Roland Berger Customizing Aftersales 20131120

8/9/2019 Roland Berger Customizing Aftersales 20131120

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Customizing aftersales

Delivering the service that customers really want

Philipp Grosse Kleimann, Dorit Posdorf, Alexander Brenner,

Swen Beyer, Dr. Ralf Kiene, Torsten Hunstock Study


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Customizing aftersales

Philipp Grosse Kleimann, Dorit Posdorf, Alexander Brenner,Swen Beyer, Dr. Ralf Kiene, Torsten Hunstock Study

Delivering the service that customers really want


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Contents

1. Introduction: USPs are critical for survival 5

2. Aftersales: Massive potential going untapped 7

2.1 Aftersales is the most important profit driver 7

2.2 The most important aftersales trends 8

2.2.1 Stronger consolidation 9

2.2.2 New players and business models 11

2.2.3 New mobility concepts 14

2.2.4 Service must be an individual experience 15

2.3 Result: The battle for customers has kicked into high gear 16

2.4 Conclusion: Stand out to survive 18

3. Customer survey 20

3.1 RB Profiler the Roland Berger approach 20

3.2 Our survey of 1,500 service customers... 24

3.3 ...revealed six customer segments 24

3.4 What makes each segment unique 27

3.5 Focus on customer segments two examples 33

3.5.1 High-demanding Enthusiasts 33

3.5.2 Status-oriented Youngsters 353.6 Six customer groups Present everywhere but largely ignored 36

4. Current practice: Today's repair shop 38

4.1 Current service formats 38

4.1.1 OEMs battle for customers with older vehicles 39

4.1.2 Independents position themselves as value champions 41

4.2 Interview 42

5. Sustainable strategies for aftersales players 46

5.1 Leverage the strengths of the format 46

5.2 Develop a company-specific approach 48

6. Conclusion 49

Want an edge over your competitors? 50

7. Authors 52


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3 | Customizing aftersales Delivering the service that customers really want

Foreword

Dear reader,

The battle for the customer is heating up in aftersales no less than in new and usedvehicle business.

Most market players have long been aware of this: Four out of five customer contacts aremade after the vehicle purchase. They are the key to a lasting customer relationship, becausethey open up opportunities for selling spare parts and services throughout the entire usefullife of a car, van or truck. When handled properly, these opportunities increase customersatisfaction and consequently the resale rate as well.

The aftersales market is as profitable as it is complex. While earnings from new vehicle salesare steadily sinking, despite massive efforts, aftersales now accounts for 75-80% of profits for manufacturers and retail players alike.

This profitability is attracting a growing number of market players: manufacturers, suppliers,parts wholesalers, authorized and independent repair shops, repair shop chains, insurancecompanies, automotive banks, mobility services providers and Internet platforms. All arecrowding onto the customer interface and attempting to decide the battle in their favor.

The aftersales player that best knows its (potential) customers can put together optimalproduct packages and accurately design its communication. That's the starting point for ourstudy: There's more than one type of aftersales customer. And we believe that splitting themup by vehicle type or, as is often done, by age segment doesn't go far enough. Using our trade-marked market research tool, the "RB Profiler", we can show that a person's individual valuessystem actually decides what aftersales products and services they buy. By testing values-basedstatements in conjunction with other criteria, we identify holistic customer segments. Thisenables 360-degree segmentation and coupled with the right sales channels the optimalalignment of marketing activities.

But read it for yourself. I hope you'll find our study interesting. And should a question or

two remain unanswered, our global team of experts would be happy to help you.

Best regards,

Philipp Grosse Kleimann


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The study in seven core statements

> The German aftersales market keeps growing, and growing, and growing...By 2016, sales are expected to be increasing by 1.2% annually. DespiteEurope's economic crisis or perhaps because of it the number of carson Europe's roads is constantly expanding.

> The aftersales business is very profitable: On average, German OEMsgenerate just 20% of their revenues but up to 80% of their profits fromaftersales.

> However, margins are feeling the squeeze: More and more playersare competing for customers, who are in turn becoming increasinglydemanding.

> Market players are hunting for the right concept that will allow themto meet a wide variety of customer demands. Yet no one seems to havefound what we believe to be the secret to success: namely, a differentiatedapproach tailored to individual customer profiles. Therefore, customersjust turn to the cheapest provider.

> The most successful market players will be those that best address thedemands of their various customers or customer groups.

> Roland Berger has decoded the DNA of the aftersales customer. TheGerman market consists of six segments that can potentially be foundin the customer base of every provider.

> With this market study, Roland Berger lays the groundwork for a customer-specific approach. Even the macro-analysis reveals many ways to improveservice, but without the accompanying micro-analysis at the companyand/or market level, the true potential will remain largely untapped.


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1. Introduction: USPs are critical for survival

The future of the automotive industry lies in aftersales. Manufacturersalready generate 75-80% or more of their profits with products and servicesfor vehicles that have already been sold. That percentage is on the rise. Yetit's getting crowded up there success awaits only those that rigorouslyplug their USP.

Why is aftersales becoming so important? It's because the rules of theautomotive game are undergoing a fundamental change. Current trends willshake up the industry between now and 2025. Markets and production areincreasingly shifting to Asia, and increasing demand for very inexpensivecars is giving rise to an entirely new segment at the lower end of the market.

At the same time, the value of automotive electronics is rising. Internetconnections and cloud services are becoming the norm, even in cars. Theconventional powertrain has long had competition: Manufacturers have tointegrate hybrids, electric and gasoline variants into the model and servicelandscape. Competition is getting tougher, pressure to consolidate is risingand the final straw is demotorization among young urban consumers:Owning your own car is no longer fashionable.

To survive in the market, aftersales players must carefully listen to theircustomers, and provide the goods and services they really want. Thismust be clear from their approach to communication and product portfoliodesign. Micro-marketing with a service offering tailored to each individualcustomer would be the ideal solution. The first step on this path is anin-depth understanding of customer needs, achieved through detailedsegmentation. Attractive offers that are both feasible and profitable foraftersales players can be put together for each segment.

Using the RB Profiler developed by Roland Berger Strategy Consultants, atool that we have been honing for several years now, we analyzed aftersalescustomers in various markets including Germany, the US and China. We

then split them into useful segments. This study focuses on the results forthe German market. In Germany, the well-known market research instituteGfK surveyed 1,500 service customers for us. We took a close look atcustomers' specific preferences for automotive services, demographicfactors, and general preferences and values.


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The result? Six customer groups that reflect the service behavior, wishes anddesires of the entire German aftersales market. Some of the differences betweenthe segments are enormous. But every aftersales player whether OEM, partsdistributor or independent repair shop potentially has each of these sixsegments in its customer base. Accordingly, they must include them in theirfuture offering.

Taking the findings regarding customer expectations as a starting point, weexamined how providers currently attempt to retain existing customers andacquire new ones. Our analysis revealed that apparently no player is rigorouslyapplying a consistent USP. In the last section of this study, we look at how thiscan be changed, what strategies are appropriate for aftersales players and howRoland Berger can come to the aid of market players in this respect.

Service differentiation in other industries

Telecommunications industry: Service adds an emotional charge to mass-

produced itemsInternet access has long since become a commodity and more or less a product

that customers buy without any brand enthusiasm, such as electricity. This makes

differentiating one's services all the more important. To stand out from thecompetition, providers are focusing on speed, reliability, hotline support, on-site

service or add-on services such as anti-virus programs. This enables them to offer

customers different packages with different prices. What's more, customers can

switch plans if their needs should change as long as it's an upgrade.

