Service reliability – the key to improve customer satisfaction at HEAT Phat Tien 5

Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 1 TABLE OF CONTENTS LIST OF FIGURES ................................................................................................................... 3 LIST OF TABLES..................................................................................................................... 3 LIST OF ABBREVIATIONS.................................................................................................... 3 EXECUTIVE SUMMARY ....................................................................................................... 4 PART 1. PROBLEM IDENTIFICATION ............................................................................ 5 1.1. PROBLEM CONTEXT ...................................................................................................... 5 1.1.1. Overview of the motorcycle market ............................................................................5 1.1.2. Overview of Phat Tien Trading and Service Company Limited .................................5 1.1.3. Overview of HEAD Phat Tien 5..................................................................................7 1.2. SYMPTOMS....................................................................................................................... 8 1.3. POSSIBLE PROBLEMS .................................................................................................. 10 1.3.1. Unreliable service of repair and maintenance............................................................10 1.3.2. Limited infrastructures and facilities .........................................................................12 1.3.3. Uncompetitive prices .................................................................................................13 1.3.4. Insufficient support from employees .........................................................................13 1.4. MAIN PROBLEM VALIDATION .................................................................................. 14 1.4.1. Problem definition ......................................................................................................... 14 1.4.2. Problem existence .......................................................................................................... 15 1.4.3. Problem importance ....................................................................................................... 18 1.4.3.1. Risk of financial result decrease .............................................................................18 1.4.3.2. Negative WOM affecting the reputation.................................................................18 1.4.3.3. Decreased ranking in the annual assessment of Honda Vietnam ...........................19 1.5. POTENTIAL CAUSES .................................................................................................... 20 1.5.1. Limited infrastructures and facilities .........................................................................20 1.5.2. Limited capability of some technicians .....................................................................20 1.5.3. Lack of management and control...............................................................................21 1.5.4. Not strictly following the company’s procedure .......................................................21 PART 2. CAUSE VALIDATION AND SOLUTIONS ....................................................... 23 2.1. CAUSE VALIDATION.................................................................................................... 23 2.2. ALTERNATIVE SOLUTIONS........................................................................................ 25 2.2.1. The first alternative solution: Conducting a “Quality First” campaign .....................25 Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 2 2.2.2. The second alternative solution: Internal training and annual technical competition27 2.3. SOLUTION SELECTION................................................................................................ 30 2.4. ACTION PLAN IN ORGANIZATION ........................................................................... 30 2.5. CONCLUSION................................................................................................................. 35 PART 3. SUPPORTING INFORMATION......................................................................... 36 3.1. INTERVIEW GUIDE ....................................................................................................... 36 3.2. QUALITATIVE RESEARCH.......................................................................................... 37 3.3. QUALITATIVE RESEARCH FINDINGS ...................................................................... 45 REFERENCES ........................................................................................................................ 