Friday, September 24, 2010

Digital Strategies Do Impact Customer Service Behaviors and Intentions

We just completed our Digital Impact Service Survey of 3,000 automotive service customers. We will be reviewing the survey results at the Digital Summit on October 14th and 15th. Here are a few nuggets to consider. Only about 25% of survey respondents use the internet to check the “ratings” of the service providers.

Whew! Not yet.

Of this 25%, 40% switch providers based on ratings, regardless of user age. It wasn’t just the young folks.

Hey, it’s only 25% of your digitally savvy customers that you’ve got to worry about.

Do you think this percentage will be increasing in the future?

That was a rhetorical question.

What do you do about this? The bottom chart tracks customer visits to the OEM owner center (OC) (by non-dealer customers) versus the likelihood to consider the dealer for service. It looks like effective “sticky” owner centers have a pretty profound impact on service repurchase intent. We suspected this.

Bottom Line: We will learn a lot more about the impact of the internet on our owners at the Digital Summit. See you there.

Friday, September 17, 2010

What You Don’t Know Really Can Hurt You – How Right to Repair Is Wrong For Our Customers

We need to think about this one a bit. AAIA’s premise is that customers should be able to choose who they go to for repair. Well, they do that today. But, more than the right to choose, the “Right to Repair” coalition thinks that the independents should have the right to cherry pick among billions of dollars of OEM investments and assets while not having to toe the line in terms of enterprise quality and systemic quality process management. This is remarkable and absurd – seems to be a mixture of communist joint property ownership and process anarchy. Rather than intellectualize how dangerous this is, let’s tell a story. What follows is a series of events (some are made-up composites, others are real composites) that paint a bleak picture of what can happen in the market today. Our OEMs are lock-jawed and narrowly focused on doing what is right for the customer, but not talking much about it. Our dealers are complacent and generally do not understand how to merchandise, market, and inform customers about their fixed operations. The independent aftermarket is an unregulated and largely unmanaged industry fully capable of profound and catastrophic failures. And, our customers range from misinformed to uninformed. Passing right to repair legislation does not even come a fractional step closer to fixing all this.

Customer, call him John Doe, goes to Joe’s Service shop down the street to get the brakes fixed on his kid’s car. It’s the third car in the fleet; old and the latest hand-me-down. Everybody knows that dealers are the last place you go because they are so expensive – so, Joe’s is a completely logical choice. Heck, John Doe’s kid, Mary, is paying for half the repair, so the repair’s got to be cheap. Called the dealer just to make sure they were priced out of the market – it took a few minutes on the phone, holding while listening to somebody else’s music, and, at the end of all this, the price seemed high. Besides, the dealer didn’t seem all that interested in the business. Dropped the car off at Joe’s. He said he might get to it this week, but he’d call when he could get to it and to talk about how much it would cost. Couldn’t hold him to his estimate – it’s a pretty old car and he didn’t know what he’d find. Seems like a nice guy who knows what he’s doing.

That’s what the customer hears and sees. Here’s what he didn’t see or hear.

The Dealer Service Advisor (SA) answers the phone and a customer wants a price for brakes on a pretty old car. It’s John Doe. The SA doesn’t know him, but he does know that the rotors are going to be shot and can’t be turned and still have any safety margin left. Almost immediately he knows from his on-line flat rate manual how long it’s going to take. His shop has a huge investment in tools, lift capacity, customer parking, diagnostic equipment, customer convenience services, staff, and technician training & certification – it’s all amortized in the labor rate. Actually, it’s the dealer General Manager who really knows all this; the SA takes it all for granted – he’s not been trained to sell what you get for that hour. So, he says nothing. But, he’s pretty smart – he won’t tell that customer on the phone what he’s going to charge per hour. He knows it’s high compared to the independent shops – maybe 15% high. The SA doesn’t know that at 15% all that stuff’s a bargain. The SA gets a lot of calls, so he’s learned to be as fast as possible – after all, he’s got all those folks showing up at the counter each day. So, he calls the parts department and gets prices for the brake parts. The parts department gets a lot of calls, too. They just look it up in their DMS and tell the SA the retail price of Genuine parts. They sell Genuine parts, because they know that they are the best. They fit better. They install quicker. They are higher quality. And, they are guaranteed – parts and labor guaranteed. The SA and parts manger know all this, but, it would take too long to tell that customer all this on the phone. So, it never gets mentioned. After a few minutes the SA takes Mr. Doe off hold and tells him the price of everything – all in one lump sum. The SA knows this is an exercise in futility – closing rates on phone quotes is dismal. So, he yawns when he gives the price. Mr. Doe says “thanks”, and the SA knows that this dog won’t hunt. Oh well.

