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DealerExec A DrivingSales Publication • 4th Quarter, 2015

A DrivingSales Quarterly Covering Dealership Brand, Capital and People.

Are they closer to your dealership than they appear?

BY DANIEL KIM • PAGE 22

Learnings from Billion Dollar

‘Startup Dealerships’ Visit DrivingSales.com to view more than 26,000 22,000 verified dealer ratings of over 800 vendors in 28 categories.


2016

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ENROLL NOW FOR THE SPRING SEMINARS

OCTOBER 12-16 (2015) Advanced Parts Management

FEBRUARY 15-19 Advanced Parts Management

APRIL 18-22 Advanced Service Management

MAY 17-19 Advanced Financial Management (3 days)

SPRING CERTIFICATE PROGRAMS: FINANCIAL MANAGEMENT January 4-8 | January 11-15 February 8-12 | February 15-19

PARTS MANAGEMENT March 7-11 | March 14-18 April 11-15

SERVICE MANAGEMENT January 4-8 | January 11-15 February 8-12 | February 15-19

PRE-OWNED VEHICLE MANAGEMENT AND DIGITAL MARKETING March 7-11 | March 14-18 April 11-15

NEW VEHICLE MANAGEMENT January 4-8 | January 11-15 February 8-12 | February 15-19

www.nada.org/Academy | 800.557.6232


F O U N D E R ’ S

L E T T E R

Dealership Executive,

W

e at DrivingSales hope you are having a fantastic year at your store(s) and capitalizing on this record breaking sales year for our industry. It’s great to see so many dealers succeeding in their markets and growing their business to heights not seen in 10 years. As we finish out the year and

look beyond, I see so much opportunity and promise. To prepare for 2016, I’m challenging myself and the GMs at my stores to really

DealerExec The Team Jared Hamilton FOUNDER

@jaredhamiltonDS

Chris Reed PRESIDENT

think about what our brand stands for and how it’s best conveyed to our custom-

chris.reed@drivingsales.com

ers. We need to take this opportunity of success as dealers to build our resources in

Mike Jeffs

preparing for the next inevitable recession and future growth. I challenge you to fine tune your business by taking a brief timeout from the 30-day window and take a step back. Think about where your business is and where

EDITOR

mike.jeffs@drivingsales.com @mikejeffs3

you want it to be five years from now. Ask your leadership team and managers for

Steve McFarland

their input to begin the process.

steve.mcfarland@drivingsales.com

I recently purchased two additional dealerships in Oregon and preparing a three and five year business plan for each store with a heavy emphasis on our brand strategy. First on the list is to ensure all employees have received the appropriate training to execute on our brand strategy. I’m asking my leadership team, and myself “Are our core brand values being demonstrated at each touch point for customers to deliver an outstanding customer experience?” This issue of DealerExec has a focus on your dealership’s brand to get us thinking about what our brand stands for, how to execute on our brand promise and how to enhance it in 2016 and beyond.

DIRECTOR OF ADVERTISING

Josh Phelon ADVERTISING & SPONSORSHIP SALES MANAGER

josh.phelon@drivingsales.com @joshphelon

Justin Rhoane ADVERTISING & SPONSORSHIP SALES MANAGER

justin.rhoane@drivingsales.com @JRhoane

Congratulations on a successful 2015! Let’s prepare to deliver clear brand strategies in 2016. Sincerely,

Jared Hamilton Founder, DrivingSales, LLC

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Thanks to our Sponsors!

DealerExec ABOUT THIS PUBLICATION

OUTSELL

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 2013. 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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C O N T E N T S

Features 12 Our Marketing Efforts Are Falling Short

Connecting Your Training and Operations With Your Brand Marketing Strategy for Sustainable Success BY ERIC MILTSCH

16 Big Data Gives Big Clues When Selling Used Cars

Simple VDP Changes Can Increase Your Lead Submissions BY CHAD BOCKIUS

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20 Learnings From Billion Dollar ‘Starup Dealerships’

How Online Used Car Companies Are Disrupting the Automotive Retail Market BY DANIEL KIM

28 Customer Experience Management and Technology

Multiple Trends and Multiple Opportunities BY THOMAS JUNG

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34 Ready... Set... Service Text

Improve Your Service Business, and Customer Service, With a Texting Program BY SCOTT PECHSTEIN

38 How Customer Focused Is Your Dealership Culture?

Do This Month’s Numbers Trump Everything Else?

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BY JAY RAO

42 Capital Threats in the Automotive Dealer Ecosystem Will Mount in 2016

Are You Prepared for Safety Recalls and Rising Interest Rates?

BY JON LANCASTER & JOY HANNEMANN

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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 | 4TH 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)

1 0 Used Car Advertising Websites

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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

CallSource CallTrack

SCORE RATING

REC

726.2 100%

CallRevu

CallRevu 360

458.81

100%

Century Interactive

Car Wars

301.55

100%

Gubagoo TalkSmart

231.14 100%

800response

132.31

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

REC.

ContactAtOnce!

Chat Connect + Mobile Text Connect

137.01

99%

Gubagoo

Gubagoo 24/7 Behavioral Live Chat

57.65

99%

ActivEngage

ActivEngage Chat

29.42

99%

CarChat 24

24/7 Fully Staffed Chat

3.8

100%

CRM-Sales Department 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

REC.

ELEAD1ONE

ELEAD CRM

381.12

100%

DealerSocket

DealerSocket CRM

1.86

88%

VinSolutions

VinSolutions MotoSnap™ CRM

0.63

85%

DealerMine Inc.

Service CRM

0.1

100%

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

SCORE RATING

Autosoft, Inc.

Autosoft FLEX DMS

135.33

99%

Auto/Mate Dealership Systems

AMPS

91.8

99%

PBS Systems Inc.

Aristo Gold - DMS

0.18

40%

DealerBuilt

DealerBuilt LightYear DMS

0.15

75%

4TH QUARTER - 2015 | DRIVINGSALES, LLC

REC.

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Fixed Ops Solutions Products and/or services designed specifically for Fixed Operations. COMPANY

PRODUCT

ELEAD1ONE AutoPilot

SCORE RATING

170.23 100%

ELEAD1ONE Service1One CIMA Systems

REC.

13.83 100%

CIMA Car Care Service Menus

0.55

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

REC.

ELEAD1ONE

ELEAD ILM

577.12

100%

VinSolutions

VinSolutions MotoSnap™ ILM

0.19

83%

DealerSocket

DealerSocket ILM

0.14

100%

Inventory Pricing 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

628.35

100%

VinSolutions

MotoSnap™ Market Pricing Analysis

23.55

75%

Black Book

Black Book Used Car Guides, Internet and PDA

8.6

100%

ACE Tech

LotPro

1.23

100%

FirstLook

FirstLook -- 360° Market Pricing

0.92

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

Autobytel Inc.

Autobytel New Car Leads

Dealix Corp. TrueCar

SCORE RATING

REC.

454.2

88%

Dealix New Car Leads

44.11

62%

TrueCar New Car Leads

12.57

57%

Cars.com NewLeadsPlus

9.79 100%

AutoTrader.com

6.92

New Car Advertising

*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

100%

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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.

229.35 100%

AutoAlert

AutoAlert #1 Automotive Data Mining Software

0.67

94%

CIMA Systems

Complete Virtual BDC

0.65

100%

OneCommand OneCommand

0.11 83%

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

DealerRater.com

DealerRater Certified Dealer Program

eXtĂŠresAUTO

Online Reputation Management

Digital Air Strike

SCORE RATING

REC.

191.7

100%

105.85

100%

Reputation Logix

31.34

70%

Slipstream Auto

Reputation Enhancement

14.12

100%

Opportunity Max

Reputation Manager

1.37

100%

SEM - PPC 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.

Dealer e Process

Digital AMMP

105.12

95%

Local Search Group

Search Engine Advertising - Automotive PPC

97.16

100%

Dealer.com

Dealer.com Unified Advertising Exchange

22.85

89%

Showroom Logic

AdLogic

21.64

100%

CDK Global

Power Search, Power Display and Remarketing 13.06

71%

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

112.87

DealerFire

DealerFire Content Marketing (SEO)

50.26

92%

Dealer.com

Dealer.com SEO

11.58

57%

CDK Global

PowerSEO

6.02

100%

4TH QUARTER - 2015 | DRIVINGSALES, LLC

REC.

