1. Methodology AASA Image Campaign: Phase 1 | Research of Independent Service Professionals © 2009 AASA and The Catevo Group | Confidential Marketing Executives Council Meeting | March 17, 2009

2. Methodology

3. Marketing Executives Council March 17, 2009 Methodology  Review existing quantitative data Validate focus group data Challenge findings of focus groups Provide basis for focus group questions – dive deeper into some of the issues

4. Marketing Executives Council March 17, 2009 Methodology  Our hopes: Obtain a better understanding of the service community regarding value-added programs, generic/name brands, country of origin, decision-making processes, etc. Obtain a better understanding of the service community for the development of an image campaign Capture feedback on marketing messages and spec creative created by Catevo Develop image campaign recommendations

5. Quantitative Data: A Review of Existing Data

6. Marketing Executives Council March 17, 2009 What We Knew  Research was collected by the Automotive Service Association and Babcox Publications  This data was used to validate some of the findings of the MEC focus groups and to enhance some of the overall findings

7. Marketing Executives Council March 17, 2009 ASA Surveys  ASA surveys its members in 2007 and 2008  The study examined the use of OE- purchased parts vs. aftermarket-purchased parts and country-of-origin issues  This study revealed that service providers want more information about the parts they purchase (i.e., country of origin, specifications, certifications, labeling, etc.)

8. Marketing Executives Council March 17, 2009 ASA Surveys They still buy the majority of their products from aftermarket sources

9. Marketing Executives Council March 17, 2009 ASA Surveys  The survey also showed that ASA members really don’t have a good understanding of the globalization issue: How parts are sourced Overseas manufacture standard validation They want to know more about “what goes into the box”

10. Marketing Executives Council March 17, 2009 ASA Surveys 60 percent of respondents said that aftermarket parts had a positive impact on their business; 74 percent said OE parts had a positive impact

11. Marketing Executives Council March 17, 2009 ASA Surveys About 29 percent said that quality problems with aftermarket parts had a negative impact on their business, compared to only 6 percent for OE parts

12. Marketing Executives Council March 17, 2009 Babcox Tech Group Survey  Results from Babcox’s every-other-year survey of techs were very consistent with results from the MEC focus groups Specifying particular brands Consumers’ preference in brands Where they receive information on products Importance of factors in deciding on a particular brand Type of parts purchased from OE dealer

13. Marketing Executives Council March 17, 2009 ASA Surveys  Contrary to the focus group findings The ASA study revealed that service providers are concerned about the quality of products outsourced from other countries  Consistent with the focus group findings The ASA study found that service providers do trust the parts they purchase from the OE dealers more; they see them as more reliable than parts purchased from aftermarket sources

14. Qualitative Data: Focus Group Findings

15. Marketing Executives Council March 17, 2009 Background  Focus groups held in: Raleigh Chicago Los Angeles  Included a mix of: Shop owners (50 percent) Techs (26 percent) Shop owners/techs (15 percent) Service writers (9 percent)

16. Marketing Executives Council March 17, 2009 Background  Decision makers on the brand of parts purchased  Had at least five years of experience  Shop had at least three service bays  Worked on all makes of vehicles  More than 50 percent of work was not tires and oil changes  More than 50 percent of purchases were from aftermarket sources

17. Marketing Executives Council March 17, 2009 Background  Participants included representatives from shops implementing “best practices”  Every effort was made to recruit the “questionable” service shop  Findings may be skewed

18. Key Findings

19. Marketing Executives Council March 17, 2009 Key Findings  Quality of aftermarket parts has significantly improved Not a concern the way it once was  Brand comes before country of origin Service community trusts the manufacturers  House brands sell on price alone Sentiment was that house brands were re- boxed generics that couldn’t compete on quality

20. Marketing Executives Council March 17, 2009 Key Findings  Few people (if any) claim they buy generic brands Only if nothing else was available (and not safety-related)  OE quality is still important Instills confidence in service community and to consumer  Quality first – everything else is secondary “Form, fit, function” is primary concern

