Keeping Chinese customers happy

Chinese automakers are selling more cars than ever before. But Chinese drivers aren’t especially enjoying the experience. According to a new study from market research firm J.D. Power, Chinese satisfaction with the whole process of buying a new car — everything from the showroom to the salesperson — declined in the last 12 months. And those who bought local cars had the worst experiences: Only five Chinese brands made it into in the top 25 for overall sales satisfaction — in China.

That’s probably not the sort of statistic that keeps Chinese leaders awake at night. But it should, given that China’s manufacturing-based economy is rapidly transitioning into one largely based on services. As Chinese consumers become richer and more sophisticated, their expectations for quality of service are rising as well. Meeting those demands is going to require a fundamental shift of mindset across a whole range of industries, from cars to clothes.

For most of China’s commercial history, consumers have fully expected service — whether in a hotel or an auto dealership — to be terrible. Anything decent was a pleasant surprise, usually enjoyed only at the high end of the market. The issue wasn’t only cultural:

China’s state-dominated economy provided few incentives for businesses to cater to the needs of their customers. In a country where service is often equated with servility, that often resulted in customer-staff encounters that ranged between hostile and indifferent. Sales clerks could be famously haughty, while banks and hospitals — places where long lines are still legendary — became opportunities to put pesky consumers in their place.

China’s economic liberalization opened the door to changes. Five-star hotels and foreign fast-food restaurants brought customer-centric experiences to China’s biggest cities. For most Chinese consumers, though, price remained the biggest consideration when buying a product. That preference aligned with China’s low-cost manufacturing model: So long as Chinese brands competed as commodities, brand loyalty and expectations of service remained low.

Over the last half-decade, the model has begun to shift dramatically. Many Chinese manufacturers now make products that meet the high standards for quality that China’s increasingly worldly customers demand. Geoff Broderick, Vice President and General Manager for Asia-Pacific at J.D. Power, says he expects that the quality gap between Chinese and foreign-made cars will vanish “over the next two to three years.”

The key is whether Chinese car companies can create an equally good customer experience, too: “Closing that gap is important to the domestic brands if they want brand loyalty and future car purchases,” says Broderick. Right now, “loyalty is dropping,” and so are profits.

In 2015, 75 percent of China’s auto dealerships were unprofitable or just breaking even. Those that survive will have to focus on more than the quality of the cars they sell, which is increasingly uniform.

Compared to figuring out how to better machine an engine block, the steps required to improve service seem oddly prosaic. But they add up. Among the 23 metrics that J.D. Power used in its newest China Customer Service Index study were whether a car was returned to a customer cleaner than when it was dropped off for service (international brands did it 80 percent of the time compared to 60 percent for domestic ones) and — in a very Chinese twist — whether a massage device was available at the dealership (40 percent of the time for international dealers, 20 percent for locals).

It’s not just the critical automotive industry that needs to work on improving service. In 2015, Forrester Research surveyed 9,000 Chinese consumers on 60 well-known brands. Of these, 80 percent were ranked as delivering “mediocre” customer experiences, with retail and e-commerce scraping along the very bottom of the rankings. That’s a problem, but also a long-term opportunity for brands and businesses to begin differentiating themselves in a crowded market.

For example, Air China, China’s national flag carrier, has long set itself apart from a slew of anonymous airlines with a focus on high-quality service, especially in its business cabin, which it’s marketed quite successfully.

Replicating Air China’s success won’t be cheap or quick. Expensive training programs, much like those pioneered by foreign hotel and fast-food brands, will need to become a part of more industry cultures. Meanwhile, employers are going to have to work harder — and pay more — to retain the employees they’ve spent the resources to train. Finally, compensation and incentive programs will have to change.

Currently, many Chinese employers remain focused on selling volume, often without regard to the client. More will need to start evaluating — and rewarding — employees on how well they treat customers, not just on how many units they sell. That is, if they want those customers to come back.

*The author is a Bloomberg View columnist. He is the author of “Junkyard Planet: Travels in the Billion-Dollar Trash Trade.”

Adam Minter