DealerExec Magazine Q3 2016 by DrivingSales, LLC

DealerExec A DrivingSales Publication â&#x20AC;˘ 3rd Quarter, 2016

A DrivingSales Quarterly Covering Dealership Brand, Capital and People.

Selling to Customers

Who Do Their Homework Online Nurture and adapt a sales effort aligned with buying behaviors

BY FRANK V. CESPEDES AND JARED HAMILTON

Visit DrivingSales.com to view more than 29,000 verified dealer ratings of over 800 vendors in 23 categories.

F O U N D E R ’ S

L E T T E R

Dealership Executives,

t DrivingSales, our goal is to help you optimize your greatest asset, your people. We call it “Fueling Excellence.” We are rapidly approaching the time of year again where we start putting our business plans together for next year. There is a lot to

be excited about in automotive, and it’s a perfect time to focus on your future. In the past few issues, we’ve presented different opportunities for you to adjust your operations to address the modern consumer. In this issue, we’re going to present some tactical ways you can improve your employee performance fortify your dealership’s foundation. Today’s customers want a better buying experience, which means we’ll need to improve our processes and their execution. This improvement starts with people. The DrivingSales Executive Summit is rapidly approaching. The keynotes and breakouts selected for this year’s event will also present on the topic of performance improvement through people. Whether it’s the former CEO of

DealerExec The Team Jared Hamilton FOUNDER

@jaredhamiltonDS

Chris Reed PRESIDENT

chris.reed@drivingsales.com

Mike Jeffs EDITOR

mike.jeffs@drivingsales.com @mikejeffs3

Steve McFarland DIRECTOR, MEDIA SALES

Southwest Airlines discussing building a resilient culture or the prior Director of

steve.mcfarland@drivingsales.com

Communications Strategy from Harley-Davidson presenting on building your dealer-

Jeff Lasson

ship brand – you’ll gain actionable insight to help you improve your performance. I’ll also be speaking on the topic of human capital with a focus on how to foster and grow your teams to lower your employee turnover rate. We’d love to have you join us in Las Vegas at the Bellagio on October 23-25. Sincerely,

MEDIA SALES EXECUTIVE

jeff.lasson@drivingsales.com

Brent Noble MEDIA SALES EXECUTIVE

brent.noble@drivingsales.com

Justin Rhoane MEDIA SALES EXECUTIVE

Jared Hamilton Founder, DrivingSales, LLC

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justin.rhoane@drivingsales.com @JRhoane

DRIVINGSALES, LLC | 3RD QUARTER - 2016

Thanks to our Sponsors!

DealerExec ABOUT THIS PUBLICATION DealerExec is published quarterly by DrivingSales, LLC featuring executive resources for automotive retail leaders covering dealership Brands, Capital and People, and a quarterly ranking of dealership vendors as rated by dealers themselves. Within the first issue of each year, DealerExec announces the annual winners of the the Dealer Satisfaction Awards from several Vendor Rating category.

SUBSCRIPTIONS To subscribe, visit DealerExecMagazine.com. Printed in the United States of America. Copyright ÂŠ DrivingSales, LLC 2016. All rights reserved. No part of this publication may be reprinted or otherwise reproduced without publisherâ&#x20AC;&#x2122;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.

3RD QUARTER - 2016 | DRIVINGSALES, LLC

DEALEREXEC

C O N T E N T S

12 28

News 10 DrivingSales News

DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team

$450 MONTH 6YRS.

Features 12 Selling to Customers Who Do Their Homework Online Nurture and adapt a sales effort aligned with buying behaviors BY FRANK V. CESPEDES AND JARED HAMILTON

16 Case Study: Shave 60 Minutes Off Transaction Times Bring Sales and Finance Closer Together

BY PETE MACINNIS

20 Burn the Ships, Build a Fortress Dealership Now is the time to refine and enhance your operations BY ERICH K. GAIL

22 Lead Your Horse to Water and Get It to Drink Four simple rules to improve your team’s performance BY JAMES OCHNER

28 Most Valuable Insight 2016 • Winner and Finalists A recap of the Most Valuable Insight competition, which is designed to reveal and showcase never-before released data and research unique in the automotive industry.

36 Creating a Culture of Accountability in Today’s Dealership

Why holding your team accountable for their success begins with the CRM BY DAN MOORE

40 The Next Five Years ... Dealers Beware

How connected cars and Amazon could impact your dealership BY CLIFF BANKS

DEALEREXEC

On DrivingSales.com, dealers can rate their vendors. All reviews are verified to be legitimate and posted for you to learn who the best vendors are – directly from your peers.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

Over 29,000 unbiased vendor ratings submitted by verified dealers.

CATEGORIES 5 Chat Tools & Services CRM/Sales Department Dealership Management Systems (DMS) Internet Lead Management (ILM)

6 Inventory Pricing New Car Leads Owner Marketing Reputation Management SEM - PPC

8 SEO Tools & Services Websites

3RD QUARTER - 2016 | DRIVINGSALES, LLC

DEALEREXEC

Chat Tools & Services

Solutions that allow conversation/interaction with individuals with they interact with a website. COMPANY

PRODUCT

Contact At Once!

Chat + Text Digital Connections Platform

99%

ActivEngage

Managed Chat + Text and Web-based Software

100%

Gubagoo

24/7 Behavioral Live Chat + Mobile and SMS text to Chat

100%

OVERALL RANKING

RATING

REC.

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

OVERALL RANKING

RATING

REC.

ELEAD1ONE

ELEAD1ONE CRM

99%

VinSolutions

Connect CRM

94%

DealerSocket

DealerSocket CRM

84%

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. COMPANY

PRODUCT

Autosoft

FLEX DMS

OVERALL RANKING

RATING

REC.

99%

Auto/Mate AMPS

99%

Dealertrack

100%

Dealertrack DMS

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

ELEAD1ONE

ELEAD1ONE ILM

OVERALL RANKING

RATING

REC.

100%

CallSource CallTrack

100%

CallSource DealSaver

93%

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

DRIVINGSALES, LLC | 3RD QUARTER - 2016

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

OVERALL RANKING

RATING

REC.

Autobytel

New Car Leads

89%

OnlineBKmanager.com

Bankruptcy Lists

83%

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

OVERALL RANKING

RATING

REC.

ELEAD1ONE GoldDigger

100%

AutoAlert

85%

AutoAlert Data Mining Software

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

OVERALL RANKING

RATING

REC.

Dealer Rater

Certified Dealer Program

92%

eXteres AUTO

Online Reputation Management

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

DEP

Digital AMMP

OVERALL RANKING

RATING

REC.

96%

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

3RD QUARTER - 2016 | DRIVINGSALES, LLC

DEALEREXEC

CRM STRONG

S T R AT E GIC IMPL EMEN TAT ION

ENABLE AND ENGAGE THE AVERAGE APPOINTMENT SHOW RATE IS AS HIGH AS 72% FOR DEALERS WHO IMPLEMENT A STRONG CONFIRMATION PROCESS THROUGH CRM. TO LEARN MORE CRM BEST PRACTICES, JOIN US AT DEALERSOCKET USER SUMMIT.

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SEO Tools & Services Search Engine Optimization (SEO) solutions are designed to optimize websites in an effort to display higher result rankings. COMPANY

PRODUCT

OVERALL RANKING

Customer Scout

Customer Scout SEO

RATING

REC.

100%

Websites Digital solution providers that create full-service website products designed to be the primary digital marketing presence for a dealership. COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

Dealer Car Search

Responsive Websites

99%

DEP

Responsive Websites

97%

DealerOn

Chameleon Responsive Websites

96%

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

THE INDUSTRIES MOST PROGRESSIVE DEALER PROFESSIONAL EVENT

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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. Final rankings are mathematically calculated on both the average user star rating as well as the intensity of dealer support for the vendor (number of reviews). Sometimes that will result in a vendor with a lower average star rating but a high volume of reviews being ranked higher than a vendor with more stars but fewer reviews.

The Vendor Ratings in this issue are based on the aggregate of all dealer ratings submitted from July 1, 2015 to July 1, 2016. *CATEGORY SCORES ARE COMPUTED PER CATEGORY AND ARE NOT COMPARABLE ACROSS THE BOARD. FOR QUESTIONS ABOUT VENDOR RATINGS, PLEASE CONTACT BART.WILSON@DRIVINGSALES.COM

View detailed vendor reviews written by verified dealers at DrivingSales.com/Ratings

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DRIVINGSALES, LLC | 3RD QUARTER - 2016

DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team.