100%

DEALER EXEC


view

point

Driving Results Across the Dealership Promote dealer group value Support product specialists Streamline the service process Enhance off-site marketing

Ask about our 30-day trial offer!

DEALER EXEC

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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

102.56

84%

Cars.com

Cars.com Online Advertising

17.66

80%

Autobytel

Autobytel Used Cars

4.74

100%

All Auto Network

Inventory Management Applications

4.74

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.

DealerOn

DealerOn - Flex Sites

129.59

100%

Dealer Car Search

Responsive Websites

127.36

100%

Dealer e Process

Dealer eProcess Responsive Websites

43.14

94%

DealerFire

DealerFire Responsive Websites

21.39

100%

Dealer.com

Dealer.com Core

2.39

71%


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 October1, 2014 to October 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

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B R A N D

Our Marketing Efforts Are Falling Short Connecting Your Training and Operations With Your Brand Marketing Strategy for Sustainable Success BY ERIC MILTSCH

W

e’re living in a chaotic, noisy time where every business is fighting for a fleeting moment of consumer attention. And to make it worse, businesses have shifted their plain vanilla marketing message from traditional channels to digital channels. It simply isn’t enough to tell yourself your digital efforts are what separates yourself from the competition. Something huge is still missing from these efforts and it is likely hurting your chances of getting your messages to stick to potential shoppers, and even existing customers.

Why are we still doing this today?

An expensive tagline on a billboard from an overpaid agency with very little automotive experience doesn’t equal a marketing campaign. That sound bite doesn’t create a memorable shopping experience. In fact, the majority of your dealership staff may not even know the tagline or the fact you have a new billboard. Continuous marketing images of the owner and his beautiful trophy wife do not resonate with the community. This helps two people: the owner and his beautiful trophy wife. Marketing copy (poorly disguised as an SEO tactic) instructing car shoppers to compare the prices at your dealership with another dealership in a different part of the city or state isn’t getting shoppers to take

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action – they’re going to compare prices whether you tell them to or not.

It must be all about the customer!

Here’s a simple reminder for you and your staff: That customer sitting in your showroom right now, the one with their spouse and kids who isn’t talking to anyone and is looking at their phone … they don’t want to be there right now and are trying to plan their escape. Now imagine if this customer is having a bad experience. There is more than a 70 percent chance the first app the customer opens on their phone is Facebook. The worse their experience gets, the higher the likelihood they will either tell a friend privately or share a negative update publicly. Your showroom experience didn’t reflect any of the fluff in your marketing messages. Take a moment to soak up these simple customer experience facts: • How important is addressing a customer’s problem? Lee Resources says if you resolve a complaint in your customer’s favor, he or she will do business with you again 70 percent of the time.1 • What are the top two reasons for customer loss courtesy of Harris Interactive/RightNow?2 The first is that customers felt poorly treated. The second

DEALER EXEC


Something huge is still missing from these efforts and it is likely hurting your chances of getting your messages to stick to potential shoppers, and even existing customers.

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simple buying experience story • Differentiate ourselves by telling our simple selling story • Change our approach toward training our staff on our customer experience expectations As an independent dealership, we have an uphill battle building our brand against the traditional stores in the region. Our first step was to create our unique selling propositions (USPs). This serves as the foundation of our message to our guests and help shape their expectations. The first version of our USPs looks like this:

Buy it simple

Just because you went digital doesn’t mean your experiences will improve.

is because a company failed to solve a problem in a timely manner. • 5 percent doesn’t seem like that much, right? Well, did you know that building loyalty with 5 percent more customers3 would lead to an increased average profit between 25 percent and 100 percent per customer? Today’s dealerships miss out on the chance to resolve customer issues in a timely manner, to empower employees to fix custom problems and build even greater loyalty.

How do you make a difference? This is how we’re currently approaching these problems. Our dealership recently opened two months ago, so these struggles are fresh and as real as possible, not simply rhetoric. Our goals are simple and current: • Create brand awareness for a new independent dealership • Differentiate ourselves by telling our

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• No haggle, no hassle, best price policy – never a worry with our best price guarantee • 5-Day/500-Mile satisfaction guarantee – not happy? Get your money back • Free delivery to your door within 100 miles – we’ll make it convenient for you • AutoCheck vehicle history reports on every vehicle we sell – every buyer should know their vehicle’s history • Easy vehicle transfers – we bring the car closer to you within three hours, ready for a test drive or purchase • Easy financing for everyone – we have many lenders waiting to finance all credit needs

Sell it simple

• 5-Day/500-Mile appraisal value – the quote will still be good when you come back • Free appraisals – no appointment necessary, we’ll even come to you • Get a check on the spot – our simple process makes it fun, fast and easy • We’ll buy any year, make or model – we love anything on wheels The individual items are a constant work in progress as we gain more feedback on our showroom process. In fact, not all of them are necessarily revolu-

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tionary; the difference will be in how we execute before they come into the store, in front of the customer and after the sale. The key elements here are the “buy it simple” and the “sell it simple” USPs. These items are at the root of our experience as these short messages set the stage for the concept behind our dealership: Creating a simple way to buy and sell vehicles. Going forward, everything revolves around these two items. While the “buy it simple” and “sell it simple” messages help tell the story, the messages mean nothing if they aren’t baked into our culture from day one. Our training revolves around ensuring proper preparation, the best follow up with customers and elevating the buying experience to something customers can honestly say was simple and memorable. Word-of-mouth is extremely powerful for us as our primary location is geographically located halfway between Rochester and Syracuse. Small town community connections are very much alive and word spreads just as quickly as a Facebook update or a tweet. It’s a safe bet for us to assume the customer in our showroom is separated by less than three connections to one of our employees. Part of our “simple” strategy also includes a Hub & Spoke location model. Our eventual expansion will include three additional locations closer to Rochester. These satellite locations will help drive the convenience factors for our test drive and appraisal appointments as well. Another example of our attempt to change the perception of our dealership within the community is how we’re approaching the trade-in purchase. While most dealers still sit back and wait for the customer’s trade-in or sell-only lead to find their way from the website to the CRM, or the occasional drive-by looking for a quote on their car, we’re looking beyond this out of date process. We’re

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taking advantage of how our mobile behaviors have changed. Everyone has a camera with them today. We decided to crowdsource this effort by having people join our Simple Squad. This approach lets anyone share a photo of a car for sale, with the contact info. If we buy the vehicle, we’ll pay a $100 referral fee. We’re also aware of how shoppers behave today. Obviously we needed to ensure a solid mobile experience, however, we’re more concerned with how our customers will interact with us via their mobile devices. We encourage our Simple Squad members to send us vehicles for sale via text. We also use the Talk Options widget on our website to give customers the extra choices they may want to contact us – especially the texting option. The follow-up process around these delivery methods are our highest priority, just having a new solution won’t cut it. Time is a critical element we’re factoring into the equation. We’re trying to create a new standard for the time spent delivering the vehicle and/or buying someone’s vehicle in our showrooms. Delivering on this standard will make our brand stick, build the trust we need and help spread the word – through old school word-of-mouth in the small town community and via the digital channels in the larger communities. Just because you went digital doesn’t mean your experiences will improve. Build the foundation first with your core USPs, track the key performance indicators and create an internal culture around those elements. This is how we’re building a new brand in a new market. Good luck creating your sticky brand!

ERIC MILTSCH Eric Miltsch is a successful automotive digital marketing consultant specializing in search, social & mobile strategies. His love of all things digital & automotive helps progressive dealers continuously improve their performance. He›s the President of Command Z Automotive Consulting Inc. and a partner in Auto Outlets USA.

REFERENCES 1 www.customerservicemanager.com/customer-service-facts 2 www.slideshare.net/RightNow/2010-customerexperience-impact 3 The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value by Frederick F. Reichheld

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B R A N D

Big Data Gives Big Clues When Selling Used Cars

Simple VDP Changes Can Increase Your Lead Submissions BY CHAD BOCKIUS

S

earch data and online shopping patterns offer unique insight into how used car customers really behave. For example: How brand loyal are they? What features are they really looking for? How does pricing affect conversion rates? With access to millions of unique used vehicle listings across more than 350 used vehicle marketplaces, as well as lead submission data we receive through our CarStory market reports, CarStory is able to answer these questions by taking a deep dive into used car consumer behavior.

How brand loyal are online used car shoppers?