50 Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 3 LIST OF FIGURES Figure 1. Motorcycle sales in Vietnam of the five largest brands from 2011 to 2018 Figure 2. The organizational chart of Phat Tien Company Limited Figure 3: Customer dissatisfaction proportion of sales and service of Phat Tien from April 2019 to September 2019 Figure 4: Average service customer percentage of HEAD Phat Tien stores from April to September 2019 Figure 5: Customer satisfaction rate about Service of Phat Tien 5 and the company Figure 6: Reasons for dissatisfaction about service at HEAD Phat Tien 5 Figure 7: The updated cause-effect map with consequences Figure 8: Process of repair and maintenance service Figure 9: The final cause-effect map LIST OF TABLES Table 1. Human resources of HEAD Phat Tien 5 Table 2. General interview framework Table 3. Detailed interview questions Table 4: Action plan LIST OF ABBREVIATIONS HEAD Honda Exclusive Authorized Dealer HAUS Honda Approved Used Motorcycle Shop VAMM Vietnam Association of Motorcycle Manufacturers VNR500 Vietnam Report’s Top 500 Largest Enterprises CSI Customer Satisfaction Index KPI Key Performance Indicator CRM Customer Relationship Management PIC Person In Charge TQM Total Quality Management Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 4 Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 EXECUTIVE SUMMARY Vietnam ranks in the top list of the world about the number of people using motorbikes for daily transportation (1). The motorbike market in Vietnam is still on the growth trend despite the forecasts that it had reached a saturation point in the previous years. Infrastructure limitations and high taxes are the main constraints for customers to purchase cars. Hence, there is still a demand for a motorcycle type of transportation. Currently, the Vietnam motorcycle market is led by five leading manufacturers, including Honda, Yamaha, Suzuki, SYM, and Piaggio, primarily the new local electric motorcycle manufacturer of Vinfast, which makes the market much more competitive (1). Though, according to the recording of the Customer Service department, customers using the service division of Phat Tien 5 still feedback many complaints, which takes the highest portion of 17 percent of customers interviewed in after-sale service surveys, compared to 15 percent of the total six HEADs. Still, two percentage is not a small difference because it equals up to 80 more complaints per month than the average quantity of each HEAD, considerably the dissatisfaction ratio of Phat Tien 5 increased continuously by up to 4 percent in the recent months from July to September (Figure 4). This is the fundamental reason for the author to do more research to discover deeper the real problem and possible causes, then suggest suitable and feasible solutions to solve this problem and efficiently enhance the competitiveness of HEAD Phat Tien 5. The author uses several qualitative methods to implement this report namely in-depth interviews with heads of customer service department (Mrs. Ngoc), service department (Mr. Minh), HEAD’s service division (Mr. Viet); several customers and data exploration from reliable internal sources; and reference from theory literature of prestigious academic journals. Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 5 PART 1. PROBLEM IDENTIFICATION 1.1. PROBLEM CONTEXT 1.1.1. Overview of the motorcycle market According to records of (3) Motorcycles Data (3), an organization that tracks motorcycle sales worldwide, Vietnam preserves its position as the fourth largest motorcycle market in the world in 2018. Vietnam is ranked behind India, China, and Indonesia in terms of motorbike sales (2). The domestic market reached an eight-year high in sales of approximately 3.38 million bikes, including both local and imported vehicles (3). Vietnam market is dominated by five leading motorcycle producers, notably Honda, Yamaha, Suzuki, SYM, and Piaggio, which take more than 97 percent of the total market. Honda is the market leader in Vietnam, which accounts for 75.9 percent of the market share in 2018 and increase to 78.6 percent of market share in 2019, up nearly 3 percent. Sales rose to 3.39 million new motorbikes sold in Vietnam for the fourth year in the row last year (1), (3). Figure 1. Motorcycle sales in Vietnam of the five largest brands from 2011 to 2018 Source: Vietnam Association of Motorcycle Manufacturers (VAMM) 1.1.2. Overview of Phat Tien Trading and Service Company Limited Phat Tien Trading and Service Company Limited (Phat Tien) is a retail company established on January 10th, 1998, which trades and offers services of Honda motorcycles, sportbikes, and automobiles in Ho Chi Minh City, Long An province and Dong Nai province. Currently, besides the headquarter in District 11, the company owns six Honda Exclusive Authorized Dealer (HEAD) stores, two Wing Service stores, the first Sport Bike showroom in Vietnam, and three Honda Automobile Dealer showrooms, with a staff of more than 900 Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 6 people, and serves more than one million customers in Ho Chi Minh City and neighboring provinces (4), (5). Each HEAD has the function of genuine Honda motorcycle business, providing genuine parts, proper maintenance and repair services, and safe driving instructions. Over 20 years of operation, Phat Tien is considered as one of the leading motorcycle enterprises in Ho Chi Minh city and neighbor areas (4). Moreover, with the need to experience a variety of vehicles of customers, Phat Tien maintains its pioneer