Autosignal | Wednesday, November 25, 2009
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Repair Shops Going After Dealership Business It's a "new day" for the auto-service industry, with 82% of surveyed car owners saying they intend to keep their vehicles longer, says Lonnie Miller, R.L. Polk & Co.'s director-industry analysis. As owners of aging vehicles, 58% of those people say they'll spend more on parts, repairs and maintenance. But it might be less money than the industry hopes. Of 90% who say they follow a manufacturer-recommended maintenance schedule, "in fact, only 41% do," Miller says. Still, auto dealers are looking to their back-end operations to compensate for slower vehicle sales. But dealers face formidable competition from independent repair shops, says Kevin Root, vice president-product strategy for DriverSide, an online provider of consumer information on car maintenance. "The dealership service base is under attack from independent shops," he says. And consumer perceptions don't favor dealers. "It's an uphill battle for them." Although typically charging more than independents for service, dealers argue that the quality of their work is better. But Root cites a recent poll where people were asked, if prices were equal, which of the three -- dealerships, independent local shops or chain repair centers -- provides the highest quality of service? "We thought most respondents would land at dealerships, but only 40% did, while 46% went with local shops," Root says. "That was mindboggling to us." Likewise, he was stunned when 66% of respondents said dealerships were more likely to overcharge for service work compared with 18% for repair centers and 16% for local shops. "We were blown away by the difference in the percentages," Root says. In another study, DriverSide mystery shopped the three business segments to determine how their repair estimates compared with actual bills. "All three tended to over-quote," Root says. "Of 230 places called, 71% over-quoted, 25% under-quoted and 4% accurately quoted." Number-cruncher Polk cites data indicating high-cost service bills reduce overall customer loyalty. That can hurt more than just a dealership's service department. "It decreases the propensity of someone going back to the dealership to buy another vehicle," Miller says. "Every additional $250 on a bill reduces customer loyalty by 0.15%." By a two-to-one margin, local shops beat out dealers in having better ongoing relationships with customers, according to DriverSide polling. Dealers can change that by marketing themselves better using modern means. "Dear Customer" mailers aren't enough, Root says. "Come on, how do you build a relationship from that?" He says customer-relationship management systems let dealers enhance their relevancy, which improves relationships. Such technology allows dealerships to email personalized service reminders addressing customers by name and including photos of their vehicles. In addition to saying, "Hi Joe, Our records indicate your Dodge Charger is due for 50,000-mile service," the emails can detail what the proposed service will consist of. "And how about a video?" Root says. "Maybe a video of a dealership mechanic explaining what to do if your car breaks down." He advises dealers to create an online "car page" with articles and videos on vehicle maintenance, including an interactive "Ask the mechanic" function. "Customers are not picking up the phone book and looking for service places," Root says. "They are going online." Tech-centric marketers can match dealership customer records to a data base showing which customers are on what social networking websites. "It is smart marketing and advanced profiling," Root says. "It is marketing to folks who can touch others in their network. Social media rewards transparency in service. That is where marketing is going today. Dealers need to think beyond service reminders." It can get complicated, but systems like PolkConnect help, he says. "And Cobalt and DealerSocket have good products. Look for systems that are as automated as it can get." Such stepped-up marketing has increased service business 27% for dealerships using it, according to DriverSide. That's at a time when independent shops are trying to grab dealership service business. When General Motors Co. and Chrysler Group LCC terminated about 2,000 dealer franchises this year, Polk got calls from marketers representing non-dealership shops and centers. "They wanted to know if they could get the customer data bases for the closed dealerships," Miller says. They didn't get it, but it was "a pretty aggressive attempt to go after dealership business," he says. Root suggests dealers counterattack against independent shops, particularly on the marketing front. "Why not turn it around and go after their business?" (Source: WardsAuto.com, 11/24/09) |
