Car after-sales

Best practice in the car service

after-sales service:
An empirical study of Ford, Toyota,
Nissan and Fiat in Germany – Part 1 39

Olajide Omotuyi Ehinlanwo

Iomega Europe GmbH, Germany, and
Mohamed Zairi
University of Bradford Management Centre, Bradford, UK

Introduction
The value system in the German car industry can be broken down into four
major players; component suppliers, car producers, dealers or the point of sale,
and buyers. These players are all affected by any turbulence in the car industry.
As a result they all contribute, to various extents, to the attempts of structural
change taking place in the industry. As Müller and Reuss[1] have argued,
perhaps what is most noticeable of the attempts at readjustment within the
value system is the insecurity on the part of all players as to what the future
direction of the industry will be. Some of the major trends or key factors
affecting each of the four key players are:
(1) Automobile suppliers
• Polarized competition.
• Internationalization and globalization tendency (for example the
global sourcing producer strategies and global competition, etc.).
• Change from just component suppliers to system partners and
suppliers integrated into the system.
• Integration into the producer system based total quality management
process.
(2) Automobile producers
• Concentration of corporate strategies on product, process innovation
and co-operation.
• Emphasis on customer loyalty and development of repeat buyers at
point of sale.
• The choice of place to manufacture and its inherent implications and
cost savings strategies has become a key focus of corporate strategies.
Business Process Re-engineering
• Global thinking and globalization. & Management Journal
Vol. 2 No. 2, 1996, pp. 39-56.
• Reduction of over capacity. © MCB University Press, 1355-2503
BPR&MJ • Concentration on return on investment (ROI) improvements.
2,2 • Continuously expanding model width and depth.
• Shorter model lifecycles.
• Increasing use of merchandising tactics.
(3) Automobile dealers
40
• Over capacity of dealers in the European market especially in
Germany.
• Concentration tendency among dealers (take-overs, mergers and
fusion).
• Reductions in profit levels and return on sales, etc.
• Increasing capital requirements.
• Under capacity and under utilization of facilities.
• Loss of market share in used car, and parts and accessory (after-sales)
business. New company forms and competitive forms, e.g. Mega
dealers – 123, Pit Stop, etc.
• Pressure from producers to increase product intake levels.
(4) Automobile buyers
• Stagnating/cyclic demand in European market.
• Stronger price/quality awareness.
• Increase in service requirements and importance of the service part in
the buying process.
• Increasing difficulty in telling the difference between available models.
• Wish for totally new car concepts (expectation of better security,
environmental considerations, etc.)[1].
Underlining all these trends and the competitive pressure is the realization in
the car industry that the present downward trends in volumes can only be
stemmed by an increase in customer loyalty and the development of stronger
brand/corporate awareness among customers. The stagnating/cyclic demand,
stronger price/quality awareness, increased emphasis on service and general
economic pressures which have reduced buying power, have necessitated the
need to develop strategies which are geared towards achieving greater brand
loyalty among customers. There is more than ever, a need to ensure that present
customers are not only satisfied but continuously delighted.
The after-sales sector, long after the customer has taken delivery of the car,
represents a means of continuous contact between the car producers and the
customers via the dealers. As a result of the unique vertical marketing system
practised in the automobile industry and the fact that the balance of power lies
with the car producers, they have been forced to and must assume leadership in
an after-sales process geared towards retaining the end customer through total
satisfaction. Whatever after-sales concept they sanction, it must optimize both Car after-sales
the delivery of the product as well as the service aspect of the process (see service
Figure 1 ).

Satisfied with product

41
58 per cent 91 per cent
Not satisfied with service Satisfied with service
29 per cent 65 per cent Figure 1.
Car repeat buying in
relation to customer
Not satisfied with product satisfaction in
percentages
Source: [2, p. 195]

