Strategy and Implementation Summary
CollisionSyzygy is positioning itself to lead the industry through developing and maintaining leading edge technologies in providing its services, by offering a value proposition to insurance carriers that is difficult for competitors to emulate, and by utilizing effective methods of marketing its services.
5.1 Strategy Pyramid
Strategy 1: BODY SHOP NETWORK EXPANSION
Territorial Franchises. As part of membership in the CollisionSyzygy network, body shops are licensed in a geographic territory that creates a feeling of loyalty and generates more business. Thus, once a member, a body shop will not have a competitor spring up across the street and receive claims referrals from CollisionSyzygy. Those firms that do have repair shop networks generally leave the repair shop to market directly to the insurance carrier for business.
Direct Business Referrals. Membership in the CollisionSyzygy service facility network means direct cases to work. Body shops pre-pay a nominal fee that gives them ten cases to work. Once the ten cases are completed, another nominal deposit buys another ten repair cases.
Monitor, Maintain Quality Standards, and Perform Inspections for Insurance Carriers. One of the primary needs for a body shop is to perform work that meets or exceeds the standards set by the insurance carrier. CollisionSyzygy performs the inspections for the body shop and keeps abreast of the quality standards required by the paying insurance carrier.
Proprietory Software. Member body shops have access to the ACT program for case process management; UltraMate® software for damage repair estimates, and ImageMate® software for processing images and electronically transmitting the documents needed to transmit the claim for handling by the insurer. This saves considerable time and expense for the body shop.
Marketing Representatives. The Internet portal can be marketed, along with CollisionSyzygy’s services, directly through the use of marketing representatives that CSI plans to implement.
Other Marketing Methods. Both the Internet and direct mail marketing can be used effectively to attract and enroll new body shops to participate in the CollisionSyzygy program.
STRATEGY 2: ATTRACT INSURANCE COMPANY ACCOUNTS
Discount on Repairs. Every claim submitted through CollisionSyzygy receives an automatic five percent discount on repairs.
Dramatic Reduction in Turnaround Time – Cost Savings. Claim processing time is drastically reduced and provides significant cost savings arising from more accurate estimates, savings from reduced in-house staff, and minimal, if non-existent, auto storage costs. Online auctions can dispose of a vehicle before the case is closed and give insurance companies more real-time knowledge of actual net costs of processing the claim.
Lifetime Repair Warranty. Repairs are warranted for life at all CollisionSyzygy repair shop facilities.
Improved Communications. ACT software allows the insurance company to keep close tabs on the progress of resolving a claim. The quicker the claim can be completed satisfactorily, the sooner financial reserves can be freed to process the next claim. This results in greater profitability to the insurance carrier because “speed” translates into lower capital reserves requirements, allowing capital to be deployed to other aspects of the company’s business.
Quality Repairs. CollisionSyzygy repair shops must meet an extremely stringent list of requirements to receive their member territory. This enhances customer satisfaction for the insurer’s claimant, thus reflecting favorably on the insurance company.
Other Special Extras. Estimates and 35 mm or digital images are FREE. Towing (within 15 mile radius) is FREE. Storage (up to 30 days) is FREE.
Build National Network. By building a national network of service facilities, in conjunction with the use of an Internet presence, CollisionSyzygy can appeal to insurance carriers located anywhere in the United States and service claims in the local area.
Marketing Representatives. The Internet portal can be marketed, along with CollisionSyzygy’s services, directly, through the use of marketing representatives that CollisionSyzygy plans to implement.
STRATEGY 3: EASE TO WORK WITH CollisionSyzygy
Internet Gateway. CollisionSyzygy is designing a website that will be the portal to its array of services. Both insurance companies and repair shops can become operational users of CollisionSyzygy’s programs within a few days of “logging on” to the CollisionSyzygy website. The current version of the ACT software would have to be enhanced to operate on the Internet.
Software Technologies. Again, ACT, ImageMate® and UltraMate® software will streamline the entire claims process. Strategy 4 will further unify the information reporting between the various industry data standards now used.
STRATEGY 4: UNIFY INFORMATION REPORTING PLATFORMS
Multi-Platform Translator. CollisionSyzygy is working on creating a single specification translation software that will make the three dominant standards of data reporting compatible: ADP, Mitchell, and CCC. This will enhance the number of service shops that can use CollisionSyzygy’s services and extend the capability of handling more insurance company accounts (and claims).
5.2 Value Proposition
Quite simply, CollisionSyzygy creates additional profits for insurance companies who use its process. A simple example can illustrate the value offered by CollisionSyzygy:
Regular Insurance Company Method for Handling Claim:
Claim is assigned to an Independent Appraiser (IA):
$80 Estimate for Repair: $2,000.
