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Dealing with Digital Disruption: How to Make Digital Retail Work for your Dealership

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Over the last few years, a combination of advancing technology and changing consumer behavior driven by the pandemic have pushed digital retail to the front of the pack of potential disruptors in the auto industry. OEMs from Tesla to Ford are embracing digital retail, but many dealers are struggling with the new landscape.  To get some perspectives that might help, I recently spoke with Lindsay Ciavattone , CarGurus’ Director of Dealer Relations for digital retail. With a background working at dealerships and an eye on the next generation of digital retail tools for dealers, she’s uniquely positioned to share insights on where digital retail is now, how dealers can choose the right solution, and what you need to do to get the most out of it. Jeremy Sacco: We’ve all been hearing about digital retail for years, and adoption has been slow to catch on. What makes this the time for digital retail to disrupt the old shopping models? Lindsay Ciavattone: Digital retail is disrupting the industry today because the customer is demanding a new experience. Until now, dealers determined the process, and customers had to go along with it. Now, with the increasing level of choice and availability online, and nationwide competition, dealers need to find a way to meet these new customer needs and provide the experience they want. Dealers need to disrupt themselves to serve the customer – before they get disrupted by somebody else. JS: We know that change isn't easy for some dealers, and incorporating digital retail is a significant change. What adjustments do dealers have to make to make sure they're getting the most out of digital retail? LC: Dealers need to understand first that a digital retail tool is just that: one tool in the toolbelt. It’s only as effective as the customer input and how the dealer personnel respond. Some think it’s a magic tool, that it’ll do everything for them, and essentially sell the cars in some new way – and of course that’s not true.  It’s also important to put a consistent lead flow and communications process in place – one that’s simple and holds people accountable. Whether you have one store or 100, process is critical, so your customers and your employees have a similar experience across the board. A great process means you can: Consistently move deals forward – you're not going back to ask questions you already have answers to in your CRM. Focus on removing obstacles that prevent sellers from doing their jobs. Act quickly – customers today expect fast responses, especially for sensitive information like credit applications. Provide a holistic approach to customer communications – phone, video, texting, however the customer wants to engage.  JS: We know that 'one size fits all' never works for dealers - or for shoppers, for that matter. But sometimes it seems like digital retail is implemented in ways that force both dealers and consumers down a narrow path. How can dealers make sure they have choices when implementing digital retail? And that they're providing options to their consumers?  LC: The first step of your due diligence when evaluating a new tool is to make sure the vendor can align with your values, your goals, your corporate structure or individual style – that they can work with you to meet your individual needs. Dealers should choose a vendor who can be their partner and work closely with them, and who can be flexible on implementation – including the ability to add or remove certain features to match your goals, as well as flexibility around integration with other systems. If it’s your first venture into digital retail, it’s important to take baby steps. A staggered rollout, for example: if you have several rooftops, get your digital retail footing in one, then roll it out to more stores. That approach helps if you have employees who may not be excited about new tools – when they see other stores have had success, they’ll be more eager to get on board. JS: If you were a dealer shopping for a digital retail solution today, what would you look for?  LC: A seamless integration with the lowest level of effort. It’s easy to say that, but not easy to find in practice – I'd look for a company that would work with me in a transparent way, that was quick to troubleshoot if necessary, and that provided all the support I needed to get up and running.  The tool itself should be as frictionless as possible, allowing customers to choose which steps of the buying process they do or don’t want to do online. Some customers are comfortable going all the way to putting in a deposit or a credit app, while others are less comfortable and just want to get through finding the right car and booking an appointment, so look for that flexibility.  Finally, as I mentioned above, you want flexibility on your side as well – in which features you implement and how you integrate with your existing systems so you’re able to create that seamless process from start to finish. JS: You’ve touched on that integration piece a couple of times. Can you give a little more detail on how a digital retail tool should connect with existing systems?  LC: If you walk into any dealership and take a look at the F&I manager or any salesperson’s computer, you’ll see 27 tabs open: OEM tools, CRM tools, inventory management, accessories, parts, financing, all kinds of things. A digital retail tool that simply drops customer information into existing dealer systems is ideal – that’s one less thing to open, to learn, to get running. I’ve talked to many, many dealers who are unwilling to work with a partner that requires dealers to use a new system, and I can completely understand that from my past experience working in dealerships. Ultimately, success will come from integrating a digital retail tool that fits into the flow of what you’re already using and allows you to maintain control of the sale.
