Sullivan Ford Auto World

Marketing Group 7: Case Solution ~ Sullivan Ford Auto World Feb.
2012
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Case Background
Walter Sullivan the founder of Sullivan Ford Auto World died and his eldest daug
hter Carol Sullivan-Diaz, a health care manager by profession took over the busi
ness and found out that the family business is in financial trouble based on cur
rent financial performance and market outlook. In addition, CSAT results from ca
r buyers show that the company has problems with their service quality. Sullivan
Ford Auto World Facts: Average sales of 1,100 cars per year Posted Revenues: $2
6.6 M car sales (from last years $30.5 M) $ 2.8 M service & parts sales (from las
t years $ 3.6 M) Margins on car sales are low (5.5% of sales revenue & 25% for se
rvice). Auto Worlds financial situation had been deteriorating for the past 18 mo
nths and running at a loss for the past 6 months. Past 12 months financials show
that gross sales figures are not enough to cover fixed expenses Margins had been
squeezed by promotions and other marketing efforts. Market: Due to rising fuel
prices, industry and in-house forecasts for future sales were discouraging. Tren
d is shifting towards vehicle service transactions. 30-day Purchasers CSAT Surve
y Results Auto world achieved better than average ratings 90% of customers said
that Auto world informed them of what to do if they needed service Less than 33%
of respondents said that they have been introduced to someone in the service de
partment (which is a sales protocol) 90-day Purchasers CSAT Survey Results - Ove
rall satisfaction with Auto World Service Department was consistently low placin
g it in the bottom 25% of all Ford dealers - More than 50% of respondents said t
hey would rather use another Ford dealer for future service
-
BA 235 Services Marketing Group 7: Case Solution ~ Sullivan Ford Auto World Feb.
2012 Major Concerns: Promptness of writing up orders Convenience of service hou
rs Appearance of the service department Interpersonal variables such as attitude
of personnel, politeness, understanding of customer problems and explanation of
work performed
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Problem Statement
Should Carol Sullivan-Diaz sell Sullivan Ford Auto World to prevent future losse
s or try to turn it around? If she chose the latter, what changes & improvements
should she implement to improve service quality in Auto World?
Case Analysis
Flower of Service Core Service: Car dealership Supplementary Service: Vehicle se
rvicing Facilitating Elements Information
Along Wilson Avenue, the Sullivan Ford Auto World rotating signage can be easily
seen. A vast display of cars and trucks fronts the showroom. It also has banner
s saying Lets Make A Deal. The service facility is at the back and is not visibly
seen along the highway. Order-taking
2012 The front end of the dealership employs salespeople who are tasked to
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transact with possible customers. The dealership offers brand new and preowned v
ehicles. Some customers who are initially looking at buying brand new vehicles s
ometimes realize that they cannot afford one and just settles for refurbished ca
rs. Similarly, there are customers looking at pre-owned cars and are sometimes c
onvinced to buy brand new cars. At the back end, service writers schedule appoin
tments for repairs and maintenance. For repairs, estimates are given to the clie
nt after the vehicle is diagnosed by a mechanic. Billing
For car sales, it is not specified in the case but this usually differs per cust
omer transaction. For vehicle servicing, customers are usually billed after the
service is done. Payment
For car sales, it is not specified in the case but this usually differs per cust
omer transaction. It can be paid with outright cash, in-house loan or thru an au
to loan from a bank. Sullivan Ford Auto World also allows trading in of the purc
hasers existing vehicle for the new one. For vehicle servicing, customers pay aft
er the service is done. Enhancing Elements Consultation
At the front end, car salespersons are there to assist and answer queries of pos
sible customers that are looking for brand new or pre-owned vehicles.
