of serving clients in full Some automotive after-sales service providers pay more attention to the benefit created by changing automobile parts while offering service to car owners, but not start from the prospective customer, carefully analyzing faults and reasons and recommending a random change of auto parts, Whilst users take advice without understanding the car's practical health situation, their legitimate rights and interests were damaged (Ramaswamy, 2000) But after-sales service has now become more and more important in doing business The after-sale service department, however, did not closely track the growth of the times as well as the progress of the customer demand layer On the other hand, since there are various car manufacturers, there are other suppliers for the corresponding after-sales service for the vehicle, and the trend mixed with good and bad is inevitable Revenue 2017 Target of 2018 Actual 2018 Customers Under-Warranty 26,012,903.23 28,614,193.55 31,475,612.90 Customer Expired-Warranty 49,548,387.10 54,503,225.81 44,692,645.16 Casual Customer 24,774,193.55 27,251,612.90 28,614,193.55 Total 100,335,483.87 110,369,032.26 104,782,451.61 (Unit: USD) Mazda Vietnam Revenue of Service Department in 2018 RESPONSIVENESS OF SERVICE ADVISOR According to purchasing behaviors, customers can be categorized into three groups as above, including Customers Under Warranty (CUW), Customer Expired Warranty (CEW), and Casual Customer (CC) In 2017, Mazda Vietnam achieved around 100 million USD as the revenue of the service department Among them, CEW contributed the largest proposition with 49 million USD, accounted for 49 percent CUW achieved 26 percent and the rest came from CC In 2018, Mazda Vietnam had expanded the authorized network, raising its total number of the service center to 40 Chairman’s ambition was to place an authorized center in every province in Vietnam by 2020 However, the revenue of 2018 recorded a sharp decline by 5% despite upgrading the facility or increasing the number of workshops Number of customers 2017 2018 Customers Under Warranty 201,600 243,936 Customer Expired Warranty 230,400 202,752 Casual Customer 144,000 166,320 Based on the final report of the service department, among many factors which affected revenue, there has been a dramatic reduction in the actual number of customer, compared with target plan, especially segment for customer expired warranty In 2017, the total number of CEW was 230,400 units, but in 2018, the number was lower by 12%, compared with the same period of last year This affected heavily to the profit of the after-sales service department because CEW was the most important consumer channel of Mazda Vietnam To clarify the declining trend in customer numbers, several in-depth interviews were conducted randomly at authorized Mazda service centers to better understand the cause of the decline in customers Through several interviews, apart from opinions such as the overload of the Mazda Centers or the location of the Mazda service center was too far from the unauthorized stores, there were two main reasons, firstly, the cost of maintenance of Mazda dealers was more expensive than unauthorized stores Secondly, the services offered by the authorized center (including cost, customer service) are not adequately competitive when opposed to outside competitors Furthermore, many customers who are using Mazda services, said they are RESPONSIVENESS OF SERVICE ADVISOR dissatisfied with the service quality which they experience when they bring their car to Mazda for repair and maintenance Customer satisfaction and quality of service were two of several topics in the literature about services marketing that has had diversity of academic research for decades Therefore, many studies have highlighted quality of service as a significant factor in satisfaction of customer, which affect customer loyalty (Ilias and Panagiotis, 2010) Consequently, if a business offers the quality of service that fits or exceeds the needs of customers, the potential outcome would be consumer satisfaction and loyalty According to Schiffman et al (2012), the quality of service was one of many factors that can have impacts on customer loyalty or defects to a rival For an automotive service company, Kandampully (1998) argued that long-term goal is ultimately measured by its possibility to enlarge and manage a broad and loyal client database through the quality of service and customer loyalty When organizations offer low quality of service, it adversely affects both the consumer and the business (Sivadas, 2000) In general, consumers who encounter a poor quality of service at a single business are intended to not come back in the future as a client In addition, loss of revenue due to low customer satisfaction can seriously harm a company's image and even threaten the company's ability to remain in business (Sivadas, 2000) Several studies suggest that satisfaction of the customer is an essential requirement for customer relationships with a product, making it necessary to concentrate on customer satisfaction to build and sustain customer retention (Bruhn 2009, p 66 ff.) herefore, these findings indicate that the satisfaction of the customer's expired warranty should be the priority to be addressed to sustain the customer and attract a new future customer In the automobile service area, Izogo and Ogba (2015) noted that one of the essential factors for attracting and maintaining loyal customers was service quality If a consumer is satisfied with the level of service quality that is being offered, this builds confidence; the