Friday, May 27, 2011

Digital Kumite: Gator vs. Tundra

I have no interest in comparing the variety and quality of accessories across OEMs. Deciding who’s the best along these lines is a matter of taste and judgment. It is also irrelevant if the accessories are not merchandised to end-customers effectively. As we discussed last week, depending on dealers to do this is a bad bet – they will conform to pan-industry worst practices. One of the most effective levers that OEMs have to merchandise accessories is the internet – they can reach the 50+% of customers who are “digital sales customers”. Again, all of this was outlined last week.

Why am I stressing accessory sales? The disastrous 2009 vehicle sales year now represents three year old car parc that is about 40% less juicy than it was in the good old days. Normal M&R sales for the foreseeable future will reflect this significantly depleted prime car parc. But, we can tie our P&A sales kites to rebounding new vehicle sales… if we can better merchandise those damn accessories.

The Deere Gator is the defending champion here. Deere does a lot of things right, but six rise to the top:
  1. Clicks to build:Starting from a blank Google search screen, it takes just a few clicks until you are building a Gator.
  2. “Video clinic” image quality: You build a Gator on the screen with Pixar-like image quality and you see the product change based on your selections.
  3. Broad selection of accessories and implements: It seems like you can choose from nearly everything that Deere has in their product portfolio. Most accessories and implements can be seen in the build image.
  4. Selection detail drill down and dynamic build: This is the ability to drill down on a particular accessory, option, or implement and understand it well enough as a customer to make a buy or no-buy choice. It is also about the visual impact of seeing your selection on your configured product.
  5. Cost tallying: You see the costs increase/decrease as you make selections.
  6. Turnover (T/O) to the dealer: Once you design your product, is there a seamless transition to the dealer? During the Gator build, you can stop the process at any time, save your build list, print or email it, and/or request a dealer quote.
Like the Gator, the Tundra is a magnet for accessories. But, it takes a lot of clicks to actually get to the build-a-Tundra capability. I entered into the world of Toyota with a simple Google search for a “Toyota Pickup”. This took me to a picture of a Tundra, then back to the entre product line-up to choose what to build, then, finally, to the build process.

Now I can add stuff to a Tundra that is sitting there on my screen. The problem is that pretty much all I can see change is the color of the truck. The Gator build is like watching a Disney movie – it changes in front of my eyes. This is what I term “video clinic quality”. The Tundra, like most automotive internet build images, leaves too much to the imagination.

Toyota offers a fairly broad selection of accessories for the Tundra, and it has excellent drill down capability for more detail on each choice. Still, there is no dynamic build sitting front and center, that is “my Tundra.” It remains red and unadorned. The cost calculator is on par with the Gator, and the turnover to the dealer is OK, but involves more steps and keystrokes than the Gator.

Winner of this round: Gator

Last Thought: If I had a site like Deere’s Gator, I’d sponsor “Make Your Own Sunday” sales events. The idea here would be to leverage the internet product configurator to gain pricing and product insights through a one-day (call it “Sunday”) promotion on the Gator. With some thoughtful conjoint analysis design, you could determine utility scores and pricing elasticities for different accessories and implements. The promotion could draw in customers to build their Gators with the promise of unique “Make your Own Sunday” incentives and discounts (that could be engineered to tally to less than existing discounts.) Data collected from the build site could also be used to add Amazon-style captions, i.e. "Customers who bought this accessory also bought XYZ". This would psychologically leverage purchases from other buyers to make consumers feel that accessorizing is the norm rather than the exception.

If you have a configurator that emulates the quality of a video clinic, then use it for a video clinic. Hotels and airlines would do this in a heartbeat.

Friday, May 20, 2011

Digital Kumite: Let’s Go Shopping for Accessories

Over the next several weeks, we will use this blog for a “digital kumite” (go look it up, I’m not doing all the work for you) on selling accessories using the internet. There is a multitude of ways to skin this cat, so we are not saying the companies we are going to highlight have a monopoly on good practices. We will simply work our way through twenty or so OEMs who sell cars, tractors, bulldozers, motorcycles, and Class-8 trucks and see how they compare.

This week is about how Deere really gets it. For next week’s “digital kumite” I will pit Deere vs. Toyota in the build-your-product ring and compare how each respective web site sells accessories. I’ll get to this in a bit, but first some background.

I’ve studied accessories and implements for a few decades. On one hand, you’ve got end-customers who might want them; on the other hand you have end-customers that might not want them. The difference between might and might not can be due to a multitude of factors, spanning invention, subvention, differentiation, retention, and detention.

