Making a plan…
Clarity the key to a vehicle maintenance product’s success
IF PROPERLY DEVELOPED and articulated, vehicle maintenance plans become an important tool in any salesman’s armoury. The vehicle industry has its back to the wall. It’s one of the world’s toughest industries and arguably currently more so than ever before. For starters, there are too many vehicles and not enough buyers. One way of making vehicles more attractive buys is by adding maintenance plans to the deal and those have also become a principal means of differentiating various brands.
For example, Hyundai claims the longest plan at 150 000km or five years. BMW claims to have introduced the concept to SA. Whatever the detail, such plans have become a staple element when buying any vehicle. If you’re buying a new car, a maintenance plan or some other form of it, is an expected part of the deal.
All leading vehicle manufacturers and many financial institutions offer maintenance plans and some dedicated service providers do nothing else. Similarly, a second-hand car can be made significantly more attractive by a dealership if it comes with a strong plan.
Paul Mokoena, group executive: marketing at Innovation Group, says buyers are increasingly using the value-added maintenance plan as a decision-making tool when assessing which vehicle to buy. As a result, the demands on motor manufacturers, insurers and dealerships to develop strong offerings continue to increase.
And yet there’s a clear irony at play in this scenario, as many prospective buyers don’t fully understand the distinction between the various plans on offer. For example, a service plan is a very different product to a maintenance plan, as is the case with a warranty.
Independent providers, such as the Innovation Group, have developed and manage product ranges for many motor brands and insurers operating in this market, as well as products offered to the end customer. They have experience of all sides of the motor plan paradigm, managing the actual business processes that lie behind maintenance plan offerings – from the call by the buyer to the call centre through to the logistics that support the work carried out by repairers.
Mokoena highlights the importance of matching a plan with a vehicle and in the right individual context. “For example, it would be a really bad idea to buy an MMP designed for the 1 500cc mass market vehicle if you own an upmarket executive vehicle. Because it’s designed for a mid-range massmarket car your cover would exclude certain items found on a luxury car and the price cap on parts cover wouldn’t cater to the cost of luxury vehicle parts. So consumers really need to make sure they understand the technical features of the cover and whether or not those details are suited to their specific situation. Otherwise they’ll end up feeling as if they’re being ripped off.”
This matter of feeling ripped off is a common thread throughout the retail motor trade and especially in vehicle plans. It’s largely because the buyer failed to read what he was buying and had unrequited expectations.
“It’s a fascinating time, because new distribution channels – such as the Internet and mobile technologies – for products are really coming into play now, creating opportunities to enhance ease of access, improve client education and lower the cost of the product,” says Mokoena.
“Recently we’ve seen players looking to develop ‘mix and match’ plan combinations. For example, at Innovation Group we recently developed a product that combines key elements of a service plan and a warranty plan. Because plans are priced to cover the cost of an extensive range of original equipment manufacturer (OEM) parts, and because they often cover items really unlikely to need attention, they can be quite expensive.
However, the mix and match concept provides great cover for items most likely to need replacing or servicing while adding a cost component for the customer when it comes to other less commonly dealt with parts. Those sorts of options dramatically lower premiums for the end customer, so we expect to see that trend growing stronger in years to come,” he says.
What product is ultimately bought – and whether someone buys at all – often has more to do with the actions and motivations of the car salesman than to how the motorist perceives the quality of the various plans offered.
In fact, often the car salesman acts as a very effective buffer, presenting only
the offerings he feels will add value to the deal and will be easy to articulate and sell. Mokoena says salesmen and finance and insurance staff on the dealership floor may be reluctant to offer value-added products for fear of chasing the buyer away with complex explanations of the offering. That’s especially relevant in a recessionary econ- omic climate, where dealerships are pushing hard to make sales.
“If maintenance plans are going to be a strong point of competitive advantage for motor manufacturers it’s essential they’re explained in detail on the dealership floor and in a way that ensures the buyer will quickly comprehend all the details and the benefits. Customers are keeping their cars for longer periods. Therefore they desire service and maintenance plans. However, the way the product is developed and packaged is central to actually meeting that need. If the product is properly developed and articulated it becomes an important tool in the salesman’s armoury and will be used.”
Consumers must understand the technical features of the cover. Paul Mokoena