Telematics, CRM, and a very long-tailed proposition, part I
When telematics first entered the CRM space, it promised to greatly increase revenues for OEMs and dealerships' service departments. But, so far, there hasn't been much sign of any money. Does this mean the idea is not working? In the first of a two-part series, Brendan McNally reports.
One of the lesser-recognized realities of the automotive industry is that the real money isn't in building and selling cars, but in servicing and repairing them.
The motor vehicle repair and maintenance market in North America is worth $150 billion annually, and, in a perfect world, the companies that build and sell the cars would also be the ones making money fixing and servicing them. Instead, most cars end up slipping away into the aftermarket once product warranties run out, and so does most of the $150 billion.
To counter this, car OEMs and their dealers have been perfecting the art and science of customer relationship management (CRM) in recent years, with the goal of creating a service experience on such a level that it would produce customers for life. And helping customers stay on top of service histories and alerting them to any problems that might arise between regular appointments have been at the heart of these efforts.
The problem has been, until recently, that vehicles had to be physically present in the dealer's service bay for OEMs to access their on-board computer and diagnostics systems. Now, telematics is starting to close this critical gap by allowing for these functions to be performed remotely.
Even so, there are many other challenges to overcome.
Lost in an infotainment wilderness
One challenge is that dealerships, which are likely to financially benefit the most from CRM telematics, tend to understand it the least.
“Until dealers and OEMs start getting their heads around the idea that telematics is part of servicing cars, it won't really get moving,” says Pat McGinnis, vice president for business development for Tweddle Group. “The problem is they see it as a feature to be monetized through the customer and not as a key part of the ownership experience.”
Another challenge is that most OEMs still view their telematics arms as separate business entities, while the service and repair branches, such as Fiat’s Mopar, are part of the fold.
Yet another challenge is that telematics-enhanced CRM (CRM telematics) is essentially unsexy, a bad quality to possess for anything in the automotive industry.
An industry analyst recently observed that what always sold cars was chrome and glass, what its color was and how fast it accelerated or well it cornered. Today, these aspects still count, but customers are increasingly turned on by connected infotainment: whether a car is compatible with Android devices, has streaming audio in the front and video in the back. CRM telematics can be bundled with infotainment, and it often is.
Groping for answers
Tweddle has been around for more than 60 years, focusing, for the most part, on managing communications and aftersales support for OEMs and dealers. About six years ago, the company branched out into connected services with an infotainment platform that became the basis for Toyota’s Entune and Lexus’ Enform app suites. Despite the success of the platform, Tweddle sold those assets to Nuance last year to focus on CRM and vehicle relationship management (VRM) services.
“Infotainment was getting in the way of our connected CRM or VRM vision,” McGinnis says.“Where we're focused now is figuring out the best way to keep OEMs and dealers engaged with the owner throughout the ownership lifecycle. Right now, telematics solutions rely on consumer subscriptions. The focus needs to change to bringing business back to the dealer for maintenance and service. No one has achieved success there, yet.”
Wesley L. Lutz, president of Extreme Chrysler/Dodge/Jeep, RAM Inc. of Jackson, Michigan, agrees that CRM telematics has the potential to bring a lot of revenue into his service department, which he would love to see. The problem, he says, is that telematics simply “isn't there yet.”
“If I had some kind of sensor that would bring up the customer data when the car is driving up, that would be very helpful, it would be incredible,” he says. “But it's not happening. It's out there, but I have not experienced it.”
CRM telematics: a very long-tailed proposition
But probably the biggest challenge is the fact that CRM telematics is a new field, which, at the moment, comes very close to the top of a very long-tail proposition, says David Sturtz, vice president of marketing and business development for Xtime, a leading provider of Cloud-based, CRM and service scheduling software.
He points out that there are currently upwards of 250 million passenger vehicles on the road in the United States, of which only a couple hundred thousand are equipped with CRM telematics.
“Keep in mind that these vehicles are all at the earliest stages of their service life-cycles, which means that most are getting oil changes and some scheduled maintenance,” he says. “And since cars are more reliable than ever, none of them are at a point yet where they will generate more than a fraction of all service and repair revenues.”
What’s more, while nearly all carmakers are coming up with their own service solutions, they are doing it at differing speeds and with varying degrees of enthusiasm.
(Return in two weeks for the second part of the series.)
Brendan McNally is a regular contributor to Telematics Update.
For all the latest telematics trends, check out Insurance Telematics Europe 2014 on May 6-7 in London, Data Business for Connected Vehicles Japan 2014 on May 14-15 in Tokyo, Telematics India and South Asia 2014 on May 28-29 in Bangalore, India, Insurance Telematics Canada 2014 on May 28-29 in Toronto, Telematics Update Awards 2014 on June 3 in Novi, Michigan, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, Advanced Automotive Safety USA 2014 on July 8-9 in Novi, Michigan, Insurance Telematics USA 2014 on Sept. 3-4 in Chicago, Telematics Japan 2014 in October in Tokyo and Telematics Munich 2014 on Nov. 10-11 in Munich, Germany.
For exclusive telematics business analysis and insight, check out TU’s reports: Insurance Telematics Report 2014, Connected Fleet Report 2014, The Automotive HMI Report 2013 and Telematics Connectivity Strategies Report 2013.