After-sales definition and scope

Without laying any claims to being all embracing, after-sales service for the
purpose of this paper would be defined as “all activities geared towards
maintaining the quality and reliability of the car carried out after the customer
has taken delivery with the goal of ensuring customer satisfaction”.
These activities can be subdivided into those that take place at the producer
level and the dealer/point of sale level. This paper examines specifically the
activities that take place at the producer level. While these activities are
channelled towards a complex range of outlets, for practical purposes the
examination has specifically been limited to include only dealers contractually
bound to a car producer.
In the boom years until 1991, after-sales on the producer level consisted of
three major departments; the parts (teile), accessories (zubehör) and service,
mostly technical (kundendienst). This separation was seen as necessary partly
because of the difference in profit margins to be made on parts and accessories
but also because of the strategies of the importers in which accessory additions
for the German market were made to imported cars on their arrival. These
accessory additions (sometimes known as rapid specs or Erst-ausrustung in
industry jargon) were booked as parts or accessories sold for accounting
purposes. However, for the purpose of this paper, those component additions
made by the German daughter companies of the importers where possible have
been excluded from the analysis. These additions are only intended to bring the
car to the level expected in the market. After-sales would, therefore, be seen as
having a product (teile, zubehör, etc.) plus a service component (additions or
changes or advice carried out after delivery of the car to a customer). Where
“product” is defined as all components that can be fitted to the car to enable it to
meet the requirements of the owner and “service” as human or mechanical
component/interaction required to install or make aware of the possibility of
installing a product on the car. These include advice, information, and all
interaction with the car owner/user.
BPR&MJ Products can be subdivided into four main groups:
2,2 (1) Parts. These are the components of a car which, due to long-term or
short-term wear and tear,have to be replaced to ensure that the car fulfils
its primary function, i.e. serves as a means of transport.
(2) Accessories. These are the extras which can be bought and installed in a
42 car that in no way affect its performance of its primary function.
(3) Tyres. This category includes both summer and winter tyres as well as
normal and wide tyres.
(4) Autochemicals. These are the chemicals that, apart from serving to help
ensure the fulfilment of the car’s primary function, are also used to clean
and maintain its aesthetic qualities. This classification includes car paint
and car paint accessories, motor oil, special car cleaning and car wax
materials, etc.[3]

Conceptual framework
Problem definition
The process of change is very difficult and organizations tend to accept much
more easily changes that have been tried and tested in their industry and found
to work or contribute to success. The structural upheavals in the automobile
industry and the problems both producers and their dealers are facing in
improving the customer loyalty rates necessitate a search for both new methods
and the revival and improvement of existing policies and processes. The use of
total quality management organization principles is now a fact of automobile
management. Benchmarking is one of the basic pillars of total quality
management and it is the aim of this study to use benchmarking to examine the
after-sales practices in the automobile industry and extrapolate best practices
which could lead to overall improvement of the after-sales delivery as it exists
currently.
The present trend in the car industry is to push for improvements at the
dealer/point of sale level, while these improvements are necessary, so also is the
realization that the after-sales policies and processes of the producer are basic to
achieving these improvements. According to Müller[4], automobile producers
must realize that “Achieving dealer satisfaction is both the basis of, and a
requirement for true end customer satisfaction”. Dealer satisfaction can only be
achieved when the after-sales policies of the automobile producer take into
account factors that are critical for continued dealer success. The critical policies
as far as the dealers are concerned represent the marketing policies of the
producers. The environmental considerations should be included in that they
represent one of the most pressing challenges facing all automobile players.

Critical policies
For every strategy, process or policy, there exists certain critical aspects whose
fulfilment are critical to the success or otherwise of the process strategy or
policy (see Figure 2).
 After-sales service takes place through the vertical marketing system also Car after-sales
used for new car sales. This system is made up of theoretically independent service
partners. In practice however, the system as practised in Germany can be
broken down further into both the single-phased and double-phased systems[5].
A single-phased distribution system exists when the producer, without the
services of any other go-between, supplies the dealers or point of sale.
Practitioners of the single-phased system include BMW, Honda, Porsche, etc. 43
In the double-phased distribution system, the producer supplies a number of
dealers directly and these in turn have one or more dealers/points of sale which
they supply. Practitioners of the double-phased distribution system include
Toyota, Fiat/Alfa/Lancia, Subaru, Volkswagen AG, Ford, etc.
Core activities in this marketing system revolve around the policies,
processes and strategies employed by producers in ensuring that their
representatives or outlets are adequately prepared and able to satisfy the
customer. Based on a review of existing literature and interviews with industry
experts and dealers, a number of producer policies were identified as being
critical or crucial to the after-sales delivery (see Figure 2). They are:
• Product policies. Dealers have on many occasions expressed concern on
the product policies as practised in the automobile industry. Based on the
GVO (Gruppenfreistellung verordnung, the European law regulating the
vertical marketing system) car producers had the right to bind dealers to
sell only their original parts or products. The dealer was therefore bound
to buy from his car producer even when the prices were not favourable.
In addition, after-sales service is made up of a product aspect and the
conditions under which the dealer gets this product certainly plays a
very important role in his success or otherwise.
• Price policies. These policies affect the bottom-line and as such are very
important for both the dealer and the producer. One of the major
problems facing the point of sale is the dealer image of being too
expensive in comparison to other after-sales outlets. A key thrust of all
producer policies therefore is an attempt to introduce transparent price
policies at the point of sale. In addition, the end-price at which the dealer
offers after-sales service is, to a large extent, affected by the price
conditions he is offered by the producer.