Cost to Insurance company: $2,080.
CollisionSyzygy Handles the Claim:
Handling Fee for CollisionSyzygy: $75 (highest rate paid)
Estimate for Repair, less 15% discount 1: $1,700
Five percent discount from CollisionSyzygy Shop: less $85
Cost to Insurance Company: $1,690.
COST SAVINGS – USING CollisionSyzygy: $390.
5.3 Competitive Edge
In general, there are various key points that give CollisionSyzygy a strategic edge over its competitors:
- Software Technologies. ACT software, ImageMate®, and Ultramate® software creates a complete claims submission, monitoring, and reporting program that is unmatched in the industry for ease of use and power.
- Open Information Platform. CollisionSyzygy can manage the claim information of all three information providers (CCC, ADP, and Mitchell) and offer consolidated reporting to the insurance client.
- Internet. The use of the World Wide Web will make it easy for body shops and insurance carriers to become clients of CollisionSyzygy and to use CSI’s services in processing claims.
- Experience. Few companies can boast the experience possessed by CollisionSyzygy’s CEO in managing the firm’s operations and future technological developments.
- Value. CollisionSyzygy creates a more extensive relationship with its repair shops than other firms. This results in lower turnover, higher discounts to insurance carriers, and more reliable repairs. CSI has mastered the value-added proposition being offered to the insurance industry.
- Online Salvage. Very few firms offer an effective auction for disposing of salvage. CollisionSyzygy’s program accesses a much more extensive marketplace by avoiding many of the restrictions imposed by other online auctions. Also, sales can be transacted almost immediately after a buyer is found unlike the more time-intensive closings associated with other online auctions.
- Quality Control. No other firm imposes a higher set of standards on its repair shop network than CollisionSyzygy. In exchange for rigid, quality standards and discounts to the insurance carriers, repair shops receive territorial franchises for work referred by CSI.
- Industry Acceptance and Recognition. Body repair shops and insurance companies recognize and look to CollisionSyzygy for collision repair services.
- Fleet Management Superiority. CollisionSyzygy can manage the collision repairs for the fleet industry and is superior to all of the existing fleet management companies.
- Generic Direct Repair. CollisionSyzygy is virtually the only generic repair firm in the industry. None of its processes are tied to a proprietory insurance company system.
5.4 Marketing Strategy
Marketing strategy will depend upon the target market being sought by CollisionSyzygy, which is as follows:
Service Repair Shops. CollisionSyzygy will use direct mail brochures, industry trade magazine ads, and the CollisionSyzygy website to attract new members to its repair network. The Internet will assist greatly in making CSI’s presence known to repair shops all over the country.
Insurance Companies. In addition to direct mail brochures, property, and casualty insurance trade magazine advertising and Internet exposure, CollisionSyzygy will use direct marketing representatives. In addition, Mr. Smith’s expertise can be expressed through trade articles which will give CollisionSyzygy additional market exposure and credibility.
Insurance Companies – Commercial Lines. Once a significant foothold has been established in the personal lines business, CollisionSyzygy can expand upon those same relationships to build a commercial business. All of the methods described above can be used in addition to direct marketing representatives of CSI accessing the commercial line business with existing and new client firms.
Trade Shows. Large trade shows are the mark of this industry because so many different businesses are attracted to learn about new technologies and, perhaps, prospect new business for their firms. Noteworthy is the world’s largest annual exposition, nicknamed NACE and known as International Autobody Congress and Exposition. The 18th NACE exposition will be held in the year 2000. More than 35,000 collision repair professionals from all over the world attend NACE. CollisionSyzygy plans to attend the NACE expositions, each year, to maintain its industry presence and to develop new clientele.
5.4.1 Pricing Strategy
In general, the pricing of CollisionSyzygy’s services is the backbone of the strategy to create value for the insurance carriers while delivering these services more cost effectively than its competitors.
Section 5.2 has already examined how value is created when an insurance carrier decides to outsource a claim to CollisionSyzygy versus processing that claim internally. Much of the lower pricing arises from discounts created through volume relationships with CSI’s vendors. The volume offered to the service providers (body shops, outside adjusters) reduces their marketing expenses (both in personnel costs and advertising materials) and more fully utilizes fixed capital assets. These savings are available for discount pricing to the insurance companies. In addition, more accurate cost estimates, through the use of UltraMate® software technology, allows cost control and monitoring that further enhances the value proposition to the insurance carrier. The effectiveness of CollisionSyzygy’s online auction has literally taken an area of unknown cost results and converted it to a quantifiable outcome that gives the insurance company additional control over the cost of the claims process.
