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?