21. Marketing Executives Council March 17, 2009 Key Findings  Online catalogs are a must Must include illustrations and be updated  Full-line offerings are not that important Confusion among full-line vs. short-line  Two-year/24,000-mile warranty coming This is an expectation among some in the service community  Training Lack of consensus on value of manufactures' training programs

22. Marketing Executives Council March 17, 2009 Key Findings  Marketing programs not valued The service community wouldn’t mind seeing marketing programs eliminated  Value-added programs do NOT increase loyalty Participants noted these programs do not influence their purchasing decisions  Trade magazines are effective Magazines were noted as the number one source of product information

23. Specific Areas of Interest

24. Marketing Executives Council March 17, 2009 Country of Origin  Most note where the products originate  Some say they would prefer to buy American but realize that is not realistic  They will ask country of origin if they haven’t heard of brand  Globalization is understood to be a reality

25. Marketing Executives Council March 17, 2009 Country of Origin  Almost no one could tell a difference in quality between U.S.-made parts and non-U.S.-made parts  Many said they could tell a difference in the appearance of the product  There is some lack of trust in parts made in smaller, emerging countries (e.g. Pakistan, Indonesia, etc.)

26. Marketing Executives Council March 17, 2009 Country of Origin  Summary: Brand comes before country of origin; they trust that the manufacturers have their best interest in mind

27. Marketing Executives Council March 17, 2009 Aftermarket Parts Quality  Parts quality has improved greatly over the past five years  Most believe that Japan has improved its quality the most  Several noted it comes down to who will stand behind their parts

28. Marketing Executives Council March 17, 2009 OE vs. Aftermarket  Many said OE has been overused  However, OE is very important to them and their customers  OE instills confidence  OE allows them to charge higher prices  Many only buy from dealers when they have to

29. Marketing Executives Council March 17, 2009 OE vs. Aftermarket  Many only buy specific parts from dealers (mostly electronics and emissions)  Dealer pricing has been reduced to gain business (at times it’s lower than aftermarket)  Some view OE parts as “cheaper over the lifecycle of the part”

30. Marketing Executives Council March 17, 2009 OE vs. Aftermarket  It is understood that dealer brands are re-boxed branded parts (e.g., Motorcraft)  Many see OE parts as the benchmark for quality  ASA data supports these findings

31. Marketing Executives Council March 17, 2009 Off-Brand/Generic Brands  Nearly all participants claim they do not use generic parts  They will use generic parts if only generic available and a vehicle has to be repaired  Many said that they would test a generic part on their vehicles first  They would never install a safety- related generic part

32. Marketing Executives Council March 17, 2009 Off-Brand/Generic Brands  Comments included: “It would be suicide to use those parts” “Why put your reputation on the line?”  A couple mentioned that they gave the consumer a choice More than half replied they wouldn’t give the choice

33. Marketing Executives Council March 17, 2009 Off-Brand/Generic Brands  A few participants who worked in economically depressed areas said they did what was needed to fix vehicles at a low price  Many said they don’t play the pricing game  In Los Angeles, the brand “Centric” is gaining in popularity (once a generic – now a recognized brand)

34. Marketing Executives Council March 17, 2009 House Brands  Many believe house brands are generic parts in house-branded boxes  Many have had problems with these parts  Many said they have been billed as “OE” but are not near OE quality  Salespeople only sell on price and do not believe in the products

35. Marketing Executives Council March 17, 2009 House Brands  Quality issues have arisen, mainly with brake products  While house brands may save money in parts, they could cost in labor  It is understood that premium products are name-brand products  Several have not had issues and find them a good value

36. Marketing Executives Council March 17, 2009 Consumer Brand Preferences  Consumers rarely ask for a brand “They don’t care; they trust us with their vehicles”  Some consumers say they are not keeping their cars long and are looking for the cheapest fix Need to be educated as to why a quality repair is needed

37. Marketing Executives Council March 17, 2009 Consumer Brand Preferences  A few noted they will offer a labor warranty but not parts warranty if the name brand/OE brand is not selected; as a result, consumers will often choose name brand/OE brand  Some say it is better to lose the job than to install a cheap or inferior part

