Wednesday, March 11, 2015

Wholesaling With Wormholes
by Brian Steinmetz

Well, they’re not the same wormholes you saw in Interstellar, but these wormholes provide nearly instantaneous direct paths from your parts counter to the customers you are trying to reach. I’m talking about targeted digital wholesale marketing – sending customized email messages directly to the parts purchasing decision-makers at a dealership’s wholesale customers.


For years, automotive dealerships have used targeted digital marketing to reach out to their retail customers (“We were glad to have you in for an oil change last month! Come back for 10% off your next one!”). With some small adjustments, this technique can also serve dealerships that are contacting their wholesale customers (fleets, independent garages, or body shops). Unlike retail customers, individual wholesale customers purchase large volumes of parts, which means wholesale targeted marketing can yield significant returns.


But it needs to be done right. How do you create your strategy?


An effective targeted digital marketing strategy is typically part of a larger customer relationship management (CRM) initiative. However, the digital marketing provides a unique feature: the ability to directly track impact. This tracking takes the form of monitoring delivery rates, open rates, and click-through rates for your marketing initiative as a whole, as well as for each individual customer. Knowing which customers are actually opening the marketing messages will produce a list of hot leads for a counter salesperson to follow up on.


Electronic delivery also allows you to customize messages for different recipients. Your active customers could receive one message, thanking them for their continued business with a 5% discount on product line ABC, while inactive customers that you’re trying to recapture could receive different messages, like a 10% discount on another product line.



“Sounds great. But does it actually work?” Yes, it does. One automotive OEM that employs this wholesale direct digital marketing strategy consistently sees positive outcomes. For every month that these messages have gone out, roughly 7% of their “inactive” wholesale customer base (those that had not purchased parts in 90 days) came back to the dealership for their first parts purchase in a while. Active customers who received these marketing messages became inactive at a lower rate than others. Taking a larger view of the situation and evaluating the OEM’s entire wholesale customer base, the customers who received the messages purchased more parts year-over-year than customers who didn’t receive messages.


Bottom Line: Targeted direct digital marketing to wholesale customers has the potential to yield huge returns on investment, when paired with a well-planned CRM strategy. The ability to deliver to your wholesale customers a tailored message cheaply, quickly, and easily is one that we all can access; we just need to build a plan and then send a ship through the wormhole.


Tuesday, March 3, 2015

Service Lane Technology: Up Close or Impersonal? What Do Consumers Really Want?
by Meredith Collins

Do consumers really want Service Lane Technology? We examined this important question as part of a recent focus day on Service Lane Technology (SLT) solutions. During the day, OEMs and SLT providers discussed where the technology is headed. While researching this topic, we also held a focus group with customers who had been exposed to service lane technology, in order to gauge their perception of it. The general sentiment of this group – which consisted of people in their late thirties and older – was that SLT could be a good thing, but only if the dealership uses it properly. That is, these customers still want their interactions to be personal; they expect a certain level of human connection.


After watching the footage from the focus group many, many times, I realized that these people shared a common idea of what a service experience should be like, and how technology can help provide it. I understood their feelings – yet their concerns didn’t reflect at all how I feel about Service Lane Technology.


For example, they want their Service Advisor to know their name; to know their children’s names. I don’t care if my Service Advisor remembers me. They want hand-written MPIs, as this demonstrates a “personal touch” and “extra attention”. I want an MPI that I can easily read, preferably one printed from a computer and emailed to me. They think it’s rude when their Service Advisor fails to make eye contact, and instead focuses on entering information into his tablet. I don’t care if he’s paying attention to me; I want him to be paying attention to my car.


So, what is driving the difference between my expectations of the service lane and the focus groups’? Why is my view of technology and customer experience so different from theirs? The answer: a generation gap.


Millennials – which I’m going to define as anyone under the age of 30 – have come to view the customer experience very differently from the generations before them.