End customer Dealer Producer/importer

Environmental policies

Aftersales service
geared towards Product PrIce Promotion
satisfying the end policies policies policies
customer Figure 2.
After-sales critical
Distribution policies policies and policy links
BPR&MJ • Promotion policies. In order that the target audience becomes aware of
2,2 the after-sales possibilities offered by both the producer and his dealers,
a well-designed promotion policy is required. Even the best policies, if
not communicated to the target audience, can be doomed to failure.
Traditionally in the automobile marketing chain, producers played a
dominant role in the conception of promotional measures and the recent
44 “corporate identity” measures of most producers do demonstrate the
importance of promotional measures to after-sales. The promotion
policies of the producer are, therefore, critical to the success or otherwise
of both his after-sales policies and that of the dealers.
• Distribution policies. The availability of the after-sales products affects
the after-sales delivery. The perceived quality of service is influenced
directly by how long the customer must wait to have the desired product
fitted to his car. For the dealer/point of sale, profitability is affected by the
number of products that he has to stock in his stores. The lower these
are, the less fixed costs he has to bear and the more profitable and liquid
he is. The distribution policies and their efficiency, therefore, play a
critical role in the after-sales plan.
• Service policies. The product technology is becoming universal. Service
has become a way in which policies and offerings can be differentiated
from those of competitors. Granted that all other critical policies function
effectively, the service policies represent the most important
differentiation technique available to both the producer and his dealers.
With consumers becoming more homogenized in their requirements, it is
of paramount importance, therefore, that service policies are geared to
offer that little extra requirement to delight the customer. Under service,
for example, would be included the training and consultancy activities of
the producers geared towards helping their point of sales/dealers
compete more effectively and satisfy the end customer. The competition
on the point of sale level and the continuous technical evolution of the
product car has made it critical for producers to offer their dealers a
whole range of support and training measures, to help them secure the
additional support required to both satisfy and bind the customer.
• Environmental policies. Consumer trends demonstrate the “coming to
age” of environmental considerations. In Germany and indeed the whole
of Europe, industry has been forced to incorporate environmental
awareness and considerations into their policies. The automobile
producers and their dealers can no longer ignore the importance of the
environment in their future policies if they do not want to alienate their
customers. Numerous surveys show that buyer behaviour in Europe and
indeed Germany is influenced by environmental considerations and
organizational policies.
Supporting these identified critical policies are the results of a study carried out Car after-sales
by Professor Meinig of the University of Bamberg[6]. In this study, 1,120 dealers service
attached contractually to 28 producers were asked to rank aspects critical to the
success of their operations and the achievement of customer satisfaction. The
following aspects of after-sales were among the factors identified by dealers as
critical to their success:
(1) After-sales price policies. 45
(2) After-sales distribution policies.
(3) An adequate market size (i.e. the geographical area for which the dealer
is responsible).
(4) After-sales service policies.
(5) After-sales promotion.

Data collection and analysis

A representative sample of the automobile industry made up of practitioners of
both the single-phased and double-phased system should have been prepared.
However, as a result of time and resource constraints, this study had to be
designed as a “pre-test” aimed at identifying both areas for closer consideration
and further study. Seven leading companies were identified initially: Adam Opel,
Renault, Volkswagen, Fiat, Ford, Nissan and Toyota. Eventually only four
companies took part in the study. These included: Ford, Nissan, Toyota and Fiat.
The questionnaire was made up of both open and closed questions. It was
also necessary to design most of the questions to be of a qualitative nature as
there was a general unwillingness among the subjects to release quantitative
information. Furthermore, since the information required touched mostly on
the drive for competitive advantage, some participants retained the option to
refuse to answer any question which they perceived as too sensitive. The
questions addressed both the enablers, i.e. the policies as they are practised and
the results/effectiveness or otherwise of these enablers from the perception of
the subjects.

Case analysis: Fiat AG Deutschland

Enablers and policies
General company information. As at 1994, the Fiat Germany group, i.e.
including Alfa Romeo and Lancia, occupied the number two position in the “car-
producer-importers” list. It had a market share of 3.62 per cent (based on a
calculation date of July 1993). Dietmar Fütterer, General Director Fiat
Automobil AG summarized Fiat’s strategy for the 1990s under four critical
thrusts:
(1) improvement of the product development;
(2) improvement of the production process;
(3) improvement of the marketing process; and
(4) improvement of the dealer network.
BPR&MJ These laudable goals represent Fiat’s approach to coping with the structural
2,2 upheavals facing the industry. Of significance for the after-sales service are the
last two measures or goals which are perhaps also a natural follow-up of the
introduction of total quality management or qualita totale at Fiat. As a result of
a recent reorganization, Fiat assumed responsibility for the after-sales activities
of Alfa Romeo and Lancia, operating a two-phased marketing system. The
46 marketing network is made up of 608 category A Fiat dealers, 300 category A
Lancia dealers, 238 category A Alfa Romeo dealers, and approximately 650
category B dealers (Figure 3).