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Reliability as Value Isn't What It Used to Be Auto industry observers have predicted for years that as automakers get closer and closer to each other in terms of vehicle quality and durability, attributes like looks, vehicle performance, features and gadgets will play a bigger role in consumers' decisions about brands and vehicles. San Diego consultancy Strategic Vision's latest study suggests that moment may have arrived. The firm says that for the first time in the 15-year history of its "True Value Index" (TVI), the top Japanese automaker, Toyota, has no vehicles leading any segment. The study is based on surveys of more than 48,000 consumers who bought 2009 models from September 2008 to March 2009. It gauges their impressions of the car or truck 90 to 120 days after purchase, covering some 150 attributes in areas like perceived quality, purchase reasons, demographics, styling, economics of the vehicle, warranty and standard features. Alexander Edwards, president of Strategic Vision's automotive division, told Marketing Daily that while Toyota still leads in perceived quality, the gap is small and the news isn't good. "Toyota clearly owns expected durability and reliability, and this has given them a significant advantage over the 15 years. But now that everyone else is doing very well when it comes to perceived quality, that advantage is minor at best," he said. "And the customers now are saying they know the Toyota vehicle is excellent here and there, but it's not a product that is giving me features I want at a price I want. And because the emotion in loving your Toyota isn't as strong as some other vehicles, since product delight isn't there, it has slipped to third or fourth place." The firm says a "revolution in consumer purchase habits" is also turning the tables at the luxury end of the market, where a mass-market brand -- Hyundai, once hobbled by a poor rep -- is competing against the likes of BMW and Infiniti. The firm says the Hyundai Genesis is the near-luxury car segment leader, as the car has brought luxury buyers to Hyundai because Genesis buyers have household incomes very close to BMW 3-Series and Mercedes C-Class buyers. "We see many Lexus, Infiniti, Cadillac and BMW owners trading in their vehicles for the Genesis. Hyundai competes by meeting a customer's security needs with perceived quality and successful programs such as 'Hyundai Assurance,' combining price, warranty and value a customer can love." Ford Motor Co. came out as the most improved brand and corporation in the TVI study. The Focus Coupe, Mustang Convertible, Flex, Expedition and F-250 lead their respective vehicle segments. Volkswagen of America lead with the CC Sedan, which posted the highest TVI score of any model, along with the Tiguan, Jetta and Audi Q7. American Honda's Odyssey, Ridgeline and Accord coupe were segment leaders, in addition to the Insight hybrid, which was the small car winner. "Value isn't a cheap car," says Edwards. "It means the value of the experience you get for every dollar you spend. Toyota, because of its quality, had really provided a foundation for that. But now buyers of other vehicles are more delighted with their vehicle and styling because they believe the quality is just as good." (Source: Marketing Daily, 11/23/09) |
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Used-Car Prices Fall in October; It's Normal A drop in retail used-vehicle sales contributed to a decline in prices in October when compared with the previous month, but the adjustment was normal and expected, analysts say. Used-vehicle prices last month declined 3 percent compared with September to $9,447, according to ADESA Analytical Services. But last month's average was still about 10 percent higher than the October 2008 average. Some of the price softness in October resulted from weaker retail demand, said Tom Kontos, vice president of customer strategies and analytics at ADESA. Citing data from CNW Marketing Research, he said used-vehicle sales among franchised dealers plunged 31 percent last month compared with October 2008, to 590,926 units. Kontos said sales also were hurt by seasonal patterns and consumers taking a breather from used-vehicle purchases generated by the cash-for-clunkers new-vehicle program. Used-vehicle sales by independent dealers were off 7 percent to 671,829 units in October compared with October 2008, according to CNW. But Kontos said he expects used-vehicle sales to recover. "In good times consumers buy lots of used cars, and in bad times used-car sales don't drop as badly as new cars," he said. "Consumer confidence figures show consumers are still antsy about whether this is a real recovery or not. If they have to replace a vehicle and are worried about spending money on a new car, they may opt for a used car." Tom Webb, Manheim's chief economist, said new-car incentives in October were relatively low, and new 2009 model vehicles were in short supply. But he said the industry still saw "aggressive pricing" of 2009s to clear them out. "That put some downward pressure on late-model used-car prices," he said. Although used-vehicle prices were down in October compared with September, seasonally adjusted prices in the first half of November showed a slight increase over last month, Webb said. Juan Flores, director of vehicle valuation at Kelley Blue Book, said used-vehicle prices, especially among trucks, had increased so much this year that an adjustment was inevitable. "Those prices didn't make sense," Flores said. Ricky Beggs, managing editor of Black Book, said the used-vehicle market is typically soft this time of year. "It's nothing to be alarmed about," Beggs said. "There's an old saying in the industry: When the leaves fall, prices fall. The activity is just not as strong." (Source: Automotive News, 11/23/09) |
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