Monday, December 15, 2014

Big Data and The Future of Vehicle Diagnostics
(an excerpt)


Dealers pride themselves on the quality and accuracy of service they provide. They know that they are the genuine service option, and that their technicians are highly trained and supported by the manufacturer’s diagnostic information. Yet, industry-wide benchmarking indicates that some manufacturers see fixed-right-first-time (FRFT) metrics as low at 90% – one of every ten vehicles leaves the service lane without being fully repaired. Needless to say, this can hurt customer retention and brand loyalty. In fact, “My vehicle is fixed right the first time” was the fifth most important selection criteria for consumers in Carlisle & Company’s 2014 Consumer Sentiment Survey (Figure 1).

In Carlisle’s industry-wide Technician Survey, technicians estimated that they spent roughly one-third of their time on diagnostic work (Figure 2); in many cases this is billed directly to the customer. While this time is necessary to properly repair a car, it significantly reduces a technician’s efficiency. Vehicles are also becoming more complex; their interdependent systems require more advanced diagnostic tools.

In short, FRFT rates and technician efficiency won’t improve until diagnostics improve. Improving these metrics requires making higher quality and intuitive diagnostic tools/systems available to technicians. New big data analytics models, such as Artificial Neural Networks, could improve the speed and accuracy of repair identification immensely.

READ ENTIRE ARTICLE 2014 Big Data and The Future of Vehicle Diagnostics


The goal of improving existing diagnostic processes is to increase FRFT rates, enhance service capacity, increase customer pay sales, reduce warranty costs, and, ultimately, drive customer retention. This paper presents a big data approach that can successfully utilize the heuristic, “experiential” knowledge within the dealer network as an effective strategy to reach that objective.

At the enterprise level, the data would be particularly useful in identifying potential recalls based on systems and parts with high failure or error rates. The data would also stimulate engineering and service process improvements. For the supply chain, the data from onboard diagnostic feeds could be used to help forecast parts sales, predict demand, and anticipate forward parts deployment. These predictive analytics would help the OEM identify potential, impending failures, and notify the customer to get their car repaired before it even breaks. The information could also be used for targeted, timely marketing of maintenance intervals and regular service.

There are many barriers to overcome to achieve full implementation: integration of the data, its security, and its ownership. For this reason, Carlisle believes that this topic represents an area that could benefit from industry collaboration. A well implemented connected diagnostic process would improve not only our vehicles but the customer experience, technician efficiency, and shop profitability.

If you are interested in participating in this collaborative effort or have more questions please contact Chad Walker at

Monday, December 1, 2014

2014 Fall NASB: Express Service Metrics – A Recap
by Eliza Johnson

At our recent North America Service Benchmark (NASB) fall meeting, one of the key topics was Express Service Metrics—the tracking of performance metrics and KPIs related specifically to Express Service.

At this point, most OEMs either have, or are planning to implement soon, an Express Service program. As Express Service becomes more common, it is becoming an integral part of many dealerships and a way to manage dealer service business. However, the rise of Express Service also drives a shift in the dealer’s staffing strategy, capacity, and profitability model. As these programs both enable and require the dealership to handle service in a very different way, we need to look at them with a critical eye separately from the main service drive.

Most OEMs report that Express Service dealers perform better than dealers that do not offer Express Service. As such, they are tracking a variety of metrics to measure and assess these programs. Currently, most OEMs are focused on volume and customer satisfaction measures including number of ROs, sales volume, sales by commodity, and overall customer satisfaction. These are all fairly common and are being used to understand the level of Express adoption and whether it is making customers happy. Retention metrics are common as well, although these are all a little different (retention overall, by vehicle age, by commodity, etc.). Fewer OEMs are tracking profitability and operations/efficiency metrics. And while many OEMs have developed dashboards and other express-specific reporting tools, these help them manage the business at the dealer level, but don’t identify what is best-in-class.