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For the back end, service writers and mechanics assist customers by coming up wi
th estimates or quotations for services that need to be done on the vehicles. Ho
spitality
The front end is a high-ceilinged showroom where four new models of cars, polish
ed to a high sheen, are displayed for customers to check out. The back end is qu
ite the opposite with its cramped room and walls with peeling paint. There was n
o mention of chairs or waiting lounge, customers stood while waiting for their w
ork orders. Security (None mentioned in the case)
Exceptions (None mentioned in the case)
7 Ps Analysis
PRODUCT Sullivan ford Auto World Product Mix
FrontEnd: Car Sales Sullivan Ford Auto World sells brand new Ford vehicles and pr
e-owned or traded vehicles that they refurbish in the service department. Ford i
s a
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known brand for its quality. Refurbished vehicles are also of good quality given
the expertise of Auto World mechanics and service personnel. Backend: Service De
pt The Service Department offers servicing for cars that broke-down and/or need p
arts replacement (Possession Processing). PLACE & TIME
Sullivan Ford Auto World has a very good location in a suburban highway intersec
tion, in an area of the city where housing developments are constructed. This lo
cation gives Auto world visibility and accessibility to two major markets: the m
otorists and the residents. Service department is located at the back of the sal
es area which gives opportunity for salespeople to refer the companys service are
a to buyers. Sales operation hours are assumed to take place on normal office ho
urs, same goes with the servicing of the vehicle. It can be inconvenient for cus
tomers to follow the window period of checking in vehicles for repair before 8:3
0AM and pick-up by 6:00PM when service is completed. In addition, the service wr
iting process is not efficient and has lot of bottlenecks and is not convenient
for customers. PRICE
No detail on pricing was mentioned in the case but it was implied that Sullivan
Ford Auto World has low margins for selling brand new vehicles. Walter Sullivan
was even aggressive on giving discounts and deals to attract high volume of buye
rs. The companys pricing strategy is to offer lower the price to stimulate demand
or attract buyers. On the contrary, aggressive discounts and low prices may con
vey poor quality of service to customers.
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PROMOTION
The company invests heavily on promotions and giving deals to induce buyers. No
promos were mentioned in the case regarding its service center. Promotions and g
enerous deals helped the company maintain desired sales volume in the past but r
ecords show that revenues have declined in the past few years and forecasts indi
cate that this decline may continue because of high interest rates. There are mi
nimal promotion activities for the service department. It seems that management
has overlooked the shift of sales contribution from car sales to service. They s
hould also launch promotional activities for the service department to help driv
e service sales up since the service department is not operating at capacity. PR
OCESS
We have identified processes that Carol Sullivan-Diaz should look into: Writing
of Service Orders Process for service writing is out of date and is inconvenient
to customers. Bottlenecks and disturbances are not properly managed. Customers
relay the problems on their vehicles to the service writers. This gives high pro
bability of incorrect diagnostics, solutions offered and estimates when customer
s have low technical know-how. This may be the reason why rework is a common occ
urrence which frustrates customers even more. Sales Process
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Salespeople do not adhere to the sales process standard procedure. Some sales pe
ople are hesitant in referring the Auto World service center because they know c
ustomers may get turned off and risk losing the sale. Referral of the service ce
nter is part of the sales protocol and should be firmly implemented. PHYSICAL EN
VIRONMENT
Case literature explicitly described discrepancy of the physical appearance of t
he front-end or the sales area (showroom and office) and the back-end or the ser
vice center area (office for service writing & service bays). The front-end is m
odern and well maintained while the back-end area is the exact opposite. The con
dition of the back-end area is the main reason why sales people do not refer Aut
o-Worlds service center despite the high skill level that its employees have. PEO
PLE
Car Sales or the Frontend team is composed of the Sales Manager, 7 Sales People,
the Office Manager & the Secretary. The Service Department is composed of the Se
rvice Manager, Parts Supervisor, 9 Mechanics and 2 service writers. Survey resul
ts show that customers are not happy with the quality of service provided by the
Service Department. Lowlights of the CSAT survey results are: promptness of wri
ting up orders; convenience of service hours; physical appearance of the service
department personnel; their politeness and way of understanding customer proble
ms and communicating work performed. Service writers are demotivated and have hi
gh absenteeism and turnover rate due to high level of stress of the job.
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PRODUCTIVITY
The service department is not operating at full capacity as stated in the case.
In addition, the service personnel do a lot of rework due to incorrect diagnosis
. On the other hand, service writers are fully utilized due to the long and manu
al process of writing service but customers are not happy with how their service
orders are handled. Productivity & efficiency of the personnel is low because o
f the factors described above.
SWOT ANALYSIS
Strengths
Strong brand equity, The Sullivan Ford Auto World is already an established car
dealership company in their area as the late Walt Sullivan was a well-known sale
sman and entrepreneur, appearing in TV and radio commercials as well as communit
y affairs.
The carrying brand Ford is also a well-established quality car brand. Its locati
on on the intersection of Wilson Ave and Route 78 suggests a prime location for
a car dealership. The nice faade and showroom will also attract a lot of possible
customers. Weakness
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The back end office is not well maintained and turns off customers. Work orders
take too long to prepare. Service writers are too stressed and most likely exper
ience emotional battery. This results to high employee turnover
Front end office employees tend to not refer the companys vehicle servicing depar
tment. This results to lost revenues for the back end office
Poor customer service survey results for the back end office Poor management of
customer complaints Opportunity
Carol Sullivan has a lot of experience in health service management. Health serv
ices are very high contact and her expertise will be a huge help in turning arou
nd the quality of service of Sullivan Ford Auto World
Threats
Bill Froelich, owner of several dealerships, expressed interest in buying out th
e company in order to achieve economies of scale. Poor result of customer survey
of the service department showed that clients are more likely to go to another
Ford dealer or some other place for their car repair and maintenance needs
There is no established formal channel for customer complaints as exemplified by
the shouting customer towards the end of the case. Other customers who may be a
t the vicinity at the time of the incident may be turned off or lose interest in
purchasing their needs at the dealership.