Here is a recap of the top stories from 2016 Q2 impacting your dealership. You can find all these stories and more on DrivingSalesNews.com

FCA Erroneous Sales Figures Prompt FBI, SEC and DOJ Investigation Earlier this year, FCA was sued by a dealer group and accused of bribing dealers to falsely report sales figures by reporting vehicles as sold that were not. The lawsuit claimed FCA would pay dealers through additional cooperative advertising funds for reporting sales then allowed them to unwind the sales the following month prior to the warranty being processed. The allegations and lawsuit would retroactively negate FCA’s public reporting it’s 69th consecutive month of year-over-year sales gains. As a publicly traded company, this inflated sales reporting has attracted the attention of the SEC for potential securities fraud as well as the Justice Department and FBI, which are investigation whether criminal behavior was conducted. In July, the FBI visited the homes of nine FCA employees who run FCA business centers across the United States. While all of these actions are still

3RD QUARTER - 2016 | DRIVINGSALES, LLC

ongoing and in the early stages, FCA could see some stiff civil as well as criminal penalties should the investigations prove fraud.

out of the United Kingdom and into European Union countries to maintain competitive pricing and retain new vehicle sales in Europe.

United Kingdom Leaves the European Union

NHTSA Investigation Tesla AutoPilot Caused Fatality

In a vote at the end of June, citizens voted for the United Kingdom to leave the European Union. More commonly called Brexit, this move could have an enormous impact on automotive manufacturers and the global automotive industry. Many OEMs have manufacturing facilities in the U.K. By leaving the United Kingdom, car manufacturers could be subject to increased taxes and tariffs for vehicles exported to other European countries making those vehicles more expensive and less attractive for European consumers outside the United Kingdom. Some OEMs export up to 90 percent of the vehicles manufactured in the United Kingdom. While the eventual impact of Brexit has yet to play out, some economists are estimating that this move could reduce automaker profits by billions of dollars and reduce new vehicle sales by a million units over the next three years. While automakers are in a “wait and see” mode, many speculate that should tariffs and taxes be imposed on exported vehicles that manufacturers will move their plants

Tesla’s much publicized AutoPilot feature, which allowed drivers to relinquish control of the vehicle’s operation to software, was blamed for causing a fatal crash in July. The Model S apparently did not detect a tractor trailer driving across a divided highway ending with the vehicle not braking and driving under the truck killing the driver. The company’s CEO Elon Musk responded by saying the AutoPilot feature is in beta mode and that Tesla drivers should treat it as such and always pay attention. The NHTSA is investigating the crash and consumer safety agencies are calling for the feature to be disabled. Tesla claims that while unfortunate, the AutoPilot feature has a much better safety in relation to fatalities on average with AutoPilot clocking 130 million miles prior to this crash while an average fatality occurs every 94 million miles in the U.S.

Volkswagen Reaches $15 Billion Settlement for Drivers in Emission Scandal The end of June saw Volkswagen settle their emissions scandal for

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owners of Volkswagens that had software installed which falsified emissions tests for some vehicles with diesel engines. In the $15 billion settlement, Volkswagen will buy back or fix roughly 475,000 vehicles which were programmed to cheat the emissions tests. Owners of affected vehicles will have two options: to either sell back their vehicle to Volkswagen for a pre-scandal valuation in addition to a cash payment of 20 percent of the vehicles value or allow owners to keep their vehicles and have them modified to conform to EPA standards. Current lessees will be allowed to terminate their leases without a fee. In addition, Volkwagen has agreed to pay $2.7 billion in fines to the EPA and California’s Air Resources Board as well as an addition $2 billion toward zero emission vehicle research.

Cadillac Reveals Controversial Project Pinnacle Tiered System for Dealers Cadillac President Johan de Nysschen revealed the implementation of a tiered system to its dealers which would reward higher volume dealers that agree to meet sales goals and customer service targets as well as offer concierge services such as roadside assistance and pick-up/drop-off service for service customers. In addition, dealers would have to have dedicated Cadillac salespeople with unique uniforms and interact with customer via tablet. On the low end of the tiered program, lower volume stores

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would be required to cease carrying new Cadillacs in stock. These dealers would still be able to sell new Cadillacs although they would need to do so via a virtual showroom. Cadillac dealers would be compensated with different margins depending on their tier level with higher tiers receiving the highest margins and incentives. To achieve these higher tiers would require significant investments by dealers, many of which are questioning whether the risk will pay off on the end while dealerships who would be in lower tiers arguing that Cadillac forcing them to stop carrying inventory violates franchise agreements. A letter from 7 states sent to de Nysschen argued that the initiative “creates a two-tier (actually, 6-tier) pricing environment, imposes unreasonable financial and operating requirements on Cadillac dealers, and employs unreasonable formulas and methodologies to assess compliance… [and that] the extent to which [Project Pinnacle] picks winners and losers… The winners can make the required investments and prospoer [while] the other dealers face business failure.” Dealers argue that non-participating dealerships would be at a pricing disadvantage against competitors that are in higher tiers. Cadillac has pushed back the beginning of this program from its original start date of January 1, 2017 to October 1, 2017.

Takata Recalls Continue to Plague Industry As Takata air bag related recalls continue to increase, dealers are still scrambling to increase recall repair completion rates. Only an estimated 8 million of the 70 million recalled

vehicles have been repaired due to lack of parts required to repair the vehicles. At least 10 deaths and hundreds of injuries have been attributed to faulty airbags to date. In the meantime, due to the lack of an alternate air bag manufacturer, OEMs continue to install faulty Takata airbags in new vehicles on the assembly line knowing that these vehicles will need to be recalled in 5-7 years. In the meantime, CEO of Takata, Shigehisa Takada, announced that he will step down once new leadership is in place. Takata is now discussing splitting recall costs with automakers which is estimated to end up being in the billions of dollars although there is no currently public information on how it plans to divvy up the costs.

Google Changes See Some Dealers Shifting Ad Budgets Toward Facebook Recent Google changes in ad placements have caused dealer budgets to increase as competition for a reduced amount of ads per search results page has increased costs. The removal of ad placements on the right side of search results pages has not only decreased the number of available ad spaces to four per page but has also pushed organic search results further down. Because of this, dealers are seeking alternative forms of advertising like Facebook to drive traffic to targeted audiences at a lower cost. Facebook also offers advantages in enhanced engagement opportunities and mediums via multimedia ads like videos and live-stream options.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

B R A N D / P E O P L E

Selling to Customers

Who Do Their Homework Online Nurture and adapt a sales effort aligned with buying behaviors BY FRANK V. CESPEDES AND JARED HAMILTON

lfred P. Sloan, GM’s CEO from the 1920s to the 1940s, and the architect of the U.S. auto distribution system, summed up the car buyer’s challenge well: “The automobile... is a highly complex mechanical product. It represents a large investment for the average purchaser. He expects to operate it, perhaps daily, yet the chances are he possesses little or no mechanical knowledge. He depends on his dealer.” Sloan’s statement remains relevant today, even in the era of internet shopping. Although consumers do a lot of online research — the average U.S. car shopper now spends 11 hours online and only 3.5 hours offline, including trips to dealers — the vast majority still end up purchasing their cars in person. According to a 2015 DrivingSales study of more than 1,300 active car shoppers (where most of the statistics from this article derive from), the changing behavior of buyers has placed even more emphasis on selling at the dealer. And yet because buyers can access prices, reviews, and other information via online searches, their attitudes toward negotiations, pricing, online engagement, and sales reps are changing. Sales tasks are continually evolving in all industries, and companies must keep their sales forces up to speed to meet the

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demands of their customers. Auto dealers again provide an illustrative example. The required changes may surprise you and raise questions about effective selling in your market.

Not everyone likes negotiating price, but a lot of people do The common sentiment about price negotiations is, “I just wish they would set one price and stay there.” But the reality is this: Only 13% of car shoppers say, “I don’t like to negotiate and I would like to buy a vehicle that is market priced and everyone pays the same,” while 45% said, “I like to negotiate until I get the vehicle to a price I feel is fair to pay,” and almost one in five people said, “I like to negotiate and will grind hard until I’m confident I’m getting the lowest price possible.” As in most industries, buyers’ preferences vary. Neither a “one price” model nor a negotiation model appeals to all shoppers. And it’s the seller’s responsibility to adapt to the buyer’s preference, not the other way around.

