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Ford’s Connected Insurance Offer is Incomplete

Ford Partnership with Nationwide Insurance

Ford announced this week that it would partner with Nationwide Insurance to offer Ford Insure and Lincoln Motor Company Insure to Ford #Connectedcar customers. This is a very good use of the connected car technology that Ford is rapidly rolling out to all of its cars and trucks. The service features easy enrollment via the FordPass or Lincoln Way apps, and provides the prospect of saving customers up to 40% on their insurance by demonstrating their safe driving. But Ford will likely find that the solution falls short for its customers in several ways.

Customer Experience Gaps

Following are some gaps in the offering that Ford will likely hear about from its customers:

Limits on Customer Choice

Nationwide is a leading insurance provider with a very strong brand and reputation. But there may be many reasons why Ford or Lincoln customers won’t want to switch to a new insurance carrier. Customers may have well-established relationships with other carriers that will keep them from switching. A better offering would allow Ford and Lincoln customers to take their connected car data to the insurance carrier of the customer’s choice.

Limits on Customer Control over Driving Data

This program requires the customer to enter into an insurance contract before knowing what his or her driving data looks like, and how it will affect insurance rates. Savings, if any, won’t be applied until the customer renews the initial policy. The customer doesn’t know ahead of time whether he or she will be likely to save. A better approach would be for Ford to give customers their driving data and help the customer understand whether the data is likely to lead to savings on insurance. The customer should have this data before deciding whether to share it with an insurance company.

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For TaaS Providers, Engagement is Everything

More OEM’s Offering Subscriptions

Over the past weeks, we have seen more announcements from OEM’s intending to become Transportation as a Service — TaaS — providers.  Nissan announced a subscription pilot called Switch.  And Hyundai announced a partnership with the startup Canoo.  Canoo intends to offer its vehicles only by subscription. 

New Metrics for New Challenges

For these companies to be successful in a TaaS business, they will need to learn lessons from service businesses that came before them.  And importantly, they will need to learn all new ways to measure business performance. 

OEM’s are accustomed to measuring customer satisfaction in terms like Quality, Durability, and Performance.  These are all product metrics, and they are the metrics that matter if the main objective is to sell the customer an expensive product once every couple of years.  But how should metrics change when the customer is buying a service, with the ability to cancel or change every day?  In that world, Engagement is Everything.

Metrics for a Services Business

I was reminded of the power of Engagement when I had a chance to listen to the weekly “a16z” podcast from Andreessen Horowitz.  The title of the podcast was “Metrics and Mindsets for Retention and Engagement.”  The purpose of the podcast was to provide an overview of the key metrics that have been used by some of the internet’s giants, like Facebook or Pinterest or AirBNB.  These same metrics have been used in automotive service businesses like OnStar or SiriusXM. Some key takeaways:

Think in terms of three key metrics:  Acquisition, Engagement, and Retention.

  • Acquisition is how many customers were added in a given time period
  • Engagement is how frequently those customers use the service, and how many of the services they use
  • Retention is how many stay with your service in any time period

Of these three, Engagement is the most critical.  It predicts Retention and its opposite:  Churn

  • Engaged customers stay longer
  • Engaged customers are happier
  • Engaged customers recruit other new customers
  • Engaged customers spend more on your services

A service provider needs to be great at measuring and tracking Engagement

  • Watch how engagement changes over time from new users to experienced users
  • Compare engagement for different cohorts of users, and drive to increase engagement as a core business metric
  • Compare engagement for different types of users
  • Understand what behaviors predict increased or decreased engagement

And a service provider needs to test and learn relentlessly

  • Test different ways to create the best new customer onboarding experience and launch early engagement
  • Test different methods to drive greater and more frequent engagement
  • Test methods for re-engaging customers who have fallen off
  • Test methods for preventing Churn

Takeaways for an OEM moving into TaaS:

So what does this have to do with the TaaS plans of the major OEM’s?  Isn’t Nissan’s Switch or Canoo’s subscription just another form of auto financing — building the cost of maintenance and insurance into one monthly price?  Without a focus on Customer Engagement, they will be, and I think they will likely fail to attract (and retain) large numbers of customers.  With a focus on engagement, though, these services have the potential to create real value for customers.  Because another way to think about engagement is to ask how often the customer is coming to the TaaS provider for additional help and additional service solutions.  Engaged customers will keep coming back to their service providers for additional transportation problems and — if they’re good — those providers will keep coming up with more and better solutions.  

