Spare Thoughts

Voice of the Customer Update – Mobile

noreply@blogger.com (Carlisle Company Team) — Fri, 27 Jan 2012 22:38:00 +0000

by Robert Desel

We just wrapped up three important pieces of consumer research to support the upcoming Digital Summit (Feb 28 & 29), NASB (March 13 & 14) and NAPB (April 23-25). Today we are going to look at some early results from our mobile survey and some macro level context for this topic. We will be going into much greater detail at the Digital Summit.

Mobile continues to grow, develop, and change at an unprecedented pace. Beginning around the middle of last year, the average time spent on mobile apps started to exceed the average time spent browsing (on both mobile and desktop). By December 2011 app consumption was 30% higher than web. If we view this from the standpoint of where we as manufacturers have been investing in our customer-facing technology, this is a very important trend. Mobile is here; it’s now arguably more important than conventional web browsing and if we want to reach the customers where they are, it is going to consume an increasing amount of manufacturer resources.

Against this backdrop is an ever-crowded ‘market’. Apple’s app store has over half-a-million apps available for download, with an average of 739 new apps submitted every day or about 17,000 last month. Meanwhile, about 10 miles up the road, Google’s Android marketplace has close to 360,000 apps with another 15,000 being added every month. To call this a crowded market place is an understatement.

Breaking through this clutter is tough, but ratings in this ‘marketplace’ are more powerful than anywhere. The chart to the right shows the distribution of download buckets by category, and we can see that there is a higher proportion of >50k downloaded apps within the 3.5-4.5 rating categories.

However, that’s not the end of the gauntlet! Once we have cut through the clutter and actually gotten a vehicle owner to download the app that we have invested precious corporate resources to develop, they actually need to keep it on their phone long enough to make a difference to our business and their ownership experience. Here is where the statistics get even scarier.

Three months after acquisition only 24% of the users that downloaded your app will still have it on their phone and by 12 months after acquisition that number drops to 4%.

Let’s do some math. The “My Chevy” app on Android Marketplace (Apple doesn’t disclose download stats) has 50,000 to 100,000 downloads. Let’s be generous and call it 100,000. If we assume they were all downloaded in the last month, by the end of 2012 only about 4,000 of these Chevy owners will still have this app on their phones. I am not picking on GM; their app is well designed and is probably one of the better ones out there. This point just illustrates how difficult it is to make an impact in this space. Furthermore, app retention rates decrease with frequency of use (the less you use it the more likely you are to hit the uninstall button). If we consider the fact that our core functionality would ‘require’ a user to use a service and maintenance app at most 3-4 times per year, this makes our challenge even harder.

Let me recap what we have covered so far:

The mobile ‘space’ is important and accounts for more of the consumers’ on-line time.
The marketplace for our OEM apps is crowded and getting more so.
Even when we cut through the clutter and get our app on the owner’s phone, keeping it there is even harder.

All of this means that the apps we build have to nail our customers’ requirements and this may mean we need think a little bit outside of the box, and come at this issue not from the perspective of what we want, but what we need to give the customer to get them to 1) download our app and 2) keep it on their phone.

With this in mind we surveyed about 2,000 vehicle owners to understand their behavior and, most importantly, what they want in an automotive service app. Here are three big takeaways to get us started before the Digital Summit in February.

1. It’s still a wide open market for us.

73% of the consumers had not downloaded any automotive service apps onto their devices. Of the consumers that had downloaded something, 3rd party apps were dominant.

2. For those owners who do have our ‘OEM’ apps, they don’t use them a lot.

This is somewhat expected, based on the typical features and functionality that we offer. However, the low frequency of use may result in longer term low retention, while some of the 3rd party apps with higher usage and higher retention will have an opportunity to capitalize on their position with additional features and functions that may not necessarily be ‘dealer friendly’.

3. Each type of app is getting pretty good ratings, but gas apps are king.

The consumers rated OEM apps at 7.03 (on a scale of 1-10). This isn’t too bad. However, gas apps got the highest ratings. Maybe we should consider adding or making more prominent ‘Gas Finder’ features in our OEM apps.

Taken together, I believe that this all represents opportunity for companies to connect with their customers. Mobile is an important and rapidly developing window to our customers, it is with them 24/7, and there has not yet emerged the ‘killer app’ for vehicle care and maintenance. Manufacturers have the resources to build that killer app, but, as with many other aspects of the digital space, the question is whether each manufacturer will go it alone and implicitly ask customers to install and keep multiple apps on their device or if a third party will build an ‘all-makes’ killer app.

We are continuing to dig deeply into this customer research, as we get ready for the Digital Summit, and will be including a thorough look at what attributes are most important to consumers and whether there are segments of the market that are looking for different things that we can use to target our efforts. See you all in a few weeks.

"The Cinderella Consulate” OR “Going Global in East Asia" - by Stephan Brackertz and Mike Chen

noreply@blogger.com (Carlisle Company Team) — Sat, 21 Jan 2012 22:21:00 +0000

Click Here for Chinese language version - 中文版本

Last year I applied for a visa at the Chinese consulate in Frankfurt. The consulate was located in a dirty and run-down area of the city. I remember double checking with Google Streetview to confirm whether I was at the real location or if there was a mistake with the map. It was for real… a consulate wedged in between a cheap computer store, a bad pizzeria and a used car lot.

Just this morning, I applied for another visa to China – and to my surprise, the consulate is now located in the best area of Frankfurt; in a brand new, shiny building. This struck me as a nice little Cinderella moment…how quickly things can change! It almost seems as if the “upgrade” of the consulate is linked to macro-level changes on the world stage. To me, this was just another indication that as China shifts the global economic balance, we all need to be prepared to rethink globalization.

In case you think “globalization” is just another buzzword or that China and the rest of Asia are far away lands that are important only to ex-pats and consultants, let’s look at two rather astounding examples of how the world is changing as a result of the influence of Asia:

Chinese car sales have exploded to reach 18.5 million¹ new vehicles. China is now the world’s largest market for vehicles. With this, the number of units in operation has rapidly expanded – in 2011, China overtook Japan in terms of carparc. Soon, China will also surpass Japan as a market for aftersales parts and service.
On the commercial vehicle side, China overtook the U.S. as the largest global consumer in 2009. In 2010, China had a market share of 30% of the global market. This growth has been mirrored in the rest of Asia and the region now accounts for nearly one in every two commercial vehicles sold worldwide. Bottom line – If you’re not firmly managing your aftersales business in China, you may miss out on a huge opportunity.
Another example…Take a look around your office and the desk you are sitting at: almost everything you touch was manufactured in Asia – from your Samsung screen over your Lenovo laptop to your Konica Minolta printer. Oh, and don’t forget the components of your Apple iPhone... Global imports and exports have changed our everyday lives forever.

As a consequence of such changes, we, as service parts executives, need to give East Asia the attention it deserves.

Last October, Carlisle held the first East Asia Parts Benchmark in Beijing. You are probably already familiar with our supply chain benchmarks for service parts OEMs in North America, South America, and Europe. The East Asia benchmark follows the same model; Carlisle facilitates the event on behalf of the group of motor vehicle OEMs. Service parts executives gather together to discuss benchmark metrics and share best practices. There are presentations, roundtable discussions, panels and social time. The scope of the benchmark covers the whole of the supply chain in East Asia, but with – understandably – focus on logistics in China. In truth, we at Carlisle held this event focused on East Asia because our clients (you) asked us to do so!

The East Asia Parts Benchmark was a great success – so much so that at the event debrief meeting all the attending companies already agreed to repeat the event in October 2012. We at Carlisle are ready to start recruiting for this event, so don’t be surprised if we reach out to you about joining. What’s more, we are pleased to report that three Chinese automotive manufacturers have already agreed to participate in the 2012 event!

Continuing on our theme of globalization, allow me to share some nuggets pulled from the 2011 EAPB benchmark. These are some things that we found when comparing East Asia warehouse data to North America and Europe:

Fill rates in East Asia are lower.
Back orders take a lot longer to clear.
Inventory levels are much lower.
East Asian warehouses are significantly less productive.
Labor costs, on average, are lower.
South Korea is home to the most productive warehouse in the benchmark.
Japan is the country with the most consistent and highest productivity.

Beyond these data insights, we also took away some highlights from the discussions at the event:

This region is important and will continue to grow.
There is a ton that companies can learn from each other!
Most non-Asian brands still have country-by-country “import solution” networks, not integrated pan-Asian networks.
Although service requirements in Asia are high enough to be comparable to North America or Europe, fill rates are low.
Many supply chain initiatives are currently focused on China.
Sophisticated concepts, such as “lean”, RIM, LDCs, and same-day delivery are being applied in Asia.
On balance, organizations still need to evolve from simply “supplying parts” to providing “service excellence”.

By the way, next week is the Spring Festival in China. This celebration of the lunar New Year is the biggest holiday of the year, in which millions of Chinese travel to visit their families. If we only count railroad passengers, the traveler total reaches 235 million! (You read that right.) Not long ago, I was completely unaware of this dynamic. However, in this increasingly globalized business world, we need to get used to putting events like the Spring Festival on our calendars. In the hopes of embracing opportunities for our business, perhaps we should put the East Asia Parts Benchmark on our calendars as well?

_____________________________
¹Some sources say 16.6 million vehicles, but that’s splitting hairs. It’s still the biggest car market in the world.

“灰姑娘领馆”, 或“者走向世界”

noreply@blogger.com (Carlisle Company Team) — Fri, 20 Jan 2012 20:54:00 +0000

By Stephan Brackertz and Mike Chen

去年我在法兰克福中国领事馆拿到了去中国的签证. 当时领事馆位于城市里一个肮赃和破落的地区. 我记得当时我在谷歌的街景上再次检查, 以确认我的位置, 而不是地图有误. 不过是真的, 领事馆是夹在一家廉价电脑商店, 一个糟糕的比萨餅店和一家二手车行中间.
今天早上我再次去申请到中国的签证. 令我吃惊的是, 现在领事馆处于法兰克福一个最好的区域,在一个全新的, 发光的建筑中. 就象可爱的小灰姑娘带给我的印象一样, 事物的变化是多么的快呀.领事馆的升级就好象代表着中国在世界舞台上宏观层面的变化. 对我来说, 这只是另一个迹象表明, 随着中国对全球经济平衡的影响, 我们都需要做好准备, 重新认识全球化.

如果你认为”全球化”只是另一个流行语或者认为中国和亚洲其它地区只是对出口商和咨询行业重要的话, 让我们从两个惊人的例子, 看看亚洲是如何影响世界的变化.

中国新车的销售量已经突破了1千8百50万辆¹. 中国现在是世界上最大的汽车市场. 它的经营单位的数量在迅速增长 – 在carparc方面它已经超过日本. 不久, 中国在售后零部件和服务的市场方面也将超越日本.
2009年在商用汽车方面, 中国超越了美国成为全球最大的消费者. 在2010年, 中国的市场份额占全球市场的30%. 这种增长也出现在亚洲其它地区. 现在几乎每两辆商业汽车, 就有一辆是在亚洲售出的. 底线是, 如果你没有很好的管理在中国的售后服务业务, 你将有可能错过了一个巨大的商机.
另一个例子…. 环顾一下你的办公室, 从办公桌到几乎能触摸的每一样东西都是在亚洲制照的 – 从联想笔记本电脑的三星的屏幕, 到柯尼卡美打印机. 哦, 别忘了你的苹果手机…全球的进出口已经改变了我们的日常生活.

对于东亚的这种变化, 做为服务零部件的高管需要给予高度的重视.

去年10月, 卡莱尔在北京举行了首届东亚零部件基准会议. 也许你已经很熟悉在北美, 南美和欧洲的原始设备制造商的卡莱尔基准. 东亚的基准遵循了同样的模式. 卡莱尔代表汽车原始制造商集团召集和主持了会议. 售后服务的高管们齐聚一堂, 讨论基准指标和分享最佳实践. 会议包括了演讲, 圆桌讨论, 问题解答和社交时间. 基准的范围涵盖整个东亚供应链, 当然重点是中国的物流链. 事实上, 卡莱尔是应客户(你)的要求而举行东亚基准活动的. 东亚基准活动是非常成功的, 以至于在最后的汇报会上, 所有的参与公司都要求参加2012年的东亚活动. 很快我们就要开始2012年活动的招聘和准备, 当您被邀请加入时, 请不要惊讶. 还有, 我们很高兴地告诉大家, 已经有三家中国汽车制造商同意参加2010年的东亚基准活动! 继续我们对全球化的讨论, 请允许我分享一些东亚基准活动中的数据. 当我们将东亚的仓库数据与北美和欧洲的相比较时, 发现了一些有趣的事.

东亚地区的充填率较低
延期交货所需要时间更长
库存量要低的多
东亚地区的仓库的生产力较低
平均的劳动力成本较低
韩国的仓库的生产力是最高的
日本的生产力是最高的和最稳定的

除了从数据中得到上述见解, 我们还在会议的讨论中得知:

该地区是重要的, 将继续增长.
企业可以相互学习的东西太多了!
大多数非亚洲产品仍然是通过国家对国家的进口方案, 而不是泛亚洲网络
尽管亚洲的服务要求很高, 但充填率较低
许多供应链目前都专注与中国
亚洲在应用先进的概念, 如”精益”, RIM, LDC, 和同天的运货
平衡, 组织还需要不断的改进, 要从简单的”供应”到提供”卓越的服务”.

