Monday, December 15, 2014

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


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

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

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

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


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

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

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

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

Monday, December 1, 2014

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

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

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

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

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

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

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

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

Monday, November 17, 2014

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

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

So what?

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

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

And pricing satisfaction.

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

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

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

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

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

Monday, November 10, 2014

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

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

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

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

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

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

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

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

Tuesday, November 4, 2014

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

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

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

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

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

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

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

Mercedes Benz

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


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

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

Bottom line

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

Sunday, October 26, 2014

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

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

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

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

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

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

Friday, October 17, 2014

How to Serve Heavy Truck Independent Repair Facilities
by Stephanie Karaa

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

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

So What Are Dealers Doing Now?

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

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

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

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

Friday, October 10, 2014

Vendor Shipped Direct: Not Always Direct
by Charlotte Tang

Like most millennials, I order a lot of stuff online. Amazon Prime makes it a weekly, if not daily, occurrence. And, as someone who recently got married, I’ve had lots of wedding gifts delivered over the last few months. With all these shipments sometimes deliveries don’t go as planned. Maybe you’ve had a similar experience—but, for sure, you don’t want this to happen to your customers.

One of our wedding gifts was a gift card to a store that sells kitchen and home items. I placed an order for three items: a honey pot for the 5 lb. tub of honey we received from a guest’s apiary; a Silpat, which is a non-stick baking mat for lining cookie sheets; and a kitchen floor mat that prevents fatigue from standing. The first two items were shipping from the company we purchased them from, but the kitchen mat was marked as “Vendor Shipped”, which I’m familiar with from collecting vendorshipped-direct data through our Parts Benchmarks each year. What happened next was a comedy of errors.

I placed the order on a Monday evening. The website said standard shipping takes 7-10 business days, but the floor mat would take 10-14 days for delivery. The floor mat shows up after about a week and a half. I hadn’t received a shipment confirmation, so that was a surprise. I get it out and lay it on the kitchen floor. It’s the wrong size (longer than the one I ordered), color (lighter than the one I ordered), and pattern (basket-weave instead of cobblestone). Oh well, it fits and I don’t feel like making a fuss.

A few days later I get a message from UPS (through MyChoice) that I have a delivery scheduled. I come home from work on a Friday and find only a return shipping label stuck to the front door listing “floor mat return” in the memo field. Huh? I guess they want me to send back the one that was wrong. I wonder why no one called to ask me to do that. We put it outside on Monday, but no one comes to take it. Finally, on Wednesday it’s picked up, and the correct mat is dropped off.
Side note: I checked the tracking info on the returned floor mat, and it took several extra days to get delivered due to multiple “recipient has moved, trying to locate new address” errors. What is wrong with this vendor?
The other items in the order had gone missing, despite being reported delivered. The store replaced those items, and we received that package without issue. Then, soon after, another floor mat shows up. It’s been over three weeks since the initial order now. Hmmm, okay, what do we do with this extra one? Can we keep it? Should we return it? I contact the store again. They tell me:
That duplicate was ordered for you as a result of a lost package claim. That claim is closed now, so we would like you to keep that duplicate mat. You were not charged for it, so if you cannot use it please feel free to give it away or donate it to a local food bank or charity of your choice.
I guess no one noted in their records that only the first two items went missing, but not the third?
Side note: I checked the order status again when writing this. The order was placed in July, and the website still says it’s processing. I never received a shipment confirmation for any of the packages. Maybe a 3rd round will show up someday?
I’ve always heard that dealers were less satisfied with vendor ship-direct (VSD) orders than those fulfilled directly by the OEM. This was my first (known) VSD order, and I have to say, I agree with them. Your customers will judge you on the entire order and delivery experience, and if your vendors are not up to par, it reflects poorly on the whole experience. They say all’s well that ends well, but I’m going to stick with in-store purchases from this store in the future.

Bottom Line: What do your delivery policies say about you? Do you resolve issues quickly and without undue hassle for the customers? Do your vendors live up to your delivery standards?

Sunday, September 28, 2014

Car-Share and Ride-Share Companies are Blending the Lines of Public and Private Transportation
by Joy Sun

Here’s something to think about: in early June, Uber—the venture-capital-funded, on-demand car ride service—set a record valuation of $17 billion, which makes this “start-up” worth more than half of the companies listed in the S&P 500. The month before, Uber was integrated into Google Maps. And now, in addition to mapping your travel based on whether you are walking, biking, driving, or taking the bus, Google Maps also offers the option of getting there via an Uber car.

Uber is a four-year-old start-up and success story that is scaling quickly (currently, Uber is up and running in 130 cities worldwide) and here to stay. So what does it mean for automotive OEMs when its founder and CEO envisions the company making “car ownership a thing of the past”, replaced by ubiquitous “car access,” but limited private ownership?

Uber is simply one manifestation of the rise of the shared economy, in which assets that used to be 100% owned and 99% idle (think of your empty guestroom or your commuter car between 9 a.m. and 5 p.m.) are becoming more productive as they are utilized by more people. The shared economy has been unleashed by the internet and smartphones, which have enabled peer-to-peer connections in real time. Whereas your guestroom used to sit idle, now it can be easily rented to vacationers on Airbnb and used to generate value.

Transportation is a sector disproportionally affected by the rise of the shared economy, because sharing transportation has historically been commonplace. Public transportation has always allowed people traveling in the same direction to use the same vehicle for a small fee. However, unless a city has invested in a comprehensive infrastructure, public transportation can rarely match the flexibility and convenience of private transportation.

In contrast to yesterday’s dichotomy between private and public transportation, today’s technology enables a slew of travel options varying on a spectrum of convenience and cost. On one side of the spectrum is your fixed-route traditional public transportation that is low cost and inflexible to your personal needs. On the other side of the spectrum, we are seeing higher cost transportation options that rival the convenience of private ownership. I’ll call these options “shared personal transportation,” and they include Uber, which offers to any urban dweller the convenience of being chauffeured, and Zipcar, which gives users access to a neighborhood car for extended hours.