Airlines: Individual service even before take-offAirlines promise a similar USP. The customer decides whether to fly eco-nomy,

business or if available first class. They can select a seat online, spontaneously

rebook or, for a surcharge, take excess baggage along according to their personal

preferences. However, even within a class it's possible to select di fferent service

levels and accommodate individual wishes not only for the flight, but also prior

to departure (e.g. Economy Flex vs. Economy Basic). Furthermore, loyal andfrequent fliers receive special ser vices such as upgrades, lounge use and shuttle

services.

Online retailers look to cross-selling

Many online retailers use their customers' previous purchasing behavior to re-

commend other potentially interesting products by e-mail or on the screen during

a product search. This means customers receive customized, individual offers,

i.e. there is cross-selling.


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2. Aftersales: Massive potential going untapped

It's no secret that the entire service and product business is highly attractivefor vehicle manufacturers, authorized handlers and independent serviceproviders. The term "downstream business" is also used, since it doesn'treally start until after the car has actually been sold.

Customer service is of critical importance for the overall brand experienceand driver satisfaction. Post-purchase there is a host of crucial customertouch points, and this is where manufacturers earn the loyalty of theircustomers. This is when customers decide to return to the same brandfor their next car or not.2.1 Aftersales is the most important profit driver

The aftersales market is huge and difficult to grasp. According to theGerman Federation for Motor Trades and Repairs, aftersales servicesgenerated approximately EUR 30 billion in 2012 in Germany alone.

Just how important this sector is for OEMs can be seen by taking a look atthe breakdown of sales and profits. Automotive manufacturers in Germany

continue to generate most of their revenues from sales of new vehicles;aftersales accounts for just 20%. But aftersales services are responsiblefor about 75-80% of manufacturers' core business profits.

OEMs are joined on the aftersales market by a host of other players fromOESs to independent parts suppliers, wholesalers, retailers, repair shopchains and independent repair shops. What's more, current trends allowplayers from other industries to enter the market with innovative businessideas. The relationships among the different players are very complex. Thislack of transparency allows the providers to charge nice markups withoutanybody noticing, but it also leads to uncertainty among customers.

We assume the German aftersales market will continue to see moderategrowth, despite the current weakness in sales volumes. The size of the

vehicle fleet is continuously growing: there are currently 43 million carson Germany's roads, and this figure is forecast to rise to 44 millionby 2015.


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A comparison of new registrations with the existing fleet shows that, everyyear, Germans register more new cars than they scrap, export or no longeruse. This drives up average age of vehicles. In 2003, the average German

car was 7.4 years old; in 2012 the figure was up to 8.5 years according toGermany's Motor Vehicle Authority. In particular, the share of cars aged7-10 years is on the rise.

The growing number of cars on the road coupled with their higher averageage confirms the importance of the aftersales business. Sales developmentprovides further proof: According to "Datamonitor 2012", the automotiveaftermarket at the retail level will continue to be a source of stable income,

with 1.2% anticipated annual sales growth for all players by 2016. Spareparts (service and wearing parts) and accessories each account for over30% of sales..

2.2 The most important aftersales trendsDue to their importance, certain trends in today's aftersales business deservecloser scrutiny. Current developments mean that not all players stand toprofit to the same extent. Some may even have to tolerate painful cuts intheir sales and profits. Four market changes stand out as they have a directimpact on the customer interface. We discuss them in turn below.

Steady growth: Despite weak sales volumes, the number of cars on

Germany's roads is constantly growing [m cars]

4.0

60 3.5

3.0

2.5

2 0

70

50

40

44.4

22%

3.5

44.0

22%

3.4

43.4

22%

3.2

42.8

21%

3.3

42.1

23%

3.4

41.8

23%

3.1

41.7

22%

4.0

Cars onthe road[m veh.]

Newregistrations

[m veh.]CAGR of cars on the road: +1.0%

Source: Datamonitor; IHS; Roland Berger

.

1.5

1.0

0.5

0.0

30

20

10

02015e

30%

28%

20%

2014e

31%

25%

22%

2013e

31%

26%

22%

2012

32%

26%

21%

2011

32%

25%

20%

2010

33%

24%

20%

2009

33%

24%

20%

>107-104-60-3New registrations Age groups


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2.2.1 Stronger consolidation

Repair shop insolvencies, mergers and acquisitions the consolidationtrend on the aftersales market has been tangible for a few years now. It easedsomewhat in 2011, but will continue at all sales levels, from wholesale toretail. Independent repair shops in particular have recently been gainingmarket share.

Of course, the fact that new cars need less maintenance and fewer repairsduring their useful lives is also an important factor. Less mileage and longer-lasting parts have continuously pushed down the amount of service providedby car manufacturers: Since 2005, the amount of recommended service hasdeclined from 1.15 service appointments to 0.95. Over the same period,

the amount of service actually carried out declined from 0.98 appointmentsto 0.90 per year. By 2025, the amount of workshop labor hours is expectedto drop by 20-25%. Drivers are apparently going to repair shops much lessoften. The upshot? More insolvencies and accelerated repair shop closings.Mergers and acquisitions are also leading to further consolidation fromOEMs and OESs to parts wholesalers and repair shops.

Against the tide: Germany has fewer and fewer repair shops for more and more

vehicles

Share of independent repair shops

52% 51% 51% 52% 52% 52% 54% 54%

35

30

50

4033.5

38.038.138.339.139.8

45

41.7

20.1

40.237.7

40

Repair shops

['000]

55%

CAGR -2.2%

Vehicles[m]

Source: ZDK; press research; Roland Berger

25

20

15

10

5

0

20

10

02015e

18.5

15.0

2011

20.4

.

2010

20.0

.

2009

20.1

.

2008

20.2

.

2007

20.1

.

2006

20.4

.

2005

21.6

2012

17.4

20.3

Independent repair shopsAuthorized repair shopsVehicles


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This will shift more power to specific players, while others will have tostruggle for survival. The positive effect of consolidation (see below fora selection of current examples) is that the surviving repair shops willultimately enjoy better capacity utilization: Given the expansion of the

vehicle fleet, they will be able to serve more customers.

Current consolidation cases

In mid-2012, automotive supplier Bosch acquired a manufacturer of diesel

components in order to expand its spare parts business.

In 2011, "team Reifen-Union GmbH & Co. Top Service Team KG" became a

shareholder of Coparts Autoteile GmbH. The goal was to create a network of

independent vehicle parts and tire retailers with nearly 1,200 dealerships.

PV Automotive, a parts wholesaler, took over the pitstop repair shop chain in

2010. Pitstop was able to stay on the market only thanks to the restructuring

program launched. At the same t ime, PV Automotive was able to secure market

share in the parts business.

US investor KKR bought shares in A.T.U. in 2004 and had to keep pumping in cash

to keep the repair shop chain afloat; r ight from the start there was speculation

about taking the company public or selling it . A.T.U. bonds amounting to almostEUR 600 million will reach maturity in 2014.


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2.2.2 New players and business models

The established players have to come to terms with their new competitors.New providers and intermediaries are crowding onto the aftersales market,

where they attempt to gain market share by using innovative businessmodels. A growing number of players are fighting to occupy the customerinterface and position their services or integrate other services into theirproducts.

Unlike in other industries, this makes the entire aftersales market lessclear for the customer.

Routing through insurance companies

Insurance companies were the first to make a move. For quite a few yearsnow, they have been using alliances to channel customers into selected

repair shops, both authorized and independent. This channeling processalready works very smoothly for accident and glass repair claims. The nextlogical step would be to transfer this approach to the service realm.

