DealerExec A DrivingSales Publication • 3rd Quarter, 2015
A DrivingSales Quarterly Covering Dealership Brand, Capital and People.
Profiting from
CHANGE How Dealers Can Invest in the Future of Retailing
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Visit DrivingSales.com to view more than 22,000 verified dealer ratings of over 800 vendors in 28 categories.
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BY CHRIS REED • PAGE 18
TIME TO TRY
SOMETHING NEW SERVICE1ONE “Provides 100 percent transparent communication from the moment an appointment is made until the repair order is complete.”
REVOLUTIONIZING THE SERVICE LANE
2015
AWARDS WINNER
DIAMOND WINNER Top-rated CRM
2015
DIAMOND WINNER
2011
DIAMOND WINNER
2012
DIAMOND WINNER
2013
DIAMOND WINNER
2014
866. 989.8077 | eleadsales@eleadcrm.com | elead-crm.com © Data Software Services, L.L.C. 2015
F O U N D E R ’ S
L E T T E R
Dealership Executive,
I
t’s been a year since I bought a Honda store in Walla Walla, Washington. Over the past 12 months, I have once again been experiencing the challenges all of you face in finding good people, creating a brand and culture, working with my OEM, and building a sustainable, profitable business. It’s been fun for me to be back in the retail mix. I have brought this perspective to everything we do as a business to support the development of your staff and your business. In Las Vegas this October we have crafted a program that has “must see” content for progressive owners and general managers as well as your staff if you want to stay ahead of the pack in a world of rapidly changing consumers and technology. The DrivingSales Executive Summit Oct.18-20 at the Bellagio in Las Vegas attracts more dealer executives than any other industry conference other than NADA. It is wher e progressive dealers come to learn from their peers and leading experts from outside the industry to gain a competitive advantage. This year we have a very strong program for dealer leadership. You will hear and meet Frank Cespedes from the Harvard Business School offering insights relevant to auto retailing from his award-winning book, “Aligning Strategy with Sales.” You will hear two highly decorated Navy SEAL Team Leaders sharing their insights on leadership. You will hear how to deliver a feeling for your dealership brand from one of the consummate marketers in the industry. I will be sharing insights on how you can win modern consumers from our $1 million study into the automotive customer experience. The program has three other published authors as keynoters as well as 46 breakout presentations from leading vendors like Google and Facebook as well as over 15 dealers sharing their successes. New this year is the AutoVentures startup conference on Oct. 18 highlighted in the cover story of this magazine. This is the first time dealers have been given the opportunity to have the same visibility into young automotive startups that the venture capitalists have. You might even leave with a piece of equity in the next billion dollar automotive startup. Dealer principals are able to attend both events for the cost of attending DSES alone. I encourage you to join me and your peers for the most stimulating event you will attend all year by registering at DSES.com.
DealerExec The Team Jared Hamilton FOUNDER
@jaredhamiltonDS
Chris Reed PRESIDENT
chris.reed@drivingsales.com
Mike Jeffs EDITOR
mike.jeffs@drivingsales.com @mikejeffs3
Steve McFarland DIRECTOR OF ADVERTISING
steve.mcfarland@drivingsales.com
Josh Phelon ADVERTISING & SPONSORSHIP SALES MANAGER
josh.phelon@drivingsales.com @joshphelon
Justin Rhoane ADVERTISING & SPONSORSHIP SALES MANAGER
justin.rhoane@drivingsales.com @JRhoane
Sincerely,
Jared Hamilton Founder, DrivingSales, LLC
DEALER EXEC
DRIVINGSALES, LLC | 3RD QUARTER - 2015
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Thanks to our Sponsors!
DealerExec ABOUT THIS PUBLICATION DealerExec is published quarterly by DrivingSales, LLC featuring executive resources for automotive retail leaders covering dealership Brands, Capital and People, and a quarterly ranking of dealership vendors as rated by dealers themselves. Within the first issue of each year, DealerExec announces the annual winners of the the Dealer Satisfaction Awards from several Vendor Rating category.
SUBSCRIPTIONS To subscribe, visit DealerExecMagazine.com. Printed in the United States of America. Copyright Š DrivingSales, LLC 2015. All rights reserved. No part of this publication may be reprinted or otherwise reproduced without publisher’s written permission. DealerExec and DrivingSales, LLC assume no responsibility for unsolicited manuscripts or photographs.
LETTERS TO THE EDITOR DealerExec and DrivingSales, LLC welcome letters to the editor. If you have questions about the publication, or would like to make a comment, or voice an opinion about the magazine, DrivingSales, LLC, or the industry in general, please feel free to write us. Please send letters to mike. jeffs@drivingsales.com. Include a phone number and email address. Letters may be edited for clarity or space. Because of the high volume of mail we receive, we cannot respond to all letters.
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3RD QUARTER - 2015 | DRIVINGSALES, LLC
DEALER EXEC
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C O N T E N T S
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News 12 DrivingSales News
DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team.
Features
16
14 A Leaders Guide to Ask ‘Why?’
How Freedom Auto Group has created a peoplecentric culture BY ERIC SAVAGE
18 Profiting from Change
How Dealers Can Invest in the Future of Retailing BY CHRIS REED
24 Dealer-to-Dealer: Implement and Deliver Your Dealership’s Brand Promise
How the Cardinale Automotive Group executes it’s core values BY ERICH GAIL
28 How to Service Your Fix Ops
Stop your service customers from defecting at an aggressive rate BY DENIM SIMKINS
30 Most Valuable Insight 2015 • Winner and Finalists
A recap of the Most Valuable Insight competition, which is designed to reveal and showcase never-before released data and research unique in the automotive industry.
38 NADA’s Used Vehicle Price Update
Large pickups continue to be the market’s standout performer
42 Cyber Security – The Time is Now
Hackers, connected vehicles and potential vulnerability at the dealership level BY CLIFF BANKS
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DEALER EXEC
18 INVE PHO C IM P PR ZERO
24
CRM
INVENTORY SYSTEM
EM
PHONE MASTERY
CONTINUOUS IMPROVEMENT TRAINING PERSONAL & PROFESSIONAL
ZERO MOMENT RETAIL
AIL
On DrivingSales.com, dealers can rate their vendors. All reviews are verified to be legitimate and posted for you to learn who the best vendors are – directly from your peers.
DRIVINGSALES, LLC | 3RD QUARTER - 2015
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Over 16,000 unbiased vendor ratings submitted by verified dealers.
CATEGORIES 6 Call Management Chat CRM/Sales Department Dealership Management Systems (DMS)
7 Fixed Ops Solutions Internet Lead Management (ILM) Inventory Pricing New Car Leads
8 Owner Marketing Reputation Management SEM - PPC Search Engine Optimization (SEO)
9 Used Car Advertising Websites
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3RD QUARTER - 2015 | DRIVINGSALES, LLC
DEALER EXEC
VDP Views Doubled New Car Sales Increased 24%*
Ads by Auto Audience™ Network
We put the right cars in front of the right buyers and drive them directly to your Vehicle Detail Pages. Learn more at the AutoAudience.com or call us at 1.855.520.9177 – Option 2 *Double the number of Vehicle Detail Page views and a 24% increase in new car sales was measured in year over year growth by Dave Hitchcock Chevrolet with the addition of the Auto Audience™ Network. Visit AutoAudience.com/ChevyCase to get the details.
DEALER EXEC
Call Management Solutions that track inbound calls through designated tracking phone numbers so that you can manage your marketing spend and increase ROI. COMPANY
PRODUCT
SCORE RATING
REC
CallSource CallTrack
766.64 100%
CallRevu
CallRevu 360
483.49
100%
Century Interactive
Car Wars
257.26
100%
Gubagoo TalkSmart
190.75 100%
800response
138.24
Call Recording
100%
Chat Products These solutions allow you to meet, greet and converse with customers who visit your website, as well as set appointments, generate leads and provide better customer service. COMPANY
PRODUCT
SCORE RATING
ContactAtOnce!
Chat Connect + Mobile Text Connect
691.06
99%
Gubagoo
Gubagoo 24/7 Behavioral Live Chat
292.99
99%
ActivEngage
ActivEngage Chat
112.58
97%
CarChat 24
24/7 Fully Staffed Chat
31.58
100%
0.33
100%\
Dealer e Process
CRM-Sales Department Dealer e Process Live Chat
REC.
These are Customer Relationship Management (CRM) systems that track all your walk-in, phone and Internet customers through the complete sales funnel and owner life-cycle. They allow for advanced customer segmentation and marketing and track your sales activities by employee to make your team more effective at attracting customers and managing relationships. COMPANY
PRODUCT
SCORE RATING
ELEAD1ONE
ELEAD CRM
519.15
DealerSocket
DealerSocket CRM
3.73
91%
VinSolutions
VinSolutions MotoSnap™ CRM
1.19
81%
iMagicLab DealerCRM
REC.
100%
1.06 86%
Dealership Management Systems (DMS) Dealership Management Systems connect all your dealership departments with accounting and maintain your dealership data in one central place. These ratings are for the DMS systems themselves, NOT the solutions that plug into the DMS systems such as a Desking or CRM solution.
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COMPANY
PRODUCT
Autosoft, Inc.
Autosoft FLEX DMS
101.1
99%
Auto/Mate Dealership Systems
AMPS
75.98
97%
Dealertrack Technologies
Dealertrack Dealer Management System
0.61
56%
Meadowland Systems
AutoMan
0.18
100%
3RD QUARTER - 2015 | DRIVINGSALES, LLC
SCORE RATING
REC.
DEALER EXEC
Fixed Ops Solutions Products and/or services designed specifically for Fixed Operations. COMPANY
PRODUCT
ELEAD1ONE AutoPilot ELEAD1ONE Service1One CIMA Systems
CIMA Car Care Service Menus
SCORE RATING
REC.
153.23 100% 6.4 100% 0.99
100%
Internet Lead Management (ILM) These Internet Lead Management solutions are built exclusively to handle incoming Internet leads and manage your Internet sales process. Many full-service CRM systems include Internet Lead Management features, but the ILM systems listed below are stand alone utilities built exclusively for managing Internet Leads. COMPANY
PRODUCT
SCORE RATING
ELEAD1ONE
ELEAD ILM
544.77
DealerSocket
DealerSocket ILM
0.27
100%
VinSolutions
VinSolutions MotoSnap™ ILM
0.23
71%
Dealer e Process Live Chat
0.33
Inventory Pricing
REC.
