Tuesday, November 24, 2009

Honda’s Three Joys – by David Carlisle

In 1978, fresh out of Rensselaer Polytechnic Institute, I went to Colgate Palmolive and immediately started working on corporate global supply chain strategy. It was a great education. My coaches were Juan Panellas and Ed Healy – they directed Colgate’s global supply chains. I can’t thank them enough for my education and attitude – I still think about these guys every day. I continued to do strategic planning through the 1980s, but it was not until the late 1980s that I happened upon Honda’s “Three Joys.”

After Colgate, my next coach was Honda’s Richard Colliver. Everybody knows Dick. We would spend hours, days, months thinking – I never learned more in my life. The kernel of our thinking for about 15 years was Honda’s Three Joys – the Joy of Producing, Selling, and Buying. There’s nothing secret about it – you can find it here: The Three Joys

The Three Joys first appeared in 1951, and by 1956 were transformed into a mission: “Maintaining an international viewpoint, we are dedicated to supplying products of the highest efficiency, yet at reasonable prices, for worldwide customer satisfaction." This is coupled with Honda’s foundational principle: "Respect for the Individual" – a philosophy made actionable by an organizational commitment to the Three Joys.

Before I go any further, I have a situational confession to make. Some IT integrators call me a “rogue consultant.” They don’t like me. I’m a Democrat who detests Sarah Palin, so I’m not her kind of going rogue. I’m just not afraid to be brutally honest. She’s running for president. OK, ever been in a sidebar, or even a real bar, and the conversation strays from baseball (the world’s greatest sport) to corporate strategy? Somebody mentions Michael Porter, Bain’s secret Hershey strategy, BCG’s lazy cows, McKinsey’s rarified clicks, or some author with the latest trick ‘n win play. You are supposed to be knowledgeable in all this, and expected to say something profound. But, inside your mind you are going “Zzzzzzzzzzzzzzzzzzz.” OK, maybe it’s just me. Why are so many strategists so damn boring? It’s because if they ever studied the Three Joys, they’d skip the buzzword bingo and be talking about baseball.

Honda is the most strategic-focused, and inherently ethical (don’t be confused by pre-1993 history – Honda is all about becoming perfect, not being perfect), car company; often overlooked because industry watchers do not understand them. Just drive a Honda for a few miles and you will understand that this is a different kind of vehicle that, indeed, we can understand. It is marvelous. This differentness, this marvelousness, goes back about 48 years.

Honda’s Three Joys constitute the perfect consumer goods manufacturing strategy. If you achieve the Three Joys, you will be successful. It starts with the Joy of Producing. This is all about the joy you gain from making the stuff you sell. Soichiro Honda said that this is a joy only known for the engineer. I generalize this Joy to be the joy of creation – the folks who create the products of your enterprise; Products that are “of superior quality so that society welcomes it.” This joy comes from creating things of superior quality that people want and are willing to obtain. It is important to note that Joy is the objective here, which talks to real human beings and culture. Recognition and acceptance of this Joy can and should drive the culture of any organization that “produces.”
I strongly believe that most of us in this industry are creators of sort. We exist in our business enterprises to create a work product. It can be to create a new powertrain, a new policy, to install an instrument panel, to create a repair order, to answer a question. In each thing we create I ask three questions: (1) Is what I created of superior quality? (2) Is my customer willing to obtain it? (3) Am I happy doing my job?
The second Joy is the Joy of Selling. Honda-san postulated that if your product was high quality, of superior performance, and reasonably priced, then people all along the value chain who sell it will experience joy. I substitute “service” for product to accommodate all the products in our enterprises. We can all identify with this by reflecting on our restaurant experiences. The litmus test for a good restaurant is the attitude of your server. Typically, if an experienced server is obviously happy, they have made employment choices that reflect the quality of what they are selling. So, if your server is happy, you can safely order the specials. This is the most difficult Joy to instill and nurture in your enterprise – it is all about becoming, not being. It represents a lifetime of work.
I strongly believe that we are, also, all “sellers” in our work place. We sell the fruits of labor (ours and others’) down the value chain. If we cannot experience the joy of selling, then something is wrong. Something might be wrong with the enterprise, or something might be wrong with the individual. I always ask people if they are happy. I have thick skin; I can take tough feedback. I want to know if they are unhappy and why they are unhappy. I might find out that we have some problems with our Joy of Producing, and I will search elsewhere. Or, I might find that the problem lies with some personal issue. We can help there, too. Discerning this Joy, and any root causes, is critical for enterprise success.
The third Joy is the Joy of Buying. Honda-san described this with “…it is none other than the purchaser who uses the product in their daily life. There is happiness in thinking, 'Oh, I’m so glad I bought this'.” I call this the joy of ownership; it is all about the joy of use. This is the acid test of a strategy – if your buyers are not happy, they will quit buying.
We are all buyers and owners in our enterprises. We all use stuff, not just cars. We use tools that are supplied to fix a vehicle, we use policies created by others, we use IT to make our jobs easier, we use office space bought by our services department, we use paper in our copy machines, we use information given over the telephone to diagnose a problem. Each of us chooses to use stuff in our companies – when we choose not to “use”, we coin cool excuses called “shortcuts”, “renegade”, or “skunk works.” When there is no Joy in “use” then we really have a problem. Although this is the Third Joy, it is the most telling – if one fails to deliver on the Joy of Buying, they will inevitably have problems in producing or selling.
The Joy of Producing, Selling, and Buying are the core elements of one of the world’s most successful enterprises. Implicit is a focus on the unique ability and contributions of individuals – “Respect for the Indvidual.” Many people simply do not “get” Honda – they try to fit it in some pigeon hole, or write it off as hopelessly unique – a rogue car company. All this is not some hokey airport self-help book slogan or motto. Only individuals, people, can experience Joy; Companies can’t, organizations can’t, nor can “divisions.”

