The Age of the Informed Customer

The Age of the Informed Customer

With the birth of the internet and increased reliance of technology, people seek education more than ever. It’s no surprise that people are more apt to search to find an answer to a question from a medical issue to consumer research. Since information on the internet is crowdsourced, the accuracy of information found varies widely. But given this research behavior, everyone has access to become an “instant expert” in a short period of time.

 

It’s no surprise that this behavior directly translates to directly to automotive consumers. As they research, the results can be overwhelming. What are they looking for? What do they want to know? Of course customers want the best price available and they base that belief on data about other market listings. But there’s more to a sale than price. And there’s an opportunity.

 

As a consumer researches a vehicle they are interested in, it behooves dealerships to present their inventory and dealership in the most favorable light. How? Of course they can show a vehicle price compared to books, but what about relative to the market? What about dealership differentiators? How do you do that?!

 

This is the information the consumer is looking for across the web; but if a dealership gives it to them, saving them time and effort, they’re making easier on them. Check plus for the dealer. But are they trustworthy? Of course! Car dealers are nice people…. But the perception of dealerships isn’t so favorable. But maybe by showing information from elsewhere, like price versus book and market listings you’re demonstrating transparency to the consumer. And that is what consumers are looking for more than anything else. Now that means a gold star!

BMW Product Geniuses Set The Standard for Building Trust With Customers

BMW Product Geniuses Set The Standard for Building Trust With Customers

Gallup 

According to Gallup, 92% of consumers don’t trust car salespeople. Our industry, while making strides, is still stuck doing business as usual. Customers will do anything in their power to avoid becoming a part of our process.  Customers want facts. They don’t want to be sold; rather, they want to be educated. They want product experts not salespeople. While we know we have to change, not enough of us are willing to be on the front lines to enact that change.

In 2014, BMW introduced the Product Genius into their retail stores, whose sole purpose is to educate consumers on its vehicles and their increasingly more complex features without the stench of an ulterior sales motive (they are salaried employees). Their sole motivation is customer satisfaction. In doing so, BMW has put an inherent wall in between the customer and the typical salesman.

 

This massive overhaul in the sales process not only keeps them relevant, it secures their role as the class of the industry.

So what can you change in your process today to follow suit?

  • PROBLEM: Most dealers put less information online as a tactic to have the consumer call and ask.
  • SOLUTION: Make sure that your virtual showroom (whether on your website or 3rd party sites) is designed to speak the language of the consumer. Adding package and option information is crucial to building value and informing your customers before they show up on your lot.
  • PROBLEM: Our employees are knowledgeable about their inventory, but they are not experts on all of the cars and their respective features.
  • SOLUTION: Ensure that any consumer-facing employees (BDC/Sales) are truly experts on your entire inventory – both in-brand and off-brand. Give them the tools they need to turn them into “geniuses.”
  • PROBLEM: Dealers still follow the “Road to the Sale” and force customers into their process.
  • SOLUTION: Allow for the customers to access information without a salesman there (think Sunday shoppers). This lets them know that we are a different type of dealership that is not constrained by the “old way” of selling cars. CARMAX is piloting a model where consumers can use iPads to navigate their inventory while on the lot. Some dealers use their window stickers to employ these consumer self-service tactics as well.

 

Learn more about BMW Product Geniuses: CLICK HERE

 