Disruption is the New Normal

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Disruption. One of the buzz words lately over-used and misunderstood. The standard business definition is “radical change to an existing industry or market due to technological innovation.”  I would argue is not always technological. And is that radical change good or bad? Is disruption good or bad?   The fact of the matter is,  DISRUPTION IS THE NEW NORMAL.   Whether we like it or not, as business owners, as consumers, as social citizens, we better embrace it. It is the new norm and will only continually cycle and accelerate.   If it is self-disruption, or at least a state of managed or accepted disruption, it can benefit our enterprise.  This agility and flexibility to take on disruption and capitalize through it and because of it, should even be a capability or culture that is driven in an organization. It will change the way customers expect products/services and experiences, it will change the way workers produce, and it will change the way we must manage our business models. In automotive, we could highlight a lot of major and recent disruptions. There is the pandemic effect amplified by home delivery and mobile service. There is the new mobility ecosystem accelerating around access to transportation on-demand. There is the new wave of EVs coming on due to many factors including gas and oil prices and a drive to a sustainable economy. Many technologies are disruptive to our previous industry and business models such as Cloud computing, Artificial Intelligence, Augmented and Virtual Reality, 5G and more. These technologies enable new experiences, real-time information, constant connectivity, and an overall overhaul of traditional, sequential, and transactional engagements. The customer experience with a brand is now always on, anywhere, anytime, and anyhow they choose. An illustrative landscape of some of the disruptive forces, effects and outcomes is pictured below. In the automotive retailer world, what have we seen in terms of disruption, again not just technological impacts but all kinds of disruptions or “disturbances”. There are quite a few, including but not limited to: Supply chain issues and inventory shortages Even more demanding customer expectations  New EV models and companies with direct-to-consumer models Ever increasing technology in vehicles including over-the-air updates Uncertain future of the “as is “dealer profit model  Ability to work with customers in a multi-channel format Some brands and vehicles getting more flexible financial access and even subscription models …and much more. The real question is, what do we do about it?  How do we handle these disruptions?  How do we survive and capitalize on disruption and build our business into future-proof models? The hard part, even though I asked the questions, is that there is no easy answer. There is no one solution, one technology, or even one way to ensure that your business can survive and thrive in the future.  I have heard before, “we cannot predict the future, but we must plan for multiple futures.” Good advice.  Meaning nobody knows what exactly the world, our industry or our business may look like in 5 years, 10 years and certainly not beyond. Anybody see the supply chain shortage coming 3 years ago? Anybody think Tesla would be on of the Top 10 market cap companies 10 years ago?   52% of the Fortune 500 companies from 2000 are extinct. That is not a typo. Read that again. So, there is no 100% prediction, and there is no one easy answer. But the recipe for success in an ongoing continuous cycle through any disruption must include some basic core operating principles and capabilities.   Some critical components and general principles include: Do not have a rigid business model, be willing to change Build a business model enabled by flexible business processes and enabling technologies aimed at delivering experiences and fulfilling needs (not transactional simple mundane tasks) Equip your people with training, knowledge, culture, and power to deliver customer experience (no barriers) Data and Insight. Understand what shifts and movements there are in your customers and your business.   You may think you are in the car business, but you are I the customer experience business. Focus on needs management over leads management. Take Action. Early, often and always. Do not wait for change to come to you, change what needs to be ahead of the curve. Consider your business as a platform (not a static and rigid set of transactional processes), with dynamic capabilities that can flex and pivot to meet demands and needs. These may sound high-level and unachievable for a dealership. But they are not, and they can’t be. They must be driven into the culture of your business .   In more tactical terms, your business must consider, deal with and optimize the ability to: Sell and service different (online, offline, omni-channel, mobile, and anyway the customer wants it.) Assess and determine new business models that can be viable for your customers and market: Subscription models Rental / car sharing models Other access and financial models to enable customers to access mobility Charging stations  The dealership as an experience center not as an inventory hub or “sales office” EV versus ICE customers service and overall needs More personalized build-to-order to overcome shortages Service as a service (more of a Geek Squad model) than a service bay model Be flexible to accommodate all different kinds of customers and their needs A tall order indeed. But if we think of and build our dealership business model more as a dynamic platform of capabilities and assets to accomplish the above and more, we can succeed in multiple paths of revenue streams.   It is not easy to accept that our business must be under a constant state of transformation.   But in order to continually survive, thrive and innovate we must always be in that continuous state of transformation. Be comfortable with being uncomfortable. Because one thing is certain, the future is exactly what we think it will be. The key take-away again, DISRUPTION IS THE NEW NORMAL.   Get used to it and realize we have to deal with it continuously and forever. Capitalize on the fact that if done right, we can enable our business to dynamically flex in new directions and new models to support and thrive in multiple paths. Put focus and effort on the notion that are business is a platform of capabilities, not a rigid set of workflows.   With the focus on the North Star of customer experience driving your business, the capabilities can be dynamically developed to withstand all change and disruption.