Fiat group
including Lancia and Alfa Romeo

608 “A” Fiat dealers

300 “A” Lancia dealers End customer
238 “A” Alfa Romeo dealers

Figure 3.
Fiat’s after-sales outlets 650 “B” dealers

Responsibility for after-sales service is borne by the department service resort

reporting directly to an executive director service. The service resort is further
subdivided into marketing, new car sales, customer service and parts and
accessories (see Figure 4). The customer service and parts and accessories
department is directly responsible for achieving Fiat’s target of “total customer
satisfaction” with a staff strength of 147. This is broken down into 59 internal
workers at Heilbronn and 88 regional workers. Of the 88 regional workers, five
are regional heads, ten trouble shooters, five secretaries and 68 field
representatives or dealer consultants. To achieve its target of total customer

Executive director-
resort service

Customer service +
Marketing Car sales parts and accessories
= service (logistics
outsourced)

Figure 4. Service product

Fiat’s organizational
structure
Service marketing
satisfaction, Fiat has introduced four new key measures in addition to existing Car after-sales
policies in the critical areas of price, promotion, product, distribution and the service
environment. These are:
(1) A three-year dealer development plan (1993-96).
(2) The patto chiaro programme.
(3) The front line programme. 47
(4) Encouragement of dealer ISO 9000 certification.
Its major customer target groups are all Fiat/Lancia/Alfa owners with increased
concentration on the re-acquisition of customers with cars older than four years
whose loyalty rates are, as with other car producers, presently declining.
Product policies. Fiat stocks approximately 80,000 products which are
subdivided into 700 product families in its central store. It does not, however,
stock all products that could be fitted to its cars for economical reasons.
According to Fiat senior managers, certain products have very low demand
levels and using Pareto’s 80/20 law, these products are unprofitable to stock in
the central store. As a result of Fiat’s close contact to original product
manufacturers like Marrielli who also belong to the Fiat group, a number of its
after-sales products are contracted out. However, up to 95 per cent of the after-
sales products carry the Fiat brand name. Resulting from the variations in
standard accessory requirements between European countries, approximately
95 per cent of Fiat Germany’s accessory requirements are sourced locally in
Germany. These products are then checked initially in Italy to ensure that they
meet the laid down Fiat quality standards.
A specific estimation of the percentage of Fiat’s after-sales products that can
be categorized as fast movers could not be given. However, approximately 70
per cent of the fast movers are manufactured by Fiat daughter companies and
30 per cent by Fiat. All Fiat products carry a warranty. This warranty can be
subdivided into a 12 month warranty for technical defects on new cars sold, a
three year warranty for paint defects, and an eight year warranty against rust.
Furthermore, all after-sales products come with a 12 month warranty except
batteries which come with a two year warranty.
As from April 1996, it is planned to offer customers the possibility of
extending their warranty period for an extra fee. Fiat maintains that its
warranty covers the cost of fitting. However, some of its dealers disagree.
According to Fiat sources, the disagreement is as a result of dealers not
excluding the product discount and bonus offered from their calculation of
prices for warranty jobs. Fiat’s products are, to a large extent, not compatible
with other car producers’ products when compatibility between the Alfa
Romeo, Lancia and Fiat is excluded. However, some of the Porsche group’s
products match Fiat’s and it cannot be ruled out that some dealers, in
attempting to satisfy the customer, use these products.
Distribution policies. Logistics at Fiat is out-sourced to TNT Deutschland.
TNT assumes responsibility for ensuring that the after-sales products arrive at
BPR&MJ the different points of sale when they are required. Normal supplies usually
2,2 come from the central store in Heilbronn. In addition, Fiat maintains 14 mini
stores in Hamburg, Osnabruek, Bielefeld, Düsseldorf, Niewied, Kassel,
Frankfurt, Munich, Dresden, Freiburg, Ravensburg, Berlin, Passau and
Heilbronn which stock about 20,000 products for express deliveries. Only three
of these stores, Hamburg, Frankfurt and Düsseldorf are owned by Fiat.
48 “A” category dealers are integrated in a computer-based communication
network called the DCS which is installed by Fiat free of charge. The dealers are
able to place orders through this system. However, of the “B” category dealers,
only approximately 150 have computer systems and they have to pay if they
wish to be connected to the DCS system. The majority of the “B” category
dealers, order mostly from the mini stores by telefax. The normal deliveries are
by truck and take place weekly, with about 40 per cent of deliveries being
normal stock orders and 60 per cent of deliveries express deliveries. Both
normal deliveries and express delivery costs are born by Fiat. Express
deliveries take between a minimum of 18 hours and a maximum of 24 hours.
The possibility of a mistake occurring in the delivery system was estimated at
0.01 per cent. The ordering system is a mixture of both computerized and
manual procedures. Fiat does not have a compulsory minimum stock level for
its dealers but recommends that they maintain approximately 400 fast moving
products in their stores.
Promotion policies. Of the support information, 80 per cent is manual, made
up of catalogues, product information leaflets, etc. Approximately 20 per cent of
the support information contains required product fitting times. This
information assists the dealer in estimating the times required for after-sales
fittings. With this information it is then possible to estimate the required times
and give the customer a collection appointment. The practice generally is to
inform dealers immediately of any changes in product or technical information.
