First of a two-part series
OAKLAND, Calif. (Oct. 20, 2000)—What do home repair specialists, auto service and tire shop owners and chiropractors have in common?
If you´re waiting for the punchline, there really isn´t one. The answer, however, lies buried in the buzz words "customer satisfaction."
Those professionals can be rated on the level of service they deliver in a particular market. Then, as the theory goes, based on how they score, consumers will either patronize that business, or run into the arms of a higher-scoring competitor.
That opportunity to rate service providers is being offered by a company that calls itself a "pioneer" of branded ratings services.
Ages ago, Texaco used to encourage motorists to trust their cars to the man who wears the "big, bright Texaco star." Nowadays, in this era of Internet immediacy, Oakland, Calif.-based ValueStar Inc. is hoping to present consumers with a similar level of trust as it rolls out its ratings program nationwide.
The company was founded in 1992 by Jim Stein, a business-to-business veteran who worked with local service professionals in various industries. One of his projects involved setting up specialized Yellow Pages directories targeted at the Asian and Hispanic markets.
Katrina Beglinger, chief marketing officer for ValueStar, told Tire Business that CEO Mr. Stein hatched the idea for the company on the premise that, aside from simply a directory listing, there´s got to be a better way to provide information of value to consumers regarding what other consumers say about a business.
What it boils down to is that issue of the t-word: Trust.
"In the research we´ve done, other than by word of mouth referrals, consumers don´t often trust the service industry," Ms. Beglinger pointed out. "Tires may be a little easier because a customer can see an actual product. But when you have a plumber or roofer come to your house, and you´re going to spend a lot of dollars on a repair, that´s a big trust issue."
Consumer skepticism abounds in service industries because a purchasing decision often is based on something as intangible as the plumber´s or auto service technician´s quality of work.
"If you have a company like ValueStar coming in and helping you make a decision," she added, "you can rest assured you´re making the best decision you can."
ValueStar´s emergence in Midwest and East Coast markets is just beginning, explained Peter Berbee, vice president of product development. A year and a half ago the company was only operating in California. It launched its new Web site in July, and has now begun rating service providers in other markets.
The company said it has already completed more than 670,000 customer satisfaction surveys in more than 350 industries, rating local service companies on their level of customer satisfaction.
How it works
ValueStar is focusing on service provider categories that encompass a pool of about 6 million businesses, including auto repair
Thus far, Ms. Beglinger said, the company has rated about 1 million businesses of various types by verifying their credentials, credit, finance, licensing etc. Its directories include firms as varied as construction, veterinarians, carpet cleaners, attorneys, auto dealers. Even funeral services.
In the automotive category, it has concentrated on tire and auto service and collision repair shops that provide a range of services such as air conditioning, brakes, mufflers, engine rebuilding and transmission work.
In the past, ValueStar sent a rep to an interested company which then provided its customer file of names and phone numbers. ValueStar surveyed those customers in order to set up a rating for the firm. Businesses earning an average customer satisfaction rating score of at least 85 percent or above were then awarded ValueStar certification and the right to use and display its symbol.
ValueStar´s customer ratings program is audited regularly by the research departments of San Francisco State University and the University of Texas in Houston.
For quick enrollment into the program, the company can conduct a phone survey of customers, at a cost of about $500. The information can then be put on ValueStar´s Web site.
However, with the expanded possibilities the Internet offers, ValueStar is in the process of building what Ms. Beglinger called a "proprietary real-time ratings transaction engine" where a consumer can go online, register and rate a transaction with a service provider. An e-mail will then be sent to the business to verify the transaction before that customer´s evaluation is included in any rating.
That ratings engine is more dynamic than a phone survey and produces more scalable results more quickly, she said.
While that system is not fully online and operational yet, the company expects a full-fledged consumer launch in the first quarter of 2001. It will, Ms. Beglinger predicted, drive more consumer traffic—and business ratings—to ValueStar´s Web site.
She described the real-time transaction rating system as a "closed loop" procedure, meaning a service provider can´t get scammed by someone saying something—positive or negative—about a business they´ve never used. A consumer must register at the ValueStar´s Web site before being allowed to rate a company.
Becoming a ValueStar "partner" entitles a consumer to a number of benefits, the company claims, including:
*Free mediation services—ValueStar will assist a consumer and business resolve a complaint.
*Satisfaction guarantee—If mediation fails, an unsatisfied customer will be paid up to $500 by ValueStar. But Ms. Beglinger said participating firms are so committed to the program "that we don´t expect to pay out a lot."