Shared personal transportation makes the experience of private car ownership available on a pay-per-use basis, which allows for a greater level of price sensitivity and flexibility for consumers. According to Kelly Blue Book, a recognized consumer guide for new and used vehicle price estimation, the annual cost of ownership (including fuel, insurance, financing, maintenance, repairs, and depreciation) for a new 2014 subcompact vehicle amounts to ~$530/month; the equivalent of traveling 441 miles in a chauffeured Uber every month (after the base rate, the travel fare is $1.20/mile in Boston)! In the meantime, ride-share companies are continuing to push down the prices of their services. This is, in part, because they are engaged in pricing wars with each other. It’s also, in part, because they are launching even lower price alternatives, such as real-time carpooling that allows strangers traveling in the same route to share rides and split the fare.

Automotive brands don’t just compete against one another for vehicle sales, they also compete within a greater context of private vs. public transportation, and now those options are being supplemented by a slew of flexible shared transportation options. Shared personal transportation complements public transportation, and, if combining the two can mean lower costs than private car ownership, with the option of flexibility when you need it, then who will be the car owners of the future (at least in urban areas)?

What does the shared economy mean for automotive manufacturers? What does “no car ownership, but full car access” mean for automotive aftersales? How do companies like Uber, Lyft, and SideCar, which contract with large numbers of part-time drivers, influence their service and repair habits? These are questions that will be explored in part II of this blog, but in the meantime, I speculate that it might bear a resemblance to fleet operations (to be investigated in a future blog post).

Bottom Line:In the context of the shared economy, on-demand ride-sharing and car-sharing companies like Uber and ZipCar are enabling more people to have the convenience of automotive access on a pay-per-use basis, without the responsibilities and costs of automotive ownership. The ramifications of these new transportation entrants on car ownership and aftersales behavior are not yet clear and are worth investigating.

Monday, September 22, 2014

Thanks, But No Thanks…
by Brian Steinmetz

The upsell: when a customer is persuaded to purchase a more expensive item than the one they originally indicated, or more than they want or need. It’s likely that we’ve all encountered it, and probably with a bit of frustration. Why can’t I just buy the parts I want? Obviously, salespeople will try to sell us things we didn’t ask for, but that’s their job. The problems arise when sales pitches get in the way of normal negotiations.

I am about to move half-way across the country; I have had enough on my mind before being subjected to some aggressive upselling. I called the local cable provider, where I’ll be moving, to set up my account. I told the sales associate that I simply wanted a basic internet modem and a DVR-ready cable box. Simple enough, right? After a brief hold, I was offered a $219/month package that included advanced high-speed internet with a combined modem/router, a soon-to-be installed land-line (for free!) that included nationwide long-distance calling, a home security system complete with two motion detectors, a window monitor, a camera whose feed I could watch from my phone or laptop, and a siren to thwart would be intruders, all alongside a 350+ channel TV package with HBO, Starz, Epix, Showtime, and the option to tack on an NFL package for an additional monthly subscription to make sure I can still watch my New York Jets every week. “And all of this at nearly 55% savings compared to what most other customers were paying, based on my credit score!”

I politely laughed at the associate’s small talk, jokes, and attempts to convince me to agree to purchase each of these services. Then I reassured the sales associate that I didn’t want the upgraded router, security system, land-line, and a good portion of the described cable package. “OK, now that we are past that, I can hear about the actual service package I want,” I thought, only to have my frustration really begin to build.

What followed was 45 minutes of me continuing to ask for what I wanted to purchase followed by the sales associate’s incremental concessions before the bloated service package approached what I wanted. “You can always just cancel after a 30-day trial, so I’ll just leave that in there for you.” Yeah, right.

When the conversation finally ended I had a service agreement for the exact package I originally asked for, plus, due to a bit of successful upselling, HBO for a small monthly fee. But where did the last hour of my life go? If getting me to purchase a premium movie channel was the sales associate’s end goal the whole time, why did we need to go through the song and dance?

The cable company I spoke with has a monopoly on service in my new neighborhood; otherwise, I wouldn’t have stayed on the phone past the associate’s first or second upsell attempt, and I would have instead taken my TV and internet needs elsewhere. While I did not have the option of taking my business elsewhere, drivers certainly do. When frustrated drivers encounter repeated and aggressive upselling of parts or service, the cheaper aftermarket options down the road start to become more appealing. As part of Carlisle’s 2013 Service Advisor survey, we learned that service advisors from all participating OEMs reported more than half of their compensation is directly tied to commission. As a result, it is obvious that many of these service advisors will try to upsell drivers as they come through dealerships for service. While that is itself not a bad thing, there is considerable incentive for them to do as much upselling as they can, and occasionally this upselling may get excessive and could push drivers, or less assertive consumers, away.

Bottom Line: Drivers are generally expecting some upselling when they bring their vehicles in for service, but we need to be careful not to push it too far. While drivers might be convinced to splurge on the genuine part over the aftermarket version, you and I both know that spark plugs don’t need to be replaced during every oil change any more than I need a siren above the door to my apartment.

Friday, September 12, 2014

The Connected Car – How It Will Fix the Cost Perception Disconnect

What is the next big thing in the automotive aftersales market? The answer probably lies with the connected car. The connected car is defined as a car equipped with a wireless data connection to the cloud. With this connectivity comes a multitude of features – new cars have everything from GPS systems to internet radio to restaurant booking apps. But is the connected car really just about infotainment? The connected car could also impact the aftersales side of the automotive industry. For OEMs, the payoff could be huge.

It all starts with the dealers, and one of the biggest areas they need to improve: consumers’ cost perceptions. Carlisle’s 2014 Consumer Sentiment Survey asked consumers what criteria were most important in the service process (see following chart). “Relative Importance Ranking” illustrates how highly consumers ranked a criterion. “Total cost is reasonable” tops the list both in relative importance and overall rank.

Most Important Criteria for Service Customers
Unfortunately, consumers simply do not feel that costs are reasonable at dealership service departments. The following graph quantifies that feeling by illustrating what customers value vs. what they believe are dealer strengths. The higher a category is on the Y-axis, the more customers value that category. The blue portion of the graph shows how many customers view that category as a dealer strength. As before, “Total Cost is Reasonable” is the top item customers value. However, just 11% of customers see this as a dealer strength.

