If VW values its customers, it needs to be a challenger not a champ

The company needs to regain its challenger mindset and think very seriously about customer retention in the wake of its unprecedented $15bn settlement with the federal government and US diesel owners.
Written by Jason Perlow, Senior Contributing Writer
If VW values its customers, it needs to be a challenger not a champ

Image: ZDNet

Last week, like many Volkswagen diesel car owners, I was notified by my class action representation that Volkswagen had negotiated a provisional settlement -- to the tune of nearly $15bn -- with the US federal government and class representatives.

By this fall, I will have the option of selling back the car, or I can have the car repaired with additional compensation.

I have a four-year-old Passat TDI SEL. I like the car a lot, but the calculation I received indicates it would make the most sense if I sold the car back and bought a new car.

At the rate this settlement is going, it looks like I'll have to go shopping for a new car this fall. Honestly, I didn't think I would have to do this so soon.

Despite being quite angry about the entire thing, I am relieved this saga is coming to an end. The conclusion appears bittersweet. My plan when I bought my car was to drive it until the wheels fell off -- perhaps 100,000 miles or more from now. Diesel engines live a long time.

Now, it appears increasingly likely that the car is going to be crushed, along with hundreds of thousands just like it. What a waste.

During the Fourth of July weekend, I cruised the local car dealerships to see what I might go for next. I have a few different brands in mind, and a handful of models are at the top of my list.

Two of them happen to be Volkswagen cars, the Golf R and the CC, both of which I'd have to spend a sizable chunk of money on (in addition to the settlement cash I'd be getting).

I'm annoyed about this entire mess. Livid, even. It would behoove me to take my money, walk away, and bring my business elsewhere. But I do like the company's cars, and despite everything, the cars are well-made and fun to drive.

This is the curse of being a Volkswagen enthusiast. You know these guys did something really, really bad, and you don't want to reward them for bad behavior, but you don't want to be an apologist either.

They did wrong us, big time.

But you can't help yourself from looking at new, shiny things. It's a sickness.

So, in addition to looking at their competition, I walked into my local Volkswagen dealership, Gunther, in Coconut Creek, Fla.

The dealership is considered to be one of the top-ranking VW shops in the country, in terms of sales and service satisfaction. They have their own little museum in there, as well as a big gift shop and a cafe.

It's a fun place to visit. Normally, I like going there, even if I have a service issue.

Look, I am not going to lie about the situation. I was confrontational. Very much so. It was probably close to 97°F outside, and the humidity was as thick as pea soup. We got drenched with rain, and we had just been to two other car dealerships that afternoon.

I was also trying to get over a bad summer cold. I was in a lousy mood.

I told the sales guy who approached me that I was a customer. I didn't buy my vehicle there, but I've had the car serviced there a number of times.

I told him I was a diesel Passat owner, and I was aware of the terms of the proposed settlement. I wanted to know if Volkswagen was prepared to retain me as a customer, because I just as easily could walk across the street after Volkswagen hands me a large check to buy a vehicle from Toyota, Lexus, BMW, or anywhere else.

Now, I realize a dealership is not the same as dealing with a car manufacturer. A dealership is a reseller that has a franchise. In many respects, these guys have been harmed just as much by Volkswagen as Volkswagen customers have, and a number of them have filed suit against the company.

And, if you look at the current NADA brand satisfaction rankings, these guys are very, very pissed off.

However, one would expect in situations like this that the company would be in discussions with its dealers in anticipation of the settlement, finding some way to reassure their customers that they will do their best to retain their business.

How would they do that? Any number of ways. Free extended service contracts and markdowns on new vehicle purchases, for a start. Special purchase programs for existing diesel owners.

At the very least, even if details are not yet known or finalized, send some sort of "mea culpa, we will do our best" message to customers who are in the same boat as me.

Customers are almost certainly looking at other brands right now because they know exactly what is coming.

But I didn't get any of that from the sales guy or from the general manager. The general manager told me he hadn't heard anything from Volkswagen since the proposed settlement was only posted earlier that week.

They don't know what buyer incentive programs are going to be coming in the fall, let alone for existing customers with diesels receiving settlements.

