Tag: digital

Direct to Consumer VSC Sales

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:

  1. 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.”
  2. 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.
  3. 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.

Corona News Roundup

I spent my sequester time looking for smart people with fresh takes on the crisis.  First, in the “obvious” category: a lot of people got hurt, and dealers who could sell online got hurt a little less.  By the way, if you’re in need of some encouragement, click on over to Megadealer News and check out some of the philanthropic efforts underway.  I have been actively seeking positive news for my Twitter feed.

I like to frame this in terms of people developing new capabilities. 

Going forward, buyer behavior is going to change.  Some of this is an acceleration of existing trends.  Balaji Srinivasan writes that corona is putting an end to the Twentieth Century:

  • Offices → Remote work
  • Stadium sports → eSports
  • Movie theaters → Streaming
  • TV news → YouTube news
  • College → MOOCs
  • Public school → Internet homeschooling
  • Corporate journalism → Citizen journalism

He might have added socializing by video conference.  We had our kids staying with us, doing remote work by day, and Zoom parties in the evening.  I like to frame this in terms of people developing new capabilities.  Here is Andrew Tai talking about people in his neighborhood having groceries delivered for the first time.

I got to know Max Zanan from watching Joe St. John’s webcasts, talking about touchless car delivery and service pickup.  In a pandemic world, we are not just worried about dirt on the floormats.  Interior prophylaxis is part of the service.  Max also points out that, if you can’t sell service contracts in the dealership, you can still sell them Direct to Consumer.  This is something I know a little about, so maybe I’ll do another post just on that.

Ridership on New York’s transit system is down 90%, and experts say this could portend a permanent change in the mobility equation.  The alternative to a personal vehicle used to be public transit or, in drivable cities like Atlanta, ride hailing.  Both are good ways to get sick.

Guns, ammo, and survival gear sold out rapidly, as if everyone is suddenly a “prepper.”  I imagine these people will want to have their own vehicle, with four-wheel drive.  I can relate, because I lived in South Florida for many years.  You don’t want to be waiting on Uber when there’s a hurricane bearing down.

My last few findings are from the world of computer networking.  Infrastructure becomes a challenge when the dealership shifts to online work, notably network security.  Virus scanning and security procedures may not be up to speed when people are working from home.  Also, not all dealer software is web-based, so VPN access becomes a requirement.

Be safe out there.

Digitally Disrupting Dealer Systems

I hesitated to use the D word here.  So much of digital is normal, healthy evolution, that saying “disruption” is like crying wolf.  So, I will digress briefly into that discussion before presenting my thesis, which is: traditional dealer-system providers are about to be whipsawed bigly by digital retail.

According to Gartner, digital disruption is “an effect that changes the fundamental expectations and behaviors … through digital capabilities.”  This idea of changing expectations is echoed by Aaron Levie, to the effect that businesses “evolve based on assumptions that eventually become outdated.”

If your UI even vaguely resembles an airline cockpit, you’re doing it wrong – John Gruber

Another common theme in studies of digital disruption is that people will come from outside the industry, bringing new attitudes and techniques that incumbents can’t match – something I like to call “advanced alien technology.”

Modal’s Aaron Krane came from online sports betting, and famously wondered why there is no “buy now” button on the Mercedes-Benz web site.  Andy Moss of Roadster came from online fashion retail.  I think I am on solid ground arguing that DR pioneers bring something fundamentally different.

In fact, I can identify the baseline assumption which is now outdated.  In olden times, the user of auto retail software was an auto retail employee.  These were experts, executing an esoteric process, and they could be trained to deal with crappy user experience and disjointed workflow.

Today’s user is, of course, the car buyer.  A few years ago, I wrote that each of the six canonical tasks in DR would need a “buddy” on the dealer side, with which to share information.  For example, the website may disclose prices for protection products, and it would be nice to pull retail markup from the menu system.

It’s hard to believe how quickly DR has evolved.  Roadster had just launched Express Storefront when I wrote that article, and already the buddy system is dead.  If a car buyer can desk her own deal, at home in her pajamas, why use a different system in the dealership?

The advantages to using the same system in store and at home include trust, transparency, cost savings, and reduced demands on the salespeople.  The new generation of in-store DR means that salespeople can be experts in customer service (and cars) instead of complicated software.