This hurts dealers. If reasonable costs are important to consumers, and consumers don’t think dealers have reasonable charges, they’ll go elsewhere. This is Business 101, but data proves that dealers still haven’t solved the problem. Our survey asked consumers why they switched to chain or independent shops for their most recent repair (see following two charts). Consumers placed “Total Charge is More Reasonable” at the top of both lists – it was the most popular reason consumers switched to independent mechanics and the second most popular reason consumers switched to chains. Service customers are leaving dealers due to cost perception.

Why should OEMs care? One of the most interesting takeaways from the graph below is the huge jump in repurchase likelihood between “satisfied” and “very satisfied” consumers. That means OEMs clearly do need really satisfied customers, because turning “satisfied” consumers into “very satisfied” could reap huge rewards in vehicle sales.

OEMs want to sell more cars and service customers are more likely to repurchase an OEM’s brand if they’re satisfied with what the dealer charges for maintenance and repairs. The trouble is that those customers aren’t satisfied.

Why? The biggest problem is likely the opaque nature of the service process. Take the typical service experience. A customer brings their car into a dealer’s service department for routine maintenance. The dealer runs a multi-point inspection and comes back to the customer with recommendations for additional services. The service advisor asks the customer to sign off on the additional maintenance.

At this point the consumer begins to feel uneasy. Everyone “knows” the dealership has an incentive to sell more than the customer really needs and to charge a lot for it. If a customer doesn’t know much about cars or what services should cost, they’ll view these recommendations with suspicion. Maybe the dealer offered a fair price and the car genuinely needed those services, but the customer doesn’t know if either of those are true. This leads to a cost perception problem – consumers feel that they either overpay for services or purchase services they do not really need.

So what can OEMs do to rectify this cost perception problem? They need to connect the car.

First, customers need to know what services are necessary. Sensors in different parts of the car could provide this data. The car detects what is needed and sends information to the customer – either through onboard systems or to a computer or smartphone. This way, when the customer rolls into their dealership they have some background knowledge about what service is required; they are not solely taking the word of the service advisor.

Second, consumers need to know that they are paying a fair price for the service. Eventually, the connected car should be able to pull in pricing data from area dealers to give the consumer a dependable estimate. Dealers may not like this idea, as they feel consumers will flock to lower cost service providers. Maybe so, but consumers are free to price shop now – and they do! Even if dealers don’t display their prices, anyone can call a dealer to get an estimate. Having the connected car generate an estimate saves everyone time. Additionally, the connected car can tout the benefits of local dealers. The car could pull in information about various dealerships’ service departments – such as what amenities are offered, what certifications technicians have, and positive reviews from other customers. All this information would give the customer a sense that they really are getting their money’s worth.

Bottom Line: Dealers have a cost perception problem. Consumers feel that they spend too much money at dealers – either by overpaying for services or paying for unnecessary services. OEMs should proactively address this, since service satisfaction impacts repurchase likelihood. The connected car can help OEMs solve the cost perception problem – both by giving trusted recommendations and clearly showing the benefits of servicing at the dealer.

Friday, September 5, 2014

New Vehicles Need Parts Too, Sometimes
by Eliza Johnson

We want customers to find buying a new car an exciting experience. We want them to love their new cars—shiny and sleek, with cutting edge technology. The tradeoff is asking them to fork over what is for most people a big chunk of change. So, imagine the customer’s frustration when two weeks after buying a carefully selected new car, the air conditioning quits in mid-July, or the navigation system starts having glitches. What is wrong with this thing? I spent $25k and it’s already breaking? Imagine the deeper frustration when that annoying issue takes two weeks to fix because the dealer had to place a special order to get the parts. What is wrong with this dealer? Not coming back. And did I make the wrong decision with this car…?

Aside from all of the design and engineering that goes into new model vehicles, the planning necessary to stock and manage service-parts inventory for these cars is a major component of a successful launch. This is pretty critical to the new vehicle customer experience. And if we want them to buy another new car down the road, we have to get this right. Think about the situation described earlier: this customer may turn to an independent service provider and be lost to the dealer from the get-go. Plus, we know that such a poor initial experience will likely push the customer to another brand entirely the next time they go car shopping.

New model parts are important for dealers and OEMs who want to keep their customers, but planning for them creates new and different challenges for OEMs. How can you forecast demand? How can you define critical vs. non-critical parts? How do you balance the needs of service and production?

We recently conducted a benchmark study with a group of automotive and heavy equipment subject matter experts to investigate how new model parts are managed and stocked, and the impact or performance of those strategies on fill rates. “New model part” typically means any new part on a new or redesigned vehicle (a few heavy equipment OEMs also include carryover parts on new vehicles in this bucket).

While there was little consensus on how to best manage new model parts and how to accurately forecast these parts, a few potential best practices emerged.

  • Some OEMs stock just a couple of months of supply for all new parts, while others stock up to 12 months of supply on a fairly limited selection of parts. In general, the standard is to keep months of supply low. Defining critical parts within new model is key so that stocking breadth can be more targeted.
  • New model part fill rates and targets vary fairly widely, both in measure and in practice. Some OEMs measure fill rates at the time of vehicle sales, others one month out, and others up to six months out. Measuring new model fill at the time of vehicle sales will better measure and mirror the actual customer experience.

  • Very few OEMs, if any, are currently tracking or tying customer satisfaction to new model part fill rates and strategies, despite the risk that problems with a new part could ruin a customer’s experience with a vehicle. Happiness with that new car will help drive your customer back to the dealer for service and to the OEM when it’s time to buy another car.
Bottom Line: A new model release requires attention to more than vehicle design and rollout. The service-parts stocking strategies are key to a customer’s satisfaction; they are worth greater thought and focus than they’ve been getting. New model parts management presents a unique, important challenge that can set the tone for a new owner’s experience. At worst, it’s damage control; at best, it can cement a lifelong customer relationship.

