It was at last year’s Detroit Motor Show that the world’s
second-biggest car maker, Ford, announced that it was looking to
diversify and become a provider of top-line motoring services. Last
week, the American car giant put its money where its mouth is and agreed
on the pounds 1bn acquisition of Kwik-Fit, a purchase which delivers
1900 outlets including 143 Tyre Plus centres, 71 Apple Car Clinics, a
33% stake in Hometune Motoring Services and a growing motor insurance
and telemarketing business.
Sir Tom Farmer, who founded Kwik-Fit in 1971 and remains chairman and
chief executive, will make about pounds 78m from the deal.
Ford’s president and chief executive officer, Jacques Nasser, claims he
has made, ’an important step toward Ford’s goal to become the world’s
leading consumer company that provides automotive products and services
through world-class brands’. Kwik-Fit, Nasser says, will allow Ford to
’get closer to the consumers who own other vehicle brands’.
On the face of it, this looks like Ford’s best chance yet to get into
the lives of its owners and potential purchasers with some nifty
cross-selling - and gain access to Kwik-Fit’s broad customer
database.
’For the first time it gives Ford a major opportunity to deal directly
with people,’ says director of consumer consulting at The Henley Centre,
Martin Hayward. Until now, Ford has had access to customers only through
its dealerships, which, although appearing to represent the
manufacturer, are just branded forecourts where the dealer, not Ford,
runs the customer relationship.
In the next three years that relationship is likely to change as the
Treaty of Rome’s block exemption clause comes up for review in 2002. In
effect, this means it’s likely that car makers will no longer have so
much control over who sells their cars.
Car supermarkets
Badged dealers may well be replaced by the Family Car Company or the
Luxury Car Co selling Jaguars, Rovers and BMWs on the same
forecourt.
Just as consumers can go into a supermarket and select from a wide range
of brands, so they will be able to go to a dealership and buy a range of
cars. Ford has already dipped a toe into this market with its pounds
28.3m purchase of Dagenham Motors, the UK’s largest Ford dealership.
By snapping up Kwik-Fit, a successful servicing retailer with 1900
heavily-branded sites in the UK and Europe, Hayward believes Ford is
preparing for inevitable changes in the way cars are sold in Europe.
Long term, access to Kwik-Fit’s database and the frequent contact it can
facilitate will let Ford see who is in the market for a new car - anyone
who’s renewed their exhaust three times or more is an obvious
target.
And with pressure on car makers to keep prices down after last year’s
Monopolies and Mergers Commission inquiry into car pricing, it’s in
after-sales services, such as insurance, where profits lie, says What
Car? editor Julian Rendell. ’It’s the lifetime of the car and the
motoring experience in which revenue is made,’ he says.
On a niche level, Land Rover has exploited this trend with consistent
success. Next month it launches One Life, a new magazine mailed twice a
year to 100,000 Land Rover drivers. ’It’s about adventure, exclusivity
and tangible customer information,’ says Lisa Thomas, managing director
of Land Rover’s direct marketing agency, Craik Jones.
This is Land Rover’s newest tool in a kitbag of gadgets designed to keep
in touch with owners. Other methods include its adventure catalogue, a
glossy coffee-table tome illustrating tempting off-road Land Rover
adventures, because, says Thomas, ’we know that’s what they love most’,
to more prosaic direct mailings about servicing, warranty renewal and
repurchase.
’Land Rover is a lifestyle car, but a volume manufacturer could do
this,’ Thomas believes. ’With Land Rover, it’s about motoring pleasure;
for Ford it could be the customer ownership experience.’
Ford, however, is more cautious about its plans to exploit its new
partnership.
Its manager of corporate affairs, John Gardiner, says that, like its
earlier purchases of Jaguar and Volvo, the Kwik-Fit brand will have a
separate identity and customer base.
Differing markets
’Kwik-Fit’s customers are very different from Ford’s dealer network. In
the UK, 80% of Kwik-Fit customers do not drive Fords,’ he says. Not so
surprising perhaps, but nevertheless, there are obvious synergies.
He says: ’Ford dealers account for 27% of the value of the after-sales
and parts market for its brand, the other 73% have fallen out of the
system and there are those vehicles over three years old that Ford
dealers no longer speak to.’
This is where frequent contact via Kwik-Fit could reap rewards. What
Car?’s Rendell agrees that this is certainly part of the strategy.
’It costs a fortune to service a car at a dealership garage, with labour
of pounds 50 an hour and sophisticated technical garages to support, so
there’s increasing pressure on car makers to reconnect with the owners
of four- or five-year-old cars who don’t go to the dealership.’
And, as Hayward adds, Ford is also ’sniffing around’ the RAC, the car
breakdown business whose sale to US group Cendant was blocked by the
Monopolies and Mergers Commission last year.
’In this context, the purchase of Kwik-Fit is absolutely a natural
progression,’ says Hayward. ’The distinction between selling products
and services is getting very blurred and, like other car makers, Ford is
selling a package that’s not about cars, but about the experience of
driving.’
However, Hayward detects possible tensions during the next few years,
when Ford’s existing dealerships battle for customers against Kwik-Fit:
’It’s an interesting conundrum, because Kwik-Fit has been very
successful at database management, and selling insurance on the back of
customer contact, while Ford dealerships, which also sell insurance,
hang on to their customer details. They belong to the dealership, not to
Ford.’
So, while the purchase of Kwik-Fit gives Ford a long-term portfolio of
real estate and ongoing driver contact, it could generate tensions.
Nevertheless, says Hayward, no other car maker has bought itself such a
strong fistful of predictive data, or the high street and out-of-town
presence that it will need come 2002.
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