This marks the culmination of important trends in auto retail, from “one experience” at Sonic to “single point of contact” at Schomp, and it should serve as a wakeup call to old-school software vendors. Digital retail will drive a gradual shift in dealer process, but a rapid one in software.

Digital Retail Taxonomy

The tech buzz at NADA this year was Digital Retail.  Tagrail has a new partnership, with dealer site provider Fox, and Moto showcased some of their OEM projects.  Roadster has an aggregation marketplace, which I’ll get to in a minute, and Modal (Drive) was conspicuously absent.  I hope they’re okay.

All dealer site providers are now claiming the hip acronym DR, including some that are way off the mark.  This week I want to cut through the clutter and taxonomize a bit.  We’ll see how well my predictions from five years ago have held up.

Dealers will migrate onto the most capable of the platform sites, and … the winning platforms will not be mere lead providers.

I am going to skip the consolidators and the used-car sites, to focus on DR solutions for franchised new car dealers.  That was the context for the earlier article (and the pull quote).  The grid above divides the DR space into four segments: True DR, Pivoters, TPC, and Marketplaces.

True Digital Retail

A true DR solution must handle the six canonical functions, do the paperwork online, and save the deal (not a lead) for use in the dealership.  True, not many customers will do the full process online, but you have to offer the capability.  Qualifying questions here are along the lines of “can you sell a service contract and book it online with the administrator?”

I don’t want to be pilloried for omitting someone, but my short list (when asked) goes: Roadster, Moto, Modal, Tagrail, AutoFi, and CarNow.  I can find CarNow dealers pretty easily online, paired with a variety of site providers.  Here in Atlanta, Ed Voyles is an example.

Pivoters

Anybody with a foothold in the dealer’s website is using it to pivot into DR.  The first group of pivoters are what I call “finance first” sites.  AutoGravity, DriveTime, and AutoFi are sites customers use to check their buying power before going into the dealership.  Based on intel from Ricart Ford, I would say that AutoFi has successfully pivoted into the DR segment.

Gubagoo is using their foothold in chat to pivot as “conversational commerce.”  SpinCar is adding protection products to their VDP real estate, which is right where they belong.  Even popular F&I menu Darwin is moving online with Darwin Direct.

Third Party Classifieds

My model for a marketplace is Autotrader plus its DR feature, Accelerate.  However, the other incumbents have not followed suit.  In fact, Cars.com “does not sell vehicles directly and is never a party to any transaction between buyers and sellers.”  This space is inhabited only by brave new entrants like Joydrive, GoGoCar, and Deliver My Ride.

As I wrote here, this model has plenty of challenges, like finding UX and services that will appeal to all dealers – not to mention the customers.  Dealers may prefer a simple clickthrough to their own DR solution.  This is the backdrop for Roadster’s Express Marketplace.

Roadster Marketplace

Roadster’s marketplace operates just like a TPC site.  It has the familiar VSP/VDP with faceted search, but then it segues into a full digital storefront.  The reference site I looked at, Cochran group in suburban Pittsburgh, lists 3,500 new vehicles in 18 makes, from 26 rooftops – with transparent pricing!

My first reaction, I have to say, was “Holy crap, they’ve actually done it!”  They have made their own private Autotrader.  Of course, the same market area lists ten times as many new cars on Autotrader but – funny thing – they all use Accelerate.  Competition is wonderful that way.

The arrows on my grid suggest some strategic directions:

  • Single-function solutions will pivot to become storefronts. AutoFi is an example.
  • Third-party sites will add DR functionality. Accelerate is an example.
  • As storefronts grow to serve dealer groups, they will tend toward marketplaces.

I guess the only remaining frontier would be for two unaffiliated groups to cooperate on a single platform, as I wrote in Toward a Digital Auto Marketplace, maybe in contiguous nonoverlapping markets.  The eCommerce term is “coopetition.”  Or, maybe Accelerate will gain some traction.

