September/October 2000

SEPTEMBER SURPRISE

How will PPG’s recent moves with LYNX and GTS affect the auto glass industry?

by Leslie Shaver and Debra Levy

 

In the span of less than a week in early September, LYNX Services by PPG (LYNX) and its parent company, PPG Industries of Pittsburgh, made two moves that have the potential to change the auto glass industry dramatically.

The first announcement came on September 7, when in addition to announcing a new agreement to provide network services to Allstate, LYNX announced a new pricing system that may revolutionize the way networks do business. Five days later, PPG announced it had acquired GlasPac Total Solutions (GTS) of Portland, Ore., a supplier of business management software for glass shops. Both of these moves have sparked tremendous debate throughout the industry.

The new facet that Allstate Insurance of Northbrook, Ill., has added to its Glass Claim Express program could herald sweeping changes in the way auto glass replacement business is done in the future. Titled Customized Offers©, the new feature allows glass service providers (GSPs)—repair and replacement companies that have already participated in Allstate’s Offer and Acceptance (O&A) program—to offer deeper pricing discounts in exchange for the volume of work.

In a letter and packet of information mailed in late August, Allstate’s national glass program manager Sheri Beaver invited all GSP’s to participate in the new program. “The changes in Glass Claim Express are designed to improve efficiency and deliver greater overall satisfaction to Allstate policyholders,” said Beaver.

The inauguration of Customized Offers coincides with a change in claims administration announced by Allstate late last year. LYNX has taken over as the glass claims administrator for the nation’s second largest auto glass insurance company. The contract had been held by Safe-lite Glass Corp. of Columbus, Ohio. LYNX now administers the entire Allstate program including Customized Offers beginning on September 20 in a rollout staggered throughout the United States.

A Change from the Past

In an exclusive interview with AGRR magazine at the LYNX Call Center headquarters in Fort Myers, Fla., last month, LYNX director of national sales Chris Umble detailed how the new option will work.

“LYNX’s entire business model is dedicated to making sure policyholder preferences are honored and that glass service providers have an opportunity to compete fairly,” Umble said. “We feel both those goals will be accomplished with this new program.”

Allstate’s previous model under Safelite had required that the policyholder be directed to a Safelite shop or Safelite network affiliate unless the policyholder specifically requested a particular shop. The LYNX model calls for the policyholder to be asked specifically if they have a particular shop they wish to use. “If the policyholder says yes, we will refer to that shop 100 percent of the time, no exception. The Customized Offers program doesn’t even enter into that equation,” Umble said.

In cases in which the policyholder has no preference, the Customized Offers Option (COO) comes into play. LYNX then offers the policyholder the names of three GSPs. In the past, such referrals would have been based on a complex algorithm that pulled the three closest GSPs (based on area code and phone exchanges) next in the rotation. However, under the COO, the first two companies chosen will be from among those companies within the vicinity which have made better offers. The third GSP listed will continue as an Allstate GSP, regardless of the price that has been “in queue” for the longest time since the last dispatch.

The level of the discount determines the size of the pool from which the first two companies will be drawn. For example, if the lowest discount in that pool is at 60 percent off NAGS, then the names will be drawn from shops that are within 6 percentage points (10 percent of 60) of the offer. If the best discount is 20 percent off, then the names will be drawn from shops that are within 2percentage points (10 percent of 20) of that offer.

“Being the lowest price does not guarantee you will always be presented. It does mean that your price will help define the pool and that you will be in the pool of most competitive shops from which two will be presented,” Umble said. “Of course, this rotation will be employed only when the policyholder has no shop of preference.”

How It Will Work?

Umble said that each GSP has already agreed to accept Allstate’s offer for auto glass repair and replacement services in four different types of territories referred to as A through D.

“GSPs that wish to enhance their offer may log-in online and move through a series of screens to enter additional discounts, shown as extra points off NAGS List Prices™. They may increase their discounts in as many or as few territories as they wish. They may also enter a reduced price for windshield repair as well,” Umble said. “Discounts provided for any territory must be honored in all those territories, regardless of state lines.” He continued, “Companies with multi-locations need to be aware of this. Your price for B territories is the same throughout the country. The price remains the same for all work GSPs receive through LYNX from Allstate, including those in which the customer requests a specific GSP.”