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Service Quality Gaps (Gaps Model)
1. Knowledge Gap
For the service department of Auto World, it is clear that there is a difference
between the companys perceived expectations of their customer and the actual cus
tomer expectations. Management avoids handling and facing customer complaints. T
his results to management not knowing and not addressing the root cause of the p
roblem. Such avoidance results to unpleased customers getting more irate. Manage
ment puts more focus on vehicle sales rather than keeping buyers happy with thei
r service center. The focus is on acquiring new customers rather than building s
trong customer relationships. 2. The Policy Gap: Incorrect Perception of Custome
r Expectations and Quality Standards Set Unsystematic service design for writing
service orders (frontline), long and slow lines. Managements decision on not inv
esting in technology to make business process efficient because of cost consider
ations. Inability of management to pulse customer requirements and expectations.
Servicescape does not motivate employees to give quality service and does not m
eet customer needs. The office where service customers are first greeted is not
well maintained old building, peeling wall paint, and no seats for waiting custo
mers. 3. Service Performance or Delivery Gap
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Based on the survey results Auto World received poor ratings on the question Was
the problem fixed right? Employees are not motivated to do well in their work and
have high absenteeism. Poor soft skills of employees. Poor employee skills on h
andling service failure recovery.
4. Communications Gap There is very weak internal marketing. Even the sales peop
le are hesitant to market the companys own service center for the fear or turning
-off customers due to the aesthetic of the servicescape. 5. Customer Gap A lot o
f customers are not satisfied because there is a big difference between the qual
ities of what customers of Auto World expects and what they perceived they recei
ved. Because of poor soft skills, the service writers do not communicate well wh
at was performed when they assist the customers in picking serviced vehicles.
Alternative Courses of Action
ALTERNATIVE 1: Sell the business. PROS 1. They wouldnt have to look for potential
buyer because Bill Froelich is already interested in buying the company. 2. The
financial situation of the company is already deteriorating for the past 18 mon
ths. If the situation worsens they could be losing more
2012
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money or the sale value of the company will continue to decrease. Selling the co
mpany will cut further losses. 3. Fuel prices are increasing and car sales indus
try forecast looks discouraging. They might be better off selling the dealership
. 4. The back end office is in a bad shape, they would need financial investment
to improve the physical environment as well as quality of service of the employ
ees. If they sellout, they wouldnt have to shell out more money. 5. Selling gross
is shifting from car sales to vehicle servicing. The company cannot capitalize
on this because the vehicle servicing department is not doing well. 6. Neither C
arol nor any of the other family members is really interested in making a career
of running the dealership. There is no longer a need for Carol to resign from h
er job where she is successful. CONS 1. The dealership is the legacy of Walter S
ullivan. He was able to build up the company to be one of the best known in the
metropolitan area. Selling will lose the familys legacy. 2. Bill Froelich is offe
ring to buy the company at a price represented by a fair valuation of the assets
plus goodwill of $250,000, which is lower than what is usually offered. Selling
Auto World now means selling at a loss. 3. As per survey results, the front end
customers are still quite satisfied with the service of the sales department. T
he company has competent sales people. 4. Carol can use her expertise in health
service management to improve the financial performance of the business. Selling
now will lose the opportunity to sell at a higher and fair price in the future.
2012 5. Selling is an act of giving up. ALTERNATIVE 2: Try to turn the business
around. PROS
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1. Carol has an MBA degree and a successful marketing career in the health care
services. Knowledge, expertise and wisdom that she gained from these experiences
can help turn around their family business. 2. Carol is armed with familiarity
with the operations of Sullivan Ford Auto World and the data from CSAT Surveys a
nd sales report can help her identify problem areas and find solutions to these
problems. 3. Auto World has technically skilled and competent staff. 4. The busi
ness has a favorable location and is a well known dealer. 5. Carol is relatively
young and can bring fresh blood to the company. Even if she fails, she will not
have a hard time finding new work in the health care industry which she prefers
. CONS: 1. Carol might need to resign from her current work and dedicate her tim
e for the family business. 2. If her attempts to save the business will be unsuc
cessful, the company may incur more losses and might be sold at lower price. 3.