position by establishing the first genuine Honda Sport Bike Showroom in Vietnam that provides the latest Honda Sport Bike models with professional maintenance service and genuine spare parts. In addition to the breakthrough development of the system of motorbike stores, Phat Tien is gradually asserting its position in the Automobile Industry with three Honda Dealers following 5S standards of Honda Vietnam including Honda Auto Bien Hoa, Honda Auto Long An, and Honda Auto Saigon - District 2 with the function of providing the latest models of Honda cars and professional maintenance service, genuine parts and especially safe driving activities to every customer. By the end of 2019, Phat Tien is the only company nationwide to have an official retail distribution network of Honda's finished products from motorcycle to sportbike and car. Phat Tien is honored by Honda Vietnam in many awards and continuously ranks among the leading HEAD systems of Honda Vietnam. Especially, Phat Tien is honored to be in the Top 500 Largest Private Enterprises in Vietnam (VNR500) in the past 11 years (5). The company also pays great attention to community social activities via Tri Duc Charity Fund. Figure 2. The organizational chart of Phat Tien Company Limited Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 7 1.1.3. Overview of HEAD Phat Tien 5 HEAD Phat Tien 5 was established in 2008. This store is located at 406A Le Trong Tan street, Tay Thanh ward, which is a very crowded area of Tan Phu district to the western region of Ho Chi Minh city. Its opening ceremony marked a milestone in Phat Tien company's ten- year operating. HEAD Phat Tien 5 store has taken a significant portion of sales and service customer quantities of the company for many years up to now, with the complete human resources of 57 people with details as the following table. Table 1. Human resources of HEAD Phat Tien 5 No. Human resources Quantity 1 Store Manager One person A Sales Division 2 Head of Sales Division One person 3 Vice Head of Sales Two people 4 Salesman Ten people 5 Registration employee (Sales) One person 6 Cashier (Sales) Three people B Service Division 7 Head of Service Division One person 8 Lead of Technician One person 9 Vice-Lead of Technician Two people 10 Technicians 12 people 11 The lead of Spare Parts One person 12 Employees of Spare Parts Three people 13 Registration employee (Service) One person 14 Cashier (Service) Five people C Office & Support Division 15 Accounting Four people 16 Security Eight people 17 Cleaners Two people Total 57 people Source: Human Resource Department Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 8 1.2. SYMPTOMS To justify the existence of somethings abnormal in the company, the thesis author has researched secondary data from the company’s internal reports of the customer service department as well as the service department to identify the symptom for further exploration. Among over 700 Honda dealers nationwide, Phat Tien is the leading one obtaining the significant market share in Vietnam and the highest in Ho Chi Minh city. In the period in which the market expands less rapidly, Honda Vietnam takes strategic actions to focus on the customer satisfaction index (CSI) as their major factor in maintaining and develop customers from many competitors. Following the Honda Vietnam approach, Phat Tien also considers customer satisfaction as their top priority. While sales are the activities to generate short-term revenue for the time of customer's purchase only, service can create revenue and profits more sustainably for the longer term. Therefore, customer satisfaction about service quality should be the critical and strategic division for particular and severe concerns and investments from the company. However, the statistical data about customer dissatisfaction proportion of sales and service of Phat Tien from April 2019 to September 2019 consolidated by Customer Service department illustrates that dissatisfaction about service takes a significant portion up to 66 percent, as shown in Figure3. Additionally, HEAD Phat Tien 5 welcomes the highest quantity of service customers compared to other stores of the entire company up to 22 percent, as illustrated in Figure 4. Figure 3: Customer dissatisfaction proportion of sales and service of Phat Tien from April 2019 to September 2019 Dissatisfaction 34% 66% Sales Service Source: Customer Service Department Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 9 Figure 4: Average service customer percentage of HEAD Phat Tien stores from April to September 2019 22% 19% 19% 16% 9% 15% Phat Tien 1 Phat Tien 2 Phat Tien 3 Phat Tien 4 Phat Tien 5 Phat Tien 6 Source: Service Department Furthermore, according to the statistics data of Customer Service Department in the period of six months from April to September of 2020 as illustrated in Figure 5, we can recognize that the ratio of dissatisfied customers of Phat Tien 5 is 20 percent, which is higher by about five percent than the average of the whole HEAD system of 15 percent. Figure 5: Customer satisfaction rate about Service of Phat Tien 5 and the company Service Customer's Satisfaction of HEAD Phat Tien 5 Service Customer's Satisfaction of the Company 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 