100%
100%\
With market volatility and transparency increasing online, knowing how to price your inventory is a science critical to increasing your store’s profitability. These Inventory Pricing tools collect various forms of market data to help define the optimum pricing for your inventory to maximize both Gross and Turn. COMPANY
PRODUCT
SCORE RATING
REC.
vAuto
vAuto Pricing & Merchandising
624.8
100%
VinSolutions
MotoSnap™ Market Pricing Analysis
39.79
80%
Black Book
Black Book Used Car Guides, Internet and PDA 8.96
100%
ACE Tech
LotPro
1.29
100%
FirstLook
FirstLook -- 360° Market Pricing
0.96
50%
New Car Leads These providers collect and aggregate leads from their web properties and from partner sites, then distribute these hot leads to dealers. Currently this category is for both finance and vehicle leads. COMPANY
PRODUCT
SCORE RATING
Autobytel Inc.
Autobytel New Car Leads
471.96
93%
Dealix Corp.
Dealix New Car Leads
52.09
57%
TrueCar
TrueCar New Car Leads
20.08
56%
Cars.com NewLeadsPlus Edmunds.com
Edmunds New Car Leads
*Category scores are computed per category and are not comparable across the board. For questions about Vendor Ratings, please email to bart.wilson@drivingsales.com
REC.
10.55 100% 6.74
100%
DRIVINGSALES, LLC | 3R D QUARTER - 2015
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Owner Marketing These targeted solutions help you mine and segment your customer database, and then market to them successfully. These solutions can market to your customers through email/direct mail/phone and other means. COMPANY
PRODUCT
ELEAD1ONE GoldDigger
SCORE RATING
REC.
184.22 100%
CIMA Systems
Complete Virtual BDC
0.73
100%
J&L Marketing
bLinked
0.29
100%
OneCommand OneCommand
0.22 89%
Reputation Management These products and services help a dealership manage its reputation. They may assist with review collection, monitoring, resolution, and promotion of online reviews. COMPANY
PRODUCT
SCORE RATING
DealerRater
DealerRater Certified Dealer Program
283.86
100%
eXtĂŠresAUTO
Online Reputation Management
174.62
100%
Digital Air Strike
Reputation Logix
41.94
75%
Slipstream Auto
Reputation Enhancement
15.07
100%
Opportunity Max
Reputation Manager
1.44
100%
Dealer e Process
Dealer e Process Live Chat
0.33
100%\
SEM - PPC
REC.
Search Engine Marketing (SEM) and Pay-Per-Click (PPC) solutions help you determine how to invest in and execute a display or paid ad campaign on the major search engines for greatest ROI. COMPANY
PRODUCT
SCORE RATING
REC.
Local Search Group
Search Engine Advertising - Automotive PPC 105.16
Dealer e Process
Digital AMMP
104.47
100%
Dealer.com
Dealer.com Unified Advertising Exchange
22.06
89%
Showroom Logic
AdLogic
20.86
100%
CDK Global
Power Search, Power Display and Remarketing 12.6
71%
100%
Search Engine Optimization (SEO) Search Engine Optimization (SEO) solutions work to optimize your websites so that they show up higher in the search engine rankings. These services generally include both on-page and off-page optimization. This category also includes Website Conversion Tools.
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COMPANY
PRODUCT
SCORE RATING
Customer Scout, Inc.
Customer Scout SEO
907.92
100%
DealerFire
DealerFire Content Marketing (SEO)
495.8
92%
Dealer.com
Dealer.com SEO
114.28
57%
All Auto Network
Auto Dealer SEO
70.66
100%
CDK Global
PowerSEO
59.5
100%
3RD QUARTER - 2015 | DRIVINGSALES, LLC
REC.
DEALER EXEC
S R E SUM
OF RCE U O N S . MAI R I CA R E A H T OR AS TES NG F I I S P B P WE SHO ALER HEN E W D N USE AT I O M R on INFO mati
N O C F O 83%
for he in t r e deliv at help our site n a c y e erFir or on Deal ooking f w o l h a re over Disc ustomers c your
e l a e D
r
t. e k c So
c
IG D / om
Learn more about DealerFire websites and digital marketing at User Summit. San Diego Bayfront Hilton 8/18 - 8/20
UserSummit.DealerSocket.com
DEALERSOCKET.COM/DIG
866-523-8807
Used Car Advertising These consumer-facing websites allow you to display your inventory to in-market consumers. They make huge media buys to attract customers to your inventory, and to increase your walk-in, phone and web leads. COMPANY
PRODUCT
SCORE RATING
REC.
Autotrader
Used Car Advertising
913.85
80%
Cars.com
Cars.com Online Advertising
94.65
75%
Autobytel
Autobytel Used Cars
46.38
100%
Dealix Corp.
UsedCars.com
36.99
100%
Websites Website solution providers create full-service websites built to be the main hub of your dealership’s online presence. These sites are central to your dealership’s marketing, branding and customer service. Micro Sites and Mobile Sites are rated in their own categories. COMPANY
PRODUCT
SCORE RATING
REC.
Dealer Car Search
Responsive Websites
361.71
100%
DealerOn
DealerOn - Flex Sites
189.66
98%
Dealer e Process
Dealer eProcess Responsive Websites
58.37
97%
DealerFire
DealerFire Responsive Websites
37.42
100%
Dealer.com
Dealer.com Core
3.07
71%
Dealers Share Their Stories Real car dealerships talk about their DSU success. WATCH THEIR STORIES DrivingSalesUniversity.com/success_stories
How Do Vendor Ratings Work? The DrivingSales Vendor Ratings site is the first formal mechanism for dealers to rate and review their vendors in a comprehensive, real-time vendor directory. It empowers dealers by allowing them to learn about all the solutions available and to view actual customer feedback, both good and bad, about how each solution actually performs.
Rules •
Only dealership employees can post ratings and reviews. Reviewers are verified to ensure they are valid and eligible to leave reviews.
•
Dealership employees can only rate and review the products they have experience using. The ratings are a chance to hear from actual customers with live experience using the solutions in their stores.
•
Each reviewer must answer three questions to complete their rating: 1. How many stars does the solution deserve? 2. Would you recommend the solution to a friend? 3. Why would or wouldn’t you recommend the solution?
•
All three components of the review, along with the job title of the reviewer, are posted live to DrivingSales.com for all to reference when selecting new vendors.
Safeguards •
DrivingSales.com protects the anonymity of each dealer employee who leaves a rating and review. However, DrivingSales requires valid name and contact information for each reviewer so that each reviewer can be validated.
•
Each review is passed through a variety of technological checkpoints to ensure vendors are not gaming the system. Furthermore, DrivingSales staff calls to verify a large percentage of the reviews.
Vendor Ranking In each product category the vendor solutions are ranked in real-time as each new dealer rating is submitted. The vendor products are ranked based on a weighted Bayesian Algorithm. This is a standard mathematical calculation that looks at the number of stars the reviewer gave as well as the statistically valid sample size needed, relative to the competitive set, to create a ranking based on the statistical accuracy of the results. Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews. We encourage all dealers to rate and review their vendors by visiting DrivingSales.com/Ratings
Dealer Satisfaction Awards The DrivingSales Dealer Satisfaction Awards recognize those solutions with the highest vendor ratings. For each category within the vendor ratings there are three award winners, the “Highest Rated” vendor and two “Top Rated” vendors. These awards reflect products and providers with a proven record of success and excellence in serving their dealer clients. The Dealer Satisfaction Award trophies are presented annually. Learn more at DealerSatisfactionAwards.com
Rankings Only dealership employees are allowed to rate their vendors on DrivingSales.com and all submitted ratings are verified. The vendors are then scored and ranked using a weighted Bayesian Algorithm (shown below). Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews.
w = (m*v 2 )*r+(v 2 *m)*c
The Vendor Ratings in this issue are based on the aggregate of all dealer ratings submitted from July 1, 2014 to July 1, 2015. *CATEGORY SCORES ARE COMPUTED PER CATEGORY AND ARE NOT COMPARABLE ACROSS THE BOARD. FOR QUESTIONS ABOUT VENDOR RATINGS, PLEASE CONTACT MIKE.JEFFS@DRIVINGSALES.COM
View detailed vendor reviews written by verified dealers at DrivingSales.com/Ratings
DRIVINGSALES, LLC | 3RD QUARTER - 2015
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DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team.
Here is a recap of the top stories from 2015 Q2 impacting your dealership. You can find all these stories and more on DrivingSalesNews.com
Federal Trade Commission Targets Industry Deception and Fraud The FTC has continued to step up its efforts to identify and prevent dealerships from practicing what it deems deceptive or fraudulent business practices. In cooperation with 32 law enforcement agencies, the FTC announced the results of Operation Ruse Control that ended with multiple actions taken against dealers and vendors. Dealers should take note and audit their compliance processes in order to ensure they don’t open up liability and scrutiny into their businesses as the FTC has explicitly warned that it plans to not only continue in its efforts but to increase them.
Amazon Launches ‘Home Services’ That Include Automotive Repair The end of March saw Amazon announce the launch of its new Home Services. This new service allows consumers to shop for
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3RD QUARTER - 2015 | DRIVINGSALES, LLC
home service providers such as plumbers, painters and even auto mechanics. Amazon will facilitate the transaction between the two parties and offer guarantees of performance. Amazon customers will be able to rate and review these service providers after completion of the work. While it is still unclear how or if this new service will affect automotive repair, Amazon is bringing transparency to pricing in the auto repair business. Service is typically the largest profit center for any dealership and while dealers have been forced into becoming more transparent in sales, service has not yet been affected. Independents have gravitated toward a more transparent and customer-centric experience, however, which may force dealers to as well.
GM Shielded From Pre-Bankruptcy Litigation A federal judge ruled in April that GM would be shielded from as much as $10 billion in claims from consumers who are seeking damages for injuries and decreased resale values for vehicles purchased prior to the company’s 2009 bankruptcy filing stemming from faulty ignition switches. U.S. Bankruptcy
Judge Robert Gerber found GM had committed no deception in it’s 2009 filing since senior GM executives were not aware of the problem before the filing. This ruling effectively separated GM legally into a pre-bankruptcy entity that is not liable for claims and the current post-bankruptcy GM will still have to resolve the legal actions being brought from consumers that purchased vehicles after the 2009 filing.
CFPB Attempting To Regulate Dealer Financing The Consumer Financial Protection Bureau announced in April that it would seek to authority to begin regulating the facilitation of auto loans originated at dealerships. It claims dealers are unfairly marking up interest rates and could be doing so in a discriminatory manner. The CFPB says their research concluded that dealer reserve markup practices could lead to unlawful discriminatory practices based on race, national origin and other protected classes. The CFPB recommends the elimination of dealer discretion in marking up buy rates and transitioning dealer compensation to a different compensation model such as a flat rate per transaction.
