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Overseas Military Sales

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1 Overseas Military Sales
Audi of America & Overseas Military Sales Monday, 6 August 2012

2 Attendees Audi Tony Trapalis, Corporate Sales Manager
Ari Kantrowitz, Corporate Sales Strategist OMSC Steve Frisch, SVP Corporate & Retail Operations Tim Daniels, SVP Worldwide Sales Rob Schwartz, VP Marketing & Ecommerce Afia Arneja, VP, International AutoSource Jeff Kryjak, Director, Product Marketing Kate Connolly, Group Manager, Product Marketing

3 Agenda About OMSC - Business Unit Review - Operations Overview
- Business Model: Special Order v. Stock Audi of America & OMSC: A Growing Partnership Review - Looking Ahead Growing The Business: Opportunities & Risks - Faster Turns, Less Aging - Production Planning & Management - The Competitive Edge - Leveraging AoA Assets Next Steps

4 About OMSC OMSC is the world’s leading marketer of automobiles to the U.S. Military, diplomatic foreign service, and international business communities outside the U.S.. Working in partnership with leading manufacturers, the Company’s corporate strategy is to focus on markets that are inherently difficult from logistical, cultural and sales implementation standpoints, and require entrepreneurial and organizational capabilities to effectively serve the unique needs of our partners and these customers.

5 OMSC’s Unique Value To Our Partners To Our Customers
Specialized sales, marketing and logistical expertise in niche markets Capture otherwise inaccessible U.S. consumer markets to generate incremental business Support customers through all aspects of pre and post purchase – finance, warranty, etc. Downstream revenue opportunities for the U.S. dealer body – new sales, repeat sales, service, etc. Carry your brand messages to these inaccessible markets outside the U.S. Opportunities to test and grow targeted segments – consumer and vehicle Trusted resource; government-endorsed contractor, longstanding Fortune 500 relationships Convenience and service; cater to customers’ unique needs; “what you need when you need it” Value; pre-determined no-haggle pricing, program positioned as a unique benefit Guarantees and protections; customer is price protected from any increases after order; satisfaction guaranteed at delivery or the customer is entitled to a full refund Financing; programs tailored to the needs of these markets

6 FINANCIAL SERVICES GROUP (FSG)
OMSC Business Units POST EXCHANGE (PX) – 71% U.S. Military, DOD personnel and contractors Sell directly on U.S. military bases overseas TELESALES - 10% E-COMMERCE – 8% Sell vehicles over the phone and online Online transactions – 24/7 Chat Significant growth opportunities AUTO EXCHANGE (AX) – 11% Same unique market as PX, different brands Retail stores located off-base in Europe Dealer-like positioning FINANCIAL SERVICES GROUP (FSG) Tremendous expertise and efficiency Centralized F&I manager Supports other three business units

7 About AutoExchange (AX)
Key Stats: Established over 30 years ago Market and sell to U.S. military stationed or transiting through Europe 16 locations just outside military bases in Germany, Italy, Belgium and the U.K. Delivered 425 Audis in 2011, 2012 goal of 672 Over 90% of AX deliveries are in Europe Aggressive local competition from BMW and Volvo Major rebranding effort CY11-13 Typical Audi inventory level units on the ground 7

8 About AutoExchange Europe – Accessible Troop Strength Estimates CY12
Locations Not Mapped: BRATISLAVASlovakia CY12 69,421 CY13 64,522 CY14 65,022 Bremerhaven GYOR Hungary Emden Brussels Belgium NECKARSULM Lakenheath Spangdahlem Schweinfurt INGOLSTADT Bamberg Mainz Aviano Ramstein Vilseck Vicenza Kaiserslautern Grafenwoehr Weisbaden Ansbach Heidelberg Stuttgart

9 About AutoExchange Military Sales The Customer & Sales Environment:
Military personnel typically stationed in Europe for three year tours, often accompanied by their families Military and Department of Defense permitted to operate private vehicles in Europe, resulting in high demand for locally delivered, U.S.-spec vehicles, to be taken back to the U.S. after their tour Europe serves as a transportation hub for worldwide U.S. military operations, extending the market beyond those stationed in Europe Our sales managers and agents are well known in the military community and are considered “part of the family” Military Sales

