Customer Experience – Treat Me Like Your Mother-in-Law

by Peter Sorgenfrei

The car buying experience has always been on the top ten list of the things people fear the most.  Consumers fear walking onto a dealer lot, being attacked by the first salesman to spot them, and then coerced into considering a vehicle in a different color, with a different trim level and at a different price (higher) than what they set out to buy.

Then comes the whole song and dance with the F&I manager and the dealership principal to ‘approve’ the terms offered after the consumer has been sitting in the chair for hours, hungry, tired on on the verge of leaving.  Far from a pleasurable experience.

Brands like Saturn and Scion entered the scene with no haggle pricing and the purchase experience got a little better for buyers of those brands but the one-price philosophy did not bleed over to other stores.  For the majority of the buying public, the dealer experience ranks right below getting a root canal.  At least there is anesthesia at the dentist!

The car buying experience should be one of the things in the auto industry that is the simplest to fix. It does not involve complex engineering, logistical challenges, supplier failure, etc. It is about human interaction and treating people they way we want to be treated.

Recently I told a sales team that they should imagine they were selling vehicles to their mother-in-law.

My basis for that analogy was that we treat our mother-in-law with more respect than our own mother (we get away with more with her), we do not completely dumb it down, cause we want her to like us, and we certainly do not pressure her to do anything she is does not want, of fear of retribution and wrath. (Just kidding Fran!)

But seriously, if car salesmen (and women) treated all their customers like their mother-in-law, I believe more and better relationships would be formed and more repeat (and less expensive) business would occur.

Next time you are shopping for a car, if the salesman is pressuring you, ask him to imagine you are the mother-in-law, after he stops looking dumbfounded, tell him about this theory and I bet your experience will be better.

Filed under: Automotive, Customer Service , Automotive, Cars, Consumers, Customer Service, ideas, Psychology, Retail

On Management Take 2: GM does the shuffle

Today’s announcement of new roles for a series of senior leadership personnel at GM is the first view of what Ed W had in mind when he said – we need younger managers in place. He is getting some of that (Bob Lutz is still around) and we are excited to see Mark Reuss and Steve Girsky getting bigger roles. They both get it.

Now the key question is how does this translate deeper down into the organization and culture? Will Mark be able to change the insular environment? Will the people he inherit all of a sudden make bolder recommendations? Will he and the rest of GM finally realize that they will not return to being the dominant player and that that is okay?

I hope so. Despite sounding bearish on GM most of the time, I, like everyone else in the industry want them to get better.

Filed under: Automotive , Automotive, GM

On Management – Why GM Needs New People

by Peter Sorgenfrei

Running a car company (or any company for that matter) is not easy. Add a board with strong personalities who seek to solidify their legacy and government oversight and you have the makings of a perfect storm. In the case of GM, it was more like a category 5 hurricane.

Fritz Henderson was not the right man for the job from the start it seemed. He has had great experience, is known as the ‘turn-around expert’ at GM, but was too ingrained in the culture of GM that caused the problems they are in now.  At the time he was tapped the board did not have that many choices and I doubt many outsiders would have taken a look at the job so Fritz got the gig.

Now what happens? Ed Whitacre certainly does not mind being in charge, and the search for an outsider is likely to take a while. With the pay restrictions in place, the board composition and the government oversight, our bet is the right candidates are not interested.

We say right candidates because there are probably a fair amount of people who want the job – the chance to attempt revival of one of the largest companies in the world is alluring, but the person who will succeed in this job is already sitting in another CEO chair, being well compensated and with less tape to deal with. Why would she/he take the position?

The person the board is likely to get under the current circumstances will not have the gravitas required to drive the kind of change needed at GM. And it is not just about the CEO’s office, several layers deep in the organization change (as in personnel change) has to happen.

Someone at the board level (and as incoming CEO) has to say. Enough! The only way this company will be able to repay the government(s) is to completely revamp the system. And unfortunately that involves human change. We as humans don’t really change. We might want to change, but fundamentally we like habits and stick to what we know (which is what we have done in the past).

It is not about consultants coming in and showing the team matrix after matrix of what needs to be done. It is about a group of people (CEO through Directors) that are completely focused on taking care of the customer and the company. It is also about a corporate culture that rewards risks, does not punish strong personalities and constantly reinforces the focus on product and customer.

The combination of management and corporate culture is not in place at GM today.  GM has dedicated, intelligent and passionate employees for sure but if you lived in a state with 15% unemployment and had children to support, would you stand up and rock the boat?  Probably not.

