Jack Nerad

Jack R. Nerad has covered auto retailing and the broader automotive industry for more than three decades in a number of prestigious editorial posts. For over a dozen years he served as Executive Editorial Director of Kelley Blue Book/KBB.com where he transformed kbb.com from a place to look up used-car prices to one of the most-visited auto research sites in the world. Nerad also was Editor of Motor Trend magazine, Director of Publications at J.D Power, and Editor of the dealer publication Automotive Age. For two decades he has hosted "America on the Road," the most widely syndicated automotive-oriented radio program in the country. In the 1990s he pioneered automotive on cable television as the host of "Motor Trend TV." An acknowledged auto industry expert, Nerad has appeared on virtually every important news channel and news program, including "the Today Show," "CBS This Morning," "Fox and Friends" and "Good Morning America." He is the author of several books including The Complete Idiot's Guide to Hybrid and Alternative Fuel Vehicles and The Complete Idiot's Guide to Buying or Leasing a Car. His latest book on successful management and customer relations is The GR Factor. Currently, Nerad is Chief Content Officer / Editor of Driving Today (drivingtoday.com) and contributes to a number of news sites including forbes.com.
Digital Motors Enables Dealers to Deliver Apple-Like Experience

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Retailing has changed radically in the past decade, and it has changed even more radically in the past 12 months. Lockdowns, business restrictions, and fear of disease have conspired to keep the vast majority at home and isolated others far more than they want to be. This has had a profound effect on the way consumers purchase products. Online sellers have seen their sales and market shares skyrocket, while those who rely on in-store foot traffic have seen sales tumble and, in some cases, have been forced to close up shop forever. When one looks at various types of retailers, one can make the case that car dealers, in general, have been among the slowest to change the way they do business, even as the world around them has changed. Taking the attitude if-it-ain't-broke-don't-fix-it and safely ensconced behind state franchise laws and licensing regulations, many dealers still operate their businesses in much the same way they did in 1960, 1980, and 2000. Generate foot traffic with advertising, convert a good percentage of those walk-ins into car-buyers, get a piece of the auto financing pie, and sell them some add-ons before they drive off the lot. Retaining a high percentage of those buyers as service customers sweetens the pot. Retailing Has Changed That said, it is no secret that today's retailing environment is far different from the environment in 1960 or even in 2000. Consumers have grown to appreciate the convenience and time-savings afforded by the ability to purchase goods online and receive fast delivery conveniently on their doorsteps. Wide choice, product reviews, comparison tools, and price transparency all contribute to consumers' switch to buying on the Internet. Add to that a dread disease and governmental business restrictions and you have a retailing paradigm shift of mammoth proportions. While many progressive new- and used-car dealers were in the process of investigating and, in some cases instituting online selling processes prior to the onset of the pandemic, once forced business closures hit, that relative trickle of activity became a torrent. Dealers have scrambled to enable themselves to continue to do business in the extremely challenging environment we have seen in the past 12 months, often turning to vendors to help them gain those new and to some extent, very alien capabilities. What is Digital Motors?  One company that has stepped into that breach is Digital Motors , essentially an online sales platform that gives any retailer of a traditional brand the ability to sell a car "just like Tesla" with an end-to-end online process. "I guess the sad reality is the only way to buy a new car that way today is if it's a Tesla," Digital Motors CEO Andreas Hinrichs told us. "So Digital Motors set out to change it. And I guess we're in the right place at the right time with the right product." Southern California-based Digital Motors was founded well before COVID-19. But Hinrichs admits that the rise of the dread disease accelerated the company's development and launch timeline. "COVID certainly is a significant accelerant to Digital Motors, but it's not the root cause," Hinrichs said. "You know, all the industries outside of automotive have gone to fully transactional over the past 20 years, and auto is the only one that's stuck in lead gen [lead generation]. And that's something we set out to change. And after a year and a half of development, we launched the platform early last year when the shutdown first hit." The change in the timeline wasn't radical, because Digital Motors had planned a summer 2020 launch. But in light of the shutdown, the startup suddenly had dealers knocking on its Internet doors seeking help.  "So we launched the platform a full three months early," he said. "And, right out of the gate, customers embraced this new process and the platform started selling cars, even at the depths of the first shutdown that happened in the spring." Because a car transaction is much more complicated than buying a pair of shoes online, developing the platform required dealing with all the complexities and idiosyncrasies of a typical auto purchase transaction that has multiple aspects, including the vehicle itself plus financing, trade-in, and after-sale additions. The typical car sale also involves state and local taxes and fees that often are very substantial. Beyond that, the auto industry's two-tier distribution model means an online retailing solution must in some ways serve two masters, representing both the vehicle brand and the dealer brand.  