However, where changes do not occur, after-sales information is updated
routinely twice monthly.
A complete recommended after-sales presentation concept does not exist.
However, in the case of accessories, Fiat does have a presentation concept which
it recommends to its dealers. No specialized after-sales advertisements are
made; to reach its target after-sales audience, Fiat employs public relation
activities, regional and dealer or area-based advertisements. The costs for these
advertisements are split into 50 per cent paid by the dealer and 50 per cent paid
by Fiat. Under the public relations activities, which are closely tied to special
service measures, the dealers are offered service mailings free of charge.
Included in the mailings is a short letter, a service folder and a return envelope/
card for the customer’s answer.
In addition, under its “loyalitätsmarketing” programme, Fiat has introduced
a number of promotional measures aimed at both retaining its existing
customers and re-acquiring the lost ones. For each dealer Fiat designs an
individual brochure containing service offerings, competence statements and
price information about the dealer. The first page is a photograph of the garage
chief mechanic, followed by a full A4 page with calculated prices designed to
prove that the image of the dealers as being more expensive than other after- Car after-sales
sales outlets is not the case. Included in the brochure is also information on the service
additional advantages of using the services of the dealer in question with his
address, opening hours and telephone numbers. This promotional measure
closely tied to the so-called patto chiaro (we keep our word) measures costs the
dealer DM395 per 2,000 pieces. In addition, advice is offered on how to
distribute the brochures to ensure that not only present customers receive this 49
information but also those younger customers that tend to use other after-sales
outlets as a result of cost considerations.
Service and related policies. Central to Fiat’s service concept is the patto
chiaro (we keep our word) and the MOS-minimum operating standards or front-
line programme. Under these programmes, dealers are given a list of helpful
tips, hints and standards which are measured regularly and are linked to a
customer satisfaction index. The result is used to calculate an extra bonus given
to participating dealers. All “A” category dealers are free to participate. The
MOS measures the dealer process when the car is taken in for repairs, the repair
process, the dealer quality assurance process, the process by which the car is
given back to the customer, including explanation of the billing and the
warranty process.
In addition, the customer satisfaction index gives the dealer a feedback twice
yearly on the satisfaction levels of his customers. Where there is a negative
customer satisfaction index result, a diagnosis brochure made available from
Fiat helps the dealer determine possible reasons for the problem and to suggest
solutions.
In addition, dealers and their personnel are offered training seminars both at
Fiat and in specialized training schools. Topics covered include technical
developments as well as commercial and customer contact methods.
Approximately 90 per cent of the costs of this training is borne by Fiat. The
attendance rate among dealers for the compulsory courses is 95 per cent and for
the non-compulsory courses is approximately 70 per cent. Apart from the 65
sales representatives, two trouble-shooters per region are also placed at the
disposal of the dealers for prevention of possible problems at the point of sale.
A telephone hot line is available within working hours, i.e. eight hours daily to
provide answers and solutions to dealer problems.
Dealers also have a free option to take part in an ISO 9002 certification process
co-ordinated jointly by Fiat and DEKRA, a quality certification organization,
and based on a ZDK (Zentralverband Deutsches Kraftfahrzeuggewerbe, the
automobile association) service concepts. In addition to this certification process
Fiat offers its dealers the opportunity to take part in a business management
scheme in which key ratios and business results of dealers are compared with a
view to discovering weaknesses and improvement opportunities. At the
moment, about 400 dealers are taking part in the programme.
Price policies. Fiat does not offer the end-customer special after-sales financing
schemes. However, dealers are given financial support in the form of credit on
after-sales products ordered. In addition, for fast-movers, they are offered special
BPR&MJ credit opportunities with fixed repayment agreements. A discount or rebate
2,2 system is also practised. The discount offered is dependent on the form of
product delivery. On average this discount is about 35 per cent of the selling
price. Special bonus plans in place include the MOS bonus scheme and a bonus
system based on the store turnover. All after-sales products are priced singly.
The recommended hourly payment rate is DM91 on average and varies
50 according to region and after-sales repair jobs, e.g. it would cost a lot more to
carry out body work repairs. The average cost for after-sales service varies
according to the model in question but, on average, costs around DM360 for a
check-up on the smaller models and DM800 for the higher class models. For
regularly replaceable parts it costs, on average, DM80 and the end-customer
pays about DM831 on average for accessories (all prices represent market prices).
Environmental policies. Approximately 70 per cent of Fiat’s products are
recyclable. However, Fiat does not at the moment have a special environmental
concept for the after-sales sector alone. The existing concept is general and
covers all its activities. There are plans to continue to introduce measures which
are environmentally friendly and it is at the moment a member and party to the
Eureka working agreement. Special arrangements exist for recycling batteries,
windscreen and glass products as well as a catalysator programme in which
end-users are encouraged to have their cars fitted with catalysators. Engine
blocks are also collected and repaired or recycled at Fiat.