GM will get a new CEO but in order to get the right person for the job, they need to attract someone that is adept in corporate cultural change as well as financial management.

Filed under: Automotive , Automotive, Cars, Consumers, GM, Psychology

What is the “New Normal?”

by Peter Sorgenfrei

A question we get frequently when discussing the future of the auto industry in the U.S. is: “Will this economic downturn have the same impact on the American psyche as the Great Depression?  Will the buying habits of the American automotive consumer fundamentally change?”  Our answer; yes and no.

First off, our current economic situation is nowhere near as severe as the massive market adjustment during the early part of last century.  While the double-digit unemployment rate, high rate of foreclosures and daily doom reports from the talking heads are not exactly great news, we are not experiencing sacrifice and shortages seen in the U.S. beginning with Black Tuesday in 1929.  While our relatives rationed gasoline and saved rubber bands our biggest shortage these days are a dearth of Eggos and canned pumpkin pie filling.  Hardly a comparison.

The American consumer, all things considered, is still consuming. He/she still eats out, still shops, still drives to work and takes the kids to soccer practice. The change that has happened in the last 18 months is how consumers talk about their financial lives. They worry more, they might cut back here and there, but net/net they are still consumers.

Car buying behavior has definitely changed – fewer new cars are sold today compared to last year and the types of vehicles purchased  is changing.  The volume story is one of consumers realizing that purchasing a new vehicle every three-five years isn’t a requirement so they are keeping their vehicles longer.  Most industry “experts” believe that the the sales volume will return, albeit to a “new normal” of 11 – 12 million vehicles per year.  The real question is what will the showroom floor look like?  Will the American consumer start buying only what they need rather than what they want?  Will the streets of NYC begin to mirror those of Paris? Probably not.

Our take is that yes, the garages of America will be populated with relatively smaller, more fuel efficient vehicles in the future but it isn’t because this economic hiccup fundamentally changed our values.  It is more a combination of less conspicuous consumption combined with manufacturers offering more efficient products mandated by law, not consumer desire.

Fundamentally, a 5-passenger hatchback cannot meet the needs of a family of 7.   There will still be a need for minivans, crossovers and yes, even SUVs that seat 7+ passengers.  The difference is they will be purchased by people who need them to schlepp the kids, carry the cargo or tow their boats.  The rest of us may downsize to more fuel-efficient Crossovers and sedans but the “new normal” will still feature the American consumer driving more car than they really need.

Filed under: Automotive, Market Research , Automotive, Cars, Consumers, Future, Lifestyle, Psychology

Echo Booming – Rolling on Dubs (for now)

This edition of Echo Booming is in a different format. We here at Sorgenfrei posed a few questions about aftermarket customization to our resident Echo Boomer – Dan Sherman.

Heavily modified Toyota Supra

Q. A lot of research has been done into the fact that your generation wants to make everything unique, is there truth to this and how does apply to vehicles?

Dan: We were raised to think that “we’re each special”, but the running joke among Echo Boomers is that “we’re all special and unique, just like everybody else.” With the advent of the internet, blogosphere, and social networking, my generation is very intent on making the uniqueness of their opinions known. However, we also easily succumb to peer pressure and we rampantly plagiarize our supposedly unique opinions; the majority of our drive for uniqueness is not truly original. This carries into the automotive sphere–we want something different from the beige Camrys on the road everywhere, but not at the risk of being unrecognizable. For instance, Gen Y used to buy “spinners” when they were hip because spinners were new, attention-grabbing and different from most wheels. However, when spinners became less popular on the road my peers became less likely to purchase. We love to follow the peaks and troughs of trends (much like fashion), and we prefer to follow customization paths that others have already undertaken.

Q. How do Echo Boomers differ (if at all) from other generations when it comes to modifying their cars?

Dan: There’s an obvious difference in demand due to age. Aftermarket accessories are expensive and high-maintenance, and older folk generally have more imperative and responsible uses for their time and money (spouses, children, etc.). I would say that we are certainly less likely to work on our own cars. Other generations grew up with carbureators and easy-access American cars, but my generation loves to modify complicated Japanese cars with turbos and heavy electronics. All generations are dynamic, however–whereas a few years ago Gen Y was obsessed with the heavy performance modifications characteristic of import tuner culture, we now shy towards appearance items.

And as stated before, the computerization of our world means that peer pressure is the new buyer’s guide. What our peers think is “cool” and “unique” is what we prefer. Other generations are more immune to the thoughts of others.