另外, 下周是中国的春节. 这个农历新年是中国最大的节日. 有数以百万的人口将在此其间探亲访友. 仅是铁路, 旅客人数将有235百万!(这是真的) 不久前, 我完全不知道这个国家的活力. 在这日益全球化的世界中, 我们需要将春节放到日历上. 为了抓住这个商机, 我们同样应把东亚基准活动放到我们的日历上.

______________________________________
¹有消息说是1千6百60万辆, 那只是鸡蛋里挑骨头. 中国仍然是世界上最大的汽车市场.

What Good Is the J.D. Power IQS for Picking Out a Good Car?

noreply@blogger.com (Carlisle Company Team) — Mon, 16 Jan 2012 20:51:00 +0000

I got some interesting feedback last week on the blog. A consistent theme of this feedback was Consumer Reports was not without sin. I thought I’d have a go at this one more time, but with a vivid example. Conveniently, Monday morning, Automotive News announced that the Hyundai Elantra won car of the year at the Detroit Auto show. That seemed top-of-mind enough for me.

Bottom line: Is the Hyundai Elantra any good? Like a typical digital customer, I dredged up a goulash of inputs. I thought I’d see how four different “perspectives” compared; (1) the panel of automotive journalists at the Detroit Auto Show, (2) J.D. Power IQS, (3) Consumer Reports, and (4) TrueDelta.

OK, I know that the “car of the year award” is very different from Power/Consumer Reports/TrueDelta evaluations, but you’d think that the car of the year would shine across a broad array of inputs. Consumers buy stuff based on a very complex set of inputs – quality, reliability, styling, cost, what other customers say, and the list goes on and on. I approached this from the left side of my brain, not the right.

The good thing about the North American Car of the Year is that it represents the professional opinions of 50 journalists – a big number – who spent significant time driving all of the nominated vehicles throughout the year (probably a week with each) and then had a final chance to drive the finalists a couple of months before the final vote. The Hyundai Elantra in 2011 was the second best selling vehicle in the world, and only 10,000 units behind the Toyota Corolla at roughly 1,010,000 units.

It deserves to be car of the year, despite what J.D. Power IQS says.

The J.D. Power IQS was published in June and the study focused on three components: (1) design problems, (2) defect / malfunction problems, and (3) unspecified other problems. J.D. Power defines these as: “Initial Quality: Taken from the Initial Quality Study (IQS), which looks at owner-reported problems in the first 90 days of new-vehicle ownership. This score is based on problems that have caused a complete breakdown, malfunction, or where controls or features may work as designed, but are difficult to use or understand.” So, IQS is about quality and personal gripes.

It is hard to split hairs on some of these categories. The 2011 Elantra was all new and did not do particularly well in the IQS. In fact, I heard that it fell quite a bit from 2010. Why? Did Hyundai take a nosedive in quality? No, the survey problems were of the apples, pears, and oranges variety. Comparing the 2011 Elantra to the 2010 is comparing a car at the end of its production cycle (2010), where it had been somewhat commoditized, to a brand new car (2011) that is in short supply and typically sold loaded with high trim levels and lots of options. Every OEM has had experience with this for about 100 years or so. That’s like comparing apples to pears. Now, comparing the 2011 “loaded” Elantra (about 85% sold with Bluetooth) with the 2011 Honda Civic (no Bluetooth) is like comparing pears to oranges. If a customer does not understand how to use Bluetooth, or is not terribly accepting of its peculiarities, well, there’s a lot to have “gone wrong”.

The IQS score for the 2011 Elantra looks pretty much like a fruit salad. Compounding the confusion was that the Elantra also had high conquest sales and brought new people to the brand. There can be a huge negative bias for “design problems” from customers who are new to the brand. This is easy to imagine. For example, what happens when someone goes from a brand with different seat controls than the Elantra? They don’t like the Hyundai seats. Other brand owners who switch don’t like Hyundai windshield wipers because the switch is on a peculiar side of the stalk.. If you are not used to this, it can show up as “difficult to use” … a design defect. It might take 6 months to adjust to the different location and understand the value of not having to take your hands off the steering wheel to turn on the wipers.

IQS is not without some value; it does identify some legitimate problems; although most OEMs already pick up most of these with internal surveys. It is a good tool to use with assembly plants to give them a target to shoot for in improving their assembly quality. There really is no other independent benchmark for assembly quality.

I went online and looked up the Elantra in Consumer Reports (CR) and they show steadily improving reliability and named it as CR’s “top-rated small car”. Even though CR’s reliability history gives the Elantra top marks for all eight reported “trouble spots by year”, the CR ratings report card spots it as only average for predicted reliability (looking further into the details, the reliability score was dragged down by average scores for body hardware, power equipment, and audio system).

Elantra’s overall score is a composite of 50 different, and unidentified, “tests”. Basically, they bury you with detailed color splotches that have real numbers behind them, and average it all up into a malted milkshake overall score. Consumer Reports has a relatively small staff of engineers who evaluate the vehicles. They have their own biases, such as what Ford experienced with My Ford Touch (Ford dropped from #8 in IQS to # 23 because of this and their new Dual Clutch Transmission). CR seems to like big buttons/knobs and doesn’t like touch screens. They tend to like a sporty feel and not a soft ride.

So where are we so far?

Elantra won car of the year at the Detroit Auto Show.
J.D. Power IQS ranked Elantra as less than average within the compact car segment (from eyeballing the circles). Reliability measured from another J.D. Power survey has the Elantra as above average.
Consumer Reports pegs the Elantra as its “top-rated small car” and shows that it has top score blotches for all 8 reported CR trouble spots. However, CR predicts the Elantra’s reliability as average. This is a different characterization than J.D. Power’s.

TrueDelta is a great source for information that deserves serious consideration. It represents data from a vehicle panel that is 75,826 members strong, with quarterly survey response rates of about 23,000. Not bad. TrueDelta shows the Elantra (http://www.truedelta.com/car-reliability.php?brand=13&model=119) as being very reliable. TrueDelta posts representative member comments about their cars. Digital customers really value this.

One key thing to realize is that everyone asks different questions, and that different questions can legitimately yield different answers. With ANY survey, it's very important to know the actual wording of the questions.

J.D. Power: "Things gone wrong – Please mark below ALL problems you have experienced with your new vehicle.” They then ask you about things that are broken/not working, controls that are difficult to understand or use, and controls in a poor location. I can understand if it’s broke I can conclude that it has poor quality. But, if I don’t like where it’s located (e.g, the wipers) how can I conclude that this, too, is poor quality?
CR: "Did the car have any problems that you considered serious” This sort of wording opens the door wide for any owner biases; they can honestly under-report problems if they like the brand/car, as the problem did not seem serious enough to report.
TrueDelta: "Did the car have any successfully completed repairs?" TrueDelta currently focuses on this because they can be sure there was a problem, as the repair shop agreed there was a problem and was able to do something to make it go away. They also request that all repairs be reported, even minor ones. This minimizes the role of subjectivity, so their data isn’t impacted by differing perceptions and attitudes as much as the other two, especially Consumer Reports. As with the other surveys, routine maintenance and preventive repairs (including those related to recalls) aren't included in TrueDelta’s analysis. They also exclude computer re-flashes, as long as these are free to the car owner.

TrueDelta appeals to the purist in me. Their results, on average, are over nine months ahead of the others, and often over a year ahead. This is a key benefit. Do you want to know how reliable a car was a year ago, when it was a year newer, or how reliable it has been recently? For the Elantra, both J.D. Power and CR are measuring how well the Elantra did in its first few months. TrueDelta reports how it did during its first year, through the end of September and soon through the end of 2011. TrueDelta is the only public information source that provides the actual repair frequencies, and not just dots. The dots used by the others can make differences between models seem much larger than they actually are.

Bottom Line: I can’t find much good in the J.D. Power IQS, because I can’t separate “quality” (which I internalize as reliability and durability) from personal preferences. If I were to care about other people’s personal preferences, I’d go to on-line customer reviews or depend on the auto rags. Using my Volt as an example, just about everything inside the car is different, and I can imagine how this could really disturb some customers. My guess is those folks are the typical ones who would invest 23.4 minutes of their time to take the survey. Not me. I want to be surprised and I don’t gauge my surprise by some average surveyed “surprise” expectation. Now, I would like to know more about the Volt’s “quality”, but I can’t get it from the NY Times advertisements on who wins the J.D. Power IQS competitions. I agree that the Elantra deserved to be car of the year. It is a very good car. Couldn’t get that out of Power IQS. J.D. Power IQS is like Netflix – huge product momentum that is, ultimately, incredibly fragile. I can poke a lot at Consumer Reports, but, it, too, confirmed that the Elantra is a very good car. Power seems to me to be “no brain”, whereas Consumer Reports is both left and right brain. TrueDelta is all left brain. It is about the facts. TrueDelta is what our emerging digital customers really want. They want a kettle full of left-brain facts so that they can make their own right-brain decisions.

Why the J.D. Power IQS Has a Low IQ

noreply@blogger.com (Carlisle Company Team) — Fri, 06 Jan 2012 19:48:00 +0000

by David P. Carlisle

First off, let me state for the record that the Power IQS gives me a great deal of comfort. I grew up on a farm where my family was large and money was very tight. So, it was quite natural for me to walk away from that with a significant dose of financial insecurity and concern. Fear of failure. The mere fact that the Power IQS is so successful and the OEMs pay a fortune for it shows that no matter how bad it gets, America is indeed the land of milk and honey. There is a vast market here for incompetence. What me worry? … Don’t you feel better already?

At the end of 2011 I bought a Chevy Volt – hey, I’m from Massachusetts. (By the way, the car is breathtaking – my favorite ride out of our stable of too many cars.) Right before Christmas I received the J.D. Power New Vehicle Quality Survey in the mail. Normally, I trash their surveys because I simply do not have the time to waste filling them out – and I generally love taking surveys. This time I looked at it carefully before sending it to our blue recycling tubs.

It was four pages long and asked me to make 281 (give or take) decisions on my new Volt. I didn’t even get the dollar bill they usually stuff in the envelope. I thought about this and had a bunch of questions.

Can “for profit” J.D. Power claim cult status, like non-profit Consumer Reports, so that they have “invested” survey respondents? No. Consumer Reports is a non-profit consumer “cult” group that is deeply invested in the information and the process. One million of them take the survey each year:

“Every year, the Consumer Reports National Research Center sends the Annual Questionnaire to all qualified, paid Consumer Reports and ConsumerReports.org subscribers. It is one of the largest and most complex consumer surveys in the world. In fact, other then the U.S. Census Bureau American Community Survey, the number of AQ respondents may be larger then the sample of any other survey conducted in the U.S. We received responses from more than one million subscribers, who provided information about many products and services, including about 1.3 million vehicles.”
(http://www.consumerreports.org/cro/consumer-reports-national-research-center/annual-questionnaire/index.htm)

The Power IQS “cult” is more about the OEMs who buy the surveys, and their purchased rights to proclaim victory, than it is about who actually takes the surveys. Car and Driver, a magazine that resonates with automotive “cultists”, seems to be falling out of love with IQS. Maybe a few of their staffers tried to complete the survey and figured out that it was pretty awful.

“Car and Driver paints the complaints that have dogged Ford among the latter, suggesting that these are less valid quality metrics than something like a poorly assembled door panel. The venerable buff book doesn't stop at defending Ford, however, cautioning against what it sees as a trend "toward the lowest-common-denominator solutions to reduce design 'problems.'" Citing examples like BMW moving its cruise control from a separate stalk to buttons on the steering wheel to appease whining customers and Porsche getting dinged on IQS for using brake pads that generate too much dust, C/D doesn't say it outright, but certainly implies that J.D. Power is no longer pushing automakers in the right direction.” “(http://www.autoblog.com/2011/12/05/car-and-driver-calls-out-j-d-power-iqs/)

I understand Consumer Reports’ subscribers filling out their surveys as if it were a civic duty, but why would these folks invest another 23.4 minutes into this IQS survey? I don’t think so. My guess is that these two groups are mutually exclusive. And, I think I know what kind of person takes the time to fill out a CR survey. IQS? I’m stumped.

Golly, well, then, just who fills out these surveys? OK, I’ve got to make 281 decisions. Decisions like figuring out if there was an engine idle problem at the first start of the day? What about at other times? (two decisions to make here). Or, did I get a security/alarm system? Was it factory or dealer installed? Was it aftermarket installed? Hmm. Got me. Is OnStar both a Telematics system and security/alarm system? I honestly don’t know. Did I get a “Homelink” system? What’s Homelink? At five seconds of thought for each “decision”, it would take more than 23 minutes to complete the survey. Got me thinking - what is the profile of someone who invests 23 minutes on a paper survey, stuffs the envelope, and takes the time to mail it? They do have an “about you” section on the IQS survey. For example, you could check the boxes for being a 45 year old five-and-a half-foot female weighing 135 pounds with two less-than-20 year old kids at home, making $150,000 a year. My big question is, does this someone really represent her economic/demographic group? Someone who would take 23.4 minutes (excluding the time to mail the damn thing) out of their busy day to fill out the IQS survey. Just think about it. It is ridiculous.