By the time a lead form comes to your dealership, the customer has, in all likelihood, already visited multiple websites during their digital car-shopping journey. Understanding where the customer started his/her search and where he/she ends up tells an important story, one that can help your dealership with cross-selling opportunities, and give you a leg-up on off-brand used vehicle inventory decisions. In a white paper entitled “Lead Loyalty and Intent to Buy Online,” we analyzed brand-by-brand lead loyalty/lead disloyalty for 15 popular used vehicle makes. We discovered that, for the most part, used vehicle shoppers are lead loyal – searching for, and then submitting leads for the same make. Between 73 and 84 percent

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of used vehicle shoppers submit leads on the brands in which they initially searched. Several makes benefit from an 80 percent or higher lead loyalty rate, including: Ford, Mercedes, BMW, Dodge, Chevrolet, Chrysler and Volkswagen. Ford, who has the most lead loyal online used vehicle shoppers of any brand, is most likely to lose online users to Chevrolet and vice versa. Not surprisingly, online used vehicle shoppers searching for domestic brands have a higher tendency to switch to another domestic brand when submitting a lead, than to an import brand. Among the different makes, there was some reciprocity between what users search for and then submit leads for. For example, when used vehicle shoppers search for Chevrolet or Ford and switch, it is reciprocal, i.e., Chevrolet shoppers are more likely to switch to a Ford and vice versa. This information could prove very useful in helping your salespeople understand what to offer as alternative used vehicles and would indicate that Ford dealers should stock Chevrolets in their used vehicle lots, and vice versa.

Examples of brand switching

• When Acura online used vehicle shoppers submit leads on makes other than Acura, 4 percent of the time they’re on Hondas. • Toyota and Honda both have average lead loyalty. However, Honda online users (used vehicle shoppers who first search for Hondas) end up submitting leads on

DEALER EXEC


Toyotas 4.8 percent of the time. Toyota users (used vehicle shoppers who first search for Toyotas) end up submitting leads on Hondas 4.4 percent of the time. • Lexus buyers are more likely to switch to BMW (2.4 percent) or Toyota (2 percent). • Mercedes falls second only to Ford in lead loyalty. But, when Mercedes used vehicle shoppers do submit leads on different makes, 3.8 percent of the time they’re on BMW (third

DEALER EXEC

highest lead loyalty). • GMC constitutes Chevy’s biggest leadsubmission crossover opportunity. GMC online used vehicle shoppers who submit leads end up submitting leads on Chevrolets 9.3 percent of the time. That’s the highest of any single make crossover by nearly 2X. • When Mazda online used vehicle shoppers pick a different make, it’s usually either a Honda (2.9 percent of the time) or a Nissan (also 2.4 percent of the time).

Grab the attention of used car shoppers

In order to hone in on the make they want, online used car shoppers put a lot of effort into research before they make a decision to buy. On average, they are using around 24 different research points – your goal should be to keep them on your site by giving them all the information they need right there. Because, let’s face it, every time they click away from your site, you could be missing an opportunity to

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sell them a car. So, how can your pre-owned car listings better grab the attention of online shoppers? We recently analyzed our extensive data and conducted a survey of customers in the process of buying to answer this question. Unsurprisingly, we learned that a key reason people shop “used” is that they are looking for great value for their money. The surprise was how little dealers are touting the great value their pre-owned vehicles

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offer consumers. Very few dealers highlight any reconditioning they’ve done to used vehicles. In fact, over half of the dealer-posted inventory we looked at on used car marketplaces didn’t take advantage of adding any seller comments to their listings – a great place to tout the things buyers really care about – such as reconditioned brakes, batteries or tires. Our research also showed that, when

DEALER EXEC


shopping on used car marketplaces, consumers react differently to listings with a large number of images. In fact, it turned out that listings with just nine images outperformed those with 30 images – garnering 71 percent more lead submissions. The takeaway for your used car salespeople is that shoppers higher in the funnel (remember, these are not shoppers on your dealer website but are on used car marketplaces) are not as interested in detailed images and just want an overall “picture” of the vehicle before diving deeper.

Some other tips for better merchandising pre-owned vehicles:

• Include Detailed Data: Vehicle condition, accident history and service history top the chart of what consumers want to know – give them easy access to this data, ideally right on from the VDP. • Features Matter: The top 25 “must-have” used car features may surprise you. MP3 support (the ability to play digital music), iPod connectivity and Bluetooth lead the

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pack of must haves. Be sure to promote them on the listings! • Price Point: Most used car price tags end in “00”or “95” yet consumers submit more leads for cars with prices ending in “99.” In fact, search result pages with vehicles ending in “99” experienced 16 percent more clicks.

Make the data work for you

Knowing what used car shoppers want from vehicles listed on your own website versus those listed on used car marketplaces can significantly help you raise your VDP views and, ultimately, result in a greater number of lead submissions, while lead brand loyalty and disloyalty data helps you focus your inventory and enables you to offer customers an alternative choice. The bottom line is that used car sales are on the rise and there are plenty of data and tools at your disposal to maximize the number of used car sales that come through your dealership. Take the time to read the research and you will be better prepared to deliver what online used car shoppers want.    

CHAD BOCKIUS Chad Bockius is the CMO of CarStory, the industry’s largest provider of search and inventory data and analytics on used vehicles. CarStory’s Market Reports are a free merchandising tool and lead source being used on over 3,000 independent and franchise dealer websites. Chad’s background includes both online marketing and automotive, having worked for companies such as Bazaarvoice, Socialware and Trilogy. Chad is working to help dealers and OEMs tap into the power of big data to help build consumer confidence and accelerate decisions.

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C A P I T A L

Learnings From Billion Dollar

‘Startup Dealerships’

How Online Used Car Companies Are Disrupting the Automotive Retail Market BY DANIEL KIM

S

tartup fever has hit the automotive industry this year with a flurry of activity. Four of the largest used car automotive startups (Beepi, Carvana, Vroom and Shift) have collectively raised more than $300 million in reported funding and both Carvana and Beepi are looking to raise another $300 million each with over a $1 billion valuation to fuel their nationwide expansion plans. Their websites claim to reduce buying and selling inefficiencies and pass on the savings to their customers. – Beepi “In the old, over-priced world, you paid extra for the dealer’s showroom. Beepi has no high-paid salespeople, no expensive real estate. We pass all those savings to you.” – Carvana “Skip the dealership. Buy the car online. Dealerships cost you money.” – Vroom “The commissioned-based environment and complicated pricing at dealerships creates undue pressure and the need to haggle for a fair price. We’re taking all of that out with no sales people and transparent pricing.” – Shift “We cut out the inefficiencies and expensive overhead associated with car dealerships, instead using the power of technology to quickly connect you to the perfect buyer or seller.”

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But have these startups really improved the existing car buying and selling process? Are they going to replace the existing dealerships just as Amazon replaced Borders and Barnes and Nobles? I conducted a comprehensive 60 point research to understand how these startup dealerships operate and how they differ from existing dealerships by evaluating three main area of their operation: Acquisition, Sales and Overhead Management. Although the jury is still out on how successful they will be in the long run, all of the companies are currently operating with a strong online presence, a no-haggle policy and a way for customers to buy and sell cars without stepping foot into a dealership lot. Based on the observations, this article gives you key takeaways that you can implement at your dealership to stay competitive in the changing automotive retail landscape.

1. Acquisition

Vehicle acquisition is the key first step in ensuring a great sales pipeline. Tradeins from customers turn to strong leads that can boost vehicle sales. All four companies had a proprietary instant valuation tool integrated into their website with two of the four used car companies acquiring cars only from their customers. Ease of use, payout and trustworthiness were considered to determine which company did the best in vehicle acquisition.

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Steps Required for Quotation 20

Ease of use

15 10 5 0

Beepi

Carvana

Shift

Vroom

Dealer

% of KBB Private Party Value Offered (2013 VW CC Sport BLK, 20K miles) 100%

90%

80%

70%

Payout Beepi

Carvana

Shift

Vroom

Dealer

Beepi

Carvana

Shift

Vroom

Dealer

30 days

7 days

14 days

7 days

Price Guarantee Purchase Guarantee Price Validity Free Pick-up Instant Value

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Shift was the easiest with 11 steps to get a quote followed closely by Beepi’s 12. Beepi and Carvana gave instant quotes online with Beepi not even requiring a phone number from the customer for a quotation. Beepi and Shift were clear winners in prompting a call to action by asking customers to make an appointment with a mechanic for an inspection. In comparison, Autotrader’s “Instant Cash Offer” required more steps, but still offered a relatively easy way to get an instant quote online. However, the process of having to print a voucher and contact the dealership separately created a disconnection for the customers to take action. TAKEAWAY: An easy to use pricing tool branded for your dealership is essential in getting interested trade-in customers to appraise their car online. Once the customers receive a quotation from you, make sure to provide a call to action in the pricing tool that leads to a dealership visit or a phone call to finish the appraisal process.

