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Monday, April 25, 2011

What You See Isn’t Always What You Get with Businesses... Especially Car Dealers

There’s a new catch phrase among businesses, “Reputation Management”. In fact, auto manufacturers are advising their dealers on ways to improve Internet surveys that are springing up all over. Probably the biggest one is Google that displays customers’ reviews of virtually every business. The manufacturers’ advice is to solicit as many happy customers as possible to overwhelm the negative reviews that are posted. There are also companies that specialize in doing exactly this…contacting large numbers of customers and persuading them to post positive reviews for a particular business. The theory is that a happy customer is less likely to respond to a survey than an unhappy one. That’s not entirely true. The fact is that a very happy customer is just as inclined to respond to a survey as a very unhappy one. The customers that are less inclined to respond to surveys are those that are “sort of” happy or “sort of” unhappy. The honest way to get lots of positive surveys is to make more customers very happy.

There was an interesting column in last Sunday’s NY Times by “The Haggler” entitled “A Customer Who’s Always Satisfied”. The reporter discovered that companies were hiring a company named “Homestead Technologies” (owned by Intuit) that sold a special software program to businesses that wanted to improve their reputations. This software program was comprised of a website template that companies filled out with customers’ names and positive reviews. The way the reporter discovered the scam was that some companies weren’t changing the names in the template. This fake name was “Lucas Fayne” and when the reporter Googled that name, he found that Lucas had given very positive Internet reviews to more than 50 roofing companies all over the USA. Each review said the same thing! There are many companies like that selling their deceptive services to companies that treat their customers badly but want to have good reviews anyway. One tipoff is finding one company that has an extraordinarily large number of reviews compared to their competition.

Another common scam by car dealers is to make their surveys look good is by making up customers’ email addresses. Rather than report a customer’s real email address, the dealers make one up using free email services like Hotmail and Yahoo. The survey from the auto manufacturer comes to the dealership address and then the salesman or sales manager fills out the survey. A variation of this scam is for the dealer to give incorrect email addresses to the manufacturer for customers he knows are dissatisfied. Some manufacturers police this by determining what computer the survey originated from by identifying the IP address. For example, my PC’s IP address is If Toyota found out that hundreds of customer surveys were coming from that address, they might be a little suspicious. But most dealers are way ahead of the manufactures on this. There is software obtainable on the Internet that disguises the IP address of your PC.

Less sophisticated car dealers resort to simple bribery. “When you get your survey from the manufacturer, bring it into the dealership in blank and we’ll give you a free tank of gas”.

My dealership’s rating by the Better Business Bureau is A+ which is the highest rating obtainable. I don’t advertise this or mention it to my customers because it really doesn’t mean anything to me. Why? Because many dealers have high rating by the BBB that clearly don’t deserve it. Businesses pay dues to be members of the BBB and the BBB is hard pressed to give a bad rating to the people that pay their salaries. The businesses and dealers who “don’t join” the BBB are the ones who get the lower ratings. After this was exposed by the press recently, the BBB is claiming to come up with a more honest approach to rating companies.

One might ask, how does “reputation management” by bribery and deception continue to propagate when it’s so painfully apparent? The answer is “money” and corporate bureaucracy. The CEO of a large business including auto manufacturers probably would like their dealers to treat their customers with courtesy, respect, and integrity. He thinks that the best way to accomplish this is to incentivize and measure his subordinates, all the way down the long line, by how good the customer’s surveys look. When a vice president’s annual bonus or chances for promotion hinge on customer satisfaction scores, he’s not going to investigate the accuracy of good surveys too closely. His philosophy is to get those customer satisfaction scores up “any way you can”. I can remember one occasion when I questioned a particular dealer’s scores because they were a perfect 100%. I think you can agree that no one or no company is perfect and that dealer wasn’t either, as it turned out.

What the manufacturers and the dealers should understand it that it’s not the customer satisfaction scores that make or break you…it’s the individual customer. The power of one very happy customer is almost beyond imagination and so is the power of one unhappy customer. I liken a customer’s experience to a “pebble dropped into an infinite pond”. The ripples go on forever. You can fool a lot of people for a short time with phony scores on the Internet, the manufactures’’ surveys, or the BBB. But when you trick a customer into doing business with you and you don’t live up to the score, she will never return and she will tell all of her friends.