I think there are two key points here:
  1. Millennials don’t need, or even want, to have a personal connection while in the service lane. We aren’t necessarily looking for the MyGuy experience. Rather, we want our service or repair to be efficient and quick, causing minimal disruption to our lives.
  2. We are also significantly more comfortable with the use of technology. We grew up with it; we don’t remember a time when it didn’t play a significant role in our lives.
With this in mind, I think that SLT is the key to providing millennials with efficient, streamlined service. Think about it: I rely on my smart phone to complete several important tasks every day. I trust it to do my banking, pay my utility bills, order an Uber, repay friends for splitting an Uber, navigate around Boston, etc. These apps aren’t particularly new or revolutionary, but the point is that I actually use them. In fact, I am completely reliant on them. People in earlier generations, however, are less likely to trust the technology to make such important transactions.


This may explain the disconnect between reactions of different groups of consumers in the service lane. Millennials are more comfortable having technology replace old processes. So, not only will millennials trust SLT, we’ll be turned off by the failure to use it.


Our research into SLT has determined that it is undoubtedly the way of the future. Not long from now, every service lane will have some form technology, and the entire service process will flow smoothly from scheduling to check-in, to write-up, through the service itself, and finally post-service. The biggest unknown is how quickly dealers will adopt SLT.


Up to this point, they’ve been slow to make changes, as there is pushback from service departments that are comfortable with the way things are. I argue, however, that SLT adoption needs to be a priority for dealers. More and more millennials are becoming car owners and are choosing where to service their cars. Even though the older customer base may hesitate to trust technology in the service lane, an increasing customer population will expect it.


Bottom Line: The next generation of customers is here. We want dealers to have technology solutions in the service lane to make the time we spend there more streamlined and efficient. Lack of technology may mean lack of our business.


Tuesday, February 24, 2015

Is Driving Becoming “Passengering”?
by Ilia Gorelov

In-vehicle infotainment systems, autonomous vehicles, and Uber: What do these all have in common? They’re technologies and trends that are converging, slowly turning driving into “passengering”. What’s “passengering”? Well, it’s being a passenger: going from point A to point B, but not piloting yourself. We’re all slowly becoming passengers.


There are three elements contributing to this trend:
  1. The human need to remain “connected”, now being facilitated by our vehicles and making driving an inconvenience
  2. Our vehicles’ increasing ability to take over basic driver inputs like braking and steering, diminishing the role of the driver
  3. The rapid growth of on-demand taxi and ride-sharing services from providers like Uber which are providing increasingly cost-effective substitutes for driving
Let’s explore #1. People, with the help of technology, are slowly overcoming a challenge that has existed since the dawn of civilization: boredom (Link Here). We increasingly feel the need to remain connected and consume information. Waiting for a ride? Check your Facebook. On a boring conference call? Read your email. On a bad date? Tweet about it while he/she is in the bathroom. Multi-tasking has taken on a whole new meaning. Why not multi-task in the car?


Vehicles are becoming cogs in an ever-connected world, linking drivers to their cellphones. In many vehicles, we can now use voice commands to read and respond to emails/text messages, make calls, pull up directions, manage and play music, and get other information like news, weather, or traffic conditions. These features are useful and conveniently accessed through our vehicles – and they’re a safer alternative to using a phone while driving. But what’s the impact on the actual act of driving? Well, it’s almost becoming a secondary function. It’s an inconvenience. Why drive, or be bored, when you can spend this time doing other productive things? What if we didn’t have to drive?


This brings us to point #2. Autonomous cars are slowly becoming a reality. Many new vehicles now come equipped with features that can manage basic driving inputs: adaptive cruise control, radar-based brake assist, and intelligent parking systems, to name a few. Autonomous test cars have already been “piloted” on public roads in the U.S. and Europe. Further, in 2014 the U.S. Department of Transportation announced that it will begin taking steps to enable vehicle-to-vehicle (V2V) communication technology for light vehicles. V2V communication can help take today’s autonomous vehicle technology to the next level. Though we’re still years, if not decades, away from a world in which autonomous vehicles rule the road, we’re seeing that slowly but surely, the role of the driver is being diminished. Just take one look at the airline industry to see where we might be heading.


Finally, let’s look at point #3. There’s this new thing called the “sharing economy” in which “regular” people provide services or rent property to other “regular” people. If you’re going on vacation, you no longer have to stay in a hotel – you can rent someone’s apartment on Airbnb. If you don’t have time to run some errands, hire a TaskRabbit to do them for you. Need a ride? Call an Uber. Ride/car sharing is the fastest growing segment of this new economy. There are just so many vehicles on the road and they spend most of their lives parked somewhere.