Do the respondents really understand what they are being asked? This is a relevant question that the OEMs should be asking. OK, so I just bought a new Volt and everybody in our family loves it – husband, wife, and two daughters. Four people in the family drive it, and we got the survey before the first 1,000 miles were put on it. The letter from Finbarr J. O’Neil says that the survey should be filled out by the person who drives the vehicle most often. That could be any of us. Lets go to page one:

What transmission type is your new vehicle? I think it is a CVT; the others in the family are clueless.
Do we have auto temperature control? I think so; the others in the family are clueless.
Does it have side airbags? Well, I certainly think it should have; the others in the family are clueless.
Does it have a Homelink system? We are all clueless.
Does it have tires and rims installed at the dealer? Or, the aftermarket? I know that the car came with these; the others in the family are clueless about what the term of art “aftermarket” really means. (Most dealers source accessories from the aftermarket … if I were to know this, how should I answer the question?)

At the end of page one I’m getting tired and confused. Of the 281 decisions I’m asked to make, I’ve just handled 29. I’m about 1/10th of the way through the survey. Page two requires me to make 161 decisions on things like the airbag/SRS light being broken, or in a poor location. Like getting wrong directions from my navigation system. Like my hands-free communication not recognizing a command. Or, the tire pressure monitoring system being broken? Three fourths of our family doesn’t know what an SRS light or tire pressure monitoring system is, and have never had any luck with navigation systems, so we just don’t use them. Inside of five minutes my younger daughter could figure out how to use a Tata navigation system programmed in Hindi. Finally, none of us talk to the Volt, though it is quite articulate. It is not that these questions are bad. It’s that they are largely irrelevant.

Ask yourself just three simple questions. Lets say you’ve put 700 miles on your new car with an automatic transmission … (1) Have you even used the parking brake once? (2) Do you know if won’t hold the vehicle? (3) Have you noticed excessive or uneven tire wear in those 700 miles? Or, do you just think that most of these questions are irrelevant? How carefully will you make the 281 decisions that the IQS survey asks?

Bottom Line: Years ago J.D. Power was useful in merchandising quality differences that existed between Japanese and Domestic cars. This “merchandising” was very effective in the media to establish consumer awareness of the Power report card. Toyota, Honda, Nissan got “A’s” and the Domestics flunked. That sure was easy to understand. It was a battle between cars that worked and cars that didn’t work. The Domestics lost gigantic market share … but, after a decade or so, they finally overcame the quality shortfall. Now J.D. Power is pushing a different sort of battleground merchandising. Now the war is between cars that have flawless infotainment systems and those that ain’t got them. This is supremely irrelevant in today’s market with today’s customers.

So, what's the real bottom line? Consumer Reports should carefully license use of its automotive survey results to the OEMs. CR's survey results are an inarguably valid representation of its more than one million-strong subscribers who take product quality very seriously. This should put the J.D. Power IQS out of our misery.

2011 Parts Manager Survey: Executive Summary

noreply@blogger.com (Carlisle Company Team) — Wed, 14 Dec 2011 22:57:00 +0000

After the downs of ’09 and the ups of ’10, the industry hoped that 2011 would be a “back to basics” year. For some, that was the case. However, the earthquake/tsunami that hit Japan in March of this year had a devastating impact on the supply chain for a number of OEMs – especially the Japanese importers.

Even with these challenges, however, the Asian OEMs continue their strong performance in terms of satisfying their Parts Managers. For Overall Satisfaction, Asian brands represent five out of the top seven brands.

Before digging more deeply into the 2011 results, let’s look at performance over a longer time horizon. The chart below shows Overall Satisfaction for the past 8 years – both in terms of “Top Box” (% respondents selecting “Very Satisfied) and “Top 2 Box” (% respondents selecting “Very Satisfied” or “Somewhat Satisfied”). For each metric, it shows both industry average (the bars) and industry best-in-class (the lines). Note that these results are just for U.S. OEMs.

The results are quite interesting. What we see is that industry averages have been improving over time – Top Box has improved by about 13 points, while Top 2 Box has improved by about 8 points. However, best-in-class scores have been relatively flat. What’s the take-away here?

Generally speaking, the gap between the “best in class (BIC)” and “worst in class (WIC)” performance has been shrinking. By leveraging benchmark efforts, such as this survey, to identify BIC performance and then [more importantly] to get behind the numbers to understand the process/policies driving the results, the industry is collectively raising the bar for average OEM parts performance.

You’ll notice above that I used the terms BIC/WIC “performance”, not “OEMs”. That was a conscious decision, as no OEM has figured everything out yet. OEMs with stellar performance in one area do not necessarily do great in other areas. That’s the magic of collaborative benchmarking -- we can get behind the numbers (the “who’s”) to understand the “how’s”, thereby enabling us to pick and choose who to emulate and how.

By the way, why has the BIC score been relatively flat? Quite simply, it is difficult for the high performers to consistently maintain their performance. Supply issues, recalls, IT implementations…even earthquakes all can cause a “best-in-class” performer to stumble for a year. And as we have learned many times over, our customers are quick to judge, but slow to forgive. A one-year stumble in satisfaction may take three years or more to recover from.

So, getting back to our 2011 results -- let’s consider the other categories on the survey. The following chart shows the results for each
of the 19 sections on our survey. It indicates the industry high, low, and average score for the “Overall Satisfaction” question in each section.

There are two important takeaways from this chart. First, note that the industry average is typically much closer to the high than the low score. This means that 1) being “average” may not be that bad, and 2) if you have the low score, you probably need to make some dramatic improvements.

Second, notice that the “supply chain” issues – on the left hand side of the chart (order processing systems, delivery, ship condition, availability, etc.) all have high scores close to 100%. Conversely, the sales/marketing issues on the right hand side of the chart (marketing, wholesale, accessories, training, pricing) have much lower “best in class” scores. Clearly, the industry is doing a better job of meeting our customer’s expectations with respect to supply chain than with sales and marketing issues.

For most categories, the OEM with the biggest gain experienced improvements of 10-20 points – that’s quite a dramatic increase in satisfaction. So, what have some of these companies done to achieve these results? Let’s look at the top two:

In the case of the ship-direct improvement, it seems – no surprise – that it is all about availability. In 2011, this OEM (“OEM 1”) increased their direct-ship availability by over 4 points, from 93.6% to 97.7%.

How did they do this? First, they attacked this from an organizational approach. While they historically had personnel that “chased” parts, OEM 1 instituted a new group in 2011 – Material Flow Coordinators. These folks are tasked with working with suppliers from a strategic level – capacity planning, forecast utilization, collaboration, performance tracking, etc.

In addition, OEM 1 brought “accountability” to the world of ship-direct. While many OEMs have policies linking availability and on-time performance to future business (both service parts and production), most OEMs exclude ship-direct suppliers from this policy. OEM 1 was one such OEM that historically fell into this category.

However, starting in 2011, OEM 1 brought ship-direct suppliers under the umbrella of this program. Now, any ship-direct supplier whose availability drops below 97% is subject to losing future business – both for service parts and production.

The 20 point accessory improvement exhibited by OEM 2 was a result of a number of new initiatives. First, they implemented a proactive inventory stocking program for newer accessories. Rather than wait for certain demand signals, they set minimum stocking levels for the market to assure representation of stock on any current accessory.

Further, OEM 2 conducted a comprehensive new model year launch of their soft goods product line during the summer. Through this program, they had product available 2-3 months earlier than any launch over the past 10 years.

OEM 2 also began conducting one-on-one merchandising and marketing visits with their dealers to support accessory sales. So far this year, they have already visited about a third of their dealers to discuss how to better sell accessories.

Finally, last year we examined the top drivers of satisfaction for each OEM. We conducted the same analysis this year and found a number of similarities, but some changes as well:

Availability continues to be a primary driver for most OEMs. In fact, it seems to have increased in importance.
Collision Wholesale support is starting to creep up as a more important driver of satisfaction. Note that Mechanical Wholesale support doesn’t even make the list.
Phone support – especially technical phone support – seems to be dropping somewhat in importance. It’s not that this is suddenly not important. Instead, it seems that many OEMs have been focusing and improving their performance in this area.
Pricing dropped precipitously in terms of importance. History shows us that as we improve performance to our dealers, their focus on pricing declines.

For more information on Carlisle’s surveys, please contact Harry Hollenberg at hhollenberg@carlisle-co.com.

Note: Spare Thoughts will be on a two week break after this post and we will resume our weekly posts in January 2012. We wish you and your family a happy and safe holiday season.

My Guy

noreply@blogger.com (Carlisle Company Team) — Fri, 09 Dec 2011 15:46:00 +0000

by David P. Carlisle

Besides surveying several thousand service customers, in the past six months we’ve held 18 focus groups with these folks. We asked them what they read, how they make decisions, what they think, and where they go. They read electronic media and tend to use their handhelds for this. They rely on advice from friends and family. They go to Yelp and Google to read reviews from strangers. They think dealers are impersonal and expensive. And, they go to “My Guy”, whoever their guy really is, to get their vehicle serviced. They trust their “My Guy” implicitly – see more here . Months of focused research, and it really reduced down to something this simple. In the 90’s I remember how the industry embraced the complexity of dealer operations with multi-million dollar process reengineering and television commercials of actors throwing car keys around the dealership like Harlem Globetrotters. Well that crap sure didn’t work.

Hyundai’s Frank Ferrara, one of my heroes, asked me to talk to a large group of his service managers about “My Guy.” I had to make a choice. Did I go for “all 5s” and feed them some pabulum stirred up for the masses? Or, did I feel lucky? Hit them with the proof behind my very simple story – you know, the charts and raw data. I asked around and was cautioned that dealer groups do not like dense charts with too many small words. They wanted everything digested and bottom-lined. I ignored this advice and took a chance. After the presentation Frank got back to me with this. “As far as your presentation is concerned, as always it was content rich which was difficult for some in the audience to digest in 1 hour. Many, many of the service managers told me they took 6 to 8 pages of notes. This is amazing to me because they are never in the note taking mode.”

One of the service managers asked me to call him back to discuss his take on the evolution of service customers. We spent nearly an hour talking. I learned that dealer service managers are very smart, entrepreneurial, and operate by a very different rulebook. I also learned that I had a lot more to learn. I’m going to be honest with you; any satisfaction score less than “very satisfied” hits me in the gut like a Joe Frazier left hook. The dealers were even more strongly receptive to my message than the others sitting in the room. Dealer service managers get it. They understand evolving customer attitudes and the value of “My Guy.” Because they are there, day in and day out. It is no secret that their world is changing as a consequence of this. They know that it is a huge priority for the OEMs and for their business models. They speak our language…perhaps better than we do.

We do not need to bring out our process mappers and corporate change management guidelines. We don’t need to bring our agencies into the loop. We don’t need to brainstorm more globetrotter trickery to sell ideas that are birthed and launched in the cold vacuum of corporate inner space.

Bottom Line: We need to directly involve our dealer service managers in the architecture of becoming “My Guys” and better competing in the market for service customers. We need to de-brand the basic processes simply because there is such incredible movement across the brands by the folks who make it happen. If we want to throw keys around the dealership we need to understand that inside one year that same cast of characters might now be a Chevy guy throwing to a Ford guy, who tosses to a Toyota guy, who dunks it to a Hyundai guy, who lays it up to a BMW gal. We intend to launch a My Guy summit in the spring of 2012 that will consist of the top three service managers from a selection of multiple franchises. For three days, we will take them through the data and then figure out what to do…that works and is sustainable. No key tosses; just focusing on the keys to success in our brave new world. How to become and stay “My Guy.”

We will accommodate a maximum of seven sponsoring brands with the My Guy Summit. Beyond these sponsoring brands, we will solicit the best of the best dealer service managers outside the sponsor group. We intend to permit strategic suppliers as sponsors. The summit will be a dealer-only crowd with no sponsoring corporate observers present. All sponsors get the full-unexpurgated results in whatever form they need to make change. If you are interested, please contact Robert Desel - rdesel@carlisle-co.com.

Musings: A Tale of Seven Cities - by David Carlisle

noreply@blogger.com (Carlisle Company Team) — Fri, 02 Dec 2011 20:39:00 +0000

Make that seven OEMs. We collect tons of data on parts and service performance for dozens of OEMs here, in Europe, South America, Africa, Australia, and Asia. Let’s just focus on seven OEMs where we have monthly Market Watch (“MW”) parts sales data, Parts Manager (“PM”) satisfaction data, Service Manager (“SM”) satisfaction data, and JD Power CSI data. I normalized the data based on high and low scores for each data line item, and used a bit of dead reckoning for representing JD Power data at an OEM level. This is in the chart below. There is no single equation that relates all the data to a key performance metric – in this case, change in sales per 5 year UIO for 2011 vs. 2010 – call this “sales per UIO”. What emerges are seven different stories.

The Basics is all about an OEM who is very focused on availability satisfaction – getting the parts to the point of sale – perhaps at the expense of returns policies and pricing. Sales per UIO for the past year is just short of mid-pack, but last year was better than most due to brilliant digital strategies. Dealer purchase loyalty is lackluster, but not surprising given returns satisfaction. The messages here are consistency over time, point of sale availability, and being at the leading edge in digital strategies. These are the basics, and it is difficult to argue with this sort of strategy.

Nailing the Top is all about significant improvements to sales per UIO this year as a consequence of a broad focus on point of sale availability and customer retention. This is a company that takes metrics seriously and has a more traditional focus on customer retention that comes from field organization touch-points. Couple this with progressive terms and conditions and fairly brilliant digital strategies and you start to sell some parts. The big question is, will all this be enough in 2013-2015 when the sweet spot of customer pay UIO starts to sour?