10 About Military AutoSource
Key Stats: Reach inaccessible customers and provide remote sales channel – online sales Accomplished through , live chat and phone Delivered 294 Audis in 2011, 2012 goal of 298 Off-base brick and mortar presence not possible due to environment and/or economics (e.g., Iraq, Afghanistan) Customer Profile: Military member located in a region outside of Europe Needs vehicle delivered in the U.S. Saved money while overseas – combat pay Channel preference – opts to conduct business over the internet Market Size: Est. 75,000 10 2011 Audi Delivery Share

11 About International AutoSource (IAS)
Key Stats: Established close to 20 years ago Sell to American and foreign nationals transferring to and from the U.S. IAS & Diplo delivered 423 Audis in 2011, 2012 goal of 520 Customer Profile: Executives from Fortune 500 companies Foreign nationals with no U.S. credit history or driving record – makes financing a challenge 60% lease due to short-term assignments 25% repeat purchase Affluent, high disposable income Large sphere of influence – high referral rate Seeks high-quality products; knowledgeable and well informed Market Size : Returning U.S. expatriates – 100,000* Foreign nationals – 1,051,919** * Source: Employee Relocation Corporate Estimates ** Source: U.S. Department of Justice Immigration and Naturalization Service 2011 Audi Delivery Share

12 About Diplomatic Auto Sales (Diplo)
Customer Profile: Members of the international diplomatic and foreign service community Marine security forces stationed in areas where there are no PX locations Affluent and high profile High-end buyer, purchases every 3-5 years Loyal with a high referral rate Market Size: Small, but stable market 9,000 U.S. foreign service employees overseas (not including spouses) 1,000 Marine security guards Telesales 37% 2011 Audi Delivery Share 12

13 OMSC Operations Overview
Sales Administration New York & Kronberg Ensure all orders are qualified and coordinate with salesperson and customer once order is submitted Warranty Support New York & Kronberg Provide customer support with any vehicle-related issues after delivery. In Europe this includes support for military personnel who did not buy their Audi through OMSC Technical Services New York Coordinate submission and tracking of orders and all logistics through delivery; manage OMSC’s order bank; prioritize production against allocation budget Dealer Services New York Coordinate preparation of all delivery paperwork and related communication; maintain relationships with more than 180 U.S. Audi dealers

14 The Model: Special Order (SPO) vs. Stock
On average, pre-sold Special Orders (SPOs) represent roughly 40% of annual Audi deliveries Special Ordering is positioned as a unique program benefit The customer SPO order to delivery window ranges from days SPOs are written with a Requested Deliver Date (RDD), based on the customer’s transportation needs and/or expected duty rotation “Order Accepted” SPOs carry a commitment (contract) from OMSC SPO lead times are managed by OMSC based on current tracking against forward allocation and other production dynamics (MY changeover, plant downtime, etc.) SOLD BUILT DELIVERED

15 AoA & OMSC: A Growing Partnership
Quick Stats: Relationship with Volkswagen Group of America began close to 30 years ago Began working with Audi of America in 1993 Growth acceleration began in 2009 Volkswagen Credit floorplan Audi/VW line at $15mm, doubled from 2011, pursuing an additional increase to $19mm Audi Financial penetration close to 30% 1.151 1,021 Deliveries 603 242 15

16 2012 Review OMSC Audi Deliveries Through July 823 551 622

17 Key Drivers Through July 2012
2012 Review YTD Business Unit Performance Key Drivers Through July 2012 Business Unit Leads Orders Deliveries Plan Actual % Plan Auto Exchange 1,064 1,846 173% 519 366 71% 396 264 67% IAS & Diplo 2,061 1,554 75% 398 191 48% 263 163 62% ECommerce 2,385 1,665 70% 214 172 80% 164 124 76% TOTAL 5,510 5,065 92% 1,131 729 64% 823 551

18 2012 Review YoY Mix Performance CY12 Delivery Mix CY11 Delivery Mix
Full Year CY12 Delivery Mix Through July 18