Plug and Play Digital Motors has assembled a process that enables it to create plug-and-play online stores that are a natural extension of the dealer's physical showroom. The customer is able to identify a vehicle of interest from a dealer inventory based on certain search criteria. Then they can structure lease or finance payments, value their trade-in, select finance and insurance products, and get instantly approved by one or multiple lenders subject to the dealer's preference. Buyers can schedule their delivery online as well. So end to end, Hinrichs claims, it takes about 15 minutes in contrast to a process that traditionally takes three to five hours at the dealership. While that might seem too good to be true, the speed of transaction is facilitated by the fact that in the typical Digital Motors transaction there's no negotiation. In pricing individual vehicles for sale, the dealer is encouraged to put a "solid foot forward." According to Hinrichs, that doesn't mean a race to the bottom or rock-bottom pricing, but a price that the typical shopper would find fair and compelling.  Of course, that is not the end of the transaction. From there, the Digital Motors platform layers on the different marketing campaigns, incentive programs, and lending programs to get the customer to the "transactable" deal. The driving force of the platform is a highly complex, intelligent FinTech engine. It has dealer-adjustable "guardrails," so customers can only put together sensible deals. But at the same time, the dealer is in full control of the economics of the process, just as they are in their physical showroom.  "One of the biggest misconceptions out there is that the more control you give to the customer, this is actually bad for business," Hinrichs said. "What we see on a daily basis is the more control you give to the customer over the transaction, the higher your profit margin is and the happier the customer is at the same time. So the dealer walks away with a better margin, the customer feels fully empowered and is in control of the process. Everybody saves time. And there's virtually zero buyer's remorse afterward." Apple-Inspired Retail Process Digital Motors execs say they're attempting to emulate a very familiar retail experience -- Apple. At retail, Apple is completely "channel agnostic." It doesn't matter if the customer puts the entire deal together in the online store or if the customer puts parts of the deal together online, or if everything is done at the Apple retail store. The same philosophy holds true with the plug-and-play experiences Digital Motors creates for its dealer clients.  Digital Motors recognizes that the consumer might not desire a complete end-to-end online transaction with no in-store contact or ability to see, feel, smell and drive the merchandise. It also recognizes that consumers might not want to complete the transaction in one online session, so it allows them to "park" the deal online and then resume on their timeline. The customer can start a deal online, get comfortable with the payment scenario, and then seamlessly finish the transaction at the dealership. Or the customer can start the transaction at the dealership and finish it at home if they like.  "Ultimately, this gives retailers a huge boost in efficiency and customers a lot of empowerment," Hinrichs said. "But Digital Motors is not the consumer-facing brand here. We're the technology platform that enables this experience. We consider our clients' online stores their stores that they own and operate with pricing as they see fit." Dealer Branding Digital Motors considers its platform's dealer-branding abilities to be one of its key strengths against other competitors vying for the same dealer-customers. They describe their platform as "hyper-configurable." "We actually can create something that looks like a custom online store for a particular dealership or dealer group in about 24 hours without writing a single line of code," Hinrichs told us. "And we're able to emulate any franchise branding for any OEM or custom branding for the dealership. So the ultimate result is not only something that resembles the branding of the dealership, lives on the dealership's website domain, but also has a feature set that can be configured to each individual dealer's needs." Future is a Hybrid While Hinrichs is absolutely convinced that car shoppers want the option of an online shopping and buying experience, he does not predict that the industry will see a wholesale shift to end-to-end online buying. Instead, he predicts the future of auto retailing will be a hybrid process that lets the customer choose when and what they do online and when and what they do in the showroom. "At Digital Motors, we do not believe that there is going to be a hard cut over from the traditional offline process to everything all of a sudden occurring online," he said. "What we clearly identified is virtually every single car buyer has an express need to do more online than they traditionally were able to do. Whether this means structuring the entire deal or parts of the deal doesn't really matter. By the time they contact the dealer or visit the dealer physically, they want to have a good understanding of their deal. If if they've played around on the online store beforehand, customers are no longer coming in just kicking tires, taking test drives, and being non-committal. By the time they walk in after getting the transparency on the online store, they're ready to do the deal." And isn't that what every dealer wants?
