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.


Thursday, July 3, 2014

Don’t Judge A Book by Its Cover

Think of a component on an automobile that is necessary throughout the vehicle’s life, yet gets used only when something goes wrong. What if I told you that this component is part of every vehicle that rolls off an assembly line—yet, sometimes, mysteriously, it goes completely missing? That every OEM takes a different approach to this component’s design, and that, in fact, sometimes its design is influenced less by the engineering group than the legal team, or the marketing department? Obviously, this is an unusual and important component, and you’d think that, as an industry, we wouldn’t stand for such a scattershot design process! But we do every time we print an owner’s manual. With this in mind, Carlisle recently investigated the world of owner’s manuals through surveys, benchmarks, and independent research.


Owners’ manuals are not just government mandated components that must be included with new vehicles. Drivers actually use them, and they use them for years! As part of our survey, Carlisle found that manual usage may drop over time, but even when a vehicle is ten years old, drivers still use their manual nearly twice a year:


You might say, “Well, duh, that’s no surprise. Of course, drivers use the manuals over a vehicle’s lifetime. They’ll obviously have questions about their vehicles, and what other options do they have?” Actually, there are quite a few ways drivers can find information today, especially when it’s at our fingertips in seconds through the internet. Yet, drivers still prefer to use their manuals first:


You might think: “Well, if drivers actually use their manuals, I guess we should care what’s in them, right? So, what did Carlisle learn about that?” That’s a good question, with many answers. Some manuals are based on graphics; some on words. Some have lots of warnings; some have barely any. Some are in black and white, some have color. It turns out that each OEM conveys information to drivers in a different way.


“So, everyone makes these differently! But who is everyone…?” Everyone is, literally, everyone! Most OEMs don’t have a single group that makes an owner’s manual; many different parts of the organization influence the content. When asked, “How much influence does each of the following groups have over owner’s manual content”, this is how ten OEMs responded:


“Ok, I get it, but does any of this really matter?” Yes! Drivers of different brands don’t view their owner’s manuals equally; drivers from some brands report being more satisfied with their owner’s manual than others. Almost half of all drivers from some brands are very satisfied with their owner’s manual, while less than a quarter of drivers from some other brands feel the same way:


Bottom Line: An owner’s manual is much more than a book in the glove box. It serves as the most common first point of contact between an OEM and a driver who is having a problem. Do not make it an afterthought or overlook it entirely. With a little focus and attention to the content and design, the owner’s manual can distinguish your brand in the driver’s eye.