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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/  
Digitize Your Dealership Operations Now to Be Ready for 2020—and Beyond

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Dealership operations can often be a big ship with a small rudder. With all this movement in the technology revolution, what does it take to change course? The answer depends upon the lens through which you view technology, change, and what is happening in the industry. When implementing technology, or deciding whether to so, do you see such decisions as ornamental or systemic? The answer is revealed, in part, by how much you budgeted this coming year to grow your dealership’s ability to connect with consumers digitally. If you made no change, you’re not unique. A new study from Ernst & Young (EY) reveals that only 20% of dealers plan to invest in their digital presence through 2020. That’s not prudent, the research firm suggests, if dealers want to remain viable connection points for consumers. “Dealers need to redesign their value proposition adapting digitalization to provide an engaging interaction and compelling experience across all touch points,” notes EY’s new report, “Automotive Retail 2030: Evolution of dealerships and potential new roles in retail.” Consumers continue to perceive and engage dealerships as their primary way to buy a car, the EY study notes. Does this information mean the calls to digital retailing have fallen — and are falling on — deaf dealer ears? The industry is nearing a jumping-off point as dealers are feeling the effects of the following trends and their influence on dealership practices: Cars as a service (CaaS) model Rideshare and ride-hailing Autonomous vehicles Electric vehicles Worker robots Used car sourcing Vehicle affordability Finance interest rates Reshaping the Industry Digital technologies can help a dealer engage these forces that are reshaping the industry. Digital does this by eliminating the obstacles, redundancy, delays, and errors that can encumber traditional practices. For instance, by having a digital subscription model platform in place, dealers will be able to streamline, manage, control, and ensure customer satisfaction from this new profit center. Modernizing F&I to enable online consumers in obtaining financing information, evaluating trades, and learning about extended warranties and other aftermarket products will help make the dealership more profitable, as well as a more accessible and comfortable choice for customers to buy a car. We know dealers are embracing digital technologies of all sorts to help them serve customers better. The herd of technology vendors at the annual NADA exhibition would have been culled out by now if dealers weren’t buying their wares, one would think. We know this is not the case. Dealer adoption of digital F&I menu systems is a good example. As we’ve reported before, dealers using a digital F&I menu versus no menu to present F&I products realize a: 58% increase in profitability; 50% increase in service contract penetration; 35% increase in GAP penetration; and 60% increase in other products. These performance gains result in a $537.50 average increase in PVR — $500 per new car and $575 per used car — for a $967,500 F&I profit per year on an annual volume of 1,800 cars. The need for dealer expansion in all channels that reach potential customers is high. Ernst & Young notes the progress OEMs, captives, and brokers are making to reach customers throughout this sales funnel. This emphasizes, based on separate studies about online sales done by EY, that these entities are improving how they reach and engage customers along their sales funnel by providing: Product information, including digitized brochures, videos, and product specs using downloads, chat, and texts; Product engagement, using online interactive tools, videos, and virtual reality experiences; and Purchase engagement, by making available online vehicle reservation tools and accessible virtual documentation, e-signature, and delivery options. Consumer education Up-funnel engagement practices as described by EY cannot be understated. Use these channels to educate consumers about not only vehicles and services, but about the various F&I products you sell. The data shows a significant percentage of consumers in your F&I office will not understand the value or benefit to them from purchasing the service contracts, maintenance plans, and similar budget-protection products you sell. In past articles, we’ve often discussed how when customers don’t understand these products or their value, they decline to purchase them. A little bit of product value-based product education with customers can help counter this, whether you educate them online and up funnel, or in your office. Finally, F&I continues to be a source of complaints from buyers, who grumble the process takes too long. Digital is the solution. Using F&I interactive videos, virtual reality tools, and self-administered surveys that reveal consumer interests about the risks and rewards aftermarket products address helps to increase product sales. At the same time, digital lending, contracting, rating, and remitting speeds up transaction times to get the customer to delivery more quickly. Tools make the transaction experience easier and the relationship between F&I manager and customer more productive for everyone. In the future consumers will increasingly move to complete retail product transactions virtually. The current usage rates may not be that convincing — through 2017, online insurance product sales accounted for 4% of all sales. But watch out: The segment is expected to blossom, growing by 300% by 2020. The evidence is sound, and the case studies are aligning around the same message. Perhaps the 80% of dealers interviewed for the EY study who did not plan digital presence investment are now awake, realizing 2020 is barely more than 12 months away. If you plan today, 2020 could be the year you look back and see the benefits of a digitized dealership — or look back in hindsight and wish you had embraced the change more seriously. The choice is yours. Jim Maxim, Jr. is president of MaximTrak , a RouteOne company, and chief digital officer for RouteOne , a provider of digital F&I platforms for dealers. He is an F&I visionary recognized by CIO Review magazine, a frequent panelist and speaker at various F&I conferences and summits, and a contributor to automotive retail media about evolving F&I technologies. Reach him at maxim@maximtrak.com.
Are You Embracing the Future and Running to Win, or Just Running in Place?

