PayLink was the finance source we chose for Safe-Guard’s D2C program, and now they have launched their own D2C program, Olive. This looks like a strong program, and I’m flattered they’ve kept many features from my blueprint. I especially like name, which is a play on “all of” coverage.
“We estimate the market size of the ‘sweet spot’ for post-OEM warranty VSC sales will continue to grow to 109 million vehicles by 2024”
This is a $260 billion market. Colonnade estimates that the “sweet spot” of vehicles less than 11 years old but past their OEM warranty is 87 million units, and growing. That’s not to mention the 40 million sold each year without a service contract, at franchise and independent dealers. I wrote about the different segments and how to value them in The Case for D2C.
Olive is positioned to address both segments, by partnering with automakers. They claim two of the global top five. I have reason to believe these are Volkswagen and Nissan, but I couldn’t find a source. Like the original, Olive uses digital marketing and online origination through a consumer facing mobile-responsive (but not mobile-first) platform.
Not one to believe in coincidence, I reckoned that maybe there is only one winning formula, and this is it. That would be bad news for APC, US Direct, Dialog Direct, Endurance, Infinite, Forever, Car Shield, Car Chex, Delta, Omega, and Concord.
If you are a data-science inclined tech strategy consultant, you might think of this as a seven-dimensional feature space
I taxonomized a bit in my first post on the topic, Direct to Consumer VSC Sales, and today we will work out a generalized framework. This means mixing apples and oranges. Many of the competitors I studied are “pure play” B2C.
Business to consumer (B2C) is everyday marketing, with branding, advertising, and SEO. Direct to consumer (D2C) means that you were marketing through a channel, and now you’re going direct. It also means that you have a channel conflict to manage. Think of an auto finance company that does both direct and indirect lending.
My research found seven features that characterize a consumer-facing VSC vendor. You can think of these as design choices for a new entrant:
- Payment plan
- Touch points
- Lead source
Contract administrator – At Safe-Guard, obviously, we were the admin, although we branded the contract for various OEM clients. Endurance administers their own contract, and Forever Car has an exclusive partner. Most B2C vendors offer multiple contracts, with a variety of coverage choices. Tec Assured works for the dealer, offering whichever contract is sold in the dealership.
Payment plan – No one pays cash for a service contract. APC has its own finance arm, and Dialog Direct is part of Budco. The challenge here is the credit-card security (PCI) standards. See My Shift in the Call Center. Admins recognize the need for a subscription-based VSC but none has yet cracked the code (maybe JM&A). Bundling the contract with a payment plan achieves the same effect.
Touch points – In the earlier post, I described three points in the lifecycle which a vendor could target. This dovetails with the lead source, below. If the vendor is working with an OEM or a dealer, they can focus on new customers who didn’t buy in the dealership. They also have access to service dates. The pure B2C vendors generally aim for the warranty’s end, or they don’t choose a touchpoint at all.
Lead source – If the vendor is working with an OEM or a dealer (or any affinity group) then that’s a source of leads. This may also qualify as a “relationship” for spam-law purposes. Then, there are the usual sources, like vehicle registration lists. This brings us to marketing.
Marketing – The pure B2C vendors use pure pull marketing, developing a brand through SEO, social, and advertising. Who could forget the Car Shield ads featuring Ice-T? Old-school telemarketing and direct mail are still in use – love those postcards! As in the earlier post, my favorite approach is digital marketing, from a lead list, with call-center backup, driven by a CRM like Salesforce or Nutshell.
Branding – Branding is complicated in this space. The pure B2C vendors must develop an online brand, even though they sell multiple admins’ contracts. On the other hand, the affinity vendors may develop the client’s brand, or they may create a separate brand as a way of mitigating channel conflict.
Eligibility – Depending on the touch point, the easiest way to deal with pre-existing conditions is to sell while there’s still OEM warranty remaining, or enforce a thirty-day waiting period. Servicecontract.com uses an inspection at Pep Boys, and there are also mobile inspection services. Dealers using Tec Assured, obviously, have their own inspection capability.
Let’s demonstrate the framework with some worked examples:If you are a data-science inclined tech strategy consultant, you might think of this as a “feature space,” with each of the competitors staking out their territory on a seven-dimensional Go board. You might also want to boil it down to three dimensions so your client can understand the diagram.
In the earlier post, I cited two broad categories: those that work with the dealer as a partner and lead source, and those that are pure B2C consumer-facing. Here, I have shown a little more of the complexity. Affinity marketing doesn’t stop with dealers, and some D2C vendors are hybrids.
If you’re a new entrant, this framework can help you structure your go-to market strategy. If you’re an incumbent, you can play seven-D Go and outflank the competition.