38. Marketing Executives Council March 17, 2009 Definition of Quality  Form, fit, function  A part that never comes back  A part that outlasts the original part  A part that outlasts the warranty  A part that lasts a reasonable amount of time  A part that needs no modification by the technicians

39. Marketing Executives Council March 17, 2009 Definition of Quality  As good or better than the OE part  A part that performs the way it says it is supposed to perform and beyond  Fit and finish the same as the part that comes with the vehicle

40. Importance of Value-Added Programs and Services

41. Marketing Executives Council March 17, 2009 Warranty  Seen as a “given”  Manufacturers should stand behind their products  Lifetime warranties are seen as junk  Manufacturers should do a better job resolving warranty claims – seen as taking too long and too tedious

42. Marketing Executives Council March 17, 2009 Warranty  Many shops are offering two-year, 24,000 mile warranties They expect/hope their manufacturer partners will support them if product failure was manufacturer’s fault

43. Marketing Executives Council March 17, 2009 Catalogs  Industry format and standards mean nothing to this segment  Print catalogs are not used anymore and can be eliminated Note: Many still use print catalogs for filters and batteries They also considered themselves “old school” and were generally older in age

44. Marketing Executives Council March 17, 2009 Catalogs  Online catalogs were used by virtually everyone Illustrations are a must Must be updated regularly Several mentioned it helped when the sales rep showed them how to use it during one of the rep’s visits

45. Marketing Executives Council March 17, 2009 Toll-Free Tech Lines  Only a few mentioned that they use these services  Los Angeles participants noted some weren’t open on West Coast time  Many use iATN instead Others use Mitchell or other repair guides  It was noted that a quick resolution line would be of assistance to some

46. Marketing Executives Council March 17, 2009 Local Availability/ Widespread Coverage  Product availability is the name of the game If the preferred brand is not available, they will choose a different brand A few mentioned they will find out how soon the customer needs the repair before making a decision about brand

47. Marketing Executives Council March 17, 2009 Local Availability/ Widespread Coverage  Widespread coverage, on the other hand, didn’t seem as important They didn’t want the manufacturer to be spotty in coverage and wanted the popular applications covered Being an all-makes supplier was not important

48. Marketing Executives Council March 17, 2009 Marketing Programs/Rebates  Not valued at all  Take too much time  Too tedious/too much paperwork  Too many programs going on at once  Online games and programs not valued either  Many believe the programs can go away

49. Marketing Executives Council March 17, 2009 Marketing Programs/Rebates  Some mentioned lower prices would be nice but realized the manufacturers couldn’t control the price directly  Do value better point-of-purchase displays to help sell (cutaways, good vs. bad, new vs. old, etc.)

50. Marketing Executives Council March 17, 2009 Field Sales Reps  Some said they appreciated the visits by sales reps These tended to be the smaller and mid- sized shops  The best reps are those who know something about the product  Others said the best are those who can truly go back to corporate and make a difference

51. Marketing Executives Council March 17, 2009 Field Sales Reps  Many said the reps just get in the way  They were seen as valuable if they could visit and teach something unknown or resolve an issue  Most said they were too busy for reps unless reps provide significant value  Most said reps should not come late in the day

52. Marketing Executives Council March 17, 2009 Training Programs  Responses ranged from “don’t need manufacturers to provide training” to “can’t get enough of it”  Some get enough from third-party sources  Only a few using online training programs

53. Marketing Executives Council March 17, 2009 Training Programs  The negative: Too commercial Too advanced for the beginning techs Not advanced enough for the experienced techs Old information (focus on a new technology) Instructors reading out of a book Manufacturers need to fill gaps in the training offerings

54. Marketing Executives Council March 17, 2009 Training Programs  The positive: Manufacturers seen as the engineers and researchers (more credible) Would send their techs to training if seen as valuable Want to focus on reducing comebacks rather than selling more products

55. Marketing Executives Council March 17, 2009 Overall Importance

56. Marketing Executives Council March 17, 2009 Loyalty to Manufacturers Who Provide Value-Added Programs  There is very little  Some noted the exception is the period once they return from training  Many noted they wouldn’t change brand unless brand quality slipped  Loyalty comes from providing a quality product  Majority felt industry would not be hurt if these programs were eliminated

57. Decision-Making Process

58. Marketing Executives Council March 17, 2009 Decision-Making Process Top considerations when deciding on a part:

59. Marketing Executives Council March 17, 2009 Decision-Making Process When you are placing an order for a particular part, how often do you ask for a specific brand?

