Friday, September 27, 2013

The Connected Car’s Not Yet Connected – Maybe This Will Help

 by David P. Carlisle

For the past several months, we’ve been researching the technology behind the “connected car.” Today we will be releasing the executive summary of the “Market Assessment of Extended Service Technologies” - a 150+ page MyGuy research report that highlights the current state of Service Technology. It is free to MyGuy subscribers and contains opinions, knowledge, and wisdom gleaned from thousands of survey data points, dozens of interviews, one focus group, and about a thousand hours of thought.

We conclude that we are, as an industry, not prepared for the “connected car”.

The dream of many OEM strategists is this:
Imagine that you are driving your car or truck and something goes wrong. Your vehicle diagnoses the problem and walks you through an appointment scheduling process with the nearest dealership. As you arrive at the dealership, you are embraced by a quartet of hugs and kisses, the paper work is all set, the parts were already ordered, you have a half-decaf extra mocha latte, and, hell, you are even ready to go in about 45 minutes.
Well, for the most part, that ain’t happening … yet.

If your dealership does provide this kind of service experience, then you are most likely a mega-dealer who “gets it”, embraces MyGuy, and has engineered your own connections to your customers and their vehicles. However, if you are a smaller, traditional dealer then you either can’t spend the time to dream up and deliver a MyGuy service experience or don’t spend/have the money to facilitate it.

What about all of those tablets we keep hearing about? Nope, tablet installs are still fairly microscopic. Every rational service manager knows that tablets and high technology are the future of the service lane experience. But…errr…that’s still years off…let the other guys figure it out first.

There’s evidence for both success and failure from those who have installed Service Technology (ST) for scheduling or for managing their service lanes. Further, there are dozens of vendors in the space. Really, choosing a Service Technology provider right now is like trying to select the winner of the World Series during Spring Training (I would have told you Toronto…). So, how do you pick your ST winner when we are still in the technology’s early stages? Easy:
  • Look at how satisfied dealer Service Advisors are with the current lot of technology suppliers.
    • Hint: Not very satisfied.
  • Figure out why some dealers are not adopting ST, which promises to connect them to their brand of vehicles.
    • Hint: Too expensive, poor DMS integration, and unsure of any benefits.
  • Evaluate the improved efficiency imparted to the service lane process by these technologies.
    • Hint: Zip. Nothing. Nada.
Bottom Line: So then, what do you do? Some OEMs profoundly get it and have begun preparing their dealers for the “connected car”, others are struggling with what to do. Read the executive summary – it’s 24 pages – and find out some of the keys to unlocking the secrets of “connection.”

Download the executive summary at:

Thursday, September 19, 2013

“MyGuy”: Not Just For Service Customers

If you’re a Carlisle Spare Thoughts follower (and if you’re not, you should be!), you’re probably familiar with “MyGuy”—a term and concept we use to capture what service customers need and want. We talk a lot about “MyGuy” and how dealerships can do better with service customers. But what about parts, or wholesale, customers?

OEMs historically haven’t prioritized the wholesale parts business; worse, some have rejected it entirely. Wouldn’t that just be helping the enemy? Wrong.

The idea behind “MyGuy” is to capture as many service customers as possible, but there will always be some who go to the independent repair shops. The worst thing we can possibly do is lose out on service and parts sales to customers by stomping our feet and calling the independent repair shops the enemy. The best thing we can do is get the independents to use our genuine parts for their repairs.

So, do our parts managers need a “MyGuy” training and best practices program too? I’ll go ahead and answer that with a resounding yes.

Parts managers are often more technical and less customer service and sales-oriented. They’re incredibly smart people, but they’re not used to selling. With wholesale, this is the key—parts managers need to become salespeople, too.

The idea with “MyGuy” on the service side is that the growing segment of digital service customers (DSCs) will look online and find alternate service providers if dealers don’t seem trustworthy, honest, and reasonably priced—dealers need to be their “guy”.

While parts customers are practically light years behind service customers when it comes to technology and online activity, their internet use is beginning to grow and they’re getting into online ordering. There aren’t many digital parts customers yet, but there will be.

