Working with intermediaries to maximise motor finance renewals
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Chrysalis Loyalty’s 'Key2Key' finance and retention optimisation system has been transformational for dealers, who typically report the doubling of their retention and renewal rates after adopting it. By automating the identification of customers in an advantageous position to change their car, Key2Key addresses one of the most challenging tasks in the dealership. By delivering pre-calculated offers that produce high levels of repeat business which are also in the best financial interests of the customer the platform not only drives more sales but makes life easier for busy sales people in the dealership.
Motor Finance explores with Chrysalis Loyalty founder and CEO, Jolyon Barker, his original reasons for starting the business and where he sees it heading as major expansion plans get under way for 2018 and beyond.
You originally worked in traditional motor retail before moving to a specialist American consultancy. So what inspired you to start Chrysalis Solmotive?
I was fortunate and privileged to be exposed to all sides of leadership in automotive retail operations – from vehicle sales, body shop, parts and service, head office logistics to all aspects of finance sales. But it was going to work for the American consultancy Half a Car Inc. – which specialised in the retention and renewal process – which made me realise the transformational potential of really focusing on this area. The problem for many businesses in motor retail is that understandably, the demands of retention and renewal don’t always fit comfortably into everyday life in a high pressure short term results environment. I realised that optimising processes for efficiency by innovating with high quality data would go a long way toward easing that pressure and creating sustainable growth. Customer loyalty was at the heart of that, so I set about focusing on solving two problems – how to encourage that in a more scientific and frictionless way that would be more successful and also easier for dealership staff to manage.
What are the key elements that captives and dealerships should be considering in terms of client retention?
Typically in the UK retail market the PCP has been the most closely managed trade cycle but there is not only an opportunity but also a responsibility to offer all of our customers a managed trade cycle, regardless of finance type or whether they are cash buyers. This area is often overlooked.
To borrow some of Richard Thaler’s thinking, we are ‘Choice Architects’ whether we want to be or not – and the first misconception is thinking that it is possible to avoid influencing people’s choices – whether positively or negatively.
Secondly, the way that customers engage in their journey with us is changing fast and while technology is playing a huge part in this, we often over-complicate this. As a guiding principle, anything we do, should simply be the facilitation of good process. I saw the value of creating a system which would create an opportunity to fulfil part of this journey in a way that would be transparent and reassuring for the customer. If what we are doing for the customer does not add value, is not of genuine benefit to them and is not founded in transparency, then it is a distraction and to be discarded.
Chrysalis Loyalty founder and CEO, Jolyon Barker
What are the challenges of implementing automated processes in dealer networks or auto finance companies?
Selecting the right technology helps with automation – but the challenge is more around what is then done when we interact with the technology.
Hearts and minds - is everybody on the same page about the value and importance of renewal? You often find that senior management very much understand the need for robust retention and renewal practices in their businesses, but the long term importance of the journey is not always shared at operational level and businesses need to consider how they think more as one unit with one shared goal and vision – and how technology can facilitate that.
Focus - it's about maintaining focus right down to the operational level because there are so many pressures operationally at showroom level. Very often that means it's a good idea to think about how you can have dedicated focus on retention and renewal practice – it’s a profit centre in its own right.
Maintenance – once on the journey of customer retention – how will you maintain the focus and skill levels required? How will you manage and measure performance from the top? Real time reporting measures help with that – as does having an API that shares data with other key systems to augment the quality of reporting and performance data.
Making it easier – selecting the right tools that support your strategy, process and people.
What makes an effective retention scheme – one where funders can roll out a consistent process that is easy for their dealers to follow and generate results from.
There is often too much focus on technology!
Step one is to remember the ‘Point of Sale is the Point of Resale’. This is often overlooked. Are you introducing the renewal process at the point of purchase and setting an expectation?
Step two is to remember to tell customers what to expect from your business. Is anybody telling customers why we manage their trade cycle and what the benefits are to them as a customer?
Step three is to prepare for each contact and meeting with the customer throughout the process and especially to manage the aims and quality of communication.
Step four is to not let the customer down by delivering something different than was discussed or worse still, by having a disconnect between the promise and delivery of the above steps – and the ultimate experience at the time a customer appoints.
Technology should deliver on the strategic aims of renewal and retention. Do we really want to lengthen customer terms or is our algorithm always looking for best possible outcomes for the customer in terms of financial sustainability? It should be simple to use, but sophisticated and easy to implement as part of a rigorous process. Customers should be at the heart of it in order to deliver a genuine benefit. Systems needs to retain the customers best interest as an outcome because without that none of us have got a business.
There are many technical facets to a strong loyalty and retention system, such as sufficient technological sophistication behind the scenes to enable integration with a whole range of other systems and data sources .
Algorithms must use data to identify relevant change triggers from a customer perspective but I think also, with the advent of GDPR, must support responsible and ethical decision making processes on the part of the lender as well as the retailer on the ground to support the customer legitimate Interests.
As a business, we are inspired to do what’s right over the longer term for the consumer, so a big part of our objective is to help provide leadership to make the journey of all of our end customers at the retail level, a better one. As a simple example, managing trade cycles helps to ensure levels of indebtedness remain sustainable and there is a real issue with consumer debt levels in the UK. We see a big part of our role as assisting lenders in meeting their obligations in ways that are good for the customer, ethical, sustainable and compliant and helping them with the challenges of regulation.
How do you see the GDPR impacting funders in the motor finance world? What is the potential for using auditable algorithms to determine when contact is appropriate, compliant and in the best interests of the customer?
I welcome GDPR. We all have an obligation to treat customers fairly according to the Financial Conduct Authority guidelines and a responsibility when permitted to do so, to use customer information in ways that are in their interests and benefit them. We have consulted extensively with a leading QC to ensure that our system and the data algorithms that underpin it ensure that we and our own clients are set up to do exactly that. We will be talking more about this over the coming year, as GDPR becomes an ever bigger story for the industry.
With all the changes in electric cars, autonomous driving, etc what are your predictions for the next 5 – 10 years and will that mean a greater or lesser need for customer retention?
There is evidence to suggest that the younger generation is less attached to ownership, not just of vehicles but ‘stuff’ in general, than the current buying generations. When we were teenagers, the car was our social media – it was how we were liberated, connected and personally freed – and while there is still much truth in that, social media has impacted so much about today’s needs and behaviours. Online retailing is now a social norm so we know that buyers are becoming much more comfortable with completing entire transactions online. When you look forward ten years it’s always interesting to also look back ten years. It wasn’t hard to find people who would say “I’d never put my credit card details into the internet”, whereas today I have friends who have deliveries coming from online retailers every day for basic household items. If I go back ten years I would have found it hard to have found people who had successfully completed a car purchase and arranged their finance online without engaging with a dealer but that is happening daily now.
I think connected car technology is going to be really interesting once we get past some of the difficulties in terms of the privacy around the use of the data. We are going to see some really innovative solutions making use of connected car technology, in much the same way that some of the new disruptor banking apps are doing with consumer data; the emphasis of the service is all around data intelligence. So it’s “hey did you know you are spending £75 a week on coffee why are you doing that?” I have friends who value that (as 30-somethings) more than they value a bank statement.
The innovations of the next ten years will also create challenges for our own industry. For example, the advent of driverless technology will actually coincide with the decrease in the desire to own things. So the range of finance products will inevitably change and the industry will have to look more closely at flexible ownership schemes, for example. The one constant will be the increasing importance of data intelligence and reliable key metrics to help with decision making. In this sense, alongside the excellence of process, technology providers will need to continue to look ahead to ensure they meet these future challenges, in synergy with a changing market.