In the annual awards, hundreds of dealers voted for their favourite suppliers, as well as marking their manufacturers in 13 categories.
The survey was confidential, so we were confident that dealers were telling us the true state of the market. Out of the 28 manufacturers featured in the Power survey, Peugeot languished in 25th place – down 11 places from a year ago – while Citroen showed an improvement of eight places but was still only 17th.
Car Dealer was invited to meet with a high-power panel comprising:
- Arnaud Leclerc, the deputy managing director of Peugeot Citroen Automobiles UK and the DS brand development director in the UK
- Neil Moscrop, brand director of Peugeot UK
- Bek Hassan, brand director of Citroen UK
- Stuart Hodge, director, quality and network development
- Richard Dyson, director, parts and service, and
- Andrew Didlick, director of communications, events and partnerships.
Why, we asked, are your dealers so unhappy?
They said they were disappointed with the results, but there were mitigating circumstances.
We were told: ‘If you look at the profitability for the past four years, it has improved every year. Turnover is up, and profitability is up, and customer satisfaction is improving. We wouldn’t describe them as “very unhappy” – everything is relative. The retail franchise motor trade has been through a very, very positive period of results – Lookers and everyone is posting record profits. I just don’t think it’s an unhappy place to be.
‘One thing to bear in mind is that we have just gone through a quite significant reorganisation, and nobody likes change – and we know that has had an impact on them.
‘We’re sure that hasn’t helped. We’re not absolutely sure the Power results are totally representative of our one-to-one relationships with our dealer network. Our relationship with dealers has been really quite good – yes, they’re challenging at times, but constructively so.
‘The fact is, our organisation has gone through some massive change. It’s very difficult for our dealers to have kept track, and as yet we haven’t communicated clearly to them what our structure looks like. We’ll be doing that very shortly.’ But they admitted that the Power results mirrored disappointing results in the NFDA survey.
‘We can apply the Power results to the NFDA surveys. We shouldn’t hide away from the fact the NFDA survey was incredibly disappointing and, as a consequence, we are sitting down to discuss what can be done, what can’t be done, and what might be the cause of that.
‘We’re planning a number of dealer forums to ask dealers to come along and sit down and talk to us honestly and openly.
‘We believe having that open dialogue will help us, if appropriate, to make changes around communication, and allow them the chance to share their views.
‘Seventy five per cent of our dealers are profitable, and reasonably profitable at that. We’ve just been through this reorganisation, we went through a reorganisation two years ago, and we went through a reorganisation two years before that. But with Peugeot we have taken the average new car profit per unit from £800 four years ago to above £1,200 today. We have a clearly-stated objective to get the average of our dealer network to 1.5 per cent return on sales. We think we are becoming more demanding as a brand. We have had product improvement and design improvement, and we want the same improvement out of customer service, so we are being more demanding of our dealer network. Inevitably, people don’t like it.
‘We have to think of the long-term ambition we all have, which is to improve our performance in the UK. The network is split into four quartiles – 75 per cent are profitable, they’re the ones who normally hit their targets and achieve the profitability and volume levels that are required. Inevitably, we have 25 per cent of our network who don’t. In the short term what we have to do is help that fourth quartile to improve. How many of those 25 per cent will be with us in two years’ time? Hopefully most of them, because we want to improve them.
‘It’s great to be talking about finding new dealers, but it’s a real challenge. We work with what we’ve got and what we know – working with people who understand the brand and the philosophy is the easiest way forward. Inevitably, we won’t be with all of them in two years because that’s not the way it works – some people will naturally fall away, some don’t have succession plans and will depart from the industry, and we will bring some new people in to replace those people.
‘Our ambition will be to retain our network – they buy into our brand and our heritage and where we want to go.’
But, they said, the ultimate sanction for dealers who do not improve was to terminate the relationship – and that has happened several times in the past few years. They discussed that openly at the meeting – and other issues.
The dealer academy
‘We need to focus on the people within the business. The Peugeot franchise definitely needs to catch up a bit in how we work with our dealers and to invest in the coaching and training of their staff, in sales and after-sales. We have put a lot of investment and work into developing the academy, our training arm. We have reshaped all our courses, to make them more customer focused.
‘We have moved some of the margin structure into training, which probably isn’t a great idea for any NFDA surveys, but it is the right thing to do. I’m not sure how much we spend on it – it runs into millions of pounds a year. If we wanted to save money we would stop it today, but it’s clearly the wrong thing to do. We’re investing for tomorrow.
‘We actively encourage – we almost insist – that our dealer principals come on our training activities. We mystery-shop our dealers, and they absolutely appreciate having that as a tool to see what happens in real time in their dealership, and to make adjustments if they feel it’s appropriate. We do it via email, by telephone, and by a physical mystery shop.
‘We also call all customers who have come into the showroom but haven’t bought from us – we want to find out what stopped them buying; was it the product, the service levels, the ambience?
‘We have some very proficient dealers who clearly excel in the way they manage their customers. But overall the results are mixed. We have shared with dealers at our forums some very good examples and some of the less good examples. Some of them shock you and some make you proud and happy. But we are working with our network to improve. We’ll work with them on a number of measures – CSI will be one measure, profitability will be another, penetration into the market another, and we balance all that and highlight those we are not happy with, and ask them to come and have a conversation with us.