More and more players are battling for the customer interface:

New downstream business models at a glance

WHITE LABELING

ROUTING BY INSURANCECOMPANIESInsurance companies areincreasingly channeling endcustomers to specific repairshops (e.g. HUK, Carglass)

OVER-THE-COUNTERBUSINESS

(Authorized) dealers andindependent repair shops (counterbusiness) are selling more original

spare parts to end customers

INTERNETCustomer

focus

Source: Roland Berger

Growing range of providersof white-label extended andmobility guarantees as wellas insurance (e.g. ADAC)

NEW TECHNOLOGIES

Innovative business models based onnew technologies open up opportunities for

non-automotive players (e.g. from thecommunications industry)

The Internet is playing anincreasingly larger role, for

instance as a repairs broker(e.g. werkstatt.autoscout24.de)


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Over-the-counter

For authorized dealers, selling spare parts over the counter to otherworkshops and end customers has become a pillar of their business. Currentprograms operated by several manufacturers and dealers confirm that salesin this segment are rising. Managed properly, such programs result in acompetitive portfolio. Successful dealers already generate 30% or more oftheir total sales with over-the-counter business, in keeping with the ideaof "If I can't sell the customer any more service hours, maybe I can at leastsell the original spare part."

Online portals

The Internet has long since established itself as a sales channel forautomotive services and products. At the moment, there are signs of abreakthrough for specialized repair shop portals that offer a broad range ofservices: from customer ratings and reports of experiences to fixed-priceofferings for repairs and inspections, including collection and deliveryservices.

While dealers and associations still view repair shop portals with skepticism,acceptance among customers and the growing number of repair shopssigning up with them confirm the upward trend. What's more, the portalsbenefit from the fact that more and more customers want services to be

presented clearly and understandably.

Successful repair shop portals in Germany

Werkstatt.AutoScout24 brokers service orders and clearly lists repair shop

services.

Drivelog by Bosch bundles mobility offerings for drivers and repair shops.

Customers with a "digital ser vice log" can keep track of costs and achieve

savings.

The opportunities online portals offer participating repair shops include newcustomer acquisition, additional capacity utilization and a way to presentthe shop's own services clearly and professionally.


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As competition heats up, acquiring new customers will play a key role inthe future even if the online search focuses on regional offers. Increasedtransparency for the customer is certainly a negative result for the repairshops, as it can lead to price erosion.

New technologies

Established and new players can also use new technologies to createinnovative business models. One example could be a lucrative retrofittingbusiness for manufacturers, dealers and repair shops: incorporatingsmartphones (and connecting them to the car's peripheral devices), car-to-car and car-to-infrastructure communication (such as for innovativenavigation systems) or complete entertainment systems. The steady risein complexity drives business primarily to authorized repair shops andfull-line providers competent to deal with specific brands.

At the same time, new technologies open up the market and make itpossible for new players to enter the automotive aftersales business especially companies from the IT and communications sector. Severalexamples have already led to tougher competition for customers: linkingtelematics and service offerings, enabling the use of apps or setting upInternet connections in cars. The latter makes it possible to providetailored offerings via location-based services (geo-marketing).

White labeling

More and more white-label products have been cropping up on the aftersalesmarket. They include both spare parts and service offerings. In the spareparts business, this is how providers reach price-sensitive customers witholder cars. It increases competition and broadens the range of options forthe customer on the basis of price differences.

In the service business, a rising number of new names are joining the ranksof the well-known guaranty and insurance providers. The range of different

white-label providers of extended guarantees and mobility guarantees isexpanding day by day. New players include the likes of automotive clubs

(e.g. ADAC) and repair shop chains (e.g. A.T.U.) They not only heat up thecompetition, they also cloud and complicate the market. For customers, it isbecoming harder to stay on top of this diverse range of offerings. However,the competition results in clear cost benefits.


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This structural change has major implications for aftersales, as the customerstructure moves away from individual private customers toward a fewlarge accounts, whether they be carsharing providers or operators of fleetand rental businesses. The steadily growing number of carsharing vehiclesand large fleets also mean that in the future, fewer and fewer private

individuals will bring their own vehicles in for service or repairs. Frameworkagreements with large customers will multiply, and players should tailortheir offerings even more closely to the needs of the remaining private carusers.

2.2.4 Service must be an individual experience

Automotive groups are constantly expanding and differentiating their saleschannels for new vehicles to reach ever-shrinking target groups. Aftersaleshas a lot of catching up to do here. So far, most providers have tended tolump all customers together and not address the various groups differentlyenough.

If you buy a premium car for more than EUR 100,000, you are probablygoing to get the same service as someone who spent EUR 8,000.Customer touch points in the aftersales business offer particularly valuableopportunities to spot individual needs and develop a tailored service offerto meet them, thus boosting profits.

... and are finding more and more users

15.0

4.0

Carsharing users, 2006-2020 [m]

Source: Bundesverband Carsharing e.V.; University of California; Frost & Sullivan; Roland Berger

202020122006

EuropeGermany

0.70.2 0.30.1


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Companies have to recognize that their customers will project a positiveexperience buying a new vehicle onto aftersales. The individual support thatthey received when buying the car is what they will demand later on whenthey need service. Companies have to meet these expectations if they wishto keep their customers over the long term the large OEMs in particular.

2.3 Result: The battle for customers has kicked into high gear

More and more players are crowding onto the aftersales market: OEMsand authorized repair shops, OES providers and various repair shop systemformats, as well as independent repair shops.

It can be a long road from manufacturer to customer:

Distribution flow in the aftersales market

Independent aftermarket(IAM)

Original Equipment Supplier (OES)Producer Original Equipment

Manufacturer (OEM)

OEM aftermarketorganization

Fast fitcentral

organizationWholesaler distributor/importer

Wholesaler

Retailer


CUSTOMEREND

CUSTOMER

authorized repair shop

repair shop

Body shop ,

supermarkets, DIY

auto center

Insurance, leasing and carsharing companies (selection)Inter-

mediates

The world of new vehicles is becoming more diverse ...


... but not aftersales


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Everyone competes against everyone else. All are fighting for market share and it's a battle taking place directly at the customer interface. Authorizedrepair shops and other types of repair shops in particular face a constantstruggle on the maintenance and repair market.

Developments over the past five years can be split into two phases. In thefirst phase, multiple new repair shops and repair shop chains entered themarket and took market share from OEMs on a grand scale. In response, themanufacturers created initiatives designed to claim back their piece of theprofitable aftersales market. They offered more flat-rate contracts, additionalparts lines and counter service concepts. In this way, during the secondphase they were able to halt the erosion of their market share and cementtheir strong positioning.

Who will win the next round? The jury is still out. But the winner willdefinitely be the player that best meets the needs of individual customersegments with a differentiated range of products and services. Those whoare most successful in doing so will win a decisive share of the market.

50

60

Market share in the maintenance and repairs market. OEMs have

halted the erosion of their positions for the moment

0.0%

+2.8%-4.4%

Phase I Phase II Phase III

Repair shop chains take

over a major share of

the aftersales market

OEM launch initiatives

and win back some

market share

Development of Phase III still unclear: Those that

best address customer needs will establish

themselves on the market

Market share

[%]

0

10

20

30

2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: DAT-Report 2013; Roland Berger

.

DIYOther repair shopAuthorized repair shop


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2.4 Conclusion: Stand out to survive

The number of vehicles on the road is increasing slightly, but this isdue mostly to commercial demand in leasing or carsharing, not privatecustomers. On the profitable aftersales market, a growing number of players

with new business models are battling for ever fewer customers with higherand higher expectations. The potential is enormous, but service conceptsat most providers remain severely underdeveloped. Practically speaking,they do not address the individual needs of the different customers orcustomer groups. Our market observations make it clear: Going forward,differentiation is not just advisable it's crucial to survival.

To respond appropriately to today's developments in automotive aftersales,communication with customers has to be precisely targeted. Each and everycustomer should ideally receive a solution and service package tailoredexactly to his or her specific needs. As things stand today, this is well-nighimpossible.