Monday, April 11, 2011

Gas Price Gouging Is Illegal, Why Not Car Price Gouging?

Florida Statute 501.160 states that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer to lease essential commodities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state emergency, unless the seller can justify the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas, and lumber. As I write this article, gasoline prices are very near or have already exceeded $4.00 per gallon. Oil has surged to over $107 a barrel. Middle Eastern and North African countries are in turmoil. Japan has suffered a huge earthquake/Tsunami disaster temporarily slowing supplies of Japanese fuel efficient cars, especially the number one volume hybrid vehicle in the USA, the Toyota Prius. The global economy is still struggling to come back from the worst recession since the Great Depression and home foreclosures and unemployment in the USA are at historic highs. Doesn’t it seem like the above qualifies as an “emergency”? If gasoline is a “necessary commodity”, doesn’t it stand to reason that what you put the gasoline in, your car, is also necessary? What good is affordable gas if you can’t afford to buy a car? As always happens when gas prices rise, car dealers jack up the price of fuel efficient cars. Up to a point this is understandable and a result of the rules of the free market place…supply and demand. But at a certain level, it crosses the line between understandable economics and enters the arena of greedy price gouging. I believe the line should be drawn at the manufacturer’s suggest retail price of the vehicle. This window sticker is officially called the Monroney label. It’s required by federal law that every new vehicle has the manufacturer’s suggested retail price displayed on the window of the vehicle up until the customer takes delivery. Not to do so subjects the dealer to a $10,000 fine. We can thank Senator Mike Monroney of Oklahoma for this law passed in 1958 (the year I graduated from Palm Beach High School). Every car dealer knows that he can very rarely sell any of his cars for as much as the manufacturers’ suggested retail price. Common practice is to discount new car by hundreds or thousands of dollars below the MSRP. Therefore I think drawing the line between a fair profit and price gouging profit at the MSRP is very fair to the car dealers. But many dealers don’t stop there. They add something commonly known as an “addendum sticker” next to the official Monroney sticker. This dealer sticker is usually designed to exactly resemble the Monroney sticker. Most customers looking at it assume it to be the Monroney sticker. But, what it is truly is the dealer’s way of raising the price of the car above the manufacturer’s suggested retail. There are two approaches the dealers take to marking up the MSRP. The most common is by adding “dealer accessories”. These are items like pin stripes, glass etching, nitrogen in the tires, door edge guards, paint sealant, fabric protection, undercoating, road assistance, etc. A package of these virtually worthless items is typically priced at couple of thousand dollars when their true value is less than $100. The second ploy is a price markup called a “market adjustment”, ADM (additional dealer markup), “Dealer Adjustment Addendum”, or some other euphemism. One of the best examples of price gouging can be seen with the Toyota Prius. A few months ago, they were being sold at, or only slightly above, dealer’s invoice. Toyota was even offering the dealers and customers added incentives to further reduce the price. Now, given the rising gas prices and the earthquake/Tsunami in Japan, you are hard pressed to find a dealer who will sell you a Prius that’s not priced thousands over MSRP! The irony is that the number of Priuses available for sale will be only temporarily interrupted. In fact, Japan will definitely increase their exports of Priuses to the USA because their domestic economy has suffered such a blow. I really don’t expect the Florida legislature to pass a law making it illegal for car dealers to price-gouge. I can’t even get them to pass a law eliminating or controlling the dealer fee. But what you can do is be very aware of what is going on now with respect to insane markups on fuel efficient cars. By doing so, you can avoid being a victim and buy the fuel efficient car of your choice at a reasonable price. This shortage of economy cars is only temporary. Waiting a few weeks and getting at least 3 competitive bids when you do decide to buy can save you thousands of dollars.

