Co-Opetition - Adam M. Brandenburger [9]
Today there are plenty of roads, but money can still be scarce. Cars, especially new ones, are expensive, so if customers find it hard to borrow, they may find it hard to buy a new car. Thus, banks and credit unions complement Ford and General Motors. But auto financing has not always been accessible. That’s why General Motors created General Motors Acceptance Corporation back in 1919 and Ford Motors formed Ford Motor Credit in 1959. It doesn’t really matter who provides the financing—banks, credit unions, or the automobile credit companies themselves. More money in this market leads to lower interest rates. Better and cheaper access to credit enables people to buy more cars—and that helps Ford and GM. The flip side is also true: selling cars helps Ford and GM sell loans. Over the last decade, Ford has actually earned more money making loans than making cars.
Auto insurance is a complement to cars because, without insurance, people might not be willing to risk investing $20,000 or more in a new car. Just as carmakers have made auto loans more affordable, perhaps they could help make auto insurance more affordable. This would be particularly valuable to first-time buyers, who often face prohibitively high insurance rates.
Complements are always reciprocal. Just as auto insurance complements new cars, new cars complement auto insurance. The more new cars people buy, the more insurance they buy, especially collision and theft insurance. Thus, auto insurance companies might want to use their expertise and clout to help their customers get a better price on new cars. We’ll come back to the subject of cars and auto insurance later in the book.
Suppliers to the car industry haven’t forgotten complements, either. Until tire manufacturers figure out a way to add a fifth wheel to a car, there’s really only one way for them to boost sales, and that’s to whet people’s appetite to drive. That’s why the French tire maker Michelin sells the Michelin guidebooks. These guidebooks don’t give just the shortest route, they make sure to point out the longer scenic routes as well. The Michelin guide makes getting there at least half the fun. It encourages travelers to keep moving, to keep wearing down those tires. There’s always another town to see, another interesting detour to make. The Michelin guide not only helps sell more tires, it’s also a profitable business in its own right. It dominates the guidebook market in France and is making inroads in the rest of Europe.
The used-car market also benefits when people pay attention to complements. For proof, look to John and Louise MacBain, publishers of La Centrale des Particuliers, a Paris weekly specializing in advertisements for used cars. They have found people who will provide the complementary services their readers want—auto insurance, financing, and mechanical warranties. And the MacBains have prenegotiated very favorable rates for their readers by giving the providers a prominent listing in the magazine and use of the La Centrale brand name. The MacBains go even further, selling some complements themselves. Both readers and advertisers want to know average transaction prices and the average time on the market for each make, model, and year. Through France’s Minitel online service, the MacBains make this information available for a fee.2 By paying attention to complements, the MacBains have ensured