Moto Commerce Digital Retail

Moto Insight has uploaded a complete demo of their digital storefront, Moto Commerce.  This shows confidence that they’re not worried about being copied, or being anatomized by some smart-aleck software consultant.  Here’s how Moto handles the six key functions:

  • Choose a vehicle – Including accessories.  I write a lot about the importance of protection products, but accessories are important too, especially for certain brands like Honda and Subaru.  Everything is shown at MSRP but, because the site is customized for each dealer, I imagine there is some flexibility.
  • Price the vehicle – Including incentives.  No idea whose data service they’re using for this.  I usually recommend Market Scan, but it is possible to roll your own.  Rodo recently developed their own incentives engine.  I tried to coach one of my clients on this, but they wouldn’t do it.
  • Price protection products – Including digital content.  Not clear how finance term is linked to protection term.  Customer could choose, say, 36 months of GAP on a 72-month deal.
  • Value the trade – They use Trade Pending, which I mentioned here, but they also offer a condition quiz with the ability to upload photos.  This is very strong because it allows the Used Car manager to bid on the vehicle during the online experience.
  • Structure the deal – The calculator is always running and continuously updates the monthly payment.  This is one approach to the nonlinear workflow problem, but it also means the customer is looking at an inaccurate payment throughout most of the shopping tasks.
  • Organize financing – Here, again, it’s hard to have confidence in the payment until we’ve processed a credit app.  The demo shows the customer choosing term and rate, as if his credit tier is already known.  Moto pushes to Route One and Dealertrack, but it should also pull.

Overall, Moto is a solid online shopping experience.  It does not literally sell the car, in the sense of doing the paperwork, but it does produce a complete, deliverable deal.  Next, the customer can reserve the vehicle, save the deal, and make an appointment.

The in-store version of Moto uses the same pages, making a seamless “omnichannel” experience for the customer.  This means it’s a potential replacement for your desking and menu systems.  Customers can also begin the process in-store, and take the deal home.

I’ll close with Andrew’s hook from the video.  Imagine your dealership offers this experience, and the other guy has only a lead form.  Which do you think the customer would rather work with?

Digital Transformation Playbook

I read a good book over Christmas break, The Digital Transformation Playbook, by David Rogers.  This is a good book because it has both theory and practice, plenty of research and real-life examples, and practical “how to” guides.

Just when you’re thinking, “oh yeah, when has that ever happened?” Rogers comes up with an example.  Many of the these include commentary from the people who worked on them.  It’s clear that the professor gets out of his classroom for a fair amount of consulting.

Digital transformation is not about technology – it is about strategy and new ways of thinking.

Most books like this focus on digital native startups.  That’s the sexy stuff and, in fact, where I have most of my experience.  I chose this book for its focus on digital transformation, in existing companies and hidebound industries (like auto retail).

The book is organized around five strategic themes: customer networks, platform marketing, upgrading your value proposition, data as an asset, and innovation through experimentation.

I did grow a little impatient with Rogers’ incessant enumerating: five core behaviors, four value templates, three variables, two trajectories (and a partridge in a pear tree) but I appreciated the effort to boil everything down to a foolproof recipe.  There are a number of these:

  • Customer Network Strategy Generator
  • Platform Business Model Map
  • Value Train Analysis
  • Data Value Generator
  • Experimental Design Templates
  • Value Proposition Roadmap
  • Disruptive Business Model Map
  • Disruptive Response Planner
  • Digital Transformation Self-Assessment

I was even inspired to start making value train diagrams of our business, and platform model maps:

On the theory side, Rogers reexamines familiar models from people like Drucker and Levitt.  He shows, for instance, that Christensen’s theory of “digital disruption” is a special case, and broadens it.

By the way, this discussion of digital disruption is one of the most lucid (hype-free) that I have read.  As usual, there is a checklist: analyze three features and choose one of six strategies.  If that doesn’t work then, yes, you’re disrupted.  Time to update your resume.

I read all the time, though I don’t often write book reviews (here is the last one) so Rogers’ fifteen-page bibliography was an extra treat.  That should keep my Kindle stoked for a while.

Wanted: eCommerce Product Manager

Things are going well here at Safe-Guard, and I am looking to hire another eCommerce Product Manager.  Posting is here.  We need someone who can not only manage a shopping site but, as we are in the midst of a digital transformation, also establish the required support and fulfillment processes.

The eCommerce department manages the development and support of these properties, whether they are standalone web sites, dealer-site storefronts, or web services … 

The successful candidate will have solid product management experience, and maybe some digital marketing.  Agile development experience a plus.  Self-starter.  Relocation.   Salary commensurate with experience.