Q. What are the primary influencers for the people that modify their rides (movies, TV, video games etc.)

All of the above. The super popular video game series Gran Turismo essentially jumpstarted the “JDM” trend, and made people much more aware of the myriad modification options available (you can modify cars in-game). Then came along The Fast & The Furious movie series, which made import tuner culture totally mainstream…this had a MAJOR impact on every Gen Yer thinking of customizing a car. It made import tuning not only cool but much more accessible, as if not restricted to a niche. And then came Pimp My Ride, which focused on the “bling-bling” factor (20 TVs in a car? Really?!). These three media are not merely influencers; they take 100% credit for shaping people’s preferences in, and penchant for, vehicle modifications. Then peer pressure takes over and determines when these trends rise and when they die.

Q. Are there sub groups within this segment? If so, who are they and how do they differ from each other?

Dan: Import tuners, driven by The Fast and the Furious, LOVE the aftermarket. Some modify for “show” and some for “go”. Those who have the means have shops install expensive performance items like turbos, ECU chips, etc. Others will pine for body kits, paint jobs and sweet sound systems. However, factory tuners (Subaru WRX STI, Mitsubishi Lancer Evolution, etc.) provide a lot of this from the factory. I’m sure they’ve eroded much the aftermarket Import Tuner market; many people get factory tuners and call it quits on customization.
Those who don’t have the cash but hope to emulate The Fast and the Furious are Wannabe Import Tuners. They go what they can get at Pep Boys, such as DIY bolt-on performance and unpainted wings/bodykits.
Bling Blingers, inspired by Pimp My Ride, love biiiig chrome rims, tinted windows, and excessively loud sound systems. They are all about image and wouldn’t dare look to the aftermarket for performance.

Q. What is the best way for a car company to appeal to these consumers? (ex: make cars that are easy to modify, TRD-like aftermarket that doesn’t void the warranty etc.)

Dan: There are a few feasible approaches, depending on the type of car:
1. The factory tuner method. My generation loves Evos because they’re different from Lancers and a lot of other cars on the road, but there are other Evos around–they fit Echo Boomers’ desire for “uniqueness” perfectly. There’s less hassle and less risk when everything is factory installed and factory insured.
2. The TRD method. We are scared to death of working on our cars and voiding warranties, especially because if we have the money to purchase a new car it’s likely coming from our parents. Getting aftermarket parts from a company that won’t void the warranty is VERY attractive approach.
3. The Scion method. It has the advantages of the TRD method, and then some. By tying in aftermarket parts with the new car purchase, it lessens our inhibitions. However, the timing issue is involved–we like to modify our cars later on when we get bored of stock condition.
4. Make cars easier to modify. Not likely from a performance standpoint, due to the packaging, power, and fuel economy restrictions placed upon manufacturers today. However, when combined with the TRD method, manufacturers would be smart to make their pre-approved (or self-manufactured) parts easier to install than other aftermarket parts.

Dan: Do you think this trend continue as Gen Y consumers get older?

A. For the most part, no. Our trends tend to die out fairly quickly, especially as we become more “mature.” We will associate car customization with immaturity and shy away from it. Part of the death of the trend will be strictly due to age; as we get older we will develop more important uses for our money and time. If we desire “uniqueness,” we will look to the automaker to provide it.

Joe LaMuraglia is a fan of

Echo Booming

Create your Fan Badge

Filed under: Automotive, Echo Booming , aftermarket accessories, Automotive, automotive enthusiasts, Echo Boomers, Gen Y

Costco Model for Auto Mags?

Much has been written about the death of print media and we’ve witnessed the passing of newspapers and magazines on a monthly basis. It is a “sign of the times” as they say and on some level, it is the economy’s way of weeding out the superfluous media outlets. As avid car enthusiasts, we worry about the future of our favorite sources of fantasy in print: the automotive magazine. So we sat down to brainstorm about ways that car rags could reinvent themselves.

The Advertising Model is Dead. Long Live Advertising

It is time to reinvent the car magazine and advertising isn’t the part of the solution – at least in the way advertising is executed today. As marketing dollars dry up and online properties promise the ability to track a users every move online, advertisers are moving away from glossy, 4-color advertising spreads in magazines to the “new” world of online display advertising. On some level you can’t blame them. When you have to fight for every penny in a budget, it is becoming more important to account for every cent. Print advertising, despite what publishers say, simply can’t be tracked in the same manner.

There is no doubt things in publishing are changing rapidly but instead of simply pointing out the obvious, we selfishly want to come up with a solution. After all, we want our auto magazines (A.K.A. “Car Porn”) for the airplane, the beach and yes, even the bathroom.