Segmentation as ideal solution for individual customer approaches

> Share of private customer businessis shrinking

STATUS QUO CLUSTERING IS OPTIMAL

> Precisely identifying customers makes itpossible to split them into various

MICROMARKETING

> Micromarketing is the idealsolution:


> In sales, dealers target customersindividually, meaning that customersthen have high expectations ofaftersales

> A wide range of additional/newaftersales players are crowding ontothe customer interface

cus omer segmen s

>Tailored service packages can bedeveloped for every segment, gettingcloser to "micromarketing" and givingthe customer an individual approach/considering his or her personal needs

- Each and every end customeris addressed individually

- Every customer receives apackage designed specificallyfor him/her

Individual support

Uniform customer approach


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Instead, we recommend a similarly effective alternative: a clearly definedsegmentation into various customer groups. By precisely characterizing thecustomers based on their values and needs structures, we can define distinctsegments. These segments each then require a tailored service package thataddresses the customer individually and takes into account his or her needs.Taking this approach makes it possible for aftersales players to succeed onthe market over the long term.

Our market observations at a glance:

> The aftersales business is highly profitable and is growing further despite

the crisis.

> Consolidation is increasing. At the same time, more and more providers

are entering the market with new technologies and trends.

> New mobility concepts are reducing the importance of private customers

and boosting the role of commercial key accounts.

> The sale of a new vehicle sets the standard for individualized customer

attention and raises customers' expectations of the service level inaftersales.

> Customers are increasingly demanding customized products that are

tailored specifically to their needs instead of one-size-fits-all solutions.


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3. Customer survey

The aftersales market is characterized by highly complex, fragmenteddistribution channels, interchangeable service offerings and a lack of switchingcosts. OEM and independent repair shops often lack a clear strategy forapproaching their various customers in an individual manner, securing long-term loyalty and differentiating themselves in an increasingly competitivemarketplace.

To develop such a strategy, these players need to understand their customers'needs and expectations better. At the moment, very few of them rely on

valuable market and customer information. Our study provides a solid basis forunderstanding customers better by first looking at the entire customer spectrumacross all types of aftersales providers. The various players can use this as abasis for building a company-specific approach more on that later.

3.1 RB Profiler the Roland Berger approach

The RB Profiler, a tool developed by Roland Berger Strategy Consultants,provides an accurate picture of the market and so enables companies tosegment their current and potential customers better. Its quantitative

methodology creates transparency regarding customer and brand values,revealing which segments offer the greatest strategic and economic value.

Segmenting customers with the RB Profiler the ideal tool for a comprehensive

analysis

SEGMENTS (illustration)

Cost-oriented

Minimalists

Progressive

INPUT VARIABLES

Demographics

Values

Behavior in relevantcategory (car purch., mobile

360 SEGMENTATION


er ormers

Price-focused

Fun-lovers

phone use)

Channel/media use

Industry affinity

> Comprehensive customer analysis bycombining various segmentation criteria

> Prediction of future purchase behaviorby identifying the most relevant criteria

> By combining the most attractivecustomer segments with different saleschannels, companies can adjust theirmarketing mix and capture furtherpotential


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Primary data collection is adjusted for each project. There are no "yes/no"questions and no right or wrong answers. Rather, consumers are asked abouttheir attitudes quality preferences and price sensitivity, for instance andthe findings are later condensed into specific values such as Quality or SmartShopping. We also record general socio-demographic data such as gender,age, place of residence and income level. Consumers provide data abouttheir habits, lifestyles, attitudes, interests and needs, and also about theirrelationship to the industry in question for example their brand awareness,spending behavior and preferred products.

The resulting "consumer profiles" show whether consumers agree or disagreewith certain value-based statements. Blue areas mean that they agreesignificantly more strongly with statements reflecting this value than theirreference group; red areas indicate below-average agreement.

In this way we build comprehensive profiles that not only indicatedemographic details and consumers' relationship to a particular industry,but also precisely divide consumers up into segments on the basis of theirdifferent values.

Sample consumer profile

RED =Consumer valuesthat the personagrees with less

> 25 years old

> Male

> Single

> Mid-level income

> Average education

> Employed full-time

Legend: E = Emotional value; R = Rational value; = Minimal value; + = Maximal value

than otherpeople/users do

BLUE =Consumer values that the person agrees with much more so than

other people/users do



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Analyzing value profiles for brands and consumer segments enables usto reliably forecast the consumption behavior of individual target groups.The RB Profiler thus creates an important basis for developing successfulbrand and marketing strategies.

We have used the RB Profiler in projects and studies in a wide variety

of industries over the past ten years. Here are just three examples:

> Developing a market entry strategy for India for a German premium

automotive producer

> Developing strategy on the basis of consumer and market segmentation

for various telecommunications companies in Russia

> Realigning the broadcast portfolio and profile of a German TV broadcaster

The RB Profiler can also be used to analyze how consumer values andbehaviors develop over time, by plotting "migration paths". Profiles canalso be analyzed at an individual customer level for the purposes of

micro-marketing.


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24 | Study

3.2 Our survey of 1,500 service customers

On behalf of Roland Berger, GfK used the RB Profiler to carry out anonline survey of more than 1,500 aftersales customers in Germany. Theextensive questionnaire included several different categories of questions:questions specific to the RB Profiler; ones requesting personal informationand demographic data; questions about people's vehicles and their personalexperience with maintenance, service and repairs; and questions relatingto consumers' future expectations with regard to services.

3.3 revealed six consumer segments

The findings reveal six clearly delineated consumer segments. Thesesegments differ not just in their preferences with regard to services butin their demographic features, willingness to pay, values and general

service behavior:

1. Low-involved Traditionalists2. Service-focused Rationalists3. High-demanding Enthusiasts4. Status-oriented Youngsters5. Price-focused Emotionalists6. Cost-oriented Minimalists

Breakdown of the questionnaire

| Comfort level with new types of media5

Usage patterns of new types of media

| Service usage and requirements4

Service usage

Use of repair shops

Priorities regarding service/repairs

Usage of potential service packages

Maintenance and repair services, incl.

willingness to pay

| Vehicle and driving information3

Emotional connection to the car

Information about the car

| RB Profiler section2

| Demographics/socio-economic1


Gender Male Female

How old are you? years

Do you own a car? Yes No

What German state do you

live in?

Baden-Wrttemberg

Bavaria

Berlin


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The six segments capture the service behavior and service requirements ofthe entire German aftersales market. They form a basis for creating value-specific customer groups for Germany. Performing the same analysis for aspecific brand or repair shop BMW or A.T.U., say would result in aneven sharper segmentation.

Three of the six segments show a strong preference for authorized OEMrepair shops and an above-average tendency to request original parts formaintenance and repairs:

Low-involved Traditionalists(23% of drivers) are on average47 years old and enjoy a very high income. They are the firstowners of vehicles that are on average five years old, mainlypremium brands. They are not really very interested in cars,but they have high expectations of professional services.They want convenience and are prepared (and able) topay for excellent service.

Service-focused Rationalists (17%) are on average 50 yearsold, have average income and drive used cars, some of whichare old (average age of vehicle is nine years). They tend notto buy premium brands. They are generally not very interestedin cars but they pay great attention to maintenance and repairs.They rate factors such as quality, friendliness of staff andpleasant, personal support highly. They expect services to beexplained to them properly and costs to be transparent, butthey are not interested in special services or VIP treatment.

High-demanding Enthusiasts (17%) are on average 38 years

old and have a very high income. They own one or morenew vehicles, on average four years old. They are focused onpremium models. These consumers consider their cars statussymbols and themselves car experts. They place great storeby first-class service. They want the convenience and extrasthat come with VIP treatment and are prepared to pay forexcellent service.

