Chrysler Frees Dealers to Please Buyers

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In an auto market more competitive than any in memory, the American automobile dealer is the locus of hope for many of the brands in the derby. Because of that, Chrysler has become the latest carmaker to plan an overhaul of how it works with dealers to get consumers to buy cars.

Chrysler is killing traditional dealer financial incentives for attaining documented “customer satisfaction,” as well as eliminating penalties for dealers who don’t build stores that meet the company’s requirements for physical facilities. Both have been sacrosanct elements of the playbooks for car brands over the years.

But Chrysler decided that the new era in the market calls for bagging its previous carrot-and-stick approach to its dealers and for letting dealers sink or swim based on their own approaches to winning the satisfaction of their customers. [more]

“If I sell you a vehicle and you’re treated well, you’ll become an advocate for me, and you’ll tell other people that I’m a great dealer and this is a great product,” Peter Grady, Chrysler’s vice president for network development and fleet, told Automotive News. “The same thing happens on service.”

Under Chrysler’s new Customer Service Initiative, the company will rely on customer surveys to measure buyer satisfaction but without assessing financial penalties for negative scores. It’ll be up to dealers to fix problems or make improvements suggested by the company’s surveys.

Jeep, Ram and Dodge brands finished in three of the bottom four places among mass-market brands in the definitive J.D. Power & Associates 2011 Sales Satisfaction Index study, which helped kick off the latest changes. Chrysler is testing the new approach with 11 dealers in Phoenix, with plans to roll out the program to its other 2,500 dealers by the end of the year.

One reason for Chrysler’s confidence in this new program is its surviving dealer body, which is in much better financial shape now than a few years ago. Until recently, Chrysler was still weeding out weak dealers in the wake of its 2009 rescue by Fiat and the U.S. government. Remaining dealers have begun to benefit from the company’s strong two-year run, in which sales keep increasing by double-digit percentages over the previous year, month after month.

Dealers have continued to be a significant part of the U.S. auto-distribution network, despite OEMs’ long-running attempts to squeeze them out structurally over time. Now that the traditional retail structure of the industry has been reaffirmed even in the digital age, it remains true that there are few better entrepreneurs around than an American car dealer who’s properly motivated.

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