Benefits of Membership

Our proposal is that the magazines forgo print advertising altogether. The current business model in print publishing cannot compete with the sexy new media that is cheaper, more flexible and measurable. That doesn’t mean giving up on advertising altogether, rather, we suggest that they re-purpose the relationships between the publication, its subscribers and the advertisers.

Think Costco. People pay a yearly fee to get access to discounts and high quality goods purchased in bulk. For most, the savings realized more than pay for the membership cost. For others, the fee is the cost of entry to the occasional deal on electronics or party supplies. In either case, Costco has a steady income stream that they can utilize to perpetuate the machine. They pass on savings to their members but still make a profit on the items they sell. Why can’t magazines adopt a similar model?

Currently, magazines are in a race for circulation so they can charge for the eyeballs that they claim to get every month. Part of that race is to keep subscription rates ridiculously low to entice people to subscribe. This may have worked in the past but as ad rates fall it is clear that it isn’t sustainable. What about this: raise the subscription price considerably to cover more of the costs and give their subscribers access to “members only” benefits that are useful, tangible and shock(!), measurable.

The idea is simple; the advertisers are now called business partners. The publisher, much like Costco, works with the business partners to offer discounts to its “members”. With the yearly subscription, a reader gets discounts on related products that they use often – think fuel, repair, tires, insurance, after market parts etc. Access to the discounts can be via an online or mobile portal or even an affinity card – all of which is measurable. The business partners pay to be exclusive partners or pay the publisher for every transaction undertaken by the subscriber.

Circulation will certainly go down as subscription rates go up but without the dependence on traditional advertising, fewer magazines are required to meet profitability goals. Of course, people who buy off the rack may pay more as well but even now, they are paying premium to read content that is outnumbered by advertising and littered with those incredibly annoying subscription cards.

In order for this model to work, the content in print must be more in-depth, entertaining and different than what is available online. There also must be clear value to paying a premium for an advertising-free publication.

Consumer Reports is essentially implementing this model to a certain degree but they don’t cater to the true car enthusiast – who, for the record, is more influenced by the content than any print ad that is in current publications. Magazines like Automobile already provide a higher standard of journalism and photography. Why not increase the price of entry, implement ways to add value for the “members” and track the efficacy of those efforts at the same time? And just think, subscribers won’t have to deal with all those subscription cards falling into the toilet the next time they sit down read a review!

Filed under: Advertising, Automotive, Marketing , Advertising, Automotive, automotive enthusiasts, print publications

Echo Booming – Baby You Can Drive My Zipcar

by Dan Sherman

I have friends in Atlanta, New York City, Los Angeles, and even Durham, NC who are Zipcar members.  Despite having an eager 2006 Mazdaspeed6 hibernating in my driveway back home on Long Island, my parents insist that I instead use Zipcar at school.  Why is ZipCar so popular?  And is its strategy of infiltrating colleges around the country creating brand loyalists for life?  My network of 20-somethings provided insight.

My Emory friends are Zipcar members because Atlanta stinks.  Let me clarify—Atlanta stinks without a car.  Students who can afford a car and all the associated costs (driving/shipping it to Atlanta, insurance, gas, maintenance, and astronomical $654 on campus parking) do so in a heartbeat.  However, car sharing best serves the needs of the stereotypical car-less, cash-strapped college student who wonders, “How am I supposed to get food and alcohol?” With a $50/year charge for membership and around $10/hour car pricing, Zipcar has a low initial cost which entices students who drive sporadically or can’t afford having a car full-time.

So why doesn’t everyone have a Zipcar? For one, car sharing completely destroys the element of spontaneity associated with owning a vehicle.  Daily dialogues between my roommates and me go something like this: “Yo, I’m starving, let’s get some Chipotle for lunch. OH WAIT, the Zipcar’s booked until 8 o’clock.  Guess we’re not eating ‘til dinner!”

Zipcar advertises itself as “green” to no end.  I asked a cadre of Gen Yers whether the environmental aspect makes them more positively inclined toward car sharing.  Their response was that the only “green” factor that moved them had dead Presidents on it.

The appeal of Zipcar will most likely continue after my peers graduate and move to cities like New York City, Chicago and Boston.  Even those that anticipate being able to afford a car of their own will likely stick with Zipcar to reduce the expense and hassle of owning a car in the city.  As an added bonus for those from outside the country, a US state license is not required for Zipcar membership.

So it is cool, convenient, and inexpensive but how will they grow?  Will the Echo Boomers continue to use Zipcar even after they leave the cities and move into suburbia?  Probably not, but as long as it continues to communicate a hip image in college towns and large cities, it should maintain its position as the leader in automotive timeshare.