Policy effectiveness
Financial results. The complex accounting systems used in the automobile
industry which separates after-sales products for accounting purposes made it
difficult to secure total quantitative results for the after-sales sector. However,
approximately 14 per cent or DM700 million of the last financial year’s turnover
came from the after-sales sector. Parts represented approximately DM570
million and accessories about DM130 million (market prices). Of these, the fast-
movers represented approximately 23.3 per cent of the after-sales turnover.
Accessories make up about 3 per cent of the total turnover with 80 per cent
coming from the “initial fitting” when the car is sold (Erst-ausrustung). The
profit margin on parts is about 17 per cent.
Ranking of policies. Asked to rank the effectiveness of its policies, Fiat ranked
its product policies as very effective, its promotion, distribution and service
policies as effective, its price policies as partly effective and its environmental
policies ineffective (see Figure 5).
These rankings were based on the justification that Fiat’s products, as a
result of the technological advances achieved in the production process, led to a
technical advantage over competitors. In addition, dealer satisfaction with
promotion policies has been achieved perhaps largely as a result of Fiat offering
a range of free promotional support tailored specially for each dealer. Fiat
considers its prices as a little above the average and the pricing policies being
rated partly effective also reflects the trade-off between offering the dealer
cheaper products and offering a wide range of service measures. Environmental
 Product policies Car after-sales
5 service
4
Service policies 3 Promotion policies
2
51
1
0

Environmental policies Price policies

Distribution policies

Key
1 = Very effective (80 to 100 per cent) Figure 5.
2 = Effective (60 to 79 per cent) Fiat’s ranking of the
3 = Partly effective (40 to 59 per cent) effectiveness of its
4 = Ineffective (20 to 39 per cent)
5 = Very ineffective (0 to 19 per cent) after-sales policies

policies were rated ineffective because of the non-existence of a special after-

sales environmental policy.

Case analysis: Nissan Deutschland GmbH

Enablers and policies
General company information. The Nissan company is Japan’s second largest
automaker and one of the largest in the world. In Germany, it is the fourth
largest importer with a market share of approximately 3 per cent. Nissan is one
of the very few companies with an after-sales director. This might perhaps
serve as an indication of the importance attached to the after-sales service at
Nissan. It has recently launched a pan-European retail identity called “Network
2000” – a reflection of the attempts in the industry to build a stronger corporate
identity[7]. This programme includes, among others, a stylish exterior and
interior design for dealer premises and facilities and, according to Nissan,
sources an attempt to provide coherence between the quality of Nissan products
and the environment in which they are sold and serviced.
The after-sales service is organized under an after-sales director with
responsibility for the conception of after-sales strategies for Germany (see
Figure 6). This department is further subdivided into seven units. Sales
support, marketing, regions and zones, training, product information,
workshop and the environment. Nissan has 920 after-sales outlets in Germany,
BPR&MJ 50 of these specialize in Nissan trucks and 870 are responsible for cars (see
2,2 Figure 7).
For Nissan’s after-sales objectives, two goals or objectives were ranked as
paramount to:
(1) improve customer satisfaction through qualified operation; and
52 (2) improve profitability of dealers and the company.

Aftersales
director

Sales
Figure 6. support Regions Product Environment
(including Marketing 1, 2, 3 Training information Workshop
Organizational logistics)
structure of Nissan’s
after-sales departments
Zone managers

According to Nissan officials, target customer groups include all Nissan drivers
and dealers. Of its after-sales staff strength, 25 per cent work outdoors and 75
per cent work and co-ordinate directly from its German headquarters in Neuss.
Product policies. Amsterdam is the home of the vehicle and parts distribution
operations of Nissan in Europe. The parts centre houses approximately 140,000
parts and over 480,000 inventory items. These parts are classified into five
product families:
(1) the SSPI or competing parts – 4,000 single products;
(2) the eye-catching group – 7,000 products;
(3) the HUK or body group – 2,000 products;
(4) the captive parts with the largest number of products 121,000; and
(5) the accessories – 6,000 products.
Nissan Germany stocks 33,000 single after-sales products in its German
warehouse or master depot at Neuss the German headquarters. Nissan does
not, however, stock all after-sales products which its models may need because