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Car Buying for the Connected Customer

I had a recent experience with buying a beautiful new Chevy Colorado that showed me that much progress has been made to meet the expectations of connected buyers, but also revealed how much remains to be done.

Web Shopping Experience:

I had a great experience with the Chevrolet website and its integration with local dealer sites. From driving a friend’s truck, and from prior experience, I had already decided that I wanted a new Colorado. The Chevrolet website helped me navigate effectively through the many decisions that a new buyer needs to make – particularly for a new pickup. Once I knew exactly which truck I wanted, and in what color, the Chevrolet site then did a good job of searching for local dealers who could sell me one. Unfortunately, a search of my local dealers’ inventory showed me that nobody had the combination of trim, accessories, and color that I was looking for. I was not discouraged though, as the site also made it easy to contact three local dealers to let them know what I was looking for. I was also able to include a note, to say that I was looking for this specific configuration, and that I was ready to buy. 

This work was completed on a Sunday evening, and I received confirmation from Chevrolet of the truck I was looking for, and the dealers I had selected. I was very pleased to be contacted by all three local dealers first thing on Monday morning. This is where the opportunities for improvement started to show.

Three Dealers, Three Different Experiences:

All three local dealers started with prompt contacts via both email and text, as I had requested. This is where the breakdowns began:

Breakdown #1: Dealers Waste My Time

All three dealers asked me to re-send the specification for the truck that I was looking for. I re-sent each one the email that Chevrolet had sent me, but why should that be necessary? It was that same Chevrolet website that had helped me identify the dealers that should contact me.  I don’t know whether the dealers actually didn’t receive the specification sheet or if they didn’t feel that they could rely on the information? In any case, it was an unnecessary bit of extra work for the customer.

Breakdown#2: Dealer Stuck in the Stone Age

The first dealer contacted me to confirm my information, which I provided. They also confirmed that they did not have the truck I was looking for. I asked Dealer 1 if they would help me either order or locate my truck, and if they would give me a price. Dealer 1 would not do any of this until I agreed to come in to meet the “Truck Specialist.” I confirmed that I already knew exactly what I needed, and that I didn’t need the Specialist. Dealer 1 would not do business with me unless I agreed to waste my time. Dealer 1 was out.

Breakdown#3: Dealer Thinks I’m a Deadbeat

Dealer 2 took my (repeated) information and conducted a search within a 400 mile radius. The closest match was not very close, including $1,500 of features that I did not want. Dealer 2 said that they could order the truck that I wanted, but it would take 10 weeks to arrive. Dealer 2 required a $4,000 deposit to place an order. Further, if I didn’t buy the truck, the deposit would only be refundable if/when the dealer sold the truck. Dealer 2 explained that this large, semi-refundable deposit was required by dealership policy, because the dealerships had been “burned before” by customers ordering what they wanted. Dealer 2 was out.

Breakdown#4: Dealer Gets the Order, but 8 Weeks and more Data Re-entry

Dealer 3 took my information and offered to order a truck with a $500 deposit. I agreed to give Dealer 3 my business and dropped off a check. Amazingly, Dealer 3 told me that the order could not be entered for another 3 days or so. My first question is why the order that I had carefully completed on the Chevrolet website and routed to the selling dealer would have to be re-entered by the same dealer? These two systems aren’t (or can’t be) connected? And the next question is why it should take 8 weeks for a standard order to be processed? This is inconsistent with customer experiences formed by next-day deliveries. It is also inconsistent with the Chevrolet website experience, which guided me to the precise truck that I wanted. The rest of the system needs to be aligned to deliver that specific truck promptly in order to meet connected customer expectations.

How a Connected Shopping Experience should work:

I’m now anxiously awaiting word from my dealer about production and delivery of my new Colorado. Over the next 8 weeks, I hope that I will see Chevrolet take advantage of opportunities that should come with a fully connected production system and a fully connected truck:

  • Build Progress: I should be able to track the progress of my order as it slowly moves toward production. I hope to get regular updates and indications of a likely production date.
  • Build Verification: Since the truck has a built-in telematics system, I expect to get an email or text from my new truck when it first fires up at the factory! Maybe a report on passing all of the end-of-line tests, showing no faults and readiness to be shipped?
  • Order Tracker: That connected truck should also let me track it as it moves from the plant to the dealership, and then text me when it arrives.
  • Personalization and Set-Up: Finally, before my truck gets delivered, why not let me input some of my preferences, so they are already loaded when I get in? Let me configure my radio pre-sets, set my preferred temperature, and configure some of the many settings in the infotainment system? I think I’d rather do that on-line before delivery. As an extra benefit, I could learn about all of the truck’s great features while deciding on my preferences. Seems like a better experience and a more efficient process for everybody.