Carol may lack the influence to the employees of Auto World. To save the busines
s, Carol needs to implement changes on the operations and employees might resist
these changes. Alternative 3: Hire an expert in auto sales and auto service to
run Auto World. PROS:
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1. There will be no need for Carol to resign from her current job and just overs
ee how the hired expert will run the business. 2. The expert may be more objecti
ve in managing the business and will not be affected by existing relationships a
nd biases. CONS: 1. This will entail additional expense for the company. The com
pany has been in the red for the past months and may not have the budget to hire
a new manager. 2. The expert may be unfamiliar with Auto-Worlds operations & cul
ture.
Recommendations
Carol should take over in running the business and implement some changes to imp
rove the companys financial position. Carols MBA and marketing experience in healt
h service industry has equipped her with scientific approach and methodology in
problem solving which was lacking in past management of Auto-World. In addition,
Carol has long exposure to the companys operations that makes her to be in the b
est position to pinpoint problem areas and come up with solutions. To turn aroun
d the companys situation, we recommend the following action plans: Revisit busine
ss processes with the purpose identifying & eliminating wastes (LEAN) and implem
enting continuous improvements (Kaizen). Start on the service writing process, c
omputerize the service writing and billing to decrease turn-around time and avoi
d long waiting time of customers. To avoid rework, it may be better that custome
rs first speak to mechanics and mechanics will
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forward his diagnosis to service writers who will give the quotations. Mechanics
should also be able to explain to customers the diagnosis, especially if there
are several possible problems. This is to manage the expectations of the custome
r that it may take several tries to pinpoint the exact problem. Improve the serv
icescape of the service department. This should be at par with the front-end bus
iness. For a start, they could provide a waiting lounge with chairs. If possible
a TV and some magazines so that customers may still be entertained while they a
re waiting. Doing this will improve customer impressions on doing business with
Auto World and lift morale of the employees. Salespeople will also be proud to r
efer the companys service department with its new look. Launch soft-skills traini
ng for the service department employees with the objective of instilling custome
r service culture. The back-end business employees have high technical skills bu
t lacks people-skills. The training will also include proper handling of service
failures. Carol can hire an outside consultant to do this. Launch a customer ca
re program to encourage delivering highquality service. The company can do their
own after-sales surveys and reward employees with high evaluations and impose p
erformance improvement programs on those who continuously fail. Integrate survey
results in the performance appraisal of the employees. Redefine qualifications
for service personnel selection. HR should be noted of qualifications and standa
rds for selection of future employees- excellent interpersonal communication ski
lls, pleasant appearance and etc. Design a channel where customers can supply fe
edback from their most recent transactions. Feedbacks can be supplied onsite
2012 (feedback forms) and electronically (through sms or emails). The objective
is to make the process of sending positive and negative feedbacks easy for the
customers. 21
Include in the sales managers objectives that protocols are being followed. This
will ensure that sales people always refer the service department.
Include the service department in the promotions and other marketing activities.
This will increase awareness of the service department. Upon computerization, t
he company can also create a database which can monitor customers. The company c
an identify loyal customers or those who never came back. With that they can imp
lement customer loyalty discount schemes (ex. 10% discount on your third change
oil service). They can also call customers and remind them of service offerings
(ex. Calling a customer after 6 months and asking/reminding that they might need
a tune up or change oil)
Change the window time for check-in and check-out of vehicles. Surveys show that
customers feel that the service hour is inconvenient. Extend time for check-in
and checkout without adding headcount through shifting schedule of the employees
.
Implement a dress-code policy. This is in response to negative survey results on
service employee appearance specially the front liners. Appropriate dress-code
promotes proper office decorum and lifts employee self-esteem. If possible provi
de uniforms for the front liners (e.g. collared polo shirts in company color wit
h company logo and employee name) and the mechanics (e.g. single colored coveral
ls with name and company logo).
Come up with innovative offerings that can drive up the company profit. An examp
le will be offering extension of service
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warranties for an additional premium to new and pre-owned vehicle buyers. Auto W
orld should maximize potential of this captive market. Offer additional services
that will be of value to the customers. When the company starts doing better ag
ain, they could come up with additional services that would entice customers to
keep coming back or to attract new ones. They could offer free pickup and delive
ry of cars for repair or maintenance. Another example could be a day-after servi
ce call or follow up, just to check if the customer was happy and satisfied with
their service.

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Marketing Group 7: Case Solution ~ Sullivan Ford Auto World Feb.

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