Have we invented the right accessory? Have we merchandised it well? Have we priced it to meet the market? Can the accessory differentiate the whole good? Is that differentiation enough to retain a fickle/meandering customer or attract a new customer? Does the selling process enhance or detain the sale of the whole good?
Time Out: Most accessory developers know everything that customers really want. Most dealers do, too. I’m not being facetious; they really do. It’s like shower rods in a hotel bathroom. Everybody knows that you need a shower rod to hold a shower curtain up in the air so that the water does not flood the bathroom. The shower rod industry belongs to a very mature market. Or, at least, it did about five years ago. Then, some inventor was probably taking a shower in a Holiday Inn, looked around and felt claustrophobic. She/he reckoned that if they could curve the shower curtain outward, it would make the shower tub look a lot bigger when you were taking a shower – I’m sure it was not a naked engineer who studied the Bernoulli effect of air flow and the associated pressure drop along surfaces parallel to the flow. Only a few short years later, almost all hotel rooms in the civilized world have scrapped their old straight shower rods and bought new bowed ones. Once you experience a bowed shower rod, it really does make a difference. It ”differentiates” straight shower rod hotels from curved rod hotels. I wonder how many motor vehicle accessories are like straight shower rods and how many are like curved rods? Taking this to the next step, I imagine that curved shower rods cost a lot more than straight rods. This is all about basic finance (“subvention”) and the laws of pricing economics. It’s not so much the price that makes the curved shower rod market; it’s the “I’ve got to have one” effect. If you managed a Marriott with straight shower rods, and stayed in a Hilton with curved rods, you’d run (not walk) back to the hotel you managed and buy a couple thousand curved shower rods. They self-merchandise.

If you can truly differentiate, all you need is product awareness at the end-customer level. If you are not completely incompetent, awareness trumps price. “Retention” cuts two ways. It’s about differentiation and need fulfillment. 99% of all motor vehicle customers who buy accessories do it to differentiate their vehicle, or they have a specific need … that they might not even be aware of. Shower rods are a good example of this – no one knew they needed a curved rod, but once you’ve experienced it you know you really need it. Curved rods differentiate hotel rooms.

If you have a pickup, tonneau cargo covers allow you to differentiate your ride, and, by the way, you really need one to keep that stuff in the back dry. If I want a tonneau cover to make my pickup look cool and keep my stuff dry, I might switch makes to the brand that offers this to me. I tend to go to hotels with curved shower rods because it makes me think they have larger bathrooms.
Over the years we’ve done a lot of survey work on the accessory market. At the start of the value chain, you have OEM product developers dreaming up, and taking to market, hundreds, if not thousands, of accessories and implements … at each OEM. At the other end of the value chain, customers buy them. From dealers. Several years ago I visited a dealer who represented an OEM with the best accessory development capability in the automotive industry. We talked about how they sold accessories. First off, they made sure that selling accessories did not get in the way of selling the car or truck – they did not want accessories to be a deal breaker. Next, they showed me a 5” x 7” polycarbonate picture frame where they had ten accessories listed, handwritten, to be sold, sometime, during the whole goods sales process. Same ten lines of accessories used for selling a subcompact or a pickup truck. All they wanted to sell was the straight shower rod they were familiar with, but who knows, the OEM accessory developers might have actually had some “curved shower rods” in their accessory portfolios that never made it to the dealer’s short list. Invention. What those developers heard echoing back from the vast distances separating them from the actual market, was that “price” was the reason a lot of the stuff did not sell. Subvention. The stuff did not sell; customers did not differentiate; and needs will not filled; they went elsewhere. Differentiation, retention. The problems were that polycarbonate frame, with its’ handwritten list of the top-10, and the fear that selling accessories would screw up the sale of the whole goods. Detention.

But all this has changed. The thing that the internet does best is disseminate information and it has done that in spades for accessories. Now consumers are no longer dependent on that 5x7 frame in the dealership with the old, boring accessories shown. Now consumers can look at everything (in most cases) that an OEM has to offer for their products. The car-guys invented build-your-own product capabilities on their websites, and Deere has leveraged this concept to break the cycle of pain. If you want to buy their Gator ATV, go to Google and type in “Deere Gator”. Almost every time, a Deere paid ad will sit on top of the list; click the Gator ad-line and it takes you to the Deere website that features the Gator. So far I’ve typed two words and had two mouse clicks. At this point the Gator on the web page automatically assembles and accessorizes – accessories start to fly into the picture and attach themselves to the Gator. I can learn more about the Gator … but, I am lured into building my own Gator. I start with a standard Gator filling up my screen in a woodland stream setting. With one mouse click, I change the background to be a trail. I choose which model I want to start building with mouse clicks. I decide on a diesel version. Next, I can change colors. I’m a purist and stay with Deere green. OK, I’m now ready for accessories. I choose these from sidebar lists that have pictures and costs. I pick with clicks. I can click to get a lot more information on the accessory, or simply choose it. Once I choose it, it magically assembles on my Gator that’s sitting in the middle of my screen. The list price updates and I see where I am. I can stop the process at any time, click on “View Summary”, save or print my build list, email it to myself, and/or ask for a dealer quote on my accessorized Gator. My Gator. It only took me a few minutes to go from an $11,199 base Gator to a fully accessorized one at $18,777. This is incredibly impressive. I know there are others out there that have similar functionality, but Deere does this very well. We know that one-third of all service customers research on the web and are “digital service customers.” The proportion of whole goods sales customers that use the web must be a lot higher – they are “digital sales customers”. ‘Build your own’ capabilities have been around for a long time, but they mostly focus on standard factory option “lists” where you can only change the color of the vehicle being built. The Deere Gator site allows you to graphically build your product and choose from standard factory options, attachments, and accessories. It is profoundly different. It solves the accessory riddle spanning invention, subvention, differentiation, retention, and detention.