19% 18% 20% 18% 20% 22% 20% 81% 82% 80% 82% 80% 78% 80% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 14% 14% 16% 13% 19% 17% 15% 86% 86% 84% 87% 81% 83% 85% Satisfied Dissatisfied Satisfied Dissatisfied Source: Customer Service Department The above data analysis shows that dissatisfied customer about service of HEAD Phat Tien 5 is not only high in percentage but also significant in quantity, which strongly encourages the company pays more attention to decrease customer complaint quantity and improve the customer satisfaction of the Service segment rather than the Sales segment of HEAD Phat Tien 5. Besides, the quantity of dissatisfied customers about the service of HEAD Phat Tien 5 is the Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 10 highest in the whole company, so the customer’s complaints about the service performance of Phat Tien 5 will affect the most significant on the whole company’s service performance. In conclusion, a low customer satisfaction rate about service of HEAD Phat Tien 5 is a noticeable symptom that requires much more attention and substantial investment to improve the current situation from the management board of the company. The current motorcycle market becomes more and more competitive while the customers also demand and require a much higher level of not only product quality but also the service's quality offering from a retail store. Therefore, it is the critical importance for Phat Tien 5 to figure out what are the real problems and their causes to find proper and feasible solutions to achieve the highest customer satisfaction ratio of which they are capable. 1.3. POSSIBLE PROBLEMS Based on the above symptom analysis, the author implemented some in-depth interviews with the company’s managers of the related departments, the store’s senior and junior technicians, and several service customers selected randomly at HEAD Phat Tien 5 to discover reasons of the symptom from various perspectives as well as propose possible solutions for further steps. 1.3.1. Unreliable service of repair and maintenance Cristobal, Flavian, and Guinaliu (21) finalized that “Higher service quality generates higher customer satisfaction, and service quality and customer satisfaction determine customer loyalty”. Reichheld and Sasser (22) explored that “not only that loyal customers are likely to buy additional services spread positive word-of-mouth, and pay higher prices, but they can also improve the service efficiency due to the experience curve effect”. Furthermore, Oliver, Rust, and Varki (23) argued that “Customers' expectations are based on beliefs about performance from prior experience and communications about the product or service that imply a certain level of quality. When perceived performance falls short of customers' expectations, dissatisfaction results, and when perceived performance exceeds customers' expectations, delight results”. Mrs. Ngoc – Manager of the customer service department, stated that: “Every day, our department receives much feedback from customers via our survey activity. According to the survey result, customers often complain about the quality of repair and maintenance most, which takes about 60 percent of total service complaints, for example, there are some cases when customers came back home, and the motorcycles have broken again, and some other cases when a problem was prepared then another part of the motorcycle became damaged; hence the Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 11 customers thought that the technicians did not prepare or maintenance their motorcycles well. Time of repair and maintenance is quite long, especially in peak time on the weekends”. Similarly, Mr. Minh – Manager of the service department agreed: “As far as I am concerned, customers often complain about the quality of repair and maintenance, some customers said that the technicians did not ask the symptom of their motorcycle carefully.” and, “I think the most important problem is the quality of repair and maintenance because many customers complain about this problem, occasionally some cases are quite serious which requires us to solve more carefully.” Both senior and junior technicians of HEAD Phat Tien 5 – Mr. Dung and Mr. Quoc, had similar comments. Mr. Dung – a senior technician, told that: “The most popular feedbacks from the customer come from the quality of repair and maintenance, which means I do not completely solve the motorcycle’s defect, or one defect is solved, then another defect arises. I think this is the most important problem because quality is the top priority of the company. Besides, some customers feel annoying about waiting for a long time”. Besides, Mr. Quoc – a junior technician also added: “Normally, the customers complain about the quality of the repair. They asked me why their motorcycle had been repaired but remained the symptoms. In some cases, the inside parts need some time to match and run smoothly. In these situations, I explained to the customers, but maybe my explanation was not clear, so the customers still complained. I think the quality of repair is the most important problem because it affects the store’s prestige to customers. Besides, some customers complain about the long waiting time. As you can see, most