Shoppers should be able to get the asking price without having to talk to anyone Compared to their tolerance for negotiations, buyers are inflexible about knowing the asking price up front. More than 50% of car shoppers will leave the dealership

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FRANK CESPEDES Frank Cespedes teaches at Harvard Business School and is the author most recently ofAligning Strategy and Sales (Harvard Business Review Press), cited as “the best sales book of the year” (Strategy & Business), “a must read” (Gartner Group), and “perhaps the best sales book ever” (Forbes).

if a test drive is required to get the asking price of the vehicle. Nearly 40% will not patronize a dealer whose website doesn’t list vehicle prices; a slighter higher percentage will leave a dealer if prices aren’t posted on the vehicles. In the auto industry and others, thirdparty sources have changed customers’ shopping behavior and expectations about list price. Among other things, many consumers want to browse without engaging with the sales staff. In the car study, nearly 75% of buyers had not contacted the dealership before visiting, and 25% left without talking to anyone. This points to a disconnect between sellers and buyers: Even when done with good intentions (“I’m here to help you”), some traditional sales practices now unwittingly increase dissatisfaction.

Most of your online advertising and social media spending is probably being wasted For car shoppers, online tools are a complement to, not a substitute for, in-

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person dealer visits. They use independent websites for model comparisons and reviews, and OEM sites for detailed model information and videos. When they do visit dealer sites, they’re typically looking for specific vehicle photos and information about local inventory. According to the National Automobile Dealers Association (NADA), dealers now spend about $600/unit sold on advertising, and the internet takes up the single biggest chunk of that spending. But few shoppers buy or even contact dealers online: Only 5% engage in online chats, and fewer than 10% will fill out an online contact form or communicate via email. Yet nearly 90% rank the dealer visit as the most important source of information during the buying process. Any strategy is about priorities and trade-offs. Car sellers should certainly be investing more in improving their pointof-sale processes and less in their social media budgets. At the same time, sellers must manage their existing digital media budgets a lot

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better. According to Sprout Social Index, dealers respond to only 16% of the online messages they receive. And this is actually better than a 15-industry average of 12.3%! “Having a presence” on social media or a web site is not a sales strategy. Sellers must figure out when online does and does not make a difference in their customers’ buying processes.

To close sales with more-informed customers, you need to retain moreknowledgable sales staff Pricing information, including dealership wholesale costs, is now widely available on independent websites, along with information about vehicle options, trade-in policies, and performance. But this flood of often conflicting information has created a new challenge in the minds of consumers: Which sources should they trust? As a result, consumers prefer dealing with one responsive, knowledgeable, and trusted representative to help them evaluate what they found in their own research, manage the test-drive experience, and efficiently complete the sale. Many dealers fall short. The traditional sales process, with hand-offs (“Let me check with my manager and get back to you”), delays, and high variance among sales reps’ product knowledge, is a big source of residual dissatisfaction. Turnover compounds the issue. According to NADA’s 2015 Workplace Study, the average annual turnover among dealer sales reps is 72%, with 50% of new hires leaving after three months. Female sales turnover is 90% annually. To improve retention rates, dealers must create welcoming sales cultures, institute flexible hours, and invest in the development of their sales reps. It’s good for business. Dealers with the highest rates of retention report gross margins 3%–4% higher than the lowest performers — an enormous difference in an industry with an

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average net profit margin of 2%. A knowledgeable sales staff is especially important as technology continues to advance. High- end cars have over 100 million lines of software code, and massmarket cars aren’t far behind. HIS automotive group estimates there are now about 27 million web-enabled vehicles on the road, a number that could rise to over 82 million by 2022. And since cars and smartphones are seamlessly connected, there are a lot of software-as-subscription possibilities that will increase exponentially in the coming years. Yet how many auto dealers have equipped their salespeople with the knowledge and skills to sell subscription services for the “app store” that the car is fast becoming? The good news is over 60% of buyers leave a dealership satisfied and view dealers as trustworthy. Contrary to conventional wisdom, the research indicates that this is more true with younger auto shoppers than with older ones. But dealers still have work to do. The message to the auto industry: You can worry all you want about disruption, but you need to nurture and adapt a sales effort aligned with buying behavior to do something about it. The message to other industries: Profitable growth is determined by how the buyer buys today and tomorrow, not yesterday, so don’t chase abstract generalizations about the internet while ignoring the point of sale. This won’t be an easy process, of course. As Alfred Sloan said, “Changing the viewpoint of [an] organization with respect to any particular way of doing any particular thing” is the “hardest problem” in management. “We all know how great is the inertia of the human mind.” This article was originally publish on HBR.org on March 16, 2016: https://hbr.org/2016/03/selling-to-customers-who-dotheir-homework-online

JARED HAMILTON Founder & CEO, DrivingSales DP, Walla Walla Valley Honda Jared Hamilton is an award winning entrepreneur and technology thought leader. He professionally speaks to audiences around the globe about social technologies, operating businesses in the digital world, and the future of web technology. Jared is the founder and CEO of DrivingSales and is often described as one part dealer operator and one part tech geek. He grew up working at his father’s dealerships in the Silicon Valley. He attended NADA’s Dealer Candidate Academy, NADA’s Advanced Education Program at Babson College, and studied Automotive Marketing and Management at Northwood University. He has over 10 years of dealership management experience in addition to his award-winning entrepreneurial record.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

B R A N D

Case Study: Shave 60 Minutes Off

Transaction Times Bring Sales and Finance Closer Together BY PETE MACINNIS

t’s no secret that everyone – consumers and dealers alike – want to improve the typical in-dealership car-buying experience that can easily take 4+ hours. According to a Cox Automotive study, less than 1 percent of consumers like the sales process as it is today, and most expect the entire experience to be plagued with “hassles” (a DrivingSales.com study found that only 1 out of 100 car shoppers didn’t feel that way). In addition, over 66 percent of consumers say they would buy a vehicle more often if it just wasn’t so difficult. Those are some big numbers and a key reason critics call the automotive retailing business one of the largest “broken” industries in the world. Many analysts say that there’s simply no way the traditional dealership model will survive without significant changes to the process. Everyone agrees that consumers – both their behavior and their expectations – have changed greatly in recent years and that the auto industry’s old school practices just haven’t kept up with this new car shopper. Consumers are used to instant gratification and high levels of service from the “Amazons” and “Apples” of the world. These very pleasant, straight-forward, consumerfocused buying experiences might not be fair comparisons to the more complicated process of buying a car – something that we know can take months of research – and requires complex deal structuring and

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financing (F&I is the most time consuming aspect of the purchase). So replicating what those models look like is not something the auto industry can do, but it’s clear we can make marked improvements if we just acknowledge where the customer experience is lacking and start tackling these things one issue at a time. A recent study by Deloitte looked at how dealers could improve the process to better address today’s consumers, observing that: “Today’s automotive ecosystem is being hit with a perfect storm of three major forces – changing competition, technological advances in digital and the connected ecosystem and increasingly empowered consumers.” The paper goes on to say consumers want to complete their purchase transactions quicker and that dealers overwhelmingly share this sentiment, with 80 percent of dealers saying that the ideal sales and financing process should take two hours or less compared to the four hours or more it takes today. Deloitte recognized that a key place for improvement is in F&I and that giving consumers the ability to complete credit application and financing paperwork earlier in the process would be welcomed by 70 percent of consumers. As a dealer, you know this is easier said than done. In fact, dealers have long suffered with in-store processes that are rife with information disconnects and unnecessary

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inefficiencies in the between Sales and Finance – often caused by inflexible, but deeply entrenched, DMS systems. Minimal technology and process innovations over the years has led to today’s onerous negotiation and F&I process – which 87 percent of dealers agree customers dislike the most. The Finance department has remained silo’d and disconnected from the rest of the sales process almost “by design.” This means that once a customer says: “yes, I’m ready to buy,” they usually end up having to re-start or rehash the deal terms once they sit down with the Finance Manager. Not only is this bad for CSI, but the inefficiencies translate into wasted dealership resources – and, let’s face it, time is money.

Dealer puts finance first

A leading California dealer, Huntington Beach Chrysler Dodge Jeep Ram, decided to take this challenge head on by exploring how they could incrementally improve the sales process. The first thing they looked at was how to better integrate Sales and Financing and how to start both processes at the same time, (i.e., the

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minute the customer enters the showroom). Breaking down their dealership’s meet and greet and test drive processes, they immediately locked in to one of the first, information-rich touch points with their customers: the driver’s license scan or copy. Though most every dealerships checks for a valid driver’s license before a test drive to protect them potential liability – not all dealerships treat this part of the process with as much consideration as they could. Some just take a photo copy, some scan it into the receptionist’s computer while others might just take a visual scan. Very few use this prime opportunity to glean relevant, customer information. For HB Chrysler Dodge Jeep Ram, they were looking for a consumer friendly, easy to implement solution that dealer personnel could adopt and be measured on. They were already using a fairly sophisticated driver’s license scanning process to help authenticate and purify customer data in an effort to eliminate ID fraud – helping them capture new customer data and update current customers in the system.