Friday, August 29, 2014

The Connected Vehicle—How Will It Make Appointments ‘More Convenient’? by Annie Cui

The connected vehicle may not yet be a trending hashtag on Twitter, but more and more vehicle owners are catching on to the technology revolution.

In fact, according to our 2014 Consumer Sentiment Survey, 70% of the consumers who currently have in-vehicle telematics stated they would like a telematics system in their next vehicle.

In-vehicle telematics systems can warn owners of needed repairs, low tire pressure, and upcoming factory recommended maintenance, as well as send notifications to the owner’s smart phone device. Some telematics systems, such as GM’s OnStar and Hyundai’s BlueLink, even notify the owner’s preferred dealer of their customer’s upcoming recommended maintenance. The dealer will then call up the owner to help them schedule their needed appointment.

But what if we simplified that even more?

Telematics developers are working on further automating the scheduling process to achieve the easiest customer ownership experience. Soon, the telematics system will not only notify the owner that their vehicle needs a service, it will allow the customer to see and select available appointments at their preferred dealer, and then automatically send that dealership all crucial vehicle telematics data.

The telematics will integrate directly with the dealer’s appointment ledger and allow the consumer to simply click on a time that works for him or her on the in-vehicle screen or on their mobile device. Then, the dealer will automatically receive the appointment notification with the service and owner info, the vehicle health report, and the vehicle history. This technology will eliminate the time wasted when the owner has to search for their dealer’s contact info, call the dealer, explain the service needed, and then try to find an appointment time that works for both parties, which can take several minutes.

The idea is that the telematics system will establish an instant connection between the vehicle and the dealer, thereby making things more convenient for the customer. The vehicle and the dealership can work simultaneously to run technical diagnostics and identify vehicle issues before the customer arrives, making it possible to know what parts are needed ahead of time and improve inventory fill rates. When the customer arrives at the service lane, the dealer will have all the necessary parts ready. Dealers can also boost shop loading and capacity management as service advisors and technicians can better plan their time, thereby improving efficiency. Not only will this speed up the repair process and reduce customer wait time, this can also improve the accuracy of dealer service timing.

Our 2014 Consumer Sentiment survey shows that the 2nd and 3rd most important factors for a customer selecting a service outlet are 1) one that has “[their] vehicle available promptly at the time they estimated”, and 2) “sets appointment quickly at a convenient time.” Telematics technology will enable dealers to improve performance on both criteria, making it possible for them to give more accurate time estimates and allowing owners to schedule a service appointment at their desired time directly from the seat of their vehicle or the screen on their phone. How much easier does it get?

Telematics technology will not only increase the accuracy and convenience of appointment scheduling, but this will likely get more customers to come into the dealership in the first place. When the customer’s telematics screen or mobile device shows appointment availability, it will only display dealers. The screen might show a few local dealers and the owner’s preferred dealer, leaving the customer to choose. Customers that would normally service their vehicles at a chain or IRF could end up scheduling the appointment with recommended dealers that come up on the screen, just because of the added convenience the telematics technology provides.

The accessibility of appointment scheduling in the vehicle, through the telematics system, will make the owner’s life easier. The better the customer experience, the more likely it is that the customer will come back to the dealership for more. However, the added convenience from telematics scheduling is dependent on the customer maintaining his or her subscription to the telematics system.

Bottom Line: The fully connected car is going to revolutionize the interactions between vehicles, their owners, and the dealers. The added convenience of scheduling appointments through in-vehicle telematics will change customer perceptions and set higher expectations for the ease of vehicle services. Dealers have to get on board and keep up with these technology improvements, or they will get cooked.**

**The link is to “Been There Done That” on MyGuy. The blog is about the importance of understanding the benefits of technology and the risk of dealer complacency associated with having the minimal upgrade from their manual processes (mostly about service lane inspection).

Sunday, August 24, 2014

The Dissatisfied Dealer: Curmudgeon or Harbinger?by Charlene Hovatter

These are the ‘happy ones’ – the barometer of your company’s service ethic and responsiveness, and your key to growing revenue and profitability. For most of our participating OEMs, satisfied dealers are the majority, and increasing.

But what about the others . . . the few, the not proud, the disgruntled? What about the dealers who mark “Very Dissatisfied” or “Somewhat Dissatisfied” on their surveys? What do they tell us about our business, if
anything? Do these guys and gals just roll out of the bed on the wrong side the morning the survey appears in their inbox, or can they provide us with just as valuable insights into our business as the “many” that are satisfied? And how do we keep those many satisfied dealers from joining their brethren on the ‘dark side’?

Admittedly, there aren’t many of these dealers. . . so, why should we care about them?

Why Care About Dissatisfied Dealers?

If there are so few dissatisfied dealers, why should we care?

Well, first of all, there is quite a bit of variation among participating companies, so some should care more than others . . .

. . . And we know from experience that moving dealers “up the satisfaction ladder” impacts their purchase loyalty.

But, beyond overall satisfaction, companies can sometimes rapidly identify areas in need of immediate attention by examining dissatisfied dealers in the sub-categories. This isn’t always obvious based on only your ‘top-box’ score.

Can A Dissatisfied Dealer Become Satisfied?

So, how intractable are dissatisfied dealers? Is it worth the time to try to move them into the “Satisfied” bucket? Based on data from our 2012 and 2013 Automotive Parts Manager Surveys, these dealers are easier than average to move . . . and they have nowhere to go but up.

We found 4,616 dealers who participated in both the 2012 and 2013 Automotive Parts Manager Survey. To ensure that the same individual filled out the survey over the two years, we matched OEM + dealer code + respondent name.

Our analysis with this sample of 4,616 dealers reveals that while most “somewhat” or “very” satisfied dealers did not change their rating between 2012 and 2013, nearly all of the “somewhat” or “very” dissatisfied dealers did so.