Filed under: Automotive, Echo Booming, Market Research , Cars, Automotive, Gen Y, Echo Boomers, ZipCar, Car Sharing

Its About the PRODUCT Stupid

I just read a very interesting article on AdAge.com – How To Build Better Car Marketing.  In it Jordan Zimmerman makes some interesting points about how agencies are up for review because marketing automobiles is a unique proposition and in his words “agencies lack a fundamental understanding of how the industry operates.”

I couldn’t agree more but I think that Jordan left out a few key points:

1. In too many instances, the agencies handling the accounts not only lack an understanding of how the industry works, they lack an understanding of the PRODUCT.  Automobiles are different than sneakers, diamonds or food – all of which the average agency grunt can relate to.  Cars and trucks are complex machines that evoke passion in enthusiasts and owners alike.  Driving and interacting with the machine involves every sense and sensation – whether the owner is aware of it or not.  Yet we trust the communication of core brand attributes to people at agencies in cities like New York who often don’t even have drivers licenses!  In order to represent an automotive brand, everyone on the team should have a passion for the product and have the ability to experience the product on a daily basis.
2. Agencies need to stop working for awards and keep the goals of their clients in mind.  In the case of the auto industry, it is a monthly cycle that is focused on moving the metal.  Award-winning ads are great, brand awareness is important but every agency should be tasked with helping sell the product and rewarded or penalized based on their ability to do so.
3. To follow up on the point above, the way agencies are organized it is difficult to measure how effective a national campaign is in terms of sales.  There is a lot of inefficiency in the system with different agencies handling the Tier 1, Tier 2 and Tier 3 advertising.   What about a different model that coordinates the three under one agency and true metrics put in place to measure the efficacy of a campaign?

The role of the advertising agency is changing rapidly and the automotive industry is a primary catalyst to this change.  Even after the economy stabilizes, automotive clients will be running lean and demanding more accountability from their agencies.  Per Mr. Zimmerman, a better understanding of how the industry works is important but I’d argue a understanding of and passion for the product is paramount for success in the future.

Filed under: Advertising, Automotive, Marketing , Advertising, Automotive, Brand Engagement, Cars, Consumers, Design, Retail

Customers drive change

Akio Toyoda spoke in Michigan yesterday. We’ve been part of this process for 10 years now and can testify to how it works making products, services and companies better and more valuable.

From Automotive News:
In his keynote speech at the Management Briefing Seminars, Toyota Motor Corp. President Akio Toyoda challenged the auto industry to reinvent the automobile and told the gathered executives that they are not in charge of deciding how to to do it.

“All of us in this room might think we are driving change in our companies and in our industry,” Toyoda said. “But we are not.

“It is the customer who is driving change. And if we want to make something happen, we’d better listen and learn the customer’s habits.”

Doing so could allow the industry to discover “a need so big that it calls for a true breakthrough idea,” Toyoda said. “Something bigger than just worrying about how many cupholders our competitor has in their new model.”

‘Contribute to society’

Toyoda said his vision for Toyota follows that of his grandfather, Kiichiro Toyoda, who founded the company in 1937. His grandfather insisted that the automaker should “contribute to society through manufacturing cars,” Akio Toyoda said. That calls upon Toyota staffers “to aspire to a higher cause than just building cars and making money,” he said.

Toyoda admitted, though, that “the severe drop in the economy and auto market has created some of the most challenging times Toyota has ever faced.” Toyota posted its third-straight quarterly loss in the three months that ended June 30 and is on track for its second-straight fiscal year of operating losses.

Toyoda also noted that General Motors Co.’s decision to withdraw from the two automakers’ joint venture in Fremont, Calif., New United Motor Manufacturing Inc., “has created some extremely difficult issues for us to resolve.”

Full article

Filed under: Automotive , Automotive, Clients, Consumers, Future, Innovation, Partnerships

It’s official: BMW will launch electric car sub-brand

Automotive New reports:

BMW will launch a new class of environmentally friendly vehicles under its own brand, signaling that even premium automakers are ready to embrace electric vehicles as a mainstream product.

Without new concepts and technologies, certain carmakers “may no longer be in the market” soon after the advent of a raft of tax penalties and incentives designed to force the auto industry to go green, CEO Norbert Reithofer said.

BMW’s board decided to create a new sub-brand — similar to its “M” label for its high-performance cars — to label a new range of sustainable vehicles, Reithofer said on a conference call on Tuesday.

Full article

Filed under: Automotive, Innovation, Marketing , Automotive, Cars, Clients, Energy, Innovation