So HB Chrysler Dodge Jeep Ram was already capturing a significant amount of “clean” data on both new and current customers – helping them keep the data in their CRM system up to date and allowing for easy follow up. When Managing Partner, Pete Shaver realized all the data they were capturing was the exact same data required by credit bureaus for finance pre-qualification (soft pull credit applications that don’t affect a consumer’s credit), he implemented this feature on the dealership’s ID scanner and mandated his sales team to ask customers if they wanted to opt-in for a credit app with no SSN required. Over 50 percent of customers agreed to the one-click pre-qualification and recognized that there would be no inquiry on their credit report and that it could cut the time spend in the dealership. A win-win. It quickly became clear that prequalification prior to the test drive alleviated data fragmentation, disconnects and bottleneck headaches between Sales and Finance, while giving the salesperson and finance manager new levels of transparency into the buyer. Another interesting discovery – these customers had, on average, a credit score of 704+ and were serious, qualified buyers who were coming in to take a test drive and were “ready to drive” off in their new car. In fact, closing ratios on these customers proved that point – 54 percent of customers who opted-in for prequalification prior to the test drive went on to purchase – versus the 34 percent closing ratios for customers who purchased without the pre-test drive pre-qualification. This means that customers opting in for pre-qualification are 56 percent more likely to buy than one who doesn’t.

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“These aren’t customers who are questioning their credit-worthiness, these are customers who are ready to buy – today,” said Shaver. After six months of having this new process in place, Shaver reports that these deals come together much quicker than other the other deals in the store – over an hour faster. In addition, closing ratios on these customers have increased by 150 percent (from 18-25 percent to 45 percent), and the dealership is making at least $300 more per vehicle sold. Perhaps most impressively, CSI scores are 4 points higher on these deals.

What can dealers do?

1. Make scanning of a customer’s driver’s license prior to test drives mandatory. At the most basic level, the dealership is able to eradicate ID fraud (and, potentially, vehicle theft) and while capturing ALL customer data (including mobile phone numbers) at the offset of the test drive. This means all walk-ins are immediately converted into leads within the CRM and customers already in the system will be correctly matched up (eliminating common human errors in data entry). At HBCDJ, 85 percent of scanned drivers’ license documents were authenticated but 43 percent of scanned licenses had information red flags that would not have been verified using standard scanner technologies, potentially exposing dealers to very expensive problems. And, important information fields including name, address and DOB are verified, insuring purified data was being exported into the CRM, Desking and Finance platforms, eliminating contracting paperwork errors and eliminating ID fraud. 2. Ask every customer to opt-in for a quick pre-qualification soft pull credit app directly from the driver’s license scan. With a simple yes and less than ten

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seconds – and no SSN requirement or obligation to purchase – sales managers will have all the information they need on the customer to start structuring a profitable deal for the vehicle of choice pre-test drive. This means customers spend less time in the dealership after the test drive. In fact, Huntington Beach says it cuts the time sitting with the salesperson by about one hour. 3. Don’t be afraid to disrupt your sales process! Salespeople may lead you to believe that it’s impossible to scan every driver’s license, let alone get customers to agree to pre-qualification. However, HBCDJ was able to achieve 100 percent compliance for driver’s license scanning; and, when asked, over 50 percent of customers agreed to one-click prequalification. Simply put: customers are looking to cut the time spent in the dealership, so a soft-pull credit app is not a hard sell: no inquiry on their bureau! 4. Once scanned, lead information should be digitally integrated with the CRM system. This means all new customer lead data gets captured, while preexisting leads and credit application data are automatically appended to the customer’s file. All data is then securely exported into CRM, DMS and finance systems, reducing data disconnects and getting Sales & Finance together on the same page pre-test drive.

PETE MACINNIS Pete MacInnis is founder and CEO of eLEND Solutions, a company that is focused on providing a more efficient sales and finance process for the entire automotive industry. eLEND Solution’s patented platform streamlines car selling by bringing more functionality online.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

C A P I T A L

DEALER-TO-DEALER

Burn the Ships, Build a

Fortress Dealership Now is the time to refine and enhance your operations BY ERICH K. GAIL

s of early Q3 2016, our current sales SAAR (seasonally adjusted annual rate) reflects growth of 1 million units over the same period in 2006. Further, our first-half 2016 results reflect our strongest rate of sales since 2011 – we’re selling more units, we’re making more money, these are the best of times. Winning comes with a responsibility, winning is a challenge, winning requires effort, courage and discipline. Yet, winning can make you soft when left unchecked.

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If we didn’t learn our lessons from the hemorrhage of 2008 and 2009, to never again find ourselves subjective to market conditions, to be ill-prepared, weakened or crippled by a lack of discipline, we are in trouble – our time is now!

Finding the courage

Our responsibility as leaders (regardless of your specific role) is to recognize we are the investor and we are 100 percent responsible for our operations, associates, their families and the communities we serve.

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Honor of this responsibility requires that we “check our ego,” find the courage to embrace “we do not have all the answers … we don’t know, what we don’t know” and as a result, we must be dedicated to finding the answers by any means necessary – we must #StartAtStart.

Blink speed

Developmentally, in both the automotive industry as a whole as well as high-transaction retail, consumer product development continues to evolve at a pace now identified as “blink speed.” Innovative, well-funded and highly capable teams of designers and engineers are working and will continue to work well through the night to develop expanded connectivity and functionality of products, services and forms of transportation – each of which can and will alter the manner in which we serve our active consumers, for example: • OnDemand Transportation: Uber, Lyft, Hail, Shuddle ... the list grows daily.

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• Ride Share Transportation: active OEM pilot programs throughout the U.S. and Europe. • Methods of Transportation: SemiAutonomous, Fully-Autonomous, Vehicles, Pods, Buses, Cargo Transport, etc. At this very moment, companies around the world are fast at work on technologies which will further integrate the connectedconsumer into an entirely new mobility ecosystem.

We are under attack

Closer examination of our operations reveal a number of areas which require our active leadership and involvement: • Our gross is slipping … we’re selling more units, yet our transaction gross is eroding, new and pre-owned • Student debt is continuing to increase which in turn is reducing the available financial resources of our younger newto-market consumers

Companies around the world are fast at work on technologies which will further integrate the connectedconsumer into an entirely new mobility ecosystem.

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Leadership

responsibility

• Our current retail model is being challenged from every angle • Manufacturers are now delivering select-model vehicles “consumer-direct” in Europe ◦ In the U.S., Tesla is now merchandising automobiles in high-end retail department stores Consider this, “blink speed” is not just representative of technology and product development – “blink speed” may very well be a near-future norm.

enables us to

Burn the ships

requires 100 percent responsibly. Acceptance of this

accomplish outstanding results and transform ordinary into extraordinary.

The speed by which we now must operate has changed. The continued complexity of our industry and the challenges we face will cull-the-heard of strong and successful versus weak and vulnerable in short-order. Long-term success will require courage, focused leadership and an unrelenting commitment to align our operations in a manner which will produce the highest level of efficiency and profitability. Famed explorer Hernando Cortes landed on the shores of Veracruz, Mexico in 1519. Cortes wanted his armies to conquer the land for Spain. Faced with an aggressive enemy, brutal disease and scarce resources. As they marched inland for battle, Cortes ordered one of his commanders back to the beach with a single directive. He said, “Burn the ships.” Our only direction is forward … onward and uppward to victory. There is no turning back – we are advancing every single day, one foot, one yard, one mile at a time – there will be no retreat. We now must recognize, we must produce profitable returns on our investments in which to fortify our operations, serve our associates, their families and our communities – we must begin our march forward now.

If only we had known

Looking back at 2008 and 2009, many of us agree, “If only we’d been more disciplined, if

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only we’d fixed “x,” strengthened “y” or been more efficient at “z,” we could have survived. We could have even thrived and expanded our operating reach in a depressed market. We could have acquired stores instead of closing them or expanded instead of reducing our ranks. If only we’d known… Well, now we know – and for those of us who were blessed to survive this period, we will not get a second chance the next time … and the next time is coming! Are we making too much money? Have we become our former selves as we were in 2006 and 2007? Ask yourself, “If the market shifts tomorrow, is my operation equipped and structured to survive? To thrive? To expand?” Do you have the ability to measure the answer these questions? In the event you don’t, do you have the courage to admit it to yourself and assemble your best and brightest to #StartAtStart today?