1 Low-involved

Traditionalists

> Very high income

> Traditional demands

> Relatively low cost focus

> Drive new premium vehicles

> Use authorized dealers and repairshops

> Prefer original parts von OEM

> Look for simple aftersales offeringsand a high level of service

23%

2 Service-focusedRationalists

> Oldest segment

> Rational values, traditional focus onvalue for money and "smart shopping"

> Use authorized dealers and repair shops

> Prefer original parts von OEM

> Want explanations for service/price andhave high overall expectations

17%

3 High-demanding

Enthusiasts> Progressive values

> Relatively low cost focus

> Drive new premium vehicles

> Use authorized dealers and repairshops

> Prefer original parts from OEM

> Love their vehicles

> Want top service and VIP treatment

17%


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26 | Study

At the other end of the spectrum we find three consumer segments thattend to choose independent repair shops or repair shop chains and arenot interested in OEM parts or special services:

Status-oriented Youngsters(17% of drivers) are the youngestsegment with an average age of 28. They have very lowincomes and generally drive very old cars (average age of

vehicle is around 11 years). They do not own premium brandsand they have very limited affinity with cars. However, they seebrands and vehicles as potential status symbols: indeed, if theyhad the money they would buy themselves a more impressive

vehicle. Entertainment and having fun are very important forthis segment. Because of their strong price awareness, they donot expect particularly high-quality service. They like usingonline services.

Price-focused Emotionalists(13%) are on average 35 yearsold, earn an average income and drive non-premium vehicles(average age of vehicle is eight years). They are generally not

very interested in cars and car-related services. For them,

emotional values and costs are what count the most.

Cost-oriented Minimalists (13%) are on average 44 years old.Their income is low and their non-premium-brand cars areold (average age of vehicle is 11 years). Their interest intheir vehicles is very limited and they show very little affinity

with cars overall. Their values are minimalist with regard to

consumption: They look at the price first and are only interestedin the most basic, simple services. Their purchase decisionsare primarily driven by cost.

4 Status-oriented

Youngsters

> Youngest segment

> Emotional and progressive values

> Cost-oriented

> Very low income

> Drive old and used vehicles

> Have simple expectations of aftersales

since they know their price limits

17%

5 Price-focused

Emotionalists

> Emotional values and "status"

> Cost-oriented

> Very low interest in the vehicle andtherefore no clear preferences regarding

aftersales services

13%

6 Cost-oriented

Minimalists

> Low income

> Minimalistic values, rejection ofprogressive tendencies and focus onperformance

> Cost-oriented

> Drive old and used vehicles> Car is not a priority; limited interest

in services

13%


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The RB Profiler uses a series of additional descriptive variables to makethese segments even more tangible. The result is a set of clearly delineatedcustomer groups of practical value in helping aftersales players individuallyadjust their positioning.

3.4 What makes each segment unique

To learn more about customers' specific desires and requirements,we examined the six segments in terms of the following categories:

> General preferences regarding cars> Criteria for selecting a repair shop (price, traditional needs,

convenience and support)

> Satisfaction with the repair shop> Readiness to switch repair shops and reasons why> Preferred service packages and contracts

Our detailed analysis allows us to draw a number of conclusions aboutthe different consumer segments, outlined below.

The characteristics of the six German customer segments at a glance

Cost-oriented

Minimalists6Price-focused

Emotionalists5Service-focused

Rationalists2 Status-oriented

Youngsters4High-demanding

Enthusiasts3Low-involved

Traditionalists1

13%13%17% 17%17%23%

Fun-and

cost-

oriented

Mini-

malism,

esp. total

cost

Cost-and

emotion-

driven

Maxi-

malism,

esp.

status

Tradi-

tional

values

Security

and

service

LowMediumMedium Very lowVery highVery high

443550 283847

Segment size

Core values

Demographics

Avg. HHI1) [EUR]

Avg. age [years]

Source: Roland Berger, GfK (April 2012, n = 1501 online)

34%10%

44%47%

1) Household income

Large city/countrysideLarge cityLarge city/countryside Large cityLarge city/countrysideCountryside

1189 1145

Non-premiumNon-premiumNon-premium Non-premiumPremiumPremium

163346 315449

51%42%40%

19%

33%8%

43%48%

75%60%

32%8%

56%34%

41%25%

xx Segment size

68%52%

36%12%

IndependentIndependent, authorizedAuthorized Independent AuthorizedAuthorized

Residence

Vehicle facts

Avg. vehicle age

I ( 9 years)Share of used

vehicles

Vehicle brand

Usage of OEM

originals [%]

Workshop usage


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28 | Study

General preferences regarding cars

Here the spectrum ranges from the High-demanding Enthusiasts, for

whom the car is sacred and who put great value on first-class service, to theCost-oriented Minimalists, who basically don't care what the car brand andservice are like, as long as it's cheap. The Low-involved Traditionalists arerelatively indifferent, as are the Service-focused Rationalists. The latter valueprofessional, high-quality service, but more because of their overall approachthan because of any particular connection to cars.

Criteria for selecting a repair shopPrice

As their names imply, the Price-focused Emotionalists and Cost-orientedMinimalists place special emphasis on low price. At the opposite end are theLow-involved Traditionalists and High-demanding Enthusiasts, for whomthe price of products and services is less important.

2.96I never miss a service appointment for my

car

3.05My car's appearance is important to me

(cleanliness, scratches, etc.)

3.13

Emotional connection to the car Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focusedRationalists

High-demanding

Enthusiasts

I know the precise technical details about

my car

Average1)

... ... ... ... ... ...

Deviation (%)2)Deviation (%)2) Deviation (%)2) Deviation (%)2)Deviation (%)2) Deviation (%)2)

7

-4

-6

1

-2

-8

31

36

33

-16

2

-3

-19

-7

-18

-35

-24

-34

1) Scale: 1 ("absolutely agree") to 6 ("absolutely do not agree")

2) Deviation from the average agreement in %; a positive value indicates above-average agreement

Source: Roland Berger, GfK (03/04 2012)

3.5I am willing to forgo quality and service topay a lower price

3.8I always pick the cheapest product

Service priorities

... ... ... ... ... ...

-15

-10

-11

3

6

-12 -3

3

20

15

24

26

Average1) Deviation (%)2)Deviation (%)2) Deviation (%)2) Deviation (%)2)Deviation (%)2) Deviation (%)2)

Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts





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Traditional needsIt's primarily the Service-focused Rationalists who set great store by topservice, namely as regards quality of the service performed, personalsupport and warranty and guarantee content. By contrast, Price-focusedEmotionalists have few discernible preferences in this area. They viewtheir cars as a basic commodity, and repairs and maintenance are simplya necessary evil.

ConvenienceFor High-demanding Enthusiasts and Service-focused Rationalists, fast

service is just as important as being able to easily get in touch with therepair shop, for example by phone or Internet. The Enthusiasts also valuecollection and delivery services. Like Status-oriented Youngsters, theyappreciate innovative and mobile communication for scheduling the firstappointment and for tracking order status. Price-focused Emotionalistsrecognize that being unwilling to pay higher prices means forgoing certainconveniences, such as collection and delivery service, or being able tochoose a particular time slot.

1.9They explain the maintenance or repairs in

detail

2.1They immediately give me personal attention

when I come in

2.8

Service priorities

They only use original spare parts

... ... ... ... ... ...