happy customer may come back and suggest the service center to others as well An online survey to investigate the impact of the quality of service on customer satisfaction at approved automotive service centers had been conducted to resolve this issue The study examined which service quality components in this sector are most valued by clients Therefore, following those arguments, the object of this study includes two main ideas First, the paper discusses the core problem and the possible causes that triggered a downward trend in customer satisfaction within the after-sales services sector of the Mazda Vietnam automotive industry Furthermore, the RESPONSIVENESS OF SERVICE ADVISOR paper seeks to propose which dimensions of service quality that have impacts on customer satisfaction and loyalty for improvement strategies relevant to possible triggers This study is expected to clarify and propose strategic responses to improve the quality of service, and thus enable them to fulfill and improve customer loyalty II Service quality and customer satisfaction Meanwhile, in both the manufacturing and service industries, service quality is an essential element, and the phenomenal development in the service sector encourages much research about service quality more appealing in the industry Based on the steady economic growth, the trend in after-sales services for automobiles is shifting appropriately Izogo (2013) expected an increase in demand for after-sales automotive services due to the shifting trend from manual to automatic gearbox with more complicated systems due to rapid technological advances Improving quality of service is the main point to the competitive advantage according to Etemad-Sajadi and Rizzuto (2013) Consequently, Taap et al ( 2011) had previously argued that many companies have considered carefully about controlling competitive advantages by assessing their performance from the customer's point of view by launching main improvement projects because poor service quality leads to lose customers, so that, it costs much more expense expense to attract new customers According to Vietnam Automobile Manufacturers' Association (VAMA, 2018), compared to previous year, the four-wheeler passenger vehicles (PV) segment has stable growth; in 2018, approximately 460,000 units were sold in Vietnam, and this result was expected to rise by 10 percent yearly (VAMA, 2018) With the rising in the manufacturer of four-wheeled vehicles, there has been strong growth in the Vietnam automotive spare parts and the after-sales service market over the last decade The auto service industry in Vietnam can be classified into two groups: organized and unorganized The organized sector can also be called an integrated single-brand and multi-brand organization PV manufacturers create structured single-brand service centers or authorized centers to please their customer by providing dedicated, thoughtful and professional services Customers typically can not know whether actions needs to be done or not to deal with their current vehicle situation We need to rely on professional experts to clarify and find solutions for us For example, some essential components must be replaced periodly, such as brake or tire, RESPONSIVENESS OF SERVICE ADVISOR because those components need to be in perfect conditions for safety driving, however, from customers perpective, replacement of spare parts which have not any scratchs is unnecessary and expensive As this may reflect the lesser awareness that the consumer has regarding service process, it could be an evidence of cheating by the service prpvider Another basic example is the replacement of lubricating oil which is suggested to be replaced after a period of time or a regular distance Many customers responded that the lubricant or engine oil was replaced, although they thought that the quality of the oil was still good The link between customer satisfaction and quality of service was the main topic that many research investigated for over decades Sureshchandar (2002) discovered that the satisfaction of customer and quality of service were closely linked Dahiyatet al (2011) and Samen et al ( 2013) all proposed that quality of service was an important factor that contributed to customer satisfaction Kumar (2010) argue that tangibles, empathy, and assurance were essential aspects of customer satisfaction while Mengi (2009) concluded that responsiveness was considered as an important point of customer satisfaction The growth in demand for the automobile industry in Vietnam recent years has led to the steady development and evolution of the automobile service market Improved service design and delivery can increase customer satisfaction if it results in increased service quality due to the strong link between the two aspects of customer experience (Woodside et al., 1989) There is evidence that customer satisfaction is strongly linked to business profitability and market share Increases in customer satisfaction can directly lead to more successful businesses — more successful automobile service providers in the case of this study Those literature propose that a customer receive such services as superior standards, he/ she will feel better and be more satisfaction on the company's services It becomes important that businesses need to improve their service quality, including quantity elements and quality elements, to satisfy their customers need It is vital matter because satisfied customers are become more attracted to the company's offers than dissatisfied customers This certainly demonstrates the reason why it is