DEALER EXEC
Automakers Seek Ownership Of Vehicles Through Copyright Protection Several automakers are supporting provisions be added to copyright law which would effectively prevent consumers from repairing their own vehicles. Automakers argue the software in most modern vehicles is proprietary and should be considered their property. Tractor maker John Deere has even went as far as saying that farmers don’t own their tractors but rather receive an “implied license for the life of the vehicle to operate [it]” due to computer code that is present in all of the components of the vehicle. Automakers argue that there is inherent danger in allowing consumers to work on their own vehicles as they lack the technical knowledge to ensure modifications to the vehicle’s electronic control unit could render the vehicle unsafe and create liability for the automaker should the vehicle cause injury through malfunction.
California Finds Uber Driver Is An Employee The California Labor Commission ruled in June that an Uber driver is actually an employee under California law rather than an independent contractor. While Uber claims to only facilitate transportation transactions between drivers and consumers, the California Labor Commission determined that Uber controls many of the details including dictating how many fares a driver must accept, the type of vehicle they can use and how they should interact with customers.
DEALER EXEC
This ruling, while only applicable to a single driver for now, sets the stage for Uber’s fleet of drivers to bring forward similar claims and could result in the company’s entire driver base being deemed employees which would lead to enormous negative financial consequences for the company.
FCA Offers Free College Degrees To Employees Of Dealers In a first of its kind action, FCA announced the rollout of a free college degree program for all employees of participating FCA dealers through an agreement with Strayer University. The program would allow employees of these dealerships to attend the university with no out-of-pocket expenses for tuition or books. FCA stated this program is designed to give its dealers a competitive advantage in attracting and retaining quality employees as well as increase its customer satisfaction scores.
TrueCar Sued By California New Car Dealers Association and Shareholders The third quarter has been particularly trying for auto buying platform, TrueCar, as it was first sued by the California New Car Dealers Association in May for $250 million facing allegations that TrueCar is operating in the state as an auto dealer without a license. Right on the heels of this lawsuit saw another filed in federal court by shareholders of TrueCar who are
seeking damages for investments made in the company claiming that TrueCar misled investors regarding explanation of its business model and practices to investors.
Cox Automotive Buys DealerTrack for $4 Billion Cox Automotive continues it’s acquisition of industry leading companies when it announced it would be acquiring DealerTrack Technologies for the sum of $4 billion. The acquisition is fully funded and will see Cox Automotive add a premier DMS provider to its portfolio of companies including Kelly Blue Book, Autotrader, vAuto, VinSolutions and Manheim.
Teen Poses as FBI Agent, Takes Dodge Charger From Dealership A 17-year-old boy posed as an FBI agent in order to steal a Dodge Charger from a Michigan dealership. This was all possible because the teenager called Cueter Chrysler in Ypsilanti, Michigan and identified himself as a recently transferred FBI agent in the market for a new vehicle. When the young man showed up at the store, he had an air-soft gun holstered on his hip and appeared to be a law enforcement officer. When the dealership asked for identification, the boy swiped the keys off of the counter, jumped into a new Dodge Charger and headed south. He made it 50 miles across state lines to Ohio before being involved in a collision, which totaled the Charger. The juvenile car thief was arrested at the scene of the accident.
DRIVINGSALES, LLC | 3RD QUARTER - 2015
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P E O P L E
BY ERIC SAVAGE
A Leaders Guide to Ask ‘Why?’ How Freedom Auto Group has created a people-centric culture
I
n one of the more famous episodes of “Seinfeld,” Jerry and Elaine are complaining about various types of people and their idiosyncrasies and Elaine finally blurts out, “I will NEVER understand people.” Jerry sums it up in a few words by saying, “They’re the worst.” At the risk of giving up my age, I used this quote because it’s a very true-to-life conversation that occurs in the heads of many people. Have you ever managed or supervised employees and struggled to get the team organized or motivated? Have you ever been managed or supervised by someone whose demeanor with people is so far off base that you wonder how this person could have a relationship with anyone? Have you watched people do things in any component of their life (work, school, home, community, etc.) and asked yourself the question, “What in the world are they thinking?” It’s not hard for any of us to reach the conclusion that “people are the worst.” After all, just scanning the news headlines every day shows there’s plenty of evidence to support the claim people are, in fact, the worst. Or are they? When it comes to understanding people there’s a lot more to the story. In the spring of my son’s fourth year on the planet, we had left the doors and windows in our home open to clear the stale winter air out of the house. He was
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3RD QUARTER - 2015 | DRIVINGSALES, LLC
fascinated by the screens and how they allowed us to be inside and outside at the same time. He asked why we had the doors open and we told him we needed fresh air in the house. It seemed a simple enough explanation, and he didn’t ask any further questions. He wandered off doing whatever 4-year-olds do when they wander off. Well, we soon discovered exactly what this 4-year-old was doing. He had somehow found a standard screwdriver (OK, Dad’s fault…), and he was finding any screen – either in a window or a door – and inserting the blade of the screwdriver in the grid of the screen and twisting it, effectively popping the grid and making huge holes in various parts of the screens. So this is pretty bad, right? It seemed this kid was bent on destroying our screens, and replacing them was going to cost quite a few dollars. Understandably, we were quite upset and frustrated when we discovered the nature of his wanderings. Now it would be easy to understand a parent who would choose to yell at the child. It would be easy for some to understand this behavior deserves a spanking, or a meaningful “timeout.” This was easily a moment when a parent could ask, “What were you thinking?!” Although angered, I remembered I was dealing with a child, so I calmed myself and asked a different question, “Why were you doing that?” I asked.
DEALER EXEC
DEALER EXEC
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There’s nothing wrong with wanting to generate a profit. It’s essential to any business. But is generating a profit the PURPOSE of our business?
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By being calm and asking for his reasons, I was leaving my judgment behind, which created a sense of trust. My 4-year-old son innocently explained that he was trying to get more fresh air in the house because those holes in the screens were too small to let enough air through. How could anyone be mad at that? Most of us are in business and don’t deal with children (no sassy remarks, now!) during our workday, but the philosophy exemplified by this story remains true in just about any application. Asking, “What were you thinking?” in reference to someone’s actions isn’t really a question at all. It’s a thinly veiled judgment, which will likely create some form of fear and prevent the real answer from coming forth. But asking, “Why were you doing that?” in a calm, inquisitive tone almost always yields truth. And not just truth, but pride in the answer! I have found, with very little exception, people are trying to do the right thing as they see it. They choose a course of action and execute on it because of the information they have about an issue and the perspective with which they see it. My son didn’t have any notion of the consequences of damaging a screen. He just knew we wanted fresh air in the house and he wanted to help. He saw those tiny squares in the screen as an impediment to the success of our mission to air out the house. He was PROUD of helping us get more air through the screens. If I had yelled at him or punished him before gaining understanding of WHY he was wrecking the screens, I would have terrified him and most likely created an association of something bad happening when he had an idea to help. So … have you prematurely judged the actions of your people? Have you observed the behaviors of your boss, co-worker or direct report and rolled your eyes, chewed them out, or asked them what the $*%# they were thinking? I’ve done it … far too many times. But over time, I’ve learned to judge
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less and ask, “Why?” more. A supervisor or co-worker who judges another’s actions without first gaining an understanding of motivation is like a crazy doctor diagnosing patients without examining them. If you went to the doctor with a broken leg and the doctor suggested a colonoscopy was in order, I think you would probably say, “thank you” and hobble out of the office as fast as you could. When we judge our fellow associates’ work and actions and just ask what they were doing (or even worse, not asking anything at all) instead of trying to understand why they were doing it, we’re just as unfit for the job as that doctor. But none of this is really about a practice or a strategy. This is really about culture. A people-centric culture ends up allowing for the kind of thinking that supports asking, “Why?” At the Freedom Auto Group, we’ve spent the last five years working hard at defining our mission and values and bringing our culture to the forefront. Today, these items are clearly defined, demonstrable, and visible to our employees, customers, vendors, and the community. A meaningful part of our culture is creating a space for the question, “Why?” But there’s much more than that. I’ve often heard people discuss how a business can become “mission driven” or have a “deep culture.” But I argue that ALL businesses are already “mission driven” and ALL businesses have a culture. The question is simply whether or not it’s the mission and culture you want for your dealership or department. Think about it – do people in your business share with one another how they did particularly well at something? About 10 years ago, our people celebrated “high gross deals.” I understand everyone likes to make money, but the real reason high gross margin transactions were celebrated was because our store’s leadership (including me!) had subconsciously defined our mission as creating profit.
DEALER EXEC
Now, of course, there were no plaques on the walls stating “Freedom Auto Group’s missions is to create a ton of profit.” We had never specifically defined our mission in this way. But our actions and our words showed our people what we valued most. There’s nothing wrong with wanting to generate a profit. It’s essential to any business. But is generating a profit the PURPOSE of our business? You see a culture exists whether or not it’s been defined. A business’s mission exists even if it’s not written. At Freedom Auto Group, we’ve defined our mission to be a Life Improvement Company. Our primary goal is to spend our time, effort and energy in improving the lives of our customers, our coworkers, and our community. To be clear, we have not decided to become a nonprofit company. Nor have we foregone the need to sell and service cars. What has happened is this: We have come to the realization there is an enormous difference between our FUNCTION and our PURPOSE. Our function is to perform the basics of any business – we need to market, sell, and service products and customers in an effort to create a revenue stream and profitability. But our purpose is to perform our function with an ultimate end in mind. In our case, the ultimate end is to improve lives. Without the context provided by our ultimate end, or mission, our function is rather hollow. And without our function, our organization has no means of achieving our mission. Sounds great, right? It is, but it’s also full of challenges. Stating a mission and living a mission are two very different things. But by articulating our purpose we have created a permanent GPS system for all of our associates. At any given moment, when faced with a challenging decision, any associate can simply refer to the mission to know what to do next. The right choice to make is the one that has the greatest positive impact on the lives of our cus-
DEALER EXEC
tomers, our co-workers and our community. There are certainly limitations. We can’t just sell cars for $10,000 under invoice to try to improve a customer’s life. But not for the reasons you might think. Follow along with this logic: We can’t improve the lives of our customers, coworkers and the community by creating a $10,000 loss on a transaction. The customer would certainly benefit, but our coworkers certainly would not, and the community would not benefit because the dealership’s ability to contribute to community causes would be impacted by the loss. This is how having a well-defined mission can change the way employees see their role. Instead of thinking about themselves first, or just the customer benefit, they have to look at the whole picture and the symbiosis that exists between all parties (customer, coworkers and community). It is this holistic view that leads to extraordinary breakthroughs in personal growth, which leads to the growth of the entire organization. And here’s my favorite part – the Freedom Auto Group is a people-centric organization. This is evident in our mission to be a Life Improvement Company and in our definition of that mission: To improve the lives of our customers (people), our coworkers (also people), and our community (lots of people). Because it’s a peoplecentric culture, there is ample room for our associates to ask the question “why?” as referenced above. Even if someone made the decision to sell a new Camry for $10,000 below invoice that person wouldn’t be greeted with “What the #%^@ were you thinking?” That person would just be asked “why” with a spirit of curiosity and discovery. Remember – there’s a culture at your dealership right now. Does your culture support asking people why they are doing what they do, or does your culture demand to know what they were thinking? If it’s the latter, why?