Smartphones Becoming an Essential Marketing Avenue

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Among the many ways that COVID-19 has changed our lives is the rapidly rising profile of the smartphone as an automotive marketing and selling tool. Certainly, American consumers relied on their phones long before the pandemic reared its ugly head. But in the midst of the health crisis, the smartphone has become the one indispensable tool in an era when personal interaction has become far less commonplace and, in many areas, is being actively discouraged by the government.  Today the phone is being used to purchase necessities, to gather information, to commune with others virtually via social media, and to while away otherwise boring hours by playing games. When viewed through a marketing lens, all of those activities present opportunities to those who are in the business of selling cars. "I think it's a fascinating space to watch," Jonathan Harrop, senior director of global marketing & communications at Dallas-area-based AdColony, told us. "Anyone who's in the auto dealership space should definitely take another look at how people are using their phones to shop for cars. And if your business isn't looking at that as a viable channel to drive some sales, then take another look because you may be surprised by who you can reach that way." AdColony is a Century City, Calif.-based service provider that works closely with advertisers and publishers to help them maximize their smartphone campaigns and integrations. The company began as a mobile game development house, but its leaders quickly saw the opportunity advertising to gamers and other smartphone users offered. So it pivoted away from game development and into a tech service. "On the one hand, we help all those free apps that everybody's used to nowadays, to make money so that they can stay free with our technology of displaying ads," Harrop said. "And then on the other side of that coin, we enable advertisers to reach users in those apps by letting them show ads. We have both the brand advertising side, which is where the auto side of things comes in, but we also do the app-install side of the business. So every time you're in one game and you see an ad from another, there's a good chance that's one of ours."  AdColony's recent study of consumer attitudes and behavior, Car Buying Survey 2020 (USA), details just how reliant consumers have become on their smartphones when it comes to shopping for a car.  Instead of treating their phone as a supplemental research tool, consumers rely heavily on their smartphones for every aspect of the car buying process. A strong majority of respondents to the survey said they use their phones to research car models and specs (66%) and compare prices (74%). Once they've narrowed the search to their top choices, they then use their smartphones to find dealership locations (60%). The 2019 edition of the survey only saw 40% of respondents using their phones to find dealership locations. Over the last year, this number jumped up by 20 percentage points. "This year we kept the questions more similar to the previous year so we could actually gauge how things are changing," Harrop told us. "Obviously for 2020 the answers are a little different but I'm of the belief that the shift that we saw in smartphone adoption this year and smartphone usage growth isn't necessarily just because of COVID-19." As with many others who serve the digital side of the auto industry, Harrop believes that Covid has accelerated trends that were already there. Consumer behavior pointed to a swing to more and more smartphone use, but the pandemic jammed its foot on the gas pedal. "If you were on the fence about ordering groceries from your phone at the end of 2019, it's a pretty good chance you're okay with it by now," he said, "especially if you live in California or some of the more impacted states." There is no doubt consumers are becoming increasingly acclimated to using their mobile devices to access important shopping and purchasing information. And that information can come from unexpected sources, like mobile-device games. This is an area in which AdColony has enjoyed significant success. "BMW has been one of our biggest customers, especially internationally over the years doing stuff both for the main marque and MINI," Harrop said. "We've done a couple of great creative units where, within the games themselves, users are actually encouraged to interact with ads in order to receive rewards from the game. Typically, coins or extra lives or what have you." That provides awareness and some degree of branding, but the information offered to consumers can go even deeper. "Users can tap on specific hotspots to learn more about safety features, performance features, what it's like to drive with the top down — little things like that sort of plant the emotion of purchasing a car rather than just straight facts, but also giving more detail than you would get from a traditional TV ad or radio ad or even a website because it's more