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In terms of most money for the car, Beepi was the winner of the group closely followed by Shift. Beepi’s price was only slightly off from KBB’s Private Party price and beat last place Autotrader’s instant cash offer by around 10 percent. The high payout is due to the expansion phase that these companies are in with lots of capital to burn and is likely to be a temporary occurrence. However, it is important to understand why Beepi and Shift were able to give a much higher payout offer than the other startups. Both Beepi and Shift give a price range for their quotation based on the condition of the vehicle and send out a mechanic to closely inspect the vehicle. Beepi, for example, schedules a 2-hour session to carefully evaluate the car with a 185-point inspection at the customer’s requested location. They are able to maxi-

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mize their payout by minimizing their risk of high reconditioning cost. TAKEAWAY: Spend time in understanding what the full cost of reconditioning will be on the vehicle you want to acquire by doing a thorough inspection. Offer a price to your customers based on the condition of the vehicle and carefully walk through with the customer what a mint condition car is worth and the deductions that were taken. Your customers will appreciate the higher payout and you’ll have less surprises when reconditioning the car for sale.

Trust To keep good on their quotation offer, all startup companies offered a minimum price guarantee and a purchase guarantee. Quote validity also ranged from seven to 30 days. But more importantly, an integrated pricing tool helped to bring a sense of trust for the customers. Having a third party branded pricing without integration to the dealer’s website lowered the trust factor leaving the customers to wonder if the dealership would actually accept the car. It also made me wonder why existing dealerships that have been in the business for so many years can’t offer a customized pricing tool online when these new startups are all doing it. TAKEAWAY: Customers need to know that you will accept the price that was offered to them. Have the GM sign the quote and put your dealership’s logo on the guarantee. Give a range for a quotation with a minimum guaranteed offer. Make sure to be clear on what the payout would be based on the condition of the car as setting the right expectation is key in customer trust and satisfaction.

2. Sales

All four startups have custom-built websites that focused on giving a great user experience and providing enough information and assurance to allow for an online

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transaction. All four startups showcased their cars in high definition interactive media with full disclosure, gave a money back guarantee and a warranty for every car they sold and fully transacted online.

Many of the startup dealership websites looked

High quality media Many of the startup dealership websites looked beautiful and followed many of the best practices for taking pictures of the car. Vroom, Carvana and Shift all used state of the art studios to take the pictures producing quality photos with sharp detail. Even Beepi who takes pictures of the car at the customer’s chosen location had well composed quality photographs, which showed they put in a lot of time into training their field agents to take the images. Even with 1080p or greater HD photos, all the startup websites loaded fast and had interactive features such as full screen and zoom. Most of them had on average 40 pictures per car and Carvana had an interior and exterior 360 viewer, which allowed the customer to fully interact with the car. These startups again prove taking standardized, quality photo and displaying them in an immersive and interactive way for consumer is one of the most important ways to attract and/or sell your customers. For full disclosure of the vehicle’s condition, all startups had some form of free vehicle history report and at least a 100 plus point inspection with Beepi’s inspection reaching a 185 point inspection. Carvana and Shift provided high-resolution photos of all the damages the cars had while Beepi provided a diagram of all dings and scratches. Beepi also took some photos of the bolts and underside of the car to ensure the car was in good condition and had not been tampered with. TAKEAWAY: Even if it is not a studio, have a place where you always take pictures of the car. Train your employees and dealer lot services people to take quality pictures. Ask your website service provid-

beautiful and followed many of the best practices for taking pictures of the car.

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Money back guarantee 10 days

Beepi

Carvana

Shift

Vroom

Limited Warranty

1000 miles

7 days

10 days 250 miles

7 days 250 miles

Shift

Vroom

Guarantee and warranty In terms of peace of mind, all startups offered between a seven to 10 days 250 to 1000 mile no questions asked money back guarantee. Also for cars that were out of warranty, all startups except for Shift provided between a 90-100 days 3000-6000 mile warranty. TAKEAWAY: Offer both the money back guarantee and warranty. If you did your homework during the inspection phase, you should be able to offer the warranty.

Online transaction Being an online used dealership, many offered to have the documents signed online or at the customer’s home and all of them included a free delivery to the customer’s home in the markets they served in. Shift had an interesting concept by giving test drives at the comfort of your home.

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3,000 miles

100 days

Carvana

400 miles

ers to host nicer pictures of your cars! Having better pictures for your customers to look at on your website compared to the third party portals will train your customers to come to your dealerships to get more information about the car. And lastly, be upfront as possible (starting from online) about the condition of the car. Your customer will thank you for it and trust you.

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90 days

Beepi

4,189 miles

0 days 0 miles

90 days 6,000 miles

Based on Shift’s website, it only takes 2 minutes to schedule a test drive and in some markets delivers the test drive in 45 minutes or less. All four companies offered integrated financing within their website and processed credit card payments for online deposits. One dealership even went as far as accepting Bitcoin as a form of payment. TAKEAWAY: Dealerships need to start thinking about their websites as not just as a marketing tool, but a place where a sales transaction can happen. You don’t see very often where a dealership’s website has the capability for a customer to process a credit card payment. And yet, all four of the startup used car companies have this capability. It might be too early for a single dealership to implement a way to fully buy a car online, but more efforts must be made to make some part of the sales process online.

3. Overhead management

There are two very distinct business models among these startup used car companies: the online dealership model and the peer-to-peer marketplace model. Carvana and Vroom fall into the online dealership model with some characteristics that are similar to the existing dealerships. They purchase and take stock of the

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vehicle. They acquire vehicles from tradeins, but also from auctions. They advertise their vehicles on other online third party channels. Beepi and Shift on the other hand take on more of the peer to peer marketplace model. They only list cars from customers. They do not take stock of the vehicle and advertise only on their site and limit their advertising on third party websites. Based on the prices offered for buying and selling a car, the peer to peer model is more competitive than the online dealership model because they are in possession of the vehicle for a shorter time and they do not rely on third party advertising websites.

Quick inventory turns Beepi is a licensed dealership in all the states they operate in and actually buy the car from their customer. However, the time they hold the car is minimized to 1-2 weeks because they do not buy the car from the customer until the car is sold. After inspecting the vehicle and giving a guaranteed price, Beepi allows the customer to keep and drive the car until the car is sold. Upon finding the buyer, they will come back to pick up the car, recondition and deliver to the purchasing customer. Shift on the other hand runs a consignment like shop where it takes possession of the vehicle to provide test drives, but does not buy the car from the customer. When a buyer is found, they will simply help to make the transaction between the buyer and the seller, as they are not a licensed dealership. They put the burden on the customer to keep paying for the car while the car is being test driven, but ends up not having to take possession of the car at all. TAKEAWAY: Fast inventory turnover is key in staying competitive. While most existing dealerships cannot take on the above mentioned model, getting the vehicle up for sale as soon as possible and pricing the car correctly will help improve

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inventory turns. Beepi’s mechanics take the pictures during the inspection process and gets the photos up on their site in one to two days. Managing a tighter turnaround in getting the car listed as soon as possible is the key to staying competitive.

Using third party advertisers Based on the research, both Beepi and Shift do not list their vehicle on third party portals such as Autotrader, Cars. com and TrueCar. Beepi seems to advertise on Craigslist to sell their cars. Instead of spending money on third party portals, these startups spend extensive amount of resources on social media and display ads. Also as mentioned in the high quality media section of this article, they spend their resources in creating a great user experience on their own website. TAKEAWAY: Invest in your website in the long term. Stop thinking so much on how to convert and rather focus on delivering a great user experience for your customers.