Why You Should Attend Conferences Like Digital Dealer

Why You Should Attend Conferences Like Digital Dealer

Yesterday, we attended the Digital Dealer Workshop in Chicago, IL. I’ll admit, I was a little skeptical of who was going to be in attendance. We’ve attended some automotive conferences in the past where there were more vendors than dealers and the dealers that were in attendance weren’t there to learn, they were invited by their vendor. That seemed to change yesterday when we noticed the ratio of dealers to vendors was much greater. We set up our booth in the AM and soon the dealers began to show up. Several dealers came up to us to just have a conversation about what we do and what their pain points were even if we didn’t have the solution for it. Some on these pain points included missing phone calls, how to solidify the appointment with a retail customer, and having relevant content, not only for search engines, but for sales people to use to sell the car. I had one BDC Manager tell me that her store struggled with content so much, that their sales people relied on photos to verify options and equipment. As a vendor, we got to sit in on other presentations throughout the day. Since the vendors weren’t allowed to sell during their presentations, the content was geared towards helping dealers with factual information. For example, I learned that 50% of pre-owned sales in Chicago are private party sales, 50%!?! I also learned that to improve a BDC, a dealership should bonus on sales, not appointments to ensure that qualified leads are showing up. At the end of the day, a good friend of mine stated after his presentation how challenging the questions were, we both agreed that it was a good thing that dealers are aware they need good data to make decisions! The dealers were pushing us as vendors to justify what we offered and why they needed to make a change.

In our industry, there’s yet another shift and both dealers and vendors are paying attention. The internet alone is shifting at such a fast pace that it’s critical that dealers partner with their vendors and attend conferences to get an outside perspective on retail customers and what’s working. Third-party listing sites are all competing for the retail customer, some are even going so far as to advertise on national T.V. that dealers can’t be trusted!

So I urge all dealers to call your reps, attend a conference, push your vendors to solve your problems and gather as much outside intel as you can to make decisions with your stores. The more you know….

CarMax, and a Lesson in Data

CarMax, and a Lesson in Data

Last Friday the Wall Street Journal released an article featuring how CarMax was seeing a decrease in the selling prices of their used cars. This signaled a cause for concern across the industry. However, this was followed up by a piece in Auto Remarketing on the same day that gave more insight and data in to what is happening at CarMax.

Wall Street Journal:

“A big used-car retailer said on Friday that its average selling prices slipped 1.6% in the fiscal first quarter, a caution flag for a U.S. auto industry that has relied on rising used-vehicle prices to prop up demand for new automobiles.

Virginia-based CarMax Inc. said its average transaction prices in the three months ending May 31 fell to $19,851, down from $20,173 in the same period a year ago. CarMax’s used-vehicle prices cooled in the latter part its fiscal year ending Feb. 28, and the first-quarter data signals the trend is continuing. 

If you looked just at this you might think the bottom is falling out of the market. The article goes on to discuss the fact that we will see a rise in used car inventory, possible interest rate increases and other signals that could point to a popping of the used car pricing bubble. But that is not the entire picture at CarMax.

Auto Remarketing:

“CarMax announced first-quarter results for the start to its 2016 fiscal year, reporting another record quarter for sales and earnings…And net earnings grew 7.3 percent to $182 million.

…In fact, total used units sales rose by 9.3 percent from 150,528 sold a year ago. This time around, the company sold 164,510 used vehicles in Q1. This represented sales worth $3.3 million, up from $3 million in Q1 fiscal 2015.

So, what is this all telling us?

 

Buying Smarter and Pricing Efficiently is a Must

While it is true that the average selling price is down, CarMax is still able to increase revenue and volume. From this we can assume that the company is being smarter about putting the right inventory on its lot. They are making sure they are acquiring the right cars that will move, and purchasing them at a lower wholesale price.

By buying smarter and pricing according to market they are able to still grow their business while moving more automobiles at a better margin, even though the average individual vehicle price is down. 

What can the industry as a whole take from this? 

 

Get Cars that Will Move and Make Money

Find the right cars:

  1. Invest in the right inventory that will move in not only your market, but specifically on your property.
  2. Buy at the optimal value so that you can in turn maintain or grow your GP.

 

What is the Secret to Success? “Transparency”

The biggest piece to take from CarMax is their ability to create a culture of transparency. By giving the customer the right amount of information about the vehicle they have built trust in their selling process. This trust carries over in to the ability to sell the costs at their margins without having to add additional discounts. And even if you are not as large as CarMax you can also create this same selling environment by building trust in your process. You can create that sense of transparency and value in your vehicle and pricing by providing: 

  1. Third party evidence
  2. Provide pricing proof points (Price vs Book)
  3. Providing original OEM specific packages and equipment in your descriptions
  4. Carfax reporting
  5. Expert reviews and awards
  6. Crash test ratings

While this is not all inclusive, it is an example of the data that consumers today rely on to make sure they are getting top value for their purchase. It is not new news that the consumer today is doing volumes of research before ever stepping foot on your lot. By providing them valuable information about the products on your lot up front you are setting up your culture of trust and transparency and setting yourself apart from the market. The transparency experience needs to happen on the lot and it needs to be put in the hands of your salespeople, as they are the ones delivering the message from your dealership to the consumer.