We will see. Meanwhile, I’m looking forward to driving that brand-new truck.

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OEM to Transportation Service Provider — Easier Said than Done!

Intense OEM Activity

Over the past year or so, several auto manufacturers, or OEM’s, have announced their intention to make a shift from manufacturing cars and trucks to become providers of comprehensive transportation services.  And their announcements are backed up by multi-billion-dollar investments. 

In December, Hyundai announced its intention to “Transition into a Smart Mobility Provider by 2025” as part of its 5-year, $40B capital plan.  Following that, Herbert Diess, CEO of Volkswagen, said in January of 2020 that, as VW shifts to become a maker of electric vehicles and connected cars, “The era of the classic carmaker is over.”  In April of 2019, Ford implemented a re-organization, which placed Jim Farley as President of New Business, Technology, and Strategy.  Farley’s responsibilities include Ford’s Smart Mobility business, which is intended to invest in and create new mobility services. Finally, General Motors unveiled it’s “Origin” autonomous vehicle in January of 2020.  In response, a NY Times article covering the unveiling reported that GM’s plan was not to sell the vehicle, but rather to use it as part of an autonomous taxi service operated by GM’s Cruise subsidiary.  Other global OEM’s have made similar announcements.

Why OEM’s have their eyes on Transportation as a Service, or TaaS

The OEM’s interest in becoming transportation service providers is understandable.  They see growing interest of consumers in purchasing transportation this way through ride sharing, micromobility services, etc.  This causes the OEM’s to fear a shift of customer loyalty toward the providers of those services, and away from the manufacturers.  OEM’s are also widely installing Connected Car technologies, which allow for easier remote management of fleets of vehicles.  But it is not easy to become a service provider, and it is even harder to do it while continuing to be a profitable manufacturer. 

Challenge #1:  Running a Service Business Requires New Skills

Today’s OEM’s are very good at efficiently manufacturing huge volumes of complex vehicles with high reliability and consistent quality.  OEM’s are good at logistics and supply chain.  OEM’s are good at product and manufacturing engineering.  OEM’s are good at product design.  But OEM’s have very little experience with managing 1:1 customer relationships.  In managing a service, every single customer experience is unique.  To be successful, a service provider has to be great at listening to and evaluating customer feedback.  A service provider has to quickly adjust their service to match changing customer needs (no more 4-year product cycles!).  To be profitable, a service provider has to rapidly adjust capacity and pricing to match demand.  To their credit, many OEM’s are experimenting in these spaces through investments in start-ups and through services pilots.  They are certainly learning from these experiences.  But to be successful and to successfully shift their business models, OEM’s will need to gain a lot more experience.

Challenge #2:  The Services Business may not be Aligned with the Manufacturing Business

Several OEM’s have painted a vision of providing comprehensive transportation services for consumers — from bikes and scooters, to cars and trucks, to buses, planes, and trains.  No OEM has indicated that they intend to make every device in the chain, but most indicate that they plan to use their own cars and trucks within their transportation service.  The challenge comes when the OEM doesn’t happen to make the product that is best suited to the needs of the transportation service.  For example, suppose the transportation services needs a standard midsize sedan as part of its service suite.  What happens if the parent OEM doesn’t make the most space-efficient, or most reliable, or most fuel-efficient midsize sedan?  Should the transportation service have the freedom to buy the best vehicle for its service, or will it be forced to buy a sub-optimal sedan from the parent and eat the loss in efficiency or revenue?

Challenge #3:  Competition with the OEM’s Traditional Customers

Before it was called “Transportation as a Service (TaaS),” or “Mobility as a Service (MaaS),” this concept had another name:  the Fleet Business.  Rental companies and Fleet Management companies have been in the business of providing transportation services for a long time.  These Fleet customers can represent 20% or more of some OEM’s sales.  Fleet customers will see a move by OEM’s into Transportation Services as a shift from the OEM as a Supplier to the OEM as a Direct Competitor.  In order to maintain their sales volumes, OEM’s may have to choose between serving their traditional customers and building their new service businesses.

So, all credit to the traditional OEM’s for recognizing the growing customer interest in transportation as a service.  They can take credit, also, for seeing the potential for disruptive business models that are enabled by Connected Car and other technologies.  OEM’s may find, though, that their new TaaS businesses may need to quickly become much more independent in order to  be build the necessary skills to grow and become fully successful.