19 2012 Review YoY Top Seller Performance | Through July -24% -61% +8%
-15% -24% +88% -71% -120% 19

20 Looking Ahead Audi Deliveries | YoY Long Range Forecast 2,102 2,000
+620, 40% from CY12 2,102 2,000 1,823 1,490 5% 10% 1,084 22% 20

21 Manual Vehicle Ordering Ability to Easily Change Destination
Opportunities & Risks Faster Turns & Less Aging > Quick turns and minimizing levels of aged inventory is a priority > Pre-selling stock inventory and maximizing SPO delivery timeframes are cornerstones of OMSC’s pro-active inventory management strategy Production Transparency Efficient and accurate information from order to delivery ensures that : Customers have a positive experience and reduces the likelihood of cancellations Salespeople have confidence in the process and more readily advance sell ORDER BUILD SHIP Challenge: Manual Vehicle Ordering Solution: Batch Ordering Mechanism Challenge: Vehicle Build Status Solution: Expanded Data Transmission Solution: Define various AIM statuses Challenge: Location of Vehicle Solution: Expanded Data Transmission Ability to Easily Change Destination Solution: Possible direct access to this filed in AIM or other system?

22 Opportunities & Risks Faster Turns & Less Aging AIM to OMSC CRM

23 Opportunities & Risks Faster Turns & Less Aging Optimize Logistics
Port of Bremerhaven Optimize Logistics > All OMSC vehicles travel to Emden, then Bremerhaven - even those staying in Europe > On average this adds four to five weeks to the delivery time and additional cost > Possible alternative: establish a more central delivery center; preliminary discussions with Rittersbacher Kaiserslautern Port of Emden Tale Of An A6 Sergeant Andrew Kline Delivering in Kaiserslautern Over 1,003 miles and roughly 30 days, to go 264 miles Kaiserslautern Delivered Here INGOLSTADT Built Here

24 Opportunities & Risks Production Planning & Management
Product cycle Model year changeover plan Production “scheduling schedule” Monthly production submission deadlines Tracking orders vs. allocation Allocation Budget Monthly budget review process? CY13 budget planning timeline More capacity and flexibility expected?

25 Opportunities & Risks The Competitive Edge #1: Demonstrator Program
Audi Military | Europe > Over 60,000 troops in Europe > BMW Military delivers an estimated 3,000 units annually, and Volvo roughly 1,200 > We can do better! #1: Demonstrator Program > Invaluable sales and marketing tool, currently a competitive disadvantage > Proposed program: 15 units per quarter (60 per year) for active demonstrator use > Support with marketing and awareness campaign > Announce to sales force at the sales meeting in October

26 Opportunities & Risks The Competitive Edge
#2: Navigation & AudiConnect™ > Audi’s navigation and new AudiConnect™ technology are non- functioning in Europe > These features are extremely important to customers so this presents a significant sales and marketing challenge and competitive disadvantage > Standard on all Prestige trims; at this price point customers are discouraged to learn this equipment won’t work > What options are there to get the technology to work in Europe?

27 Opportunities & Risks The Competitive Edge #3: Return Home Shipping
> Provide military customers with the option to put their vehicle back into the Audi transport system for shipment to the States for their next assignment > This is a tremendous value-add, and a natural extension of the Premium Brand Ownership Experience > This kind of program is currently available to BMW military customers

28 Opportunities & Risks The Competitive Edge #4: Factory Delivery/Tour
> A factory delivery and/or tour would enhance the Audi experience for new and potential customers > Customers often ask about this program - how can we offer this to our customers or craft a special military package?

29 Opportunities & Risks Leveraging AoA Assets
> Maximize the Audi assets and resources including: Collateral Materials & Sales Tools - Brochures, photo, video, product launch kits and events Merchandising - Showroom display, POS kits Sales Training - classroom materials, Ride and Drive events (stateside and Europe) Customer Experience Programs Audi Driving Experience Audi Forum > Collaborative Marketing Planning - Review stateside/U.S. dealer marketing calendar; tie in and create synergies whenever possible - Identify and propose marketing opportunities for potential Audi support

30 Overseas Military Sales Group
Audi of America & Overseas Military Sales Group


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