As it stands, OEMs aren’t aligned in how they are tracking Express Service programs—and this lack of consistency means there is no coherent way to benchmark Express operations. Establishing a common set of benchmarks and gaining dealer and industry acceptance is critical to understanding the long term success of Express Service programs. And, in driving change at the dealership to best support Express Service, these standardized metrics need to be socialized and integrated into dealership processes (accounting, etc.) and training. The key here is to identify what is best-in-class for Express Service and what high performance looks like. To do so, we need comparable data. As a result, Carlisle spent time at the most recent NASB meeting rationalizing metrics to make benchmarking Express Service a reality

During the meeting, we discussed potential metrics in the areas of Volume, Retention, Customers, Satisfaction, Staff, and Operations. The goal was to confirm a small set (10-15) of metrics to be established immediately and discuss future additions. Below is a summary of the outcome and the initial set of measurements that will serve as an industry benchmark:

This represents a starting set of metrics, which most OEMs are able to track and agree are key to assessing and managing the Express business. As a starting point, this allows us to understand how Express volume compares amongst OEMs vis-à-vis standard repair service, the impact on the customer experience and retention, and staff productivity and consistency. While this is a starting point, it will be important to integrate additional productivity measures as well as profitability measures in the future—OEMs will need to lay the groundwork to collect the data necessary. Additionally, as these metrics become standardized, we can introduce segmentation to assess, on a deeper level, distinctions for vehicle age and type.

Bottom Line: Express Service is now an industry standard and OEMs believe these programs are performing well. However, there is little standardization within the industry regarding how to measure these programs. Assessing performance long term will require robust reporting and an established set of benchmarking metrics across OEMs. By adopting and measuring these metrics, OEMs can assess themselves and manage and track dealer improvement plans.

Monday, November 17, 2014

Hey, Maybe Being Good Is Great
by David P. Carlisle

We have been measuring parts manager satisfaction for about a decade now. We do it on a global basis for some OEMs, and pretty much have the entire North American auto market covered. In other words, our measurements represent nearly all automotive OEMs. Lately, the leader in U.S. overall parts manager satisfaction has been an Asian OEM that is noted for blistering excellence. Our satisfaction survey is not a public beauty contest, so we cannot share the names with you. But, we can share insights. And a fundamental, driving question:

So what?

Or, what’s so good about being a satisfaction leader?

The same OEM that is the perennial leader in U.S. parts manager satisfaction not only leads in overall satisfaction, but leads in many individual categories of parts manager satisfaction: order processing system, collision wholesale, parts availability, accessories.

And pricing satisfaction.

Most folks familiar with parts pricing find it intriguing and, at the same time, baffling. How do you effectively price 150,000 parts? How do you know whether you are too high or too low? How can you effectively measure pricing elasticity? (OK, you can’t.) How do you price to “competitive levels” when most of your parts are somewhat captive? See, these questions are both intriguing and baffling.

To be an effective parts pricer, you must listen to the market. This goes beyond the math and science – you listen to dealers. If they complain a lot, relative to the competition, you’ve got a problem. If they do not, you might have an opportunity.

The parts manager survey reflects the market. It is nothing more than a listening device. So, what are the dealers telling this best-in-class OEM? Up and down the line, dealers are saying that they are doing well. They might be saying (probably are saying) that, given how well things are going, “We are pretty happy with your parts pricing.”

Let’s consider parts sales for a big auto OEM – $2 billion in sales each year is pretty close to the median for these companies. Let’s assume that annual CPI parts pricing fetches you 3-4% of added sales; call it 3.5%. Next, let’s make a safe assumption that being number one in parts manager satisfaction will allow you to get 4.5% instead of the typical 3.5%. This is a very safe assumption. So, what’s the 1% worth? $20,000,000 annually. Twenty million. Twenty million that can be partially invested in processes and programs that will make life for dealers better. Like improvements to your order processing system, improved collision wholesale, higher parts availability, and more effective accessories.

Bottom Line: Parts manager satisfaction is not a beauty contest. It is the market speaking to us all. It is the market speaking to you. If you listen, you might find that it’s worth it.

Monday, November 10, 2014

Luxury Owners Don’t Want To Pay For The Palace
by Benedict Ko

We recently hosted a focus group with luxury vehicle owners who told us about their service experiences at both dealer and non-dealer service locations. What we learned about luxury owners and their decision-making process was surprising.

When I think of luxury owners, I think of people who are willing to pay more. They are willing and able to buy a first class seat, even though an economy seat performs the same function. They buy a name brand suit, when a no-name suit might look just as good. And, they are willing to pay for the luxury and comfort of a BMW or Mercedes-Benz, when a non-luxury car will perform the same functions for a lot less money. So, you’d think that when it comes to repairing that luxury vehicle, they’d also be willing to spend more right?