Blessed 4Ps is all about great people, products, prices, and policies. Just having the first two puts you in a leadership position, where you don’t have to worry very much. Purchase loyalty is, not surprisingly, on the low side, mostly due to the relatively sparse dealer network that hampers dealer-to-dealer wholesale support.

Know Thy Place is all about the power of the brand and the respect within an organization of their brand. Respect is the key word here.

Rocky IV is all about attitude and aggressiveness. It’s Rocky butting up against that enormous Russian fighter. And winning. It is all about the power of leadership and the focus of an organization.

At the Limit is the story of a great and mature brand, great product, but, ultimately, the lack of resources. Here, there is very little difference between this “city” and “Nailing the Top” (they know what to do across a broad spectrum) and Rocky IV (really smart leadership and some stunning talent). There really is no reason for the low normalized positions in purchase loyalty and sales per UIO.

Need the Green is the story of a comer. Corporate has their sights set very high, great brand getting stronger, great product, very smart leadership, scrappy talent, and empowered. Empowered to nail the key stepping stone metrics. Normalized sales per UIO is at the bottom of the group simply because they did not falter during the recession – kept going strong with a consistent strategy and consistent investments. They need the green to get where they are going.

Bottom line: The efficacy of our business strategies cannot be tested with a universal equation populated with standardized variables. Rather, the variables themselves tell a story. And, it is pretty important to understand your story, because circumstances might change, …or, you might need to change. What do I see in this chart? I see “power”: brand, product, people, leadership, programs, measurement, attitude, and aggressiveness. I see “threats”: resources, investment capital, and commitment. And, I see “strategies”: digital, point of sale availability, pricing, and terms & conditions.

Dream 3PL Checklist for Farming Out Your Supply Chain

noreply@blogger.com (Carlisle Company Team) — Fri, 18 Nov 2011 17:31:00 +0000

In the old days, an automotive service-parts third party logistics (3PL) provider looked a lot like public warehousing that the rest of the world was using. They provided a network of bricks n’ mortar warehouses with labor. Your suppliers shipped to them and they shipped to your customers. The business case compared your bricks n’ mortar to theirs and your labor costs to theirs. If they saved you enough money, well, then you might “outsource.” Some companies have specialized in outbound transportation, where they have great DDS route-building algorithms. They have site managers who take on the day-to-day carrier coordination. They have teams who negotiate carrier rates and break-bulk costs. Lately these companies have been offering collaborative savings to multiple OEMs. Other 3PLs offer IT solutions and process control solutions. Kit building, receiving inspection and consolidation, small parcel management are a bunch of other add-on solutions.

The landscape is very 1950’s. Lots of players, lots of redundancy, lots of bits and pieces to manage. It is very sub-optimal. So were those 8 mpg gas-guzzlers in the 1960s. 3PLs must evolve, and when they do there are some serious costs to be saved by all their customers. Here’s my evolutionary checklist:

Not My IT. Putting in new enterprise supply chain systems costs tens of millions of dollars and takes years. You do a comprehensive requirements definition and supplier selection process and then buy an SAP variant that doesn’t work very well and costs a fortune more than the fortune you budgeted to integrate it all. Why not use a 3PL that bought that Cadillac SAP system for all their customers to use? Why not use it on their mainframe? Why not use mostly their people to run it? Why not use our own people just for the mission critical stuff like lifecycle planning and forecast parameter setting? Why not depend on the 3PL to hire the integrators – on the cheap – to build the interfaces to the sources of our data? There’s a 20% return on sales business here for the integrators that smells a heck of a lot better to the OEMs than typical software value-creation pricing policies.
Not My Lean. Who cares about process classification when it’s really all about cost and quality? Too many do, who shouldn’t. Lean really is all about lean costs and robust quality. So, I really don’t care about those process control boards, Taekwondo cards, and “no fear” existential slogans. Why can’t I just go out and buy this stuff and harvest the benefits in less than a lifetime.
Not My Depot. Who cares about dedicated warehouses and dedicated bins for “my” parts? If Vintage Parts can be world class with hundreds of thousands of commingled part numbers, then so can a mainstream 3PL. We need to focus on cost and quality rather than the accouterments of where each part dwells. Damage, cycle time, fill rates, and cost as a percent of sales.
Not My Carrier. Who cares if DDS routes have multiple OEMs on them? When I go to my Chevy dealer for service I could care less about the truck that showed up at 2AM to drop off fresh parts. Nobody cares. Collaborated, consolidated, customer delivery is not a nice-to-have, it should be a basic requirement. The same goes for inbound. By the way, who really cares about logos on trucks? Get rid of them.
Not My Break-Bulk. Who cares if these collaborated consolidated customer deliveries originate from a collaborative and consolidated break-bulk facility? Nobody. These facilities should, also, be receiving consolidated supplier drop-ship orders for the DDS routes, as well as referrals … and small parcel orders for criticals where we can still make the OTD work.
Not My Returns Processing. Who cares if everybody’s dirty warranty returns and obsolescence returns share the same aisle? Nobody should.
Not My Follow-up and Expediting. If we can use a third party to process our invoices and charge our suppliers a ridiculous line-item charge for this, well, why can’t we farm out all of our post-ordering activities to make sure the stuff arrives in time for the customer order?
Not My Export Packing and Freight Forwarding. The best we’ve seen here is Volvo out of Sweden. However, this is an area where few others shine. Why can’t 3PLs offer a blanket supply chain service that wraps around some areas of distinctive incompetence? Why is this an afterthought?
Not My Reman. Why can’t 3PLs offer an integrated service for all the stuff that aftersales is supposed to be doing well. Why can’t we get a 3PL to understand that reman is big money and represents low-hanging fruit? Why haven’t we seen a credible “LRP” – Lead Reman Provider – come in and knock our socks off?
Yes, My Metrics! Why do 3PLs constantly play 3-card Monte with the metrics? Why can’t they simply adopt NAPB metrics and report their performance in the universal language of motor vehicle supply chain? Why not use a consistent report card that spans all players in the market?

Why I Don’t Believe AutoMD Can Claim a 57% Variance in Auto Repairs for the Same Service - by David Carlisle

noreply@blogger.com (Carlisle Company Team) — Fri, 04 Nov 2011 15:05:00 +0000

I pulled this off the internet: "New auto repair quote service, AutoMD Negotiator, reveals that Minneapolis vehicle owners can overpay $341 on average for vehicle repair. … A new, national report by AutoMD.com reveals that Minneapolis car owners are potentially overpaying by 57% on average on car repair" (http://www.wmctv.com/story/15867549/minneapolis-car-owners-experiencing-57-average-variance-on-auto-repairs-for-same-service-just-under-national-average)

Ultimately this news plug was all about US Auto Parts Network, Inc., who owns AutoMD Negotiator, selling more parts. “57%” is awfully precise. Let’s take a look to see if they are worthy of this precision. Bottom line, they are not.

We have done extensive research on emerging digital service customers (EDSCs) over the past several years. About one third of all service customers are EDSCs – service customers who use the Internet to research motor vehicle service options – and about 40% of these switch service providers based on their research. They switch, but do not emerge more satisfied.

The reason for this is due to the low quality of the information they get from the Internet. Like Auto MD Negotiator. Let me explain.

The AutoMD Negotiator claims that their service is the solution to consumers’ price shopping quandary: “We call shops and negotiate for you, so you won’t overpay for auto repair.” In a nutshell, here’s how the Negotiator works: the user enters his vehicle and repair information, receives quotes to his inbox, selects one and schedules an appointment – all without picking up the phone. One of the charts in the AutoMD propaganda piece showed price quotes for a Saab in Minnesota – Saab is nearly bankrupt and primarily a Northeast niche specialty vehicle. To find out more, we went online and used AutoMD’s Negotiator. We submitted a wheel bearing replacement for a 2000 Hyundai Sonata. In a few hours, we received three quotes for the repair in our inbox, all from independent shops or chains, ranging from $450 to $611. As you can see in the chart, none of these quotes passed the laugh test. For more data points, we entered three more repairs. After receiving more quotes back from the Negotiator, we decided to call all the shops directly for quotes to see how they would compare. Three out of the eight quotes (37.5%) we received from the Negotiator were equivalent to the quotes we received when we called the shops directly – one of these three quotes was the same, but for 2 bearings instead of one. So far in our experiment they score two out of eight – 25%.

It appears that sometimes the Negotiator actually called the service provider directly (in the case of the chain franchise), but they never revealed that they were calling on behalf of AutoMD. Other times, it seems that they didn’t call at all, because surely they would have been told, as were we, that the shop didn’t perform those types of repairs. We called up AutoMD pretending to be a shop. We asked how we could sign up to be considered for the Negotiator. As it turns out, there are no fees or surcharges for service providers that want to be listed on AutoMD. Furthermore, there are no requirements for service providers who wish to be listed. Shops are asked to provide basic information, but there is no certification process, at least according to the person we spoke with.

When using the Negotiator, there are no selection criteria besides price – and sometimes the cheapest is the cheapest for a reason. When entering a repair request, the Negotiator doesn’t allow the user to restrict his search to certified providers or specify whether he would like genuine parts. There is no option to filter for providers that offer loaner vehicles or other conveniences, which are critical for those of us who only have one vehicle or who need Wi-Fi to check email when waiting for our vehicle during a workday.

The Negotiator claims to save users time and money, but without a robust process for collecting service provider information, how can the user be assured that the service provider selected by the Negotiator is a legitimate business? Based on our phone calls, the Negotiator also missed the boat on some crucial information; imagine a customer’s frustration if he showed up to an appointment scheduled through the Negotiator, only to find that the selected service provider can’t perform the needed repair. Or, if the user’s repair was performed by someone who is unqualified and/or puts a junk part in his car. At the end of the day, finding the lowest price is not the same as finding the best value, but it seems the Negotiator is not programmed to understand this distinction.

Bottom Line: AutoMD Negotiator is fatally flawed and should die from a thousand cuts. The first “cut” is from a meat cleaver – using a call center to call up service shops for a self-diagnosed repair is just plain silly. If the intent is to help customers find the best price for the service they want, you really need to start with what they want. Do they want cheap? Do they want quality? Do they want amenities? AutoMD Negotiator is like Nextag’s pricing of squirt guns. The price range is from $10 to $2,107. The “Miller 198130 Water Cooled MIG Gun” with quick disconnect represents a price variance of around 99.5%. Or, it might be a heck of a lot better squirt gun. Or, it might be a mistake and not a squirt gun at all. If you want to compare prices for automotive service, you need to do a lot more work than AutoMD does.

Amazon Prime – Are There Lessons for Service-Parts? - by Brian Crounse

noreply@blogger.com (Carlisle Company Team) — Fri, 28 Oct 2011 21:23:00 +0000

Amazon’s stock got hammered this week, following relatively weak third quarter earnings, and it’s no longer a $100 billion company. At the time of this writing, it’s “only” worth $98B. The Harvard Business Review has some insights on why the weak earnings for Q3 may not be so problematic.

To date, I’ve talked about Amazon’s online victory, and about its problems at a warehouse in PA. In this post, I want to look at one prominent piece of Amazon’s customer retention strategy, Amazon Prime.

I got to thinking about Prime after reading this Practical Ecommerce article, which sheds some light on Prime’s successes. For those of you not familiar with Prime, here’s how it works:

Sign up for $79 a year (79 is a prime number. Get it?)…
…or it’s free if you sign up for e.g. Amazon Mom
Get free standard or 2 day shipping on all orders (no minimum order size)
Or get $3.99 overnight shipping per unit
Access some streaming digital media (e.g. movies) bundled for free

Prime was first launched back in 2004 or so, but seems to have really gained traction recently (the article reports that there were 2 million Prime Customers in 2009, which increased to 5 million in 2011).

The genius of Prime is that it removes nearly all friction from Amazon purchases. Once Amazon gets a customer over the hurdle to commit to the $79, there really are no more hurdles for placing orders. Customers don’t have to do the math to check whether a purchase makes sense once shipping charges are added in. They don’t have to wait to pool enough purchases together to make shipping charges acceptable (or qualify for other free shipping programs that have minimum order sizes). They don’t have to wait a week for slow-boat free shipping. They don’t have to pay much more for next-day service. Amazon easily becomes the first option for making purchases.

The consumer part of me LOVES this. The part of me that likes supporting local businesses HATES this (because I buy so much more from Amazon now). The part of me that works on customer retention strategy LOVES this. The supply chain analyst in me HATES this.

Amazon is basically willing to risk significantly lower margins (due to less shipping revenue, and higher shipping costs) in exchange for growth opportunity.

For customers paying the $79, the margin risk to Amazon is actually quite low. The chart below shows Amazon’s net profit (gross profit minus fulfillment and transport expense, plus shipping charges¹) for a few different cases, assuming no change in customer behavior after joining Prime. The baseline case is the blue curve: it starts at zero and slopes up based on Amazon’s operating margins (gross margin less fulfillment and net transport costs). The green line shows estimated profits for customers that always use Super Saver Shipping. Amazon makes less money on these customers per dollar purchased, because the savings in transport costs (slow boat vs. standard) are likely lower than the lost shipping charge revenue. But the point of Super Saver Shipping is to grow sales by converting ~$15 purchases into $25+ purchases.