Conclusion

Are these startup dealerships driving all existing dealership to extinction? Definitely not. But they serve as a wake-up call for the auto retail industry to adapt to the changes that have already taken place in other retail industries. Both the dealerships and its partners must come to terms that purchasing a car online is a reality. Taking steps to adapt to the new retail landscape in order to stay relevant is urgent. Dealerships have an upper hand in being in the communities they serve and for franchise dealerships, being able to sell new cars. But holding on to that alone can lead to lost market share. Don’t be surprised to hear next time you talk with your customer when they say, “But Shift/Beepi/Carvana/Vroom offered me the vehicle for much cheaper.”

DANIEL KIM Daniel is Founder and CEO of Sparki Labs, a technology focused company that delivers unparalleled customer experienced through their universal media platform for dealership websites. Prior to starting Sparki Labs, he was a consultant at Bain & Company where he advised and consulted leading automotive technology companies. He holds an MBA from University of Pennsylvania’s Wharton School.

For the full version of the report, please contact info@sparkilabs.com

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B R A N D

Customer Experience

Management and Technology Multiple Trends and Multiple Opportunities BY THOMAS JUNG

L

ast year, 2014 ushered in the need to fully understand what customer experience management (CX) is all about for big and small companies across all types of industries on a global basis. CX management comes down to knowing all the customer touch points, their details and understanding each piece as part of the collective whole. Stories abound of big companies not knowing that on-boarding a customer involved more than 100 internal functions and people, and being surprised that customers canceled orders on a major scale. Do you know, fully and completely what happens to your customers as they move through your processes? CX can be a sophisticated and expensive platform or it can be as simple as being aware of what happens to your customers as they move through the purchasing and service process. The following is a look at the multiple issues and multiple opportunities that are available by understanding what CX is and how it determines whether you get a new customer and keep an existing one.

We as customers just expect more

Various industry experts and my own customer-facing experiences illustrate that our expectations from customer service have changed and continue to change drastically. We expect in some cases, depending on the business and product, to be able to conduct business on a 24/7

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schedule. We hate scripted customer service that lacks the ability to allow creativity to solve problems and you better have experience management across all customer touch points, and that’s just for a start. We will take our business elsewhere if you are not willing to value me as a customer. I have a hard and fast rule for bad customer experience – find a new solution. I find myself driving across town avoiding the Office Depot next door because of a few bad service encounters and a less organized store layout.

Companies will and must increase their investment in customer experience management

In a 2014 Gartner study, they discovered that top marketers focused on delivering – and investing in – a seamless customer experience. Additionally, they found digital marketers were spending almost as much to retain customers (45 percent) as they do to gain new ones (55 percent). This trend will no doubt continue in 2015 and well beyond with more of marketing budget allocations going to customer experience management. Whether you are a big or small company, you will no longer be able to ignore the customer experience. Forrester’s Customer Index clearly demonstrates that customer-

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R E M O T N S O I U T C C A F S I T A S

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According to Bain Consulting, a 5 percent increase in customer retention can increase a company’s profitability by 75 percent.

centric companies gained 43 percent in performance compared to a 33.9 percent decrease for companies who have neglected customer experience.

There is no arguing with the numbers, ever!

Karl Sewell and Sewell Cadillac pointed out decades ago that by providing a better in-store customer experience they will improve their customer satisfaction, increase loyalty and improve customer retention. In a recent discussion with and OEM the 30-minute purchase cycle was being evaluated. Polk data puts the average OEM brand loyalty around 50 percent showing how fierce and competitive the market is. A Maritz survey shows that the sales and service experience is the key to repeat business. A recent F&I Magazine article illustrates that loyalty falls off a cliff from 82 percent in year three to a stomach churning drop of 42 percent in year four of ownership. These eye-popping numbers obviously confirm the need to implement customer experience and retention programs. Ironically the answer is not overly complex – provide value and convenience in a trustworthy and friendly atmosphere. With the right strategy, people and tools CX goals can be achieved.

Never underestimate the value of customer retention If you are still convinced customer retention plays a relatively minor role in helping a company grow a healthy bottom line, here are a few statistics that will change your mind. According to Bain Consulting, a 5 percent increase in customer retention can increase a company’s profitability by 75 percent. Need some more? Gartner Group statistics tell us that 80 percent of your company’s future revenue will come from just 20 percent of your existing customers. I know you’re convinced now, but one final statistic provided by Lee Resource should

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seal the deal: Attracting new customers will cost your company 5 times more than keeping an existing customer.

Tracking and measurement are essential

Yes, you can measure and track customer experience programs. A wide variety of studies on the results of customer experience management strategies shows a strong correlation between customer experience and loyalty factors. Thus, I encourage every dealer to measure customer retention by year, model and geography. Set retention goals and remember the golden rule that you cannot manage what you do not measure. Furthermore, re-purchasing, trying new offerings, forgiving errors, and most importantly recommending a company to friends and family are proven to be influenced by the customer experience across all touch points. Any plan to repurchase, upgrade or renew subscriptions is a key indicator of customer experience management success. The other critical metric and one that has a number of marketing technology companies providing platforms for is, “The Net Promoter Score” (NPS). In order to set benchmarks, companies will use survey platforms as part of advocacy programs to gather this information. There is no mystery that we have seen growth in customer experience surveys. So much so that customers are being over surveyed. It is time to move to the single questions Net Promoter Score and have science and process solve the rest.

CX tech integration with existing marketing technologies The wide adoption of marketing automation platforms by companies of all sizes means that CX technologies and tools will have seamless integration. A quick search on Google illustrates the numerous options available to the market. Any doubts about

DEALER EXEC


how CX is getting integrated into major company offerings can be seen in the M&A market. IBM’s recent purchase of Silverpop and Salesforce’s acquisition of Pardot illustrate the need to have integrated offerings with measurement tools built into them.

A one to one cross-channel experience

Cross-channel experience is simply the same quality of customer experience across whatever device the customer chooses to use to communicate with you. As it becomes easier to manipulate customer data at the Corporate level, www.domo.com as an example, it will be easier to personalize the customer experience, making it much more effective. A company like Domo and others have addressed the need to release data and make it useable to executives to help them understand what is happening with their operations. The personalization of communications has demonstrated that customer’s response to these communications is much higher than generic offers that may be inappropriate to a customer’s needs. You do not have to look any further than Amazon to understand the application of data driven personalization to make appropriate offers to existing customers. They have combined every possible customer experience tool into a seamless platform that includes: appropriate offers based on past purchases and behavior, reviews to give manufacturers and potential buyers the information to fix problems or buy a product with confidence and you can do this no matter what device you are on. That is managing the customer experience across all customer facing touch points.

Companies are moving to a mobile-first CX

Again, no mystery here with nearly 80 percent of millennials using their phones to shop and get information – your company’s mobile

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experience had better be great. Google’s latest algorithms reward companies in search that have a responsive design for mobile users. Keep in mind that Google’s interest is self-interest with the growth in mobile advertising going nowhere but up. This corresponds with the growth in texting as a major option for customers to communicate with customer service operations. Technology is not driving these developments, but we are as customers in a more customercentric world. This move to a mobile first approach places the customer in the center where he or she should be. Although most companies now have their websites and digital assets optimized for mobile devices, it’s still more or less an add-on feature. In 2015, we’ve see the progressive customer-centric companies moving toward a mobile-first policy. So instead of thinking about the mobile experience as an add-on to the customer experience, think of it as the priority. Ask yourself as a customer service manager, what is always with you? Your phone is the answer and it is the same situation for everyone else. If I want to talk with someone or set up a time to talk with someone, I often find myself texting them to call me. I do not have a desk phone and I never leave voice mails. Mobile first is real and all

You do not have to look any further than Amazon to understand the application of data driven personalization to make appropriate offers to existing customers.

G N I T E S K E I R MA OLOG N H TEC 31


service procedure and policies need to be established with this as a priority as the main means of service communications.

Mobile passes the desktop as device of choice

THOMAS JUNG Thomas Jung is the CEO and Co-founder of AdvantageTec. He has over 20 years executive experience in the technology and software industry. Prior to AdvantageTec, Thomas was on the executive team at vAuto as Chief Marketing Officer and a standing board member. There he rebranded and repositioned the company from MPowerAuto to vAuto and was in charge of marketing and strategy. From 2000 to 2006 Thomas was divisional President for Cars.com and VP Product Development & Dealer Services. Prior to Cars.com Thomas was the CEO and Co-founder of Marketdrive Interactive providing Owner Circle software to automobile manufacturers. He started his career as an automotive technician at Dr. Ing. HcF Porsche AG in Stuttgart Germany.