ERIC SAVAGE As the president and CEO of the Freedom Auto Group, one might think all Eric Savage has on his mind is selling cars, but that is not at all the case. More than any other purpose, Freedom Auto Group was built to embrace the “Life Improvement Business.” Certainly that is expressed in the way Eric’s company helps people purchase, maintain and service their cars. Of even greater importance to him is to provide an environment at Freedom where every team member’s life is improved by occupying a job that focuses on improving the lives of others. But most significantly, Eric and the Freedom Team work to create Life Improvement in their Community. By reinvesting Freedom Auto Group’s success into charities and community projects, he is able to help those most in need.
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C A P I T A L
Profiting from Change “Crowdfunding� is opening new doors for dealers to invest in young companies.
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here has never been a more lucrative time to be an automotive entrepreneur or investor. There have been 33 major transactions with $35 billion in equity changing hands over the past 18 months per The Banks Report, creating many multi-millionaires.
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Industry analysts and savvy investors believe the environment is only getting better for both entrepreneurs and early stage investors. Billionaire investors Warren Buffet and Bill Gates are investing in leading retailers with innovative agendas. Leading private equity investment houses like Fraser-McCombs Capital, Bain Capital,
DEALER EXEC
Warburg Pincus, and TPG have investment teams focused on automotive opportunities. Industry powerhouses like CDK Global, Cox and DealerSocket have active busines s development teams and several have established venture funds to engage with earlier stage companies. Attractive exit valuations have stimulated an inflow of investment dollars into the industry, as evidenced by two young companies, Beepi and Carvana, each reported securing $300 million in equity in June in a race to re-engineer the used car transaction. Several automotive companies,
DEALER EXEC
including Edmunds and Toyota have sponsored “hackathons� to recognize opportunities at their earliest stage. Not to be left out, several OEMs have established incubators to foster young entrepreneurs. What is behind this surge of interest in automotive innovation? Savvy entrepreneurs and investors see a convergence of factors creating opportunity. Foremost is the gap that has emerged between the consumer experiences delivered in other retail sectors and in automotive. Recent consumer research by both DrivingSales and AutoTrader reported that 99 of
100 auto shoppers approached the purchase process with the expectation that it would be a hassle, a truly stunning statistic. The Internet has profoundly transformed consumer expectations of convenience, transparency and service – expectations not being consistently met in automotive retail today. Franchise laws, regulatory and financing issues, and the sheer complexity of the second largest purchase many consumers ever make, have acted to insulate automotive retail from some of the forces that are disrupting other sectors of retail. An increasing number of entrepreneurs
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The connected car platform opens up a new horizon for innovation and investor engagement, and not just with Apple and Google.
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are betting automotive will succumb to the same forces that have disrupted other sectors. As a result, they are looking to invest in solutions that will drive that disruption. The customer service innovation theme is driving many other entrepreneurs. Some are looking to use technology to streamline the traditional buying process of 3-4 hours – both by enabling parts of the transaction to occur online as well as smoothing the workflows in the store. Others are looking at the ownership experience, exploiting increasingly intelligent and connected cars. Smartphones and location awareness have opened many opportunities to engage shoppers and owners in smarter ways. Being able to push specific offers to targeted shoppers driving past their store in the automall or while walking the lot are just the tip of the iceberg of what valuable solutions are being developed. The connected car opportunity is bringing together odd bedfellows, including the shotgun wedding of the 21st century technology elite, Apple and Google, with 100-year-old automotive manufacturers. The connected car platform opens up a new horizon for innovation and investor engagement, and not just with Apple and Google. Automatic Labs, founded in 2011 to provide an independent connected car platform, announced in June a $24M funding round with participation of an insurance company (USAA), a dealer technology company (CDK Global) and the media company Comcast. Automatic Labs already has 22 apps that users can now install that can leverage car data to do anything from finding your car in the parking lot, to monitoring your teen driver or automate your car expense reports. One can be sure this is just the start of another revolution in your driving experience. These are just a sample of new ideas germinating within automotive today. Mark Boyd is a highly successful serial auto entrepreneur and investor,having participated as a founder, early investor or
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adviser in some of biggest names in automotive today like Chrome, TrueCar, Dealix, Cargigi, LotLinx and many more. Boyd believes there has never been a more favorable climate for investing in automotive startups. Changes in technology and consumer behavior have opened up opportunities for disruptive innovation and profits. According to Boyd, smart money from both outside investors and established companies in the industry are being invested into acquiring other established companies – which means the prospects for successful exits for new entrants have never been greater. It is doubtful anyone knows more about innovation in automotive than Tony Rimas, managing partner of the private equity firm Fraser McCombs Capital. He has not only originated investments in companies like HomeNet, ClickMotive, Dataium and Autoniq, but is director of operations for a $1B 10-store dealer group. Rimas sees automotive investing at a turning point. “Historically, the automotive sector has both been under-funded and has lacked mentors for young companies,” said Rimas. “Many promising companies have failed because they lacked experience in navigating the structural and regulatory peculiarities of the industry.” To help fill this void, DrivingSales, the leading automotive retail community, Fraser McCombs Capital and MicroVentures, a crowdfunded investment bank, have partnered to create a novel new program that brings together entrepreneurs, dealers and other investors, as well as leading automotive technology companies to jumpstart innovators with access to industry knowledge, advanced customers and smart capital. Called AutoVentures, the program kicks off with automotive’s first dedicated startup conference in October, adjacent to the DrivingSales Executive Summit at the Bellagio in Las Vegas October 18-20. The conference will include content on achieving success in the automotive sector
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powered by DrivingSales & Fraser McCombs Capital
AutoVentures Conference October 18, 2015 | 8:30a – 5:00p AutoVentures is taking place before the kickoff of the 7th annual DrivingSales Executive Summit at the Bellagio, Las Vegas REGISTER AT
autoventuresconference.com
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and lessons learned by successful automotive entrepreneurs. The meat of the event will be short onstage pitches by 20 young companies in three categories: Early Stage [$0-0.5M], Mid-Stage [$0.5M-$2M] and Growth [$2M+]. A panel of experienced automotive investors will question companies in the two larger categories onstage. The best investment ideas will then be determined by the conference audience, voting through their smartphone. All presenters plus an additional 10 or more companies will be accessible for 1:1 demos and meetings with interested investors.
DEALER EXEC
Perhaps the most novel aspect of the program and the conference is the integration of a mechanism for any accredited investor to not only vote for good investment ideas, but also invest in them. MicroVentures will both administer an angel fund portfolio investors can participate in as well as enable investors to build their own portfolio with investments in any of the 20 or more companies participating in the program. Investors will be able to acquire an equity stake in one or more young companies for a minimum investment of $25,000. MicroVentures is leader in a new
model of investing that has eliminated much of the friction and hassle of early stage investing. Founder and CEO, Bill Clark, set out create one of the financial industry’s first organizations to merge crowdfunding with the venture capital industry. Since 2009, MicroVentures has connected over 11,000 investors with 140 companies. Entrepreneurs have been big winners with this model. The traditional startup fundraising process often took 3-5 months of effort by the entrepreneur, time taken away from creating value in the business. In contrast, fundraising in the MicroVentures model
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CHRIS REED Chris is President of DrivingSales. Prior to joining DrivingSales, he was Chief Marketing Officer of CDK Digital, a $500 million digital marketing company, and a number of successful start-ups. He has an MBA from Harvard Business School and a BA from Princeton University.
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takes an average of six weeks and days of personal effort by the entrepreneur versus months. Opening up the funding model will also enable potential customers to become investors and have a shared commitment to the business’ success. Investors also win through visibility into investment opportunities they would otherwise have no awareness of, as well as an efficient process to help them evaluate those opportunities. MicroVentures takes friction and time out of the process with a streamlined and consistent due diligence and screening process on behalf of investors. All investment resources will be online for program participants to review and create a short list for scheduling meetings with entrepreneurs at the conference. “The idea of an automotive-specific startup conference is fantastic,” said Mark Boyd, “Dealers will have a unique opportunity to invest in their future … gaining a competitive advantage for their store by working with cutting-edge vendors, moving the industry forward and then profiting from their equity stake. Its a win-win-win.” One of the entrepreneurs looking forward to October is Mark Paul, founder of AutoAp who is building a business to solve the operational headaches, and liability, dealers face with the recent explosion in vehicle recalls. His solution can give dealers confidence that they know the recall status of every vehicle on their lot at all times while reducing hours of effort to minutes. Paul values getting in front of potential investors and says his business is at a stage that the visibility with potential dealer customers and fellow entrepreneurs provides even more value. “It will be very exciting to simultaneously connect with innovative dealers looking for advanced solutions as well as automotivefocused investors,” said Paul. Jon Lancaster, a prominent former dealer and active automotive investor, says the rewards of investing in your industry can
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be more than financial. He finds mentoring young entrepreneurs with fresh ideas and approaches to be stimulating and personally rewarding. He also feels a sense of mission on behalf of his friends and colleagues in automotive retail. “There is no doubt that automotive retail will look very different 10 years from now than it is today,” said Lancaster. “I believe that everyone can win – the consumer, the dealer and the entrepreneur – by the retailer being part of the business transformation, rather than its victim. I do this by investing in, and mentoring, these innovators.” For dealers new to early stage investing, Lancaster’s advice echoes that of the legendary mutual fund manager Peter Lynch – invest in what you know, diversify and be patient. Being immersed in the industry dealers and automotive vendors will have a leg up on other investors, and even the entrepreneurs, on which ideas will work best. Getting access to, and influence over the evolution of a compelling new innovation can be both profitable to the dealership’s P&L as well as a dealer’s investment portfolio. Placing multiple bets is key because not all with pan out – often due to circumstances beyond the entrepreneur’s control. Finally, patience is required because most of these investments will not return capital, if they do at all, for seven years or more. Lancaster’s final advice is to focus on evaluating the entrepreneur, more than even their idea. Every business will need to evolve as it engages the market – will the entrepreneur be flexible to adapt? “What I like most about the AutoVentures program is that I not only will see more options for investment, I will be able to meet with each of these entrepreneurs one-on-one and assess them for integrity, intelligence and adaptability.” Whether you want to directly participate in automotive innovation, or just survey the landscape, the coming months will be an exciting time to see the future of the automotive sector.