Dick Colliver retired this year from Honda. I spent about 20 years thinking with him. Once he moved to Honda we spent 15 years of thought focused on the Three Joys. We never needed another strategy, even when we encountered dips in the road. He is a great friend and Honda certainly is a great company. Both deliver on the Three Joys.

Wednesday, November 18, 2009

LKQ&U, or Neuf Ou D'occasion Pacotille

Last week we eked out some interesting tidbits from the 2009 NASPC Parts Manager Survey (over 8,500 dealers participated with a 54% response rate). There’s more gold to be mined here. In the survey we asked dealers to name top IAM suppliers and to rate their performance. LKQ/Keystone was on the list.

As a bit of background, one part of LKQ’s business sells junked car/truck collision parts that are typically removed from totaled or wrecked vehicles. They call these parts “salvage” and sell them as if they are “Genuine.” This is like calling maggot larvae “caviar blanc.” Junk parts certainly are not “Genuine” … why do we let them get away with this?

Another part of their product line comes from their “Keystone” acquisition – these are “knock-off” parts. These knock-offs are sort of like $15 Rolex watches that you can buy on the street near NYC’s Times Square. So, it’s either new or used cheap junk. It sounds better in French: “neuf ou d'occasion pacotille!”

Last week’s big message was, quite understandably, Order Response Time (ORT). Dealers use close-by jobbers for parts that they do not have and can get quickly. They can return them pretty much no-questions-asked if things don’t work out. Compared to the OEM supply chains providing genuine parts, parts breath, fill rates, and warranty terms are lousy, but hey, they can get the part fast.

LKQ’s performance is particularly lousy compared to the big guys in the aftermarket. My reading of the chart is:
  • LKQ’s parts breath is just plain awful – it only “works” for a very small percentage of dealers.
  • LKQ’s fill rates are not much better.
  • OTD is awful compared to the big program groups or jobber chains.
  • LKQ’s warranty is awful – maybe that’s why they just changed it.
  • Return policies lag what one would expect from the IAM, but represent the high point in this pile of scrap.
LKQ’s revenue was up 3.4% in the first 9 months of 2009, and their stock price has been steadily recovering.

LKQ’s success is all about the worst parts of the US – it reminds me of the old Soviet industrial economy: LKQ sells a cheap sub-standard product with dismal service to unsuspecting citizens. This business model works because insurance companies are steadily increasing their control of the collision market; forcing body shops to buy crap like that saves them some money. Don’t get me wrong. I really like LKQ. Reasonably brained-out investors love companies that have a sustainable competitive advantage and a lock on a market. LKQ/Keystone is the biggest dog in town selling junk car parts. If you can’t find a junk car for cheap parts that kind of fit, you typically go for “Taiwan Tin”, a.k.a. Keystone. So, it is a great stock to buy. Another Orwellian Paradox of sorts.