Meanwhile back at the OEM, Service Operations work continues with data mining and problem resolutions to improve how vehicles are cared for and serviced by dealers. New diagnostic equipment is developed and new diagnostic solutions are programmed. New and improved parts engineering for existing parts results in parts supersessions – so, new parts, better parts, are released and managed throughout the supply chain. Technical Service Bulletins (TSBs) are developed that will help dealers’ service technicians with repairs – new ways to save repair time, improve quality, and increase safety. Some of these TSBs relate to those old superseded parts; others relate to the replacement parts. New tools are developed that do better jobs and save time for specific applications. Lots of time is invested in maintaining flat rate labor standards that reflect all this. A fairly large group of staff are focused on dealer technical training and certification. It is important to be technically competent when repairing a motor vehicle. Another staff group is at a call center and gives parts and service hotline repair advice – they give a lot more than advice; they solve unforeseen problems. Service Operations staff are also involved in managing warranty operations and disbursements; this is serious stuff because of parts and labor guarantees that the OEM stands behind. More than that, it provides a huge database of information on how well parts, systems, and processes are working … so, if they are not working well enough, they can be improved. It’s really a team effort. OEM purchasing tests parts and works with suppliers to make sure they are making what is specified … if they do not, they can be delisted and lose the business. OEM supply chain management makes sure the parts get from the suppliers to the dealers in pristine condition. They also collect returned parts and warranty parts for testing. All this costs a huge amount of money; Service Operations is a cost center. These costs are amortized in the cost of Genuine parts. But John Doe hasn’t got a clue all this is going on.

Joe’s Service gets his parts from Manny’s Auto Parts, gray market suppliers, and a dogs-breath of other places. Some of these guys give him bottles of Seagram’s at Christmas. Well, the ones who count do. The gray market suppliers get their parts from dealers all around the world … when dealers can’t return a part to the OEM (it might have been superseded or damaged) they can sell it to the bottom-feeders … who proudly display the OEM label and call it Genuine. Well, it’s not … it’s a junk part. Manny gets his parts from a whole bunch of other suppliers. They come in and buy everything in a brand’s line (like brake parts and rotors), junk it, or sell it to bottom-feeders in another country, and sell Manny their stuff. Manny doesn’t care. He’s in the business of selling parts and making money... and getting bottles of Seagram’s at Christmas from his suppliers. The stuff he buys can be sold under the price of the real Genuine part, because these manufacturers don’t have all the quality management costs that the OEMs have. If the stuff Manny buys doesn’t work, he sends it back and no questions are asked. Some of Manny’s suppliers get their stuff from third-world emerging markets. It’s reverse engineered and looks like the real thing. Some industry groups and third parties proclaim that reverse engineering can result in a better-than-Genuine part – Manny uses this line when he talks to his customers. The differences are subtle, the content might be degraded, and the overall quality is more a function of serendipity than rigorous QC. But, it’s cheap. Manny’s latest brake short-line is GoodEnuf Brakes. Manny stands behind it – hasn’t a clue of what he’s standing behind, but he does this nevertheless. The salesman is a nice guy and gives him bottles of Seagram’s.

GoodEnuf Brakes is a small company, but they strongly support their independent aftermarket trade association. Sends them good sized checks to help break the OEM stranglehold on a broad array of diagnostic and technical repair information – right to repair stuff. The trade association hires lobbyists to craft “friendly” legislation at the state and federal levels. The trade association also makes political contributions to friendly legislators. It takes a lot of money and patience to change the laws of the land and buy some good old American justice for their clients.

Jim Straightlace is the CEO of an OEM and he’s under a lot of pressure to cut costs. The media’s been ripping him apart for his lobbying costs. He finally caved and cut this line item. It’s just too difficult to explain it to the media, shareholders, institutional investors, and government watchdogs. Hell, his kids read the newspapers (on-line) and have been ribbing him every chance they get.