Build a fortress dealership

To survive, thrive and expand, we must embrace a philosophical challenge. Are we standing on the “hope plan” or are we creating a retail ecosystem wherein each of our departments, are working in alignment to serve and support each other? Are we building a welltrained army who in-turn produce the needed ROI for creation of a “fortress balance sheet?” To achieve the goals we have never achieved before, we must start doing things we have never done before. In the evaluation and creation of a “fortress dealership,” we must examine and hold ourselves accountable for:

Store/brand loyalty (new and pre-owned sales) • What is our current % of ◦ Repeat Sales? Including pre-owned ◦ Repeat Service, 1st, 2nd, 5th visit? Including pre-owned

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Sales Operations

• Do we have a CIT policy for maximum days from contract-to-funding? • Do we have an established process for finance product sales including minimums?

focus to drive one-touch, one-click direct actions immediately into our CRM? (phone, form, text, chat) • Does our CRM provide us the needed data from which to gauge ROI performance, per source? • Is our website constructed to convert visits into direct actions? • Do we source and track every phone call, form fill, text and chat? ◦ Do we source by each individual investment type? (SEM, Social, 3rd Party, etc.) • Do we evaluate our direct actions in our CRM to the investment, by source? • Do we monitor our current quantity of days “initial contact to sold?” ◦ Indication of the effectiveness of active marketing combined with the speed and efficiency of our inStore process. The above examples represent a few of the areas we must evaluate in order to construct and enhance a “fortress dealership.” Alignment of our in-store processes, unification of our departments and fact-based investment of our capital; when combined with disciplined leadership will produce a “fortress balance sheet” as measured by the percentage of net to gross, each month.

Service Operations

100% Responsible

• Do we have an expectation of activitiesto-be-completed by each sales associates, each working day? (created appointments, outbound calls-emailstext, etc. ) • Do our Sales Managers “voice-to-voice” confirm our created appointments? • What is our current average units sold, per sales associate, per month? • Do we have an in-store (at time of sale) referral process? ◦ Earned and deserved, all we need to do is #JustAsk • If so, do we build for increased units sold, month over month, per associate as a result? • Do we have a hard-stop days-in-inventory inventory on pre-owned vehicles? • Do we have an up-front exit-strategy on your trades, thus producing a wholesale profit?

Finance Operations

• Do we have a process for service introduction at the time of sale, including all pre-owned sales? • Do we have a first-service appointment creation process at the time of sale? • Do we monitor your current fixed absorption rate each month? ◦ Do we have a plan to achieve +100%?

Marketing Operations • Do we invest our resources to target leads? or in-market Buyers? ◦ Do we know the difference? (and there is a massive difference) • Do we integrate all elements of our active marketing channels with a singular

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Let there be no empty chair, excuse or deviation from our role in service to our team(s) and store(s). Leadership requires 100 percent responsibly. Acceptance of this responsibility enables us to accomplish outstanding results and transform ordinary into extraordinary. #StartAtStart. Embrace the courage needed to be uncomfortable as you enhance and refine your operation. Growth and success are fueled by the courage it takes to say, “We don’t know what we don’t know,” yet having the tenacity and desire to burn the ships and build a fortress dealership. Onward and upward to victory, always!

ERICH K. GAIL Mr. Gail is a Chief Executive of the Cardinale Automotive Group; Chief Executive Officer of Cardinale AG Vehicle Supply Group North America and Chief Executive Officer of ZMOT Auto. Mr. Gail is a 27-year veteran of the global automotive industry having served in a variety of executive and senior leadership roles within a vast array of management and investment groups. Mr. Gail has extensive experience developing new business operations as well as enhancing the performance of mature organizations throughout the United States, Canada, Europe, China, Korea and Japan.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

P E O P L E

Lead Your Horse to Water and Get It to Drink Four simple rules to improve your team’s performance BY JAMES OCHNER

t has been said that you can lead a horse to water, but you can’t make him drink. While I agree that there are those that won’t, the vast majority will … provided you do your job to the best of your ability. The easiest way to get someone to drink water is to get them thirsty. Sounds simple, right? It’s not as simple as it sounds and may require you to do some soul searching to make sure you’re not the problem. Here are four simple rules to help you get more people drinking water.

The “why”

Ever since we were able to talk we have asked the question, “Why?” It was once considered acceptable to respond with, “Because I said so,” or “That’s the way it’s always been done.” That is no longer the case. People need to know the specific “why” behind what they do. I’m not suggesting you compile a detailed outline of every single process in place at the dealership, but it wouldn’t hurt. The core competencies should, at the very least, deserve enough attention to outline the method used to get a desired result. If a child were to ask why they should go to school a parent may respond by saying something like, “Because school is important.” What’s the next question? “Why?” The next response might be, “Because you need to get an education.” What’s the next question? “Why?” I could

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go on, but you get the point. The reason a child needs to go to school is to get an education so they can have the skills needed later in life to be successful. The same is true for adults entering the workplace. If they have a clear understanding of where they will end up as a result of the process, it becomes much easier to embrace the journey. It’s like giving them a GPS system for a trip somewhere they’re not familiar with.

The “how”

We’ve all heard it before, “Practice makes perfect.” Here’s a news flash: Practice only makes permanent, perfect practice makes perfect. Being the best at what you do takes effort and energy. When sales people decide to make their job a career, they can truly become the best in the business. It is management’s obligation to provide them with the tools they need to become successful. The factory provides training, you can find training videos on the Internet, but does your team have a solid program in place to get your sales consultants to the next level? Daily team meetings, weekly management meetings and weekly department meetings are all an integral part of the success of your training agenda. It reinforces the “why” and makes sure everyone is focused on hitting specific objectives

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and addressing a myriad of situations that tend to come about on a regular basis in the car business. This all needs to be top down. If there’s no buy in from the owner and general manager, there will be no buy in from the troops. It’s a classic case of do as I say, not as I do.

The “who”

JAMES OCHNER James is currently the General Manager of I-10 Toyota in Indio, CA. He has consistently been able to increase customer satisfaction results and profitability at the automotive dealerships with which he’s worked. Through a combination of visionary leadership, the ability to change gears fast and often, extensive experience in every aspect of automotive sales and service, and a knack for developing and implementing highly effective processes, James has built a successful career that has spanned some of the largest automotive dealerships in California.

There are three steps to succeeding with any venture you undertake. The right people in the right places with the right process. It is critical all the members of your team are in the right seat on the bus. I’ve known great sales people that became horrible managers and average sales people that became super star leaders. It is no longer necessary to hire people to fill holes. We are in an employer’s market right now and should take advantage of hiring and retaining the right people for each and every department and position. We’ve all done it before. We interview someone and then our thought process for hiring them is “I think they’ll work out.” I don’t know about you, but I want to know they’re going to work out. It’s time to get back to basics. Conduct a thorough interview, call references, take advantage of personality tests if you can, call previous employers and maybe even get a little old school and have them sell you the car they drove in on. How badly you want quality employees? If you want them bad enough, you need to be willing to compensate them and/or provide better benefits than your competition. Good help is hard to find, but when you find them you should pay them well and treat them with respect. We’re not in the 1980s anymore. You can’t brow beat your people. If they’re good, they probably know it and will leave the relationship if you’re mentally abusive. Remember to praise often and sandwich corrective action with positive

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affirmations. Treat people the way you would like to be treated.

The “salt”

One size does not fit all, but with the right people in the right places doing the right things your dealership is better prepared for success. Sometimes, however, nothing works with certain people. If that’s the case, you may need to use some salt to get them thirsty. People respond to one of two things: pleasure or pain. If you can’t get them to pleasurably enjoy a drink of water, it’s time to bring the pain. There are a few ways you can inflict pain, but the most successful way that I’ve found is through a person’s pocket book. Adjustments to variable compensation can be one of the best ways to teach an old dog new tricks. Reward people for good performance and adherence to policies and procedures. One way not to tolerate repeated failure is to consider eliminating employee’s bonuses. In order for this to work, management needs to stick to their guns on this one. If you let one slide, you have to let them all slide. If you’ve given all you can and taken away when necessary and that still doesn’t work, it might be time to put that old horse out to pasture. Sometimes people don’t work out and they need to be moved along. Don’t forget due diligence though. In today’s highly volatile workplace, disgruntled employees will look for any break in the dam to take you down. Dot your I’s and cross your T’s with regular performance evaluations and written notices when necessary. By putting these practices into place and inspecting that they are carried out and followed through with you will position your dealership for sustainable growth with satisfied employees. Happy employees make for happier customers, which rolls all the way down to the bottom line … PROFIT!

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THE SUCCESS OF YOUR BUSINESS IS OUR BUSINESS. THE NADA ADVANTAGE When it comes to automotive 20 Groups, NADA offers unrivaled expertise and resources. In addition to unparalleled auto retail experience, NADA consultants have the associations resources at their fingertips. Learn more about the NADA advantage by attending an upcoming 20 Group meeting.