customers come on the weekends, so there are lots of tasks. Sometimes time to repair for the previous customer becomes extended due to additional defects identified during the task, so after the customer will generally wait for a longer time.” “I think this is the most important problem because quality is the top priority of the company.” Mr. Tuan – a service customer of HEAD Phat Tien 5 also had the same statement: Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 12 “I think the quality of the repair is OK. Once after repairing, the symptom remained despite I had carefully checked before going home. On the next day, I went to the store to check again. Then they double-checked and solved the defect completely.” “Most of the times are about 30 minutes. Sometimes longer for about 1 hour. I think the time is quite long, but it’s fine because there are many customers and I wait in the room with an air conditioner.” Mrs. Lien – another service customer of HEAD Phat Tien 5 added: “I think the quality is good. Mostly I change lubricant and repair some small parts because my motorcycle is rarely broken.” 1.3.2. Limited infrastructures and facilities Bowers and Swan (24) confirmed that “tangible elements (physical settings, ambiance, layout, facilities, infrastructure) of the healthcare service encounter play a major role in judging the overall service quality”. Besides, Thai (25) stated that investment in good physical infrastructure could greatly enhance customer satisfaction from the provision of excellent outcomes of the service. Mrs. Ngoc – Manager of the customer service department, commented that: “Taking the smallest proportion is what the infrastructure, for example, the service waiting room is not spacious and comfortable, and some issues with the air conditioner, coffee maker machine, hygiene of waiting room or restrooms.” “Regarding limited service facilities and area, I think because the store develops so fast that the investment may not have adapted to fulfill the demand.” Mr. Minh – Manager of the service department also confirmed that “a few customers complain about the facilities and infrastructures of the store.” Mr. Dung – a senior technician, added that: “Quantity of motorcycle lift is limited compared to the number of customers, especially on the weekends, which makes it harder to repair for all customers at the same time.” Besides, Mrs. Lien – a service customer shared that: “The facilities are good. The waiting room is clean and fresh, with an air conditioner. The store offers some coffee. However, I think the service area is not wide enough”. Mr. Tuan – another customer also shared his opinion: Service Reliability - the Key to Improve Customer Satisfaction at HEAD Phat Tien 5 13 “The waiting room is not spacious. However, there is an air conditioner and some drinks to serve in the meantime. And I can observe the repair process through the glass wall of the waiting room, so it’s very convenient for me.” 1.3.3. Uncompetitive prices Phusavat and Kanchana (14) pointed six criteria, including quality, costs, delivery, flexibility, customer-focus, and know-how, have an impact on customer satisfaction in service providers in "automotive technical repairs, retails, and transportation and handling businesses”. Besides, Roth S and Bösener (26) figured out that satisfied customers are willing to pay more than the actual price, and vice versa. Mrs. Ngoc – manager of the customer service department, shared that “price of spare parts and fees of repair and maintenance is fairly high”. Mr. Minh – manager of the service department, also agreed that “several customers said that the fee of repair and maintenance and cost of spare parts is rather high.” Mr. Tuan – a service customer, opened up about his thinking that “The prices are a little higher than small repair workshops, but I think it’s reasonable.” 1.3.4. Insufficient support from employees Miguel, Edward, and Dick (27), and Gordon and Terrence (28) also agree that the friendliness of employees, the speed and accuracy of service, and the cleanliness of the infrastructure are the attributes affecting customer satisfaction. Moreover, Bagdare and Jain (29) recommended that the ability of the retailer to create unique and pleasurable events gives the retail store a distinctive image for identification and recognition. Mr. Minh – manager of the service department, stated that “some customers complain the technicians do not support them enthusiastically.” Mrs. Ngoc – manager of the customer service department, shared her opinion that “the technician’s attitude with customers is not good. For example, the staff was not friendly or enthusiastic.” Mr. Dung – a senior technician, shared a case study: “In some cases, the inside parts need some time to match and run smoothly. In these situations, I explained to the customers, but maybe my explanation was not clear, so the customers still complained.” In summary, according to results of in-depth interviews with the company’s managers and customers, secondary data as well as research of literature, the author identified four possible problems including unreliable service of repair and maintenance, limited infrastructures and facilities, uncompetitive prices, and insufficient support from employees.