How to Sell More Cars When You Don’t Have Enough Cars To Sell

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Talk about disruption! 5 years ago I wrote an article here in Dealer Marketing proclaiming that the car business as we had known it was long dead, showing that the business had changed more in the last decade than it had in the previous centuries, and predicting that the next 10 years would make the last look like smooth sailing. Turns out it only took a few years for the car business to get turned upside down again. In 2017, the average new car dealer had between a 60 and 90-day supply of new vehicles out on the lot getting suntans A volume dealer in a big metro dealer might have hundreds and hundreds of new cars in inventory on any given sales day. Cars that customers could come to the store and see, touch, feel and drive. Last month, Honda World of Louisville had six new Hondas in stock. Not six hundred. Six. Period. Dave Clayton at Pawley’s Island Ford says he gets asked every day whether or not the dealership is going out of business because of the empty sales lot. Car dealers aren’t going out of business, though. They’re selling cars. A lot of cars. The question is how? “We had to pivot from the standpoint of we used to carry about 600 to almost 700 cars in new car inventory, and that's no longer the case,” said Chuck Morelli from Honda World .  “I have no more inventory than my competitors now so we have to make sure that that experience is there. Like I told my team, the customer has no reason to come here anymore because I don't have the inventory that they're going to drive off in so how are we going to make the customer’s experience better and make it different than our competitors?”  Providing a better customer experience, a friendlier, faster, fairer, more fun buying experience, has been the secret sauce all along, and it still works The 6 new Hondas Morelli has in stock works out to about a 1-day supply because his team is still selling hundreds of new Hondas a month and delivering a world-class buying experience. They were just named DealerRater ’s Honda Kentucky Honda Dealer of the Year for the 7th year in a row because treating your customers well never goes out of style. What successful dealers are doing now is helping customers and salespeople look past the immediate gratification of driving a shiny new car or truck off the lot today. Some dealers are devoting entire new websites that allow customers to pre-order their car their way. But making custom ordering a vehicle so easy even a caveman could do it is only half the battle. The simple fact that customers aren’t going to get their cars today is practically forcing dealers and salespeople to stay in touch with their customers for longer periods of time before the deal is done, forcing them to have difficult and disappointing conversations, forcing them to build a better relationship and most importantly, earn the customers trust. They  sell more cars  by looking past the easy money of today’s sale and playing the long game for lifetime customer value. “We're not putting market adjustments on our cars.  Where we're focusing daily and talking about with our associates daily is the guest experience,” says Morelli. “We want the guest experience. We want them back. We want their friends back. We're very transparent. I don't go a day without talking to a guest about a car. And I'll just be honest with them, and I'll apologize to them, and say I know I'm giving you bad news, but I want to know what's going on. And on these deposits -  if they back out, we don't say anything. I had two customers back out today, and I immediately had them filled so I don't fight it.” Building and maintaining that level of trust and those deeper relationships comes with an added benefit - more used car inventory. “Probably 90% of our business overall is from repeats. We've been in business for 42 years so we've got that repeat business. They've always come to us,” says Clinton Bramlett from a GM store in Texas.  “We're getting our used cars from our repeat business. We do their service. We do their maintenance. We do all of that. We know all the history of their cars without a CarFax. And that's where we're getting all of our stuff from.” By incentivizing the sales teams and a little technological help, dealers have boots on the ground to mine relationships and their database, helping to keep used car inventories respectable when auctions have been unable to fill the demand.  Meanwhile, almost every dealer has aggressively turned to buying used cars “off the street,” building websites, producing radio and TV spots, and in some cases, even building separate car buying facilities. The only thing in this whole world that’s ever been certain is that things are going to change.  Disruption is inevitable. And in the car business lately, it’s par for the course. By concentrating on the customer, by finding a way to give the customer the vehicle they need and the experience they want, by building the trust that brings about an avalanche of lifetime customer value, dealers can continue to thrive and be the pillars of their community no matter how many cars are on the lot soaking up rays.    
