Tuesday, 12 March 2013

New Media, New Marketing

Jack Poor, Guest Post
Which media most affects consumer behavior in the Automobile purchase cycle?
With the explosion of new and different media options today, it is timely to consider which media platforms consumers are crediting with influencing their automotive buying patterns. In conjunction with The Futures Company (formerly the famed Yankelovich Research company), the TVB’s proprietary consumer research analyzes media performance not as a consumable (what’s platform X’s share of total media usage?) but rather as an impacter – In other words, how do different media affect consumers as they move through the purchase process?
With this approach, we can rank media on the basis of its marketing power (the consumer “Purchase Funnel”) as opposed to advertising reach and recall metrics.
The research study consisted of a 2,500 person survey covering 13 different media platforms from TV to Social Media and evaluated 10 different categories ranging from Auto to Supermarkets to Fast Food to Banks.
What did we find out?
The good news: Media advertising works. 92% of consumers who are in the market for a product or service say that advertising was a prime driver of their awareness of the offering. The not so good news: Media advertising’s impact diminishes as the consumer travels from the Awareness phase down to the Consideration and Preference phases of the Purchase Funnel. By the time they reached the actual Purchase point, only 66% of respondents claimed that advertising had a major impact. Automotive advertising behaves better than the 10 category average for all media impact, but Television is well over average in impact in every phase of the Automotive Purchase Funnel. At the top of the Purchase Funnel, the Awareness phase, TV ads were cited as a primary influencer by 70% of auto consumers vs. 64% for the 10 category average. And toward the bottom of the Purchase Funnel, Driving people to visit the store or website, TV was credited by 52% of the auto prospects vs. only 43% in all categories.
What’s changed?
While TV remains dominant, the Internet has surpassed newspapers as the #2 primary auto purchase influencer. Interestingly, the Internet does not diminish in importance as the consumer moves down the funnel towards purchase. In fact, Television and the Internet work in tandem in the auto category. 17% of consumers said that TV ads drove them online to learn more, 15% said that the TV ads got them talking with others about the products and 11% actually visited the showroom due to TV ads. When prospects were exposed to TV ads 4 plus times, the percent that went online rose to 23%, the highest active response. Other evidence of Internet advertising influence on Auto purchases is consumers citing online display and video, online search and blog and review sites as being auto influencers.
The Take-Away:
TV ads remain the primary driver in the auto purchase decision making process. They tend to drive online exploration and research as well as word-of-mouth and store visits. But, when it comes to making an actual car purchase, 40% of prospects say that it’s not media (which helped get them to the dealership); it’s what happens on the showroom floor that closes the sale!
...Jack Poor, VP Marketing Insights, TVB...
February 20, 2013
TVB is the not-for-profit trade association of the Broadcast Television Industry

Saturday, 9 March 2013

Sparks from Orlando

David Ruggles - Ward's Dealer Business
One of the more interesting occurrences taking place in Orlando during NADA convention week actually happened at the American Financial Services Association (AFSA) conference held at the Peabody Hotel earlier in the week. The conference preceded the J.D. Power conference and the NADA convention. One of the most anticipated presentations was to be given by industry forward thinker and innovator, Dale Pollak. Many of the attendees were curious to see what Dale would have to say to a room full of bankers.
Pollak made the case that technology could better determine retail values by sampling actual prices posted on dealer pre-owned inventory in each market. It then followed, based on Pollak’s reasoning, that wholesale and loan values could then be established by calculating backwards from the market driven retail price. He then asked the room full of bankers, “Wouldn’t it make more sense to lend based on actual market numbers rather than the theoretical numbers provided by the “guide books?”
Of course, this new concept assailed the current and historical practice of lenders and dealers using the guidebook numbers provided by Kelly Blue Book, Black Book, and NADA, which use much different methods from what Pollak proposed to establish their values. Adding to the intrigue is the fact that Pollak’s company, vAuto, is under the same Cox Enterprises/AutoTrader corporate ownership as Kelly Blue Book and Manheim Auctions. Manheim Market Report (MMR) has become a commonly used appraisal tool for dealers these days.
Mike Stanton, VP and COO of NADA Used Car Guide took the microphone when the floor was opened up for Q&A. Clearly irritated at having his business assailed in a public place by a partner of NADA University, Stanton made the assertion that Pollak had misrepresented the methodology used on the sixth floor of NADA headquarters, where the NADA guide book staff crunches the numbers for the iconic values guide. There was an uncomfortable hush in the room as the discussion unfolded.
In a later conversation, Stanton itemized a number of potential problems with Pollak’s new concept, including the fact that all possible vehicles are not necessarily available for sale in a given market at any single point in time to provide consistent retail pricing. In other words, single markets do not always provide enough units of each example to be statistically relevant. Then there is the issue of price sampling inventory with inconsistent mileage. In addition, lenders need a certain “smoothing” in the values they depend on to make lending decisions as value volatility can be unnerving to lenders. To be sure, NADA in particular, has improved its methodology in recent years after dealer margins were pinched when the relationship between actual wholesale values and retail values were not accurately reflected when the used vehicle shortage caused auction prices to skyrocket in 2009.
With retrospect, it is easy to imagine that the participants in the discussion would have preferred that it had unfolded in a different forum. But the genie is now out of the bottle. It will be interesting to see if this discussion has legs. There is a lot at stake.