*A "Consumer Bill of Rights´´—Participating companies agree to guarantee such things as problem mediation within 48 hours.
*``SmartShopper´´—The company Web site said it provides the convenience of "one-stop shopping." Once a consumer narrows the choices of service providers, multiple companies receive an e-mail in which the consumer can articulate a specific need, request a bid or pricing information, availability of times, "and anything else that will help you evaluate these service companies." and
*ValueStar Rating Points—Each time consumers rate an authorized service provider after a transaction is completed, they receive reward points redeemable for products, services and travel.
What the symbol means
Back to that Texaco commercial for a moment. The "badge of honor" those gas jockeys wore was supposed to guarantee quality service from a Texaco station.
"Any time you see the ValueStar symbol, it means that business has had its credentials checked and stands behind the service it provides enough that it has given the power of feedback to its customers," Ms. Beglinger said.
Because ValueStar will list companies and often their competitors alike, she said the obvious goal is to get the highest possible ratings percentage. It´s "an incentive for companies to consistently provide the best level of service" as customers seek top-rated local service providers.
There is no charge to a company to have its credentials verified by ValueStar. But for a firm to sign up for the ratings program and receive a license to display the ValueStar symbol costs, on average, $1,200 annually. Or a business can opt to pay a transaction fee for every customer referral it receives from ValueStar. Both approaches average out to about the same cost.
Ms. Beglinger claimed ValueStar is the only company rating local service providers and "the only one offering online customer satisfaction ratings in real time."
There are, however, similar companies that rate service providers in a specific industry, such as icarumba.com for automotive service, or contractors.com, which connects homeowners with building contractors. She described those as "verticle" companies, while ValueStar is "horizontal" because it covers a wide variety of industries.
The company currently has a presence in eight markets across the U.S.: in Sacramento, Calif., Los Angeles, San Francisco, which is its largest market, Seattle, Philadelphia, Dallas, Washington, D.C., and Chicago.
It has service representatives there to call on businesses, sign them up for the program and provide support, Ms. Beglinger said. ValueStar also plans to do local marketing to drive consumers to its Web site. Twice a year, the firm publishes directories listing businesses´ ratings, and it also offers a quarterly update of new program participants.
One aim of ValueStar is to provide a "search tool" that helps shift feedback to consumers, Ms. Beglinger said. "All they have now is the Yellow Pages or word-of-mouth referrals—that´s often how they find a business."
Besides drawing consumers to its Web site, she said the company is pursuing deals with the top five credit card issuers in the country, and recently signed a marketing contract with a top-20 card issuer, First National Bank of Omaha.
ValueStar wants to peddle its program directly to card holders through mailings in their monthly statements. Card issuers and banks also could offer special benefits to consumers who patronize ValueStar-certified companies, she said.
How do ValueStar-certified companies value their ratings?
After logging on to the firm´s Web site, Tire Business accessed the company locator feature, typed in a local zip code, and pulled up about 20 auto repair establishments in the Akron area. Each listing bore the ValueStar symbol next to the business name.
But calls to several companies produced surprising responses.
The service manager at Viall Tire & Auto Service drew a blank about ValueStar and his shop´s presumed participation in it.
On the other hand, the dealership is listed on icarumba.com´s Web site, which rates auto service shops and promotes customer referrals to businesses. But Vial Tire is yet to see any benefits from that association, he said. "The only thing we get is quite a lot of (calls from) vendors, but no customers."
Despite a ValueStar listing for Gary´s Complete Auto Service in Barberton, Ohio, owner Gary Wagner said he has "never heard of ValueStar" and, if the company belonged to the program, "I guess I´d be the one to know about it."
At Munroe Falls, Ohio-based Hall´s Auto Service, chief technician and part owner Dave Hall vaguely recalled a customer mentioning a Web site that rates service shops. But Mr. Hall also was not familiar with ValueStar, even though his company was listed on it.
The most quizzical response TB received was from Mary McFarland, secretary treasurer of McFarland & Sons Auto Service Inc. in Akron. "We´re a repair shop. How in the world did we get in there (ValueStar´s listing)?" she asked. "We´ve never gotten involved in anything like that. Tell them to take us off that."
After noting that her shop doesn´t even have a Web site, Ms. McFarland added: "I think (ValueStar) should contact us if they´re going to put us on their Web site."
The reason some of the above shops may not have heard of ValueStar, the company´s vice president of product development, Peter Berbee, explained to Tire Business, is because the firm provides three participation levels: verified; verified authorized; and top-rated.
However, "in a lot of cases, we´ve verified the merchant," he acknowledged, "but they have not had any direct contact from us yet."