Monday, April 04, 2011

Eight Rules to Follow For a Good Service Experience

You buy a car only once every 4 or 5 years, but you should service your car at least two or three times a year. Car dealers make more money from servicing and repairing cars than selling them. The man who takes your order you when you drive into a service lane is paid on commission just like the salesman who sold you your car. His title may be service advisor, service writer, or assistant service manager, but he’s really a salesman. The more service or repairs he sells you, the more money he earns. Follow these eight easy to follow rules and you will not get “taken to the cleaners” and still get the service necessary to keep your car running well. (1) Always ask for a written estimate. Florida law gives you the right to receive a written estimate for your service and repairs. If the estimate exceeds the actual amount by greater than 10%, you don’t have to pay that overage. Be sure that you get a written, not verbal estimate. If you’re contacted later and told there is additional work that should be done, ask that they put that in writing too. If you’re not in the dealership, ask them to text or email this before you approve it. (2) Insist that the technician or service advisor test drives your car with you. If you have a drivability problem, meaning squeaks, rattles, pulling, vibration, inadequate braking, etc., always insist that you accompany the tech (preferably) or service advisor on a test drive so that he can be an eye witness to your complaint. Repeat this test drive after the work has been completed. Descriptions of drivability problems are often miscommunicated verbally and in writing. The service advisor and the technicians will usually not offer the test drive because it’s time consuming and they’re both paid on commission. It’s up to you to insist. (3) Request the best technician to work on your car. Most service departments have several techs who can work on your car. Some are better than others, just like doctors, lawyers, and hair stylists. Why should your car be repaired or serviced by the guy that happens to be waiting for the next job? The first time you visit a service department, ask who their top tech is. He usually has been working their longer, attended more schools, and holds more ASE certification ratings. The service advisors and the service manager know exactly who these guys are and usually will be glad to tell you, especially if it determines whether or not they will keep you as service customer. (4) Request the best service advisor. You choose your service advisor pretty much the same way you choose your technician…experience, training, certifications, etc. There’s an additional measurement that’s very important with a service advisor…customer satisfaction score. All manufacturers that I know of, grade service advisors on how well they individually treat their customers. The sum of these scores is the dealer’s scorecard to the factory and very important to him. You have to ask for this score, it’s not usually made public. Once you’ve picked your technician and service advisor, you’re going to have to make an appointment to be sure that they are available on the day and time you bring your car in. Having both of them handle your service will require some flexibility on your part and may require longer for the work to be completed. But this is a small price to pay for the work to be done right the first time and for the work to be something that was truly necessary. (5) Get competitive estimates on repair work. Repair work is work that you don’t regularly require…your air conditioner, radio, or transmission is broken is what you have to be careful about. Dealers typically price oil changes, tire rotations and balance, and front end alignments competitively. Repair work, because you’re not familiar with the price is where you have to watch out. When you get your first estimate on an expensive repair, get at least two more from two other service departments. Often times, the mere act of shopping the original price will cause the first estimator to lower his. In fact, if you feel comfortable with your service department that gave you the first estimate because you like the tech and the service advisor, offer to let them repair your car if they will meet the lower price. (6) Know which maintenance is recommended by your car’s manufacturer. If you don’t read anything else in your car’s owner’s manual, read what the manufacturer recommends for maintenance. Service departments typically recommend far more maintenance than the manufacturer does. Usually they don’t tell you this unless you ask, hoping that you will assume that their recommended maintenance is the same. Manufacturers will usually say that for extreme or unusual operating conditions (stop and go driving, very high or low temperatures, etc), additional maintenance may be required. You must be the judge of this, but for a rule of thumb you can’t go too far wrong following the manufacturer’s recommendations. (7) Have your car’s VIN checked occasionally for manufacturer’s bulletins. Every dealer should run your vehicle’s vehicle identification number at least once a year to be sure there are no outstanding recall campaigns or technical advisory bulletins. In fact, if you require a repair, you should always ask them to check to see if it may be covered by the factory when it would otherwise be out of warranty. Sometimes dealers are prohibited by the manufacturer from telling their customer about a bulletin unless the customer asks. There are so many of bulletins that come out all of the time that many dealers are overwhelmed. If you are having your car fixed at an independent shop, you should be very careful about this because independent shops would have no knowledge of these. (8) Don’t take no for an answer when your car is out of warranty. If your car is just one day or one mile out of warranty, it will usually be covered anyway. This principle applies to a few hundred miles and a few months too. But you have to ask and often insist. Performing free work out of warranty is referred to as “goodwill”. Some dealers have the ability to do this and all manufacturers do. If the dealer tells you “no”, ask him to contact the factory service representative.