0

-4

2

33

32

20

10

14

26

-2

-5

-7

-49

-29

-61

-1

-38

6

Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts





1.9Maintenance/repairs are performedquickly

1.9Repair shop is easy to contact by cell phone

or online

3.0

Service priorities

Repair shop picks me up and/or drives mehome

-3

0

-5

32

37

8

13

10

31

4

-4

8

-68

-21

-58

12

-24

-3

Service appointment can be made online or

via smartphone app 3.7 -12 -1 21 15 -1 -28

Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts


... ... ... ... ... ...

mobile 3.7 -13 -2 23 17 -5 -27





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30 | Study

Smartphones make communication easier via mobile Internet access andapps. The proportion of High-demanding Enthusiasts and Status-oriented

Youngsters with smartphones is particularly high. They are happy to use thischannel to exchange the necessary information with repair shops and makethe service process as convenient, personalized and innovative as possible.

Support

The picture is not much different for actual customer support. It's theService-focused Rationalists and High-demanding Enthusiasts who prizeintensive and individual support whether in the form of preferentialtreatment, express service or even house calls (where the work is carriedout at an agreed address). Price-focused Emotionalists and Cost-oriented

Minimalists put much less value on this kind of treatment.

52%I own a smartphone

Willingness to share data

Share1)

49 21-9 -25 8 -51

... ... ... ... ... ...



Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts

Deviation (%)2)Deviation (%)2) Deviation (%)2) Deviation (%)2)Deviation (%)2) Deviation (%)2)

,

2.4I get preferential treatment when makingan appointment

3.2They make house calls

(e.g. for tire changes)

3.3

Service priorities

Express service offered Finished inunder an hour

... ... ... ... ... ...

-8

-12

-9

28

14

10

18

18

19

3

7

10

-12

-14

-39

-18

-26

-15

Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts






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Satisfaction with the repair shop

Once again, Service-focused Rationalists and Price-focused Emotionalistsdisplay the largest differences here. The former are typically customersof OEMs/authorized repair shops and are basically satisfied with theirexperience. This is an indication that these players are the first to launchinitiatives toward improving their customer focus. Repair shop chainsand independent repair shops especially have some catching up to doin this respect, as their typical target groups, such as the Price-focusedEmotionalists, are clearly dissatisfied.

Readiness to switch repair shops and reasons why

Poor quality plus non-approved repairs are two key reasons customersswitch repair shops. Service-focused Rationalists and High-demandingEnthusiasts also switch frequently because the range of services offered istoo small: Both segments wish to receive additional services. By contrast,Price-focused Emotionalists and Cost-oriented Minimalists tend to switchmore for reasons of price.

1.68Quality of the work performed

1.73Personal support

1.78

Satisfaction with the repair shop

Customer's assessment

... ... ... ... ... ...

-1

-1

-2

17

19

16

8

8

8

-4

-9

-9

-31

-26

-33

6

5

3

Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts





1.67Poor quality of repairs/services

1.88The agreed-upon repairs/services werenot performed

2.62

Grnde fr einen Werkstattwechsel

Too few services offered

... ... ... ... ... ...

10

5

1

12

10

15

7

5

10

-8

-5

-2

-39

-27

-47

13

-13

11

Status-oriented

Youngsters

Low-involved

Traditionalists

Price-focused

Emotionalists

Cost-oriented

Minimalists

Service-

focused

Rationalists

High-demanding

Enthusiasts






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The segments and their specific requirements and wishes could scarcely bemore different from each other. Every aftersales service provider's customerbase contains all six customer segments to some degree. Although the firstthree groups can be found more often and in greater numbers at OEMsand OEM-authorized repair shops, repair shop chains and independentrepair shops cannot simply ignore them they too have members of thesecustomer segments in their customer base (or would like to have them). Andauthorized repair shops also count Status-oriented Youngsters, Price-focusedEmotionalists and Cost-oriented Minimalists among their customers. Goingforward, clear service differentiation and an individual approach to differentcustomer segments will therefore be essential for aftersales players ofall types.

3.5 Focus on customer segments two examples

To illustrate our survey results, we describe two segments in detail below.Of course, in practice these consumer segments would be further refinedfor specific brands or automakers. They can then be used by the companyin question for sales and marketing. For example, the company can meetcustomer needs better, put together appropriate service packages, traincustomer service call center staff and choose the right communicationchannels for specific customer groups

3.5.1 High-demanding Enthusiasts

They like new cars, are proud of their vehicles and are typically OEM customers:

High-demanding Enthusiasts at a glance

CAR/SERVICE USAGE

9

20

3227

12

8

4348

Vehicle age [%] 4

New vs.used vehicle

New vehicle: 67%

SOCIO-DEMOGRAPHICS

Age [%]

45-54 55+25-34 35-4418-24

38

Brand distribution> Premium: 36%

> Non-premium: 59%

HIGH-DEMANDINGENTHUSIASTS

17%

Male/Female: 62%/38%

Avg. household income: Very highAvg. household size: 2.8

Education: Mainly university degree (40%)

< 3 3-9 > 9

3


Repair shop loyalty [%]

12

21

24

16

14

9

Used vehicle: 33%> Economy: 5%

Provalues

Status

Trendiness

Protech

Antivalues

Simplicity

Total Cost

> Vehicle considered as status symbol

> Proud of the car

> Care about the brand and the look of the car

>Joy of driving and special equipment is very important

> Interested in technical details and trends

> "Cars are my hobby"

> "I know a lot about cars"

EMOTIONAL CONNECTION TO CAR

> Strong maximalist profile

> "Status", "Trendiness" and "Protech" in focus

> Low importance on cost orientation and values like "Simplicity"

and "Society & Nature"

PROFILER VALUES

Residence: Evenly split between city a. countryside (70%)

Years

10

Repair shop usage

> Authorized: 66%

> Express shop/chain: 8%

> Independent: 25%

> Gas station: 1%

Spare part usage

> Original OEM parts: 54%

> Other brands: 40%

> No-name parts: 4%

> Refurbished parts: 2%

xx Segment size


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34 | Study

A typical High-demanding Enthusiast:

Dr. Alexander Waldenfels is 38 years old and lives in Munich. He drives a BMW 5Series that he bought new four years ago. It is very unlikely that he would ever buya used vehicle. In fact, he's currently considering buying a new premium model.

Alex, as he's known to his friends, is driven by "progressive" values. Performanceand hedonism are equally important to him. In terms of the RB Profiler values, herates Status, Technology and Trendiness highly.

Alex loves his car. He sees it as a status symbol, and all the technical extras and thedriving experience are very important to him. He thinks of himself as a "car guy" he's always up-to-date on the latest developments in the automotive market. Infact, he often gives his family and friends advice about cars. If his car needs serviceor some work done, he prefers to go to an authorized dealer: OEM parts are a mustfor him.

Alex is prepared (and financially able) to pay top rates for top service. In return,he expects a lot from his repair shop ideally he would like them to exceedhis expectations. Convenience is very important to him, for example 24-hourcustomer service, fast, reliable processes and extras such as VIP treatment. He likesthe service he receives to be personalized and is happy to provide the necessary

personal information and vehicle data online if necessary (he has his smartphonewith him at all times). For customers such as Alex, market players should provideexclusive, innovative service packages.

What do High-demanding Enthusiasts drive? Very new premium cars, with a clear

preference for German brands

-24%

69%

95%

-3% 19%

13%

9%

9%

Deviation from average across allsegments [%]

Share of brands withinsegment [%]

4

4

3

5

Avg. vehicleage [years]

> Segment drivesvery new premiumvehicles

HIGH-DEMANDINGENTHUSIASTS


-12%

-11%

-34%

8%

36%

-

3%

3%

4%

4%

7% 4

3

4

6

3

brands have adisproportionatelylarge share


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3.5.2 Status-oriented Youngsters

A typical Status-oriented Youngster:

Melanie Gause is a 28-year-old who lives and studies in Berlin. She drivesa Peugeot 106 that is almost 11 years old and is unlikely to be buying a newcar in the near future. If she did buy one, it would be a used vehicle for sure and definitely not a premium brand. With financial help from her father,she could possibly stretch to a VW Polo.