The purple line is for Prime customers. Note that it gets a big head start at $0 purchases. The $79 membership fee is a significant profit source for any customer that buys less than $1,000 of goods a year. That’s because Amazon is in a low margin business². By making Prime sufficiently awesome (and having the ability to make frictionless purchases is pretty awesome), Amazon can really pump its profits from smaller customers. In fact, if you buy less than about $800 a year from Amazon, and join Prime at $79, they don’t even need you to order anything the next year. You already gave them the profit they’d get from selling you stuff.

The key thing about Super Saver Shipping is that Amazon already gives up a lot of transport cost recovery, especially for larger customers, whose average order size is very likely to be greater than $25. While the gap between the blue curve (where Amazon recovers much of the transport costs by charging the customer) and the purple Prime curve gets large for large customers, the gap between the green Super Saver Shipping curve and the Prime curve is much smaller. What this means is that Amazon isn’t really risking much with Prime. Any incremental sales volume, for almost all customers, leads to greater profit, despite higher transport costs and lost shipping charges. That’s a pretty cool strategy.

So what’s the take-home for service-parts?

It depends on the customer. Our dealers are already committed to us; they are franchises. So the part we can focus on is making purchases from us frictionless, to maintain or increase dealer purchase loyalty. How do we do this? One proven way is Retail Inventory Management (RIM). At its best, RIM makes buying from the OEM very easy. Parts arrive, as needed, with relatively little attention and labor required from the parts manager. And the best OEMs design RIM policies so that dealers can get quickly the parts not stocked by RIM, at a reasonable cost, without hoops to jump through. Kind of like the no-minimum, $3.99 1-Day shipping option for Prime.

But not all RIM implementations are perfect. They don’t always do an obviously superior job of managing parts inventory, and we don’t always make it easy enough for dealers to obtain non-stocked parts. So, many of us have room for improvement. In recent years, we’ve hosted several successful roundtable and panel sessions about RIM at our benchmark conferences. The next session for NAPB participants is our Focus Day on RIM, coming this February. This will be a great opportunity to discuss how we can make our RIM systems act as our version of Amazon Prime.

But even RIM has limited upside. Our dealers are already fairly loyal customers. The customers that aren’t so loyal are the independent repairers. What might an Amazon Prime program look like for them?

To make buying from us as easy as buying from Amazon via Prime, think of all the hurdles involved with buying parts from our dealers.

Repairer has to be motivated to call a dealer, rather than their usual all-brands sources
Repairer has to wait on hold for 15 minutes
Repairer has to talk with a distracted parts manager to be sure they have the right part
Repairer has to wait several hours for the parts to be delivered
Repairer has to be prepared to bicker over a return if there’s something wrong with the parts (incorrect part, damage, etc.)

I’m just dreaming, but maybe we could follow Prime’s lead and do this: For a fixed price (that could be waived under various favorable conditions), independent repairers could:

Access an online multi-brand, detailed catalog of genuine parts;
Place an order online, which is then routed to the closest participating wholesaling dealer and confirmed, with a stated same-day ETA;
Offer guaranteed order response times - the repairer gets a discount if the parts are late, which both the dealer and OEM eat.

Actually, I’m not completely dreaming. Some OEMs have their own commercial parts sites that have some of these features. Others are looking closely at patching into aftermarket ordering systems. OEConnection’s RepairLink with MORE is in the right ballpark, at least on paper. But the key is in the execution, so that ordering parts from our wholesaling dealers is truly frictionless.
______________________________

¹We’re leaving marketing, S&GA, and other non-supply chain costs out of the equation here, which means we’re assuming they are fixed costs. The parameters for fulfillment, transport costs, and shipping charges are estimates based on Amazon’s annual reports. It’s difficult to precisely estimate key items like the incremental cost of 2-day vs. Super Saver Shipping, so these curves do have some uncertainty.
²It’s non-digital retail business, at least. Its digital businesses may be another story.

Running a Warehouse—What We Should Not Learn From Amazon - by Brian Crounse

noreply@blogger.com (Carlisle Company Team) — Fri, 21 Oct 2011 16:41:00 +0000

A couple weeks ago, I wrote about Amazon’s impressive growth over the past decade, and what it means for the motor vehicle service parts industry (quick summary: “Even if we can’t see the money yet with digital service customers, maybe we need to take the long view and be confident in our efforts”).

There are a number of other aspects of Amazon’s business that I think provide insights for service parts. But for this post, I want to talk about how not to run a warehouse.

You may have seen news in the past month (originally in the Lehigh Valley Morning Call) about some problems Amazon has been having at its warehouses in Breinigsville, PA. Among other things, it seems that the heat index inside the Amazon warehouses often rose above 100 degrees this past summer, which resulted in situations where workers reported seeing “paramedics bring people out of the warehouse in wheelchairs and on stretchers.” In particular, on June 3, 2011, Amazon acknowledged in a letter to OSHA that “15 out of 1,600 employees experienced heat-related symptoms.” And on June 10th, a doctor at the Lehigh Valley Hospital called OSHA to report that “several patients have come in the last couple days with heat related injuries” from Amazon.

Let’s put a few things in context. In our database of North American service parts warehouses, 65 of 225 warehouses that provided us with CY2010 safety data had zero recordable incidents over the entire year. Having one percent of your workforce suffering from overheating on a single day is simply unacceptable.

If you have ambulances on-call outside your workplace, you’ve got problems.

Such problems are unusual, even in warehouses in hotter climates. I asked a couple clients, folks who have spent considerable time in warehouse environments, what they thought. Here’s what one said:

I had seen some of the original reports on that incident and found it odd … our PA warehouse is fairly cool even in warm weather, so its not really an issue there.

What I found odd is that I have worked in warehouses in locations prone to extreme temperatures. … but processes are in place to handle it. Also, when I was at [a] warehouse in … California, [we] often saw temps over 100 F for 10+ days in a row. The key to ensuring employee safety and reasonable comfort were always the same… The issues appear to all be with how Amazon handled it, and not warehousing in general.

So, what exactly happened here?

Amazon’s Breinigsville warehouses are “activity-dense.” It’s possible to estimate Amazon’s warehouse space productivity from their annual reports; the amount of dollars shipped per square foot per year are fairly high relative to the service parts warehouses we know best here at Carlisle & Company.

These warehouses are also “people-dense.” 1,600 workers (more during peak seasons) in 1.6 million square feet of warehouse space is a lot. I suspect the prior tenants of these warehouses (the buildings date back to 2000, but Amazon’s only been in them since 2010) didn’t have this many people packed in them. By itself, space efficiency is a good thing, but when you have a lot of people, with a lot of machines, moving a lot of product, it going to generate a lot of heat.

These buildings may not have very good thermal performance. It’s hard to say much without getting in the building and doing an energy audit, but the one thing that’s apparent from the aerial view is that these warehouses have black roofs. That’s not unusual for warehouses in the northeast, but it sure doesn’t help keep the building cool in the summer. For a contrast, if you look north a few hundred yards, you’ll find a very bright, white roof on the Nestlé® Pure Life® water bottling facility at 305 Nestle Way. This building was certified as LEED Gold in 2009. Or, go take a look at the warehouses near the Ontario, CA airport: all light-colored roofs.

Amazon doesn’t seem to care very much about its warehouse workers. Is that provocative enough? I am basing that statement on 3 pieces of evidence: The Morning Call story, a recent WSJ article by Richard Brandt, and a recent accidental public Google+ post (key quote: “Amazon does everything wrong, and Google does everything right”). The following is an excerpt from the Brandt article.

During the first few weeks, everyone at the company was working until two or three in the morning to get the books packed, addressed and shipped. Mr. Bezos had neglected to order packing tables, so people ended up on their knees on the concrete floor to package the books. He later recalled in a speech that, after hours of doing this, he commented to one of the employees that they had to get knee pads. The employee, Nicholas Lovejoy, "looked at me like I was a Martian," Mr. Bezos said. Mr. Lovejoy suggested the obvious: Buy some tables. "I thought that was the most brilliant idea I had ever heard in my life," he said.

It appears to me that Bezos and Amazon have a laser focus on their core strategic priorities, but don’t pay as much attention to the details as they should. Yes, I know that Bezos spent a week working at an Amazon warehouse in 2009. And that he applied the five whys in response to a safety incident in 2004. But, again, if you have ambulances parked outside your warehouse in 2011, something’s amiss.

In summary: Amazon:

Pushes a lot of volume through its warehouses
Does so with a lot of people
In warehouses with black roofs
Doesn’t always place a premium on workplace safety

Maybe these problems, at least #3 and #4, are isolated to these particular warehouses. I hope so, because fixing a couple warehouses is easier than fixing the whole company. But if these issues are Amazon-wide, Amazon needs to make some changes. Here are two suggestions:

Amazon should focus more on sustainability, making it a core part of corporate culture. Why is this relevant? Because high-performance, sustainable buildings promote safety and productivity.

Amazon is not completely remiss in this area; here’s a page that lists of a number of energy-saving kaizen projects, describes Amazon’s LEED Gold HQ buildings, and notes that four Amazon warehouses were LEED-CI (Commercial Interior) certified in 2009. These are all good things. But Amazon should and could do more—clearly, not all warehouses are high performing. In contrast, Google focuses enormous amounts of attention and resources on energy efficiency and renewable energy.

Take care of its people, for real. Amazon clearly has morale and rentention problems, at least at its Breinigsville warehouses. Amazon can probably get away with this in the current labor market, but 1) it’s not a sustainable long-term strategy and 2) it’s not the right way to treat people. I am reminded of Paul O'Neill’s strategy when he arrived at Alcoa as an outsider CEO in 1987. He choose safety as his number one key performance indicator because 1) it won him support of the unions, 2) trained the organization to focus on, and achieve, specific targets, and 3) it was the right thing to do. O'Neill was able to then extend his success with improving workplace safety to improve all aspects of the business, resulting in a very successful tenure at Alcoa through 2000.

These are things that all of us can be doing, if we’re not already.

In the next post in this series, I’ll get back to something Amazon does well – retain its customers, and what it means for service parts.

Quick & Easy Lessons from the Consumer Call Center Data Book - by Jay Cremins & Sarah Outslay

noreply@blogger.com (Carlisle Company Team) — Thu, 13 Oct 2011 22:02:00 +0000

Recently, one of our benchmark participants was asked: “Why were you interested in participating in this benchmark?” Their reply was superb: “So that we can move toward more common definitions” … and answer “where we are weak or best.”

The reply was superb because improving continuously, as required to stay relevant in today’s business environment, is impossible if you fail to discover best in class practices, ideas, and processes to implement. In this particular case, the benchmark was consumer call center oriented.

Using examples from the consumer call center benchmark as a model, the remainder of this document will dissect two key facets of the reply: “common definitions” and “weak or best.”

Common Definitions

Industries are different … companies are different … business units are different … call centers are definitely different. Complexities include managing consumer-facing call centers, dealer-facing call centers, mixed-purpose call centers, a combination of two, or a combination of three. There is only one way to appropriately compare practices. Collaborating among peers to develop and agree upon common definitions.

In our recent consumer call center study, the OEM participants had highly variable consumer-facing Average Handling Time (AHT). This data was misleading.

It was not the AHT that was widely variable; rather, it was each firm’s definition of AHT that was widely variable. Collectively agreeing on a common definition allowed valid comparisons and meaningful analysis, such as the correlation between overall satisfaction and phone AHT:

Based on the data reported by participants, the correlation between reducing AHT and increasing satisfaction is tenuous. Lesson learned: AHT matters; but, it is not a primary driver of consumer-facing satisfaction.

Weak or Best

Prior to this benchmark, OEM B believed that they managed attrition at a best in class rate:

Because they chose to be subjected to outside comparison, they are now aware of opportunities to improve – and have a peer from whom they may learn how.

OEM B also discovered opportunities to improve a high level corporate goal: consumer-facing satisfaction.

Based on the study data, consumer-facing satisfaction does not correlate with:

AHT (see above)
ASA – Average Speed to Answer

However, analysis of the benchmark data indicates that consumer-facing satisfaction does correlate with:

Case load per agent

“Quality Performance” metrics

Lesson learned: AHT and ASA matter; but, case load per agent and quality performance metrics correlate with consumer-facing satisfaction.

These examples, all from the call center benchmark data book, highlight how we all use benchmarking as a fundamental strategic process “so that we can move toward more common definitions” … and answer “where we are weak or best.”

Quality Focus Day - The Power of Benchmarking - by Charlotte Williamson

noreply@blogger.com (Carlisle Company Team) — Fri, 07 Oct 2011 18:43:00 +0000

Think back to preschool. What were some of the key skills you learned?

Did you include counting on that list? Maybe you remember teaching your children how to count to ten before they even began school. This is one of the most basic skills we learn as children, and it is used on a daily basis throughout life.

At last week’s NAPB Focus Day, we spent 8 hours discussing warehouse quality: damages, counting errors, wrong part errors, etc. We’ve seen companies add voice technology and scanners (and remove these tools as well), all in an attempt to be more productive and perform with higher quality. But the quality tool that came up over and over again is something you learned in pre-school: how to count. It happens to everyone, but when you lose track in the middle of counting, it can cause errors in our dealers’ orders and impact our quality and satisfaction scores. The anecdotal evidence shows that shortages tend to occur when picking quantities from 2 to about 10. The problems seem to go away when you get into the hundreds of units and can be helped by having quiet zones in the warehouse, allowing our workers to focus on the task at hand.