So what the heck does Uber have to do with driving becoming passengering? Well, for one, services like Uber (UberX, specifically) provide a real, cost-effective alternative to car ownership, especially in urban areas. I own a car in Boston, but frequently use UberX to avoid the inconvenience of getting stuck behind the wheel in traffic, looking for parking, etc. When I look at the blue Uber coverage map of Boston, I begin to question whether utilizing UberX could actually be financially advantageous to owning my own car (after all, coverage extends well beyond Carlisle’s Concord offices). In fact, imagine that blue area expanding out from Uber’s 250+ cities across the world. How far can we really go in an Uber? Could I visit family in New Jersey by simply hopping in various Ubers across the eastern seaboard? Could I go cross-country? Sounds like an interesting idea for a documentary.


So how do these 3 trends tie together? Well, imagine a world in which a fleet of connected, autonomous “Ubers”, immediately available upon request, take you anywhere you want to go. As soon as you get in, your phone and personal preferences are synced with the connected vehicle and you’re alerted to the weather, traffic conditions, breaking news, incoming emails, schedule for the day, etc. You only pay for the time/distance travelled, or maybe you buy a “family travel plan”. Even as a self-proclaimed car guy, this sounds pretty convenient, efficient, and appealing. Maybe passengering isn’t so bad. Maybe I don’t even need to own a car. Well, maybe a Z06 for some weekend fun…


Bottom Line: As vehicles become more connected and autonomous, driving is taking a back-seat (literally) and the role of the driver is diminishing. Further, readily available and cost-effective ride sharing services are providing real substitutes to driving. Combine all of these trends and one day we’ll all be passengers.

Thursday, February 19, 2015

Managing Customer Service Satisfaction Is Easy: Make Them an Offer They Can’t Refuse
by David P. Carlisle

Customer service satisfaction is a subject with which we are all very familiar. So familiar, in fact, that we tend not to pay any attention to it, because we’ve seen it all. There’s nothing new.


Well, maybe we are wrong.


I, too, was a jaded been-there-done-that kind of guy until a few weeks ago, when I received a letter from my pickup truck dealer.


I had previously dinged this dealer in a survey when they tried to sell me an air filter double-netted to around $135 retail. The service manager called me up at 7:00 in the morning with hurt in his voice. He apologized, and we remained friends. That was over a year ago.


About a month ago, my daughter took the pickup in for routine service. The service advisor sold her a radiator flush – she accepted, because she trusts this dealership. Then, a few days after the service, I got a barrage of service satisfaction emails. I gave my dealer perfect scores and checked the box that it was OK to share with my dealer, but I commented on my dissatisfaction with the radiator flush. I was honest in saying that I was not satisfied, but knew that the imperfect scores I should have given would have proven overly traumatic to my dealer.


I never heard anything back from the OEM or dealer about my dissatisfaction. Hey, I gave it a shot.


Then, a few weeks ago, I received an offer that I could not refuse: my dealer paid for compliance. They sent me a $25 gift card as a token of appreciation for my “complete” satisfaction.


Let’s Take a Step Back:


I am used to:
  • “Stamps” on my repair order asking me for perfect scores.
  • My service advisor begging for perfect scores and telling me that his income would significantly suffer if they were to get anything but perfect scores.
  • An elderly woman calling me after my service appointment, reading from a script, and asking me if I was less than completely satisfied.
  • The letter from my service manager asking me to call him if I was not completely satisfied.
  • Filling out the dealers’ separate satisfaction survey that seemed designed to encourage score perfection.
  • Finally, getting a manufacturers survey at the end of all this.
  • And, of course, being positive that all this interference simply spoils the soup, rendering the satisfaction survey stupid.
However, I am not used to getting a gift card for $25 in appreciation of my deceit.
To me, the gift card was spot on. I do not have to be bribed to come back to my servicing dealer, but the $25 tells me that he is trying—really hard—to make the factory happy. My dealer’s service manager also wants me to be happy with his operation – he takes great pride in it, but he knows that he really cannot sustain perfection. The $25 is his way of “winking,” and thanking me for “perfect scores.” And, it has nothing at all to do with actual perfect satisfaction.