Melanie's values are what we call "emotional". In terms of the RB Profilervalues, she rates Thrills & Fun and Trendiness as important and wants toachieve a certain status. She wants to do something with her life, but having

fun is her priority at the moment. She doesn't have a lot of cash so most ofher purchase decisions are driven by price.

If she has a problem with her car something that has been happeningmore and more often lately she goes to a small, independent repair shopand tries to keep the price as low as possible by choosing no-name spareparts, for example. Right now she is happy just to have a car at all.Later she plans to drive a more impressive model, a real status symbol.

They value status, but tend to drive older used cars

Status-oriented Youngsters at a glance

03

16

3843 60

32

8

11

New vs.usedvehicle

New vehicle: 25%

45-54 55+25-34 35-4418-24 Years

28

Brand distribution

> Premium: 12%

> Non-premium: 85%

STATUS-ORIENTEDYOUNGSTERS

17%

Male/female: 41%/59%Avg. household income: Very low

Avg. household size: 2.2

< 3 3-9 > 9 Years

4 CAR/SERVICE USAGE

Vehicle age [%]

SOCIO-DEMOGRAPHICS

Age [%]


9

14

14

18

13

Used vehicle: 75%> Economy: 3%

Status

Thrills & Fun

Trendiness

Simplicity

Quality

>Try to look after their car themselves

> Care what the car looks like

> See car as potential status symbol

> Progressive hedonism as main focus e.g. ,

and

> Cost orientation as additional driver

> Comparably low importance of traditional values like

and

Education: Mainly high school, 23% still students

Residence: 50% live in a big city

Werkstattnutzung

> Autorisierte: 30%

> Express-Werkstatt/-Kette: 1 6%

> Unabhngige: 53%

>Tankstellen: 1%

Ersatzteilverwendung

> OEM-Originalteile: 31%

> andere Marken: 50%

> No-Name: 15%

> berholte Teile: 4%

xx

27

Repair shop loyalty [%]

Provalues

Antivalues

EMOTIONAL CONNECTION TO CAR

PROFILER VALUES

Years

10

Segment size


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36 | Study

Melanie can't afford any special services from the repair shop, so herrequirements are average in this respect. The price is what matters to her.In principle she's interested in online and smartphone offers, but ratherhesitant to give her personal or vehicle details to a repair shop onlinebecause she doesn't really see the advantage of doing so.

For customers such as Melanie, players in the aftersales market shouldprovide low-price basis packages.

3.6 Six customer groups Present everywhere but largely ignored

As we have seen, using the RB Profiler and a sample of more than 1,500aftersales customers, we were able to identify six relevant service types

in Germany alone. These six segments are found to some degree in thecustomer base of every provider from OEMs to independent repairshops. Yet hardly anyone recognizes them as distinct groups.

Mid-class brands preferred: The Status-oriented Youngsters drive older cars

and often buy French brands e.g. Peugeot and Citron

24%

10%

10%

5%

Deviation from average across all

segments [%]Share of brands withinsegment [%]

13

11

13

9

Avg. vehicleage [years]

> Comparably oldvehicles

> Preference for-

Status-orientedYoungsters

43%

-15%

12%

21%

3%

3%

4%

4%

5% 12

12

10

13

9

-volume brands

-22%

-

43%

-5%

2%

-22%



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Most aftersales players have not defined clear customer profiles. Theyassume that understanding the various wishes and requirements wouldinvolve too much effort and complexity. But even differentiating betweenprivate and commercial customers is already a step in the right direction.Simple approaches can increase customer satisfaction: Many privatecustomers still choose their repair shop based primarily on the perceivedprice, whereas corporate fleet operators often go for those that offer thebest technical skills and greatest convenience.

Aftersales providers will only improve customer satisfaction and loyaltyover the long term if they address the various customer groups in asprecisely targeted a way as possible. This is true for OEM-authorizedrepair shops as much as for independents.

Our study reveals the six customer segments in the aftersales business.We take an overview of the market and create an optimal basis fordeveloping individualized approaches. Every provider can analyze its owncustomer base using a company- or brand-specific segmentation, and thensort it into meaningful groups and figure out what it means. This in turnprovides the foundation for a targeted mix of offerings, very close to ourideal solution of micro-marketing.

After a brief look at current practice, we will show you what actionindividual aftersales players can take and how Roland Berger StrategyConsultants can help.


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38 | Study

4. Current practice: Today's repair shop

We met with aftersales players at all distribution levels to discuss currentmarket developments and how they could differentiate their productsand services. These discussions covered new approaches that are alreadyunderway as well as untapped potential. We talked to a wide range ofaftersales players: Premium OEMs such as BMW and Jaguar Land Rover,

volume manufacturers such as Hyundai and VW, various kinds of repairshop concepts such as Bosch Car Service and Euromaster, and intermediaryplayers such as TV Nord, AutoScout24 and mobile.de.

A selection of our interviewees:

Even though most players don't segment their customers, there are stillenormous differences in performance and services offered by OEMs,authorized repair shops and independent repair shops/repair shop chains.They have only one thing in common: All of them need to approachcustomers in a more targeted way.

Our discussions clearly confirmed one point: A tailored range of servicestargeting specific customer groups will be crucial to these companies' future

survival.

4.1 Current service formats

Very few OEMs are able to retain customers whose vehicles are more thanfour years old. This means that they miss out on a sizable chunk of thehigh-margin repair business. These lucrative customers frequently migrate toindependent repair shops and repair shop chains. And over 60% of ownersof vehicles older than eight years no longer patronize OEM-authorized repairshops at all.


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4.1.1 OEMs battle for customers with older vehicles

This trend is not new. To counteract it, companies need service formatsthat better address the needs and desires of the various customer segments.Lower prices are not the only reason that people are going to dealer-

authorized repair shops much less often than in the past. It's also theuniform service provided to all the different customer groups.

A few OEMs have recognized these deficits and are attempting to tailortheir services to customer profiles and age of vehicle. These efforts involvenew formats intended to cultivate long-term customer loyalty.

A few examples are detailed below.

Mercedes Benz: Pilot projects with various service formats

Mercedes Benz's goal is to make each visit to the repair shop an "individual

service experience." Initial pilots have already kicked off in England, the US andGermany. For instance, in Reutlingen, each vehicle is scanned and the service

advisor receives all the information about the customer. Furthermore, the pilot

branch focuses on four clearly defined ser vice formats: "Hin & Weg", "Hier &

Jetzt", "Kl ipp & Klar" and "Hol & Bring". This makes it possible to tailor services to

the individual needs of customers. Customers select options depending on their

preferred level of convenience or budget and, depending on the format, are given

a replacement vehicle or can wait in the business lounge.

Independent repair shops are preferred by drivers of older cars

Where repair/maintenance work is done, categorized by vehicle age in 2012 [%]

40

60

80

100

Independent repair shops/chains

Do-it-yourself

Source: DAT-Report 2013

0

20

>8 years6-8 years4-6 years2-4 years


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In recent years, many OEMs have launched model offensives to gain afoothold in new niches of the vehicle market, or even to define new niches.This differentiation represents a major challenge for these manufacturers because now it has to carry over into aftersales, too. Where demand fornew products arises, new service requirements will also arise in parallel.

4.1.2 Independents position themselves as value champions

Over the past few years, independent repair shops and repair shop chainshave been continuously developing. They have raised their profile primarilythrough aggressive expansion of their branch networks and large-scale adcampaigns, which have helped position them as broad-coverage playersoffering better value for money. In doing so, they have distanced themselvesfrom OEM-authorized repair shops in customer's eyes.