The country’s largest providers of auto glass repair and replacement services—Safelite, Harmon Auto glass, Diamond-Triumph etc., —have participated in Allstate’s program in the past and are expected to continue. With the program having been announced so recently there is no way of knowing which companies will or will not customize their offers. “That’s not information I or anyone else will have access to,” Umble said. “Glass shops will need to know their competition in much the same way as they have in the past.”

Umble said there is no limit to how often a GSP can increase its discount, thereby reducing its net price. A company that decides to increase its discount and to decrease its net prices, however, must agree to honor those prices for 120 days. LYNX will charge a $10 fee each time a GSP makes changes to its offer.

Companies that do not have access to the Internet will be able to submit their offers manually but there will be a $50 charge each time a change is made.

 Opting Out

“The Customized Offer is an optional program,” said Umble. “Companies that have agreed to Allstate’s O&A pricing may need never deviate from it. They will still be included in the rotation and will still receive work. But many have told us they can do better—and they’ve said the same thing to the insurance companies. ‘Just give them a chance to compete,’ and now they can do so,” Umble said.

Umble added that Allstate will begin requiring customer satisfaction surveys and will track consumer satisfaction ratings of all glass shops to which it refers work. In addition, Allstate has indicated that it may one day revoke participation in the Glass Claims Express program for poor customer satisfaction ratings.

Industry Reaction

A number of industry professionals have applauded the steps LYNX has taken to ensure customer choice with the COO. Basically, if glass shops have a strong market presence they will not have to lower their prices.

“This is a very good thing for companies that have a strong market presence,” said one East Coast company executive. “If you have done a good job of marketing your company, if you’re known and requested by name, you may be getting most of your referrals because of requests rather than a random rotation. And you’ll continue to get them without offering any additional discounts. But, you need to know that before you decide whether or not to participate in COO and at what level.”

The most important thing a shop owner needs to know before offering his or her COO discount may be where Allstate jobs come from—whether it is from consumer requests or rotation. “Let’s say 60 percent of your Allstate business comes through consumer requests, and 40 percent through a random rotation,” said one glass shop owner. “You need to remember that any increased discounts affect all Allstate pricing. So when you reduce your prices, you’ve reduced them on 60 percent of the work you were going to get anyway.”

For companies that will not be able to rely on market presence for work, it may be necessary to submit the lowest bids to get work. However, the provision that requires companies to hold their prices for 120 days makes this risky. “Companies that attempt to manipulate their pricing on a daily or weekly basis will have to live with their mistakes for four months,” said a shop owner in the Southwest. “And in this business today, that’s an awful long time to live with a mistake.”

Another industry insider added, “You better come in with a good price because you will have 120 days before you can get it back up.”

While four months may be a long time to live with a mistake, the repercussions of a failed or unsafe installation could last longer. Unfortunately, some say these kind of installations could be one of the direct consequences of the COO, which may force glass shops to bend already tight margins in order to get work. “I am concerned we are turning this into an eBay for auto glass,” said Tim Smale, CEO of the Independent Glass Association, based in Idyllwild, Calif.

“Some people who join this program will have no idea of their price and they won’t be providing quality or safe installations,” said another industry observer, who wished to remain anonymous. “When the guy with the lowest bid is getting the job it can hurt safety. All this does is point the way to more trouble.”

For his part, Umble defends the safety measures LYNX and Allstate have in the COO. “The COO is not about that,” he said. “In fact, under this program, Allstate will measure customer satisfaction at the shop level. Surveys will go right to the policyholder, and track the quality of their experience among other items. Allstate plans to capture these ratings and quality—not just cost—will become a measurable outcome of this program.”

Still there are concerns among many in the auto glass industry. “The program encourages participants to lower prices so they can compete with glass companies that have built a reputation on quality and customer service,” said AGRR columnist Steve Coyle from the Performance Achievement Group of Madison, Wis. “At least two of these three providers are recommended simply because they offer the largest discount to the insurance company. In many cases these larger discounts reflect cutting corners and unfortunately the corners that are cut may result in unsafe installations,” said Coyle.