Bottom Line: The lesson here is that the millions of dollars OEMs spend on what seems to be completely bogus satisfaction surveys actually can make a difference. It is not about the scores themselves — we all know these are useless; it is about things like my dealer’s incredible act of creativity. My dealer chose to thank me for playing the game, rather than simply urging me to lie. Through this interaction, we winked back at one another. As a result of this, our relationship has been humanized, and I am still loyal. Well done.


Wednesday, February 11, 2015

Luxury Owners; No, They Just Seem To Be Difficult
by David P. Carlisle

We conduct a lot of owner survey research where people tell us about themselves by checking certain boxes. “How satisfied are you with Brand-X’s dealer experience?” They check one of five boxes, ranging from “Very Dissatisfied” to “Very Satisfied.” “Why are you dissatisfied?” They check one to three things off a list. We tabulate the results and profile cluster of dealers. But, still we wonder. Toyota teaches the “Five Why’s” as part of their Lean training. Ask “why” five times and you will usually get at what’s really going on. You can’t do that in a static survey. That’s why we have a focus group facility in our offices.


I recently moderated two very different customer groups. One was a group of typical Volvo owners. The other group was from BMW, Mercedes-Benz, Lexus, and Audi. Day and night. The Volvo group was composed of people who had made fairly clear lifestyle choices with safety as their core value.
  1. Why do you own a Volvo? I like it.
  2. Why do you like it? It drives well.
  3. What about it “drives well"? You know, it is the whole experience.
  4. Is there any part of the experience that sets Volvo apart? Sure.
  5. What is it? It is the safest car on the road and I value myself and my family.
Ok, it doesn’t come out exactly like that. But, you always will get to “safety” within the Five Why’s.


With “safety” as a unique core value, Volvo owners are pretty much OK with what’s offered up in the ownership experience. Do they mind waiting for service in the waiting room? No problem. Do they expect a loaner car or alternative transportation? Well, that stuff would be nice (and they do receive it), but they don’t sit and stew over it if it isn’t perfect. They chose Volvo. They get pretty much everything other luxury vehicle owners get, but they do not have the same feeling of entitlement or value dissonance.


That was “day.”


Time Out

Well, the Volvo Focus Group looked pretty good, … but it did not foot to the numbers. We expected higher-than-normal levels of customer retention from Volvo, based on what we heard in the Focus Groups. So, we decided to listen to a different “luxury” owner group that just consisted of BMW, Mercedes, and Audi owners.


Now to “night.”


I sat down with the other “luxury” owner group and frankly expected more from them. Each had spent a lot of money for their brand choice, and brand statement. They were entitled, and nobody’s fools. The following isn’t a direct transcription, but it captures the essence of this group.
  1. What are your expectations for alternative transportation? Just get me out of there as fast as possible. I am too busy to hang around the waiting room of my dealer.
  2. What are your expectations for the waiting room at the dealer? I don’t care about it; I never want to be stuck there.
  3. What do you think about going to your dealer for service outside warranty? You think I’m nuts? I never go back because their charges are exorbitant. I take my car to “my guy” in my town and I trust him.
  4. Why do you think the costs are exorbitant? Just look all around you at one of those ‘palaces.’ You know who’s paying for it? Me! Well, not “me” because I would never consider using them outside warranty.
  5. But, what if you were treated differently? What if the service advisor was also the technician and there was no handoff? I don’t care about that. Hmm. OK, it would be better. But, I’m not going to pay for those palaces!
Time Out

What’s the logic that connects happy Volvo owners with lower service retention to unhappy upper-luxury owners with higher service retention? I suspect that the logic tether that connects all this together is affordability. Volvo owners might stretch more to purchase their vehicles, justifying the stretch not as a brand statement, but as a precious investment in safety. Money is precious to this group and they tend to shop more outside the dealer to stretch their service dollar. Upper-luxury owners, especially those where the volume is at the bottom of the brand chain, love to talk about how much they pay for service, how it is simply outrageous, and how they won’t stand for it after warranty. Those at the top of the brand-chain simply don’t talk much about this sort of stuff … and are not likely candidates for a focus group. But, for all of them, time is more valuable than money. So, they tend to go back more often to their dealer for service simply because it is easiest and quickest.