The answer: not exactly. Through our focus group, we discovered that luxury owners can be just as price sensitive as non-luxury owners when it comes to maintenance and repairs. In particular, the luxury owners we spoke with are sensitive to the perception of higher cost, regardless of the added comfort and convenience associated with it.

“…service advisors, managers, fancy this [and that]; you don’t think you’re gonna pay for it?

This luxury vehicle owner says what many of us are thinking when we enter a luxurious looking place: “This is going to be expensive!” He suggests that the independent shop will be cheaper because the overhead should be lower without all the “fancy”.

Being viewed as the more expensive option is a difficult issue to combat for dealers and the OEM. Customers are paying for higher quality parts and service from a dealer. However, dealers, especially luxury dealers, should be aware that communicating high quality service and products to the consumer can sometimes be overdone and cross the threshold into excess. Consumers, luxury or not, are price sensitive enough to shy away from spending their hard earned money on excess. At the end of the day, luxury and non-luxury vehicle owners are looking for value. Relative to the competition, they want to get what they pay for, and not all the “fancy”. Focusing on providing value through better service processes and pricing are keys to capturing market share. Luxury owners are not any more interested in paying extra for the palace than anyone else.

The Bottom Line: Perception matters. Too much “fancy” at dealerships can drive customers to the aftermarket, in luxury and non-luxury segments. Focusing on the value proposition, including price and service, can win back these customers. Excess glitter and glam might just drive them away.

Tuesday, November 4, 2014

A Look Across the Ocean – Tailored Service Offerings Are On the Rise In Europe
by Michael Lohfink

It's no secret that the automotive service business is extremely attractive for OEMs, authorized dealers, and independent service providers. In 2013, the total European Aftermarket was around EUR 196B in parts and labor (including VAT) – authorized dealers were able to capture roughly EUR 78B of that pie (Datamonitor).

Service is of crucial importance for the customer’s overall brand experience and is an important driver of customer satisfaction. Over time, service involves numerous vital customer touch points, each of which represents an opportunity for OEMs to earn the loyalty of their customers. This is when customers decide to return to the dealership for their next service or for the purchase of their next car – or not. Our recent consumer sentiment survey shows that a customer who is very satisfied with the service s/he received is 66% more likely to return to the dealership for service than a customer who had a neutral service experience. Likewise, a customer who is very satisfied with the service s/he received is 36% more likely to purchase a vehicle from the same brand than a customer who had a neutral service experience. (2014 Carlisle Consumer Sentiment Survey).

Over the last couple decades, OEMs have constantly expanded and differentiated their sales channels for new vehicles to reach ever-shrinking target groups. They’ve introduced new vehicle classes and unlocked new customer groups. This is where service has a lot of catching up to do. So far, most OEMs have tended to lump all service customers together. That is, if a customer buys a premium car for more than EUR 75,000, it is likely that s/he receives the same service as a customer who buys an economy car for EUR 15,000. Service customer touch points offer valuable opportunities for an OEM to identify individual needs and develop offerings tailored to meet those needs. The goal is to boost those customers’ satisfaction and maintain their loyalty.

OEMs have to understand that their customers will project the positive experience they have from buying a new vehicle onto Aftersales. The individual support that they received when they bought their car is what they will demand later on when they need their car serviced. And here, OEMs have to meet the expectations of numerous small target groups if they wish to increase service satisfaction and keep the customers over the long term.

Discussions during this year’s European Parts Benchmark Senior Executive Focus Day in Frankfurt, Germany, showed that some OEMs have realized this trend. They’ve started to react by offering services that are tailored to the distinct needs of individual customer groups. The ultimate goal for these OEMs is to provide each customer with a distinctive – and memorable – service experience.

Here are some examples of what two German Luxury OEMs are currently doing to individualize their offerings.

Mercedes Benz

The OEM’s long-term goal is to make each visit to the dealership an "individual service experience." Initial pilots have kicked off in England, Germany and the U.S. Each pilot dealership focuses on three clearly defined service formats which make it possible to easily tailor services to the particular needs of different customers:
  • Relax or Ride – Customers can wait for their vehicle at the dealership in a lounge with Wi-Fi, desktop computers, television, toys for the kids and refreshments, or they can take a shuttle service to any nearby destination.
  • Door to door – An employee of the dealership picks up the customer’s car and returns it when the work is complete.
  • Drop and Drive – Customers receive a courtesy vehicle for the time theirs is being serviced.
These options allow customers to tailor their own service experience to satisfy their own needs depending on the level of convenience they prefer or their budget.