‘We try to manage and help them. If ultimately that doesn’t work, and we’ve tried very hard, we need to be adult about it and say it’s not working for either party, and we would be prepared to part company. We have done that in the past but it’s not our preferred route. We don’t want to lose partners, we want to do everything in our power to retain them. It’s a last resort.
‘We have terminated some Peugeot dealers – in the past two years, half have been mutual and half have been us. It’s an indication of how we work with dealers. While it is a last resort, at the end of the day we have improvement plans, for financial, after-sales, sales or customer service. We’ll work hard for a couple of years to try to improve a dealer, but at the end of the day it’s a business partnership and we expect to have a relationship with our business partners.
‘On the Citroen side, the initial results of the mystery shop have been very favourable, with something like an 80 per cent pass rate – so 80 per cent of our dealers are looking after customers well. Clearly we’re back to that 20 per cent who fall into that bottom quartile, and we hope through the next phase that those dealers will improve.
‘We have 185 Citroen dealers and 221 Peugeot dealers at present. We’d like to fill the open slots for both our brands – we have 14 available for Citroen and 20 for Peugeot.’
‘It’s an exciting time to be part of PSA at the moment, because as a group we are making a lot of constructive progress in terms of the three key objectives we have – that’s improving profitability, ours and our network’s, improving the quality of our products and improving customer service. Those three things link across Europe.
‘It’s about throwing the challenge down to our dealers to be as good as our cars – certainly, the market has recognised our cars have changed, and our challenge is to work with our dealers in a profitable, sustainable fashion to achieve market share growth while improving customer satisfaction growth based on the tremendous cars we are producing these days.
‘It’s an exciting time as we develop three dedicated brands. DS is important in the UK – this is the second biggest market after France, so for Europe it’s really key we clearly position DS on our long-term plan.
‘In the first quarter of this year, revenues were up and we feel we are back in the race. We’re really confident about the future – we have the best products we have ever had, and now we need to take it forward through our dealer networks. We’re excited about the next few years – we have a fabulous future, some great new products to come and some brilliant new products in our range already.’
The state of the market
‘The market has been interesting – it is very much driven by fleet and that is very strong, and the retail market is up, but moderately up. We feel the retail market will strengthen. The demand for the fleet market is a great sign for the economy, as that reflects confidence in the future. Retail is up on last year but moderately so. A lot of it happens at the end of the month – you can draw your own conclusions from that – but the market is strong.
‘The van market is really strong – it’s 20 per cent up this year and it was 13 per cent up last year. I think the biggest-ever van market was 370,000 units, and I think we’re going to get very close to that. We’re number one in Europe for van sales. This is good news for dealers. We don’t have a separate, unique van network – we distribute all our vans through all of our dealers, and all our dealers service van customers, which to me is a real strength. In general terms, dealers make more per unit out of selling a van than they do with a car.’
The PCP explosion
‘The reason the UK market has been so strong over the past few years is because of rentals and PCPs and personal lease.
‘About 50 per cent of Citroen customers are on PCP, while it’s 60 per cent for Peugeot. On DS, it’s closer to 90 per cent.
‘Honda say their penetration is around 85 per cent – and we know they have restricted the offers dealers can make – but we can’t see that. Look at the profile of the market – PCP isn’t for everybody. If you look at the more mature drivers who like ownership, they are definitely more into instalment credit and nought per cent, and so on.
It’s unrealistic to expect that 80 per cent of the market will go for PCP. We think our 60 per cent is a good benchmark, but it’s unrealistic to expect too much more than that.’
‘We are rolling out a new programme to help with the way we look after and manage our Citroen customers. It started in after-sales and will now move to the sales side of things. It’s about delivering a series of promises to our customers – for example, your car will be washed, we’ll get back to you within 24 hours if you have a problem, and it culminates in our Trip Advisor site, which we have cunningly called Citroen Advisor… It’s encouraging in that rather than just having systems and processes – which still sit in the background – it looks at the customer and says we will treat each one as an individual, which is critical to delivering a customer experience. If a customer wants to drop off a car at 10am and pick it up at 3pm and they need a vehicle that will carry two pushchairs, then we’ll recognise that, instead of saying, “So, you need a courtesy car, it’ll be a C1 and you need to organise your life around it…”
‘There’s an important balance between the product we offer and the experience we can give our customers that is tailored to their individual requirements. If you go to Sainsbury’s or Tesco, most of us spend fortunes in there and they never once say ‘Hello’ – they take your money, they smile and the next time you go there you deal with someone different.
‘We want a more personal experience as we realise that’s what customers want. They want to be acknowledged as an individual – they are spending a lot of money and we have to provide a feeling that individually they are important to us.’
Problems with DMS
‘One of the biggest single challenges manufacturers face with their dealer networks is the integration of systems. I think there are 26 different DMS systems in Europe, and as far as communicating seamlessly with a customer is concerned, as if the franchisee and car manufacturer were the same business, it’d be a lot easier if we had just one supplier and our systems could link seamlessly with dealers.
‘There has been an enormous amount of investment in the PSA group to transform the ability for us to communicate with customers in a seamless way, whether that be sales or service. I think we recognise customers are prepared to buy cars online today, and if we want to be in the market we must have systems that enable them to achieve just that in a sophisticated, customer-friendly, business way.
‘We guess the group will ultimately publish a list of the preferred DMS systems we want to work with. There has got to be data migration so when the customer comes in they feel as if they’re dealing with Citroen – not a Citroen dealer or Citroen the manufacturer, but Citroen.’