vital to recognize drivers of service quality that afftect to customer satisfaction to advise employers about the situations where changes are required RESPONSIVENESS OF SERVICE ADVISOR III 2018 Vietnam Customer Service Index (CSI) To better understand customer feedback regarding Mazda's quality of service in 2018, the Vietnam Customer Service Index (CSI) survey will be analyzed to find out the key reasons for the quantity reduction of potential consumers Following the result from the 2018 Vietnam Customer Service Index (CSI) survey which was conducted by J.D Power, the data will be analyzed to understand the weaknesses of Mazda Vietnam and find solutions for customer satisfaction improvement Fieldwork June to December 2018 Survey Area Nationwide Method Online survey through online panel partners Respondents Owners of vehicles delivered between June 2013 through December 2017 (i.e 12 ~ 60 months ownership) Vehicle serviced at the authorized dealership between June 2017 through December 2018 (i.e ~ 12 months) 2018 Vietnam Customer Service Index Study (CSI) Outline 2018 Vietnam CSI Factor was structured based on five main factors, including Service Facility, Service Quality, Service Initiation, Vehicle Pickup, and Service Advisor Each factor has different attributes which clarify how customer evaluate the service and different weight which affect to the total customer satisfaction index RESPONSIVENESS OF SERVICE ADVISOR Factors Service Facility Service Quality Service Initiation Vehicle Pickup Service Advisor Attributes ▪ Ease of driving in/ out of the facility ▪ Cleanliness of dealership ▪ The comfort of the waiting area ▪ Convenience of parking ▪ Total time required to service your vehicle ▪ The thoroughness of maintenance/ repair work performed ▪ Condition of the vehicle on return ▪ Ease of scheduling service visit ▪ Timeliness of drop-off process ▪ Flexibility to accommodate your schedule ▪ Timeliness of the pick-up process ▪ Fairness of the charges ▪ Helpfulness of staff at the pick-up ▪ Courtesy of Service advisor ▪ Responsiveness of service advisor ▪ Thoroughness of explanations Weight 17% 24% 21% 20% 18% 2018 Vietnam CSI Factor Structure RESPONSIVENESS OF SERVICE ADVISOR Boulding, W., Kalra, A., Staelin, R and Zeithaml, V.A (1993), “A dynamic process model of service quality: from expectations to behavioral intentions”, Journal of Marketing Research, Vol 30, February, pp 7-27 Brady, M.K., Cronin, J.J and Brand, R.R (2002), “Performance-only measurement of service quality: a replication and extension”, Journal of Business Research, Vol 55, pp 17– 31 Buttle, F (1996), “SERVQUAL: review, critique, research agenda”, European Journal of 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Structure 33 RESPONSIVENESS OF SERVICE ADVISOR CSI Score Distribution: Mazda customers report the smallest proportion (15%) of “Highly Satisfied” (895 and above) customers and 39% of dissatisfied (821 and below) customers 34 RESPONSIVENESS OF SERVICE ADVISOR CSI Score by Year of Ownership CSI Trend - Among makes, there are five makes performing above the average and four makes below the average 35 RESPONSIVENESS OF SERVICE ADVISOR Told when the vehicle would be ready: Customers are more satisfied when they are told when their vehicle would be ready 76% of Mazda customers were informed, slightly above the average Updates on service work progress: 62% of Mazda customers reported that the dealership called them for keeping informed of the work progress –the most preferred method Updating via e-mail also performs better than the average and competitor set 36 RESPONSIVENESS OF SERVICE ADVISOR Service Advisor reviewed work done on the vehicle after service complete: Large satisfaction gap is observed on those who were explained for the work performed and who was not after the completed service 6% of Mazda customers were not explained Explanation of work performed afterservice completed: Large satisfaction gap is observed on those who was explained for the work performed and who was not after the completed service 6% of Mazda customers were not explained 37 RESPONSIVENESS OF SERVICE ADVISOR Explanations of Work Prior and PostService: 15% of Mazda customers were not explained about the work completed comprehensively (before ANDafter service), including 3% was not explained at all Copy of service form provided before work begun: A copy of service form beforethe service begun should be provided to customers to increase their satisfaction Mazda (90%) performs below the average 38 RESPONSIVENESS OF SERVICE ADVISOR Service work explained before vehicle taken for service: Explanation of service work before the service starts increases the customer’s satisfaction 3% of Mazda customers missed to be explained Loyalty and Advocacy Intentions – Impact: Highly satisfied customers are likely to return the same service center (both under and post-warranty) and recommend the dealer or service center to their friends or relatives 39 RESPONSIVENESS OF SERVICE ADVISOR Buyer Profile 40 ... Customer Satisfaction: A Mazda Vietnam Report Contents: Introduction Page 2 Service Quality And Customer Satisfaction Page 2018 Vietnam Customer Service Index (CSI) Page The Existence and Importance... ECONOMICS HO CHI MINH CITY International School of Business Huynh Nhat Tan REDRESS FOR SERVICE ADVISOR RESPONSIVENESS AND ITS IMPACT ON CUSTOMER SATISFACTION: A MAZDA VIETNAM REPORT. .. customer loyalty: an empirical examination of the 26 RESPONSIVENESS OF SERVICE ADVISOR mediation effects of customer satisfaction and customer trust”, International Journal Services and Operations