Nissan GmbH

Figure 7. End customer

Nissan’s after-sales 50 truck dealers
outlets 870 car dealers
of economic reasons. Products not stocked are products where demand falls Car after-sales
below a 3 per cent monthly average. Ten per cent of its after-sales products are service
contracted out, i.e. not manufactured in wholly-owned production facilities.
However, all Nissan’s after-sales products carry the company’s brand
mark/name.
Of the after-sales products, 2 per cent, are classified as fast-movers, i.e.
products that are often in demand. These fast-movers are up to 95 per cent 53
manufactured by Nissan in wholly-owned production facilities. All Nissan’s
products carry a warranty. Although the warranty for the first three years
covers the car, it also covers all after-sales products fitted to the car. This three
year warranty has a limit of 100,000 kilometres. In the case of after-sales
products sold, the warranty covers a period of one year including the cost of
fitting. Nissan estimates that 1 per cent of its after-sales products are
compatible with other car producers’ models.
Distribution pol icies. Nissan’s after-sales outlets are geographically
distributed among seven German states. In the federal state Schleswig-Holstein,
Nissan has 70 outlets; in Lower Saxony, 90 outlets; in Nord-Rhein-Westfallen,
150 outlets; in Hessen, 80 outlets; the Rheinland-Pfalz and Saarland federal
states have combined 80 outlets; Baden-Wurttemberg has 100 outlets, Bavaria
100; and the new federal states in ex-German democratic republic have 250
outlets. These outlets are supplied both through rail and truck. Of the supplies,
80 per cent are by truck and 20 per cent of the distribution of after-sales
products takes place by rail. Nissan has a central store or master-depot in Neuss
supported by five mini-stores. These mini-stores are in Luckau-Berlin,
Hamburg, Wurzburg, Augsburg, and Essen.
Normal supplies take place weekly. Express service takes roughly 16 hours
and costs 50 per cent more than normal orders. Although the cost of normal
deliveries is born by Nissan, express delivery is split 50-50 with the dealers. The
dealer pays 50 per cent of the costs and Nissan bears 50 per cent of the costs. In
essence Nissan is prepared to supply its dealer with normal deliveries and, most
probably as an encouragement to better dealer planning, charges a cost for
express orders. Nissan estimates the chances of a mistake occurring in its
delivery system as 0.01 per cent and if such a mistake should occur the cost of
correcting the mistake would be born by Nissan. The distribution or ordering
system is 95 per cent computerized with approximately 5 per cent still manual.
Nissan does not have a recommended minimum stock level for its dealers.
Promotion policies. Nissan offers its dealers or outlets promotional support.
This support is made up of a brochure box, flyers, menu pricing, service leaflets,
price lists, accessories brochures, posters and an electronic catalogue system,
among others. Of the point-of-sale information, 30 per cent is computerized and
50 per cent of the information contains estimated product fitting times designed
to assist the dealer with better estimate fitting times.
Of the information, 20 per cent contains product advantages which could be
used as sales propaganda. At least about 30 per cent of the information
regularly sent always includes up-to-date prices and 5 per cent contains legal
BPR&MJ regulations that affect and guide the use of the product. Only 5 per cent of the
2,2 information contains very specific technical details. Dealer information is
normally updated at least monthly with a general information check taking
place quarterly. There is a recommended after-sales presentation concept for the
outlets but this concept, though designed to assist the dealers, is not binding.
Nissan is one of the few producers that has specialized after-sales advertisement
54 campaigns in addition to new car advertisements. These promotional efforts are
at present mostly dealer or regional based. However, the dealer must meet 50
per cent of the costs of the dealer-based advertisements with Nissan paying 50
per cent. In addition, Nissan employs seasonal offers to support its promotional
efforts.
Service and related pol icies. Nissan does not offer its dealers/outlets
assistance in the conception of after-sales strategies. Dealers are given a free
hand to determine which path they intend to follow. The policy is to treat
dealers as partner companies with the freedom to decide direction and market
strategies. This policy looks set to change, according to Autohaus[7]. Nissan
field representatives are currently undergoing training to enable them to offer
management consultancy services to dealers.
Approximately 300 seminars or after-sales training blocks are offered yearly.
According to Nissan officials these training blocks have a 100 per cent
attendance rate. The training mostly takes place at the Nissan German
headquarters in Neuss. Areas of after-sales which the training addresses
include technical know-how and customer contact methods among others. In
addition, Nissan has information lines open to its dealers between the hours of
9 a.m. and 5 p.m. daily to offer assistance for after-sales problems. Furthermore,
with its pan-European 24 hour service, Nissan offers its customers direct help in
cases of emergency all over Europe. This service is linked to a dealer system in
which certain dealers offer 24 hour service possibilities. At the moment there
are 80 such service stations in Germany. Nissan also offers a service feature
called its Nissan-Truepass “Super plus”. This service is directed mainly at the
owners of new Nissan cars and offers, among others, assistance when a defect
occurs more than 50 kilometres away from the customer’s home.
Price policies. Nissan does not have special after-sales financing schemes.
Dealers, however, receive discounts for products they buy. The type and form of
discount is based on the products supplied and the volume the dealer buys.
Although Nissan officials did not give the exact percentages of discount
granted in an article in the Unternehmer Magazine, May 1994, Nissan discounts
were estimated at between 17 and 50 per cent for parts and 24 per cent to 46 per
cent for accessories on normal orders[8]. For express orders, the article further
estimated between 17 per cent and 30 per cent for parts and from 16 per cent to
35 per cent for accessories depending on the discount group to which the dealer
belonged. The average discount for normal orders was estimated at between 40
per cent and 45 per cent for parts. Express parts receive a discount of between
22 per cent and 26 per cent. For accessories, the average was estimated at
approximately 25 per cent for normal orders and 22 per cent for express orders.
 At the moment Nissan ranks its payment conditions as not very competitive. Car after-sales
No special bonus plans exist but there are plans to introduce a system that service
would be based on dealer attainment rates of pre-agreed targets. Of the
products, 99 per cent, are priced singly, with 1 per cent priced as complete
packages. Nissan recommends an hourly payment rate for its dealers. This rate
stands at DM90 per hour and varies according to region and dealer. At market
prices, a general check-up costs the end customer approximately DM300. The 55
average change of parts cost DM150 and accessories cost DM1080.
Environmental policies. Nissan has a recycling concept in practice. The
objectives of the concept are actively to develop environmentally friendly
products and to introduce a uniform concept for recycling all after-sales
products all over Germany. According to reports in Autohaus[9], Nissan and six
other Japanese importers recently signed a co-operation agreement with
Preussag recycling GmbH. Under this agreement known as MARI, Preussag
undertakes to recycle the importers old cars. At present 70 to 75 per cent of all
after-sales products are recyclable. Nissan does not, however, bear the costs for
the recycling – this is either born by the dealer or the end-customer.