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Comscore’s data shows the total number of website visitors from a mobile device overtook the number of visitors from a desktop in 2014. So it is true that as customers we choose how to access the Internet and thus our interactions with companies that we are doing business with or considering doing business with. We as consumers have drastically changed the rules and as a company you need to understand this. The days where a company dictated the interaction rules are over and has been so for at least a decade. Immediacy is the rule now, we want to be notified quickly, give us the data on the device of our choice and we will respond quickly. The longer it takes you as a company to solve my problem or send me the information I need to make a decision to help you solve my problem or deliver the service, the more risk you are creating for me to be dissatisfied and seek another solution.

You must include mobile as a service channel It is an absolute that your mobile customer experience needs to be just as good or better than your desktop experience. Today, there is an unstated credibility test that we perform as consumers with every company we consider doing business with. The first is: do you provide me with the information, free of course, on your website like white papers, customer testimonials, free trials, product sheets to name a few, to let me begin a buying process with you. To make that a reality, you will need to take a mobile-first approach. You need to design websites with the mobile user

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as the priority and create marketing communications that target customers via mobile that also need to include the option of allowing customers to text for resolving customer service issues. All of these are credibility qualifiers we use as customers to determine if we want to do business with you.

Mobile matters now!

You simply cannot neglect the mobile customer experience in 2015 or at any time moving forward, you will lose customers if you do. It is that simple. If a potential customer can’t quickly find your company, locate product information or buy a product they are looking for on their mobile device, they will leave your site and find a competitor that can help. This is true on the buy side but becoming more important on the service side. All it takes is a search of “texting as a service tool for customer support,” to understand how mainstream the text option is for customer service. If you are still using the phone and leaving voice mails for your customers, whether it is to get approvals for additional service or an update that the service is complete, you are behind your competitors that know the effectiveness of texting to get these tasks completed immediately. Remember, Coca-Cola headquarters in Atlanta does not have voice mail for their workers. No voice mail at CocaCola: Just a few years ago that would have been unthinkable. But not now, not where we are in a mobile and customer centric world. Remember, as a customer I set the rules for who I will do business with, I am the center and I want options in how I interact with you for purchasing and service. The polls have closed and the results are in: It is a mobile and customer experience centric world and to be in it and survive … well you know the rest.

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B R A N D

Ready... Set…

Service Text

Improve Your Service Business, and Customer Service, With a Texting Program BY SCOTT PECHSTEIN

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I

n 2014, Morpace Omnibus surveyed online U.S. consumers who text regularly. Nearly half of respondents said they would be very interested or somewhat interested in corresponding with a dealership via text message after a vehicle purchase, for things like service updates, recall notices, and maintenance information. A 2014 Customer Service Index Study con-

4TH QUARTER - 2015 | DRIVINGSALES, LLC

ducted by J.D. Power and Associates found that communication from a service manager is a key element for consumers when it comes to a satisfying service experience. And a survey by AutoMD in 2013 showed that a vast majority of consumers who rely on a dealership for service do so because their car or truck is under warranty, or because their vehicle has been recalled for service. A total of 83 percent of dealer-goers say they would rely on an independent shop if it weren’t for a warranty or recall notice. Dealerships need to develop a positive experience for consumers on every service visit, starting with the first visit – while their car is under warranty or recall, to help offset customers choosing independent shops down the road. Consumers want to text with you, and they need to build a relationship with you (and feel comfortable engaging with your dealership) when it comes to servicing their vehicle. It stands to reason, then, if you offer your customers a texting option when it comes to your dealership’s service

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One need only look at the data regarding texting in general to truly understand the opportunities that exist for your service operations.

department, you’re opening up opportunities to connect and engage with a significant segment of your customer base in the manner they prefer. And you can build deeper relationships with them in the process.

The new service frontier

We all know texting is the new frontier when it comes to car sales, but there are dealers who still don’t understand the benefits of texting in the service department. One need only look at the data regarding texting in general to truly understand the opportunities that exist for your service operations. Here are some statistics to consider: • Today, 94 percent of cellphone owners between the ages of 30 – 49 years send and receive texts.1 75 percent of cellphone owners between the ages of 50 – 64 send and receive texts.1 • 98 percent text messages are read, compared to 22 percent of emails, 29 percent of tweets, and 12 percent of Facebook posts.2 • 88 percent of cellphone owners with annual household incomes of $50,000 or more send and receive texts.3 The average number of mobile texts sent and received on a monthly basis outpace call volume across all age groups.3 • Text messaging (SMS) produces engagement rates 6 – 8 times higher than email,4 and 90 percent of text messages are read within three minutes of delivery.5 • 63 percent of smartphone owners use their mobile device to research and shop while at a dealership; 52 percent visit an additional dealership as a direct result; and 72 percent are more likely to visit another dealer than those not using a mobile device on the lot.6

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Let’s look at the current service process at your dealership, and how texting can enhance that process.

Your service adviser sits with a customer to discuss the work required to be done on the vehicle. At his computer, he reviews past service and what is scheduled to be done, based on the work that was done during the prior visit and the vehicle’s current mileage. He hands the customer a work order to approve along with an estimated cost. And then the customer either kills time at the dealership, takes a shuttle to work or home, or hops in a loaner car and heads out. A majority of the time, the mechanic finds something else – either a problem that is urgent and requires immediate attention, a different diagnosis altogether, or a potential problem that requires warning the owner of future issues. The service adviser tries to call the customer at the phone number highlighted on the work order. In the meantime, the car is on the lift, taking up service space, and wasting valuable time while everyone waits for the customer’s reply … time that should be spent actually working on the vehicle.

Let’s add texting to the existing process

While the customer is at the service desk for the write up, the service adviser asks for the customer’s permission to text with updates while allowing the customer to text back with questions. The customer can confirm permission either directly on their phone via the dealerships text platform or the service adviser adds this information to the Repair Order and asks the customer to initial. Now the customer has opted-in and your service adviser can text the customer with issues – and the customer can text in reply. Each adviser has his own texting account and can get alerts when text messages arrive. Many times, even if a customer is returning a call,

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the adviser might not be at his desk. Communication is quicker and more efficient than ever before, for your service team and for your customers. Be warned, however. If you’re enabling your service advisors to text customers from their personal cell phones, your dealership is at risk for regulatory violations and hefty fines. Telephone Consumer Protection Act (TCPA) guidelines are strict when it comes to texts, and fines for non-compliance can run as high as $1,500 per violation. That’s why it’s critical to implement a Web-based texting platform to help enforce proper opt-ins and opt-outs. It also serves as a lead management tool to monitor and track communications. There are many benefits to implementing a texting program into your dealership’s service department. For starters, you can use text message marketing in your service materials to drive additional service business by enabling customers to contact you the way they prefer – to receive notifications about special service and maintenance offers, to receive appointment reminders, to schedule service appointments, or to receive notifications about recalls and other important information about their vehicle. You can also text-enable existing service landline phone numbers without having to create new numbers dedicated to texting, to drive additional service business with your existing customers and to generate service business with new customers, while improving the overall experience in the process. And texting can create efficiencies in your service operations by enabling your advisors to get quick answers to important questions, to alert customers to additional work that needs to be performed, to update customers on the status of repairs, to let them know when repairs are completed and the vehicle can be picked up, and ultimately decreasing the time cars are on your lifts which cuts into productivity and erodes bill-

DEALER EXEC

able service hours. Texting platforms can be easily implanted and easily integrated into your existing dealership operations. Below is an overview of how they work on a general level. Consumers see a marketing message that directs them to “text or call” one of your dealership’s publicized phone numbers. These numbers can be any landline or toll free number, including call tracking numbers. When a text comes in from any of these numbers, the system automatically identifies the contact as a text and routes the customer into a lead management platform. The customer is immediately provided with an opt-in message. Once the customer opts-in, your sales staff is immediately sent an alert in the form of a text message and an email. Your staff can now begin a text conversation with the customer from either their desktop computer or mobile phone within the platform. All texts are logged and stored and can be delivered to your CRM. If the customer wants service pricing information, has questions about repairs or wants to schedule a service appointment, your staff can text directly to the customer. Both the dealership and the customer have a record of the conversation and any pricing quoted. What is the bottom line? Texting is more efficient than a phone call or an email, particularly in the service department, and it’s the way your customers prefer to communicate with you. It’s also efficient for reaching a broader audience of service customers, and to keep those customers coming back.

