Consumers today have more choices in services and products than ever before, and yet they seem more dissatisfied. They have greater access to information, but this data seems to make the process even – not less – complicated than when choices were limited.
The reason for this? We’ve shifted from a transactional economy to an experiential economy.
There are three entities involved in a transaction – the service provider, the market, and the client. Previously, value was determined by the service provider and the market, and the client was left completely out of the transaction. The individual wasn’t “in” the transaction because the market was made up of an aggregation (a total sum) of clients. For example, the “market value” of an oil change was $40, so a service provider charged $40 regardless of how the individual perceived the value of that service.
Now as value creation has transitioned to an “experience” and not just transaction, the marketplace has become a forum for conversations. This has been prompted by technology and ease of communication between consumers via social media and online searches. A society of negotiations and online auctions have created a legion of consumers searching for value.
Consumers are now willing and able to be co-creators in this experience and are willing to pay accordingly, as opposed to paying based on the value built into the cost of production by the company.
An example would be a technician that makes $30 an hour working on someone’s vehicle. For the company to make money, they have to charge a certain hourly rate based on the company’s overhead and revenue structure. The client had no choice but to pay the charges since they had nothing to do with the way value was determined in the transaction.
The Reason You Should Be Afraid
In his work “Co-Creation Experiences,” C.K. Prahalad uses the acronym DART. This stands for Dialogue, Access, Risk- Benefit, and Transparency.
Now, the reason you should be afraid– dealerships are not prepared for this type of co-creation. We still work off of the model that says we create value in a service and the client can frankly take it or leave it. As we can see, they are leaving it.
Our response to this mass exodus has been to race to the bottom and implement the “Walmartization” of services (a term coined by Prahalad). If the guy down the street can do a $20 oil change, so can we! Even if we lose money, at least we keep the client from defecting, right? Of course, our model was based on the old “we can get them on something else” theory. In a co-creation of value, “utility” – defined as the total satisfaction received from consuming a good or service – can be felt on every point of the transaction.
These “measuring” points include:
- An easy appointment process.
- Online appointment options with complete pricing and functionality.
- Chat options.
- A smooth reception process.
- Evening drop off and pick up.
- Access to Wi-Fi at the dealership.
- A comfortable area for customers to wait and work.
A client can see the utility in all these touchpoints, not just the interaction with the cashier, and they are all vital.
Another Reason You Should Be Afraid
You have to find where clients find value in the transaction, and you accomplish this by talking to them. This leads to the “D” (dialogue) of our acronym DART.
The problem is dialogue has never been our strong suit. We’ve never involved clients in the determination in the value proposition of a service. Again, the market determined the pricing.
Since we were never involving the client in this, we were competing with someone “down the street” and our battle was one of numbers based on the race to the bottom. If the company down the street charged $20, and if you wanted the business, you had to do the same. We thought the only place where a client saw value was at the cashier window.
For those of you who fought the race to bottom with the principle that you provide a higher level of service – i.e., factory-trained technicians and OEM parts – good for you. But the reality of value is that if your clients don’t see it, it doesn’t exist.
The Reason You Should Not Be Afraid
We can now see that the entire value chain is derived by the client as a co-creator of the experience. It is no longer the traditional point of exchange – paying the bill – where value can be extracted.
As we continue to dialogue with clients (or learn how to), we can see where our processes need to be adjusted. This is based on where the client says we can enhance the experience to better personalize the encounter.
So instead of allowing the competition to draw us into a race to the bottom – which they are more equipped to win – we should be opening communications with clients about where they would like to see value built into the transaction.
Aftermarkets are more suited to the “Walmartization” of the auto service business because of their lack of investment. A dealership needs to play the Peter/Paul game on every transaction to make the profit margin balance out at the end.