Disruption is Change

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Disruption is about change. In the automotive industry we usually connect the word disruption to some up-and-coming vendor program, product, or new technology. When really disruption comes from how these things introduce new habits, adjust how you communicate, and/or change your approach. You may not need new products, services, or technology to create a disruption in your market, all you may need is to reflect and change. Technology is not the disruption; it is a confirmation of needs which are waiting to be filled. With technology having affected the way people consume and engage, becoming a force of positive disruption in your market is well within your grasp. Retail automotive has a never-before-seen opportunity to show with clarity how it has evolved to rise to the consumer challenge to “do better.” No longer is the showroom a place with fancy-suited strangers and cold metal, the most competitive dealerships are bringing the showroom, and their people, to their customers, creating more open and sustainable relationships. Social media has given us a spyglass into the lives of others, making people realize their own humanness is not so abnormal. Consumers are driven to engage with individuals and business they feel they know, trust, and relate to. Further reenforcing that people buy from people, and relationships matter. The key to disruption is not missing the point of disruption. Stop doing what you have always done. Consumers are clear about their needs, how to meet their needs and expectations, are we listening? They do not necessarily need more technology; they need more communication with clarity. Your customers expect their in-dealership experience and online experience to be cohesive. They want a process that is mindful of the buyer, a business that is community-aware and, believe it or not, a long-term relationship with you. Disruption is a mindset; it is when you genuinely care as much for the people you employ and the people you are selling to as you do your sales. Disruption mindset starts with leadership, it is creating the culture for employees that mirrors the experience you want for your customers. It is building long term relationships with your customers by fostering long term tenure with your employees. You’re thinking, all that’s great, how do I achieve disruption? Here are a few areas you can easily check yourself in and create positive disruptive change within your dealership: 1.      Does your employee culture reflect the experience you desire for your customers? 2.      Do your customer’s in-dealership experiences and online experiences feel cohesive and transition smoothly? Does it feel like a singular purchase experience? 3.      Do you have a social presence sharing outside of what you earn a profit from? Is it a place your customers return to after the sale? 4.      Is your dealership website a virtual showroom only for vehicles, or is it also a meet and greet for your staff? 5.      Are you actively listening to your customers' needs and expectations? “But tackling some of those would be like opening a can of worms.” Open that can of worms, friend. Without conquering these things, none of the disruption you achieve in your market will be sustainable.  
The Chip Shortage Is Coming! Is Your Used Inventory Ready?

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By now, the entire industry and many consumers have heard about the chip shortage ready to hit automotive showrooms about the time our summer kicks off. A shortage of semi-conductor chips due to COVID slowdowns with production hit auto makers in the early part of 2021, and dealers are now bracing for impact. Popular vehicles like Ford F-150 trucks and other models are harder to come by right at a time when vaccinations and a lessening of restrictions are bringing car buyers nationwide back to dealership lots in droves.  While there are a lot of ideas on how dealerships can work around the shortage and continue to turn a profit, one theme that continues to resonate throughout the industry is to have dealers look to their used car inventory to shore up sales before the event. As we look to the summer buying season, what are some things you can work on now to ensure you're ready?  1. Build Trust A recent Marchex report shows more than 91% of people surveyed said they rate trust just as, if not more, important than the price of a vehicle. This becomes even more crucial when it's time to look across your used car inventory. What products can you use to your advantage to help build that trust with the customer? One of our favorite ways to show dealerships how to do this is with a Lifetime Powertrain Warranty. By offering a Lifetime Powertrain Warranty as an additional safeguard for the used vehicles in your inventory, you're adding another layer of trust to your guest's purchase.  2. Use Extras Just like our example with the Lifetime Powertrain Warranty suggestion above, throwing in extras to entice customers to move forward with a used vehicle has shown to be an effective way to move the needle toward a sale. Some of the add-ins we've seen that work well are: Warranties Free oil changes Complimentary tickets to a local sporting or arts event Even a contribution to the buyer's local charitable organization of choice  3. Do a Complete F&I Audit  Now is the time to look through and audit your current F&I offerings. Used vehicle buyers tend to purchase more ancillary products like dent and ding protection and paint repair. Some things to look at as you go through your audit – look over your disclosures to ensure you are up to date with compliance. Important terms to check include stating the purchase of products is not required to obtain financing, and the agreement or declining of products will not affect APR. Lastly, ensure every F&I product you offer is properly displayed on your presentation page with benefit statements for each.  4. Increase Promotion of Popular Used Vehicles Several models, like Ford F Series pick-ups, will continue to drive demand. The longer the chip shortage lasts, the harder these popular used models will be to find on dealer lots. Ensure you are identifying the most popular models on each of your lots and promoting them heavily as we move into the summer months.  While the chip shortage is not ideal, you can act now to shore up your used inventory and build trust to push buyers toward the used vehicles on your lot. A combination of promoting high-demand vehicles, auditing your F&I products, and offering incentives like Lifetime Powertrain Warranties can go a long way when building the buyer confidence needed to push you to the finish line this summer. 