interactive." Forward-thinking marketers are also using consumers' own smartphones to amplify advertising messages that are delivered by radio or television. "A lot of people use their phones while they're watching TV, and I say "˜watch TV' in the broad sense that could be Netflix, that could be Hulu, that could be broadcast TV," Harrop said. "So when you see a car commercial on TV, a lot of people will go straight to their phone. You know, let me learn more about this car or let me find a dealership for this car. That increase in usage is way up from last year's edition of the survey." The study found that consumers who research cars on their phones are likely to visit a dealership. More than two-thirds of respondents (70%) said they are very likely or likely to visit a dealership after researching cars on their smartphones, and that number is up 11% over last year's result. Of course, smartphone users are also getting more and more likely to buy a car with a phone in hand. While more car shoppers use their smartphones throughout the research process, AdColony is also seeing consumers use devices at the actual purchasing stage. Nearly a quarter of the respondents to the AdColony survey said they have used their smartphones to purchase a car. More than a third of respondents say they are interested in online purchase processes. Those marketers who look at a desktop experience as the key to reaching online shoppers might be sorely mistaken. Increasingly it is the phone, not the computer, that is the key shopping and purchase tool of choice. "The younger people are the more they view a tablet and a phone as all they need," Harrop said. "And if they do have a computer they've tended to have that separation. Now that a lot of people are working from home, they've been using their computer for work and when they're done with work, they like to just say, all right, I'm not touching my computer." But their phone is their lifeline, the heartbeat of their existence. From vehicle research to price shopping to dealer selection, Americans turn to their smartphones to guide the buying process. And on the leasing edge, more consumers than ever are using their phones to make a car purchase and schedule delivery. Not only can you research and buy a car from your couch in your pajamas, but now you can buy a car on a phone app just like ordering a specialty beverage from Coffee Bean.
The Power of Dealership and Customer Trust in Automotive Marketing

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In the deep dark recesses of black-and-white television, there was a game show hosted by Johnny Carson called "Who Do You Trust?" The show was a long-running hit because, in a comedic way, it explored a fundamental human emotion — trust. That emotion resonates strongly in the auto industry because it is far easier to sell vehicles to people if they trust you, your business, and the process than if they don't, which is why it is a mystery that auto retailers don't spend more time cultivating trust within their potential customers. Though some strides in that direction have been made over the past 20 years, auto dealers and auto salespeople still lag virtually all other professions in terms of trustworthiness. Recent rounds of polling by the Gallup organization say that Americans believe only professional lobbyists and members of the U.S. Congress are less honest and less ethical than car salespeople. That's a pretty low standard, isn't it?  In its series of "Trusted Automotive Brand" studies, AMCI Global, the respected auto industry advisory company, found the customer's perception of trust in the auto industry is, at best, tenuous. The most recent of the studies calculated that the "Trust Indices" of the top automotive brands are below 50 on a 100-point scale, with 1 being not trusted and 100 being completely trusted. In comparison with many other consumer product and retail categories, carmakers and car dealers lag well behind. Some might find it ironic that consumers put more trust in retailers who sell them shaving cream or soft drinks than those that sell them $50,000 vehicles, but that is the current state of the business. "The auto industry has been chasing satisfaction for decades now," Ian Beavis, AMCI's chief strategy officer, told me. "But the industry is still putting $4,000 on each car to persuade people to buy. What we've found is satisfaction is not nearly the driver of loyalty and advocacy that trust is."  "Trust is an emotional measure," Beavis added. "The industry builds things; it is used to working with things. But to build trust it must rely on the human element." Trust a powerful human emotion and an emotion that is closely tied to buying decisions. While many observers and critics of the industry suggest that providing the car-buying consumer with more information and data will improve the process, what they fail to grasp is that the purchase of a vehicle is, at its heart, an emotionally driven decision. As I said more than 20 years ago in my book,  The Complete Idiot's Guide to Buying or Leasing a Car , nobody really  needs  a new car. Instead, the industry revolves around the fact that millions of people each year really  want  one. If a new vehicle's purchase devolves to simply a rational "asset acquisition" that would best be done by a professional, a lot of the art and most of the profit leaks out of the business like air shooting out of a punctured balloon. Instead, the best way to court an emotion-driven purchase is to cultivate that emotion with another deeply held and powerful emotion — trust. If consumers trust the product, the maker of the product, the retailer of the product, and the process they go through to purchase the product, they will be far more likely to buy — and pay more — than if they lack trust in any or all of those aspects. Further, Beavis and I agree that it has never been more critical to the auto industry than now. An automotive retailer's role is changing before our eyes as electrification, autonomy, and mobility services become more and more prominent. Consumers want to learn about the new technologies from people they trust. They don't want to figuratively keep their hand in their wallet pocket as they are being educated about very expensive technology. Factors That Diminish Trust The sad fact is that several extremely common auto industry practices are not just neutral to building trust; they are antithetical to it. Take the time-honored "ups" process, for example. A prospect walks onto the lot, and the next salesperson in line goes out to greet her or him and, one hopes, start a relationship that will culminate with that person agreeing to transfer $50K of their money into the hands of that dealership in return for a vehicle the prospect could buy at any one of a number of same-brand stores in their market. That's a multi-thousand-dollar crapshoot right there. Isn't there a chance customer, salesperson, and store would be better served by letting the customer choose the salesperson they'd like to work with? Not traditional? Too difficult?  Yes to the first. No to the second. Many dealers around the country are having success by posting photos and biographies of their salespeople online. That way, customers can decide for themselves who they want to deal with and, implicitly, who they are likely to trust. Among many who have discovered this a successful strategy, I have interviewed a salesperson in Minneapolis who uses his musical background to build rapport with his potential clients, and he reports that many of them have not only purchased cars from him but have also become friends. Why? He establishes trust with them. Another traditional sales technique that is antithetical to building trust is the age-old F&I process. Consider the psychology of this from the customer's point of view. The prospect has typically spent at least an hour with the salesperson and has managed to put aside the in-bred lack of trust in that stranger at least enough to essentially complete — at least in his or her mind — a deal for a new vehicle, a very big thing in that person's life. And then what happens? While the customer thinks the deal is done and only "paperwork" remains, she or he is then marched into a different office to meet a new person with whom they have no relationship at all. Then that person immediately tries to sell them stuff. A lot of stuff. Expensive stuff. Can't you see the tenuous level of trust that was built between the salesperson and the customer go flying right out the window? Instead of taking this trust-destroying path that should have disappeared when policemen quit hitting suspects with rubber hoses, wouldn't it be better to empower salespeople to take the customer from first inquiry to delivery? Isn't this approach more likely to engender and reinforce trust and grease the wheels of a sale? Note, too, this doesn't preclude selling products and services that are typically sold by the F&I manager. Quite the contrary, if the salesperson whom the customer trusts is selling these goods and services, the take rate is likely to be higher than in the traditional process. Developing Trust You don't have to be a clinical psychiatrist to see that developing and nurturing a trusting relationship between customer and store personnel is a good thing. Who do you want to buy something from? A person you trust or a person you suspect is dishonest, unethical, and thus untrustworthy? That should be a no-brainer. So how do you develop and nurture trust between your personnel and would-be customers? As I outline in my most recent book,  The GR Factor: Unleashing the Undeniable Power of the Golden Rule , the key is treating people (and prospects are people, by the way) in the manner you would want to be treated. In the book, I wrote this: "Treating others as you would want to be treated is not only a philosophy and an attitude, it is also the basic premise that enables win-win situations, and win-win situations are foundational to sustainable business success." That is not just a religious affirmation. It is something you can, quite literally, take to the bank.