The NAPB Focus Days allow experts from the major heavy equipment and automotive manufacturers to spend the day sharing and learning from each other. Each expert has time to present their struggles, tools, and best practices, followed by questions from the group. The attendees came away with lists of ideas for improving quality to take back to their teams. Some ideas are easy, can be implemented quickly, and are low cost. Others will take more planning and budget, but have been tested and proven to be effective by our peers.

The solutions presented by the participants range the gamut from working with people and refining processes to implementing new technology.

One company has found great success in reducing picking errors by working with its people. All employees go through a 35-minute training to learn tips and tricks for counting quickly and accurately. They have a 3 -minute narrated version of the training for on-the-floor use at the time of counting errors. This reinforces the basic skills needed to prevent shortages and overages, resulting in almost a 50% reduction in picking errors year-over-year.

Another company found that they can improve their dealers’ receiving processes by intentionally sending them an over-shipment, under-shipment, and mis-pick and then monitoring the resulting claims. For any dealer who does not accurately report the incorrect shipments, the company will give them time to develop a plan to fix their receiving processes. In the past, dealers have tended to report shortages but not overages. Now that the dealers know they are being monitored, overage claims have become more balanced with shortages.

Sometimes technology changes can have unintended consequences. One company found that switching to voice picking not only let them improve quality, but also enabled them to monitor employees in detail and view productivity over specific time periods. This allows them to see gaps in the day where little or no work is being performed. They can use this information for discussions with employees about their work performance and have seen an immediate improvement after the employees were made aware of this functionality and their own performance.

These are just three of the many ideas and success stories shared by the 20 participating companies during 8 hours of presentations and discussions. The participants were very interested to hear the challenges that others are facing and the initiatives they are using to overcome them. This is a unique forum at which companies can interact at many different levels (strategic and tactical) and benefit from each others’ knowledge and experience. Even those who are doing well can learn from the others during the Focus Days.

We look forward to seeing subject matter experts at the 2012 NAPB Focus Days, which are being scheduled to deep dive on the topics of Supply Chain Collaboration, RIM, Pick/Pack/Sort/Ship, as well as two sessions on eMarketing.

Long Term Digital Transformation – What Can We Learn From Amazon? - by Brian Crounse

noreply@blogger.com (Carlisle Company Team) — Fri, 30 Sep 2011 21:37:00 +0000

I’ve been thinking about Amazon recently. There hasn’t exactly been a shortage of ink spilled or bits flipped by people writing about Amazon. But I’m not writing about the Kindle Fire. Or how Amazon’s 2012 Kindle-related sales may exceed $6 billion. Or about Zappos. Or the Elastic Compute Cloud. All of those topics are interesting, but that’s not what I want to talk about.

I want to talk about OEM motor vehicle aftersales.

While Amazon and this industry have their differences (e.g. Amazon doesn’t have to ship mining truck axles to the middle of Chile, but they ship to millions of customers, and have seasonality issues that make even harvest-time at an agricultural OEM look tame), they have some basic commonalities: they both exist in a time of digital transformation, they both have awesome supply chain challenges, they both sell service parts, and they both want more market share. In this post, I want to talk about digital transformation. I’ll discuss the other topics in future posts.

Digital Transformation

At Carlisle & Company, we are spending a lot of time collaborating with our clients on digital aftersales strategies. Sometimes, the skeptic in me wonders why. Though we think we understand how future behavior by emerging digital service customers (EDSCs—a horrid consulting acronym if there ever was one) will shape the market, early returns are ambiguous. While our surveys and focus groups tell us that these customers are substantial in number even today, and currently have their opinions of service options shaped by online resources like reviews, it’s still hard to see where the dollars are, or how the money we invest will reap returns.

We at Carlisle haven’t earned much money in this domain yet, despite substantial investments of thought and time, and our clients, who are busy building and enhancing owner centers, online appointment capabilities, and mobile apps, haven’t hit the ball out of the park yet either. Are we doing this because we’re smart and thinking long term, or because it’s trendy and fun? While I personally schedule my car service appointments online, and have a few parts and service-related applications on my phone, I’m not exactly a representative sample. I think way more about vehicle aftersales than normal people. I also wear those weird Vibram toe shoes around the office—I’m kind of an outlier.

But then I am reminded of Amazon. Its 1997 letter to shareholders (a letter that Jeff Bezos is obviously proud of; it’s helpfully reprinted in each year’s 10-K) emphasizes that “It’s All About the Long Term.” And it was. And is. Amazon had a net loss in 1997. And 1998. And 1999. It had a net loss of $1.4B on $2.7B in net sales (yes, a net of -51%) in 2000. By 2001 (another year with a net loss), Amazon’s market cap was 80% off its peak, driven down in part by the dot-com bubble burst, in part by these mounting losses and negative free cash flow. In 2001, it was reasonable to be nervous about Amazon’s future.

Meanwhile, in 2001, the Borders Group reported $87M in earnings on $3.3B in sales, the 6th consecutive year of steady profits.

We all know what happened since then. Amazon bet on online commerce, executed brilliantly, and won. Borders lost. They weren’t direct competitors, but they sold enough of the same stuff, so they provide a useful contrast. It’s amazing to me not just that Amazon survived, not that they “won”, but that they won big.

Here’s their sales trend since 1997. I used a log scale to highlight how steady the growth has been on a percentage basis for the past decade:

Here’s a chart of their net income by year, and a simple (no discounting) cumulative sum of their net income/loss. Amazon would argue that free cash flow is a better measure of performance, and I’d usually agree, but I went with net income because the free cash flow calculations that I could track down were incomplete and a little dodgy.

I find these curves remarkable, because of both the size of the annual and cumulative losses, and the current positive trajectory. Amazon’s cumulative income, even before any consideration of a discount rate, was negative from its founding through 2009. It’s now throwing off $1B+ a year in income, supposedly more in free cash flow, and has a market cap of over $100B (at the time of this writing). Talk about focusing on the long term. And, eventually, succeeding. Big.

So how does Amazon’s current success, which has many factors, apply to OEM vehicle aftersales businesses?

Here’s my point: Even if we can’t see the money yet with digital service customers, maybe we need to take the long view and be confident in our efforts. We know that the web, social media, and mobile devices are profoundly changing how consumers select and purchase goods and services. We believe that we need to engage in these areas, at the very least as a defensive action, as our research indicates that digital consumers tend to move away from genuine OEM parts and service. Beyond that, we believe that we can use digital media to strengthen our relationships with our customers. The hard benefit NPV of our efforts may not be apparent yet.

But, I am reminded again of Borders and Amazon. One company seemed intent on preserving its established, profitable business, with some online enhancements, all the way to Chapter 11. The other bet big on its digital strategy, executed brilliantly, and is worth $100 billion.

Survival of the Fittest – Fast-Fits Are Fitter Than You Think - by Stephan Brackertz

noreply@blogger.com (Carlisle Company Team) — Fri, 23 Sep 2011 13:40:00 +0000

Every now and then we take a look at what is going on in Europe. And there is an interesting story unfolding right now we wanted to share… Carlisle recently conducted a major survey of over 5,000 European automotive end-customers in 5 countries. What we found was a mix of “we knew that already”, some “surprises”, as well as some real “bombs”. Bombs are more than surprises… they are things we didn’t know at all or things where our common knowledge is actually wrong. One of the things we learned – and this is a real bomb – is that Fast-Fits are on their way to eating the dealers’ lunch. All indications are that Fast-Fits are stealing dealer customers away and are doing so successfully.

How is this happening you may ask? Here are some survey insights:

About one fifth of customers already go online to search for Aftersales related information.
Customers that are online are about evenly split between dealer loyalists and aftermarket workshop loyalists (independent workshops and fast-fits).
Prompts from the independent aftermarket tempt them to try a different repair provider (25-45% of online customers change repair provider based on what they find on the Internet).
The prompts typically come from fast-fits. They are sucking dealer customers and independent workshop customers in to try fast-fit services.
A sizeable portion of self-declared “dealer loyalists” are already defecting to Fast-Fits.
This issue is big enough to notice in Europe, and huge enough to panic in the United Kingdom.

So what? A typical response to this may be, “we OEMs don’t have to worry because Fast-Fits deliver awful customer satisfaction; our dealers are far better.” Not so. In fact, our survey data shows that ‘dealer defectors’ are satisfied with their service experience at fast-fits. This is a big deal after all.

“Why didn’t I know about this?” may be the next question. That’s mainly because we underestimated Fast-Fits in the past and their ability to evolve and re-invent themselves. This is happening below our radar. And if we look back we can understand how we underestimated Fast-Fits.

Let’s backtrack a bit, to the way it used to be…
Fast-fit chains like ATU, Speedy, Midas, and Mekonomen grew to a significant presence in Europe with many hundreds of outlets. Private equity firms saw a good business model and many fast-fits were bought by private equity investors that loaded up the capital structure with debt. Fast-fits became marketing masters – bombarding consumers with low price messages in print fliers, TV, and radio. They pulled a lot of customers into their workshops and then bungled things up by not delivering service quality. Worse, poor employee compensation plans ensured that up-selling glided into phony repairs and rip-off territory. These plans would have made Amway proud.

As a result, Fast-Fits were like jet engines – they sucked in a lot of customers, squeezed them, burned them up and spewed them out at high

speeds. Most of the customers didn’t “stick” due to the poor service experience – but loyalty didn’t matter in this business model. As long as there were enough fresh, unburned customers around to suck in, the jet engine could keep spinning. Over the years OEMs became less and less worried as enough customers spread the word that service quality is awful and business practices are frivolous. When the recession and the debt crisis hit we thought we could write-off Fast-Fits completely and focus on other threats.

The recession was like a near-death experience to Fast-Fits:

Customers clenched up and spent less, delaying service and repairs
Older cars were being pulled off the road by cash-for-clunkers programs
Rolling over large gobs of private equity debt became tricky

Let’s fast forward back to where we are today and where we will be if we don’t react…

Fast-fits are back and are snapping away at our “dealer loyalists”. The enabler for this is the Internet. A brilliant and comprehensive plan to take advantage of the Internet is helping fast-fits back from the brink of destruction. We underestimated the fast-fits. The experience shows that they are damn good at evolving. If it’s survival of the fittest out there, fast-fits may be fitter than we think.

Let’s compare some of the DNA of fast-fits and OEMs. Two very different animals, but wouldn’t it be nice if we could splice out some of those fast-fit genes and integrate them into our OEM genome? Especially the genes about Internet strategy and speed to evolve?

So fast-fit DNA explains much of what we are seeing. And the natural environment is also changing in their favor (how Darwinian). Customers are moving into the online world. Fast-fits have already adapted to this change quite quickly. To stay fit, OEMs need to be ready to make the next evolutionary step into this space.
There’s lots more interesting aspects to this story – ask us for the details or a look at some of the scary survey data.

P.S.: Oh, and how did fast-fits fix the customer perception problem with workshop quality so quickly? Wouldn’t we love to splice out and implant that gene into our DNA?

Future Shock – Social Media, Call Centers, Digital Service Customers, and the End of Those Good Old Days - David Carlisle

noreply@blogger.com (Carlisle Company Team) — Thu, 15 Sep 2011 21:04:00 +0000

This week we hosted our third Digital Aftersales Summit for 14 OEMs, where the focus was on social media, digital everything, and our emerging digital service customers (EDSCs). Eight hours, heavy participation, no salesmen, and pretty much no breaks. OK, this marathon session wiped out most of the participants. The leaders want it that way. I, personally, just hate breaks. Waste of time.

Social media really is very simple; it’s all about a profound role reversal. In the old days you bought a big chunk of air-time, crafted tight 30- and 60-second messages for millions of dollars, then let ‘er rip. Millions of impressions later, people bought your stuff. Never could do much with a ROI on this. So, they bought your stuff and if they didn’t like it they called you on an 800-number. Technology evolved to a point where your 800-number was manned by a computer with a sweet digital voice that would get everything it needed to know after customers spent 10 minutes shouting nouns and verbs and inputting complex alphanumeric strings on the phone dial. This eventually got them to a person they couldn’t understand and who knew nothing. Only the brave and strong ran this gauntlet to finally explode with anger at the customer service representatives. Yeah, those were the good old days.

Now we put up Facebook pages and plot to get “liked”; we do fewer of those

atomic ad blasts, because it’s all highly personalized and targeted now. OEM page content has to look like your Aunt Millie’s so it doesn’t give off an impersonal, corporate vibe. Want to be friendly-like. Agencies don’t do well with this sort of strategic dumbing down. Still have those 800-numbers. But, now when customers buy stuff and don’t like it, they tweet their discontent to what could be millions of connected potential customers … or slam you on Yelp/Google/Dealer Rater … the list goes on and on. So, we’ve got to figure out what to do with all those tweets & slams. In the old days we slapped that unhappy customer around with our call center constipation; now, he/she owns us. Role reversal.

Timeout: Ultimately it is this simple, but the implications are incredibly profound. Earth shaking. All those corporate customer service policies and procedures (and their associated infrastructure) are lined up to service the traditional un-empowered customer. Yesterday, all you needed were a few people to interface with the agency and a large call center that architecturally resembled a Temple Grandin-designed slaughterhouse. You could outsource it. This stuff does not work for digitally savvy customers. They don’t watch TV, don’t read print, skip commercials, avoid paid ads, don’t bother with 800-numbers, and express their feelings both bad and, well bad, using Twitter. None of our policies, procedures, infrastructure, or other junk works for these folks. It’s a corporate Betamax dilemma: (1) most executives think their “Betamax” marketing and customer service infrastructures are working just fine, (2) the “Betamax” owners know that ain’t so. (3) So, do you go out and buy a VHS player or… (4) cobble something together and wait for the equivalent of DVD, Blu-ray, or Netflix to come along. Not clear yet.