Okay. That's understandable. I know how big companies work when it comes to that kind of stuff. I work in technical sales, and when the fiscal year ends, you don't necessarily have full visibility into next year's programs sometimes for a few months.

I could also understand that dealers may have been prevented from directly communicating anything to do with the settlement to existing customers under the advice of counsel.

That hasn't stopped them from sending me emails just about every other week for promotions on new vehicles.

A heads-up and periodic communications would have been nice. "Yes, we're thinking about you. We know you might be considering other brands because of what is going on. We know you are probably very angry about this whole thing. We'll figure this out together, we promise."

Something like that.

But the general manager did something that totally floored me. He said that, as a customer, I should be happy with the "generous offer" Volkswagen is giving me, and it should be incentive enough to renew my relationship with them.

Say what?

I'm pretty sure the generous offer was not VW's idea. It was the federal government pointing a gun at their heads.

Look, I've been in large corporate sales for a long time -- for three major IT industry players. All of them have distinctly different styles of doing business, but I have never seen any of them say "you should thank your lucky stars we didn't screw you more... now renew your business with us".

I've had to deal with customer retention issues many times in the past at different employers. Sometimes, we did screw up, and we had to make it right to keep them. That might have meant eating into our profit margin to retain a contract or to sell new systems or services.

Or we might have had to chalk up a certain amount of consulting dollars for free. At one of my previous jobs, we called that "Blue Dollars". We spent a lot of Blue Dollars at that place.

Yes, I am aware of the $1000 "Good Will" package ($500 of which could only be spent at VW) I was sent shortly after the scandal broke. It doesn't make up for an over 20-percent devaluation of my car from book value, essentially making it impossible to re-sell unless I accepted very low-ball offers from potential buyers.

Volkswagen is going to be up the wazoo in Blue Dollars. If it is smart, it should be prepared to retain every single diesel customer, because if they simply just let them walk, the long term damage to their brand could be catastrophic.

This kind of thing has the potential to influence the buying decision of multiple generations of customers. What they do next will either secure their future or potentially sabotage it.

Volkswagen lost what has been termed "The Challenger Mindset". It's described in detail in Malcom Gladwell's ""="">

The book is all about how smaller, more agile companies -- the upstarts of the world -- are frequently able to defeat much larger, slower, heavyweight, established companies.

This is how their essential characteristics are defined:

Image: Medium

Volkswagen may have had The Challenger Mindset a long time ago, but that is not how it operates now.

Depending on what month it is, it's either the most or second-most profitable automobile company in the entire world, trading places back and forth with Toyota. So, they have a champion mindset now.

Indeed, that champion has received a few UFC-style punches to some sensitive areas, and he's got cracked ribs and took a knee shot to the groin. He's wobbling. He's not gonna keel over and get knocked out, but he is stumbling big time.

He's also been found guilty of shooting steroids, placing his heavyweight title into potential jeopardy.

Everyone outside the ring thinks he looks like a bum.

A challenger does not assume he has return business. A challenger attempts to win the business from his competitor and assumes his competitor is also trying to steal away his return business and does everything he can to prevent this from happening.

I've been learning a lot about this challenger vs. champion mindset in the last year or so, because my company is particularly fond about embracing it. It has impacted every aspect of our business.

We embrace The Challenger Mindset with every single customer we deal with, whether it is a legacy customer who has had our return business for decades, or if we are pursuing a competitive win.

We are hungry. We are humble. We are service-oriented. And we are urgent. That's not how we've traditionally done business, but that's how we do it now.

Volkswagen as well as its dealers need to get a chip off their shoulder and start thinking about this challenger mindset. It's not an easy thing to do -- if you are already a champion.

But champions can become bums in short order if they permanently stay in that mindset. It needs to internally disrupt. Volkswagen is way overdue for this.

These lessons are equally applicable to the technology industry. They are also applicable to the automobile industry, and they are applicable to any industry that has to deal with customers in any form.

Indeed, Volkswagen might have to spend a tad more than that $15bn to ensure a certain amount of customer retention. Yes, that's a very hard pill to swallow.

But it would be far, far worse to come off as callous now and let those customers marinate in exit mode. It is a long time between now and October, when the first buyback checks are expected to be cut.

What would help Volkswagen return to The Challenger Mindset? Talk Back and Let Me Know.

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