ATTEND AN UPCOMING INTERNET MANAGERS MEETING January 16-17 Hilton Scottsdale Resort Scottsdale, Arizona January 23-24 Sheraton Sand Key Resort Clearwater Beach, Florida January 29-31 Sheraton New Orleans New Orleans, Louisiana (NADA Convention) February 16-17 Doubletree Guest Suites Tampa, Florida

Stop by our booth at #DSES and pick-up a selfie stick!

Visit nada.org/20group to learn more.

MOST VALUABLE INSIGHT 2016 • Winner & Finalists

What is the Most Valuable Insight Competition? The Most Valuable Insight Competition is designed to reveal and showcase neverbefore released data and research unique in the automotive industry. The competition was created in the spirit of progress and industry thought leadership. Taking the conversations to the highest level, auto industry professionals share their research findings and insights live on stage with the highest-level dealership executives to foster inspiration, progression, and celebration of a better automotive retail industry. The Most Valuable Insight Competition encourages automotive professionals to illuminate something in the automotive industry that will impact dealership executives at the top. Sales pitches are never accepted.

How does it work? A panel of the top dealer principals, GMs, dealer group presidents and vice presidents vote and select four finalists from submitted applications. Those three finalists then have the opportunity to present at Presidents Club – the DrivingSales Presidents Club is an intimate, “by invitation only,” annual leadership conference for dealer principals, GMs, presidents and vice presidents. Finalists have nine minutes to present their research/insight on stage to a panel of dealer judges followed by a 5 minute Q&A. The panel of dealers and several others in the audience silently score each presentation and decide the winner.

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FROM LEFT TO RIGHT Eric Savage – Owner, Freedom Auto Group. Brad Lillie – Vice President, Gregg Young Chevrolet. Andrew DiFeo – General Manager, Hyundai of St. Augustine.

r e n n Wi Ten Words That Will Help You Close Email Leads

here are a whole slew of articles and books created with the purpose of teaching you how to write the perfect email to get customers to pay atten-

tion and take action. They’ll tell you to be prompt, include a strong call to action, use catchy subject lines or include fun graphics. However, when it comes to the meat of what you should

say, you have nowhere to turn. But that’s not the case anymore. As it turns out, the words you use do matter. In fact, dealerships who have a high email close rate communicate

While it’s great to know the specific words that you can use to build strong emails, it’s also important to understand why these words helped drive sales – and use those concepts to further your success.

Jason Jewert – Manager, Performance Improvement Consulting, CDK Global

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Words Matter!

r e n n Wi

CDK RETAIL INSIGHTS

The top and lowest ranked words and phrases identified in the research included:

differently than dealerships who have a low close rate. Using sentiment analysis and a cool new field of research called Natural Language Processing, we were able to determine which words contributed to the high or low email close rates. Those we determined to be “high closers” had an average close rate of 10.9 percent. Those with a low close rate had an average close rate of 1.6 percent.

Double-check your words

So, which words matter? Words like “provide” and “phone number” indicated a high close rate while phrases like “give me a” and “to ensure that” failed to indicate a high close. Go through some of your most common emails and start replacing some of those “low closer” words with some of the “high closer” words. While it’s great to know the specific words that you can use to build strong

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emails, it’s also important to understand why these words helped drive sales – and use those concepts to further your success.

Guide your customers

Many of the strongest words occur because they are giving the customer good information and an easy, actionable next step. They ask simple questions like “would you like to come in and test drive the Sportage?” or say they’ll “provide details about the vehicles you’re interested in.” When you leave the next step in their hands, like saying “feel free to come in when you have a chance,” you lose the urgency and will often lose the lead.

Speak their language

Low-closing words like “body style” indicate that your customers can get lost when you’re speaking dealership language instead of

speaking to the customer in their language. Instead, sharing the benefits of a vehicle in a way they would understand, like offering up that the vehicle has “heated seats” or is “comfortable” helps them imagine themselves driving (and buying) that specific car.

Meet them where they’re at

Your customers emailed you, so email them back. Don’t force them to call or come into the dealership before they’re ready. “Give me a call” was the highest indicator that an email would be left in the dust. Instead, provide them information they need via email and slowly nudge them through the process. If you’re meeting them at every step, you’ll also be the one to meet them in your dealership when they’re ready to buy. While words are important, it’s important to remember that context matters too.

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t s i l a Fin How A Better Hiring Process & Strong Employment Brand Can Save Your Dealership $368,000 in Profit

ireology is a leader in the retail automotive space, helping thousands of rooftops follow a prescribed hiring process to find and retain better talent.

Our experience working with top automotive dealerships led us to a powerful insight: A strong employment brand, matched with objective, data-driven candidate evaluations is one of the best investments a deal-

ership can make. Broken down more simply, our formula for success is Brand + Process = Results. This insight presents itself at a critical time. Today, 70 percent of a

A strong employment brand, matched with objective, data-driven candidate evaluations is one of the best investments a dealership can make.

Adam Robinson â&#x20AC;&#x201C; CEO, Hireology

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t s i l a n Fi dealership’s gross margin is tied to the dealership staff: $58 billion across the industry, according to DrivingSales. Compared to $8.9 billion in fixed and variable operational costs, you’ll realize the opportunity presented by operationalizing your people process. The opportunity is furthered by the fact that turnover in variable ops roles is 72 percent, according to NADA. Factoring the average cost of a bad hire at $16,000, the revenue impact for dealer groups of all sizes speaks for itself. At the same time, the next generation of young, digitally-savvy employees are entering the workforce en masse for the first time. While these trends may seem unrelated, together they can be the most important differentiator your dealership has seen. To drive results in this climate, successful dealerships are achieving two things: • Building an employment brand • Establishing a process-driven approach to hiring Each of these concepts are important alone, but together present a unique opportunity to transform your dealership hiring into a well-oiled machine.

Building an employment brand

An employment brand is the public face of your company specifically written for job seekers, giving them a preview of what it’s like to work for your dealership. This introduction includes your company’s community involvement, history, team structure, and career path in a dedicated section of your website. As much of the consumer car buying research moves online, so does research around companies

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for engaged job seekers. With the importance of an employment brand in mind, we outlined four key elements to consider when building your employment brand:

and including your location to help boost your search ranking. An established career site for your job postings and details about your company dramatically boost SEO.

1. Mobile-friendly design With 60 percent of all job searches starting from mobile - especially among millennial job seekers, it’s more important than ever to make sure your website looks great on mobile so your applicants can learn about your company from any device.

Establishing a process-driven approach to hiring

2. Easy to use Have you ever used your phone to apply to an open position on your website? Is this the experience you’d like your candidates to run through when they apply to your positions? Making the careers page easy to find and view across all devices will ensure you don’t have any roadblocks preventing engaged candidates to find and apply to your open positions. 3. Deliver on “What’s in it for me” Today’s top applicants want to know more: is your dealership active in the community? Is there a company history and culture? How about a career path where employees can develop over the next few years? A great career site addresses all of these topics, presenting your organization as a strong fit for employees looking for more than punching the clock. 4. Think of SEO Let search engines like Google help you find great applicants for free. We recommend building out detailed job descriptions with accurate job titles,

Job applicants are exactly like your car buyers. Try taking the same metrics you’re currently using to gauge sales effectiveness to your applicants. • What is the time to respond for an internet lead? If you’re like most dealerships, it’s around 2 minutes. Yet the average response time for a job applicant is likely measured in hours or even days. • Imagine if you treated your buyers like applicants today: you probably wouldn’t be selling many cars. • Get your hiring efforts into a smart process to automate the disjointed, manual efforts resulting in a better experience for your hiring managers and your applicants. Three key things comprise a great hiring process: 1. Speed to response Send an automatic response back to each applicant as soon as they apply to the job. This quick thank you serves as an immediate touchpoint and places the next action – the prescreen survey back on the applicant’s plate. 2. Light automation to qualify the lead Having applicants take a brief survey helps score the lead. Completing the survey demonstrates the commitment of the applicant while helping prioritize which people to interview first.