Aside from segmenting its customer base by vehicle age, the German Luxury OEM has already launched initiatives to address the preferences of different customer groups. One example is the "BMW Excellence Club" that is exclusively offered in Germany. Here, only customers buying a BMW 7 Series sedan can become members of this club. Those members benefit from premium driver training, special sporting and cultural events, and exclusive offers. For example, upon request, BMW offers a service appointment guarantee within 48 hours, which is not available to drivers of other BMW models.

What’s more, BMW recently introduced “Service while you fly” from select airports in the UK. Here’s how it works:
  • A service customer leaves their car in the designated VIP parking area and checks-in with a concierge.
  • While they are away on vacation or a business trip, their vehicle will be serviced at the local dealership and will be ready for them when they return.
  • Bookings can be done online or over the phone, and payment authorization is managed electronically. This reduces customers’ waiting times and increases convenience.
These are only a few ways OEMs are trying to “spruce up” the good, old, service world by offering services that are specifically designed to appeal to individual target groups. And even though no official results have been reported yet, chances are that these programs will positively affect service satisfaction, ultimately increasing service retention and overall profits.

Bottom line

To succeed in the Aftermarket, OEMs must carefully listen to their customers, and give them the goods and services they really want. This goal must be clear from beginning to end – from the way the strategy is designed, to the services offered, and how dealers communicate with customers. Micro-marketing services tailored to each individual customer would be the ideal solution. If done correctly, attractive service offers that are feasible and profitable for OEMs will increase both service satisfaction and service retention.

Sunday, October 26, 2014

The New New-Car Buyer We Never Knew
by Michael Sachs

There was a time, not so long ago, when there were two types of car buyers – new-car buyers and used-car buyers, and rarely would the twain meet. However, last month IHS Automotive announced that through the first half of this year, consumers who owned a vehicle that was purchased used were responsible for nearly half of the new vehicles registered to individuals. The report went on to say that nearly 30 percent of those consumers purchased a new vehicle of the same brand as their used car or truck. By comparison, about 50 percent of new-car owners buy the same brand they already have.

I have two theories about why we’re seeing people in the showroom who traditionally buy used cars. Both are temporary phenomena.
  1. The latest safety and entertainment technology in new cars is so compelling that it is drawing interest away from used cars, which lack these latest features.
  2. Banks have loosened their lending standards (and lengthened loan durations) so much that people who were previously ineligible (and could only afford used car prices) can now qualify to buy new.
Regardless of which theory you buy into, the fact is neither one will last forever. Technology we’re seeing in new cars today, like lane departure warning systems and blind spot detection, is truly revolutionary. However, such features will eventually become standard equipment and future enhancements will be more evolutionary than revolutionary (think iPad). If it’s the loose money theory that you believe, then you probably also realize that lending to those whose credit worthiness is low eventually ends when default rates reach intolerable levels. So, we have second owners buying new cars and we think this is a temporary phenomenon. What does this mean for the OEMs? It means that there is a window of opportunity to capture the loyalty of car owners who we would otherwise never see in the dealership, either for car purchases or service.

At our North America Service Benchmark (NASB) meeting later this month, we will be talking about ways to increase retention of second-owner vehicles. Second owners are notorious for getting their cars serviced outside of the dealer channel. In fact, we know from our Consumer Sentiment Survey that first owners are 50% more likely to go to the dealer for service than second owners. Without an initial touch point with the dealer, there is no opportunity to expose second owners to what the dealer service department has to offer. Furthermore, because many used car transactions take place without a new-car dealer involved, second owners are very difficult to reach with messages about, or special offers for, dealer service.

Now, second owners are coming to the dealership to buy new cars. This means that we can finally engage with them, introduce them to dealer service, and stay connected with them throughout the ownership lifecycle. We have a good shot at getting these new customers to come back to the dealer for service, at least initially. The key to making this a long-lasting relationship is meeting (or preferably exceeding) their expectations. From previous blog posts concerning our Consumer Sentiment Survey, we already know what’s important to these customers. If we want to see these customers in the dealership for service more than once, then we need to deliver on their expectations. Keep in mind their expectations aren’t necessarily the same as those of new-car buyers we’re used to seeing. As such, they may need to be treated differently.