DEALER EXEC
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P E O P L E
Implement and INVEN Deliver Your Dealership’s DEALER-TO-DEALER:
Brand Promise PHO
How the Cardinale Automotive Group executes it’s core values BY ERICH GAIL
W
ith each passing day, our industry continues to evolve and transform – placing us at the apex of various decisions: Start? Stop? Grow? Change? Shift? Adjust? Align? Is it all or some of the above? Jim Collins, author of, amongst many leadership books – “Good to Great” outlines for us a centric-guide of leadership, management and alignment of purpose within the Hedgehog Concept. “The essence of a Hedgehog Concept is to attain piercing clarity about how to produce the best long‐term results, and then exercising the relentless discipline to say, ‘No thank you’ to opportunities that fail the hedgehog test.” Leadership requires courage and in order for us to be of service to our managers and associates; creation, adoption and deployment of a focused guide is essential. We are 100 percent responsible, as such, we have embraced and tailored the Hedgehog Concept to guide our group of companies.
What you are deeply passionate about?
The “Good to Great” companies focused on those activities that ignited their passion. The idea here is “not to stimulate passion but to discover whatever makes you passionate.”
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For us, each Cardinale company carries our CW (CardinaleWay) trustmark – the CardinaleWay is our founding commitment, mission statement, tenants and brand promise all in one stated: We Develop Outstanding Relationships Where Everybody Wins. It is by and through this commitment that we lead and manage each of our companies – honoring the relationships and responsibilities we hold in service to our associates, partners, clients and communities.
What can you be the best in the world at?
CO IM T PE PRO
This discerning standard goes far beyond core competence. Just because you possess a core competence doesn’t necessarily mean you can be the best in the world at it. Conversely, what you can be the best at might not even be something in which you are currently engaged. Within each Cardinale-Group company, ‘Management-Driven’ is our best-in-theworld commitment. For us, ManagementDriven represents a discipline commitment in direct contrast to that of a Market-Driven driven philosophy. To be ManagementDriven is to define “our” specific goals and objectives and to achieve them through daily commitments to people – process – performance without deviation, subjectivity
ZERO M DEALER EXEC
CRM
CRM NTORY SYSTEM INVENTORY INVENTORY SYSTEM SYSTE ONE MASTERY PHONE MASTERY PHONE MASTERY ONTINUOUS CONTINUOUS MPROVEMENT TRAINING CONTINUOUSIMPROVEMENT IMPROVEMENT TRAINING PERSONAL TRAINING & ERSONAL &PROFESSIONAL PERSONAL & OFESSIONAL PROFESSIONAL ZERO MOMENT RETAIL MOMENT RETAIL ZERO MOMENT RETA DEALER EXEC
CRM
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We are a family-organization, in name, ownership and in relationship with each associate throughout our group. or a market condition. Specific to our retail operations within the Cardinale Automotive Group we have defined ManagementDriven to reflect five core non-negotiable values which are the requirement of every active leader, manager and associate: 1. CRM The center-nucleus of our retail operations – if it is not in our CRM, it does not exist. Further, the standard of accuracy for our CRM data is measured daily, weekly, and monthly allowing us to initiate predictive analytics with precise accuracy. Elements of daily engagement / performance standards include: • Consistent Associate Involvement – Completion of daily work-plan – Create a minimum of 1, to-be- manager confirmed, appointment from an inbound OTB – Create a minimum of 1, to-be- manager confirmed, appointment from an active client, prospect or referral –Complete and document with detailed notes, a minimum of 10 outbound telephone calls with a duration of no less than 3 mins. • Hourly (Sales) Management Involvement – Real-time measure and management of inbound opportunities ( telephone, eLead, chat, text ) – Three 1:1s with all active sales associates – Voice-to-Voice manager
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confirmations of all active appointments • Daily Leadership Involvement – Performance measurement to the following standards (minimum) • 75% appointment creation of all inbound OTBs • 75% manager confirmation of all created appointments • 80% show rate of manager confirmed appointments • 80% sold rate of shown-confirmed appointments 2. Inventory (Investment) System From the very moment we acquire inventory, depreciation and market condition effect our investment. As such, we must define inventory, merchandising and capital management parameters to ensure our success. Elements of our performance standards include: • Acquisition – Defined exit-strategy (upfront) – 80% Cost-to-Market cap – 83% CTM cap on hero OE brand only – 45-day Market-Day-Supply – 60-day Inventory life span – 16.5 Inventory Cycles per year • Merchandising & Reconditioning – 27 high-quality ‘cerebral trigger’ photos – Story-board vehicle descriptions – 48-hour Acquisition > Retail Ready timeline 3. Phone Mastery To our brand-promise, developing an outstanding relationship requires that we serve our interests and the
interests of our active clients and prospective customers. In order to ensure we fulfill our combined needs, we have developed a department-specific telephone curriculum and process for inbound and outbound telephone calls. Measured in real-time as well as reported daily-weekly-monthly, we are able to identify high-performing areas and associates as well as provide support for and to under-performance. Elements of our Group | Region | Store | Team | Associate performance standards include: • Minimum of 4.5 total score on 5.0 scale utilizing a variety of metrics, per call. • 75% appointment creation for all inbound telephone phone calls (Sales & Service) 4. Continuous Improvement Training | Personal & Professional We are a family-organization, in name, ownership and in relationship with each associate throughout our group. Our belief is mentoring is a lost art; yet for us, all the gold in life is found in the relationships we have, hold and develop together. It’s not enough to just simply provide skills training in sales, finance, parts or service; we have an opportunity to “Go & Grow” in strength, awareness and understanding together as a one-team family. Continuous Improvement (Kaizen) is a daily initiative within each department; additionally, we select a book, each quarter, to explore, read and study as a group in small teams each week. The styles, topics and themes from each
DEALER EXEC
book range from leadership and financial to emotional and spiritual – the inter-company relationships developed and awareness achieved each week are an invaluable fabric of our culture. Elements of our improvement training standards include: • Daily skills training • 1:1 engagement with department manager 3x per day • Weekly book reports and review of one chapter per week, in an engaged team setting 5. Zero Moment Retail As dealers, we are the investors, financiers and thus 100 percent responsible to manage the performance of our brands – as such, WE RESERVE THE RIGHT to market our brands and our stores when we want, where we want, in any method we choose, direct to our teams. For us, Zero Moment Retail is the very science of integrating all elements of our digital (marketing) selling strategy to identify, target and convert an in-market buyer dealer-direct. Utilizing the performance data we hold as the dealer, we are in-fact empowered with unique business intelligence which enables us to target specific buyers, channels and to attribute the direct ROI of each invested dollar specifically to a vehicle sale, service or accessory transaction. Elements of our Zero Moment Retail performance standards include: • 1:1 marketing ROI attribution • Less than $200 marketing investment, per unit sold. • Less than 10 days Initial Contact to Sold (Sales) • 100% service absorption
What drives your economic driver?
Evaluating the “Good to Great” companies, we discovered each attained pierc-
DEALER EXEC
ing insight into how to most effectively generate sustained and robust cash flow and profitability. In particular, they discovered the single denominator – profit per x – that had the greatest impact on their economics. Our chosen metric is a 20 percent factor of net profit of gross profit, in each store, region and state. Adherence to this discipline as an operational and financial management emphasis, correlates with (continued) ascent, increased cash flow and ensures we are equipped with a “Fortress Balance Sheet” from which to invest in and expand further our continued operations, as well as ensure sustainability and further opportunities in a challenged economy.
God-First
The “union” of the Hedgehog Concept intersects each commitment and discipline in order to provide alignment of purpose – we are a God-first company! The spiritual center we hold as a Godfirst company honors the relationship, beliefs, soul and core values of each and every one of our associates – we are a family wherein and “Go & Grow” together each day.
100 Percent Responsible
Let there be no empty chair, excuse or deviation from your role in service to your team – leadership requires that we are 100 percent responsible – acceptance of this responsibility enables us to accomplish outstanding results and transform ordinary into extraordinary. Embrace the amazing adventure of being uncomfortable, whether it’s taking on additional duties, placing yourself into an area you are unfamiliar or learning a new skill – growth and success are fueled by the courage it takes to say “I don’t know what I don’t know,” yet having the tenacity and burning desire to blaze a new trail and go find the answers.
ERICH K. GAIL Mr. Gail is a chief executive of the Cardinale Automotive Group; chief executive officer of Cardinale AG Vehicle Supply Group North America and Chief Executive Officer of ZMOT Automotive Digital Velocity. Mr. Gail is a 24-year veteran of the global automotive industry having served in a variety of executive and senior leadership roles within a vast array of management and investment groups. Mr. Gail has extensive experience developing new business operations as well as enhancing the performance of mature organizations throughout the United States, Canada, Europe, China, Korea and Japan.
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B R A N D
How to Service
Your Fix Ops
Stop your service customers from defecting at an aggressive rate BY DENIM SIMKINS
A
s dealer executives you are approached daily with the latest and greatest techniques to attract more customers to your service department. Although this is a very necessary action to grow your business and increase your customer database, I would suggest looking within your dealership walls for the actions that are causing more than 70 percent of your customers to defect after the warranty time period has expired. The real underlying issues are our customers are skeptical due to a lack of trust, and we have years of history to overcome to earn our customers business and loyalty back. The good news is you already have a customer base that continues to use your service department and will purchase their next vehicle from you. In addition, every month you continue to fill the front end of
the funnel with new customers with the opportunity to hold on to and never let go. So lets start today, actually lets start on the next customer purchasing a vehicle from you right now. Our goal is to reduce or narrow the opening at the bottom of the funnel to restrict the defection rate. Let’s face it, our customers have many options, as I do when I’m picking up my morning coffee. But I choose to go to the same place that I have built a relationship with. Barring a major dissatisfied experience, I don’t see a reason to defect. I know selling and servicing a customer’s vehicle is a lot more complicated than making a venti skinny sugar free vanilla latte, but the basic fundamentals of building a relationship are very similar.
It Starts With Building Trust From Day One
Stephen Covey said, “Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships.” According to analysis of Better Business Bureau complaint data, consumers rank automotive repair providers in the bottom 1 percent of all service categories. So how do we earn the customers trust? Simple – we become transparent and allow the customer to steer the enterprise during their service visit and we encourage the customer to be involved within the repair process. For instance, showing the customer the dirty air filter instead of just telling them or taking a customer out to their vehicle and
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DEALER EXEC
let them look at the oil leak helps break down that barrier of distrust. When a customer is not at your store a video or quick picture will tell a thousand words in your favor, again building trust.
High Effort = Low Customer Retention
Assess how convenient it is to do business with your service department. When a customer is choosing a place to do business, convenience is a major factor in the equation when they are pulling hard earned money out of their budget to spend with you. This goes a lot deeper than just being open more hours. Have your significant other mystery shop by calling your store and ask to have their car serviced. Have them ask a few questions about what service they would need to do at this time and mileage on their vehicle. Have them report back to you how easy it was to get an appointment at 4 p.m. on a Friday afternoon or better yet ask for a Saturday service repair and measure your staff’s response. Look at your operation as an owner and remove yourself from the car business for a minute (this will be extremely difficult) and analyze every customer touch point and determine if your operation is convenient to your customers while trying to do business with you.