Bottom Line


If one had struggled to create a beautiful architectural service solution, struggled to hire professional staff, struggled to have a perfect waiting area, and struggled to offer brilliant alternative transportation, … maybe even struggled to go beyond what you expect is expected … and all you heard was this whining … what would you conclude? You might conclude that these customers were difficult. Brats. And, you would be wrong. They just don’t value much the stuff you think they value, and are offering. For them, increasing service retention takes a different kind of currency. For Volvo customers, the “currency” for this barter arrangement seems to be perceived “affordability.” For the upper-luxury customer the realm’s coin seems to be “time.” It might just be that simple.


One Last Thought


I do not think it is uncommon to build a world that customers don’t want to live in. Ex-K-Mart shoppers don’t think much about all the work that went into their K-Mart shopping experience. They just don’t value it or like it. So, they go to Wal-Mart or Target where they get what they value. Lesson? Understand what your customers value and give it to them. Don’t dress up what you value and think it represents a fundamental truth.


Tuesday, January 27, 2015

Lean Inside a Parts Warehouse: Different Paths to Success Or Failure
by David P. Carlisle

For decades now, I have been fascinated with the Field of Dreams “build it and they will come” metaphor. I first heard it, obviously, in the movie where it sorta made sense in the context of fantasy. Next, Carl Sloane mentioned it as a reinvigoration strategy to motivate his partners in Temple, Barker, & Sloane (now Oliver Wyman) to grow the business. He majestically said, “Build it …. and they will come.” Carl was a god-like figure and that was all the Kool-Aid I needed to do his bidding.


To me, “build it and they will come” always recalls the phrase’s roots in a fantasy movie about a baseball game. This makes it a perfect metaphor when discussing business strategies. Some strategies are based in fantasy. Others are not.


That brings us to “lean”. Lean warehousing started at Toyota, and had no ties to fantasy. It combined Toyota’s approach to manufacturing with shop floor realities – largely interpreted by Tony Gomes (who now manages Honda’s NA warehouse operations).
Tony is the real thing – he talks with passion about the three lean building-blocks: process, tools & technology, and culture. Tony stresses culture.


I have argued with Tony for more than a decade, pretty much all in my head. Tony stresses each and every bullet in the culture box. With passion. I am not a purist and tend to stress the subset of bullets that work within each culture.


OK, back to the metaphor, “build it and they will come.” It is all about “it” – just what is “it”? I think Tony and I would agree on this: “it” is a combination of methods and tools that constantly evolves as a consequence of an organization’s culture.” “It”, too, reflects the organization’s culture, and “it”, too, evolves. “It” would be markedly different from culture to culture, reflecting different goals, values, constraints, and attitudes. I suspect that Honda warehouses, under Tony, look very different from the Toyota warehouses where Tony grew up.


Case in point, GM’s lean journey focused on productivity and quality, where they trudged a two-decade path from worst to best. You can see a plot of their progress in "The Story of GM’s 19-Year Ascent to Best-in-Class Warehouse Productivity.”


Looking inside a lean GM parts warehouse is very different from the inside of a Toyota, … or Volkswagen warehouse. VW made the climb up with a much faster pace than GM – the story is told in “Digging Deeper Into Lean at Volkswagen Group of America.”


Toyota, GM, VW, and, I suspect, Honda are all slaves to CI – continuous improvement. The only thing they might have in common is a touchstone lean graphic talking about methods, tools & technology, and culture.


Another approach to that lean field of dreams is to sloganize it. This left-most path in the above graphic is a corruption that can get all of our heads nodding and saying, “yeah, yeah, yeah.”


First, set your sightline on “lean” and announce that it is your strategy – “announce it and they will build it.” It is easy to imagine this as a top-down strategy of the George Patton variety. The marketing folks participate in a staff meeting, hear the new direction, and do what they do best: merchandise it.


Billboards everywhere. Electronic displays on the shop floor. Banners. Pages and pages on their web site. Slogans on business cards. And, pamphlets to be distributed to customers. These efforts usually stop short of specially printed books of matches.


This sort of lean strategy makes me feel uncomfortable. It reminds me of visiting a house where most of the art on the wall is of big-eyed children. What can you say?


