Tag: vAuto

Cox Automotive Double Play

It is time to break out your game board once again and play “link the subsidiaries.”  I heard this one recently from a Cox person at a conference.  I don’t know if they have it in production yet, but it sure sounds good.

If you authorize vAuto to source new inventory as it sees fit, then it can connect to Manheim and automatically place the orders.  As soon as the gavel goes down, Dealer.com can pick up images and data from Manheim and immediately begin merchandising the vehicle.  Cox also owns the logistics company that hauls the vehicle, so they can report when it will arrive on the lot.

So, you could conceivably have a customer walk in to buy a vehicle that is arriving today, with the entire sourcing cycle untouched by human hands.  In fact, this sounds a little like what I described in Cox Automotive Home Game.  No mention (yet) of the COXML message format.

Update:  Details here from Mark O’Neil.  The chain goes: vAuto, Stockwave, Manheim, NextGear, and then Dealer.com.

Raising the Bar

Armchair strategists are feeling vindicated now that AutoNation CEO Mike Jackson has abandoned his “asinine” plan to ground all vehicles under recall.  I see the same argument whenever anyone tries to change dealer operations.  They estimate the reduction in profits and write about that, as if that were the end of the argument.  It’s not.  That’s not how competition works.

If you talk about disclosing product prices online, you will hear that F&I gross is now $1,500 and who wants to screw that up?  Same story with TrueCar and their diabolical plan to disclose transaction prices.  You even hear this complaint about vAuto and the velocity method, which sounds to me like the most logical thing ever.

My back-of-envelope calculation says that AutoNation carrying an additional 10,000 units of inventory, at maybe 2%, would cost them roughly $5 million per year.  That’s 0.02% of sales.  For comparison, the related “Drive Safe” ad campaign was $10 million.

AutoNation, with investment-grade credit, enjoys a lower carrying cost than its private dealer competitors.  Selling diverse brands, they are less exposed to a recall by any one manufacturer.  They can also exploit their scale to mitigate the cost of such a policy, not to mention the PR benefits.

If federal regulators had followed Jackson’s lead, this would have raised the bar for all dealers.  Two senators, now disappointed, were lined up to make that happen.  Jackson’s policy, a minor challenge for AutoNation, might have proved fatal for smaller dealers.  That’s how competition works.

It is a mistake to look at process change only in terms of the costs.  Athletes training hard for a competition don’t think about how much it hurts.  They think about how much it’s going to hurt the other guy.

Update:  Motley Fool estimates the cost to AutoNation at $0.06 of EPS, a little higher than my estimate (and Jackson’s) due to the Takata debacle.

Owner Loyalty in the Service Department

I was asked recently to explore the service retention space.  This is a little outside my F&I comfort zone, but everyone knows why service retention is important.  Parts and service make up 40% of a typical dealer’s gross profits.  And, there is actually some overlap with F&I.  Consider, for example, a service contract with “zero deductible at original dealer.”

Here, I present my impressions of the space in workflow terms, plus some thoughts on the features I found technically interesting.  The workflow has a natural break between the onsite procedures of the service department, and marketing procedures which may be a different department (or outsourced).

The space is dominated by two recent mergers: AutoPoint, which acquired DME about a year ago, and Dealer Track’s Service Pro offering combined with Xtime.  See Cox Strategy Redux.  There are some pure play marketing firms in the space, but these two vendors cover the full cycle.  They are able to exploit not only workflow synergies but technical ones.

For example, you want your telematics to feed information to both the shop and the invitation process, and you want your intake procedures to include information from the accepted invitations.  Also, if the vendor has analytics that can drive a marketing program, maybe they can optimize shop loading as well.

If you are looking at a full-cycle vendor, then the distinction I am making about workflow may seem arbitrary.  Here are features and functions commonly associated with software support for the service department:

  • Greeting boards and RFID tracking
  • Mobile greeting/CRM tools with write-up capability
  • Service menu with “loyalty products” as well as shop services
  • Scheduling and shop loading
  • Status tracking with text alerts for customers and technicians

Pure marketing, on the other hand, brings in additional vendors and different offerings.  In addition to the usual mailers and campaigns, these might include a box of cookies, owner loyalty “membership” programs, and prepaid maintenance.

If you’re in F&I, you may have sold the Ultra Care prepaid maintenance product.  The provider of Ultra Care is not a normal warranty company, however.  Performance Loyalty Group (PLG) offers this product as a service retention play.  Here are features and functions on the marketing side:

  • Multichannel marketing campaigns including call center support
  • Analytics to plan and evaluate the campaigns
  • Telematics interface
  • Geo-fencing and mobile apps

The service invitation process is well established, and now understood to include all media from cookies to WhatsApp.  What is interesting is the use of analytics to make best use of the media.  Text messages may be cheap compared to mailers, but there is a cost in terms of the customer’s attention.  AutoPoint has an advantage here, because they do original research on aggregated data.  Analytics is only as good as the data you put in.

Strategically, telematics is not only a powerful tool but a barrier to new entrants.  It reminds me of how the big DMS vendors once had a lock on OEM dealer communication systems.  For updates on the “battle for telematics data” follow Bob Chabot.

The holy grail of owner loyalty marketing is having the customer run your app on his smartphone.  This may even compensate for not having telematics data.  You can push invitations to it, and then manage service visits from scheduling through payment, along with geo-fencing and notifications.

Owner loyalty, of course, is not confined to the service department.  An app can be the touchpoint for new and used vehicle marketing as well.  Here, I am thinking specifically of the “velocity” method, in which the dealer is actively seeking vehicles to remarket.  For a list of popular app functions, look at AutoPoint or My Own Auto.

Trade Valuation and Online F&I

What Dale Pollak says about trade valuation is spot on, and it also applies to upfront pricing.  Dale says that having an efficient process is worth more than wringing every last dollar out of every car.  Brian Benstock says the same thing about his new-car business, “making less per transaction, but doing more transactions.”

Readers of this blog already know my thoughts on upfront pricing.  Trade valuation is another objection to online F&I.  How can the customer desk his own deal if he doesn’t know what his trade is worth?  Well, the pieces are falling into place.  In addition to choosing a car online, the customer will soon be able to do his own F&I.  The challenge to us, as innovators, is to present software tools that encourage customer involvement.

Update:  Six years later, Brian Benstock is still at it.  Read here about his vision for a digital “store without walls.”