The chains have two major advantages: transparent fixed-price offers and theoption of working for key accounts with multi-brand fleets. For independentshops, the trick is to offer the most important standard services consistentlyacross all brands.

Our customer segmentation approach is ideal for such providers because it isnot restricted to a specific vehicle type or brand but based on customers and

values. Integrated shops and chains can easily steer this approach centrallyand use it for all their branches.

It makes perfect sense for an independent repair shop or repair shop chain toshift its focus from brands to customers and customer groups. For example,

what does an independent shop need to do to attract and retain privatecustomers who have older vehicles and are Price-focused Emotionalists?

Professional players such as Bosch Car Service and A.T.U. offer loyalty cards,guarantees and flat rates that, consciously or not, support profiling of and bycustomers.


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4.2 Interview

"Each customer is different and would like a personalized approach"

We spoke to Walter Briem, Head of Service Germany at Audi, about service

differentiation, technical innovations in aftersales and which industries the

auto industry can learn from.

Mr. Briem, our general impression is that automotive aftersales are much

less customized for specific consumer segments than, say, new vehicle sales.

Why is that?

A personalized approach and meeting customers' individual needs is justas important in aftersales as elsewhere. Targeted approaches create lastingpositive experiences for customers. But you are right: New vehicle saleshave developed particularly strongly in this respect in recent years.

How important is customer differentiation at Audi?

Customer differentiation in aftersales is of enormous importance to us.Skilled, qualified service staff form the basis for an individualized customerapproach. It is also vital to maintain systematic contact with customers and

meet their needs with customized offers. The first step here is to hone yourCRM systems. However, few OEMs currently provide their dealers withsuch systems for aftersales.

Which OEMs do?

Those of us in the premium segment have reached a good level here. Manymanufacturers already enjoy good proximity to their aftersales customers orare in the process of setting up a close dialog with them. That's true for bothprivate customers and the large number of people driving premium companycars.

So is customer loyalty no longer a challenge for Audi?

I wouldn't go as far as that. We have to continually develop in this respect,winning our customers' loyalty afresh each day. More than 90% of ourcustomers with Segment I vehicles i.e. cars that are less than five years old and around 80% of those with Segment II vehicles cars that are betweenfive and seven years old use our Audi Service Partners.

You mentioned that you have a lot of corporate accounts. Does Audi

differentiate primarily between private and business customers?

No, no. But private and business customers do have different needs,which is reflected in our aftersales approach.


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In our study of consumers in the German aftersales market, we identified

the following six groups: Low-involved Traditionalists, Service-focused

Rationalists, High-demanding Enthusiasts, Status-oriented Youngsters,

Price-focused Emotionalists, and Cost-oriented Minimalists. Do you use

the same segments?

It's not clear if we use exactly those segments. But your segmentation isclearly based on criteria that are important for the automotive aftermarket.In the case of a premium brand such as Audi, customers have very highexpectations when it comes to service, while price is less of a factor thanin other segments. In return, they rightly expect outstanding service atevery point of contact with the Audi brand. Another thing that I personallythink is very important is that, although segmentation is helpful for creatingefficient processes, ultimately each customer is different and would likea personalized approach.

If you don't use this type of segmentation at present, what mechanisms

do you use to address your service customers' individual needs?

The key thing is to continually train your sales staff and increase theirsensitivity to customer needs. The moment a customer enters the repairshop, a staff member should ask him or her something along the linesof "What is particularly important to you today?" It's a very simple step,but a highly important one. We make a note of our guests' priorities in

their customer profiles so that our service staff can support them in anappropriate, personalized fashion. At the end of every visit to the repairshop, we ask them whether we were able to meet their expectations thistime in terms of the support we offered, whether they were made to feellike a valued customer, quality, clear processes and price. In the case ofcustomized support for key accounts, many of our service partners havespecial customer support staff who work exclusively with such clients.

And we currently have a pilot project in progress where specially qualifiedservice staff support private customers who own older vehicles anothergroup that we plan to serve better in the future.

How do you work with independent repair shops that offer original parts?

Our Audi partners support them and have specially trained staff to sell themoriginal parts.

Do you take a special approach to drivers of Segment II and Segment III

vehicles specific spare parts for older vehicles, for example?

Our philosophy is to offer all clients premium products, both original partsand services, at an appropriate price.


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What is your customer approach?

Our customer approach includes round-the-clock support by our servicecenter. That means that if you can't use your car, we provide you witha mobility solution immediately and at no extra cost. We don't havedifferently priced services depending on your "status" no gold, silver andbronze customers or anything like that and we have no plans to introducesuch a system.

So you don't differentiate services in the repair shop?

The technical quality provided by the repair shop and the repair servicehas to always be first class, for all customers and in all customer segments.That's why we also introduced our "Audi for Audi" program, which providesall customers with replacement vehicles in warranty and goodwill cases iftheir own car has to stay in the repair shop for more than an hour.

So where does customization come into it?

In the way we treat individual customers and their specific needs.

Can you give an example?

Usually, customers bring their vehicles to the repair shop and explain whatthey want to a member of the service staff. That is the traditional drop-off approach. Some customers don't have the time to drop off the vehicle

themselves and would prefer us to come and pick up the car and bring itback afterward. For them we are currently testing an alternative system thatuses new media, for example. Customers can communicate with the repairshop via smartphone or tablet and supply all the details needed, even if theyare at work or on the road.

That sounds great if a l ittle futuristic.

This type of communication is set to take off in the future. Soon, our comingout to pick up your car will be the rule rather than the exception, part ofthe basic service we offer to all customers. Communicating with customersthrough all channels i.e. a multichannel approach is very important. At

Audi we are highly focused on the new types of media. We are currently

working on a number of ideas aimed particularly at the younger generation.For example, with some of our partners you can already book repair shopappointments online.

What are the biggest hurdles to service differentiation in your view?

There are several. First, if you want a customized customer approachyou need a holistic IT or CRM system. We're making good progress here.Customer dialog is also very important in today's increasingly digital world.


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Do you mean personal customer communication is on the way out?

No what I mean is that the nature of personal customer communicationis changing, for example because of new media.

Finally, which other industries should the auto industry look to in order to

learn about service differentiation in aftersales?

The aviation industry is definitely a leader here. Aviation was the firstindustry that created incentive programs for its customers. Another modelis the hotel industry, where premium players have been very successful bytreating customers in a personalized fashion, providing them with beyond-the-ordinary levels of service and using a wide range of "appeasements"

where necessary.

Walter Briemis Head of Service Germany at Audi. Audiis part of the Volkswagen Group and one of the three bigproducers of premium vehicles in Germany, alongsideDaimler and the BMW Group. In 2012 Audi sold 1.63million vehicles and recorded earnings of EUR 48.8 billion(company's own figures).


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5. Sustainable strategies for aftersales players

There are many different types of offers by the various repair shop formatsat the customer interface: VIP or budget offers, key drop-off or activeinvolvement, fast-lane or airport service, pick-up and collection or receivingstations in city centers, all-inclusive service contracts or remanufacturedparts. Going forward, aftersales players must cover all of these options in abetter way. They have to put together meaningful combinations of serviceproducts out of the myriad options available in order to best tap the marketpotential and satisfy their customers over the long term.

At some locations, "service factories" will ensure that vehicles are processedefficiently, cost-effectively and error-free. Mobile formats from other sectors

will also play a larger role. The data required for customized solutions iscontinuously improving. In addition to vehicle data, aftersales players haveaccess to an increasing wealth of personal information. More and morecustomers are willing to reveal information about themselves if this ensuresthem individual service.

In other areas, this phenomenon is nothing new. Amazon, fo

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Roland Berger Customizing Aftersales 20131120