Knowledge and Expertise
In a recent Critical Mix – Google Services Path to Purchase study of 1,500 drivers the second most important feature when deciding on a vehicle service center was knowledge and expertise. With information readily available on virtually everything, it is extremely critical to customers that you are the subject matter expert. Having expert knowledge has become expected, but then it is also recognized and acknowledged by more than 56 percent of the customers. Those who can display their knowledge in a customer friendly way will be rewarded for their efforts. Customers want someone that
DEALER EXEC
will answer their question completely and in their terms. A solid training program starts the foundation, but a continuous learning strategy is a must. Those who demonstrate their knowledge will be rewarded with customers wanting to choose you for their repair business.
Perceived High Cost
When surveyed, customers routinely say the reason why they don’t go to the dealership for maintenance and repair work is due to the perceived high cost. Price does not always mean cheaper. Most salespeople agree overcoming a price objection is a matter of conveying value. At the dealership level we have the opportunity to talk about the value of the service and explain a fair price does not mean the cheapest price. In order to do this you need to be aware of your competitors pricing and know today’s customer is researching other options on price when standing in your service drive discussing the services needed for their vehicle. A fair price along with a conversation about value of services will help your customer feel better about the perceived cost. Dealer executives – it’s time to roll up your sleeves and jump in feet first. Immerse yourself in fixed operations and become aware of the points within your service process that are causing your customers to defect at an aggressive rate. Spend time with your parts and service staff and talk to them about some of these areas of opportunity and ask them how they feel they can improve and provide a better service. Be ready to take in an earful, but with your knowledge and expertise you will be able to help direct the fixed operations team in creating a customer centric process that will improve your repeat purchase cycle. Simply focusing in on four basic tactics of trust, convenience, knowledge and price you will start to close the hole on defectors and build a strong and loyal customer database for years to come.
DENIM SIMKINS Denim Simkins is a veteran within the automotive industry with over 22 years of experience within fixed operations. An accomplished dealership fixed operations performer and a leader within the industry. His strength of building a dedicated and loyal team has allowed Denim to achieve high-level success within his career earning performance awards from Ford, Toyota, Honda and Nissan. Growing up and working within the automotive industry at an early age has given Denim a wide-angle perspective of the immense change upon the service and repair business. Denim first passion is his family and wife of 16 years. As a sports enthusiast he spends most of his free time immersed within his kids sporting activities and recreational activities outdoors.
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MOST VALUABLE INSIGHT 2015 • Winner & Finalists
What is the Most Valuable Insight Competition? The Most Valuable Insight Competition is designed to reveal and showcase neverbefore released data and research unique in the automotive industry. The competition was created in the spirit of progress and industry thought leadership. Taking the conversations to the highest level, auto industry professionals share their research findings and insights live on stage with the highest-level dealership executives to foster inspiration, progression, and celebration of a better automotive retail industry. The Most Valuable Insight Competition encourages automotive professionals to illuminate something in the automotive industry that will impact dealership executives at the top. Sales pitches are never accepted.
How does it work? A panel of the top dealer principals, GMs, dealer group presidents and vice presidents vote and select four finalists from submitted applications. Those four finalists then have the opportunity to present at Presidents Club – the DrivingSales Presidents Club is an intimate, “by invitation only,” annual leadership conference for dealer principals, GMs, presidents and vice presidents. Finalists have nine minutes to present their research/insight on stage to a panel of dealer judges followed by a 5 minute Q&A. The panel of dealers and several others in the audience silently score each presentation and decide the winner.
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Most Valuable Insight Dealer Panel from left to right: Doug MacIver, Owner, Ride Time. Eric Savage, President & CEO, Freedom Auto Group. Jeff Miller, General Manager, Mark Miller Subaru.
r e n n Wi The Importance of an Initial Quality Response and Improving Your Digital Customer Connections
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onnecting with customers via email may sound as easy as 1-2-3. Receive a lead … respond with an electronic note … and wait for the customer to reach back out with the follow-up email. Connection made! Well, what if I told you many dealers fail at making a digital connection with their prospects – either because they don’t view an online lead with the same weight as an in-showroom visitor, or because they simply just don’t know how to engage online? Either way, the majority of opportunities that start with an email or an online lead from your dealer website are falling through the cracks. Since our industry began responding to online leads, we have put all the focus on speed of response and making sure we are first to the inbox. Unfortunately, that means we primarily ignored the quality of that response. A quick response is very important, but it’s the combination of speed and quality that has the power to improve your connection rate and ultimately sell more vehicles through better customer engagement. So why is a quality response so important for making connections? Well, what our research has found is that the Initial Quality Response (IQR) is the Moment of Validation for the customer – it meets the needs that most prospects have when shopping a new dealership: 1. Do you Care? 2. Can you be trusted? 3. Will you answer my questions?
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Sounds simple enough right? Respond with a few encouraging words and ask for the appointment … get them on the phone … in the showroom … where the real selling process can take over! This is an approach we see often when working with dealers and quite frankly, it’s outdated. If that’s the approach you use today, it‘s only eroding trust and, over time, will reduce your customer connections. What if we told you that you could increase your close rate by just changing one thing you do? By simply adjusting your approach for responding to your customer’s digital leads you could begin to greatly impact your close rate.
Adding Quality to an IQR
Here’s our story. We began our process with a simple question: “What if you could quantify quality?” Since quality is subjective, we needed to first ascertain what was at the foundation of a high quality lead response. We set out to determine what specific elements could be quantifiably measured across all lead responses and if, by including all these elements in all responses, would we see an impact on close rate? With additional research and alignment with industry studies across North America, we identified five key elements in the body of the response that help drive customer connections. We then assigned a weighted score to each element and subsequently, by analyzing and scoring over 2000+ digital responses and correlating them with sales data, we created a methodology that would
allow us to quantify responses. What we discovered supported our original thesis; that dealers struggled with making online connections with their digital customers, and this was negatively impacting their close rate. We found the average score was 21.6 out of 100, which equated to a 5.2 percent close rate. Compare that with response score of between 90 to 100, and that close rate skyrocketed to 16.9 percent. We also discovered that unless you have a well-crafted high quality response, you’re actually better off not responding. Yes that’s right – no response is better than a low quality response. In fact, dealers have a 4.2 percent close rate with no response and only a 3.2 percent close rate when they responded poorly. So, back to the original challenge to you – if you could change one thing at your dealership that would impact your close rate, would you do it? It’s not that difficult. The key is education; ensuring your dealers are aware of the five key elements in the body of a high quality response and that each of their lead responses contain those components. 1. Introduction/Genuine Interest – This is the digital “meet and greet” that sets the tone of the response. By including key elements such as thanking them for the inquiry and introducing yourself by name and title, you will let them know you care and you can be trusted.
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r e n n Wi 2. Vehicle Value Propositions – Remember, an online lead is all about the vehicle they’re interested in. By confirming and validating their vehicle choice and letting them know its availability, you further increase their emotional connection with the vehicle (or vehicles). Including attributes or awards about the vehicle further drives this home. 3. Answering/Asking a Good Question – This is the epicenter of an Initial Quality Response and is the key component to driving the connection rate. By not answering either an asked or implied question (based on Lead Type), you risk the quick erosion of trust. Asking a good question takes some thought, but it is the key engagement element that drives a response. An example quality question is: “What feature
of this vehicle is most important to you?” verses simply asking “What’s your phone number?” If they didn’t provide you a phone number when submitting the request, it is most likely because they would prefer to communicate via email until they’ve built trust in your dealership. 4. Price – OK, we can feel you bristling as you read this. Yes, this has long been a controversial subject when it comes to responding to a customer via email. The age-old response is, “You are just giving the customer the license to hunt.” While this may be true to a certain degree, statistics show that if you give a competitive price (not necessarily the lowest price), 60 percent of the time the customer will give you the opportunity to earn their business. Also, what we see is when a price
is included in an Initial Quality Response, transparency is obtained and close rates rise significantly; in many cases they double. Price is important to your customers … provide it in some form and you will see results. 5. Dealer Value Proposition – Providing the customer with a reason to do business with your dealership and offering a differentiation statement will help set you apart from the possible crowd of dealers. Remember, you may not be the only dealer competing for the customer’s business so make sure you make yourself stand out! Our research shows missing even one of these key elements will dramatically affect your success to close the deal. Think about it this way – when you bat five for five, you’ll probably drive in more runs.
Better Quality for Better Results
Jared Hamilton (left), Founder and CEO, DrivingSales with Alan Bird (right), President & Chief Executive Leader, SCI MarketView. 32
When delivering high-quality initial responses, the education within your dealership is key. Engaging with your online customers in your digital showroom starts with a high quality response. Consider it the digital handshake. As a Dealer Principal or GM, it’s just as important to get visibility to all digital responses and to make everyone accountable, ensuring customer engagement is always top of mind in your dealership. Ask the Monday morning questions, “How many ups did we get?” and “What was our quality of response?” It certainly affects your bottom line.
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t s i l a n Fi Consumers Want Big Changes to the Car-Buying Process
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utotrader’s Car Buyer of the Future Study, which was released earlier this year, shows only 17 out of 4,002 people – that’s less than 1 percent – prefer the current car buying process, and the rest want significant changes, particularly in the test drive, deal structuring, financing paperwork and service phases. The results of the study aid in the industry’s understanding of consumer behavior and help dealers and manufacturers prepare to meet the needs of tomorrow’s car buyers. “While there is good work going on right now to adapt decades-old sales processes, consumers are telling us that we as an industry are not moving fast enough,” said Jared Rowe, president of Autotrader. “By recognizing – and embracing – the need for change, we have a tremendous opportunity to surprise and delight our consumers.” The Car Buyer of the Future Study identifies which changes consumers desire, the underlying reasons behind those changes and the benefit to dealers and manufacturers adapting to tomorrow’s car buyers. In addition to identifying the changes consumers do want, the study also dispels some commonly held beliefs about the future of car buying.
Dispelling Myths About the Future
Some commonly held beliefs about the future of car buying are that sales people will be less important in the future; consumers don’t want to nego-
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tiate; and lowest price will always win. In fact, the study shows the opposite.
who are willing to drive to get the lowest price.
• Myth #2: Sales people will be less important in the future. In fact, the dealership and its sales people will continue to play a very important role in the car buying process. Eightyfour percent of consumers in the study indicate they want to buy a car in person. Further, 43 percent see the dealership as a place to learn. At the dealership, consumers want to validate information they found online and learn about specials offers, warranty information and service options.