Bottom Line: Selling Genuine Parts against the dog's breath of product sold by LKQ/Keystone is a pretty much hopeless proposition. At the end of the day, the end-consumer has no knowledge or appreciation of the differences between LKQ’s junk pile and “Genuine**.” Furthermore, the entire process is managed by trusted third parties (I call them trusted third pirates): insurance companies. These are the “good hands” companies who make ducks quack out their name. They are the good guys – just watch Yogi Berra on TV and have a good laugh. They are the guys stopping Barack in his tracks and making us worry about bankrupting the nation by providing health care to folks too poor to live beyond what should be a reasonable poor-man’s lifetime.

OK, it really isn’t quite hopeless, but it is difficult. Here’s what we need to do:
  • Support lower repair cycle times. This results in lower repair costs for insurance companies, and they like this. We can do this through large collision wholesaling dealers that stock a lot of breadth and can deliver the part same-day if necessary. If the body shop needs additional parts, the dealer can get those through the PDC in a day or two, max.
  • High levels of service will trump low part cost when it directly impacts the customers’ time. OEMs need to make sure they are providing large collision wholesalers the right tools to succeed: OEC repair link, inventory stocking support, special returns privileges, special express order (maybe drop ship) privileges to support key body shop accounts, and training.
  • OEMs need programs to certify body shops on the use of OEM-specific repair processes, which should include the use of genuine parts. This would also help maintain brand images, as the vehicles are repaired to “Genuine” OEM specs.
  • Maybe the consumer does not have a choice (and frankly the body shop has limited decision-making as well), but certainly they do have the right to know. Mr. and Mrs. Consumer pay their monthly insurance premium on a timely basis, hoping to never get into an accident. In the unlikely event this occurs, the insurance company can repair their vehicle to below pre-wreck conditions by using junk and sub-quality parts. This isn’t an assumption; it’s a fact. In many cases, the consumer never knows this has occurred; state legislators know this and allow it to happen. OEMs need to develop strategies/tactics to communicate to customers and body shops (and even insurance companies) the benefits of using genuine parts (for instance, point of sale materials at dealerships or body shops highlighting the benefits of OE parts, language in lease agreements requiring the use of OE parts, online/social media messaging, etc.). Someone needs to start making a stink about this. We see some good efforts here by GM and VW. Maybe others should take notice.

** Email Jessica to get the free NASPC white paper on Genuine jshea@carlisle-co.com. All photos in these blogs are copied from Google’s internet image search engine.

Thursday, November 12, 2009

Blog 52: Why Do Dealers Stray?


We just completed the 2009 Parts Manager Survey (over 8,500 dealers participated with a 54% response rate) and were able to probe into areas we’ve always had some questions about. One area we always wonder about is, “why do dealers stray?” Why do they go to the independent aftermarket rather than buying all of their parts from their OE?

For the past 20 years I have heard “pricing” in response to that question. Not true. When we plot Parts Manager satisfaction with pricing versus purchase loyalty (% of purchases from their OE) we find no correlation. Once we strip out two outliers, where the purchase data is not apples-to-apples, we see a pretty-much flat line – so purchase dis-loyalty is driven by something other than pricing. Hmm, I wonder if everybody knows this.

But, we know that dealers stray. Where do they go? This is interesting. We asked dealers to name their top two non-OEM suppliers. I will describe these suppliers, but not name them, since the NASPC survey group already got all the gory details.

“Other” came out on top. A monster jobber group was second, and “Nobody” was third.

These three answers provide the clue as to why dealers stray. Smaller import dealers tended to say “Nobody” simply because nobody – no nearby jobber – stocked many of their parts. This is because those makes have smaller UIO counts, which do not attract the attention of the IAM. Larger importers and domestics had smaller “Nobody” responses simply because ample supply of their parts is available in the aftermarket.