How Dealers Today Leveraged Fixed Ops and Digital Advertising for Quicker Recovery

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During the COVID-19 lockdowns, numerous automotive dealerships radically cut back their general ad expenses to maintain as much of their bottom line as possible. Furthermore, in April, the annual pace of sales dropped steeply to 8.47 million, a dramatic drop from the 17.05 million level it was pacing earlier in January. Nonetheless, dealers have seen significant recoveries in late spring due to their efforts and their swift willingness to embrace a message of wide-spread cleanliness and contactless business operations during the early stages of COVID-19. The dealers' quick and efficient response to the global pandemic helped them gain the confidence and trust of many drivers who still needed to service their vehicles during the most intense period of the stay-at-home executive orders which was enacted in various locations throughout the country. This brilliant tactic used by dealers benefitted their business significantly as the focus of car sales shifted to the maintenance of existing automobiles, as well as the sale of used cars and trucks which requires constant and systematic intervals of service. These strategies were enacted during early summer to assist their service and repair operations and began shifting digital ad spending over to Fixed Ops campaigns. Additionally, this technique focused on-site offers to convert low-funnel service/parts traffic to their websites.   An increase in repair orders and service revenue started during the early weeks of May as dealers increased their focus on repair order activities. The numbers continued to rise extensively by the month of June as dealers worked on improving the process of service to make it even easier for customers by offering enhanced contactless pickup/drop-off. For August, automotive digital advertising firm PureCars reported a 16.9% increase in dealers’ ad spending on Waze by leveraging digital channels that emphasized service-interest drivers.  The power of video noted The longevity of the pandemic has led many dealers to embrace video as another medium and advertising channel. In this present pandemic economy, video usage is significant for brand storytelling. It continuously proves to be a mandatory tool to increase conversion and exposure. Moreover, it allows for more efficient transactions between dealers and their customers. Overall, consumers engage with videos more and they tend to be more popular in comparison to other forms of advertising content today. It is proposed that by the year 2022, more than 82% of all consumer internet traffic will be from online videos, fifteen times higher than it was in 2017. Additionally, reports show that today, users view more than 1 billion hours of video daily on YouTube. Dealers have also learned that videos go beyond engagement and entertainment, and they offer a space to transmit emotionally charged, health-focused, and genuine messages to consumers during the pandemic. This platform allows dealers to convey their meanings and concerns for customers and employees in a more authentic way than any other channel would. Adapting a better strategy for the final months of 2020 Fixed Ops have been the main operator of revenue for auto dealers this summer thanks to this strategy. As 2020 draws to an end, it will most likely continue as long as they continue to emphasize on servicing used vehicles. Some dealers were concentrated on taking a proactive approach to change their operations to cater to the new pandemic customer. Because of this, they are seeing pre-pandemic figures in various cases today. As they worked on making operations safe and easy, they focused on evolving their service and repair opportunities and promotion by using digital advertising channels. Consequently, this approach resulted in a successful system that assists dealers in obtaining a lower cost per customer acquisition level, the ultimate business strategy that will guide them through 2020. Sources 1. https://www.autonews.com/sales/supply-crunch-still-hampering-sales-recovery   2. https://www.cisco.com/c/en/us/solutions/collateral/executive-perspectives/annual-internet-report/white-paper-c11-741490.html   3. https://www.youtube.com/about/press/