The Biggest Changes Need to Come in Four Main Areas
• Myth #2: Consumers don’t want to negotiate. Over half, 56 percent, of consumers said prefer to negotiate, and two of the most influential groups in car buying – Millennials and females – also prefer negotiating over flat-rate pricing. This is a result of the fact that consumers do not yet trust flat-rate pricing, and they feel that they have to negotiate to get a fair price and the best deal. • Myth #3: Lowest price will always win. While price is important to consumers, the dealership experience can trump lowest price: 54 percent say they would buy from a dealership that offered their preferred experience over lowest price. Additionally, 73 percent report they are willing to drive farther for a great salesperson, versus 65 percent
Test Drives: While 88 percent of consumers say they will not buy a car without test driving it first, the majority report they do not prefer the way test drives are currently conducted (an accompanied test drive with a sales person). Instead, they want more convenience and less pressure while test driving, such as having the ability to test drive multiple vehicles across brands in a single place and taking a test drive with a product specialist instead of a sales person. Deal Structuring: Negotiating will be a part of the car buying process for the foreseeable future, and consumers indicate they would like to see a big change in the way they go about negotiating the deal structure. Fiftysix percent of consumers liked the idea of online deal building and want the ability to start the negotiation on their own terms – preferably online. Forty-five percent said they would like to remain anonymous until they lock in the deal structure. Financing Process: Nearly threefourths of consumers, 72 percent, want to complete the credit application and financing paperwork online. The key factors driving this desire are to save time at the dealership (reported by 72 percent of those who favor online paperwork) and to have less
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t s i l a n Fi pressure while filling out paperwork (reported by 71 percent of those who favor online paperwork). A separate study conducted by Cox Automotive in 2014 showed that the time buyers spend in the F&I office averages at 61 minutes, more than two-thirds the total amount of time they want to spend at the dealership (90 minutes). Moving F&I information online and the providing the option to begin paperwork online, enabling consumers to complete it on their own time, would greatly enhance the in-dealership experience and cut down on the time they spend in the dealership on the day of purchase. Service: When it comes to servicing their vehicles, 83 percent of consumers indicate they would like to have the ability to access a network of local service centers that honor service agreements. The key factor driving this desire is convenience. Of those who prefer local service networks, 76
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percent want to go to a service center close by, and 63 percent want to be able to service the vehicle anywhere. As a result, the industry should focus on providing consumers more flexibility, control and convenience in the area of service. There is an opportunity for manufacturers, dealers and industry partners to work together to provide more meaningful options to consumers in the area of postpurchase service.
The Benefits for Dealers and Manufacturers who Adapt are Clear
Dealers and manufacturers who focus on creating – and ultimately deliver – a better shopping and buying experience can reap significant benefits. Improvements to the carbuying process may lead to these positive outcomes: • Nearly three-fourths (72 percent)
of consumers say they would visit dealerships more often if the buying process were improved. • Two-thirds (66 percent) of consumers say that they would be much more likely to buy from a dealership that offers their preferred experience. • Over half (53 percent) of consumers would buy a vehicle more often if the buying process were improved. “The sales environment is expected to remain strong across new, used and CPO cars over the next few years, and it is exciting to see we have several ways to enhance the consumer experience for the benefit of all involved – buyers, manufacturers and retailers. At Autotrader, we will continue doing our part and working closely with our customers and partners to usher in that new reality,” Rowe continued.
From left to right: Randy Kobat, VP-General Manager, vAuto. Adam Kottler, Dir. of Advisory Services, CallSource. Kevin Filan, VP Customer Marketing & Industry Relations, Autotrader. Alan Bird, President & Chief Executive Leader, SCI MarketView. Jared Hamilton, Founder and CEO, DrivingSales.
t s i l a n Fi Make Sure Your Service Department is Setting Appointments
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ue in large part to the proliferation of smartphones and their easy click-to-talk functionality, phone calls to all dealership departments are on the rise. The message is clear: consumers want the immediate gratification that comes with a phone call – but, sadly, at least 40 percent of the incoming calls that go to the sales department and 20 percent that land at the service desk end up being mishandled.1 It’s difficult to calculate just how much revenue your Fixed Ops department is losing when these calls go astray, but you can be fairly certain one of your nearest competing stores is reaping the benefits of your loss. The average dealer only converts little over 30 percent of their inbound service leads to appointments, leaving up to 70 percent of those leads for their competitors. Effective call handling can increase conversion rates up to 90 percent, which means your dealership could be generating three times as much business without increasing marketing spend. However, with proper training and guidance, your service department should be able to eliminate any mishandled calls. Recent research, conducted by CallSource, looked at how dealers nationwide handle in-bound service calls. The study was able to pinpoint the six, most important behaviors that help service departments set appointments. The largest research of its kind analyzed data across 2,464 phone calls
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and looked at 21 common call handler behaviors to determine which ones were crucial in moving in-bound calls into appointments. When successfully performed, these six behaviors were able to improve call-to-appointment conversion ratios from as low as 11 percent to as high as 90 percent. Surprisingly, in nearly 30 percent of the calls reviewed and analyzed, these key, obvious tactics/actions were not taken by service department call handlers. This study, presented at the DrivingSales Presidents Club last April, gives dealers unique insight into the state of automotive service department call handling. By reinforcing these basic steps, a dealership’s call-to-appointment ratios should immediately improve.
Six Crucial Steps for Service Appointment Setting Success 1. Asking caller “How May I Help You?” – This obvious question was only asked 64 percent of the time on the analyzed calls. 2. Establishing if caller is a prior customer – Recognizing valuable repeat customers is good for business and saves time on the call yet this only occurred 62 percent of the time. 3. Identifying vehicle that needs service – Crucial in maintaining control of the call and guiding it toward an appointment yet only 69 percent of
the time did call handlers do this. 4. Obtaining caller’s full name – Getting the customer’s first name helps build rapport while the last name is important for accurate record keeping but this only occurred in two-thirds of calls studied. 5. Asking about additional questions/ concerns – Not only does this show the caller attention to detail, it’s an effective way to identify potential upsell opportunities but only 6 percent of the calls studied included this crucial step. 6. Determine caller’s timeframe for service needs – This is the best way to get caller’s to commit to an appointment but only 65 percent of call handlers did this on calls analyzed.
Does Your Service Department Give Good Phone? • Who’s on phone duty today? • Are they experienced call handlers? • Has everyone on your team been trained to effectively handle inbound service calls? • If they’ve been trained, how are you monitoring their effectiveness? • Do you have consistent phone skills training for all new associates? 1. CallSource internal research
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t s i l a n Fi A Look Inside vAuto’s Most Valuable New Car Pricing Insight
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or many dealers, the way they have traditionally priced their new vehicles has been a bit of a shell game for buyers. If buyers wanted to find out the real price of the vehicle, they typically had to go to the dealership to determine what they might pay for a car. A Buick dealer in Missouri recently shared his store’s previous new car pricing strategy. “If you went to Autotrader, you saw one price. If you went to Cars.com, we’d have a different price. Our goal was to get customers to our website, where we offered our Internet price, which wasn’t always the price we’d quote in the showroom.” But over the past 18 months, there’s been a growing recognition among dealers that the shell game-style new vehicle pricing is out of step with the expectations of today’s buyers. Dealers understand today’s new vehicle buyers spend multiple hours online visiting sites like Edmunds.com, KBB.com and TrueCar to determine what they should pay once they’ve found their vehicle of choice. This understanding has led dealers to create and execute new vehicle pricing strategies that aim to offer a greater level of consistency, transparency and market relevance. These efforts have been aided by new technology and tools that give dealers the market data they need to price their new vehicles in tandem with their goals for profitability and sales volumes.
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At vAuto, we’ve been tracking the positive results these more marketprecise pricing strategies create:
Increased Buyer Interest
Through a research effort with Autotrader, we’ve found that dealers who use incentives/rebates as part of a market-based pricing strategy see an average of 32 percent more vehicle details page (VDP) views on their new vehicle listings. This initial buyer interest owes to prices that fall within the range buyers expect to see from dealers, given the research they’ve conducted online. I know: You can’t take a VDP to the bank, but the dealers agree that more VDPs means more opportunities in your showroom to retail new vehicles.
Increased Sales Volumes
“Our volume is up 66 percent with our new pricing strategy,” says the general sales manager for a Ford dealership in Florida. The pricing strategy followed the dealer’s desire to increase sales volumes – in part to maximize the benefits from Ford’s stair-step incentive program. With technology and tools, the manager knows, on a daily basis, how each of his new vehicles compares to the competition. He uses those insights to set and adjust his prices as he identifies competitor price changes. “I now have people driving here from all over the state because we’ve got the lowest prices,” the manager says.
Other dealers, who apply a lessaggressive pricing strategy, also report increased new vehicle sales volumes as a result of their marketprecise pricing strategy. “We’ve seen a 15 percent increase in volume, which I’d attribute to a more efficient process for pricing every new vehicle and offering more consistent pricing across our entire inventory,” says a Chrysler Jeep dealer in Colorado. Previously, the dealer set new vehicle prices at the beginning of every month. By the end of the month, one-third or one-half of his new vehicles might be posted online without a price. “It may have been confusing for a customer to see 20 Grand Cherokees, and 10 have an aggressive discount and 10 are at MSRP,” the dealer says. “We’re more consistent now, and we get a shot with customers who may have been confused by our pricing in the past.”
Improved Profitability
In today’s highly competitive market, it’s important for dealers to have a clear view of supply and demand data for every new vehicle. These marketbased insights allow dealers to know if a specific vehicle, given its color, equipment and other characteristics, represents an opportunity to maximize front-end margin, or whether the unit is better suited to meet a dealer’s inventory turn objectives. By incorporating live market data into his pricing strategy and sales pro-
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t s i l a n Fi cess, a Northeast Toyota dealer reports an average $400 increase in front-end gross profit. The dealer attributes half of this increase to knowing exactly which cars and price points merit a “go for gross” opportunity, and which cars should be priced more aggressively to improve or maintain market share. The other half owes to a sales process that uses market data to validate asking prices with customers. “We hardly discount any vehicles in the showroom because everyone knows our price is really a good price, based on available vehicles in the market,” the dealer says. “If customers push back on price, we show the data. In most cases, they’ll say, ‘OK, but I had to ask to make sure.’” Looking ahead, it’s believed inven-
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Serious ROI from Social Advertising: How to Make Paid Social Pay Off
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tory turns will be a principal driver of new vehicle profitability, particularly as factories increase customer/ dealer incentives to meet their sales targets and floorplan interest expense becomes more important to manage. Our research shows that dealers who adopt market-based pricing strategies reduce the average days in inventory for new vehicles, and sell a greater share of their new vehicles in 60 days or less. (On a national basis, the average inventory age in new vehicles runs near 100 days; with about 40 percent of the inventory at 90 days or older.)