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Tinker Hatfield is famous among sneaker enthusiasts; his engineering work for Nike revolutionized movement, running, and athletic performance. Comparing the sneakers of the past to his radical Air Jordan design is a lesson in the way futuristic thinking and innovative technologies improve fundamental behaviors and activities, like running. When you consider everything required of you to run your dealership, you’re either running in place — or running to win by embracing the future. If you’re dreading the virtual dealership, you may not have noticed the sun setting on your own empire. Customer engagement and the reality of virtual car sales are now proven, practical, and profitable for those running to win. Disruptive technology has taken root, and dealers examining their fundamental behaviors with an innovative lens are going to have an advantage. This isn’t just me saying this. Futurist Jim Carroll, in a 2015 speech, “25 Trends for 2025,” summed up some interesting insights: In 2005, Facebook was used mostly by college students. Google Maps was brand new. Twitter didn’t exist yet. Autonomous vehicles weren’t on most people’s horizons, and drones were still bees. “And as always,” Carroll said, “Most people weren’t really thinking about the future in 2005, and thinking how different 2015 might be. Thinking about the future is not the job of most people. The result is that most predictions about the future are often treated as ridiculous, comical, or viewed as based on too much science fiction.” Ring true? In its “2020 Report: Twenty Trends That Will Shape the Next Decade,” Intuit predicted, “The balance of power will shift from the business to the marketplace as customers grow more informed about products and services. With this shift from ‘push’ to ‘pull’ marketing, companies won’t find customers, their customers will find them.” Sound familiar? The report added, “The use of social and mobile networks and technologies will possess greater utility . . . business[es] will be redefined in how they create value and compete and will help consumers . . . anticipate and guide decision making and risk management.” How connected are you? How you cope and thrive in the car business over the next decade will challenge the best — but isn’t chaos the medium in which car dealers excel? For some, yes — those who plan and invest now to flow with the changes that various influences and demographics are driving. The future is different and is now: Subscription transportation services, ridesharing, and autonomous pods. Fewer customers and fewer sales. A business where 90% of car buyers transact and complete the deal online, with little or no human interaction. Downsized showrooms, chatbots, and virtual reality. A service department transformed by vehicles driven by electricity, fewer parts to repair or replace, fewer oil changes, and less routine maintenance. Dorothy, we’re not in Kansas anymore. Innovators who entered the automotive business without having to unlearn legacy processes are creating the disruptive practices that we have to contend with or assimilate to. Until we realize this, the showroom will continue to operate as it has. Some customers will still prefer to touch the metal and enjoy the new car smell, sit with a sales associate to work the deal, visit F&I for finance and lease options, and hear aftermarket presentations void of depth and conviction. The day-to-day pace of change may seem nonexistent at a micro-level like this. Soon, however, we’ll be reminiscing about the “old days” (even 2018) when there was an entire office dedicated to F&I. A virtual showroom will replace the physical one, with just enough square footage for a real model or two for those who still want to touch and test drive. Most consumers will prefer to shop and buy online, taking test drives using multisensory VR devices from their living rooms. Perhaps they’ll sign the deal with a touch of a thumbprint to a smartphone-like device attached to their wrist. The vehicle may even drive itself to their residence. Autotrader recently announced a significant upgrade to its platform, adding online deal-making functionality. That sounds like big news, but is it? Pundits have predicted that online car buying would be a reality by 2019, and vendors have been getting dealers ready by promoting digital, online, and in-store consumer engagement tools to target buyers by lifestyle, interests, and needs. In a 2015 article in this magazine, I listed several actions to help dealers get ready for their future. Here is an updated list: How many have you embraced? Disrupt. Now’s the time to disrupt the status quo. Can customers engage with and buy from your dealership without stepping into your showroom? Are your finance and aftermarket options incorporated into the deal flow, beginning online and up-funnel, or are customers still required to hang around another 60 to 90 minutes in a 10-by-10 office? Learn. Leverage the technology and talent behind vendors. Take advantage of what they offer so you can fight margin compression more successfully — and so you deliver a seamless and engaging experience, online and in the showroom. Develop. Train, train, and train some more. Create experts to maximize the productivity tools you now have. Develop product experts for your vehicles and your aftermarket products. Train your specialists to ask the questions that deliver the products’ value stories that customers need to hear. Embrace. I’m amazed how many dealerships still use old F&I techniques and paperwork when studies show they cost opportunities and money. Bring your dealership up to current best practices by incorporating e-menu, e-rating, e-contracting, and e-registration into your F&I. Stop using paper-based processes that consumers find slow, old-fashioned, and even untrustworthy. Replace them with digital presentation tools like tablets, kiosks, and pads that let consumers interact with and control the product presentation and selection process, and affix a digital signature. Technology provides a more compliant F&I process that consumers appreciate and increases profitability through improved PVR and product penetration. Just as Nike set out to transform human performance with Tinker Hatfield’s disruptive technology, innovative F&I services, connected experiences, and intelligent tools are creating new consumer behaviors and taking automotive retail beyond today’s boundaries. Run, don’t walk, if you want to stay in the race. Jim Maxim, Jr. is president of MaximTrak , a RouteOne company, and chief digital officer for RouteOne , a provider of digital F&I platforms for dealers. He is an F&I visionary recognized by CIO Review magazine, a frequent panelist and speaker at various F&I conferences and summits, and a contributor to automotive retail media about evolving F&I technologies. Reach him at maxim@maximtrak.com .