Our surveys are designed around a 5-point scale, with 1 being “Very Dissatisfied” and 5 being “Very Satisfied”. On average, dealers with a “Very Dissatisfied” rating in 2012 moved up 1.7 points on the scale in 2013, while dealers with a “Somewhat Dissatisfied” rating in 2012 moved up 1.3 points in 2013. So, when these individuals change a rating, the magnitude trends toward moving up into the “Neutral” – “Very Satisfied” range. This suggests that dissatisfied dealers are not chronically dissatisfied, but rather reacting to specific, actionable situations, and that they are relatively easily ‘recaptured’ once their issues are resolved.

Bottom Line

For all of our surveys, in addition to the primary deliverable which focuses on “Very Satisfied” customers, we issue a “Total Distribution Report” which shows a complete breakdown of scores across the five satisfaction ratings for each survey question. This is one of our oft-forgotten deliverables. Some participating OEMs may not even know about it or distribute it internally. However, it provides unique and sometimes powerful insights into your survey results by allowing you to tailor your analysis to your specific needs. Spend some time with this report, looking at the percentage of your dealers who are dissatisfied in either “Overall Satisfaction” or specific topics. Then, leverage your raw data report to seek out these dealers and identify their particular issues. Sometimes it will be a systemic issue impacting a large number of dealers, or it could be a number of issues unique to individual dealers. Calling dissatisfied dealers to further discuss their issues is a highly effective method of increasing OEM satisfaction ratings. Taking steps to identify your most dissatisfied dealers and address their unique needs will move your organization toward greater customer engagement and profitability.


If you need assistance with this or other analysis related to your survey results, contact Harry Hollenberg at or 978-318-0500 X106.

Friday, August 15, 2014

Transportation Rates – Are You Getting A Good Deal?by Paul Gurizzian

Whether you are buying a new set of golf clubs for your weekend leisure or transportation services for your day job, you want a good deal. The question of whether or not you are getting a good deal on your transportation purchases can be difficult to answer on your own.

To help our motor vehicle service parts clients answer this question, we at Carlisle have built a transportation rates benchmark database for the U.S. market. This database includes, on a blind unattributed basis, the rates that auto and heavy equipment OEMs pay for truckload, parcel, and, more recently, dedicated delivery service (DDS). (For DDS, we calculate all-in costs per stop, costs per mile and costs per dealer, rather than rates, per se). For parcel, the rates are zone-specific, and for truckload the rates are for specific high-volume lanes. In short, the benchmark rates are highly relevant and comparable to help you determine if you are getting a good deal.

Well, what have we found? Enormous variability in rates! And, before you ask, the rates are not simply correlated with volume. That is, if you are a big OEM, do not take comfort that you have low rates. Conversely, if you are a small OEM, do not accept that your rates should be higher.

The graph below shows real world benchmark results for five motor vehicle OEMs buying truckload services from Tennessee to the Carolinas/Georgia. This data is normally expressed on a cost per mile basis, but to protect confidentiality in this blog, the Y-axis values are not shown. The key takeaway from this chart is that OEM 1 is paying nearly 90% more per mile than OEM 5. This disparity is similar to results we found in other benchmarked lanes.

Another example below, but this time for DDS, shows a similar disparity. Here, we see that OEM 1 is paying about 70% more than OEM 5 on both a per mile basis and a per stop basis for standalone DDS service. Once again, the Y-axis values are hidden here to protect confidentiality. Carlisle calculated these “rates” by dividing annual OEM standalone DDS spend by the relevant miles traveled and serviced dealer points. By the way, we see a similar disparity across OEMs for shared DDS and DDS-like, too.

So what could be contributing to this disparity in rates? Why are some OEMs laughing all the way to the bank, while others are crying in the poorhouse? There are a number of reasons; some structural, some operational, and some performance-driven. A starter list of drivers includes:
  • Negotiating savvy and strength
  • Purchasing process
  • Carrier contract terms
  • Supplemental services performed by carriers
  • Carrier performance requirements
  • DDS route design
  • In the case of DDS, delivery volume per dealer
Bottom Line: If you are responsible for buying transportation services or for the profit and loss of your aftersales business, the observations above are potentially very important. Let’s do some simple math to demonstrate this importance.

According to our North America Parts Benchmark data, the typical service parts OEM spends between 4 and 11 cents of each parts sales dollar on inbound and outbound transportation. The average here is 7 cents. Let’s say, conservatively, you are like OEM 3 or 4 in the first graph and are 15% higher than the low cost purchaser. In this situation, you may be leaving one point of pre-tax margin on the table, just in transportation rates. On a billion dollars of parts sales, this translates into $10 million in annual profit. Are you getting a good deal?

Friday, August 8, 2014

Metrics without Minds: Getting the Full Value Out of Our Metrics Investmentby Nate Chenenko

I was at Target yesterday, and the cashier happened to have his screen facing me. As the person ahead of me in line finished checking out, I saw that the cashier’s screen changed; it looked like this:

Because I have a healthy obsession with metrics and workplace incentives, I asked the cashier what it meant.

He said, “That means my last ten checkouts were all green”

I asked, “What do you have to do to get a green checkout?”

He replied, “I don’t know, I just know it’s based on how fast you check people out and if you’re fast then you get green, and if you’re not then you get red, so I know 90% of mine for the day have been green - so I’m doing ok.”

This is interesting for two reasons—one very good, and one very bad. Let’s start with the good reason:

The Good:
  • Target is showing metrics in a manner that makes them very obvious to the person who can actually work to change them. This cashier gets immediate and consistent feedback about his performance on every transaction. If he’s slow (red) on one transaction, he’s immediately alerted and can start thinking about how to improve. And even if he’s been 100% green all day, he still sees that fresh “G” pop up on the screen, encouraging him to continue the good work. And I’d bet that Target managers have some real-time monitoring that allows them to see if a cashier’s performance drops below a certain threshold so that the manager can intervene.
  • Furthermore, I like the use of red and green. We know these stoplight colors really work for operators in a variety of situations.
So Target’s technology implementation is good.

