Tag: Cox

Stop Worrying About Self-Driving Cars

I am planning an article on car dealer “megatrends,” and this is the first item not making the list.  It’s a sexy topic, though, and journalists can’t leave it alone.  For example, here is top Cox guy Mark O’Neil trying to change the subject.  Mark would rather talk about online sales which, with predictive analytics, is a key trend dealers should be watching.

Autonomous vehicles are part of a cluster of technologies which have the potential to reduce car sales, dramatically in some scenarios.  This McKinsey study does a nice job of explaining the cluster.  In short: car rental fleets go away because everyone uses Uber, and Uber drivers are obsolete because the cars drive themselves.  Car ownership will be fractional, like a time-share.  If you do own a car, it can work as a taxi all day while you’re at the office.

This is indeed a formula for sharply reduced car sales … in Europe.  Most of the U.S. is sparsely populated, and poorly served by public transportation.  The Boston Consulting Group has produced the best study on autonomous vehicles, here, and this is from their study on car sharing:

Car sharing … will not do to the automotive business what iTunes did to music: it will not redirect a stream of revenues to a disruptive upstart, and it will not spark a widespread change in consumption.

The BCG predicts that, by 2021, car-sharing will have a trifling impact on U.S. sales: fifty-two vehicles, total (chart on page 11).  They predict that fully autonomous vehicles will not be available until 2025, and will not be 10% of the market until 2035.  It is only these vehicles that trigger the nightmare scenario for car dealers.  “Driver assistance” systems are luxury features, which boost dealer profits.


NHTSA policy guidance is based on the five-level SAE model.  This roundup, from Automotive News, envisages Level 4 autonomous vehicles by 2021.  No manufacturer is even guessing at a date for Level 5.

Bringing these vehicles to market is an important challenge for the manufacturers, and they will have an important impact on society.  They will not change the business of selling cars, however, for a good long time.  For car dealers, other trends are more urgent.

Links for the two BCG studies, in case you can’t download the PDFs: Car Sharing, Autonomous Vehicles.

Three Requirements for Online Car Buying

In this post, I am going to elaborate on Dealer Systems in the Consumer Space.  Every system in F&I must have a counterpart in the consumer space.  The diagram below shows the traditional dealer process in orange, and consumer systems in blue.


Each of the six tasks is now, or will be, available to customers online.  Obviously, these are web based systems and, for best results, they are also mobile.  Each consumer system must:

  • Share data with its dealer-system counterpart
  • Share data with other consumer systems
  • Save deal data for later use

Each consumer system must share data with its dealer-system counterpart.  If it quotes a VSC rate, the customer will expect to see that rate on the menu in the dealership.  If it obtains a credit decision, the customer will expect the dealer to know about it.  There are various ways to accomplish this.  In the VSC example, both systems should be reading rates from the same API.

Consumer systems must also share data among themselves.  Vehicle data is input to VSC rating, price is input to deal structuring, and the “line five” subtotal is input to credit processing.  It’s a good idea to keep a data-flow diagram handy.

Finally, the consumer systems must cooperate to store in-process deal data.  Customers should be able to choose which tasks they wish to do online, and then save the deal to be completed at the dealership.

I am mainly addressing new entrants from outside the industry, who may have a good system for one of the tasks, but fail to connect with the others.  This may also include dealer groups moving into online car buying, and system vendors like Cox.  My chart of platform capabilities is here.

Luddites in Las Vegas

At this year’s Industry Summit, I attended a session called Presenting F&I Products Online.  I have strong opinions on this, and I wanted to learn what other people are doing.  I wrote here about using an expert system.  Would I find my colleagues using apps, widgets, expert systems, and analytics?  Do they have a menu for consumer use, with responsive design that runs on an iPhone?

Sadly, this session was not so much about how, but whether to present products online.  This may explain why I got blank stares when I did this survey last year.  I am biased, so I will try to be fair with the other side.  Their argument is:

F&I is the last place we can make decent gross, so why would we screw that up by putting it online?

They assume that disclosing, say, VSC rates on a consumer site will inevitably lead to lower margins.  Well, maybe.  Consumers can apply for credit online, including direct lenders, and that hasn’t harmed dealer reserve.  A robot will never sell as well as Justin Gasman, but a consumer on a web site has all day to self-close.

Even if we assume that putting products online is bad for margins, the question remains whether we can hold back the tide of internet commerce.  This brings me to the Luddites.


In the early nineteenth century, Joseph Jacquard invented an automated loom that put a generation of weavers out of work.  The Jacquard loom can be programmed to weave complicated patterns, using punched cards.  This was the first time skilled workers had lost jobs to something resembling a computer.

The weavers didn’t take it lying down.  Organized under the apocryphal Ned Ludd, they set about smashing and burning power looms all over England.  I am wearing a silk jacquard shirt as I write this, but Luddism lives on wherever people fear losing out to technology.

This is not to demean thoughtful people like panelist Mark Thorpe, who quite reasonably want to see profits kept up for their dealers.  From my perspective, however, protection products will inevitably be offered online.  Consumers want to buy cars online, and providers want their products included.

When customers want something, the market has a way of giving it to them.  If it’s not the usual vendors, like Cox and CDK, then it will be technology startups like ShowroomXpress or new entrants like Amazon.  I see a parallel here with TrueCar and transaction prices.  The Luddites say these dealers are cutting their own throats.  I say they’re planning for the future.

