Satnav for the fleet: The liability Trap

The rapid evolution of vehicle tracking and mobile data development has seen a wealth of new providers enter the telematics marketplace. But, warns Tony Neill, the distribution channel should research these providers carefully before signing on the bottom line.

The emerging telematics industry has enjoyed considerable expansion in the last few years with applications becoming increasingly innovative and robust, and business models gradually becoming established.

The market however is still a relatively young one. Consequently dealers who have only got cellular industry experience, and who have made a decision to venture into vehicle tracking to bolster their revenue streams, or those considering joining the mobile industry for the first time, need to make themselves aware of the potential pitfalls.

Particular vigilance is required over what has to be one of the most critical of issues faced – that of contingent liability.

Due diligence
It is essential that dealers do their homework and ensure the contract for liability lies, not with themselves, but with the provider.

The problem with the rapid growth of any industry sector, or technology, is that it is always likely to attract unscrupulous business start-ups looking to make quick, easy money at the expense of the unsuspecting and ill-informed.

If a system fails, the customer will turn to the firm or individual that supplied it. If the provider has gone out of business however, it is the dealer that will be forced to shoulder the financial burden of reimbursement.

Furthermore, even where telematics providers set out with the best of business intentions, rapid liquidation or administration will always remain a very real possibility. According to the latest start-up business research by Barclays, 18 per cent of all new businesses fail within their first year, while 50 per cent fail within three years. Industry experts meanwhile suggest that failure rates within the telematics sector are likely to be even higher.

Dealers should not only set out to ensure that they’re selecting a provider that takes responsibility for every aspect of a system’s operation, and who can offer that system for one fixed cost, but they should also ensure that they’re not involved in the liability chain.

The mobile phone channel operates in what is now a well established marketplace and with, in the main, reputable companies built on solid financial foundations, from the likes of Nokia and Siemens to Samsung and Motorola. When a customer has a problem with a phone, the dealer simply goes back to the network and has it repaired or replaced under warranty. As a consequence, the issue of contingent liability is not something dealers are accustomed to considering.

The vehicle tracking industry however has proved more volatile and has a tendency to operate in a more arbitrary fashion.

Caveat venditor
The more reputable system providers will hold the contract liability but all too frequently, across the market as a whole, this is not the case. The message has to be ‘dealer beware’. There can be very real benefits from operating in the telematics market but these will only be realised by those that do their homework.

The problems associated with clawback claims for example, experienced by so many in the cellular market, can be avoided if the right tracking supplier is selected. With cashflow being king this can be a considerable advantage, as can the offer from some providers that negates the need to buy or hold stock.

As a company, Navman will take all appropriate steps to mitigate risk, dealers should be doing exactly the same by ensuring that they’re supplying technology from a company they can have confidence in. Trading history, reputation and the nature of offering should all be investigated.

Not all telematics companies operate a successful distribution channel and for those that do, not all will offer an acceptable level of protection for the seller.

In addition, dealers should be shrewd when analysing the pricing structures for the prospective systems that they’re considering selling to their customers.

Low headline daily price rates may initially help attract the interest of clients but will ultimately disappoint if they then discover that the system they’re being offered is a stripped down version of what they require or had been expecting.

The industry is becoming increasingly price competitive but in order to achieve lower prices, functionality is frequently being sacrificed. Flexibility on pricing and a system’s offering is important but crucial business benefits should not be surrendered. Equally, a longer term perspective is imperative and price considerations should not override issues of technical reliability and a telematics companies’ reputation. Sacrificing the frequency of updates, for example, in return for a lower price is less likely to compromise customer expectations than the sacrificing of important driver reports.

The caveat venditor message is simple yet imperative. It can be relatively straight forward to set up a tracking system, however unreliable that system may prove to be – don’t make this your problem. Protect your reputation and client relations; carry out your due diligence and choose wisely.

PROILE
Tony Neill is Vice President Europe, Middle East and Africa at vehicle tracking and mobile data specialist Navman Wireless Business Solutions. He is responsibility for expanding the company throughout Europe.
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