Level the playing field for them. Instill processes and procedures that encompasses the entire lifecycle of automobiles on your lot. From making smarter purchases for your specific dealership,  to creating trust with your buyers in how you market your cars, to the tools and messages your sales people use when face to face with your consumers; in today’s car buying experience everything counts. CarMax is an example that when you focus on the entire process you can still grow your business and profit margin even when your average top line sale is lower.

The Opportunity of a Lifetime

The Opportunity of a Lifetime

Opportunities of a lifetime don’t come by often, that’s why we call them an “opportunity of a lifetime”, and I recently got one! My opportunity was to join a successful company, INC 500’s fastest-growing software company in Chicago and 3rd fastest growing software company in the nation, and run Product Management. I’m now 2.5 months into the job as Vice President of Product Management for MAX Digital.

In my new role I inherit successful products that have made the company the success that it is. And, as with any existing product, I have a plethora of enhancement requests (customer requests?), technical debt, innovation, competitive differentiators and so much more. Now begins the exciting balancing act of determining just the right mix of all these things. It’s truly a Product Manager’s dream come true!

Will we get it exactly right day one? Probably not, but we’ll start somewhere and continuously improve with our customer’s feedback and enjoy the exciting journey that we are about to embark upon. I invite you to follow me as I take this journey; I will be posting something new next month. In the meantime, I would love to hear your comments and advice – thanks in advance!

3 Things That Lead to Success with In-Group Transfers

3 Things That Lead to Success with In-Group Transfers

Throughout my visits with groups, I continue to see the same dynamic repeat itself when trying to get groups to do more “in-group transfers”. Sourcing inventory internally is a great way to increase retail success while avoiding wholesale loss. I’m not talking about “swapping spit”, or “I’ll trade you my aged over book car for your aged over book car”!!! Nor am I advocating the ole, “let’s keep trading this car in the group and re-starting the clock”.

First, let’s talk about stocking. If a Lincoln store has a 40 day old 2014 CL Class that I’m understocked in over at the Mercedes store, move it! If the Mercedes store has a 2013 Silverado Truck that’s not getting any bites, move it to the store that needs trucks. There’s no reason top selling, most profitable and fast-selling vehicles aren’t moved to the store with the best shot at selling it, especially if they’re aging. Sourcing inventory internally not only makes business sense, but avoids auction fees. I can’t tell you how many times I’ve seen cars sent to auction only to be bought by their sister store in the group!
Second, aging inventory needs a good home. If you’re not getting any hits on a vehicle and you have it priced/marketed correctly, move it! Just because a vehicle comes up on some magazine list as a “Hot Seller”, doesn’t mean your Lexus store is going to be good at selling a domestic truck. Move it to the store that sells trucks!

Third, encourage the behavior!!!!!! Too many times I’m in a group meeting where one UCM doesn’t want to buy/sell cars from/to the other UCM because “it will make that guy look better on the reports!” I don’t blame them. Why not look at the number of times a store sources inventory from another and praise them on their process? Get the UCM’s together often to create a team culture. Buy them pizza, go bowling, serve tabasco soaked peanuts and beer from the back of a pickup during an internal auction (been there done that! Thanks to a group in Alabama!). Do this and maybe next time when they need a Buy-Bid, they’ll call one of their sister stores and not their buddy over at the buy-here-pay-here lot.So I challenge the Directors, Owners, GM’s, UCM’s of groups to build a culture that encourages in-group sourcing of inventory. Work as a group and dominate your market.

So I challenge the Directors, Owners, GM’s, UCM’s of groups to build a culture that encourages in-group sourcing of inventory. Work as a group and dominate your market.