Owner Loyalty in the Service Department

I was asked recently to explore the service retention space.  This is a little outside my F&I comfort zone, but everyone knows why service retention is important.  Parts and service make up 40% of a typical dealer’s gross profits.  And, there is actually some overlap with F&I.  Consider, for example, a service contract with “zero deductible at original dealer.”

Here, I present my impressions of the space in workflow terms, plus some thoughts on the features I found technically interesting.  The workflow has a natural break between the onsite procedures of the service department, and marketing procedures which may be a different department (or outsourced).

The space is dominated by two recent mergers: AutoPoint, which acquired DME about a year ago, and Dealer Track’s Service Pro offering combined with Xtime.  See Cox Strategy Redux.  There are some pure play marketing firms in the space, but these two vendors cover the full cycle.  They are able to exploit not only workflow synergies but technical ones.


For example, you want your telematics to feed information to both the shop and the invitation process, and you want your intake procedures to include information from the accepted invitations.  Also, if the vendor has analytics that can drive a marketing program, maybe they can optimize shop loading as well.

If you are looking at a full-cycle vendor, then the distinction I am making about workflow may seem arbitrary.  Here are features and functions commonly associated with software support for the service department:

  • Greeting boards and RFID tracking
  • Mobile greeting/CRM tools with write-up capability
  • Service menu with “loyalty products” as well as shop services
  • Scheduling and shop loading
  • Status tracking with text alerts for customers and technicians

Pure marketing, on the other hand, brings in additional vendors and different offerings.  In addition to the usual mailers and campaigns, these might include a box of cookies, owner loyalty “membership” programs, and prepaid maintenance.

If you’re in F&I, you may have sold the Ultra Care prepaid maintenance product.  The provider of Ultra Care is not a normal warranty company, however.  Performance Loyalty Group (PLG) offers this product as a service retention play.  Here are features and functions on the marketing side:

  • Multichannel marketing campaigns including call center support
  • Analytics to plan and evaluate the campaigns
  • Telematics interface
  • Geo-fencing and mobile apps

The service invitation process is well established, and now understood to include all media from cookies to WhatsApp.  What is interesting is the use of analytics to make best use of the media.  Text messages may be cheap compared to mailers, but there is a cost in terms of the customer’s attention.  AutoPoint has an advantage here, because they do original research on aggregated data.  Analytics is only as good as the data you put in.

Strategically, telematics is not only a powerful tool but a barrier to new entrants.  It reminds me of how the big DMS vendors once had a lock on OEM dealer communication systems.  For updates on the “battle for telematics data” follow Bob Chabot.

The holy grail of owner loyalty marketing is having the customer run your app on his smartphone.  This may even compensate for not having telematics data.  You can push invitations to it, and then manage service visits from scheduling through payment, along with geo-fencing and notifications.

Owner loyalty, of course, is not confined to the service department.  An app can be the touchpoint for new and used vehicle marketing as well.  Here, I am thinking specifically of the “velocity” method, in which the dealer is actively seeking vehicles to remarket.  For a list of popular app functions, look at AutoPoint or My Own Auto.

Cox Strategy Redux

It has been a few months since I posted my lighthearted Cox Automotive home strategy game.  In that time, four new projects have been announced linking members of the conglomerate.

Cox Game2

I am still watching for some extension of auction functionality into the used-car department, maybe leveraging vAuto.  No word yet on the development of COXML.

The Expanding Dealer Automation Space

In my earlier article on Cox Automotive, I wrote that the subsidiaries tile our “function space.”  By this, I usually mean the F&I function space, although Cox is broader than that.  In today’s post, I will explain about function spaces and why this idea is important for software strategy.

Let’s say that you have been asked to identify all the functions performed in the F&I office, and then find software to automate them.  I did exactly this for AutoNation, back when PVR was $600.  The first thing you discover is that a simple list won’t do.  You at least have to put the functions into workflow sequence.

Tasks in sequence are a one-dimensional function space: a timeline.  This will help you to define where the credit process ends, for example, and menu selling begins.  Ah, there’s the rub.  Maybe the workflow branches out, and now it occupies two dimensions.

As I wrote in F&I Magazine, the workflow that produces a finance contract is a lot like the workflow that produces a VSA.  If you can picture the “F” workflow as parallel to the “I” workflow, this is much more useful than a simple timeline.

Function Space

Typically, when you see a diagram like this, it is already partitioned into the familiar systems: CRM, Desking, etc.  That’s the definition of “thinking inside the box.”  If you were designing an integrated system, you would want to start with the unpartitioned space.  That’s the only way to properly scope and organize your web services.

In fact, it may give you some new insights about how to pass data and control among the functions.  Should a desking system pull VSA rates?  Should the menu run OFAC?  Can you instantiate a “deal object” somewhere, and pass it by reference?

Last summer, I wrote about mapping dealer-system functions onto the consumer space.  So, that’s a third dimension based on who the user is, plus a strategic imperative that the online experience must dovetail with the dealership experience.


What we see with Cox Automotive is an expansion of the domain covered by a single vendor.  The space dominated by the old CDK-Reynolds duopoly is a subset of this one (I will illustrate this in a later post, using a function point inventory).  The overarching function space was always there, of course, but it was filled with disconnected niche vendors.

In practical terms, this means that an increasing share of the dealer’s software budget will flow to integrated vendors outside the duopoly domain.  Since this is a strategy post, I will close with a Go metaphor.  Reynolds and CDK have been playing the game on a quarter board, and now Cox has highlighted their absence from the other 280 points.