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?

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.

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.

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.

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...

JDPower Quality Ranking and Statistical significance

...is JDPower more reliable than Republican pollsters?...

JDPower's latest quality survey reports a gradual (but over time substantial) improvement in vehicles sold in the US, averaging 126 customer-reported defects per 100 vehicles, versus 216 for 2007. That recent vehicles are better than those of a decade ago matches casual observation of new and used cars. But JDPowers also reports numbers by brand, resulting in a ranking widely reported by the media and (when the rank is high) echoed in advertising. (See for example the Feb 13 story in Automotive News.

Toyota as Number One

...remember Japan as Number One?...

I'm just back from a meeting of the Japan Foundation American Advisory Board, where part of the discussion was on the ups and downs of the field, such as high enrollments into the mid-1990s from those approaching the region in an instrumental way. Do you remember a prominent book of that era, Ezra Vogel's Japan as Number One. [mea culpa: he was the advisor for my undergraduate senior paper]

The End of Luxury Margins

...luxury at low cost is a potential disaster for the industry...

Diana Kurylko at Automotive News has a front-page story in the January 21st issue [online here arguing that "$30,000 is the new luxury-car hot spot". The evolution of CAD systems (linked now to engineering databases) and the revolution in materials science means that it is feasible to provide the NVH (noise vibration handling) of a luxury vehicle at little or no incremental development cost and a modest manufacturing cost. Leather remains necessary – a $1,000 cost premium for two front buckets and a rear seat?) – and additional speakers and other spiffs add cost. But safety mandates mean that stability control, keyless entry and so on are either present or can be added at low cost as the underlying IT backbone is in every vehicle.

Henry Ford, A Documentary

Public Broadcasting Service Premiere of 

American Experience Presents Henry Ford 

Tuesday, January 29th, 2013 9:00 – 11:00 PM on PBS

 – A Review by David Ruggles –

additional comments by Mike Smitka

Henry Ford changed the world with his assembly line method of auto assembly, patterned after processes he observed in the meat packing industry. One might think there is nothing new to be learned about the man, his life, and his legacy. And perhaps there isn’t. But I have never found such a wealth of information and insight in one place as in this wonderful documentary directed by Sarah Coit and to be presented by PBS in conjunction with the 150th anniversary of Ford’s birth.
A study in contrasts and contradictions, Henry Ford was a genius who did a lot of good for mankind, while at the same time his behavior presented a case study for the psychiatry profession. Henry Ford began his career at a time in our history when a few plutocrats had combined net worth equal to a major portion of the entire GDP of the country. Before the turn of the century, John David Rockefeller’s net worth alone exceeded 10% of the GDP of the United States. In today’s dollars, that would be the equivalent of about $1.5 Trillion. Together with Andrew Carnegie, J. P Morgan, John Jacob Astor, Andrew Mellon, and others, monopolies controlled the U. S. economy and government policy was bought and sold at will, at least until Teddy Roosevelt signed the Sherman Anti-Trust Act in 1890 and the graduated income tax was passed in 1913.
When Henry Ford historically doubled the wage of his workers from about $2.50 per day to $5.00 per day, it was a giant step forward for the country’s middle class. He also pioneered both 8 hour work day and the 5 day work week. Ford didn’t make these moves for altruistic reasons alone. His assembly line production method burned out employees. In the face of overwhelming employee turnover he was interested in employee recruitment and retention. He also attached conditions to the wage which were onerous for many employees. Ford’s “Sociological Department” monitored employees through a network of thugs and spies. Heavy drinking, gambling, and other adverse behavior was strongly “discouraged.”

Velocity Overdrive, the Road to Reinvention

A Book Review

by David Ruggles and comments in italic by Mike Smitka

Dale Pollak’s third book, “Velocity Overdrive,” is another winner and is must reading for dealers and any student of the auto business. That includes auto manufacturer executives.

Dale’s ability to put into words the changes the industry has been experiencing has helped hundreds, if not thousands, of auto dealers, both new and used. He has rightfully pointed out that the delivery of information via the Internet has brought “efficient market” economic principles to the pre-owned business in particular, compressing available “spread.” New data driven management methods that are based on rapid inventory turn at lower, but real world gross profit for the specific market, actually produce considerably higher total gross profit through higher velocity, a concept difficult for some to grasp. In some areas of retail the benefits of sacrificing margine to increase inventory turns is commonsense. Automotive retailing is catching on: Daily, market realities are making believers out of skeptics.

My favorite chapters include 8, “Dealership Department Silos,” and 14, “The Extra Mile in Reconditioning.” In these chapters Pollak dares to challenge long and stubbornly held beliefs that the pre-owned department exists to be pillaged by the fixed operations departments. After all, it was thought, sales people and managers sell from their cost, not based on any kind of rational retail market value. And gross profit booked by charging retail prices for internal reconditioning, or “retail recon,” is retained regardless of what happens to the used vehicle, they thought. There are dealers who have followed this “retail recon” policy for another reason. They would rather pay management compensation based on fixed operations rates than sales manager rates. The Internet has changed all of that. Dealers still in denial on the issue especially need to read this book!!