GM and, to a lesser extent, Ford have been rolling out some vastly improved products. Reviews have been favorable. Yet their sales have yet to firm up. What gives? What do they have to do to regain the customers they have lost over the past few decades?
In the long term, better products will do the trick. But, as the saying goes, in the long term we’re all dead. GM and Ford might be dead before this sea change can occur on its own.
For a quicker result, they need to look at why people buy Toyotas and Hondas: they think they’ll get what they expect to get. Toyota’s quality reputation has taken a few hits lately, but nothing serious enough to shake consumers’ trust in the company.
In contrast, car buyers aren’t sure what they’ll get with a GM or Ford product anymore. And, if something does go wrong, they strongly suspect that the manufacturer will dodge responsibility to the fullest extent possible.
My advice to GM and Ford: if you want customers back sooner rather than later, you’ve got to take a much stronger stand behind the product.
It’s not just about a longer warranty. A warranty doesn’t only specify what the company is legally bound to cover. It also implies what the manufacturer is not legally bound to cover. Putting too much emphasis on the warranty effectively says, “Once the warranty is up, you’re on your own. By buying this car, you’re betting that we’ve done our job well enough. Don’t like that bet? Then don’t make it.” Put another way, a warranty suggests an adversarial relationship, where the manufacturer isn’t going to do something unless forced to by force of law. Few people enjoy a relationship that is entirely based on a legal contract.
So, while a longer warranty can certainly play a role in restoring confidence, these manufacturers need to go beyond the warranty and pledge that, if something goes wrong with the product, the manufacturer will do anything within reasonable limits to make it right.
What does this mean, really? It means putting yourself in the customer’s shoes, and saying, “If I were the customer, what would I expect the manufacturer to do?” Now there are always going to be rare, random failures in this part or that part with any car. Maybe the manufacturer should pick these up, just because they are rare and because it’ll keep the customer happy. But this sort of problem should be so rare that the potential impact either way is limited.
Of much greater significance are common failures that occur out of warranty, but short of 100,000 or maybe even 120,000 miles. Such failures are caused by a lapse in engineering, not just bad luck, and so the customer will rightly expect the manufacturer to take responsibility beyond the term of the warranty.
My suggestion to GM and Ford: pick up the tab on these common failures. And don’t take this step quietly, but as a clearly stated policy. Even today these and other companies have “customer care” departments that sometimes pick up the tab with out of warranty repairs. But how such decisions are made is unclear, and not anything that can be counted on in advance. What this says to the customer: “Maybe we’ll pick up the tab, maybe we won’t. You’ll find out when it happens.”
GM and Ford have tried the case by case approach, and it isn’t working. When they buy Hondas and Toyotas, Americans are saying they don’t like that bet. The solution: don’t make customers wonder whether you’re going to pick up the tab. Provide them with confidence that, if something goes wrong owing to inadequate engineering, the company will take care of it. The great majority of car buyers are not interested in placing a bet on a car company, even if they’re the sort of person who enjoys going to Vegas. Make them wonder, and they just won’t buy your car, even if it is much better than last year’s car.
True. And the Japanese manufacturers have embraced this concept for a long time. I can give two personal examples. I had a 1988 Acura Integra that quit running at about 80,000 miles. Turned out it was some sort of electronic component in the distributor. It cost me about $250 and I never gave it a second thought. About two months later I got a letter from Acura saying that they had become aware of potentially defective parts in the distributor and I should bring the car in to have the part replaced. If it had already been replaced, send in the receipt and get reimbursed. Believe me, at 80,000 miles I was impressed. I also had a 2002 Acura TL I bought used. At one point I got a letter saying they had become aware of a higher than acceptable rate of transmission failures between 50,000 and 100,000 miles – beyond the 50k warranty. So they extended the warranty to 100k miles. Now that is how you gain customer loyalty. By the way, my wife now has a new Acura TL. How could I buy anything else?
Funny, I was just going to cite Honda’s transmission situation as an example as well. I have a 1999 Odyssey with the same basic transmission. My first one went out at 40K, under the certified warranty. The second one went out at 120K, out of the certified and goodwill warranty. Honda picked up the tab anyway. I didn’t even have to push hard, I just asked.
Here’s a side benefit to Honda (that Im sure they are aware of): When I thought I might have to pay for it, I checked local transmission shops for prices on a rebuild, mentioning the known issues with these Honda trannies. Guess what? None of them had ever heard of Honda transmission issues. None. So, taking care of the customer also protects Honda’s reputation in the industry, meaning there aren’t a bunch of transmission mechanics bad mouthing Honda.