Did Subaru dealership falsify customer surveys?

By David Barkholz, Crain News Service

SANTA ANA, Calif. (Feb. 26, 2015) — A suit filed by Subaru of America Inc. alleges that a group of employees at a Subaru auto dealership in California regularly gathered on their lunch hours to falsify customer satisfaction surveys.

The employees at South Coast Subaru in California had given the auto maker bogus customer email addresses so that the surveys would be sent to the employees — not the customers — to fill out, the suit claims.

If the allegations prove true, South Coast Subaru certainly went rogue in its efforts to boost customer satisfaction scores. But the tale is about far more than one dealership. Subaru's lawsuit highlights friction between factories and car dealers over measuring customer satisfaction at dealerships.

Reforms are under way at some auto makers, but the problems are a long way from being resolved.

Auto dealers complain that factory customer questionnaires are long and tedious and that the feedback from the forms is slow to get back to them, particularly in the Internet age of instant feedback.

And many dealers and auto makers complain that the forms are too easy for dealership staffers to game, undermining the validity of the scores.

But the scores remain important because many factories tie substantial bonuses to them. For example, customer satisfaction is a key component for General Motors Co. dealers to receive quarterly bonuses under GM's Standards for Excellence vehicle sales incentive program.

South Coast Subaru representatives did not return phones calls last week from Crain News Service seeking comment. A Subaru spokesman declined to comment beyond the details in the complaint.

That a dispute over customer satisfaction surveys made it to court is rare, industry experts said. Usually, disagreements are worked out behind closed doors, said Mike Charapp, an attorney who represents dealers at Charapp & Weiss.

Almost since the inception of the surveys years ago, dealers and auto makers have jousted over the appropriateness of dealers appealing to customers for top scores, he said.

In its complaint, Subaru alleges that in September during the investigation it found that two named and 10 unnamed employees of South Coast Subaru of Costa Mesa in suburban Los Angeles had provided Subaru with phony email addresses for dealership sales and service customers so the surveys could be sent to the employees.

The suit alleges that 224 surveys were filled out by those employees in 2014, thereby boosting the customer satisfaction scores of the store and resulting in bonuses not legitimately earned.

The employees had the surveys emailed to them when real customers' closing documents either didn't contain an email address or had an invalid one, the lawsuit alleges.

Prior remediation

The alleged actions constitute fraud, the suit said, and would put South Coast Subaru in violation of its dealer agreement with Subaru. The car maker is asking for unspecified repayment of dealership bonuses plus damages.

The civil lawsuit was filed Feb. 6 in U.S. District Court for the Central District of California, Southern Division, in Santa Ana.

According to the suit, South Coast Subaru had been put on a remediation program by Subaru in November 2012 for failing to maintain sufficiently high customer satisfaction scores. It exited that program in 2013 after improving scores, the suit said.

Subaru discovered during its investigation that the employee-intercepted surveys had been sent from an Internet Protocol, or IP, address located at South Coast Acura, another dealership owned by South Coast, the lawsuit alleges.

Any dealership returning customer satisfaction surveys from a single IP address is sure to be quickly found out, said Chris Travell, vice president of strategic consulting at MaritzCX.

The firm is a U.S. leader in sending out and analyzing customer satisfaction surveys for the auto makers. MaritzCX contacted 160 million U.S. customers last year for sales and service transactions at the dealerships of GM, Ford, Chrysler, Nissan and others.

The filters built into the data-collection software will flag surveys being returned from a single IP address or a handful of in-store addresses, Mr. Travell said.

Reform-minded

Moreover, it's a myth that auto dealership salespeople heavily influence their customers to provide good customer satisfaction scores with pleas that bad scores will result in their firing, Mr. Travell said.

Last year, MaritzCX studied the attitudes of consumers on the matter for an unnamed auto maker, he said.

The study found that just 3 percent of consumers queried said they were influenced in how they filled out their surveys by what a salesperson told them, he said.

Several auto makers are looking to reform their customer satisfaction surveys by making them shorter and adding an opportunity for consumers to write a narrative review of their experience rather than being stuck with multiple-choice questionnaires.

GM, for instance, in January rolled out surveys with 10 questions and space for comment to some customers.

The shorter form is expected eventually to replace the 20-question surveys it has traditionally used. MaritzCX is the survey vendor for the GM brands.

Not only is it expected that short-form surveys will get back to factories and dealers quicker, but the short forms also are more difficult for salespeople to coach, Mr. Travell said.

Lawyer Mr. Charapp said he'll have to see a lot more evidence in the Subaru case before making any judgments about the dispute.

He did note, however, that a court finding of fraud against a dealership could be grounds for terminating a franchise agreement while poor customer satisfaction scores are not.

Mr. Charapp said enough experts question the statistical validity of survey scores that courts are reluctant to make them the sole basis for disciplining or terminating a dealership.

This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.