Who’s wreaking all this damage to our yesterday solutions? To quote one of our Digital Summit participants, it’s basically anyone with a pulse and access to the internet. Emerging Digital Service Customers (EDSCs) go to the web for information, education, and decision-making. In as few clicks as possible, they know everything they need to know and become empowered:

costs & savings,
locations, and
what others think about the service.

So, when they choose a service provider they can figure out if they are paying more than they would at other close-by alternatives and they can determine if past customers were satisfied.

Dealers are not in the sweet spot of any EDSC target – there’s just a lot fewer of them inside a default 10-mile search radius than there are independent service providers. Yesterday’s rope-a-dope customer

management strategies are just as obsolete as those Betamax strategies I just talked about. Rude behavior, price padding, aggressive up-selling, phony free inspections, and other stuff from the service providers’ rope-a-dope arsenal has shifted from opaque to transparent. All a customer has to do is walk back to their car, grab their iPhone, check costs and prices, read through Yelp, and determine if they’ve been bamboozled. Worse yet, they become ticked off and use Twitter to broadcast their research findings to a couple of million folks searching for this sort of stuff … to write stories and blogs, to make decisions on where to get service, to make decisions on what car to buy. They put the car into drive and move on to another shop. The flim-flam man at the shop won’t even know what hit him and has no idea how to respond.

Timeout: Worse yet, what if he’s really not a flim-flam man? Here’s the real American Tragedy. He could be a dealer service advisor quoting double-netted parts prices for Genuine parts on a 150,000 mile junker, using warranty-driven labor rates that are posted on the wall, following inspection procedures that he heard about at NADA that were endorsed by his/her field rep, and relying on training he got in high school because none’s available from the OEM. DOA.

Bottom Line – It’s 1981, again. That was the year of the first JD Power Survey and represents the backbone of Toyota’s reputation for quality and customer satisfaction. The critical IQS survey came later, representing a nexus for mass customer opinions. This profoundly changed our industry and who was what on the game board. OK, Consumer Reports helped, too. JD Power is another Betamax artifact. They just don’t know it yet. If reputation is still important to this new generation customer – and it is – it is being very differently defined. The rules are different. Winners will understand this sooner. Losers will defend their tight budgets and hold on to their Betamax customer retention strategies until it is too late. The game board is about to change again. It might just be those importers from Detroit that now have the advantage. Again.

Carlisle Launches a New “Technician Feedback Survey”

noreply@blogger.com (Carlisle Company Team) — Fri, 09 Sep 2011 16:42:00 +0000

While Carlisle has long been conducting industry-syndicated surveys focused on Parts Managers, Service Managers, and Sales Managers, the Technician has, for too long, been ignored. That came to an end this week, as Carlisle launched the pilot version of its new Technician Feedback Survey.

This survey – while focused predominately on better understanding the factors impacting technician retention – also delves into other issues critical to technician satisfaction. These include such areas as training, rewards/recognition programs, job motivations, career paths, etc.

At just 2.5 days into the launch, this survey is clearly a wild success. With only 6 OEMs participating in the pilot, we have already received over 2,500 responses. Based on comments from the respondents, this survey is long overdue:

I really like that you are doing this survey. It gives me a place to give my opinion and insights on how [OEM] is doing.
35 years and this is the first time they ask what I thought
It was short/to the point, shows commitment to the technician
Thanks for asking the rank and file guys!!
Very nice to see the company actually interested in the people making it a great company
I think it is great that you are giving us at the dealership level an opportunity to provide input
This Survey is a wonderful idea and I’m happy to share my thoughts
I’m just happy that someone is even interested in my opinion as a tech - good job [OEM]
I really appreciate the opportunity to voice my comments and concerns…
It is nice to see [OEM] finally asking the technician for their input.
Good survey!! Helps me vent my issues, management won’t listen without firing me.
I like the fact I have been given the opportunity to be heard and would like to see more surveys like this one
Any time someone cares enough to ask what we think as techs is appreciated.

Initial results from the survey will be reviewed at the upcoming Automotive Roundtable in October. Following that meeting, we will begin discussions regarding a full industry roll-out for 2012.

Emerging Digital Service Customers (EDSCs) – How They Play Outside Auto

noreply@blogger.com (Carlisle Company Team) — Fri, 02 Sep 2011 22:08:00 +0000

EDSCs are very different from typical customers. We’ve talked a lot about this. Most importantly, they differ in (1) using information on the internet to commoditize parts and labor, and (2) relying on social media and the more broadly defined e-community to tell them the truth. This, in fact, is really about the commoditization of product merchandising, marketing, selling, and ultimately, differentiation. Here’s how it plays out. Car’s broke. Use mobile device to find service provider close-by. Sort providers based on customer reviews. Choose provider. Check parts and service quotes based on internet research. Negotiate. Form opinion based on cost benchmarks, results, and trust. Write review. Resistance is futile.

OK, that’s cars. Before we move on to heavy equipment, let’s consider medium duty trucks. Medium duty truck owners are more like car owners than heavy truck. These owner operators don’t have large fleets of trucks. They primarily focus on their bakery, local brewery, or plumbing supply business. They are more sophisticated than car owners, but, unlike heavy truck fleet owners, they do not have fleet managers that focus on uptime and cost.

What about heavy trucks, farm equipment, and construction? Twenty-two year old sales reps typically don’t play in these sandboxes. My caution here is to watch the technology and how it is used; don’t overly fixate on the customer. The patterns of customer loyalty erosion outside auto and medium duty truck will reflect how technology will be used, not the genetics of a brand or a customer.

Ag, heavy truck (HT), and construction dealers have much stronger aftersales customer relationships than their automotive cousins – this is truer of Ag and construction than HT. That is important because these sorts of products typically don’t have tail fins, 20 color choices, tuned exhausts, and fancy fat low-profile wheels and tires. Ultimately, they are commodities that are primarily differentiated by acquisition cost, performance, uptime, and total cost of ownership. Up-time is critical and this is all about fast response to maintenance and repair needs. Now, let’s watch the technology.

Time out: The largest, most sophisticated fleets are using technology to maximize value, not just to find cheaper parts and service. In particular, they want easier parts and service, and will pay more for it; for example, telematics and infrastructure that are integrated with dealers’ DMS and fleets’ purchasing systems that automatically open repair orders, send estimates to fleets, and then send POs from fleets back to dealers. Dealers that can support this will get the aftersales business.

Two things are bound to happen. First, dealer/distributor labor rates and parts costs will become more benchmark-able for the faster moving wear parts that are available through the aftermarket. Second lines will help here, but they might not be able to plumb the depths of competitive pricing. Labor rates will be more transparent from dealer to dealer … and from dealer to non-dealer. Fix-my-own commercial operators will buy more from the internet. They will buy what’s available … and more will become available. That’s the good news.

The bad news is that they will document their experience and write customer reviews – they will do this because they will find these reviews helpful in choosing dealers, and choosing manufacturers. This will serve to further commoditize these segments. Winners will be (1) low cost total providers, (2) with great digital marketing presence, (3) with extraordinary supply chain performance, and (4) who closely watch the technology, how it is used, and get in front of their customer needs … rather than chase after them.

Repair Pal Pals – Superstars of the Independent Aftermarket

noreply@blogger.com (Carlisle Company Team) — Thu, 25 Aug 2011 17:15:00 +0000

First off, I’ve got to give AutoMD a compliment. They really don’t try much to hide that they are owned by US Auto Parts. They are a wolf in a wolf’s clothing, and savvy EDSCs see this … and move on to Google and Yelp for help.

RepairPal is different. They are wolves in sheep’s clothes. Mort Schwartz is on their advisory board – he’s on WorldPac’s board of directors, too. Mort’s a consultant to Genuine Parts, headed up Strauss Discount Auto, and been a Svengali to the independent aftermarket for decades. He’s got his own company – Schwartz Advisors, where Rick Keister is an affiliate. Rick ran Keystone Automotive and Delco Remy’s aftermarket businesses.

Rick is a RepairPal investor too.

Hmm…

My mother told me that I’d always be judged by who I hang out with.

Bottom line: RepairPal is an AutoMD wannabe – an extension of the independent aftermarket that makes its money from selling non-genuine parts and service. Hey, there are lots of companies like this out there. They certainly aren’t objective sources of automotive service and repair information. They need to come out of the closet.

The Coupon Phenomenon - by Charlotte Buchanan

noreply@blogger.com (Carlisle Company Team) — Wed, 17 Aug 2011 18:51:00 +0000

As a consequence of the recession and resulting consumer thrift, coupon distribution and usage has skyrocketed in the last few years. And it’s not just coupon-clipping moms on TLC buying hundreds of rolls of toilet paper and jars of peanut butter. Our summer focus groups have highlighted the importance of coupons and specials in influencing EDSCs’ (Emerging Digital Service Customers) everyday purchasing decisions. EDSCs proudly report how they comb the internet for deals. They know what websites to visit and what phrases to type into Google in order to find coupons for specific goods and services. When it comes to LOF service, they know Jiffy Lube offers a standing $5 off coupon on their website.

Timeout: How do they know this? Well, a Google search for “oil change coupons” or “oil change” turns up the Jiffy Lube website as the top result. Alexa’s search analytics tool confirms that the highest impact query driving organic search traffic to jiffylube.com is in fact “oil change coupons”. This is not just dumb luck for Jiffy Lube.

Through ubiquitous daily deal sites like Groupon, EDSCs also receive coupons right to their inbox. The aftermarket quickly jumped on the Groupon bandwagon, with Midas, Goodyear, and a host of independent repair facilities selling thousands of oil change deals in 2010. OEMs came late to the party; this April a group of ten Chicago-area Hyundai dealers tested the water by offering a $29 Groupon for an oil change, tire rotation, carwash and multipoint inspection. Over 1,300 people purchased the deal, many of them new customers and/or owners of competitive makes. Other OEMs and dealers quickly followed suit, offering various deals across the country.

Hyundai’s press release indicated that they will be monitoring redemptions of their Groupon, which expires this fall, to assess the promotion’s benefit. One metric will be whether Groupon holders purchase additional parts and service during their Groupon appointment. Another, far more important metric, will be what these customers do after they redeem their Groupon. How many new customers return to the dealer six months, a year, two years down the road, and for what? Can dealers convert these dealer-skeptic EDSCs into loyal customers?

Bottom Line: Coupons have proved to be a lever that OEMs and dealers (as well as aftermarket providers) can use to get people in the door. However, coupons alone won’t educate customers about the benefits of genuine parts and service. And, as we explored in a previous blog, customers who don’t know what “genuine” means won’t prefer it. We must educate customers to retain them.

“Right to Repair” – There’s an Awful Lot Not Right About It - David Carlisle

noreply@blogger.com (Carlisle Company Team) — Fri, 12 Aug 2011 20:59:00 +0000

OK, I will move on after this blog. It is difficult to be a Massachusetts liberal living among like-minded do-gooders who love to mint laws protecting civil liberties and promulgate social got-to-haves. Trillions of dollars in debt and we still churn out new laws that compromise liberal, civil, and social interests with conservative pork barrels. Right to Repair is a simply wonderful example of this.

Massachusetts is becoming another battleground on this issue – I hope that the Old North Bridge is strong enough to handle the load, again. What’s “right to repair” all about? It’s about a bill making its way through the Massachusetts legislature “allowing independent auto mechanics access to the same repair information available to dealership mechanics.” (Boston.com 7/6/2010 Mass. Senate approves Right to Repair Act) If you do a Google search on this topic you get a lot of hits and very few points of view. Let me simplify it all for you.

A lot of companies that produce non-dealer auto parts are supporting a non-profit industry group, AAIA (Automotive Aftermarket Industry Association) in their multi-million dollar lobbying efforts to push this legislation through to set legal precedence so that they can sell more parts and make more money. They chose Massachusetts as a battleground state because we voted for McGovern, feel strongly about civil liberties, and, heck, ain’t fixing your car where you want a civil liberty? So, because we are a bunch of Democrats, a bunch of Republican businesspersons are playing us as a bunch of dupes.

Let’s look at the Massachusetts Right to Repair Coalition and examine the facts that they are making their case with.

They (look at the names on the coalition – mostly a bunch of parts companies) want a level playing field that requires the manufacturers to provide to independents the same repair and diagnostics information that they provide to their dealers … at a fair price. This is a non-issue because this information has been available since 2002. There are lots of sources for this information – the big one is the National Automotive Service Task Force (NASTF at NASTF.org). NASTF says that the information currently available covers 99.8% of all repairs. Consumer Reports independently says that lack of access to data represents about .2% of all repairs, and that may be overstated. The missing .2% might be a function of language skills, education, training, IQ, and lack of basic technology. So, this issue is all about 2 repairs in a thousand. Have you ever had what they call an “intermittent failure?” These are service problems that are nearly impossible to diagnose because they come and go. It might just be that the 2 in 1,000 statistic is incredibly overstated, and irrelevant. How often do automotive service technicians experience intermittent failures and do not have enough information to complete the repair? This “demand” is like stating, “when did you stop beating your wife, for a fair price?” The false accusation and negative inference is the intent.