Increased Productivity
Dealers and managers who use technology and tools to execute their new vehicle pricing strategies gain
more time to manage their teams and work deals. “I probably save eight to 10 hours a month, which is no small thing,” says the Colorado Chrysler Jeep dealer. “I don’t miss the manual process I used to follow to price every vehicle, and now I can also lean on others to use the tool and maintain our pricing consistency.” As market-based pricing in new vehicles becomes more ubiquitous, dealers will benefit from a greater level of consumer confidence and trust. As the Northeast Toyota dealer says, “When everybody starts doing business the right way, we’ll all be fine. We’ll see fewer dealers doing things like pricing vehicles way below invoice and switching people to other cars, which gives us all a bad name.”
We want to thank all the vendors who for applied for the Most Valuable Insight competition. It was a very competitive field and we realize there are many fantastic vendors who do great work to assist their dealers. We would like to recognize those companies and their insight who’s application scored in the top 10. Thank for your effort in moving the automotive retail industry forward!
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Bot Fraud & Data Leakage: The Good The Bad & The Ugly
Haystak Digital Marketing
Used Vehicle Data to Improve Search Marketing Results
CDK Digital Marketing
How Natural Language Processing Technology Can Help You Understand What’s Important to Car Shoppers
Pearl Technology Holdings Supercharge Your Service Drive: Target “Conquest Customers” for Retail-Ready Inventory
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C A P I T A L
NADA’s Used Vehicle Price Update Large pickups continue to be the market’s standout performer.
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s expected, used vehicle depreciation slowed modestly in June compared to May’s more rapid pace. Prices of used vehicles up to eight years in age fell by 2.5 percent on a monthly basis in June, or more than a halfpercentage point less than the 3.2 percent drop recorded a month earlier. While May’s fall was among the worst recorded for the month since 1995, June’s drop wasn’t quite as unusual. As a result, NADA Used Car Guide’s seasonally adjusted
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used vehicle price index was little changed for the month – falling by 0.2 percent relative to May – to 123.7. With the first half of the year now behind us, one could say used vehicle prices have held up well despite mounting pressure from the new vehicle market and rise in supply. After all, NADA UCG’s index slipped by just 0.6 percent over the first half of 2015 compared to the all-time high reached over the same period in 2014. In addition, depreciation year-to-date (YTD) stands at 9 percent relative to all of 2014, which is only
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moderately higher than the 7.2 percent rate recorded last year and less than the nearly 10 percent YTD fall logged in 2013. Digging a bit deeper, we see the year’s steady performance is a result of strong truck prices compensating for weak car prices. Starting with cars, subcompact, compact and mid-size car prices have been among the softest all year. This is due in large part to intense new market competition, both within their respective segments and from high demand crossover utilities (lower gasoline prices aren’t helping either). For example, new subcompact, compact, and mid-size car incentives were up by a combined 10 percent through June, and the average spent per unit for the trio is similar to what’s been spent on luxury compact and mid-size utilities – vehicles that cost thousands of dollars more. The downward price pressure has taken its toll on used prices for the group.
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Compact and mid-size car prices fell by nearly 3 percent apiece on a monthly basis in June, and prices for the pair YTD are on average 11 percent lower than in 2014. This compares to depreciation of 7 percent over the same period last year. Subcompact cars have performed even worse. Prices for the smallest car segment plunged by an average of nearly 4 percent in both May and June to bring YTD depreciation to 12 percent, which is 4 percentage points worse than last year’s mid-year figure. By comparison, prices for used trucks and utilities have remained strong. With prices declining by 2.1 percent, compact utility prices bounced back somewhat in June from May’s 3.3 percent fall. Depreciation for the group YTD stands at 7 percent, which is just slightly worse than last year’s 6 percent figure. In June, midsize and large utility prices fell by averages of 2.2 percent and 1 percent, respectively,
The downward price pressure has taken its toll on used prices for the group.
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Large pickup prices dipped by 0.5 percent in June to bring YTD depreciation to just 4 percent – an industry low.
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which brought YTD depreciation to 6 percent – essentially unchanged from 2014. Down 1.8 percent, mid-size van movement was fairly typical for June; however, the 10 percent drop in value YTD is two points higher than last year’s 8 percent figure. Large pickups continue to be the market’s standout performer. Large pickup prices haven’t fallen by more than 2.5 percent on a monthly basis in more than five years, which is a threshold passed by compact and mid-size cars more than a dozen times. Large pickup prices dipped by 0.5 percent in June to bring YTD depreciation to just 4 percent – an industry low. With declines ranging from 1.5 percent to just over 2 percent, overall luxury segment losses were less substantial than what occurred in both May and last June. Even so, YTD depreciation for luxury cars is among the highest in the industry. Luxury compact car prices are down by 11 percent, while luxury mid-size and
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large car prices are off by 13 percent and 15 percent, respectively. As for luxury utilities, prices of compact and mid-size luxury utilities are down by respective averages of 8 percent and 10 percent so far this year.
Supply Trends
Auction volume of models up to eight years old reached 2.07 million units through June, good for a 7 percent increase over 2014’s six month tally (on a like-age basis). Excluding five year old auction volume, which compares the 2010 model year versus 2009’s steep drop dictated b y the last recession, volume has increased most for one- and two-year-old units (rental and mixed lease/rental risk units). As far as overall supply is concerned (not just what is sold at auction), NADA Used Car Guide expects total used supply for models up to eight years old to
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increase by 2 percent in 2015 over last year’s level. Late-model supply (up to five years old) is forecast to grow by a more substantial 8 percent. Supply growth will be most apparent on compact and mid-size cars and compact utilities, or high volume segments where both overall sales and lease penetration has grown substantially. For example, lease penetration for the group reached a quarter of all new personal deliveries in 2014, up mid-teens-to-low-twenty percent range as recorded in 2011.
Used Vehicle Price Forecast
NADA Used Car Guide’s forecast for July places prices of vehicles up to eight years in age 2 percent – 2.5 percent lower than in June. Moving forward, prices are expected to drop by 2.5 percent or more in August, with depreciation continuing to rise through October as the market heads into what is typically the
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softest part of the year. On an index basis, NADA UCG expects used vehicle prices to decline by 2 percent over the second half of 2015 relative to levels recorded YTD. If things end up as we expect, the year would finish with prices 1 percent lower than in 2014. Depreciation is expected to reach 14 percent for the year, which would be slightly worse than 2014’s 13 percent figure. Sticking to recent trends, subcompact and luxury car prices should be most depressed, with depreciation reaching 18 percent – 20 percent by year’s end (again, relative to all of 2014). We anticipate compact car, mid-size car, and mid-size van depreciation will reach 15 percent – 16 percent. Compact utility, mid-size utility, and large SUV losses are expected to range from 10 percent – 12 percent, while large pickups should perform best with annual depreciation checking in below 10 percent.
Depreciation is expected to reach 14 percent for the year, which would be slightly worse than 2014’s 13 percent figure.
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C A P I T A L
Cyber Security – The Time is Now
Hackers, connected vehicles and potential vulnerability at the dealership level BY CLIFF BANKS
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he day has arrived. We are now officially in the era of the hackable vehicle. Earlier this summer, two researchers remotely gained control of a Jeep while it was traveling on a highway outside St. Louis. The “hackers” took control of the radio, the air conditioning and windshield wipers. Even more frightening, they were able to shut off the transmission. Vehicles have been hacked before. The same researchers also hacked into a Ford Escape and Toyota Prius in 2013. But at that time, the hackers used a laptop computer that was wired into the vehicle’s onboard diagnostic (OBD) port. Prior to now, the question – even, debate – has been whether someone could hack into a vehicle remotely. In theory it was possible. Now we know. The reason it’s a huge deal is because the researchers, Chris Valasek, director of vehicle Security research for IOActive, and colleague Charlie Miller, proved they could hack into a moving vehicle while miles away. They were more than 10 miles away from the vehicle when they sent computer code over a cellphone’s network (in this case, it was Sprint) to hack into the Jeep’s Webbased entertainment system. Suddenly, the idea that a malicious hacker could take control of a large number of vehicles isn’t so far-fetched. Following the publication of an article in Wired magazine recounting the event, Fiat Chrysler Automotive, which had been
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“As more connected vehicles hit the streets, the opportunity for a significant hacking situation increases.” working with the researchers for nine months before their hacking of the Jeep, immediately issued a recall for 1.4 million of its vehicles. The recall consists of a patch that either the dealer can download into the vehicle’s computer system, or the vehicle owner can do it using a UBS flash drive. The implications are far reaching. As an industry, automotive suppliers and manufacturers are playing catch up to close off areas hackers can exploit.
CLIFF BANKS Cliff Banks is an industry veteran of 24 years. A long time editor and analyst, he is the founder and president of The Banks Report, an online service that analyzes news and trends in the automotive retail sector. He is a regular contributor to the DealerExec.
Dealership Vulnerability
Meanwhile, few people are considering the potential vulnerability at the dealership level. But most of the discussion about security at the dealership level is focused on data protection. That’s an entirely different and critical discussion – although some if does overlap. The problem is, security today is not just about data protection. It’s not outside the realm of possibility that hackers may one day gain control of large number of vehicles by gaining access to a dealership’s network. In 2011, researchers from the University of California, San Diego and the University of Washington were able to upload a virus to several vehicles using a dealership’s service diagnostic tool. They were able to turn on the brakes, disable the engine and even listen to conversations in the vehicle.
Connected Vehicles
As more connected vehicles hit the streets, the opportunity for a significant hacking situation increases. Furthermore, just about every manufacturer is looking at ways to use the onboard telematics system to connect the vehicle to the dealership’s service department. Meanwhile, vehicles have already been
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hacked using a dealership’s computer system. About five years ago, Texas Auto Centers, a group of used car dealerships in Austin, Texas, laid off a young employee. Angry he had lost his job, he used a former colleague’s password to access the dealership’s computer system. From there, he was able to remotely gain control of vehicles that had been sold with a black box provided by Web Tech Plus designed to let customers know when they were behind on their car payments. The technology remotely causes horns to begin honking or disables the vehicle’s ignition system as a way to prod customers to make their payments. The former employee was able to make horns go off while also disabling the ignition systems on hundreds of vehicles.
Attacks Will Increase
The attacks are only going to become more sophisticated and vicious. Recently, we’ve heard of one dealership whose DMS system was taken hostage remotely by a foreign criminal outfit. They were able to access it using a password. The dealer ended up paying a ransom to the perpetrator to regain control of the system. DMS systems and networks come under attack every day as hackers seek to overwhelm the system looking for vulnerabilities. The DMS providers have done a good job defending against those types of attacks. But dealers have to begin stepping up and focus on what they can do from a security perspective. Developing and enforcing strict password usage is just the first step. NADA has published a guide for dealers outlining what they need to do to enhance their security. Cyber security is an urgent matter today. It’s not a something dealers can kick down the road any longer. It’s time to start paying attention.
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