 Defining Quality

“Although the COO makes references to quality, there are no criteria required to assure a glass service provider is returning vehicles to original equipment manufacturer (OEM) specifications. Neither are there provisions spelled out for monitoring and measuring adherence to a standard of quality. It can sometimes be very easy to satisfy a customer when their only concern is the appearance. Unfortunately, most customers do not consider, or are unaware of, safety issues until it is too late,” Coyle added.

 The GlasPac Deal

Almost immediately after introducing the COO plan to the auto glass industry, PPG came up with yet another far reaching announcement: it had decided to buy GTS.

GTS, a software provider that has its applications in more than 3,200 glass shops in the United States and Canada, would allow PPG to fully simplify and automate many steps in the glass-buying and installing process.

“We envision these expanded services to include online claims processing, glass ordering and electronic payment,” said Tom Molenda, manager of new product development for LYNX.

Umble added specifics to this plan, saying that the new technology could make it possible for LYNX to schedule jobs online and for installers to order glass online. “We needed a more efficient system in the management of claims and auto glass installers need a system to make them more competitive,” he said.

The great potential of this plan, combined with the COO plan and PPG’s new joint venture of Harmon (see AGRR magazine, July-August 2000), has created a fear of the auto glass manufacturers in the industry. “They have the potential to become the Microsoft of the auto glass industry,” said a representative from one auto glass software supplier. “Their next step would be the retail market. Who’s to say they don’t turn Harmon into the PPG retail store and use LYNX to do the online scheduling through GTS? It could knock everybody out of the loop.”

Another industry observer agreed. “PPG is into manufacturing, distribution and networks and, with the advent of ProStars, they are marketing to the consumer,” he said. “Now they have access to a point-of-sale system. The threat in our industry is no longer Safelite, but a large manufacturer that is in all aspects of the businesss.”

Umble dismissed these fears by insisting that GTS and PPG will remain separate. “This acquisition does not mean that LYNX will only work with GTS and it does not mean that GTS users will only order PPG glass,” he said. “GTS will continue to be its own business. It will do what it has to do to compete and make money.”

Leslie Shaver is a contributing editor for AGRR magazine. Debra Levy is the publisher of AGRR magazine.

 

Glass Shops Make the Next Move with Customized Offer Option

by Debra Levy

 

On first meeting, Chris Umble might remind you of a venerated chessmaster—relatively quiet and thoughtful in demeanor, all the while planning the next great move to stay ahead of the game.

But the 48-year old director of national sales for LYNX Services by PPG Industries (LYNX) gets excited when he talks about his company’s new claims administration program with Allstate Insurance (see related story page 20).

“It’s all about choices,” said Umble in an exclusive interview with AGRR magazine on September 6. “The new Allstate program allows policyholders to choose their glass shops, and it allows glass shops that can compete more efficiently to do so.”

Umble says that LYNX and Allstate worked together to develop the Customized Offer Option (COO) that recently debuted. “Allstate had been used to a more traditional network model,” he said, “but their experience with LYNX over the past two years demonstrated the advantages of an open, inclusive business model. Cost is important, but so is customer satisfaction. This program is designed to promote satisfaction among all parties.”

Umble said glass shops should not view COO as a real-time auction, or anything close to that, but rather as “an opportunity for those companies who can fine-tune their prices in certain markets to do so.”

Umble strongly disagreed with the premise that such a pricing model might force companies to reduce quality and material in an effort to better their prices. “The COO is not about that,” he said. “In fact, under this program, Allstate will measure customer satisfaction at the shop level. Surveys will go right to the policyholder, and track the quality of their experience among other items. Allstate plans to capture these ratings and quality—not just cost—will become a measurable outcome of this program.”

He also addressed some of the skepticism he hears in the marketplace about PPG’s role with LYNX Services. “LYNX is a claims administrator. In fact, it is now ‘out of its own’ and has been moved out organizationally from ARG. We must now compete for capital dollars and other resources with other business segments including ARG. I hear the stories but let me say, if PPG was going to get into the auto glass retail business, it would have done so by now. LYNX was created to help insure the continuation of our customer base, not to compete with them.” Umble said insurance companies occasionally have the same concerns, but LYNX allays their fears easily.

“Will I, or anyone else at PPG, have access to what particular companies are charging? No. I don’t even know how to find out that information. And if we did, we would be in big trouble with our customers. We’d violate our agreements with insurers,” he said. “It just won’t happen.”