SCOTT PECHSTEIN Scott Pechstein serves as Vice President of Sales for Autobytel Inc. where he manages in-house and field sales and account management for the company’s broad range of industry leading products. Scott serves as an automotive industry representative, a company news media representative, and lead trainer of the Autobytel Dealer Insight Series. Scott also contributes sales insight for the development of the company’s client marketing communications programs. Scott is an NADA Convention, NADA 20-group, IS-20 Group, DrivingSales, Autocon, and Internet Super Conference speaker.

REFERENCES 1. Pew Research Center’s Internet & American Life Project Spring Tracking Survey, April 17 – May 19, 2013. 2. Frost & Sullivan 2010. 3. Experian Marketing Services and Simmons National Consumer Study. 4. HelloWorld Benchmark Mobile Marketing Study, 2012. 5. Mobile Squared Report: Conversational Advertising, 2010. 6. Placed, Inc. and Cars.com Mobile Device Use at the Dealership, January 2014.

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P E O P L E

How Customer Focused Is Your Dealership Culture? Do This Month’s Numbers Trump Everything Else? BY JAY RAO

The six building blocks of culture

M

any companies describe themselves in these ways in annual reports, speeches and advertising. Being customerfocused is vitally important for any business that relies on repeat customers, a positive public reputation, and referrals. Southwest Airlines is one of those businesses, and its rise from obscurity to industry dominance was largely fueled by its obsessive customer focus. Auto dealerships can do the same, and recent research indicates that they have plenty of room for improvement on that score.1 Every dealership likes to say it has a customer-focused culture. For many, that’s more of an aspiration than a reality. Their challenge is to get beyond that aspiration – and threadworn slogans – to a point where everyone from the corner office to the showroom to the service department is guided by an internal compass of customer-centricity.

The six building blocks of culture

What is this thing we call “company culture?” Social scientists and management professors like me use the term all the time. But for most people, enterprise culture is a slippery term that is hard to get a firm grip on. Nevertheless, culture is real and it has a profound effect of the way a business operates and connects (or fails to connect) with its customers. The best way to understand organizational culture is to understand its essential building blocks – there are six – Values, Behaviors, Climate, Resources, Processes and Metrics. All of these are closely interconnected. You can read more about the origins of this model in a previously published article.2

The six building blocks defined

Values are reflected in how a company sets its priorities and spends its money Values have less to do with what companies say and more with what they actually do. What are our beliefs? What is our mindset and how we view the world around us? Behaviors describe how people act. Values are exemplified in our behaviors. It

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“Customers are at the center of everything we do.” is most pronounced in the way the leaders and owners of dealerships spend their time. Do our mangers and leaders engage and enable our people to do their best? Do we spend more time with our customers or with our finance department? Climate describes the quality of workplace life. Are our people coming to work energized every day? Is the place collaborative or combative? Is the workplace caring our cut-throat? Is the dealership empathetic or aggressive? Resources refer to the human capital as well as the physical assets. Among dealership, physical assets rarely give them a great competitive advantage. Do we have the right people? Do they have the right skills? Are they constantly learning new skills? Processes are the ways we work. How do we hire? How do we learn? How do we build deep capabilities over time? Success describes how people are rewarded, how achievement is measured, and what earns praise from management, customers and competitors. Do we only keep score of our sales and profitability or do we try to please the customers? Do our customers love us? Do they keep coming back? What is our Net Promoter Score? A business’s values are reflected in its priorities and how it spends its time and money. In effect, values determine “what matters around here?” Southwest Airline’s notion of what matters can be described as “service and fun.” These can be traced back to the airline’s founder and longtime leader Herb Kelleher (now retired). Kelleher nurtured a corporate-wide

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passion for service and fun for both employees and customers. In doing so, he created America’s most popular and profitable airline out of a small regional carrier with three planes. Think about the values that dominate your business – the things you and your managers and employees obsess about. Do people obsess over customer service and satisfaction or do this month’s numbers trump everything else? Where is your dealership’s focus? Behaviors describe how people act in the service of their values. In the best organizations, key values are widely shared. People take those values seriously and align their work behaviors with them. In the worse cases, values are the drivel served up in weekly and monthly reports and leaders’ speeches that are generally ignored by employees and managers alike. There is little doubt that the leader’s values and behaviors have the greatest influence over the climate he/she wishes to create in the workplace. Also, through their power to make decisions, allocate resources, and reward behavior (how success is defined), leaders have more control than anyone else over which values dominate and shape the climate. Using their visibility and ability to persuade and influence, leaders send clear signals about “what matters around here.” Their formal power to reward some behaviors and punish others gives them a tool for aligning peoples’ workplace behaviors, which in turn determines the processes that are set up within the firm. How do we do the hiring? How do we interact with our customers? How do we solve

problems collectively? Employees are always noticing what their boss is doing. If the boss’s behavior is not aligned with official values – that is, if he or she does not “walk the talk” – the result is an everyonefor-oneself culture in which employees are disengaged and have to be “bribed” to do the right things; group cohesion around key goals never gels.

How one company did it

As an example of the cultureshaping power of leadership, consider the case of Vernon Hill and his great success in building a customer focused banking business. “Banking?” you ask. “But we’re in the automobile business.” No matter. Some of the most powerful insights about management are gained when we look outside our industry and its circle of competitors. Under the direction of founder/ CEO, Vernon Hill, Commerce Bancorp expanded from a single location in Cherry Hill, New Jersey to 470 branches. Deposits during Hill’s tenure grew at a compound annual rate of 30 percent, six times the industry average, and shareholders’ returns grew at the same 30 percent pace. Commerce was sold to Toronto-Dominion Bank in 2008 for $8.5 billion. How did Hill profitably grow this bank so quickly? Coming from the retail industry, Hill did what he’d seen the best retailers do: He infected his business and its employees with an obsession for customer service. At a time when competing retail banks were limiting hours, reducing services, and charging fees for things that had once been free, Commerce did the opposite.

DEALER EXEC


“Ours is a culture of customer service.” Service hours were extended to evenings and weekends – even Sundays. Instead of pushing customers toward the Internet, as other banks were doing, Commerce welcomed them – and their dogs – to its brick and mortar “stores.” As Hill saw it, the main ingredient of retail success was an army of engaged, customeroriented employees. At Commerce, most people were hired on the basis of attitude. As he and Southwest Airlines discovered, skills can be taught – values and behaviors cannot. Both adopted the practice of hiring people with customer-friendly attitudes and training them, as needed, in specific job skills. And to drive home the message that customer service was the value that matter most, Commerce held a “Wow! Awards” night every year at New York City’s Radio City Music Hall, where the top prize was a new Porsche. The Commerce story illustrates how each of our building blocks creating a re-enforcing culture. Hill infused Commerce with values he had developed earlier in his career: customer convenience and unstinting service. Through employee selection and training, rewards, encouragement of innovative ideas, and other mechanisms, his bank supported the behaviors on which his strategy depended for success. So, if you are the owner or general manager of a dealership, think about the six building blocks that form its culture. And ask yourself these questions: • What matters around here? What do you and other employees focus on? If “making the numbers” is obsession No. 1, get beyond that. The numbers are truly important in any business. But the numbers are the “result” of something more fundamental: How customers feel they are treated, their willingness to refer

DEALER EXEC

their friends and to return for service and their next auto purchase. Obsess on these points and the numbers will follow. • How are we training our people? If customer focus is the goal, train people in needs recognition, listening skills, and effective interpersonal communication. Create opportunities for non-sales personnel to meet and interact with customers they serve indirectly every day. • How do we learn what our customers think of us? Many dealers follow up sales and service with customer questionnaires. The question is, what are you doing with the data? Are questionnaire results genuine, or are sales people telling customers to “please give me a 10 on everything.” • What values am I modeling for employees with my own behavior? As the leader, you set the cultural tone of the dealership. So demonstrate your interest in customers. Spend part of every day meeting and talking with customers – in the showroom, on the lot, and in the customer service lounge. Employees will notice. Don’t be the person in the back-room that the sales person has to run to for every little negotiation. Many factors that contribute to the success of an auto dealership are out of the management’s control. The economy. Interest rates. The portfolio, quality and appeal of the manufacturer’s vehicles. The culture of the business, however, is under your control. So build one that puts customers at the center of everything it does.

REFERENCES 1. www.trust.drivingsales.com 2. Jay Rao & Joseph Weintraub, “How Innovative is Your Company’s Culture?” MIT Sloan Management Review, Spring 2013.