“Other” is an interesting choice – it really means that a dealer tended to use jobbers that were nearby and/or familiar to them (“Joe’s Jobber”) and were either a) not affiliated with a recognizable program group, or b) the parts manger simply did not know the affiliation of that jobber. Or, it means that the dealer did not think about a “brand”, they thought about the relationship. They buy from “Joe” down the street, and they either do not know or do not care what program group “Joe” is associated with. In many cases this may be because “Joe’s” association has changed (he used to be independent, but recently became a CarQuest jobber) or it may be that the program group association is transparent to existing customers. While “Other” seems to be a big slice of the pie, it really is not. “Other” is more likely a collection of local accessory suppliers, bulk oil, and local jobbers. After reading almost 500 verbatim dealer comments on this one, there is no lurking monster out there.

So far, I have just interpolated the data. For the top three IAM suppliers we asked dealers to rate various aspects of their service relative to the OEM. Hey, it’s a recession and dealers are down and out. It is the kind of environment that you think would make dealers unkind. So, they were not just blowing smoke. Just looking at the big jobber monster, it is not “better” than the OEM in any area – it never got more than 50% of the vote. However, it shines in two areas: OTD (order-to-delivery time) and returns. These are not surprising. When a dealer needs a part, a jobber is only minutes away. Dealers have an immediate need that they get filled within hours, if not minutes, and they can return almost everything without penalties. Who wouldn’t like that?

So, why do dealers stray? First off, it is not about pricing. They stray because local jobbers just might have a critical part, delivered within minutes, while the vehicle is still on the lift and the repair can be performed immediately. Also, sometimes it’s not the OEM parts manager who makes the choice. Many service advisors let the customer decide and consequently, it is often the customer who strays rather than the dealer.
Mr. Customer, I can order the part from the manufacturer – and it will be here tomorrow and we can install it the following day. Or we can get it from a local supplier this morning – this can be installed this afternoon and you can pick up the car on your way home from work. Which would you prefer?
Outside the OEM, dealers are not particularly IAM brand loyal – the “Other” choices tell us this. They tend to go to close by jobbers who they have a relationship with.

Bottom Line: It’s all about OTD. This gives us a lot to think about as our dealer networks are collapsing. Let me leave you with a few thoughts on this one.
  • Hint: The best OTD to the repair is from the dealer’s parts room bin. RIM really is an OTD strategy. It is more important than all the political mud it sometimes stirs up.
  • D2D is an OTD strategy, too.
  • It is important for OEMs to figure out if their dealers are straying for reasons other than OTD – if so, then their share losses are inexcusable.
  • For importers, it’s pretty important to understand if they are straying at all – the “Nobody” patterns are pretty telling.

Tuesday, November 3, 2009

Reinventing Extended Warranties - The Super Soaker Effect

[Or: How to convert a Beverly Hillbilly Internet Extended Service Plan into a Super Soaker]

Let’s take a quick tour of the woes in the auto world to set the table on this one. A few years back we’d wonder if sales would be 16.5 million units, or 17 million. I made side bets with some clients and made money several times. Well, this year we are looking at 10 million units and some change. Next year looks like 12.5 million. It takes 15 million units a year just to replace the aging fleet. What’s going on?

Risk aversion. Fear. Belt tightening. It’s not just the auto segment, it’s all segments.

People are afraid to commit to the $20K - $30K in loans or cash to replace the car/truck they are driving. Our internal debaters and researchers will spend the next year jawboning on this and by the time they are finished we will have a nice piece of history to reflect on. Risk aversion, fear, belt tightening, is roughly right without being precisely correct.

So, what do you want to be? A historian?

Let’s run with this fear concept.

If customers are not buying new cars and trucks because of risk aversion, and are holding on to what they’ve got for longer, they might be interested in an extended warranty. That would certainly take the risk out of holding a vehicle longer, past the warranty period. We just finished a recent European customer survey and found this to be true there.

You might say that’s easy to check – just have someone go and fetch the numbers. The problem with this is that it ignores the “Super Soaker” effect. A Super Soaker is the 1989 brainchild of Lonnie Johnson (a rocket scientist). It is a gigantic pneumatic $25-$35 squirt gun that the world never saw before. Lonnie reinvented a toy segment that was characterized by 89¢ just-plain-awful squirt guns. The numbers for this segment were different before 1989. We need a Lonnie Johnson to reinvent the extended warranty segment.

