Many businesses, large and small, see partnering with brand ambassadors as a way to publicize and market their products and services. Sports sponsorships are a perfect example.
Especially motorsports sponsorships.
While it's easy for a company to simply write a check and get their logo in front of millions of people... forced, artificial product marketing rarely works. It takes seconds for potential customers to detect an inauthentic message -- much less an inauthentic relationship between ambassador and brand. I can list dozens of instances where an association resulted in a loss of money, time, and brand positioning for the company involved.
Which is why it's fun to find a partnership that works -- and why I talked with Brad Basmajian, the Chief Operating Officer of Toco Warranty. Toco provides pay-as-you-go vehicle repair plans on a monthly basis (as opposed to standard vehicle service contracts that require full payment up front.)
Earlier this year, Toco became a sponsor of Stewart-Haas Racing and the #14 car of Clint Bowyer. In addition, Toco became the co-primary sponsor of dirt-track racing legend Donny Schatz and an associate sponsor of Tony Stewart himself (the "Stewart" in Stewart-Haas), giving Toco high-level and grass roots exposure.
Here's how Toco Warranty successfully brought a new vehicle service plan model to life -- and is using motorsports to reach new customers.
Let's talk about the business first.
Toco Warranty was founded in 2013 by Nota Berger. The problem he set out to solve is simple: The way a vehicle service contract (VSC) was sold didn't make sense for the people who actually needed it.
On the one hand, VSCs were sold at the dealership. That doesn't make sense: You're paying for coverage you won't need for years, until your factory warranty runs out... and you have to pay that up front, or build it into your financing.
Or a VSC was sold in a third-party, "telemarketer" way with a huge down payment, hundreds of dollars in payments per month...
The entire point of purchasing a service contract is to avoid the pain of a huge, unexpected repair bill... but if you bought a service contract, you felt that pain every month.
Think of it this way: If the cable company asked you to pay $2,500 up front for cable, you'd laugh. The founding idea is that a service contract should be like any other bill you have. It shouldn't cost a lot. You should never have to pay for it for any longer than you actually need it. And everything should be handled in a simple, transparent way.
The other problem is that people automatically think "extended warranty."
There's a big portion of the country that thinks the only way to purchase a VSC is through the dealership. And most of them also don't think there's a cost-effective way to do it.
So one of our key messages is that there is a better way than paying a huge down payment, and then hundreds of dollars a month.
But the bigger message is that so many people don't know they can purchase a service contract outside of the dealership. And avoid the high-pressure sales tactics that take place at many dealerships.
Which in a way is understandable; most dealerships make very little on new car sales. Their profits have to come from making sure they don't leave any money on the table.
Absolutely. But you're back in that office trying to finalize the deal... the last thing you need is to pay for something you don't need yet.
That's why the opportunity to partner with Stewart-Haas is so natural. Our goal is to spread the word to all the hard-working people who rely on their cars, who love cars... and who shouldn't be hustled and bullied into buying a product that doesn't work for them.
That's why Tony and Clint are such great brand ambassadors. You're not going to bully those guys into anything. (Laughs.)
Let's talk about the startup period. Starting a business like this is incredibly capital-intensive; as with anything that has an insurance aspect to it, you need to achieve a critical mass of revenue to match cash outflows.
You're right. The startup period is really hard. There's a reason why people don't start this kind of company all the time. (Laughs.)
Just like any form of subscription or membership service, you need a large enough group of people to make it work. To your point, to balance the people who have issues against those who don't.
And do it fairly.
We were lucky that AmtTrust Financial Services believed in that vision. They're a huge insurance with the means to do that... and they helped us grow our business to where we have a large enough member base to support our model. That's why we were recently able to become our own company.
That's a major hurdle to cross. There's no way to bootstrap a company like yours.
Absolutely, but our goal is to take what we've accomplished and continue to improve on it. The philosophy of budgeting for reality can be applied to other situations and products... but for now, our focus is to keep improving the product and especially the customer experience.
Now that you have significant data, what does your average customer look like?
We've done significant analysis, we've done lots of surveys... and the data always comes back split right down the middle. There aren't more men than women. There aren't more older people than younger people.
We're right in the pocket of every demographic any marketing company could ever come up with. (Laughs.)
But that makes sense: The average American doesn't have a lot of savings... and something like one-third of people own a car that is at least 7 years old.
Which is a real problem. Power trains may last ten or twelve years, but the things that break usually go at to 5 years, and often cost $500 or $1,000 in a single shot.
Which means many people deal with an incredibly difficult situation: In effect, come up with $1,000 or you can't drive to work today.
A lot of people dislike shopping for something like insurance because it helps avoid a negative. I would much rather spend money to get a positive.
True, but we don't feel that way. We provide a service that people actually need and actually benefit from. And that's always fun.
But to your point... you never want a negative, but most people do want to be protected from negative experiences. Our goal is to provide relief from the inevitable and do it in a positive way instead of having people feel like they're up the creek with no options.
Churn is generally an issue for any subscription service; that's not exactly what your business is, but still...
We have a very healthy customer base. We don't see significant attrition on a month-to-month basis. Compared to most subscription services, we're fairly unique in that way.
We work hard on customer retention, but the real driver of retention is the customer experience. That's as important as anything we do: How we treat people, the way we communicate with our customers... that's the real key.
We're all consumers. We all know how we want to be treated.
Which means the business model is obviously important, but it only works if you have the right people.
You can't force a person to pretend to be nice. You can fake a lot of things, but "earnest" isn't one of them.
It all starts for us with the hiring process. We embrace the Tony Robbins model: Can they do the job? Will they do the job? Is the cultural fit right?
If those questions aren't answered with an emphatic "Yes!" then a candidate isn't right for us. When you have people who want to come in to work, who like the people they're around... the customers you talk to benefit from that genuine smile.
Automation is great... but it's easy to automate yourself out of being human.