Stock Used Car Inventory Like a Baker Stocks His Shelves

Stock Used Car Inventory Like a Baker Stocks His Shelves

Used car inventory will be more plentiful this spring and summer than in years past. It will be even more important you stock your inventory with the best-selling, most profitable pieces of inventory for your location in order to drive traffic, gross and increase sales and ultimately lead to profitability.

Even the most successful dealers can only stock 50%-60% of their inventory from trades. Filling in the gaps with off-site purchases can be a very risky and expensive task. Making the right decisions is critical to drive profitability.

As you head out this spring and summer, I ask you “think like a baker.”

It’s important that a baker have enough loaves of each kind of bread every day. Too much pumpernickel, he/she has to throw away what does not sell. That waste costs him/her money and in your case would be a wholesale loss. Not enough rye and his customers will go someplace else to buy. One thing is certain; a baker does not stock his shelves with anything but baked goods. Franchise car dealers are the same way. Your brand is who you are. Leverage the marketing dollars of the manufacturer and be sure you stock the inventory that people think and expect you to have.

A baker does not carry fish or fruit in his display case. Why should you? Be sure your inventory is stocked with the cars, trucks and SUV’s people associate you with. Ensure you appropriate days’ supply of your best sellers to avoid wholesale loss. Used car managers time is extremely valuable today. Before you head out and spend your money on inventory you have little experience with, no brand support for, both from an advertising and service perspective, be sure your brand’s top sellers based on your sales data are properly stocked, merchandised and priced. Dominate that market first and then consider stepping out and purchasing market performers.

For more information on how to ensure you are stocking the right inventory this busy selling season, contact myself or one of my teammates here at MAXDigital, parent company of FirstLook, for more details.

Top 5 things NOT to Do with Your CPO Process

Top 5 things NOT to Do with Your CPO Process

So how much does it cost for your dealership to certify a car?  Does the Retail Customer understand how Certified adds value to the vehicle?  Can they quantify it?  Let’s take a look at the top five “Don’ts” when it comes to your CPO process: 

  1. DON’T assume the customer knows what CPO or Certified means!  I’d bet if a Late Night Talk Show went out on the streets and asked random people what they thought a “Certified Vehicle” meant, we’d get some pretty interesting answers.  I’m sure we’d hear, “that means it’s got a certification letter,” or “it’s just another way for a car dealer to make money,” and “they checked it out”.  DO list out what certified means anywhere and everywhere you can:  your website, in your vehicle’s ad description online, on the car, in your showroom and with your sales team.
  2. DON’T rely on your webloader to automatically know that a car is certified and how to explain what your certified program does.  Check that it’s pulling from your DMS as certified or make sure your team is marking it correctly.  Ensure that your car is listed and is searchable as Certified on third party sites.  Bullet point everything certified means in your vehicle descriptions.
  3. DON’T use basic VIN explosions.  VIN explosions only list equipment NOT Factory Packages!  Make the CPO car advertise like it was when it was new!!!!  A CPO customer is looking for that “almost new” vehicle.  Listing factory packages like “Technology Package” and “Cold Weather Package”, makes the car advertise like it did when it was new.  Advertise the original Factory Package with MSRP’s to build value with customers.  For example, the BMW Premium Package on a 3 series 328 was $2,200 when it was new!!!  Use factory colors in your online descriptions, basic webloaders use standard colors like black, white and tan instead of “Raven Black”, “Diamond Pearl White” and “Sierra Nevada Tan”.
  4. DON’T do CPO half way.  If you’re going to sell CPO cars, do it, train to it, dedicate personnel to it and make it part of your store’s culture!  Acquisition, Recon, Sales, Service and Finance all have important roles to play.
  5. Finally, DON’T lose the gross profit opportunity!  CPO adds value to the car, stand behind that.  When negotiating the deal, keep reminding the sales team and the customer the value points of CPO.  F&I also has a great opportunity to continue the warranty and provide products that will protect the customer’s investment.

 Be proud of your CPO process and your brand.  Your store is best equipped to certify your brand and to ensure that a customer is getting the best value and most reliable pre-owned vehicle.  If you have a solid CPO process in place, it will positively affect your non-certified pre-owned as well.