Plus, these guys don’t have to look far for other suppliers; suppliers like WorldPac are knocking on their doors, dropping in for visits, and running impressive promotions and incentives.

Plain and simple, our dealers aren’t doing this. In some recent research conducted by Carlisle, wholesale customers said that they see their dealer on average once a year. Once a year?! That just won’t cut it. Joe’s Repair Shop has a car on the lift and is going to buy from Mike, the WorldPac rep who just happened to drop by with a brand new free headlamp he thought Joe might want.

But it’s not just getting our foot in the door; it’s maintaining visibility and creating a loyal customer. IRFs are, without question, different than service customers. They value delivery speed, parts availability, and parts quality, but they, too, need a trustworthy go-to “guy”. They’re old school and they want that rapport.

Maybe Joe’s Repair Shop wouldn’t buy from WorldPac if he could call up his buddy at the dealership and get the part from him in a few hours. But why would he do that when “every time I call, the phone just rings and rings” or “every time I call, it’s a different guy—they don’t know who I am and I don’t know who they are”? We should know these guys by name, and we’re not even picking up the phone?

The competition is tough, and the independents aren’t going to come looking for dealers. We need to be out there building and sustaining the business.

Bottom Line: Capturing wholesale customers is a whole new ball game for parts managers. They aren’t used to being in a sales role, but that’s what they need to do to grow the wholesale business. There’s a long way to go and maybe a parts “MyGuy” is our next endeavor. For now, one step at a time…!

Friday, September 13, 2013

The Millennial Question

Cars aren't cool anymore. That is the verdict of a broad swath of Generation Y. …Smartphones take them to virtual hangouts with friends.” 1

“Some young people shun driving because it interferes with their texting…” 2

“More young adults today would rather hit the information highway than the open highway...” 3

In the past few months “conclusions” such as those above have played out across the internet as front-and-center issues for our industry. These generalizations arose from a Zipcar study about consumer behavior; it implied that Millennials value their mobile devices over auto ownership. Story-hungry media misinterpreted some parts of this study to explain Gen Y’s reluctance to purchase new vehicles and dealer service. True or false? Let’s first look at the study itself.

In early 2013, Zipcar released findings of a survey examining attitudes and behaviors of Millennials regarding transportation and technology, particularly the perceived value of car-sharing and mobility services, like Zipcar. Let’s focus on the two most cited (and misinterpreted) questions:

The question on the left has generated such headlines as: “The Cheapest Generation” 4 and “The End of Car Culture.” 5 However, the reality is not so black-and-white. The truth is that a young college student or a young professional living near public transportation can get by without a car, but their laptop is their livelihood. What good is a car if you don’t have a phone or laptop to arrange meetings and make appointments? Remember, Millennials typically do not have landline phones, so all communication is facilitated through their mobile phones and computers. Does this mean they don’t value cars? Of course not.

The media and the public seem to have drawn grand conclusions from question two, on the right, with one article stating “They'd rather hang out with their friends on Twitter than get in a car to go see them.” Again: look at the survey. The key word in the survey question is “sometimes”. Sometimes, Millennials responded, they chose to visit friends online rather than drive to see them. That’s true for most people, and no different than the car-crazy baby boomers who, back in their youth, phoned friends rather than drove to see them. Online communication and social media, not to mention the telephone, are supplements to in-person communication, not replacements.

So then, why aren’t Millennials buying new vehicles? It’s a convoluted issue, but really boils down to one thing – the economy. The truth is Millennials are being hammered by low wages, low employment, and skyrocketing student debt.

The median income for a 25 to 34-year-old has increased by over 170% since 1980. Meanwhile, the cost of America’s best-selling vehicle – the Ford F-series – has increased by over 257%. In 2011, payments for an F-150 accounted for 83% of a 25 to 34-year-old’s income, as compared to only 63% in 1980. Clearly, the cost of new vehicles is outpacing income.

But median income only paints part of the picture. What about employment rates for the younger generation?

The above data includes college students who are often, and understandably, not employed. However, it is clear that employment rates are strikingly low for this generation and actually shrank more than 3% in the past year. The job market isn’t what it once was. Consider the field of engineering – a degree in engineering used to guarantee a great job after college. Today, it’s increasingly difficult for recent engineering graduates to find jobs. Many companies are seeking seasoned engineers, instead of green, unproven grads, to keep training costs low and output high.