Joe at Joe’s Service is a nice guy and just trying to make a living. His niece wrote up some really nice reviews for him on the internet, so he’s 5-star rated at some websites. His shop is small and usually pretty dirty; there’s no waiting room and the customer parking lot also displays wrecks and used cars that Joe sells on the side. Joe was not very good at book learning; he got his degree at the U of Hard Knocks. He derides dealers and the big shops as being “big business.” He doesn’t have a budget for a lot more tools, the most modern state-of-the-art diagnostic equipment, technician training, fancy waiting rooms, coffee and doughnuts for customers, loaner cars, shuttle service, service advisors, and technical hotline support. He really doesn’t do all the work, either. He’s got a helper. Kid can’t read or write too well; doesn’t talk much either. That’s OK. No “big business” rules tell Joe who to hire or what to do. Kid does what he’s told and fixing brakes is a breeze. Kid can ask Old Joe if he gets into trouble. Joe generally understands what the kid is saying. Mr. Doe comes in and wants his little girl’s car brakes fixed. Joe said he might get to it this week, but, he’d call when he could get to it and to talk about how much it would cost. Said to Mr. Doe that he couldn’t hold him to his estimate – it’s a pretty old car and he didn’t know what he’d find. Throws the keys to the kid and tells him, sort of, what to do. Kid finally brings the car in puts it on a lift and removes the brakes and rotors. They’re shot. Kid doesn’t check the VIN; doesn’t see if there are any TSBs, supersessions, or recalls by calling a local dealer. Remember, talking is not his specialty. So, he calls Manny’s and barks out an order for the parts he needs. He simply ain’t got too many words. Manny sends over cheap brake parts he’s lucky enough to have in stock from his latest short-line emerging market supplier. GoodEnuf it says on the box. The installation instructions are comical in their brevity and lack of utility. No matter. The kid can’t read too good. The kid’s pretty good with a hammer, and will try anything to get all the parts in the package used in the job. Well, most of the parts, anyway. Besides, the brake parts don’t fit too well and it takes a lot longer to replace them than Joe thought. Joe calls Mr. Doe and tells him that there was a lot of rust and they had to be extra careful not to damage the wheel bearings during the job. That always works. That’s why it cost so much. Mr. Doe still thinks he got a bargain with Joe’s 15% lower hourly labor rate and using less expensive “high quality” aftermarket parts. After all, don’t they all meet or exceed the OEM spec?

Mr. Doe pick’s up the car and proudly gives it to his little girl, Mary. Just in time for prom night. Mary doesn’t drink. She gives the keys to her date that night. He drives. It rained and the roads are wet. Shortcut back home goes over winding roads. Approaching the curve a little fast. Apply the brakes.
… Well, as Dirty Harry would say, “Do you feel lucky?”

Bottom Line: Our industry would be nuts not to fight right to repair legislation. Joe’s is modeled on some local independent repair facilities (IRFs), so, his story is not an exaggeration. But, he’s certainly not representative of IRF “best” practices – he’s more like a nexus of bad practices. But, that’s not the point. There’s nothing out there stopping “Joe’s Service”, managing “Joe’s Service”, or making sure “Joe’s Service” does it right. Joe can’t lose his franchise if he screws up or underperforms. Right to Repair doesn’t help Joe’s Service do better work – it only gives him, and all the other IRFs, more credibility at somebody else’s capital expense … but with no more responsibility. It is a real bad idea.

Friday, September 10, 2010

What About Collision?

I hosted a Webinar for VW’s wholesaling dealers last month and talked about where the market is heading. VW is very creative with their leveraging of NASPC resources. Basically, TJ Dolliver and his folks said they’d help my brother find a convertible Bug if I did this for free. Outfoxed again – me, that is. After the Webinar, I told TJ I’d do the next one free of barter restrictions – maybe a t-shirt. The real creative bent on this Webinar wasn’t so much the negotiation, it was the application. We collect all this data for the industry. We feed it to you in April. We see that things are getting better. We know the root causes of what went wrong and the drivers of recovery. We understand what’s going on in the retail environment via tens of thousands of surveys each year. Yet, our retailers are still suffering from a recession hangover and are reticent to buy more inventory and hire more staff. These are the two big show-stoppers we all talked about in April.