Survive and Advance. Selling Cars in a Digital World.

Survive and Advance. Selling Cars in a Digital World.

Today we find experts writing articles about the auto industry that have only set foot in a dealership a few times or may have never even purchased a vehicle.  While most of these articles are well intentioned and help create a healthy discourse; many just try to prove a specific position for the writer or the company commissioning the tome.  Many are hypothetical at best.

Recently Accenture released a study conducted by Coleman Parkes; 10,000 automobile owners were surveyed in eight countries: Brazil, China, France, Germany, India, Italy, Japan and the United States.

I find most of this particular article interesting and thought provoking. I believe as we examine the article; that we can get much insight from the article.  The part that can lead to much worry and concern; is at best far down the road for any  appreciable percentages and at worst almost like shouting fire in a theater.  (The survey also showed that 75 percent of drivers polled would consider working through the entire car-buying process online.) The business of business plays out on many levels.  The primary issue is SURVIVE AND ADVANCE*.  In retail and especially with high capital requirement businesses you have to meet payroll every month.   This requires doing the right things in all facets of the business.  The owner/decision maker has to be very careful matching the here and now with proven practices.  They have to be willing to make some risky but necessary adoptions of new and innovative ideas.  The tough part is not buying some one’s opinion as an actual BEST PRACTICE. You have to match the here and now with changes, issues and opportunities that come up.

The article  states 80 percent of drivers in the market for a new vehicle are using some form of digital technology to research before purchasing, while almost two-thirds (62 percent) are beginning the car-buying process online.  I do not doubt these numbers and they could be even higher in some areas or for preowned purchases.   Just think about you friends, popular culture, your family and even yourself.  It is so easy to look things up on line.  Why would anyone not take advantage of the wealth of information that is available?

The writer states that the digital customer has made things disruptive.  We have found that the impact is a better educated customer, one that has done their homework.  Just like in school some people do a better job of doing their homework.  Teachers generally find those students are a pleasure to teach and work with.  A well-educated customer when aligned with well-informed product experts that have the tools to make a transaction go smoothly; is a win for all.  Time for all is more efficiently used, customer satisfaction and employee satisfaction is much higher.  The customer gets what they need at a fair price and the company can make a fair margin.

The digital market place has had a tendency to be little more than the old Pay for Play; MAD MEN type advertisements.  “Carpet mats so clean you could eat off of them.” Long lists of abbreviations, artificial hooks, read the fine print, more is better and just lots of hype.  Customers have proven and the study restates they are looking honest and provable information.  They look at social media not for thinly veiled ads but for peers opinions.  They look at numerous sites, they ask questions.  When they get to your site are you ads short, concise and do you back up with proof?

Accenture’s study really proves what we have said for a long time; make sure you use actual facts that can be proven. Give the customer a reason to see that you are supplying what they are wanting; not only the vehicle but the information and evidence.

The survey also showed that 75 percent of drivers polled would consider working through the entire car-buying process online.  The two key words are DRIVERS and CONSIDER.  Were these actual drivers or people that were thinking about purchasing a car but never have?  Consider is much different than actually doing.   Was there a trade involved? Was this purchase for a new or used vehicle?  What was the age and purchase price point for the vehicle?   An automobile is much more complex than the purchase of a smart phone or article of clothing.  The digital age can smooth out the process and speed up the process.  However, there are many reasons that a customer will want and need to go to a Brick and Mortar business for the final transaction.  The factories, the public companies, the retailers all are investing more and more money on facilities to meet the demand.  They must also invest in creating product experts with the right tools to make this process more efficient and palatable. Could there be transactions only on the internet? Of course there could be and will be. However, for the foreseeable future it is still a one on one transaction at the dealership.  Invest in being able to do this the best way possible.  Survive and advance,  Just like Coach V in 1983; If you do that you will be around for the great future frontier and win along the way.