They want to ensure consumers’ choice of where to get their car fixed. We all have that choice today – just read the signs in the waiting rooms of Joe’s Sunoco, Jiffy Lube, Firestone, Midas, and any other independent mechanic. So, there’s nothing here either.

They want to save consumers $300 - $500 per family annually. How? We see numbers like this all the time but with no substantiation. We recently documented a mystery shop at Jiffy Lube – a non-dealer independent service outlet – and determined that you could save more than $150 a year by going to a dealer. Now, this is really simple stuff – changing your oil. Where’s the proof on the tougher stuff? Nothing’s here.

They want to protect Massachusetts drivers and their families by requiring all safety bulletins and recall information be distributed to all repairers, not just independent repair shops. Done! This information is all over the internet, sometimes, in the most unexpected places. If you have a few minutes to go to Google and type in “technical service bulletin” you will find “Clever Dude” which describes how to get all the TSBs you could ever want. To get everything, all the gory details, it’s going to cost you $24.95 for each vehicle; or, you can get a summary for free from Edmunds. Again, there’s nothing in this Coalition’s demand that is not already done and documented as history.

Finally, the coalition wants to protect 32,000 jobs in Massachusetts related to the independent automobile industry, including more than 5,700 repair shops. It’s not like all those jobs and service shops are going to China. The reality is that the OEMs have been steadily losing market share over the years. 75% of all non-warranty repairs are already done by the independent shops. The work will stay in Massachusetts and the shops will continue to benefit from increasing independent aftermarket market share. This last coalition worry-wart is just plain stupid. Not really. The lobbyists are really being paid to shift more sales, profits, and jobs away from dealers to non-dealer service outlets.

Never assume that someone spending millions of dollars lobbying something is truly stupid. If none of their facts line up very well, then something must be missing. That’s why I read the Massachusetts House Bill 102.

The bill stipulates that the OEMs make available to the independent motor vehicle repair facilities pretty much everything involved in product support at the same cost and terms that they charge authorized dealers. And they want it in the same form and same manner that all this stuff is provided to dealers. This includes diagnosis, service, training, repair information, and tools. If they don’t do this and the law passes, the independents can sue based on unfair and deceptive trade practices.

This reflects the brilliance of the lobbyists who wrote this bill. They found an elegant trap - voters want to hear about how they can save money & jobs, and protect their civil rights. Voters do not want to pay attention long enough to understand and appreciate complexities. And, here, the complexities are profound. Embedded in the Right to Repair bills are three things – “hidden agendas” – that the “coalition” really wants:

“Everything” - The independent aftermarket parts and service providers want everything, including information that is intellectual property representing multi-billion dollar investments into competitive advantages.
“Same Cost” - The independent repair shops want it at the same cost dealers get it for.
“Big Stick” - The lawyers want an enormous litigation club where anybody can launch an “unfair and deceptive trade practice” lawsuit.

Spreading the wealth of information at the same cost that dealers get might sound reasonable on the surface. But, it is not. In the area of long-term customer support, OEMs generally treat service and engineering as cost centers, and parts sales as a profit center. A lot of stuff that Bill 102 asks for is provided at no charge to dealers: diagnostic systems development, training curriculum development, tool design, hotline technical support, internet technical support, technical service bulletins … the list goes on. Some of this stuff is provided to dealers at minimal cost/profit levels – dealer service training, technician certification, dealer technical systems support, tools; again the list goes on. OEMs do this because it incentivizes dealers to invest in their own customer support and provide the highest possible level of service. This “stuff” costs millions of dollars annually, and the investment is internally seen as:

A way to differentiate brands in the market place – e.g., a Yugo vs. a Toyota. Yugo’s lack of customer support in the US market was one reason for its failure. Ultimately, customers benefit from Chevy’s higher standard of customer support.
A way to increase end-customer satisfaction, achieve higher brand recognition, higher brand loyalty, and sell more cars and trucks.
Just part of the cost structure that is offset by parts profits.

Codifying a bunch of vague claims and demands into a law, then giving lawyers an atomic-sized “unfair and deceptive trade practice” stick is going to cost millions of dollars in legal fees. With thousands of independent service stations in each state, it would be fairly easy to assemble class action lawsuits. One way or another, millions of dollars of excess cost will be incurred by the OEMs to defend their interpretations of a vague law and for protecting their competitive secrets. Who suffers? Vehicle and service customers who, ultimately, will have to pay for all those lawyer Gulfstream jets. We should name this law for what it really does: Lawyers’ Right to Fleece You More (LRFYM) Act.

If you compare a typical OEM to NAPA and most of those parts companies who are paying the Right to Repair lobbyists, the OEM provides a lot more services, and bears a lot more cost, due to the stuff that Bill 102 asks for “at the same cost and terms that they charge dealers.” It’s because OEM parts sales is a profit center and service and engineering are cost centers. The lobbyists know this, the lawmakers simply don’t care, and those liberal Massachusetts voters, like me, are all dupes.

Jay Forrester, the MIT inventor of System Dynamics, would love to build a system dynamics model of what would happen if this bill were to pass. Consumers would ultimately get slaughtered.

Disclosure of relevant IP would make it easier for off-shore companies to make cheap unregulated and untested safety-related parts that would be marketed – like what we all see today when we buy contaminated frozen shrimp from Vietnamese fish farms.
All the OEMs would have to start charging dealers fair and stand-alone prices for all the stuff that Bill 102 ask for – they’d have to do this because there is simply too much cost involved to give it away for free or at current costs and terms.
OEMs could reduce parts costs to do this, but, due to matrix pricing, consumers would never see this. The dealers would need to preserve current prices to preserve fixed operations profits.
Human nature would take over in this very cyclical, mature industry. These higher costs would cause many dealers not to buy the training, technician, certification, tools, hotline support, technical service bulletins, diagnostic support … the list goes on.
Because of the costs, the independents would not buy this stuff either.
With declining sales for all this “stuff”, OEMs would reduce their investments. And, both the content and quality of this “stuff” would decline over time.
It might take 5 years, but sheer economics and system dynamics would combine to give the US market a KO punch. We’d end up with a Yugo market.

Hmmm. I Wonder If Things Are All Right With Parts Sales Trends?

noreply@blogger.com (Carlisle Company Team) — Thu, 04 Aug 2011 23:22:00 +0000

Our monthly detailed Market Watch report shows steady sales gains for the major OEMs. Accessories and collision are going gangbusters; M&R looks OK; Powertrain less so. So, in terms of OEM sales to dealers, things look good. What we said in March is dead on.

But, what about dealer sales to end-customers? This week Automotive News talked about owners spending less on service; so far in 2011 owners are spending $169 vs. $176 in 2010. A modest 4% decline. No problem; it’s just a single digit fraction. Charles Child wrote the article and leaned on J.D. Power data: he thought that the decline in spend was surprising given that the average odometer tallied to 78,000 in 2011 – about a 28% increase from the pre-recession 2008 average odometer. So, vehicles in dealer service bays seem to be older and have higher mileage. Of course.

Wow, Americans really have a tough time with simple math. 2011 is three years into the recessionary equivalent of the Dutch Elm disease – new car sales swung from 16.5 million units annually to 10 to 11 million. http://ccsparethoughts.blogspot.com/2011/03/2013-light-vehicle-parts-market.html
There are simply not as many young cars out there. The higher odometer average is more a consequence of this simple math than of the spate of aberrant behaviors that Child’s lists in his article.

So, there’s nothing to worry about? I would not go that far. The J.D. Power data seems to support our car parc and parts sales analyses from March 1st. And, the mud pies thrown at the dealers are, also, familiar.

“Automotive” represented the top complaint in state consumer protection investigations – “faulty repairs” was listed under this category. People see this and think, “dealers”. Our customers are changing and the digital revolution is generally not a friendly place for dealers. http://ccsparethoughts.blogspot.com/2011/02/oops-hey-that-internet-thing-might-be.html

After reading Child’s article several times in an effort to separate the facts from the bad analysis, I’m stuck on the startling implications of 2011’s $169 a vehicle spend for an older vehicle vs. 2010’s $176 spend for a younger vehicle. Older cars cost more to repair and maintain, and

spending should be less “deferred” the further we get away from 2009 and the more total miles traveled increases. The small decline in spending at dealers is indicative of a larger problem facing dealers and OEMs – namely, that they hemorrhage market share in older car parc to the IAM. Given current economic conditions, this will accelerate – our focus groups confirm this, and the recent AAA affordability study does, too. Childs hints at this by saying that the J.D. Power report didn’t take into account how much business is going to the independent repair shops. Again, we talked about this in March. More evidence.

Bottom line: It might be wise to prepare for tougher market conditions in 2012 and 2013. Maybe it’s time for the OEMs to watch the Godfather again. “No, no, no! No more! Not this time, Consigliary. No more meetin’s, no more discussions, no more … tricks. You give 'em one message: … it's all-out war: we go to the mattresses.”

Why Collaborate? Four Examples of Successful Industry Marketing Collaborations

noreply@blogger.com (Carlisle Company Team) — Thu, 28 Jul 2011 01:25:00 +0000

Note by David Carlisle: This past week I was in Detroit to recognize the accomplishments of a few UAW groups that had really moved the needle. During the in-between times I chatted with an NAPB steering committee member about the value of this past year’s supply chain collaboration focus day. “Huge” was the response – they are working with another OEM in collaborative cross-docking and dealer deliveries. In one region they are saving one-third of the DDS miles and millions of dollars. So, we do “get” what collaboration is all about. Other industries get it too. We need to get more of it.

There is no doubt that industry collaboration represents a substantial challenge. Different company objectives, priorities, cultures, and, of course, budgets have to be aligned behind a single effort. The larger the group, the greater the resources…and, the greater the potential for discord. When talking to companies about collaboration, the question on everyone’s mind is always “who’s in, who’s out?” Indeed, building a collaboration group is not unlike building a house of cards; if one company wavers, the whole thing can come crashing down.

Though there are certainly barriers to collaboration, particularly when it comes to public, customer-facing efforts, we can take comfort in knowing that other industries have already taken the leap…and landed safely on the ground. Four collaborative marketing efforts stand out:

1. Go RVing: The Recreational Vehicle Industry Association has engaged in collaborative marketing since 1997. Targeted print and media ads point customers to GoRVing.com, an interactive website where consumers can learn more about RV camping and travel. Go RVing has a robust social media presence, including an active Facebook page with over 61,000 fans. The $8.25 million “Phase IV” campaign, launched in 2010, promotes the affordability of RV vacations with the tagline “Go Affordably. Go RVing.”

2. got milk?: Hailed as one of the most successful ad campaigns in history, got milk? was launched in 1993 when fluid milk processors in California agreed to fund promotion efforts. The campaign was licensed nationally in 1995 for use in print ads featuring celebrities with “milk mustaches.” Now with an interactive website promoting various health benefits, the campaign is managed by the National Fluid Milk Processor Promotion Board, which has an approximate annual budget of $110 million.

3. Pork: Be Inspired: The National Pork Board’s original campaign, Pork: The Other White Meat, was also cited as one of the most memorable campaigns of all time. This campaign promoted pork as a healthy option and, according to the National Pork Board, stemmed the decline in pork sales. This year the Pork Board is launching its new $11 million Pork: Be Inspired campaign, which aims to increase sales by targeting customers who already eat pork.

4. Orbitz.com: In response to the growing popularity of travel booking sites such as Expedia.com and Travelocity.com, five airlines pooled $145 million to develop Orbitz in 2001. With its exclusive deals and appealing functionality, Orbitz quickly became one of the top three travel booking sites. After an IPO in 2003, Orbitz was acquired by Cendant Corporation for $1.25 billion in 2004.

Bottom Line: The collaborative industry marketing concept has already been tested and validated by other industries. Some of the campaigns featured above are approaching their 20th year, a testament to the results they have generated for their respective industries. We can learn from these examples to forge even more successful collaboration efforts in the service parts space.

Genuine Schmenuine, It’s All the Same, Or, At Least Your Customers Think So

noreply@blogger.com (Carlisle Company Team) — Thu, 21 Jul 2011 21:57:00 +0000

In our summer focus groups with real customers, we ask people what Genuine parts are and where they can get them. It’s actually pretty amusing. Just for auto, we have a $30-$50 billion dollar industry in the States selling stuff at a premium that pretty much nobody understands.

The Mecca of Genuine is CAT, and you can’t find much on the virtues of Genuine on their website. Most of the auto OEMs have little to nothing about Genuine on their websites, or if they do it is buried 15 clicks deep. Exclude GM from this group. GM recently switched from Mr. Goodwrench to “Certified Service” – based on our focus groups, this was a good move.

Let’s think about this. Imagine another big product category: snack foods. Sales of snack foods in the U.S. hit $64 billion in 2010. If snack foods were like auto parts, you’d go into a grocery store and 70% of the stuff in the aisle would be generic, like “A&P Snack.”Well, companies like Frito-Lay aren’t going to let that happen.

They continuously bombard all forms of media, extolling the virtues of their brands. They put their vending machines in public schools and give the schools kickbacks that pay for books and football jerseys. It’s the American Way. We all know what Fritos and Ruffles mean and why we prefer them.

But, people don’t know what Genuine parts and service mean, so, they don’t prefer them.

Bottom Line: We don’t need Genuine parts vending machines in public schools for oil filters and struts. But, it seems that we really do need to educate our customers on what Genuine – or whatever we call it – really means. Sort of like the Nutrition Facts on the backs of food packages, which help customers make informed choices. We need to help our customers understand what they’re buying.