Rate Markup, the CFPB, and Common Sense

David Ruggles, first published in Auto Finance News
Auto industry finance experts agree that the Consumer Financial Protection Bureau will eventually turn its focus to rate markup on dealer arranged finance contracts. Consumer advocates bring up anecdotes of what they refer to as “rate gouging” as proof regulation is needed. David Robertson, President of the Association of Finance and Insurance Professionals, points out, “There is no empirical evidence that consumers who use auto dealer arranged financing pay higher interest rates than other auto loan borrowers.” But Dodd Frank has already imposed similar legislation on the mortgage business capping rate markup and broker compensation.
The threat that the CFPB may take away the opportunity for dealers to make “rate spread” is an emotional issue, if only for the sake of principle. According to Terry O’Loughlin, director of compliance for Reynolds and Reynolds Co. (www.reyrey.com), “The CFPB would more effectively advance consumer interests if it identified serious problems to police. It is attempting to provide a solution to a problem which doesn’t exist. There is nothing preventing consumers from shopping rate. In fact, it has never been easier for them. Often, dealers are able to gain financing for consumers they couldn’t arrange for on their own.”
Despite the fact that auto industry is dug in against regulation of rate markup, there is another way of looking at the issue. Highly respected Finance and Insurance trainer, George Angus, training director for Team One Research and Training, provides perspective. According to George, and others who agree with him, myself included, making excessive rate mark-up is counterproductive, perhaps even “stupid.” In fact, George used that exact word to describe the consequences of excessive rate markup to an enthralled group at last summer’s F&I conference held in Las Vegas. It is dealer compensation plans for their F&I producers that are the problem.
Why is excessive rate markup “stupid?” Increasingly there are companies like Rate Genius, who contact borrowers with an offer to pay off their “unnecessarily high interest rate” auto loan and replace it with a more “market rate” contract, thereby reducing the consumer’s monthly payment. They represent the market at work. Rate Genius, and the others, have every right to do what they do. Depending on how long after the original bank contract has been signed by the consumer at the dealership, and the dealership’s underlying agreement with their lender, the dealership may or may not receive a charge back to their interest reserve. The lender certainly takes a hit. It is quite likely that the dealership experiences a chargeback on other products sold and added on to the contract being paid off by Rate Genius and the others, and replaced with their own products.
The real damage is done to the relationship between the consumer and the dealership. What are the chances the consumer will return to the dealer for another vehicle? What are the chances the consumer will speak well of the dealer who charged them the “excessive rate” to their friends and associates?
Paying the F&I department based on income PVR (Per Vehicle Retailed) encourages charging higher than market rates that can end up in premature borrow payoffs, chargebacks, and hard feelings on the part of the dealer’s customers. Angus suggests paying F&I producers based on finance penetration and a formula based on the number of products sold per deal.
Our industry needs to tend to this issue for reasons of common sense, before the CFPB gets involved.

Thursday, 7 March 2013

JDPA Quality: Interpreting Correctly

...be it 71 or 149 defects per car, purchasers' experience is identical: 1 defect...
In terms of quality, we are fortunately decades away from 1980, when I bought my first new car. My Toyota had problems almost from day one. The paint peeled, the transmission broke, and over time other things went wrong. But at least I made it all the way home from the dealership, which was not the experience of my best friend in high school, who had purchased a Detroit 3 product. We've seen big, important improvements in average quality and less variation among brands, thanks in part to the light Dave Powers helped shed on the industry.
But in all the argument over the details of the ranking, it's easy to forget that this is about the 2nd significant digit. The real story is that today all purchasers get good quality. Be it a Lexus at 71 or a Volvo at 149 defects per car, purchasers' experience is identical: 1 (one) defect.
If you're a fleet operator, or at an OEM where warranty costs matter, then the variations in defects per 100 vehicles matter. But the advice I give when asked which brand is best: they're all equally good, choose your car for reasons other than minor differences in quality -- are the seats comforable, do you like the feel when driving, and are the aesthetics acceptable -- can you stand looking at the interior for the next 5 years?
...mike smitka...
PS: This is a followup to comments received via email and a response by Dave Sargent to my letter to the editor in Automotive News.

Sunday, 3 March 2013

Click on the logo for information on the Automotive News PACE "Supplier of the Year" Award
The Award Ceremoney will be Monday, April 15th at the Fisher Theater in Detroit, on the evening of the first day of the Society of Automotive Engineers. The focus of the competition is innovation among automotive suppliers to the global motor vehicle industry. Award winners have included firms from Australia, East Asia, Europe, NAFTA and South America. Over the years this included software suppliers, machine tool and other process suppliers, materials innovations, and parts suppliers to other suppliers, to passenger car and commercial vehicle manufacturers and the (repair) aftermarket.
Each finalist, selected from the pool of applicants in early fall, is visited in the November-January period by a team of 2 independent judges, who include individuals from a wide array of backgrounds, from OEM assembly plant managers to engineers to a race car driver and even (gasp!) a couple economists and a banker. The 20-plus judges meet in a closed door session in February to select winners. This past year I visited:
  • BorgWarner with its compact brushless actuator for emissions control
  • Brose with its kick-to-open hands-free rear lift gate opener
  • Continental with its LocSync tire pressure monitor system that uses software rather than additional sensors to associate the correct tire gauge with the correct location
  • Visteon with its MSF zero-leak HVAC connector
If you're not one of the roughly 300 attending the award ceremony, look for a late evening flash story on the Automotive News web site and corporate PR releases for the winners.
...mike smitka...