Re: Audi of America, are you listening?

[Osman Parvez <oparvez1@nycap.rr.com>]

Phil,
    This issue you noted is an interesting one. As a person who actually
made a living (for a 10 months) selling new and used Audis, I got to
experience first-hand the other side of the dealer-desk. In recent
years, Audi has probably spent millions trying to reach it's customers
and gather feedback. They do this through a variety of ways, first they
mail out survey's to all new car purchasers. Next, they call those new
customers and ask about the dealership experience. They also do this
with their service departments as well, however only to cars/customers
who are still under the "Audi Advantage". 

     While I was working there, I pretty much kept my mouth shut for
fear of losing my position for saying something about the practices of
Audi or my former employer. Now that I'm back in school, I am relatively
free to state my mind without fear of repercussions. 
 
     Let me ask this: When was the last time you saw a poor, I mean a
really lousy $20,000 car sold in the United States? Sure, we can quibble
about which $20,000 car is "better" but in reality they tend to be only
marginally better. Furthermore, that "better" product is often
determined to be so by subjective measures. Therefore, Audi..... if they
intend to continue their remarkable growth, needs to concentrate on the
Highest Customer Delivered Value possible. Not just the highest quality
product. 

     The Customer Delivered Value is not just made up on the monetary
savings over another product. It is a composite value based on 4 main
factors: Monetary Cost, Buyer's Time, Buyer's Energy, and Pyschic (yes)
Costs and then follow up on those 4 factors over time. 

Right now, Audi is profiting from what I consider to be primary a
product driven strategy. In that they are delivering the best possible
products, and competing on the basis of those products. While other,
more progressive companies, are pursuing a Customer Satisfaction
strategy. The benchmark is Lexus in that department. I have yet to hear
a Lexus owner complain about the service department (even as they for
over $50 for an oii change). Furthermore, I didn't even see a single
Lexus owner come in to trade his/her lexus in those 10 months of working
at the dealership. They must have enormous customer loyalty stats. 

Ok so..eventually, other companies will catch up to the product. Look at
the new 3-series from BMW. Although this highly biases group of
individuals on the Q-list will shout that it is inferior, the car has
been rated equal or just better than the A4 by several major
auto-magazines. BMW is catching up. We may not like them much, but the
rest of the public out there tends to like them (and pay more for 3
series).

Ok, so Audi spends a nice bit on their customers who fit under the
3/50,000 Audi Advantage. They do that majorily through the previously
mentioned satisfaction surveys and by making the service FREE. 

What they aren't doing is retaining those customers. We are the holdout,
esentially, from the late 1980's when Audi almost withdrew from the US
market. But what about all those others who left Audi? What did Audi do
to keep them? The answer, I'm afraid, is nothing. 

When a customer nears the time to replace their 4 or 5 or 6 year old
Audi, what is Audi doing to keep those customers loyal? The answer, I'm
afraid is nothing. For once that Audi Advantage warranty runs out, the
dealer network in the United States will rake that poor customer over
the coals. BTDT too many times. How can Lexus manage to charge $50 for
an oil change yet still have incredible customer loyalty and
satisfaction? Good question...it's called listening to their customers
and tending to their needs, not just the needs of the car.   
Why is retaining customers so important..especially old diehards like
ourselves? Well.. with the diehards like the ppl on this list, you must
realize how many people you talk to on a daily basis about your Audi.
Many people on this list are utterly obsessed... and have converted many
others. This is free of charge to Audi and has a snowball effect for
them. 

Now, what about all those other customers... the vast majority who
aren't utterly obsessed with the superiority of the product? 

Let's do a little math and I'll show you....

Ok, I don't have official numbers.... this is an example only:
--------------------
Let's say that Audi sold 50,000 A4's last year.

In 6 years (or 7 or 8), let's assume that 75% are going to look to
replace their A4's with a new car. 
Ok.. many of us wouldn't... but I think the majority would...trust me,
we are NOT the typical Audi customer by a long shot. 

