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Captives response to changing customer expectationJonny combeGeneral Manager, Product & Channel Development

White Clarke Captives Forum

By 2025, Gen Y is expected to account for 75% of all vehicles purchased.

We live in a rapidly changing environment, pace of technology quicker than ever, if we dont truly understand how gen Ys and millennials consume goods, we will be dead in the water.

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Its a crazy world that we live inPage 2

Instagram acquired for 1bn during which time it had 13 employees3 months later Kodak filed for bankruptcy. Facebook the worlds most popular media owner, yet it has no content.

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So where does that leave the auto industry?Page 3

Freddie Hoyt giving a staff briefing

Serialwas ranked at No. 1 on iTunes even before it dbuted, leading iTunes rankings for over three months, well after the first season ended.[1][33]It also broke records as the fastest podcast ever to reach 5 million downloads at Apple'siTunes store

1 month at Jeep dealership on Long Island. Monthly target 129 carsFollow the various characters in the dealership.3

I just dont want one balloon to a car.Page 4

To me, visiting a car showroom is a job that has to be done, rather likeattending a funeral

Tim, 29 Google Consumer Survey 2014

As captives, have we leveraged too much from the balloons? Does that point of sale advantage still exist?What does the young consumer believe?

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Bmw report into consumer purchasing behaviour.Page 52003Dealership visits Car buyers carry out online research before purchase 1%

92%Car buyers willingness to buy cars online Renault -> VW -> Audi -> BMW -> MB etc.I think we probably do do that, but were lulling ourself into a false sense of security.

But whats this all got to do with Gen Y?73% would be more excited over new financial services from tech companies than from their actual nationwide bankAlignment of qualitiesMillenials rank all four of the biggest banks among the 10 least loved brands (http://dataconomy.com/like-bees-to-honey-millenials-and-the-future-of-fintech/)

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Where is the investment going?Page 7

Saving Global - SavingGlobal, based in Berlin, allows savers to open savings accounts around Europe without having to visit branches or learn the local language and they can manage their account quickly online.SavingGlobal allows Germans to ditch the paltry rates at home and put their cash in banks in other countries where interest rates are higher.Ffrees Unbank be ffrees. UKs first unbank you and your money are first and the fat cats are last. Sheffield based. 400 account applications per day. Online only!Osper mobile banking for young people. Targetted at 8-18 year olds. Prepaid mastercard with banking app. Parents have a separate login to keep an eye on things.Centralway - Centralway Numbrs is the new bank branch. As one of the most popular mobile banking applications in Germany, Centralway Numbrs enables you to manage your financial life on the go. App first.Squirrel Makes managing money easy. Stagger disposable income into manageable amounts ensuring you stick to an agreed budget.Nutmeg Online investment management. Build a portfolio based on your preferences. Can start with 1,000 per fund. Commitment to being open and transparent.Wikifolio - The idea being that, through Wikifolio, investors can put their cash into the trading strategies of professional traders via ordering wikifolios through various online brokerages similar to existing investment products.eToro- the world's leading social investment network, you can tap into the wisdom of the crowds to help you make smarter investment decisions. Use the wisdom of the crowds to build his portfolio.Tink follow your money. A simple way to keep track of your everyday personal finances. Gathers all your transactions, categorises them and puts them in one place. Live in Sweden, coming to Europe soon.Money Dashboard a true view of all your finances. Makes money by offering products & services to you. Using big data!Moni Co-founder was a former Google employee - Laurence Aderemi. One of the first companies to participate in the Techstars programme. Transfer Go local in, local out. Money is transferred internally within transfer go. 10x cheaper than Banks. Engaged with 30,000 customers.World Remit - UK based, raised $100M investment to go after Western Union, launched by Ismail Ahmed when he studied in London and wanted to send money home to Africa.Azimo - part-British part-Polish start-up that intendsto make remittance transfer easier, cheaper and more accessible focusing on lower skilled migrants. Launched 2 years ago, now in 198 countries.Currency Fair Peer to peer transfer. First you send funds to your CurrencyFair account. You then convert these funds by matching with other customers on our Marketplace (or via QuickTrade), and finally you instruct us to transfer those funds out to a beneficiary bank account around the worldKlarna Provides payment services for storefrontsTransfer wise Peer to peer transfer. Save money by giving you a fair exchange rate banks hide the fees in the exchange rate. Landstar - Lendstar is your social finance app for paying and chatting among friends. Easy, fast, free & more secure than online banking. German basedAux money Peer to peer marketplace for lending money. The company assesses the risk of borrowers by using its own proprietary algorithms which parse a range of signals, including some of the traditional metricsthat banks consider when deciding whether to lend money, such as credit history, but also by looking at a multitude of more subtle signals (which Johnen calls its secret sauce) such as how potential borrowers behave on its website and elsewhere online.Lend Invest - Peer to peer mortgage plarform. 423M invested in loans to date. Largest peer to peer mortgage platform in the UK. Founded on the back of the GFC.Property Partner Invest in property from 50-50k. Aim to jump hurdles that exist in the buy to let market.Landbay Peer to peer investment in mortgages. Fuitful Peer to peer lender on both private and commercial properties. Money secured by commercial properties. LTV of 65% and low risk borrowers only.Ledico Founded in Germany, not in UK yet. P2P lenderPret dunion P2P lender founded in France. $34M investment in July 2015. Lending works P2P lenderZopa P2P lenderBondora P2P lender that secured $5M investment from the US giant Lending Club. Based in Estonia. Desire to conquer cross border lending.Borrow Sale advance loans, Bridge loans & term loans for luxury assets. Create a new category of lending where top 10% of population can get loans secured by luxury items. 150M of transactions to date. Average loan $20k, $5k - $2M.