Indeed, a tour of the call center headquarters in Fort Myers, Fla., provided a glimpse of a very sophisticated and complex operation that would be difficult to access without a deliberate edict.

Umble responded negatively when asked if there was an inherent lack of fairness in the program’s parameters that allow prices to be lowered at any time, but requires that they not be raised for 120 days. “This is not a daily, weekly or even monthly bidding mechanism. It’s simply a mechanism that enables companies that chose to do so to enhance their offer. But, that offer entails a commitment of at least 120 days.”

 

News Analysis: The New Allstate Customized Offers© Option
“Be Careful What You Wish For, You Just Might Get It”

by Debra Levy

 

At first glance, the new Customized Offers© option (COO) being promoted by Allstate Insurance may sound to some like a bad April Fool’s joke six months early. But a closer inspection may reveal otherwise. AGRR magazine contacted a number of key industry leaders (all of whom wished to remain anonymous) and provided an overview of the new option. Each person with whom we spoke made a quick assessment of what such a program might mean to his or her own company. Over the course of several discussions a number of common themes and conclusions emerged. Chief among them were the following:

 1. Consumer Preference Counts.

COO honors consumer preference and choice. A conventional network system tries to eliminate consumer preference. This program does not,; and, it does not override consumer preference for price. Price only comes into play in those cases where the consumer has no preference.

“This is a very good thing for companies that have a strong market presence,” said one East Coast company executive. “If you have done a good job of marketing your company, if you’re known and requested by name, you may be getting most of your referrals because of requests rather than a random rotation. And you’ll continue to get them without offering any additional discounts. But you need to know that before you decide whether or not to participate in COO and at what level.

Conclusion: Track how Allstate customers come to you—through requests or rotations, know your market share and market presence and make pricing decisions
accordingly.

 2. The Internet Changes Everything.

The technology that first led to the consolidation of the auto glass industry and the emergence of networks has now come full-circle. “You really have to see what’s happening,” said one glass shop owner with multiple locations in the Western states. “In the beginning, the insurers hooked up with networks because networks could offer EDI, make adjustments electronically and provide information that way. The process provided an advantage to the larger companies that could make the necessary investments. The Internet has changed that now.” He added, “This is the first time that shops have been able to take advantage of those economies on their own and I expect there will be more to come.”

Conclusion: Invest in technology for the future that will provide you open access and full Internet capabilities. Consider the back end too, and consider making arrangements for Electronic Funds Transfer (EFT). “People don’t always understand that EFT speeds payment directly to your account,” said Lisa Langford, manager of process integration for LYNX Services. “A very small percentage of LYNX participants take advantage of that right now.”

 3. Haste Will Eventually Make Waste.

Our experts cautioned against viewing the COO as some sort of an auction. “Companies that attempt to manipulate their pricing on a daily or weekly basis will have to live with their mistakes for four months,” said a shop owner in the Southwest. “And in this business today, that’s an awfully long time to live with a mistake.”

Another owner was more analytical and provided a hypothetical example. “Let’s say 60 percent of your Allstate business comes through consumer requests, and 40 percent through a random rotation. You need to remember that any increased discounts affect all Allstate pricing. So when you reduce your prices, you’ve reduced on 65 percent of the work you were going to get any way.”

Conclusion: Those companies that were relying heavily on LYNX random rotation to provide them with work will need to make some adjustments either in pricing or in increased marketing and sales efforts locally.

 4. Efficient Companies Do Well.

All of those with whom we spoke agreed that companies of any size efficient enough to do work at lower prices while at the same time marketing themselves will do well.

Conclusion: Be efficient.

5.Repair is a Question Mark.

Comments were mixed regarding how the new program would effect windshield repair pricing and repair-only companies. Some said that in the long run, it may help repair-only’s get more work. Others suggested that it may prove a ‘loss leader’ for replacement companies.

Conclusion: The jury is still out. Get more detailed information about how repair work is assigned before making any decisions.

6. The Changes Fee Stinks.

“Adding insult to injury,” said one shop owner. “Making me fall on my own sword,” said another. “Probably a necessary evil,” said a third, “but evil nonetheless.”

AGRR

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