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3. Move candidates through decision process quickly to determine fit and fill role A hiring framework establishes a structured process managers will follow to conduct objective interviews, score applicant responses, and share feedback. By turning the interview cycle into a process, teams will decrease the time to hire and ultimately find better candidates. What’s the real value of these results? We looked at two dealership groups – one in the Mid-Atlantic region and another in the Midwest with established hiring practices and career sites to see the real world impact a hiring process and employment brand yield. Sources of hires Looking at applicant traffic, just 6.2 percent of candidates came from the Mid-Atlantic’s career site. Yet the career site generated 77.3 percent of eventual hires, while job boards resulted in just 22.7 percent of eventual hires. Similar results were seen at our Midwest dealership: the career site had 18 percent of total applicants, but 71 percent of actual hires. A career site helps dealerships focus on a small collection of highly-engaged candidates found to be top hires. Quality of hires by source Career sites are also instrumental to attract the most “A” and “B” players. The Midwest and Mid-Atlantic dealerships reported high numbers of topquality hires from the career site: 70 percent and 75 percent, respectively. Turnover dramatically decreased as a result of integrated a prescribed,

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data-driven hiring process: The Midwest dealership group reported turnover of 21 percent while the Midwest dealership came in at just 13 percent. These were 3x – 5x below the typical dealership turnover rate of 70 percent. How a hiring process can save $368,000 Let’s look at how a 55 employee store with a prescribed hiring process and a strong employment brand can add $358,000 in profit. By decreasing turnover with a prescribed hiring process, this dealership only needs to hire 14 new employees over the course of a year instead of 37 using the old way of doing business. With the average cost of hiring, onboarding and training a new hire at $16,000, the difference leads us to $368,000: an incredible amount saved simply by investing more into your hiring practice to ensure you’re staffing with top talent.

Developing an employment brand site will also get your dealership front and center with engaged applicants looking for long-term careers where they can grow as professionals.

Summarized insight A process-driven approach to hiring can return hundreds of thousands of dollars to your bottom line by transforming the disjointed elements of hiring into a well-oiled talent-finding machine. Developing an employment brand site will also get your dealership front and center with engaged applicants looking for long-term careers where they can grow as professionals. Together, these best practices will differentiate your dealership to find engaged, digitally-savvy candidates who will stay with you long term and return profitability to your rooftops.

DRIVINGSALES, LLC | 2ND QUARTER - 2016

t s i l a n Fi 3 New Vehicle Inventory Management Sins That Stifle Performance, Profitability

very smart auto executive once observed: “Volume is the cure for all sins.” But what happens when volume isn’t around to cleanse the sins? The answer for dealers, of course, is

fewer new vehicle sales, higher inventories and even slimmer margins. Since 2009, franchise car dealers have been riding a very strong wave of new vehicle sales volumes. The past two years have brought nearly 17.5

million new vehicle sales, well above the industry’s 10-year average of 14.7 million sales. But there are signs of a volume slowdown: • Dealers report flat-to-minimal

The good news is that dealers, by and large, can stop the inventory management sins tomorrow—before new vehicle sales fully plateau or fall.

Brian Finkelmeyer-Director, Conquest Business Development, vAuto

3RD QUARTER - 2016 | DRIVINGSALES, LLC

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growth in retail sales, with inventory turn rates sliding south. • New car inventories are climbing – the Inventory to Sales Ratio is at the highest watermark since the 2008 recession when new vehicle sales dropped off dramatically. • Incentive spending is on the rise, as manufacturers aim to meet their sales projections by spurring consumer demand. • Dealers are voluntarily opting out of stair-step programs due to targets they consider outside their reach, given current market conditions. While these are signs of a slowdown, they are also symptoms of what might be described as sins that result from a laissez faire approach to new vehicle inventory management. Recently, an Automotive News poll asked dealers to identify their annualized inventory turn rate for new vehicles. Fifty-eight percent of respondents didn’t know the answer. Likewise, vAuto-commissioned research finds that dealers typically spend only two to three hours a month deciding what vehicles they should stock in their new vehicle inventories. These findings suggest dealers are missing key opportunities to improve the fortunes of their new vehicle departments and offset the damaging effects of ongoing margin compression and declining sales volumes. What are these missed opportunities or sins? You could segment them into three areas. 1. Improved stocking vAuto recently studied the inventory turn, gross, and monthly sales results of every dealer of a particular luxury brand. The findings clearly showed

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that dealers who paid closer attention to stocking fast-turning combinations far out-performed dealers who mostly skew their orders to high sales volume combinations. The reasons behind the insight weren’t difficult to discern. Most dealers tend to look at their OEM reports and recent sales histories as they order vehicles, a conventional approach that works pretty well when sales volumes are strong. But some dealers take a different tack. They seek to understand the new vehicle combinations that offer the lowest market days’ supply. They know that by stocking these vehicles, they will be able to attract online shoppers and increase turn and gross simultaneously, even as volumes remain flat or soften. These dealers are more likely than their peers to ask, “Do I really want to have another Silver Camry LE when there are already 400 identical vehicles in my local market?” 2. Improved pricing Most retailers use price as a tool to manage their inventories. You see this in grocery stores everyday – markdowns on bakery items, dairy products, meat and other goods that are nearing an expiration date. Dealers, meanwhile, are less age-astute in new vehicle pricing. Currently, nearly a third of all new car dealers price their inventories at full MSRP, with no consideration for aging or supply and demand. vAuto research shows dealers who price their vehicles to current market conditions and age parameters sell their vehicles faster, and realize a four-day improvement in their days to sale average – a boost that translates to an extra 55 retail sales a year on a 200-car inventory.

These findings suggest dealers are missing key opportunities to improve the fortunes of their new vehicle departments. 3. Improved dealer trading Dealer trades are generally regarded as a necessary daily activity that drives nearly 25 percent of all retail sales. But most dealer trades take place in two minutes or less – largely because the vast majority involve a straight-swap – the same model/trim, often with a different color. But this get-it-done quick approach misses the dramatic variances of supply and demand related to vehicle color. For example, a recent analysis of the Hyundai Sonata Sport in Orange County, CA, showed a 10 times higher supply of silver vehicles than white. Unfortunately, when dealers overlook these variances, their inventory suffers – witness the 15 percent of aged inventory for most dealers that results from poorly executed dealer trades. The good news is that dealers, by and large, can stop the inventory management sins tomorrow – before new vehicle sales fully plateau or fall. They can commit to more market- and turn-minded inventory management to maximize their new vehicle sales volumes and, in turn, capture the total gross profit opportunity that every new vehicle sale presents in F&I, fixed operations and used vehicles.

DRIVINGSALES, LLC | 2ND QUARTER - 2016

P E O P L E

Creating a Culture of Accountability in Today’s Dealership Why holding your team accountable for their success begins with the CRM BY DAN MOORE

ccountability is an issue in every business, and it’s on every manager’s radar. Automotive isn’t unique in that regard. But dealerships face a unique set of accountability challenges. With the car buyer’s journey evolving as rapidly as it has over the past several years, there are thousands of customer touch points for every salesperson to keep track of. And you have to keep track of every person on your sales team. You’re responsible

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for their accountability, and they’re accountable for a big, complex mess. A culture of accountability has two key ingredients: Dedicated people and doable tasks. It can’t be one or the other; it’s got to be both. Here’s why: Think about your seasoned salespeople. They’re natural sellers, but today’s customer interactions don’t come as naturally to them – and those interactions are happening in more ways and at a higher frequency than ever in their careers. If a customer is sending buying

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signals on your website or one of your Facebook ads, these salespeople might easily miss that signal. And if not, they might assume that’s someone else’s responsibility to follow up on. Probably the guy in charge of internet leads. Either way, the opportunity falls through the cracks – not because these salespeople aren’t dedicated, but because they didn’t know when and how to do what you needed them to do. Similarly, you might have more modern-minded salespeople who are amazing with email responses. You’re busy, and their email stats look great at first glance – seems like there’s nothing to worry about. Little do you know, it’s been ages since these salespeople have worked all their phone tasks. They’re doing things, but they’re clearly not dedicated to doing things the right way, or creating the right consumer experience. And these are just two examples – the tip of the iceberg. But before you accept your accountability issues as a given, consider this: The technology tools available to today’s dealerships, especially the automotive CRM, have evolved just as rapidly as the buyer’s journey. And whether you realize it or not, the CRM has become the best tool in your arsenal for

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managing not only your customer base, but your sales team as well. Here are five ways you and your CRM can work together to improve accountability in your sales team:

1. Define your mission

First things first: What do you stand for? If you don’t know where you want your dealership to go, how can you hold your team accountable for getting it there? You need a clear picture of what success looks like for your dealership, and how you expect your team to contribute to that success. What’s the one thing you want your dealership to do better than anyone else? Do you want to increase retention? Improve your CSI scores? Boost performance in some other area? Do you know which metrics you should track to check your progress? If you don’t have answers to questions like these, you can assume your CRM isn’t set up to help you succeed. You can also assume your sales team can sense there’s a lack of direction, which won’t inspire dedication.