Bottom Line: The expanding population of new-car buyers has profound implications for service retention and brand loyalty. You are now seeing a new group of customers in the dealership buying new cars that you, as an OEM or dealer, previously never really had a shot at. This is a unique opportunity. Take advantage of it and convert your new new-car buyers into life-long customers.

Friday, October 17, 2014

How to Serve Heavy Truck Independent Repair Facilities
by Stephanie Karaa

Many heavy truck OEM parts are sold through the dealer service lane, but Independent Repair Facilities (IRFs) generate a considerable share of sales as well. In fact, approximately 21% of dealer parts sales are made to IRFs. OEMs have a dual task of competing with IRFs for service customers, but also enticing them to be customers themselves when it comes to selling genuine parts. While the competition for service customers is important, so too is ensuring that dealers continue to make money selling parts when customers prefer to visit the IRF for service. In an effort to identify how dealers can better capture IRFs’ parts business, Carlisle conducted focus groups with heavy truck IRF owners and managers.

The heavy truck repair market for OEM parts consists of vehicle operators (63%), dealer service departments (~16%), and IRFs (~21%). Examining heavy truck IRFs specifically, our three focus groups targeted owners and managers in Boston, Chicago, and Los Angeles. Most participants worked on class 7-8 trucks, but also did some work on lighter trucks and passenger cars. We learned that when it comes to sourcing parts, participants are very willing to go to the dealer. Yet, despite this willingness, they don’t always do so.

So What Are Dealers Doing Now?

Pricing: Pricing is certainly important, but the last dollar does not determine parts sourcing for IRFs. So, if pricing is relatively competitive, other areas drive purchasing decisions.
  • The Good:
    • Participants said dealer part pricing has become significantly more competitive.
    • Due to the quality, fit, and finish of OEM parts, end-customers view pricing as fair and justifiable in the aftermarket.
Convenience: If pricing passes a reasonableness test, IRFs then focus on speed and responsiveness as part of the value proposition, and their parts sourcing must support this. Essentially, the time IRF managers spend identifying and finding parts over the phone is precious time spent away from repairs and customers.
  • The Good:
    • Dealer parts availability is generally deemed acceptable.
  • The Bad:
    • Delivery standards fall short of the rest of the aftermarket, which delivers more frequently at set times.
    • Hold wait times can be excessive when calling dealers.
Knowledge: As repairs grow more complex, access to technical information becomes essential.
  • The Bad:
    • Dealer parts staff lack expertise, and overall phone handling skills are inefficient. When IRFs finally reach a dealer staff member, the individual lacks technical knowledge or seems unwilling to pass along the information due to competition in the service lane.
    • Dealer technology and technical information lags the aftermarket, which provides online and eCommerce tools.
So What Must the OEM Dealer Network Do?

Showing IRFs you value their business goes a long way! It only takes a few negative experiences for an IRF to discontinue sourcing from a dealer. IRFs are turned off when they perceive dealership staff as indifferent and will quickly tell others not to bother wasting their time at a location. Therefore, it’s even more critical to address these key issues to maintain parts purchase loyalty from the first interaction.

We’ve boiled our recommendations down to a few key actionable changes to provide faster, higher quality service.

Short-term steps:
  1. Define phone handling standards: Do not allow calls to go unanswered and avoid excessive hold times.
  2. Provide phone handling training that is practically oriented towards day-to-day customer requests and systems training that enables quick parts identification and access to technical information.
  3. Gear customer service training to support basic technical knowledge, and assign knowledgeable staff members to manage the complex repair questions.
  4. Create an evaluation process, including mystery shops, for counter staff’s performance.
Long-term steps:
  1. Invest in technology that allows staff to look up parts by VIN, provide cross-referencing, and show inventory availability to speed up call times.
  2. Consider creating a per-minute/per-use technical support hotline – IRFs are willing to pay for this!
  3. Move towards daily delivery in specific time windows to IRFs in major metro areas.
Bottom Line: The heavy truck IRF business is particularly quick-paced and value-oriented, focusing heavily on access to technical information. Understanding these parts purchasing needs and current purchase practices is critical to successfully competing for their parts business.