Overall, it looks pretty good out there based on recent Market Watch results. The only fly in the ointment has been collision. LKQ/Keystone, the junk car-parts company, has been going gang-busters this year vs. last year. What’s going on? VW’s wholesaling retailers filled in some of the blanks for me. Retailer GMs are still shivering from last year’s melt-down and are being very conservative. They don’t see what we see, or they don’t really believe what the factory guys tell them. So, they have clamped down on investment in both inventory and staff. And, in the process, they are missing the market. The clips are from this week’s Detroit News. Last year, miles traveled stalled and accidents were way down – from fewer miles, lower speeds (to get higher recessionary mpg), jet-stream weather impacts (drier winter in the NE), and better vehicle safety features. Furthermore, last year folks pocketed their insurance claim checks as part of their cash conservation plans (there must have been dancing in the streets at some insurance companies due to low-ball estimation procedures). All this led to a real contraction in the collision market during 2009. 2010 is not 2009. Things have changed, and the market is coming back – recent government data shows we are out of the nose-dive in miles driven, there’s more pent-up celebrations, less cash conservation, more aging ugly dents that still need to be fixed … hence, more collision parts demand. Similar logic applies to all wholesale demand. And, while our retailer GMs maintain their grim recessionary reticence with cash and cadres of staff, junk car-parts companies like LKQ, and the independents, are having a ball.

Bottom Line: VW’s a pretty smart company. We need to use every tool possible to communicate and educate our retailers.

Thursday, September 2, 2010

Digital Devastation: How the OEMs and Dealers Are Being Disadvantaged By the Internet Hurt Locker

The big theme this year at the NASPC was “collaboration.” No area is riper for collaboration than the Digital frontier. The research for this blog stemmed from a recent family vehicle repair – it took me about 5 minutes. I would have done this for a more recent brake and rotor replacement on my Chevy Suburban, but RepairPal had no listing for my Chevy dealer (located about 2 miles away). The only Chevy dealer listed was 9 miles away, was un-reviewed, and had a 3-star rating. The un-rated independent shops all had over 4 stars. I find this to be disturbing. Hence “Digital Devastation.” All major players are showing up at the NASPC Digital Summit on October 15th. We will present a collaborative model for a digital presence that overcomes the digital “hurt locker” populated by planted social media postings, incompetent trade organization research postings, and “show me the money” third-party aggregators. My fear is that the OEMs will try to down the digital T-Rex with an ineffective flurry of pellets from a shotgun blast, rather than work together on a more effective rifle shot. So, be patient.

I had dinner with my daughter in NYC last month. She works for a large book publisher. She and her friends are very literary. So, during dessert Rebecca talks about one of her literary friends who recently quit her job working for a restaurant chain. Walked in and said, “I quit.” “Not so fast,” the story goes. The chain manager knew she could write like a wiz, so they negotiated a severance package that included 150 reviews of his places using, of course, different “voices” and idioms, so they’d be authentic. Rebecca was not talking about the crap one reads in social media, she was talking about interesting ways to make some money.

OK, it’s just a story. Hmm. Maybe not. I went to RepairPal and asked to find some shops close by that would service my Range Rover. The stars under the name of the service provider indicate how well regarded these stores are. I really loved these. Joe’s CITGO pegs the top chart with 5 stars and one review. There’s only one dealer on the page, Land Rover Metro West; it has no reviews and, curiously, 3.5 stars. All the others that have not been reviewed have 4.5 stars. Guess being a dealer gets you nicked by a point. Went to DealerRater and checked up on my Land Rover dealer – they gave it 4.9 out of 5. Hmmm.

Joe’s CITGO looked pretty nifty. So, I asked RepairPal for close-by service specialists for an old discontinued Chevy Geo. Joe nailed that one too. He’s 5-star rated on Land Rovers and Geos. His technician training costs must look like Harvard’s endowment. Hmm. That Joe!!!

Then I looked up the cost of front brakes and rotors, because we just had this done. RepairPal gave me back a range of prices (my cost was in the range) that visually indicated that the dealer was more expensive than the “independents.” Now, in my case, the independents – “Midas” – was more expensive than the dealer … they used “blizzard pricing” that includes a confusing array of parts, processes, options, and optics that confuses the crap out of you. The dealer just told me what he’d charge. The third-party web sites didn’t capture this very well. I thought the reason that Midas’s quote looked so good (sidewise & upside down) might be because of cheap labor rates. I looked up labor rates in Acton using AutoMD and found that the local Ford dealer was pretty much in-line with the independents. There were simply too many choices, so I looked elsewhere. Labor didn’t seem to be a big factor on that search.