Let’s play Lonnie. But, before we do, let me take a whack at describing the current state of our 89¢ squirt gun that we call “extended warranties.”
The story starts at Radio Shack and K-Mart when the cash register operator asks me if I want to spend another $4 on an extended warranty on a $10 sale-priced Mr. Coffee. After hearing this about a hundred times, I feel like slapping them and shouting back, “whadya think, I’m an idiot?” I buy a shiny new car or truck and the F&I manager tells me I’m stupid for not buying that mop & glop and security system. Next, with a smirk on his face, he wants to sell me an extended warranty. My K-Mart conditioning comes to play and I say, “no.” Freedom is 5 minutes away when I’m rid of this slime-ball F&I zombie. Besides, hey, a 3 year warranty is forever and why do I need to bother myself planning for the future? Three years pass by and I throw out a dozen cleverly designed unopened envelopes of junk mail from who-knows-who trying to sell me crap I’m suspicious of. If it were important, why would they use the US mail? The mail is for catalogs and just-plain-crap. Three years ago things were better. I think I’ll hold on to this baby for a few years longer. But, what if it breaks down? Warranty’s out. I’d like to take some of the risk out of my extended ownership. Wish I hadn’t thrown out all those envelopes. What do I do?
What do you do? Well, you can go to the manufacturer’s web site and find out about their extended warranty plans (let’s call them extended service plans – ESPs.). They typically use the Beverly Hillbillies TV show as their design inspiration. Beverly Hills = internet merchandising. Elly May Clampett = the promise. Granny Moses = the real process to buy the ESP. Jethro Bodine = the boneheads who think this stuff up. I’m Jed. Typically, you have to work the process through the dealer – the F&I manager sells it, the service manager needs to do an “inspection”, you need to bring the vehicle back and forth. Elly May ain’t nowhere to be seen. (By the way, giving an aftersales internet lead to an F&I manager makes about as much sense as Diane Von Furstenberg hosting a farting contest during Fashion Week.)

I just bought a prototype Super Soaker 48-month ESP for a 5 year old SUV that had 54,000 miles on it. I gladly spent $2,000 and another $700 for new brakes and a tie rod end. I’d do the same thing for my tractors and excavator. I really wanted the ESP “my way” and worked with a very progressive OEM and a remarkable dealer to make it happen. Rather than go through the rough-edged prototyping process, let me share with you the ultimate “my way” vision of how to convert a Beverly Hillbilly internet ESP into a Super Soaker (this is how the process should work).
  1. The process starts out in the online Owner Center where my VIN and all the service records are stored and advice is given on my car. Ford’s Owner Center is the benchmark. (GM’s is way too cluttered and compromised to focus on something like this; remember, GM’s Owner Center is the “General Store” serving up a goulash of interests appeasing a huge cross-section of GM insiders with a piece of the Yahoo turf. What we need here is a category killer).
  2. The Owner Center knows my car. It knows my mileage. It knows that it is out of warranty. It knows I need new front brakes and tie rod ends because the folks who designed the Owner Center have mined millions and millions of ROs and know what’s going on with the fleet at different times in the lifecycle.
  3. The Owner Center merchandising banners are designed like the OnStar email (OnStar is the benchmark for getting customer attention) that gives me color-coded alerts to draw my attention to things that need attention – like low tire pressure, oil changes, or, maybe, the need for an ESP.
  4. The Owner Center knows I’m a good candidate for an ESP and merchandises it to me.
  5. The Owner Center uses the data it has and calculates what the estimated payments would be on a 48-month ESP. Lump sum or monthly payments.
  6. The Owner Center has a click-to-buy button. It directs me to a fork in the path. I can contact the closest dealer and buy direct from them (button 1), or I can be directed to the closest dealer who uses an OEM-sponsored internet selling process (button 2). Stihl is the benchmark for this.
  7. I select button 2. Button 1 is pretty much reserved for the dealer’s friends and family.
  8. I am informed that I can pay now and get a 5% discount, or pay later without the discount. I can select the terms (lump sum or monthly). The 5% was easy to fund based on higher closing rates associated with an early “ask” and costs of lost sales.
  9. I am informed that my vehicle will need an inspection and I am told why that makes sense. I am told that the inspection will bring the vehicle up to “certification levels” to start the new warranty period and that the vehicle might need some maintenance or repair work.