Now The Bad:
  • The employee I spoke to didn’t know what made a transaction red or green! He knew that his performance was being measured, but he didn’t know how. If he doesn’t know the goal (the characteristics of a transaction that make it “green”), how is he supposed to reach the goal?
    • Yes, it’s possible that this employee didn’t want to tell me the details, but I think that he was being honest when he said “I don’t know.”
  • This is a training issue, and proves that all the metrics, dashboards, and tools in the world won’t help if you don’t communicate with your employees.
Bottom Line:

We know the value of metrics. In fact, we’ve installed measurements in every facet of our business. But if we skip the training and employee relations (or don’t check to see that our training was effective), how much value do we miss out on? Let’s make sure we align management’s goals for a high quality, productive workplace with the employees’ need to understand exactly how to become high performers—then we’ll get the full value of everything we’ve spent on measurement and reporting tools.

Friday, August 1, 2014

The War on Inefficient, Low-Value Added, Boring and Enervating Drivingby Thomas Neumann

Riposte to “The War on Driving” by Ilia Gorelov

I need to preface this by stating that although I’m a telecommuter, I like driving; I like the open road and I like cars. I really do. My top three all-time drives include a multi-day pleasure cruise through the American Southwest in a convertible – open skies AND open roads; a night drive from Amsterdam to Northern Bavaria, where I arrived one hour earlier than the nav system predicted; and, lastly, a drive through the Alps in a supercharged coupe, when I set my personal land speed record of 155 miles an hour.

I should also mention that I’m German, and I know how good not having a speed limit feels. Trust me.

Here is what I don’t like: city driving, sitting in a traffic jam, commuting. Unfortunately, this is the reality for almost all people, almost all of the time.

I envy my colleague, Ilia Gorelov, because he can find enjoyment while traversing 18 miles in 30-45 minutes for his daily commute. Honestly, at that speed, about 30 miles per hour (and that’s on a good day), I could not enjoy driving a car. Ilia wrote that he likes the feeling of control he has when driving, thinking about the day and listening to the radio on his way to or from work in the privacy of his car. I just get annoyed with all the horrible drivers – myself, naturally, excluded. Driving is Ilia’s way to unplug and unwind, and maybe this is a good start for making the case for more autonomous vehicles:
  • The Distracted Driver – A Danger to Himself and Others: OK, I know I’m exaggerating here, but strictly and maybe a bit unfairly speaking, Ilia is a distracted driver, albeit a very, very mild case, compared to all those other multi-taskers behind the wheel. According to the U.S. Census Bureau, fatal crashes due to distracted driving (caused by such things as the use of cell phones behind the wheel, texting, and impossible-to-use infotainment systems) have increased from 10% of fatal crashes in 2005 to 16% in 2009, while the overall fatality rate has decreased from 1.5 deaths per 100 million vehicle miles traveled to 1.1 over the same period. The bottom line: vehicles have become safer, thanks to significant industry efforts, while drivers have become more dangerous. Let people do the talking, and vehicles the driving. Autonomous vehicles = no driver = no driver distraction.
  • The Open Road – A Costly Illusion: The statistics are widely known: per year, the average American loses 38 hours due to delays while commuting and wastes 19 gallons of fuel for a total “congestion cost” of $818 per year. On the national level, this adds up to $121 billion (Texas A&M
    Transportation Institute, Urban Mobility Report 2012). Sitting in your car in a traffic jam may make for good think time, but otherwise, unless you come up with a cure for cancer while sitting in a traffic jam, (national cost of $216.6 billion), it doesn’t make a whole lot of sense. Autonomous, networked, intelligent vehicles have the potential to reduce congestion and increase the time you can spend with your family. I’m amazed at the car commercials shot on mountainous, winding roads with no other vehicle in sight. When I crossed the Alps, there were lots of other vehicles around, their drivers presumably enjoying the mountain solitude with me.
  • The Feeling of Control – What Control???: Granted, the transition from safety-related “driving aids” to “losing control” to the autonomous car is gradual, but modern cars come with a host of features that make you wonder how much control the driver really has: anti-lock brakes take over
    the braking in an emergency; power steering makes turning the wheel a breeze when parking (unless you have a parking aid system already); cruise control regulates the speed and automatically disengages when other cars get too close; AC maintains a constant temperature; suspension settings adjust with speed; advanced gearboxes know which gear you are going to select next; crash avoidance systems stop your car if … well, if you are too distracted, tired, inattentive or otherwise preoccupied. We could go on, but the reality is that these days the most significant unaided driver input is starting the car and turning it off, and that we are approaching the point when technology is ready to take the driver’s place in a significant way.
So, I don’t agree with Ilia Gorelov that a “War on Driving” is going on. There is a “War on Inefficient, Low-Value Added, Boring and Enervating Driving” going on – and rightfully so.

I do agree with Ilia that the emergence of more autonomous vehicles will change the relationship between the driver – better yet, the passenger – and the vehicle. The more autonomous a vehicle becomes, the less important, by definition, the “driving experience” will become. Simultaneously, other vehicle attributes will become more important. In the future, maybe product differentiation won’t be based on “top speed” and “horsepower”, but, instead, on “average travel speed” and “computing power”. Creature comforts that you can truly enjoy because you don’t have to focus on driving may also become more important.

But this is a topic to explore in more depth in a future blog!

Friday, July 25, 2014

Collision Avoidance is Unavoidable

by David P. Carlisle

I was in a Charleston oyster bar recently savoring a couple of dozen raw oysters with a friend. My friend had another friend in for the weekend, who also loved oysters. He was the CFO at a company that makes highway rumble strip equipment. You know, those machines that make a series of 18” perpendicular grooves on the sides of busy highways … that wake you up when you start to fall asleep at the wheel. I thought I’d take a chance as I swallowed an oyster. “So, what’s new?” I said. He replied, “Parallel grooves down the center.” He then went on to explain that paint companies were developing long lasting highway paints that needed to be sprayed into a groove so they wouldn’t wear out. I replied, “Cool, that will save a ton of repainting money.” He said, “Yeah, but that’s not the point.” What’s the point I replied. “Driverless cars need indelible white lines.” He replied.

“They’re coming.”

Google’s been showing us the end-state of their driverless car concept. We are half way there already, as evidenced by the last few years of Super Bowl commercials. Advanced collision avoidance systems have become familiar TV turf, with cars swerving around a busted load of big fat watermelons, braking hard, and saving the day.