Policy effectiveness
Financial results. The financial results of Nissan Germany are not published
but, according to Nissan officials, after-sales turnover for the financial year end

Product policies
5
4
Service policies 3 Promotion policies
2
1
0

Environmental policies Distribution policies

Price policies

Key
1 = Very effective (80 to 100 per cent)
2 = Effective (60 to 79 per cent) Figure 8.
3 = Partly effective (40 to 59 per cent) Nissan’s ranking of its
4 = Ineffective (20 to 39 per cent) after-sales policies
5 = Very ineffective (0 to 19 per cent)
BPR&MJ in 1994 was DM309 million. Parts accounted for approximately 7 per cent of
2,2 this figure. Without fast-movers, parts accounted for only 2 per cent. Fast-
moving parts, therefore, account for approximately 5 per cent of Nissan’s
turnover. Accessories, on the other hand, accounted for approximately 3 per
cent of the 1994 financial year’s turnover.
Ranking of policies. Nissan ranked itself, in relation to competitors, as partly
56 effective with product policies, partly effective with promotion policies,
distribution policies as very effective, price, environmental and service policies
also as partly effective. Justification for its ranking is what it regards as the
tremendous potential for improvement in marketing and dealer aspects of its
after-sales service. Logistics was ranked as very effective because the policies
practised in distribution had ensured that Nissan was able to maintain the very
good average standards found among most producers (Figure 8 for Nissan’s
rankings).
References
1. Müller, W. and Reuss, H., “Veranderungen wettbewerblicher erfolgsfaktoren im
automobilmarkt”, (“Changing factors for competitive advantage in the automobile
market”), in Müller, W. and Reuss, H. (Eds), Wettbewerbsvorteile im Automobilhandel
Strategien und Konzepte fur ein erfolgreiches Vertragshandler Management (Competitive
Advantage in Automobile Marketing: Strategies and Concepts for Successful Dealer
Management), Main Campus Publishers, Frankfurt, 1995, p. 11.
2. Spilker, M. “Wettbewerbsvorteile durch eine active und systematische Kundenorientierung”
(“Competitive advantage through an active and systematic customer orientation”), in
Müller, W. and Reuss, H. (Eds), Wettbewerbsvorteile im Automobilhandel: Strategien und
Konzepte für ein erfolgreiches Vertragshandler Management; (Competitive Advantage in
Automobile Marketing, Strategies and Concepts for Successful Dealer Management), Main
Campus publishers, Frankfurt, 1995, p. 195.
3. BBE Branchen Report (BBE Branch Report), Vols 1/2, BBE Consultants, Cologne, 1994, p.
293.
4. Müller, W., “Kundenzufriedenheit beginnt beim hersteller,” (“Customer satisfaction starts
at the producer”), Unternehmermagazin, 3 May 1995, p. 38.
5. Reuss, H. and Wolk, H., “Distributions-Szenario, die revolution im automobil vertrieb:
konflict management im automobilfranchising und wege seiner handhabung”
(“Distributions-Scenario, the revolution in car sales: conflict management in automobile
franchising and ways of handling it”), unpublished BBE consultants internal paper,
Cologne, 1990.
6. Meinig, W., “Dealer satisfaction index”, Eurotax Schwacke/Autohaus, press release, 19 June
1995.
7. “Network 2000”, Autohaus, No. 16, August 1995, p. 48.
8. Steiner, A. and Hernberger, J., “Kostenoptimierung im Ersatzteilwesen KFZ”,
Unternehmermagazin, 4 May 1994.
9. “News Briefs”, Autohaus, No. 12, May 1995.