    I am told that the dealer will pick up and drop off the vehicle for the inspection work and that this will be done at my convenience. Many dealers already do this for normal service– it is a best practice. Heck, even Herb Chambers does this and he’s no dummy.
  10. I am informed that it will be my choice to have the dealer perform this maintenance and repair, or that I may take the vehicle to an independent. Once the maintenance and repair work is completed, the warranty period starts.

    The dealer has been trained not to get greedy at this point in the process. Do not overlook this.
  11. The dealer picks up the vehicle. I get a call telling me that the vehicle needs new front brakes and a tie-rod end. No surprise here; I’ve already been conditioned to expect this. He/she emails me pictures of the damage on my vehicle and explains the “surgery” needed. Alternatively, I can get all the dealer feedback through the Owner Center. The correspondence hits on trust/value/cost/convenience.
  12. I agree to the repair work that needs to be done.
  13. I get my 5 year old 54,000 mile vehicle back with a risk adverse 48-month warranty.
Bottom Line: We need to think like Lonnie, not Granny Moses.

Reinventing Extended Warranties - The Super Soaker Effect

[Or: How to convert a Beverly Hillbilly Internet Extended Service Plan into a Super Soaker]

Let’s take a quick tour of the woes in the auto world to set the table on this one. A few years back we’d wonder if sales would be 16.5 million units, or 17 million. I made side bets with some clients and made money several times. Well, this year we are looking at 10 million units and some change. Next year looks like 12.5 million. It takes 15 million units a year just to replace the aging fleet. What’s going on?

Risk aversion. Fear. Belt tightening. It’s not just the auto segment, it’s all segments.

People are afraid to commit to the $20K - $30K in loans or cash to replace the car/truck they are driving. Our internal debaters and researchers will spend the next year jawboning on this and by the time they are finished we will have a nice piece of history to reflect on. Risk aversion, fear, belt tightening, is roughly right without being precisely correct.

So, what do you want to be? A historian?

Let’s run with this fear concept.

If customers are not buying new cars and trucks because of risk aversion, and are holding on to what they’ve got for longer, they might be interested in an extended warranty. That would certainly take the risk out of holding a vehicle longer, past the warranty period. We just finished a recent European customer survey and found this to be true there.

You might say that’s easy to check – just have someone go and fetch the numbers. The problem with this is that it ignores the “Super Soaker” effect. A Super Soaker is the 1989 brainchild of Lonnie Johnson (a rocket scientist). It is a gigantic pneumatic $25-$35 squirt gun that the world never saw before. Lonnie reinvented a toy segment that was characterized by 89¢ just-plain-awful squirt guns. The numbers for this segment were different before 1989. We need a Lonnie Johnson to reinvent the extended warranty segment.

Let’s play Lonnie. But, before we do, let me take a whack at describing the current state of our 89¢ squirt gun that we call “extended warranties.”
The story starts at Radio Shack and K-Mart when the cash register operator asks me if I want to spend another $4 on an extended warranty on a $10 sale-priced Mr. Coffee. After hearing this about a hundred times, I feel like slapping them and shouting back, “whadya think, I’m an idiot?” I buy a shiny new car or truck and the F&I manager tells me I’m stupid for not buying that mop & glop and security system. Next, with a smirk on his face, he wants to sell me an extended warranty. My K-Mart conditioning comes to play and I say, “no.” Freedom is 5 minutes away when I’m rid of this slime-ball F&I zombie. Besides, hey, a 3 year warranty is forever and why do I need to bother myself planning for the future? Three years pass by and I throw out a dozen cleverly designed unopened envelopes of junk mail from who-knows-who trying to sell me crap I’m suspicious of. If it were important, why would they use the US mail? The mail is for catalogs and just-plain-crap. Three years ago things were better. I think I’ll hold on to this baby for a few years longer. But, what if it breaks down? Warranty’s out. I’d like to take some of the risk out of my extended ownership. Wish I hadn’t thrown out all those envelopes. What do I do?
What do you do? Well, you can go to the manufacturer’s web site and find out about their extended warranty plans (let’s call them extended service plans – ESPs.). They typically use the Beverly Hillbillies TV show as their design inspiration. Beverly Hills = internet merchandising. Elly May Clampett = the promise. Granny Moses = the real process to buy the ESP. Jethro Bodine = the boneheads who think this stuff up. I’m Jed. Typically, you have to work the process through the dealer – the F&I manager sells it, the service manager needs to do an “inspection”, you need to bring the vehicle back and forth. Elly May ain’t nowhere to be seen. (By the way, giving an aftersales internet lead to an F&I manager makes about as much sense as Diane Von Furstenberg hosting a farting contest during Fashion Week.)