But, what pushed it over the top, for me, was the Detroit News talking about “Obamacar” – President Obama pushing wireless talking cars that could save tens of thousands of lives.

So, I made some calls.

I talked with an insurance company executive who confirmed that they have been studying collision avoidance and have already built advanced models of the impact of these systems on crashes … and on insurance premiums. But, collision avoidance has so far been “evolutionary” and easy to adjust to. The Driverless Car will be revolutionary. Collision avoidance “averts” a certain amount of collisions; the Driverless Car pretty much will avoid them all. Zippo. Nil. Nada.

The Driverless Car “revolution” is easy to understand – the Driverless Car will save lives and trips to the hospital … and it will thrash entire industries built on the fact that you crack up your car. The Driverless Car will act like the asteroid impact on the dinosaurs. Collision repair shops? – like the Brontosaurus, headed for extinction. Aftermarket collision parts suppliers like LKQ industries? – like T-Rex, got to move to juicier markets. Insurance companies? – headed down the same path as the Dubreuillosaurus; hard to explain annual increases to “collision insurance” premiums.

OK, so those outcomes are easy to imagine and predictable. Still seems a long time out. But, what about those watermelons and the collision avoidance systems? So, we built a mathematical model to take a peek at what ruckus these things could cause.

To do this, we made some more calls and talked with some of the automotive engineers who are creating these systems. They are really excited about all this. There are literally dozens of subsystems that work together to detect and avoid an imminent collision. We simplified them to just four technology clusters: forward collision, side view assist, lane departure, and adaptive headlights. Based on Insurance Institute for Highway Safety (IIHS) data and Carlisle & Company mathematical modeling, it appears that, once fully deployed, 30% of collision repairs could be avoided by these four technology sets.

That’s huge. But, the fine print reads, “fully deployed.” So, we looked at adoption rates and automotive fleet composition. The Highway Loss Data Institute (HDLI) estimated that by 2020 approximately 20% of all registered vehicles would be deployed with forward collision warning systems. We updated their assumptions and ran this through our model; we came up with a 40% deployment by 2022. 40% made sense to us based on the most recent data. But, that might be the lower limit … if Federal legislation is rolled out mandating these highly effective safety systems … much the same way they mandated front airbags. (Think “Obamacar.”) What could evolve over several decades of optional adoption can be sped up into just a few years. But, let’s just stick with the “normative case” without forced legislative adoption. What happens by 2022 – eight years from now:
  • 15% of all collision repair jobs will be avoided … along with commensurate reductions in the markets that are associated with these repairs.
    • For the OEMs, the collision parts market represents approximately 35%-40% of their parts revenue. 15% of this will vanish.
    • Automotive dealers represent the OE “genuine” selling channel for this 35%-40% of the parts market. Again, 15% of this will vanish.
    • There are thousands of collision repair facilities that live off collisions … already, and they have been mightily squeezed by insurance companies as part of massive cost reduction efforts. 15% of their businesses will vanish.
    • There are dozens of aftermarket companies that serve the collision market. They will have to exist in a brave new world where 15% of their market vanishes.
  • The 15% market contraction will have other “second order” impacts on the automotive OEMs.
    • A smaller market will require less warehouse space for storage. By 2022, we calculate the need to be 6% less than today.
    • The market collapse will shrink the warehouse headcount – we think the reduction here will come to 8% by 2022.
    • If the market vanishes by 15%, transportation costs can be avoided. This cost reduction tallies to about 5% of overall parts distribution transportation cost.
This is the normative case. You can practically take this to the bank. But, what happens if things speed up? What happens if there are legislative mandates? What about “Obamacar?”

It is easy to imagine a 2022 future where the impact on collision repair jobs increases from a15% decline to a 20% decline.

Collision avoidance is not at all like front air bags, which were also designed to save tens of thousands of lives. Air bags individually cost a fortune, but their deployment actually increased the size of the collision market – by increasing the economic likelihood that a vehicle would be totaled in a collision. Deploy an air bag in a fender bender, add $1,000 to the repair cost. Couple this with another $1,000 in collision repair for that accident, and the car’s got to be worth more than $2,000 not to be totaled. Air bags saved lives and actually created jobs.

And collision avoidance? Obviously, this will saves lives, too … but in the process these new systems will also reshape every industry based on the assumption that vehicles will have accidents. If you avoid the crash, the air bags do not deploy, and no fender gets a bender. I know that the insurance companies are thinking a lot about what this means for them. But, are auto dealers? Collision shops? Independent aftermarket suppliers? Air bag manufacturers? Junk car part shops? …

Sunday, July 20, 2014

The War On Driving

Lately, I’ve heard several people say that they hate driving. As someone who’s always felt the opposite way, I wonder why.

My daily commute to work, roughly 18 miles each way, takes me 30-45 minutes, depending on traffic. I could get to the same destination, but in almost twice the time, if I took several trains and a few short walks to and from these trains. I could avoid the hassles of driving: navigating roads with their painted lines and colored traffic lights; dodging bicyclists, pedestrians, animals, and, of course, other drivers; monitoring my car’s speed, fuel, mileage, tire pressure and myriad other vehicle maintenance requirements. I could simply sit on a train and read, catch up on work, check my social media, etc., but I choose not to. Why?

For me, the ability to get directly from point A to point B on my own timetable and in privacy (or with company, if I choose), is spectacular. Time alone in my car allows me to think—about the day, about tasks at hand, about weekend plans, about the political situation in Wherever. Anything really. Since I began driving to work I’ve also rediscovered one of the greatest inventions of our time—the radio. I have access to new and old music, news, sports, comedy, you name it. Most importantly, I have some respite from staring at a screen. Although the way automotive technology is heading, this may not be the case for much longer. Driving is my time to unplug (if you drive an electric car, pun intended!), relax, and think. I try to make my driving experience enjoyable and to appreciate that when I’m driving I have control.