The final nail in the coffin is student debt. College loans are now the second-greatest source of debt in America, with mortgages being number one. How much cash are we talking about? The Consumer Finance Protection Bureau reports $1 Trillion. Furthermore, according to the Federal Reserve, over 14 million borrowers are under 30: the Millennials. What’s the median debt look like? Well over $20K per person for both private and public universities and growing quickly, and over 60% of students are borrowing. These numbers dwarf the kinds of education-related debt Gen X experienced.

The Millennials aren’t buying cars, but not because they don’t care and not because they don’t need them. No, it’s because they’re broke. New vehicle prices are much higher than what previous generations paid, relative to their incomes. High unemployment rates for Gen Y further reduce potential buyers. Finally, the Millennials are in debt. College graduates who have over $20K in student loans, with dangerous interest rates, will delay costly life decisions such as purchasing a home or a new vehicle.

Bottom Line: Millennials don’t hate cars – they’re broke and pinching pennies. As they pay off loans they will begin to purchase new vehicles, new homes, etc. In the meantime, face the fact that the nature of debt and the makeup of the labor force represent significant obstacles to new vehicle purchases.







Friday, September 6, 2013

RIM – The Evolving System

When OEMs began discussing Retail Inventory Management (RIM) at our Focus Days, starting in 2010, they struggled to understand how different RIM systems worked. OEMs used tools that varied enormously from one to another, and the metrics were limited; there was no data available to clearly show which RIM system was best and why. Four Focus Days later, the group has begun to define what works, what these systems are capable of, and how to improve them.

During this year’s 1.5-day RIM Focus Day – expanded from one day at the participants’ request – we concentrated on stocking logic, key performance indicators (KPIs), RIM terms and conditions, and implementation methods. It’s an understatement to say that these forums are changing the industry.

The group has been collaborating with RIM dealers by recommending changes in the programs. In response, a number of those companies have modified their RIM programs. OEMs have also modified terms and conditions for RIM dealers, in order to encourage those dealers to comply with the group’s recommendations. Over time, we have evaluated the impact and relative cost of the terms and identified which ones are most effective.

Stocking logic is another success story. It has always been difficult to compare the performance and effectiveness of RIM systems, due to a lack of consistent metrics in the areas of fill, dealer inventory, and compliance. This year, the group dissected each metric and discussed the challenges in data gathering and calculation. By the end of this Focus Day, OEMs reached a consensus on how each metric should be strictly defined.

Why devote so much time to metrics? Improved data allows us to see RIM effectiveness, and the defined set of core metrics can be reported by all RIM systems. That means future cross-brand comparisons will truly reflect differences in system usage and performance. And with an improved dataset the group can really begin to compare and contrast various approaches to stocking logic.

Three OEMS also demonstrated their RIM systems to help group members better understand the functionality and dealer interface associated with each. Two of the systems were custom-built, while the third was an off-the-shelf product; they ranged from a fairly simple order recommendation system to a highly complex and integrated system.

That served as a jumping off point to analyze how RIM systems integrate with Dealer Management Systems (DMS): the structure of various interfaces and the DMS systems with which OEMs have integrated. We discussed the future evolution toward more transactional Point of Service (POS) data collection, and the possibility of working jointly to develop interfaces.

Most OEMs want an integrated DMS system that includes complex solutions, such as policy recommendations and automatic order generation and promotions, to name a few. OEMs are also taking the reins, limiting dealer controls, in order to drive improved consistency and performance across the supply chain.

Bottom Line: Defining the metrics and collecting a common set of data will help the group effectively benchmark RIM performance, and show who is truly best-in-class. Understanding who the industry leaders are, and why, will enable RIM to become more efficient and help OEMs satisfy dealers and end-customers. These Focus Days have shifted the industry and started new trends in RIM systems. Once again, industry benchmarking is helping to raise the performance bar.

To find out more about all upcoming benchmarking and research activities visit our Carlisle Calendar.