I just bought a prototype Super Soaker 48-month ESP for a 5 year old SUV that had 54,000 miles on it. I gladly spent $2,000 and another $700 for new brakes and a tie rod end. I’d do the same thing for my tractors and excavator. I really wanted the ESP “my way” and worked with a very progressive OEM and a remarkable dealer to make it happen. Rather than go through the rough-edged prototyping process, let me share with you the ultimate “my way” vision of how to convert a Beverly Hillbilly internet ESP into a Super Soaker (this is how the process should work).
  1. The process starts out in the online Owner Center where my VIN and all the service records are stored and advice is given on my car. Ford’s Owner Center is the benchmark. (GM’s is way too cluttered and compromised to focus on something like this; remember, GM’s Owner Center is the “General Store” serving up a goulash of interests appeasing a huge cross-section of GM insiders with a piece of the Yahoo turf. What we need here is a category killer).
  2. The Owner Center knows my car. It knows my mileage. It knows that it is out of warranty. It knows I need new front brakes and tie rod ends because the folks who designed the Owner Center have mined millions and millions of ROs and know what’s going on with the fleet at different times in the lifecycle.
  3. The Owner Center merchandising banners are designed like the OnStar email (OnStar is the benchmark for getting customer attention) that gives me color-coded alerts to draw my attention to things that need attention – like low tire pressure, oil changes, or, maybe, the need for an ESP.
  4. The Owner Center knows I’m a good candidate for an ESP and merchandises it to me.
  5. The Owner Center uses the data it has and calculates what the estimated payments would be on a 48-month ESP. Lump sum or monthly payments.
  6. The Owner Center has a click-to-buy button. It directs me to a fork in the path. I can contact the closest dealer and buy direct from them (button 1), or I can be directed to the closest dealer who uses an OEM-sponsored internet selling process (button 2). Stihl is the benchmark for this.
  7. I select button 2. Button 1 is pretty much reserved for the dealer’s friends and family.
  8. I am informed that I can pay now and get a 5% discount, or pay later without the discount. I can select the terms (lump sum or monthly). The 5% was easy to fund based on higher closing rates associated with an early “ask” and costs of lost sales.
  9. I am informed that my vehicle will need an inspection and I am told why that makes sense. I am told that the inspection will bring the vehicle up to “certification levels” to start the new warranty period and that the vehicle might need some maintenance or repair work. I am told that the dealer will pick up and drop off the vehicle for the inspection work and that this will be done at my convenience. Many dealers already do this for normal service– it is a best practice. Heck, even Herb Chambers does this and he’s no dummy.
  10. I am informed that it will be my choice to have the dealer perform this maintenance and repair, or that I may take the vehicle to an independent. Once the maintenance and repair work is completed, the warranty period starts. The dealer has been trained not to get greedy at this point in the process. Do not overlook this.
  11. The dealer picks up the vehicle. I get a call telling me that the vehicle needs new front brakes and a tie-rod end. No surprise here; I’ve already been conditioned to expect this. He/she emails me pictures of the damage on my vehicle and explains the “surgery” needed. Alternatively, I can get all the dealer feedback through the Owner Center. The correspondence hits on trust/value/cost/convenience.
  12. I agree to the repair work that needs to be done.
  13. I get my 5 year old 54,000 mile vehicle back with a risk adverse 48-month warranty.
Bottom Line: We need to think like Lonnie, not Granny Moses.