This doesn’t appear to be true for many people. Here’s an example. This morning on my drive to work it was a beautiful day here in Boston. The sun was shining and birds were chirping. As I drove to work with my windows down, listening to my favorite summer tunes, I looked at the cars around me and noticed that no one else was enjoying this moment. Nine out of ten drivers were sitting in their cars, windows up, in climate-controlled cubes, staring down at an unknown object at every stop sign or traffic light. In the days when rolling down a window takes only a single push (no longer even a hold!) of a button, it boggled my mind that on this glorious day, people preferred to sit in their cars, windows up, and stare at their cell phones. If people can’t appreciate the open air and (somewhat) open road, no wonder they hate driving.

Maybe I’m making too big a deal about this. Maybe it’s a stretch to draw a connection between those rolled up windows and the drivers’ dislike of driving. However, I do know that technology could soon make driving a thing of the past, or reduce it to minor operator inputs. Manual transmissions are nearly extinct, engine noises are being “engineered” and piped into cabins through speakers, and cars are taking over the tasks drivers used to do. What happened to the glory of a perfectly executed (unassisted) parallel parking maneuver?

Don’t get me wrong, technology has immensely improved vehicle safety, performance, and fuel economy, but it’s also created a greater disconnect between the driver and the automobile. As the passion for driving diminishes so will the connection people have with their cars and their love of particular car brands. As people become less passionate about their cars, and the associated brands, what will happen to their preference for OEM parts installed by OEM-certified technicians? What will happen to the OEM-customer relationship?

Picture a world in which everyone is commuting in Google’s Driverless Cars. Highway transportation is 100% efficient and every aspect of driving is engineered, connected, mobilized, integrated and optimized. Sound great? Not to me; I’d rather drive.

Bottom Line: The war on driving has begun! Can we stop it? Probably not. But if automobiles do become completely commoditized and “driving” simply becomes “passengering”, the automotive industry as a whole will have to evolve. In the meantime, what we can do is roll down our windows, turn up the radio, and enjoy the open road while we still can!

Friday, July 11, 2014

Waiting for Service Retention

Year after year, our Consumer Sentiment Survey shows that vehicle service customers hate to wait, particularly when the wait is longer than promised. “Getting the vehicle back when promised” is consistently a top-tier customer value. The chart below has become familiar to our clients and the top concerns remain the same. “I just want my vehicle back when you told me it would be ready.”

As consumers, we are forced to wait for things all the time. On a recent flight from our NAPB conference, we sat on the tarmac for 30 minutes waiting to take off. I was shocked to find that, despite this delay, we landed five minutes ahead of the scheduled arrival time. While waiting on the tarmac, I had been anxious about missing my tight connection, so I was thrilled that the airline not only got me there on time, but early! My prior frustration disappeared when I realized I wouldn’t have to race through the airport to make my connection.

Perhaps the winds really were in our favor on the flight from Atlanta, as the pilot claimed, but I suspected that the airline overestimated our flight time to increase customer satisfaction about “on-time performance”, and decrease the number of missed connections. Even if the airline had intentionally misled me about their flight estimates, it had worked, and I was even grateful.

A quick Google search shows that this practice has indeed become commonplace for airlines. Some airports have even responded to complaints about wait times at baggage claims by routing travelers to carousels farther from their gates. Travelers spend less time standing and waiting, and complaints have dropped as a result. Airlines have realized how large a role waiting plays in a customer’s experience, and they have found ways to respond.

As an industry, we need to find new ways to address wait times and improve the waiting experience. Nowadays, customer satisfaction isn’t just about getting the vehicle back when promised, but also about the experience the customer has while waiting for their vehicle. Three aspects of waiting can make or break someone’s experience:
  1. Whether or not the time spent waiting is “occupied” or “unoccupied”
  2. Whether or not the customer feels as though their wait time is “fair”: Is the wait proportionate to the value of the service I’m receiving? Is everyone abiding by the rule of “first come first served”?
  3. Whether or not the experience ends on a positive note
Regardless of the various tactical and operational improvements dealers can make to shorten wait times, a few basic changes can significantly improve the customer experience during the wait.
  1. Give the customer something to do while they’re waiting. This seems too simple to be true, but an appealing and pleasant waiting area can ease customers’ boredom and frustration during a long wait time. This doesn’t just mean having a few chairs, old magazines, and a crusty coffee pot. Dealers need to provide TVs, free Wifi, private areas for business calls, play areas for children, and more. Some dealerships we’ve seen have gone so far as to have free manicures or massages!
  2. Quick or Express Service should be just that - fast. Customers coming in for a quick lube service select this option based on its speed and convenience. They know this service isn’t rigorous and expect the vehicle to be out quickly. Service Advisors should be clear and communicative about the progress of the service. If something comes up, the customer should be informed immediately so they don’t think other customers are getting faster service. When a customer observes another customer arriving and departing before their own service is completed, even a short wait time can feel quite long.
  3. A long wait can be saved or ruined based on the last 10 minutes. A customer who is frustrated by their wait can still be saved if the dealership handles their closeout process in a sensitive way. Customers typically remember their experience based on how the visit ends, so this portion is crucial. Too often, it is rushed or even overlooked. Service Advisors should have the ability to offer small concessions to customers who have had a negative experience - a discount on today’s service, coupons for upcoming service, or even a free snack or beverage in the waiting area. Taking a few extra minutes at the end to establish a connection and relationship with the customer is crucial. On the other hand, ignoring the customer’s frustration or failing to provide these small, but effective, consolations may result in the loss of a loyal customer.
Our research about the growing popularity of chains shows that customers care more and more about speed and convenience. To compete with companies that cater to customers who want speedy service, dealers need to get smarter, not just about decreasing wait times, but also about improving the waiting experience.

Bottom line: We’ve seen how service retention numbers drop precipitously as customers pass the warranty threshold. As new cars require even fewer maintenance services, it’s ever more important to retain those customers who do come to dealers. One of the best ways to improve customer experience and perception, and thus retain customers, is to tackle the waiting game. If you can’t cut down wait times without comprising quality, improving the customer’s experience during that wait just might be enough to keep them coming back.