Behavior Prediction Tech Can Improve Stores' Marketing ROI

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A dealership owes its existence to retaining as many of its existing customers as it can and replacing those who defect with new customers. That is plain to anyone who has ever spent any time around the car business … or pretty much any business for that matter. Keeping the customers satisfied is a business goal so transcendent that it has been memorialized in song. Yet keeping loyal customers loyal is a more challenging task for a dealership than it is for other types of retailers. Those who run coffee shops or delis or even clothing stores might see their customers several times a month or even several times a week. But a car dealership might not see a loyal customer for months or maybe even years at a time. You've heard of long-distance relationships? For auto dealers, the relationship might better be termed "time-distant." And like a long-distance personal relationship, it can be hard to maintain. With any luck, your store retains the sales customer as a service customer after the sale, so that is one way of maintaining positive contact. But in these days when the titillating impulse to try something new is ever-present, providing good service experiences might not be enough to persuade them to purchase from you again, especially if that customer has moved across town, or if he or she drove crosstown to buy from you in the first place. So the game boils down to keeping as many of your sales customers as is humanly possible, giving service customers the impetus to become sales customers, and gaining incremental business by enticing people you've had no contact with at all to visit your store and buy a car from you. Just like hitting a baseball or catching a trout on a dry fly, the basic concept is easy to grasp. Executing it is the hard part. One thing you could do — one thing that a great many auto retailers resort to — is using mass media to put and keep their names in front of potential customers. TV, radio, and online ads enable you to reach many people at once with a concise message about what you do…and with luck, what you do that is different from the things all your fellow dealers do. But mass media can lack two key ingredients — relevancy and personalization. And without relevancy and personalization, the expensive messages are nothing but clutter. They bounce right off the potential prospect if, indeed, the prospect pays any attention to them in the first place. On the other hand, big data plus the data you already have on hand in your DMS and CRM systems can enable you to create compelling, personalized messages to your customers and potential customers. When you think about it, your DMS knows a hell of a lot about each and every sales and lease customer you've ever had. That data can be used predictively to suggest to you — and to your customer — when they might be ready to transact with you again. The difficulty is data-mining it. This is where behavioral targeting technology like that pioneered by a company called automotiveMastermind comes in. Its behavior prediction technology helps dealers anticipate individuals' automobile-buying intentions with an amazing degree of precision. This enables the automated creation of micro-targeted communications to current customers and prospects alike. Far from being one-size-fits-all, these communications are tailored to each individual and are delivered only to them. "When you combine the DMS data that we have from the dealer on their customers with IHS Markit data, we've got over 1,000 points of data on these customers," Ian Grace, automotiveMastermind's senior manager of partner performance, told us. "That allows us to understand better who's going to buy and, more importantly, why they're going to buy. So that then we can empower the dealer with that information to make a proactive phone call or outreach to the customer." In fact, the outreach itself might provide the impetus to begin the shopping process and to buy. For example, an email might remind the prospect that she is driving at a pace that could take her beyond the mileage limits of her lease. Or it could warn a customer that his vehicle is about to go out of warranty. "Ultimately, what we're here to do is to let the dealer know what their customers' potential pain points or pleasure points are," Grace said. "Are you [the customer] in a bad spot? Or could we get you into a better spot? That's ultimately what's at the core of our technology. That's what we're letting the dealer know, and that's what our marketing is saying [to the consumer.] So we're here to ultimately help you." This just in — helping customers actually works. More to the point, providing customers with reasons to transact that are unique to them and speak to their individual circumstances are keys to marketing effectiveness and favorable marketing/advertising return on investment. Stores like Audi Princeton and Lexus of Warwick that rely on behavior prediction technology have found it has boosted their loyalty rates while at the same time gaining them sales from their service-only customers and from conquests of likely buyers in their areas. Mastermind dealer partner Lexus of Towson's first-month direct mail campaign based on the analysis of thousands of data points that enabled it to close 20 deals at a 63% close rate, up from the store's typical 35-40% rate. The ability to predict when customers are going to buy and what customers are going to buy offers magical pieces of information that dealers can leverage to their advantage. But they can only use that leverage if they are able to deliver compelling, personalized information in a timely manner. And that's where technology must come to bear, technology that can have very salubrious effects. "We've got some dealer partners that are such strong partners with Mastermind and truly believe it at such a core sort of cultural level for their store, that it's one of the questions that they ask in their interview," Grace said. "Have you ever heard of automotiveMastermind? Have you worked with automotiveMastermind at a previous dealer? And if they say yes, then that's a feather in that potential hire's cap."