2. Make things doable, and do your part

I’ve met plenty of frustrated managers who think they have great pro-

cesses, but when they run a report from the CRM, they find way too many overdue tasks. They blame their team, but I almost always blame the processes. Most of the time, overdue tasks are incomplete because they aren’t doable. In theory, calling every internet lead three times a day is great. But in reality, you get hundreds or thousands of leads every month, so your people would need more hands and ears to meet your expectations. They only have two hands and two ears, and therefore they have too many overdue tasks in the CRM. The only way to be sure that what you’re asking for is doable is to do it yourself. You have to lead by example. You have to be in the CRM, seeing firsthand what you’re asking of your team and verifying that it’s worthwhile. This is a critical step before jumping to the conclusion that you have a people problem.

3. Get to the heart of the issues

Of course, there will still be people issues. And this is another case where the CRM can help you. The CRM is a great way to draw a complete picture of every relation-

ship with every customer. This is something Bryan Armstrong at VW South Town takes very seriously, and I admire him for it. “Having everything documented about the relationship with the customer is only prudent on the dealership’s part,” he says. And he’s right: If (heaven forbid) you lose a customer, you want to know why. You want to look at the pattern and substance of communication between your salesperson and that potential buyer, and identify whether the issue was dedication or doability. Either way, the full context will inform how your train your team.

4. Train, train and train again

I always say there’s no such thing as overtraining. The difference between a culture of accountability and a culture of missed opportunities often comes down to the quality and frequency of your training. Whether you’re training a new CRM process or introducing improvements to an established one, you’re trying to replace someone’s go-to way of doing things. And that takes time. Research says it takes people 66 days to form a new habit. Now, I’m not saying you need 66 straight days of training, but obviously one session won’t cut it. I’ve seen some dealers really knock it out of the park when it comes to training. Kevin Frye at Jeff Wyler Automotive has something I think all dealers should have: a training center, right in the dealership. “For us, training’s not a choice,” Kevin said. “It’s a must.” He has managers from every department – F&I, internet, HR – hold quarterly trainings for the whole staff, and he holds one-off sessions year-round. When you erase the confusion around how and when to use the CRM, it’s a lot harder to pass the buck. You might be wondering whether training can solve problems when the problems are caused by lack of dedication. Sometimes it can’t, but if you value training, you’ll find you end up with more dedicated people overall.

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Kevin doesn’t even hire people who don’t buy into the importance of training. “Continual improvement is an integral part of being a modern-day sales professional in automotive,” he told me. “If they’re not interested in learning and improving, it’s not a fit.”

5. Motivate your people

What motivates a salesperson? Selling more cars and making more money. So tell your sales team that if they dedicate themselves to the doable things you’re asking of them, they’ll cash in. The trick is to use the CRM to show them how the CRM will make them more money. A great idea is to make things competitive. Run reports on how your reps stack up against one another, and share the results with the team. See who has the most sales and the fewest overdue tasks. Kevin swears by this tactic, and I can see why. I mean, no salesperson wants to be the lowest one on the totem pole. The person at the top of the totem pole becomes your living proof that following processes pays off. If you focus on helping your team understand how the CRM benefits them, you shouldn’t have to use discipline, which every manager wants to avoid. There are plenty of steps to take before that. Has the person had the right training? Have you given them regular feedback? Do they know why following this process matters? That’s exactly what Bryan asked himself when one of his salespeople was struggling. Instead of going straight to discipline, he walked them through the CRM and how it would help them do their job better. That conversation paid off: The rep’s monthly sales went from 15 to 23! Holding your team accountable for their tasks isn’t easy, but you’ve got a powerful ally in your CRM. Let it share the burden of day-to-day management with you; it’ll leave you more time to be accountable for driving your business forward.

DAN MOORE Dans wide array of experience in digital marketing and leadership has given him a unique perspective on marketing at VinSolutions. Being a big idea thinker and strategist, with boots-on- the ground experience at the dealership has given him a great reputation in the automotive industry. Originally from the Sacramento area, he previously served as the CEO at Smart Web Concepts, and in a variety of management positions with in automotive. He studied marketing at American River College.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

C A P I T A L

The Next Five Years ... Dealers Beware How connected cars and Amazon could impact your dealership BY CLIFF BANKS

he next five years -- what changes will the automotive retail industry see? It certainly feels like the industry -- if not society as a whole -- is on the edge of what will be seismic changes. We’re not guilty of hyperbolic overstatement in calling the pending shift seismic. With artificial intelligence, virtual

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reality, increased Internet connectivity and the promise of autonomous driving, our lives may be really, really different in 10 years. It will be a Star Trek world without the space travel. What will this changing world mean for car dealers? This is not another article of how autonomous vehicles will kill private ownership (which, I don’t think will happen).

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Instead, there are more troubling and immediate forces on the horizon that should be shaking dealers to their core. Again -- not hyperbolic overstatement.

Connected Car Era

We are five years away from being immersed in the connected car era. This is different from the autonomous vehicle. We’re talking about vehicles that are connected to the Internet. We’re seeing some of it today, but within five years anywhere from 200 million to 300 million vehicles produced will be connected to the Internet. In my opinion, this is the most disconcerting development staring the industry in the face -- and no one is talking about it. Stay with me -- the era of the connected

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vehicle could decimate service revenue and profitability that dealers see today. We all know how important that revenue is for today’s car dealer. And service departments drive the majority of a dealer’s profitability today. But in five years, much of the service work done in the dealership today will be done using over the air software updates. (OTA is the term used by investment and research firms). It’s hard to see how or where dealers are necessary in that environment. Tesla has already shown how OTA updates can be used for service work. Someone at the OEM writes the appropriate code, and pushes a button sending the update to all of the affected vehicles.

Within five years anywhere from 200 million to 300 million vehicles produced will be connected to the Internet.

DRIVINGSALES, LLC | 3RD QUARTER - 2016

Earlier this year, ABI Research estimated automakers could have saved $ 6 billion -- one third of what they spent fixing recalls in 2015, by using OTA updates. That’s warranty money dealers will no longer get; and all that traffic to the service department will be gone. We actually may see an era again where the only service technicians in the dealership are the folks doing mechanical work. I don’t want to be Chicken Little, but this is a discussion the industry needs to start having.

CLIFF BANKS Cliff Banks is an industry veteran of 24 years. A long time editor and analyst, he is the founder and president of The Banks Report, an online service that analyzes news and trends in the automotive retail sector. He is a regular contributor to the DealerExec.

Amazon

A second development affecting dealers is Amazon’s first step into the automotive retail space with the recent launch of Amazon vehicles. As we all know, Amazon Vehicles currently is only a research site that does not have a process for connecting consumers with dealers. Everyone has a theory about what Amazon’s next move is, but it isn’t entirely clear yet. But its history is to destroy local retail. So dealers need to understand that Amazon isn’t their friend. But it has challenges. Here’s what we do know. Despite its expertise in online transactions, Amazon’s future strategy – at least for several years – will not include selling new cars online UNLESS it involves a partnership or solution for car dealers. State franchise laws prohibit entities such as Amazon from bypassing dealers and selling new vehicles directly to the consumer. That dynamic is not going to change for a long time. So dealers can probably take a deep breath here. Amazon is not going to take over the world of selling new cars. Unless... Part of Amazon’s challenge is its own internal perspective of the automotive retail space – and that is one of the reasons the company has taken so long to even launch an automotive research site. Over the years, we have heard a consistent message from people/companies that have discussed

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potential plays with Amazon – the online retail giant is wary of having its customer service reputation sullied by dealers. Whatever move Amazon makes on the new car side, it will likely try to gain greater control over the entire sales process. If dealers aren’t willing to give up their control, Amazon will not get out of the starting gate – unless it’s willing to let dealers maintain control over the process. A third challenge for Amazon is the complexity of automotive retail. Amazon’s director of its automotive category, Adam Goetsch, has about a year of experience in automotive – and that’s in the parts and accessories portion. Prior to taking over the automotive business, Goetsch ran Amazon’s home products and lawn and garden categories. Automotive retail isn’t a business where one can waltz in without experience and show everyone how it’s done. Even for “old pros,” this business can be challenging. AutoNation and Sonic Automotive have spent years developing their online transaction models – and they still have a ways to go. Another example is the GoogleAutos experiment from a few years ago, which never got off the ground despite having some smart and experienced people driving it. Furthermore, Amazon doesn’t have the infrastructure to make a big play in the automotive retail space. It requires a large sales and support infrastructure – a key dynamic that has kept some of the larger technology companies from getting into the industry. Despite those challenges, Amazon is here to play ball. But it’s hard to see it being successful without making a big acquisition, or even partnering with or acquiring a dealer group -- a possibility already being speculated about. Whatever move Amazon makes, it’s likely to change the landscape of automotive retail within the next five years. (For more analysis on Amazon’s potential plays in automotive, visit TheBanksReport.com).

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