Why Warren Buffett Is NOT Wrong on Car-Dealer Model

Why Warren Buffett Is NOT Wrong on Car-Dealer Model

When Warren Buffett gets involved in any business, people notice… the car-dealership space is no different. Everyone has a perspective, but I wanted to take a moment to reply to a recent CNBC piece that is calling out Mr. Buffett as being wrong when it comes to his belief that the dealership model is not going to change. This is certainly a topic discussed at every dealership in the country and there are many leaders wondering what the future will hold in regards to how the current model will change. The author, Daron Gifford, lays out some compelling arguments, but I want to take a moment to illustrate how I see the model changing (and in some cases, has already changed).

In Comparison

Mr. Gifford refers to Walmart, Target and Costco as examples of Retailers who wouldn’t have two months’ worth of inventory on the ground. But is this really a fair example? The Automotive Industry is like none other. Perhaps the Housing Market is the closest as the price and sheer physical size of the product are factors when it comes to shipping and the ability to purchase the product.

But unlike most other retail, you don’t need good credit and a down payment to buy a pack of Hanes Underwear. I’m pretty sure that if the store runs out of the undergarment it could have them overnighted, but you can’t do that with a car. I also wager a bet that they don’t sell pre-owned either … or, at least I hope they don’t.

So when considering the auto sales industry it is hard to compare it directly to big box, high SKU industries. So what about the challengers in the direct space.
As Gifford points out, and everyone is well aware, Tesla is making a lot of noise with their push for direct sales, but when considering Tesla and the change they are bringing to the market a question that needs to be asked is “What will Tesla do with pre-owned?

What’s their model? If they don’t control remarketing like BMW does, their product residuals will diminish quickly and lenders will think twice about funding their deals.
Also, how will Tesla handle pre-owned without lot space?

Additionally, if the retail model of ordering a product online and then waiting for that product to ship is the future, then why do Windows and Apple stores exist?

American Consumers love to try out the product and “experience” those stores. The employees at those stores are “Product Experts” if not Geniuses on their product lines. American shoppers are not only impulse buyers, but once their research is done, they will purchase a vehicle with only visiting 1.2 dealerships in person. This is why the Automotive Industry must change … but it isn’t necessarily going to be the way Mr. Gifford explains.

I am certain Tesla will work through these questions, but this shows that the answers regarding the future of dealerships are not so simple.

The Model has changed … and it is the evolution from selling to becoming product experts

Now by pointing out why some of the comparisons need more thought, it is obvious that the consumer has changed and with that have demanded a new experiences in how they interact with businesses. They no longer want or need to be “sold.”

As Gifford accurately points out:

Buyers have changed, too; they are more informed, Internet-savvy and less likely to accept high-pressure sales techniques.
Most customers dislike the current model, despite recent enhancements. They still feel forced into a choice and lack trust in sales personnel. Buyers in one survey said they would rather give up sex for a month than haggle on a price with a sales person.
This is where the model needs to, and is being changed.

Forward thinking dealerships are currently at work changing both their process online and the in-store “Customer Experience”. The change is driven by the consumer raising the need for more relevant information, product experts and a shorter purchasing process.

The new model is more like the following.

Dealerships are responding to the fact that the buyer has changed. Progressive dealerships are changing to focus on how to keep customers engaged with their online inventory longer by providing consumers with specific relevant information about these vehicles. The more accurate and detailed the dealership can be the better served they are at establishing the true value for their inventory and driving more consumers to their websites.

After the online research is complete, the consumer chooses the dealerships that they will either contact or visit. In the newer, faster model, the stores have formalized the manner in which they can quickly communicate specific answers consumers have about the vehicles of interest. They need real, detailed answers … and they need them in real time. The consumer is informed, and dealership staff need to be experts too … on every car on the lot. Technology is a huge equalizer here. Dealerships also are working to transform the Sales Team from the salesperson of old to true product experts to handle the needs of the consumer once they arrive on the showroom floor? We now know that over 60% of consumers are using their mobile phones while on the lot, and progressive Dealership Sales Consultants are also using mobile technology while on the lot to facilitate their ability to get real time information when it is most critical.

Change is good and yes, dealerships must change. Will dealerships turn into order takers? I doubt it, but will they need to become product experts and provide a better customer experience? Yes.