(50,000*75%) = 37,500

So Audi has the opportunity to sell their previous customer's 37,500
A4's. 

Let's assume that a full 50% of those customers are no longer taking
their Audi's to the dealership for routine service and repair because
the cost of doing so is so high. I'm not talking only about monetary
costs, but I'm talking about the Total cost.. which has pyschological,
time, energy, and monetary values... So Audi is no longer in any direct
contact with these customers .... and even if they did bring in their
cars for service, Audi doesn't bother to mail them a satisfaction survey
if they are past the advantage period.. Those 37,500 Audi owners have
VERY low satisfaction... and 50% at least have found other places to
service their vehicles. They are not loyal at all to Audi.

50% of 37,500 = 18,750 lost sales.

Figure the average profit for Audi (not the dealer) on an A4/A6 is
$4,000.. which is reasonable (i've heard that Jeep's have a profit
margin of 9,000 so..)

18,750 * $4,000 = $75,000,000 lost PROFIT.

Now before you jump down my back because of the satisfaction surveys...
remember that most surveys are "initial satisfaction" or they are
satisfaction for 3 years MAX. How many people trade in their car after 3
years? Not that many....and after the dealer network gets through with
them in 6,7,or 8 years... I bet my figures are actually conservative. 

------------------------------------------
So for not being able to keep their dealerships to keep customer
satisfaction high, even past the advantage period, Audi stands to LOSE
$75 million/yr.

While I was there, we were starting to see alot of Audi 90's and Audi
100's come in from leases. The vast majority of those customers did NOT
buy/lease a new audi. Why didn't they? Not because of the lack of a
fantastic product.. but because the TOTAL COST of doing business with
Audi was higher than they'd like. They saw more CUSTOMER DELIVERED VALUE
in other products from other manufacturers. 

So.. maybe not $75 million lost last year in possible repeat business,
But I'm sure it was a significant amount. The customers today, within a
few years....maybe 6 or so, will bring in their Audis to trade. But
because of poor post 3/50K treatment.... they are gonna look elsewhere
for business. If Audi doesn't improve post 3/50K satisfaction for
customers (who they don't even monitor!), they stand to lose (according
to this simple example) $75 million every year! 

Are they listening to their customers? Yes, they are listening to their
customers for 3/50,000 miles to some degree. I personally think they
could do a 200% better job, I've seen the survey's remember...and the
results..and the manipulation...trust me, those survey's were a joke. By
tying in salesman compensation to those survey's (and service writer
compensation as well), they have encouraged manipulation.  

But after 3yr/50,000 miles, those customer's essentially dropped off of
Audi's interest. Does Audi realize this now? I think they are starting
to figure it out to a degree. How many people got the free oil change
coupon in the mail, courtesy of Audi?? That was the first time I've seen
ANYTHING from Audi for many years...

congratulations..they are just figuring it out. 

Well, some of you may ask why can't Audi just recruit new customers to
replace those 75 Million dollars of lost profit every year..

The answer is that recruiting new customers is ALWAYS more expensive
than retaining old ones. 

Are they listening to us? You bet they are! This forum is independent of
Audi or AOA and therefore much more reliable an indicator.
Unfortunately, we don't buy alot of new Audis. But we do know alot about
the way dealership's treat their old customers, don't we? 

=Osman

P.S. Just a personal plug, if they are listening. I'm looking for an
internship this summer in MIS, and will graduate as a freshly minted MBA
in 2000. Feel free to contact me. 


Phil and Judy Rose wrote:
> 
> Dan,
> Is the qlist believed (or known) to be monitored closely by Audi? In any
> case, posts like the one below (by cobram) deserve placement in a special
> archive to be forwarded to Audi of America. Not hate mail, but reasoned
> (even passionate) examples of how Audi's "customer disservice" policies are
> shots aimed at its own corporate feet.
> 
> Phil R.
> '91 200q
> (recently informed by Audi dealer parts dept. that differential oil seals
> were not stock items because the need for them was virtually non-existent)