As an aside:How many of these sites use video content as an explanation?How many are mobile optimised?How many were designed mobile first?7

Who is disrupting in automotive?Page 8

These have been picked because they are particularly successful in targeting Gen Y. Following slides outline why they are successful.

Walk through.

Transition: Next walk through different elements of the customer journey, look at some key stats which give an indication of wider macro trendsLook at some example companies that really stand out in this area.8

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Previously looked at stats showing increase in research online.Customers are coming to a retailer/dealership knowing what they want.

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Research prior to purchasePage 10In 2014, 97% of all consumers are using the Internet to research cars.Cars Online, 2014

For Gen Y, 100%10

destinations on the path to researchPage 11Almost 90% of customers use dealer websites or OEM websites in the early steps of their decision makingSource: Innovating Automotive Retail, McKinsey, 2013

Ok so a few qualifying points here:Our websites are only one element hereConsumers will look at trade press, social media, etc

BUT:Our site is a massively under utilised resource. We have a huge volume of traffic going through so lets change it to make it more in line with what the customer needs.

So who are the key disrupters when it comes to research?

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researchPage 12

Where can a prospect find out about finance on your website?

What kind of indicative pricing do you offer a prospect?

Do you only use the MRP?

TrueCar:Provide customer transparency on the price they payMake their money from passing on very warm leads to dealersHave a network of 10,000 dealers in USAFounded in 2005, in 2010 won CNN money award in 20 best websites to help individuals make finance decisions2011 raised $200M in debt & equity financing, now listed on the Nasdaq.

Conclusion:Look at questions which have been put to captive fleet lenders.

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Purchasing a vehicle online.Big chance in consumer behaviour here. A couple of facts which help tell this story

Next slides13

Customers methods of consumption are changing.Page 1433% of car buyers say that they would consider purchasing a vehicle online.

There is a natural bias here towards younger generations14

A view from the millennials.Page 15More than half of millennials say theyd prefer to visit the dentist than haggle with a car salesman.

Time

Sums up the sentiment that exists out there.Almost been a sense of if we build it they will come. No they dont. Theyll actively avoid it. Key contributing factor to why the disrupters are being successful.

For example15

carvanaPage 16

What considerations have you made to enable a customer to transact with you online?

Based in Phoenix and their mission is to make car buying better by bringing technology, transparency, and exceptional customer serviceto the process.100% online car retailer.Patented 360 degree photo process2013 opened a car vending machine.Carvana ranked 5th on Forbes List of America's Most Promising Companies for 2015

If you get a chance check out Shift and Vroom.

Last element of customer journey for this presentation.16

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More people have access to a mobile phone than they do a toothbrush.Number of mobile phones has now exceeded the number of people on the planet.Mobile is the fastest growing manmade phenomenon that we have ever seen. 0-7.2billion devices in under 30 years.

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Mobile banking transactionsPage 18Mobile Banking Transactions in the UK Grew Nearly 105% in 2013

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Mobile firstPage 191.5BN Mobile Transactions expected by 2020 up from 356 million today

Centre for Economic and Business Research (CERC)

On top of that, need to consider an estimated 6% of all instore sales are influenced by smartphones.19

Mobile firstPage 2020 million adults will use their mobiles to pay for goods and services by 2020, with the value of purchases tripling from current levels to 14.2bn in 2018.

Centre for Economic and Business Research (CERC)

Value of purchases are increasing year on yearConsumers are more and more willing to buy expensive items online.Story of recently purchasing a washing machine, did it all from my phone.

So in our world, who is leading the way when it comes to mobile?20

beepiPage 21

Beepi peer to peer marketplace. Founded April 2013Cars undergo inspection by a Beepi and they take up to 9% commission.10 day return policy.Founded in April 2014.In 2014 valued at $200M.21

beepiPage 22

Is your digital real estate mobile optimised?

How well are you using video content?

Super intiative mobile site designed with mobile first.Video content, very clear explanation.

What mobile considerations should we make?Do we design our online real estate with mobile first mentality? In 2014 55% of our new car enquiries came from a mobile source.Are we designing mobile friendly video content for our customers?

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So whats left of the balloons?Page 23

Today we have looked at:The balloons dont work any more. We will build it and they will come, that doesnt work.As captives we need to engage with the disruptors in the fintech space. If we dont our competitors are! Would love to talk more about accelerators and share our plans for an innovation lab.Taken a snapshot look at whats going on with fintech in the UK and other disruptorsThen looked at some key parts of customer journey research, purchase and mobile optimisation.

The conclusion is this23

summaryPage 24The battle is won or lost in the world of the digital real estate.

Previously the battle has been in and around the showroom. But thats long gone now. Gen Ys and millennials dont care. We need to have coherent digital strategy if we are going to stay alive.

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Thanks for listening.Page 25