I continued to think about that Midas brake job with blizzard pricing and wondered about the parts they used. I went to Edmunds.com, where smart car buyers start, and researched “aftermarket parts.” They advised me to “shop around, make sure you’re dealing with a good mechanic and request high-quality aftermarket parts.” Great advice to most folks who don’t know how to top off their wiper fluid (let alone figure out if someone’s a “good mechanic”) and who don’t know the difference between cheap bacon fat and butter (which resembles the difference between aftermarket parts and Genuine).

These are just a few easy examples of the “Digital Devastation” mounted against car dealers and OEMs. I didn’t have to work hard at it to come up with these examples, and I wasn’t selective in the process to help build my case. The internet is the next consumer “service” battlefield, and there seems to be only one army out there. Social media and third-party sites are foot soldiers and mercenaries of the independent service and parts providers.

Bottom Line: We need to do something about this. We will talk about this at the Digital Summit on October 15th. Carlisle & Company accumulates an annual treasure trove of information that supports our belief that dealers are actually pretty good choices to make for getting your car or truck serviced. For the past 20 years we’ve kept this information “in the family.” I think it is time for it to come out of the closet. We need to develop a robust AAIA-like web presence that has:
  • Sticky Content: Customers only return to websites that provide robust information that has high quality broad-based utility and provides simple, tangible value. It has to be at the top of the list of places-to-shop. It needs to be the portal to OEM owner centers, vehicle shopping sites, service parts information, recall notices, user manuals, service intervals … and much more.
  • Quality Information: Customers want easy access to information to make better choices. Why not give them that information? Why not rate service providers on the stuff that really counts: technician education and skills? Conveniences like loaner cars and rentals? Waiting rooms? Why not publish costs of common repairs and maintenance that show dealer and independent costs? Why not do this using statistically fair ground rules?
  • Customized/Savable Search Criteria: Let digital customers choose how they rate alternatives – hey, Netflix customizes its ratings. This could be done with a simple survey that new customers take. Have them make choices that change how each service alternative is rated. For example, do they want Genuine Parts or aftermarket? (Do they know the difference?) Is labor cost the most important thing, or is total cost? Do they require any convenience things … like waiting rooms, loaner cars, or shuttle service? These could be used to build rating profiles like “El Cheapo” to ”Treat me like my Mother.”
  • Research: Post our research that shows that dealers really are not more expensive in many repairs. Why not translate all that information that we, and the OEMs, collect into bite-sized chunks for digital service shoppers? The facts are friendly.
  • Education: Educate consumers about the choices they have and the information that they use. Joe’s CITGO isn’t an expert at either Land Rovers or Geos. RepairPal simply assumes he is. Why not explain what you get for higher labor rates – things like training and certification. Why not explain the advantages of “Genuine” parts?
  • Customer Reviews: The honest facts should be friendly. If customers want to review service outlets, then we need to make sure that these reviews are not bogus. Dealers should not be dinged by one star just because they are dealers.
  • Lead Aggregation: Accumulate Google search term requests for parts and service (“Capture”) and connect these requests to appropriate dealers (“Connect”) and help close the lead.
  • What “Genuine” Really Is: In language that people can understand, eliminate the confusion between what “Genuine” parts are vs. the aftermarket. No, Edmunds has it all wrong – reverse engineered aftermarkets parts are not better and should not be requested. We talked a little about this last week with collision parts, and we will continue this journey in subsequent blogs.
  • Lobby Information Support: AAIA is very aggressive at fighting everything that the OEMs try to do to protect the sanctity of “Genuine” and the circumstances regarding warranty coverage. Most recently, the AAIA lodged a formal complaint with the FTC against Honda’s stipulation that Genuine parts be used to preserve its warranty covenants. Honda is fighting that battle pretty much alone – and it is a battle front and center to most OEMs looking at higher quality products with more comprehensive warranties.
  • Field Support: We have tens of thousands of dealers out there that could be much more effective with social media and showing up in the top–ten of any search. We need to support this web presence with SEO/SEM/SMO (Search Engine Optimization/Search Engine Management/Social Media Optimization) consultants that could advise, train, and shepherd dealers to make them more effective in doing war on the Digital Frontier.
Please email us back your thoughts on this – I think it is a pretty big issue. Also, I’d like to hear back from you about your thoughts and actions concerning the right-to-repair legislations that are cropping up in Massachusetts and elsewhere. Thanks, David