CollisionSyzygy has built its pricing strategy to maximize the value proposition to the insurance company while making it difficult for competitors to be selected for their pricing. The first 100 claims per month provide a thin profit margin of 15%. Claims above 100 jump the average profit to 35% per claim. Five percent of this profit is spent on the standard discount offered to an insurer on every claim.
5.4.2 Promotion Strategy
The promotion strategy for CollisionSyzygy will include the use of the following methods:
- Direct mail brochures and mailers.
- Internet marketing.
- Full-time account representatives.
- Referrals from repair shops and insurance companies.
- Magazine advertising and professional trade articles.
- Annual NACE trade show and other smaller, regional trade events.
5.5 Sales Strategy
After becoming familiar with CollisionSyzygy’s services and capabilities, repair shops will want to join the CollisionSyzygy service network because:
- Marketing is performed for them by CollisionSyzygy. Indeed, business is directly awarded to a repair shop through its membership in the CollisionSyzygy network.
- Insurance company standards and inspections are managed and performed by CollisionSyzygy.
- Various types of expenses are minimized and fixed asset utilization is maximized by a relationship with CollisionSyzygy.
- Information management and reporting, claim cost estimating and data communication is made swift and cost effective through the use of CollisionSyzygy technologies and utilizes a translation platform that crosses the three leading methods: ADP, CCC, and Mitchell.
Insurance companies and other risk management providers will become CollisionSyzygy clients because:
- In general, it is much less expensive to outsource claims to CollisionSyzygy than to process claims internally or use CollisionSyzygy’s competitors.
- Turnaround time on claims processing will release valuable capital reserves that can be used to acquire additional new insurance business.
- Proficiency in training new internal personnel will be attained more rapidly and at a lower cost when outsourcing to CollisionSyzygy.
- Service technologies will be upgraded and maintained by CollisionSyzygy rather than by the insurance carrier.
- Live human beings will be available to assist in servicing insurance accounts–not just websites and email.
Full-time marketing representatives will be available to answer inquiries, assist in demonstrations, set up software, and for training insurance and body shop personnel on CollisionSyzygy’s specific claims process.
5.5.1 Sales Forecast
The unique and comprehensive array of claim processing services, offered by CollisionSyzygy, will allow it to rapidly build sales. Furthermore, the depth of the market–both individual and commercial–will handsomely reward the market leaders and innovators like CSI. Much of the revenue CollisionSyzygy earns is merely a reversion of a portion of the profits created for the CSI client. The following chart estimates sales from June 1, 2000 to May 31, 2001, and reflects the additional infrastructure created by the capital investment.
|FY 2001||FY 2002||FY 2003|
|Salvage Fees – Insurance Co.||9,540||19,540||23,448|
|Salvage Fees – Buyer||9,540||19,540||23,448|
|Claim Handling Fees-Ins. Co. @ $45||10,740||10,740||12,888|
|Claim Handling Fees-Ins. Co. @ $50||8,640||38,640||46,368|
|Claim Handling Fees-Ins. Co. @ $70||6,180||6,180||7,416|
|Referral Fees – Service Shops @ $5||8,340||38,340||46,008|
|Referral Fees – Service Shops @ $30||17,220||17,220||20,664|
|DRP Appraiser Fees @ $65||1,800||1,800||2,160|
|DRP Appraiser Fees @ $70||3,552||11,552||13,862|
|Total Unit Sales||124,737||262,752||315,302|
|Unit Prices||FY 2001||FY 2002||FY 2003|
|Salvage Fees – Insurance Co.||$50.00||$50.00||$50.00|
|Salvage Fees – Buyer||$50.00||$50.00||$50.00|
|Claim Handling Fees-Ins. Co. @ $45||$45.00||$45.00||$45.00|
|Claim Handling Fees-Ins. Co. @ $50||$50.00||$50.00||$50.00|
|Claim Handling Fees-Ins. Co. @ $70||$70.00||$70.00||$70.00|
|Referral Fees – Service Shops @ $5||$5.00||$5.00||$5.00|