JAY RAO Professor of Tech., Operations & Info. Management at Babson College Dr. Rao teaches extensively in the Babson Executive Education programs. His executive teaching and consulting is in the areas of innovation, implementation of innovation initiatives within firms, corporate entrepreneurship and customer experience innovation. His research has appeared in The Sloan Management Review, The European Financial Review, IESE Insight, Journal of Innovative Management, and many others. He has written several business cases that range in topics from Innovation, Innovation Strategy, Customer Experience, Customer Service, Operations Strategy, Strategic Alignment, Supply Chain Management, and Quality Management.

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C A P I T A L

Capital Threats in the

Automotive Dealer Ecosystem Will Mount in 2016 Are You Prepared for Safety Recalls and Rising Interest Rates? BY JON LANCASTER & JOY HANNEMANN

T

ight margins, aggressive regulatory compliance measures, and increasing employee costs all contribute to the day-to-day management of working capital in automotive retail. Safety recalls and rising interest rates will present the greatest challenges to underprepared dealers in 2016.

The state of automotive recalls: how many cars are you parking … indefinitely? AutoNation CEO, Mike Jackson, recently reported they are stopping the sale of any vehicles with open safety recalls. According to Automotive News’ report, five to 10 percent of AutoNation’s inventory could be parked due to the new policy’s implementation. It’s no surprise the largest auto dealer network in the U.S. is taking action, despite the risk to working capital. 2015 has been EXAMPLE FORECAST

DEALER WITH 10% PARKED INVENTORY

Monthly sales forecast Annual forecast Turn rate

100

100

1200

1200

10

10

Units needed in stock

132

120

Units for sale

120

120

Affect on working capital

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AVERAGE DEALER

4TH QUARTER - 2015 | DRIVINGSALES, LLC

($204,000)

an increasingly litigious year for all parties responsible for keeping unsafe vehicles off the road. A host of reporting and responsibility failures among manufacturers, federal agencies, and dealerships leave communication gaps that have proven dangerous for consumers. In February, NHTSA (National Highway Traffic Safety Administration) was thrust into the spotlight as the agency’s administrator was called before congressional hearings and criticized for their reactive nature and insufficient responses to consumer complaints. Japanese air bag manufacturer, Takata, announced in June yet another recall on a faulty air bag inflator, pushing the total to nearly 34 million vehicles (the largest auto recall in U.S. history). Then in July, U.S. Transportation Secretary, Anthony Foxx, announced the largest civil penalty ever imposed by NHTSA, totaling $105 million. As a result, Fiat Chrysler Automobiles acknowledged violations of the Motor Vehicle Safety Act’s requirements to repair vehicles with safety defects. The penalty was accompanied by rigorous federal oversight and buy-backs of defective vehicles from owners. Last year’s recall activity generated proposed legislation to combat the failing systems, including The Hide No Harm Act and Whistle-Blower Bill. California lawmakers

DEALER EXEC


have discussed rulings that would prohibit DMV transactions for vehicles with open recalls. While legislators debate potential resolutions, fixed ops consultant Gary Simmons says dealers’ feelings of recalls run the gamut of fear, hassle, and hysteria. Some dealers see it differently. Tom Loveall is the service director at Family Motors in Delano, California and he views recalls as purely opportunity. In his opinion, the chance to see a customer that hasn’t come in for two to three years stands to improve retention and a small percent of interactions are even turning into new and used car sales. Loveall approaches each recall with a strategy. In one instance, the store opened an additional day of the week, extended training to extra techs, booked appointments every 20 minutes, and tackled over a hundred open recalls a day. “Training, training, training,” he says is crucial to implementation. Loveall said factory training is supplemented with daily meetings to review new recalls and align with the parts department. DrivingSales fixed ops director, Denim Simkins, offered a global assessment of less proactive dealerships. For technicians and

DEALER EXEC

shops that haven’t been directly affected by litigation, he says often dealerships are desensitized by “recall-mania” and allow daily warranty and customer pay operations to trump the importance of proactive recall communication and sensitive customer interactions. Simkins challenges service advisors to view recalls as a service-based relationship proposal. “Provide a service, not a sales pitch,” he said. “This is an opportunity to make the customer feel good about you and establish an opening for repeat business.” Proactive recall management is the right thing to do for the future of our businesses and the safety of consumers. But without careful design, parking inventory with a “NOT FOR SALE” sticker could be staggering. To manage the frozen capital risk, technology to speed departmental organization paired with increased velocity in both fixed and variable ops will be key factors for dealers tackling this challenge head-on. What can we learn by comparing AutoNation’s announcement to VW’s recent blunder? We watched Volkswagen’s stock price drop by about 30 percent since their emissions scandal was uncovered. AutoNation is taking on the dangers of fro-

Proactive recall management is the right thing to do for the future of our businesses and the safety of consumers.

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zen capital to build value (not to mention potential margin and velocity) in the eyes of shoppers. There is an opportunity here for dealers of any size to build perceived value in simple trust-based sales supported by process and a clearly stated value proposition, “we’re selling safe vehicles.”

The second major threat to working capital is normalization of monetary policy JON LANCASTER After four decades of entrepreneurship from the dealership level, Jon Lancaster sold his Lexus and Toyota stores to a Fortune 500 public company. Since the 2012 sale, Jon advocates for dealers by educating across the industry.

It has been nearly 10 years since the federal funds rate has increased. Albeit gradual, analysts and reports from the Fed all indicate the increases are coming. Normalizing monetary policy will surely affect real estate values, rent factors, cash flow, and operating expenses for dealers. Let’s take a deep dive into the effects of interest rates on cost of real estate financing. Currently many dealers have a low interest rate on a floating rate adjustable loan or a three to five year fixed rate. Depending on the date of inception, the maturity due dates on these three to five year notes is not too far off. When refinance time comes, an appraiser (and therefore the lender) will think like a buyer applying three standard valuation methodologies in the process: replacement cost, sales comparison, and income approach to value (or discounted cash flow). 7.5 Cap Rate 600,000 ÷ 0.075 = $8,000,000

JOY HANNEMANN In her role at Lancaster Investments, Joy Hannemann supports Jon Lancaster’s start-up investments, real estate development, and worldwide speaking engagements. Joy is a regular contributor to DrivingSales News covering the latest trends in retail automotive.

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The cost approach is simple: What would it cost to replace your building? Then subtract the depreciation and add the market value of the land. This valuation methodology takes into consideration and adjusts replacement costs based upon a published industry standard geographic cost index. In the sales comparison method, the appraiser looks for like properties, in like markets, and ideally by the same franchise to determine what an individual would expect the value to be, based upon these sales. The income

4TH QUARTER - 2015 | DRIVINGSALES, LLC

approach, or discounted cash flow, quite simply says at the market interest rate and your current rent payment, how much is your building worth? As interest rates increase, the value of real estate generally goes down. This is similar to the value of a fixed income bond or security where price and interest rates move in opposite directions. If income from an investment is fixed for a period of time, investors want an increase in their rate of return in a rising interest rate environment. Analysts will make future value determinations using a market capitalization rate. The market cap rates are derived from the market and based on factors including interest rate, investors’ required return on equity, liquidity premium, recapture value, and risk premium. Consider this: What are the results if the cap rate increases by 1.5 percent, or 150 basis points? In this instance, we’ll assume an annual triple net rent of $600,000 and apply the cap rate to determine building value.As you can see, the 150-basis-point move from 7.5 percent to 9 percent effects loan-tovalue substantially when value is reduced by $1,333,333. The impending environment will force dealers to 1. Make critical adjustments to down payments (affecting operating capital) and 2. Prioritize paying down debt. 9.0 Cap Rate 600,000 ÷ 0.09 = $6,666,666 Dealers do have control over how victimized they will become in 2016 by the impending recall and monetary policy threats. But consider this, Hireology Co-Founder and CEO Adam Robinson recently said in an interview with DrivingSales, “The only thing you have 100 percent control over is who you put on your payroll. That is it. That is the last thing that you have full control over. If Robinson is right, investments in human capital are the future for retail automotive.

DEALER EXEC


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DealerExec Magazine Q4 2015  

DealerExec Magazine for October, 2015 by DrivingSales

DealerExec Magazine Q4 2015  

DealerExec Magazine for October, 2015 by DrivingSales