Bottom Line: Deere hits on all the “tions” and deserves to be seen as a very relevant benchmark by OEMs in all motor vehicle sectors.
  • Invention. Deere directly connects their accessory and implement inventors to all digital end-customers. They can see from the clicks and builds if there is a market for their attachments and accessories. The Deere Gator site is the equivalent of a gigantic video product clinic. The graphics are spectacular enough to give it statistical clinic relevancy. The data from this must be mind-bending. My guess is that the cost of developing this sort of interactive visual build would be more than offset by reducing product development misfires and clinic costs.
  • Subvention. Rather than have dealers filter back pricing issues (that might be irrelevant and misleading) the build “clinic” tests pricing on customers who build Gators on the Deere website. If something is not chosen for any/many builds, it’s either the product or the price. The price is easy to vary and determine pricing elasticities.
  • Differentiation & Retention. The key to differentiation is market awareness. If you develop 1,000 accessories and only ten show up inside the polycarbonate frame, well, you ain’t got much product awareness. If your website builds from tiny pictures and lists, and your choices don’t show up on that vehicle in the middle of the screen, well, you ain’t got much product awareness. If, when you build, you can only choose from a very short list of what’s possible, well, you ain’t got much product awareness. Deere solves this riddle with complex and comprehensive Pixar-like simulations of what the customer is building. It is brilliant.
  • Detention. There is nothing you can do to get dealers to overcome their fear that selling accessories will detain and screw up the whole goods sales process. Rather than depending on the dealer for the connection, Deere leapfrogs the dealer and configures the exact product with the end-customer. The build is sent to the dealer or printed out. The sales discussion starts with the build and works down or sideways, rather than starting with a stripped product and working up, or simply staying pat. Detention for Deere’s digital Gator customers is irrelevant.

Friday, May 13, 2011

I’m From the Internet, “Please, Let Me Help You”

Genuine crash parts is a big business that is getting modernized and opportunized. The digital revolution is not escaping this segment.

It begs a situation summary: A motor vehicle that we feel comfortable driving 80 miles an hour experiences an incident that requires fairly extensive repair. This is fairly common. Another common thing is NHTSA examining safety data and finding out that 20 to 30 vehicles in millions had similar failures. These dozens to millions reach a trigger point and, maybe, millions of vehicles are recalled. This makes the news and people make highly informed different vehicle choices based on statistics that are dozens in millions. Big brother is watching out for them. And, sometimes the statistics are pure garbage -e.g., the spate of sudden acceleration problems we’ve seen since 60 Minutes eviscerated Audi.
OK, both of the situations described above occur simultaneously. I enjoy the irony when consumers behave schizophrenically. They blindly trust their vehicle to a local collision shop and their insurance company and gladly get their car or truck back polished, vacuumed, and cleaned. They assume that it comes back pretty much like new, and assume that all the parts should work like NHTSA checks for. Behind the scenes, they might be getting junk car parts from other crashes that are slathered with Bondo, or cleaned up with a dirty rag. Worse yet, they might be getting knock-off parts that have not been checked out by their manufacturer to see if they can perform to the integrated “machine” standards that NHTSA holds them to. They trust the system to work and that, somewhere, Big Brother is watching out for them. If not Big Brother NHTSA, well, then little brother OEM.

The “system” is evolving. Junk car parts lots have been Wall Streeted by LKQ/Keystone. It’s no longer a bunch of isolated rural eyesores; it’s a “system.” Linking together a dogs breath of junk parts suppliers and non-Genuine parts makers with bump shops, insurance companies, and claims estimators is APU Solutions - go to their website and get educated.

Bottom Line: Our digital world is not just about evolving digital service customers, B2B and B2C solutions, or about third party service reference sources. It is really all about making the market more efficient and knitting systems of new, and old, solutions together. Our consumers are educated by videos, sound bytes, and perfect paragraphs they see on TV and the internet offering seemingly objective sources. They feel safe and are perfectly content to text to a friend about a NHTSA-propelled recall while moving at 80 mph in a car that was repaired with parts pulled out of a wreck that killed more people than the damn recall. This environment is a feeding frenzy for internet companies; hey, all they really want to do is help you.