|Referral Fees – Service Shops @ $30||$30.00||$30.00||$30.00|
|DRP Appraiser Fees @ $65||$65.00||$65.00||$65.00|
|DRP Appraiser Fees @ $70||$70.00||$70.00||$70.00|
|Salvage Fees – Insurance Co.||$477,016||$977,000||$1,172,400|
|Salvage Fees – Buyer||$477,016||$977,000||$1,172,400|
|Claim Handling Fees-Ins. Co. @ $45||$483,308||$483,300||$579,960|
|Claim Handling Fees-Ins. Co. @ $50||$431,983||$1,932,000||$2,318,400|
|Claim Handling Fees-Ins. Co. @ $70||$432,580||$432,600||$519,120|
|Referral Fees – Service Shops @ $5||$41,699||$191,700||$230,040|
|Referral Fees – Service Shops @ $30||$516,588||$516,600||$619,920|
|DRP Appraiser Fees @ $65||$117,007||$117,000||$140,400|
|DRP Appraiser Fees @ $70||$248,656||$808,640||$970,368|
|Direct Unit Costs||FY 2001||FY 2002||FY 2003|
|Salvage Fees – Insurance Co.||$7.26||$7.62||$8.00|
|Salvage Fees – Buyer||$7.26||$7.62||$8.00|
|Claim Handling Fees-Ins. Co. @ $45||$6.53||$6.86||$7.20|
|Claim Handling Fees-Ins. Co. @ $50||$7.26||$7.62||$8.00|
|Claim Handling Fees-Ins. Co. @ $70||$10.16||$10.66||$11.20|
|Referral Fees – Service Shops @ $5||$0.73||$0.76||$0.80|
|Referral Fees – Service Shops @ $30||$4.35||$4.57||$4.80|
|DRP Appraiser Fees @ $65||$9.43||$9.90||$10.40|
|DRP Appraiser Fees @ $70||$10.16||$10.66||$11.20|
|Direct Cost of Sales|
|Salvage Fees – Insurance Co.||$69,215||$148,851||$187,553|
|Salvage Fees – Buyer||$69,215||$148,851||$187,553|
|Claim Handling Fees-Ins. Co. @ $45||$70,128||$73,633||$92,778|
|Claim Handling Fees-Ins. Co. @ $50||$62,681||$294,351||$370,882|
|Claim Handling Fees-Ins. Co. @ $70||$62,768||$65,909||$83,045|
|Referral Fees – Service Shops @ $5||$6,051||$29,207||$36,800|
|Referral Fees – Service Shops @ $30||$74,957||$78,707||$99,171|
|DRP Appraiser Fees @ $65||$16,978||$17,826||$22,460|
|DRP Appraiser Fees @ $70||$36,080||$123,201||$155,233|
|Subtotal Direct Cost of Sales||$503,757||$1,056,105||$1,330,692|
5.6 Strategic Alliances
The primary strategic alliance is the UltraMate® and UltraImage® software systems provided by Mitchell International. These systems make it possible for repair estimates to be quickly and accurately created and for claim data and images to be transmitted to CollisionSyzygy and the insurance carrier in handling a claim.
Another key alliance is the body shop network which receives the claim assignments from CollisionSyzygy. The growing size of this alliance with CSI will enhance its capacity to accept and service new claims business from insurance carriers. A national density of collision repair shops will create a certain “liquidity” for insurance carriers to use CollisionSyzygy in handling their claims.
The following table outlines key milestones in CollisionSyzygy’s progress of becoming the premier independent, generic company. CollisionSyzygy’s plan for success includes a very comprehensive, one-stop series of programs and services to capture the claims market and build the service repair shop network to process that business.
|Milestone||Start Date||End Date||Budget||Manager||Department|
|Internet & E-Commerce Service Platform||3/1/2000||4/15/2000||$50,000||William||N/A|
|Online Salvage Auction||6/1/2000||12/28/2000||$75,000||William||N/A|
|Compatibile Information Reporting||3/1/2000||5/1/2000||$50,000||William||N/A|
|Launch Sales Force Marketing||6/1/2000||12/31/2000||$125,000||William||N/A|
|Expand to Commercial Service Offerings||1/1/2001||3/31/2001||$40,000||William||N/A|
|7 Day/24-Hour Claims Center Access||7/1/2000||2/28/2001||$60,000||William||N/A|
|Rental Management Services-Internet||8/1/2000||12/28/2000||$50,000||William||N/A|
|Attend NACE Trade Show||8/1/2000||12/15/2000||$150,000||William||N/A|
|Office Phone System||6/1/2000||7/15/2000||$15,000||Karen||N/A|
|Computers & Office Furniture||6/1/2000||6/30/2000||$25,000||William/Karen||N/A|
|ISP Connections (12)||6/1/2000||6/30/2000||$12,000||IS Mgr.||N/A|
|Create Promo Packages||6/1/2000||7/15/2000||$97,500||Karen||N/A|
|Operating Expense Float – 6 months||6/1/2000||12/31/2000||$951,204||N/A||N/A|
|Regional Trade Shows/Exhibitions||5/1/2000||12/31/2000||$125,000||William/Karen||N/A|