Really, nothing. It is simply too embarrassing. And, that’s why it typically does not work. It is hard to criticize a soup label if you can’t taste the soup, or if the can is empty.


Bottom Line: If you’ve been staring at big-eyed children for a while, you might not be able to see very clearly, or assess where you are in the journey to lean. Here’s what you need to do:
  1. Look at your productivity and quality metrics versus a relevant benchmark group and assess if you are in the top (best) quintile or not. If you are in one of the bottom three quintiles, you probably are not a lean shop.
  2. If your people tell you that the benchmark metrics are irrelevant, then you probably are not a lean shop.
  3. If you suspect that you are in one of those bottom three quintiles and you see a lot of “big-eyed children” posters, slogans, and web-razzle-dazzle, then you probably are not a lean shop.
At this point, you have discovered that you are either on the journey to lean, or not. If you are not, get rid of the big-eyed children poster and merchandising. Then, get your head around the idea that lean is all about the nature and boundaries of your company culture, using appropriate methods and tools. “It” will not look exactly like anybody else’s lean derivation. In time, “it” will evolve to be your own statement of culture.


Tuesday, January 20, 2015

Outsourcing? Well, It’s Not So Easy Anymore
by David P. Carlisle

In 2015, we will be probing deeply into third party logistics (3PL), based on NAPB and EPB steering committee desires. We will be launching two 3PL surveys to the OEMs, conducting two different sessions at the conferences, and looking into the future with the Crystal Ball. Here’s a glimpse at some fundamental issues.


Twenty years ago, or so, was the heyday of parts outsourcing. Originally, an OEM’s most compelling reason for outsourcing was to support entry into new markets – e.g., Chrysler into Europe and Asia in the early 1990s. New markets were quickly eclipsed by new costs. Many who outsourced did so to reduce costs; variable labor cost reductions, headcount reductions, fixed facility cost reductions, technology investment reductions, and transportation cost reductions. If you started with bloated and inefficient warehouse operations, then it was easy to sit at a desk, and make outsourcing pencil. The big decision for OEMs was – “who” to outsource to.


The “outsourcers” (3PLs) were great marketers, but mostly had middling facilities and/or know-how. Greatness wasn’t essential for them to succeed back then; it was more about the razzle-dazzle. Mediocre warehouse operations could outperform the client’s operations and make the critical, original business case work. Once the parts operations had transitioned to the 3PL, it was essential for 3PLs to erase all the ways their clients could make comparisons. The 3PLs did not want to be held up to established standards. Razzle-dazzle.


  A lot has changed since then. First off, OEMs quite often found that life after outsourcing was not better. In a recent survey, only 46% of OEMs felt that costs were “better”; only 23% felt service was better. In fact, 31% felt service was worse. Well, that will wake you up in the morning.


OEMs found that continuous improvement of their own operations, as well as what they could see of the entire industry, was better. This is demonstrated in the 2004-2013 bar charts showing productivity and quality for over 100 OEM parts warehouses (insourced operations and outsourced). Over time, new methods, new technology, and new culture resulted in very significant improvements in productivity and cost. In many cases, the performance resulting from these improvements was better than the cost and productivity of 3PL operations.


Examining benchmark productivity for Europe, the numbers suggest that 3PLs have actually been losing ground in productivity; compare 2009-2014 to 2003-2013. In North America, outsourcing productivity gains seems to be on par with that of insourced operations. But, that’s not good enough. The real issues have to do with the rapidity of evolution, and the “big delta” one should get from outsourcing. OEMs are asking themselves, “Why bother?”


Decade-long 3PL contracts started to feel like the early days of a bad marriage.


Worse yet, the quality of internal operations has vastly improved, leaving 3PLs as high cost … and low quality.


Bottom Line: The razzle-dazzle doesn’t work anymore. Something else has to change. Over the past two decades, the OEMs have made plenty of changes … to such an extent that 3PLs and outsourcing simply do not pencil any more. The change needs to come from the 3PLs, if they are to survive. They need to leapfrog the evolution in practices adopted and experienced by their customers and potential customers. They need to offer “upper first quintile” cost performance and quality. They need to be measured, and measure up. They need to structure contracts that are unambiguous. They need to razzle-dazzle themselves for a change.