60. Marketing Executives Council March 17, 2009 Decision-Making Process When you are placing an order for a particular part, how often do you purchase a brand recommended by your aftermarket supplier?

61. Marketing Executives Council March 17, 2009 Decision-Making Process When you are placing an order for a particular part, how often do you choose the least expensive part?

62. Marketing Executives Council March 17, 2009 Decision-Making Process When you are placing an order for a particular part, how often do you only select the same brand than that of the one you are replacing?

63. Obtaining Information

64. Marketing Executives Council March 17, 2009 Obtaining Information  Trade magazines were number one Note: They do not read them – just “skim” through them Motor Age, Underhood Service and ACDelco’s Intune were the most mentioned publications Chilton and Mitchell repair guides were also mentioned

65. Marketing Executives Council March 17, 2009 Obtaining Information  Several noted they went to trade shows (AAPEX, SEMA, CARS, local ASA events), or browsed the Internet (iATN)  Some relied on local organizations (IGOA in Raleigh and ASC in Los Angeles)  Half relied on getting info from their suppliers (e.g., CARQUEST rep)

66. Reaction to Marketing Messages

67. Marketing Executives Council March 17, 2009 Marketing Messages Why Take the Risk? This theme focuses on the question of “why take the risk on gambling with your livelihood by choosing a product from an unproven source?” Independent service providers strive for customer loyalty and cannot take the chance of losing core customers

68. Marketing Executives Council March 17, 2009 Marketing Messages "Good Enough" Never Really Is Relying on short-line manufacturers for parts doesn't always yield the best results for techs, shop owners or their loyal customers This theme also appeals to the inherent pride that independent garages bring to their craft; after all, if the standards of quality that go into the overall repair job are so much higher than the competition, shouldn't the quality of the replacement part be, too?

69. Marketing Executives Council March 17, 2009 Marketing Messages Fool Me Once. Only. This theme shows what would happen if the wrong decision was made and the damage that might occur to a customer relationship because of a poor decision about a replacement part This theme plays up the pain that awaits independent garage owners who take the cheap way out with inferior parts lines: lost loyalty, re-dos, unfavorable word-of-mouth, etc.

70. Marketing Executives Council March 17, 2009 Marketing Messages  All three of the messages resonated with the focus groups. “Why Take the Risk?” scored the highest.

71. Reaction to Spec Creative

72. Marketing Executives Council March 17, 2009 Spec Creative Review Approximately half of respondents preferred the ad on the left. The other half preferred the ad on the right. “Pride” Ad “Fear” Ad

73. Marketing Executives Council March 17, 2009 Spec Creative Review  Those who liked the “pride” ad: Felt the “fear” ad was too negative Felt the “fear” ad spoke to the positive aspects of the independent aftermarket (loyalty, doing the job right, customer satisfaction)  Those who liked the “fear” ad: Liked the “in-your-face” approach and the shock value of it Felt it addressed what professionals want to avoid

74. Marketing Executives Council March 17, 2009 Spec Creative Review  Additional findings: Shop owners and older focus group participants preferred the “pride” ad – Shop owners noted that the “pride” ad spoke to one of the scariest aspects for the independent aftermarket service provider: losing a loyal customer; much like real estate, it is more expensive to obtain a new customer than to retain a loyal customer More of the younger focus group participants and technicians preferred the “fear” ad

75. Marketing Executives Council March 17, 2009 Would Advertising Work?  Many thought the ads were “preaching to the choir”  They thought that the shops who most often at fault for buying/installing subpar parts would be the shops who are not generally committed to the industry and who do not belong to associations, attend trade shows or read trade magazines  So, how as an industry do you reach out to them?

