Satisfaction - Why Toyota Camry "costs" more than the Malibu

Just finished reading
Satisfaction
How Every Great Company Listens to the Voice of the Customer

Chris Denove and James D. Power IV of J.D. Power and Associates

In the foreword to this interesting book, J. D. Power III, the founder of J. D. Power and Associates recalls two meetings where he presented to Pontiac representatives. Meeting one took place in January 1980 when he detailed the Japanese automakers emphasis on quality. He predicted that the then GM market share of 48% would drop to 33% by the end of the decade. Not too surprisingly, some of the Pontiac / GM representatives did not take too kindly to the prediction.

Famed baseball player and sometime philosopher reputedly said, “Predictions are notoriously difficult – especially predictions of the future.” Power’s anecdote provides living proof of this little witticism, because he got his prediction wrong. The GM share fell to that 33% share two years earlier than predicted! Power made a similar presentation to Pontiac executives in 1989, providing similar dread warnings. GM’s share today is in the mid-twenties and most people are familiar with the terrible financial situation this once proud industry behemoth is now in.

Power’s overall point. – Product quality counts. It is a key determinant of customer satisfaction. Customer satisfaction leads to improved financial performance. The author’s make the point that executives know this correlation but do not always live and breath this philosophy.

Customer satisfaction builds loyalty. Good customer service often generates good word of mouth advertising – no matter what the industry. I found it interesting that one of the nation’s largest house builders, Pulte Homes, suggests that 45% of its sales are influenced by the positive recommendations of another customer. I might have been a little dubious of that figure had I not learned at a recent conference for mortgage brokers I attended, that the top performing brokers got up to 40% of their business from previous customers!!

Satisfaction contains numerous product references featuring good and bad performance by manufacturers and service providers. Not too surprisingly, JetBlue and Lexus get significant coverage reflecting a very high level of customer satisfaction. The book was finished before JetBlue ran into some loss making quarters which it could be argued undermines the thesis of the book, although I think it would have taken an absolute genius (or a SouthWest executive ) to figure out just how dramatically aviation fuel would increase. It will be interesting to see how JetBlue performs over coming quarters, but I tend to believe that their renowned customer service combined with very strong customer advocacy will bring them back to profitability.

Lexus figures prominently in the book simply because they are THE best and consistently so. It really is astonishing that Lexus was able to take brand leadership in the luxury car market, against Mercedes-Benz, Cadillac and BMW within ten years of entering this market sector.

One of the many interesting chapters in the book refers to Different Companies, Different Touchpoints. Here the authors suggest that a company’s ability to understand the various ways its business touches customers and then uses that knowledge is what determines success. For instance the touch points for service providers:
* Objective quality of the service provided
* Subjective experience of how the service is performed
* Process by which the service is acquired

differ from the touchpoints differ for product manufacturers e.g. Lexus

* Product execution
* Product quality
* Sales experience (as perceived by the customer)
* Service experience

The continued success of Lexus isn’t just due to the quality of the car itself (which is superb) but also due to the overall customer experience and the satisfaction of all touchpoints. I can vouch for this personally, because when I bring in my ten year old Lexus for a winter service, the loaner car out in the parking lot has had its engine running for many minutes. Thus I sit into a nice warm car and off we go. Maybe other dealers do this, but I know that I regularly talk up Lexus (become an advocate) for the brand after visiting the dealership.

Enterprise Rent-a-Car gets kudos from the authors also. It is another organization that maintains very high levels of customer satisfaction which has helped it become the largest car rental company in the United States. Do you remember when Avis would proudly claim “We’re number two – we try harder”? Seems as if it will have to change that to “number three” today.

If you need good solid evidence of the value of quality and customer satisfaction, look no further than the price of a Chevrolet Malibu as compared to its Toyota competitor, the Camry. Both models target basically the same market and provide roughly same functionality and mileage. Indeed, the authors suggest that the current real quality gap between the two cars is quite small. Indeed in writing this review, I checked the J.D Power site www.jdpower.com and compared the two vehicles. The Malibu rates better in total!! Yet, the authors state that because of the perceived reputation of the Camry, the car normally sells for about $2,000 more for a comparable specification. Given that GM sells about 250,000 Malibus per year, that is a significant drop in revenue. Effectively, the cost of many years of lost Satisfaction.

A good book written by people who know the benefits of quality.