|
| July 8, 2000 Bod Rodi believes Dot.com honeymoon is over. ( While this is long, there are many profound and excellent observations from a leader in the leasing field with perhaps more internet experience than anyone in the leasing business, and also the internet business itself. His comments and observations should be taken very seriously and may help brokers,lessors and funders survive, plus make more money---editor ). A response to Travis Foxx whose points are all well taken. Travis states that customers are "getting used to accepting less customer service". In 1989 when we were putting our original Prodigy site together this concept was being described as "The Customer as Co-Producer". This a highly desirable but elusive concept. We have been trying to engineer this for over 10 years and while we have had some good success it is only recently that customers (vendors) are taking a real interest in this. In the early days, when there were only front end systems, the customers responded but quickly learned that service was no faster than faxing an application to the lender. Now that many of us are wired "front to back" and can deliver "rapid response" service (often a couple of minutes or less in some cases) the "personal" service is becoming the value added that people respond to. Travis's statistics are right on the money and I am very familiar with them. I would like to offer up one of my own that, I believe, supports the "high tech/high touch" methodology endorsed by John Nesbitt in his book of the same name. Charles Schwab, arguably the most successful of the "on line" brokerages took to opening local offices to support their internet based clients. In the areas where these offices opened, business increased an incredible 500% in the first year the "local" presence was established. Having been involved in the first initiatives that involved automation in the leasing industry I understand why Schwab has had this kind of success employing old fashioned customer service methods. If a business model offers the "high touch" aspect, along with the automation, even if the price is slightly higher, the customer will reward the company with their business. I can almost guarantee that the more desirable customer, who is used to personal service, will respond even more. The simple fact also remains that when we are talking about a $15-20K transaction,(the transaction size that is most likely to experience the most initial success on the internet)we are only talking about a few dollars difference between what most people would call a "great rate" as opposed to a competitive rate. I repeat what I said many times. There just isn't enough of a proprietary price or service advantage to have people flocking to these web sites. Do we even know what price or service advantage it would take? Travis is right in that everyone is "struggling with the customer service issue". I often question the amount of resources that go into proving that these models can work. Is it for the customer who will ultimately be served, or is it an ego trip for the whiz kids who write these plans, or is it for the poor injured VC people who might have to pick up their chips and go home losers after they thought they had discovered the secret of invulnerability in the internet business plans they fund. With respect to fraud I believe that it will be rampant and uncontrolled on these sights. The cost of controlling that alone may price them out of the market and the first major internet commercial lending fraud will scare the ever timid banks right out of the market. How will the VC funded dotcoms respond if and when they are called on their reps and warranties by one of the banks or lenders that bought these deals? If they make it the responsibility of the lender to check and verify everything how will those costs effect the pricing to the customer? I'm still haven't heard one of these company representatives say how they will mitigate risk for their funding sources which has always been one of the primary jobs of the good broker/lessor. Most of what Travis stated was very true and correct. The one exception I take is this. It is the technology and the Internet itself that is the force to be reckoned with. The dotcoms pose almost no threat. Failure to take our current business processes, which are designed to mitigate risk and ensure profitability, and automate them is the real danger to the broker/lessor. Many of the "inefficiencies" that Mr. Ross refers to, have been built into our business process so that we don't become the victims of fraud, delinquency and losses. Anyone who automates the process, writes the business and does not address this issue is doomed to abject failure. If anyone doubts me just look at Kit's now famous "list"...And that's just the most recent history. I believe that the "honeymoon" period for the dotcoms is just about over. Everyone will be looking to see which of the dotcoms report profitable results or even generate a significant enough revenue stream to warrant additional investment. In closing please remember that all of you have spent your careers "differentiating" your companies from your competitors. Embrace automation and use it to enhance the differentiation and reputation you have already established. Don't fall prey to the hype that your read in press releases. Remember that the dotcoms pay people large sums of money to pepper the airwaves with those releases. That is how they sell more stock and generate interest in their IPO. It isn't about success in the leasing business. It's about a successful IPO that will make the founders millions. It's the gold rush and these guys are just the modern version of the "Fortyniners". Some of them will make a fortune which will create a bunch of great stories to tell at our leasing conferences. A few, who actually have major backing and management teams may have an impact on certain market segments but Travis, Kit, Hal and I will hopefully be comfortably retired before they "dominate" our industry.
Bob Rodi
www.leasingnews.org
|