76. Marketing Executives Council March 17, 2009 However…  Many of the focus group participants believed that an image campaign would be useful because: It would reinforce always doing the right thing (“don’t cut corners”) The magazine could be passed around (from tech to tech, from shop to shop) Many of the technicians at the “good” shops today will own a shop in the future so this is a way to invest in the future It’s better than doing nothing

77. Marketing Executives Council March 17, 2009 But…  The groups did agree that advertising alone is not the answer  Reaching out to the shops that offer the $12.95 oil changes and $69.95 brake jobs will be a major challenge  Ultimately they are the ones who are jeopardizing the image of the independent aftermarket due to their unprofessional business standards and by installing parts of questionable quality

78. Summary of Key Points

79. Marketing Executives Council March 17, 2009 Validating Existing Beliefs  Brand comes before country of origin  “House brands” sell on price and price alone  No one claims they buy generic parts  OE quality is important  Form-Fit-Function is primary... everything else is secondary  Trade magazines can be effective

80. Marketing Executives Council March 17, 2009 Possible Surprises  Quality of aftermarket parts has improved  Print catalogs have become obsolete (online catalogs a must)  Full-line offerings not that important  2-year, 24k mile warranties making a mark  Marketing programs not valued  Value-added programs don’t increase loyalty  “Low-end” shops impacting whole industry reputation

81. Marketing Executives Council March 17, 2009 Why the Research Worked  Validated industry consensus  Revealed some unknowns  Countered conventional thinking Continued...

82. Marketing Executives Council March 17, 2009 Why the Research Worked  Contradicted original strategy and messaging: “Preaching to the choir” on quality Lack of loyalty toward value-added programs “Short-line” vs. “full-line” argument lacked resonance Campaign target should be changed, expanded Audience of image campaign should be on “low-end” service shops

83. The Road Ahead

84. Marketing Executives Council March 17, 2009 The Road Ahead  Realizing budget is an issue for 2009, it is important to start the “buzz” going at least on the trade side.  If budget becomes available, expanding the “buzz” in 2010 is recommended.

85. Marketing Executives Council March 17, 2009 The Road Ahead  Remainder of 2009 Trade PR Advetorial Campaign Industry Award Program

86. Potential Next Steps (a springboard for discussion)

87. Marketing Executives Council March 17, 2009 Supplier Image Initiative Next Steps To target repair professionals -  Technical Article Series on Product Quality  Collaborate with trade associations to get message out – ASA  Address business practices

88. Marketing Executives Council March 17, 2009 Supplier Image Initiative  Repair Professional – “Product Quality” 6-Part Series: Feature Articles 1.What’s in a Brand? 2.Keeping Customers for Life 3.Value of Value Lines 4.Beyond Price: Value Added Services 5.Who Supplies the Tail? 6.We are All in this Together

89. Marketing Executives Council March 17, 2009 Supplier Image Initiative Next Steps To target channel partners -  Advertorial Campaign: – Members devote one full page ad to campaign from existing Marketing budget (divert funds) – Negotiate an advertorial page for our message – Member’s ad remains in tact – No additional cost to member  Industry Award: – Supplier Excellence based on our criteria – Voted on by channel partners – Promoted throughout the industry

90. Marketing Executives Council March 17, 2009 Supplier Image Initiative  Jobber / Distributor – “Recommended Best Practices of Value Added Suppliers” Supplement with full-page trade ad 6 Feature Articles 1.What’s in a Brand? 2.Definition of Full-Line 3.Value of Value-added 4.Direct Importing: Risk v. Reward 5.Who Supplies the Tail? 6.We are All in this Together

91. Marketing Executives Council March 17, 2009 Supplier Image Initiative  Supplier / Manufacturer – “Supplier Image” Special Reports 1.What’s in a Brand? Selling Against Short Lines 2.The Value of Value-Added Services Quantify do not Just Give Away for Free 3.Protecting the Aftermarket Maintaining consumer confidence

92. Methodology Thank You © 2009 AASA and The Catevo Group | Confidential Marketing Executives Council Meeting | March 17, 2009