Direct to consumer (D2C) service contract sales can be divided into two broad categories: with and without dealer consent. This, along with the lifecycle “touchpoint,” determines the choice of tactics. Today’s post will discuss the state of the art for dealer-driven D2C selling.
Direct-to-consumer marketers price VSCs to absorb high cancellation rates and can generate margins in excess of 25% – Gina Cocking
Outfits like Car Shield market directly to consumers using their own advertising and their own lead lists. These are generally brokers, selling service contracts from their chosen administrators, outside the dealer process. Car Chex does this, and also does marketing for dealers. Endurance, whose ads you may have seen on television, is actually an administrator. On the dealer side, obviously, D2C marketers will offer whatever service contract is sold in the dealership. The leaders here are APC and Dialog Direct.
The traditional tactics are telemarketing and direct mail, but there are some exciting new entrants. The image above is from Tec Assured. Their 2-8-28 contact program uses a combination of digital and phone messages directing the customer to a branded website. The site handles credit cards and premium finance. Instead of a call center, Tec Assured leverages the dealer’s BDC.
So, the ideal approach would be some Hegelian synthesis of the old and the new. First, though, let’s talk about touchpoints:
- Second chance – this is around thirty days after the vehicle purchase, and the talk track is something like, “hope you’re enjoying the new car, and you forgot to buy a service contract.”
- Warranty expiration – this is a few months before the factory warranty expires. A postcard is traditional. Directing the customer to your website, via digital marketing, is more modern.
- Service visit – dealers have the inside track here, because they can follow up a service visit with something like, “lucky thing that repair was covered.”
Thinking about these touchpoints, you can see the power of adding digital tactics to traditional D2C marketing. You may also have noticed the eligibility issue and the financing issue, because the sale is happening outside the dealership and after vehicle purchase.
Servicecontract.com offers monthly subscription pricing, which may begin during the factory warranty period. This means the customer is paying in advance for coverage that hasn’t started yet. On the other hand, if the factory warranty is expired, then they require an inspection at Pep Boys or a 30-day waiting period.
Financing is key. No one is going to buy a $2,000 service contract on their credit card. This is why Dialog Direct is affiliated with Budco, a well-known premium finance provider. APC also has a financing arm. Servicecontract.com is essentially an innovative form of premium finance.
In my experience, the hardest piece to build is the call center and support infrastructure. Whoever handles the finance contract has to support accounting, cancellations, and customer service. Even if you’re not doing telemarketing, you still need a call center.
Digital marketing means using email, text, social, and retargeting to direct the customer to your website, following a contact program like Tec Assured. As a Salesforce trailblazer, I would call this a “customer journey.” The journey should be driven by some analytics, and culminate in the customer clicking a Personalized URL that links to the website. The journey can also include phone contact and direct mail.
The website can change its skin to match the dealer’s branding, based on the PURL. When I was at MenuVantage, we supported a dozen different brands, like GMAC’s IntelliMenu, all from a single code base. The site UX will include the usual shopping and checkout features, along with sales tools like testimonials and TCO data – not unlike an F&I menu system.
Also like a menu system, the website must be able to originate contracts via API for whatever product provider the dealer chooses. See my various posts on this topic, as here and here.
This is classic digital transformation. The challengers bring new tactics, and these tactics will certainly become the norm. The incumbents are well entrenched, though, and tactics can be copied.