Research & Analysis

Connected Television Represents A Great Disruptive Opportunity for Dealers

By

It is estimated that 39% of adults are watching video on a CTV device on a daily basis. This is up from 31% back in 2019 according to  data  from Leichtman Research Group (LRG)1. This represents a large audience with spending power and the desire to shop for a vehicle. As a result, dealerships are taking a closer look at the connected television medium because of who is viewing CTV, as well as how often, not just the overall households.  The increase in CTV also represents a disruptive leveling of the playing field for advertisers who historically have purchased traditional TV, and those who could not previously afford it due to budget constraints or efficiency concerns.  The programmatic targeting capabilities of CTV allows for large advertisers to buy more efficiently through diversification of their media mix and better data fidelity in their audience reach. It also allows smaller or more niche advertisers an opportunity to advertise in front of larger audiences on television without the high cost and ad waste associated with traditional media buys. Creating greater efficiencies The decision for auto retailers and their advertising agency partners to consider CTV is less about re-allocating digital media budgets to video, which most dealers already execute through programmatic and social video campaigns.  Furthermore, dealers should not entirely abandon their traditional media buys and budgets, either. However, in many cases those dealers that begin to explore a reallocation of portions of their traditional media investments over to CTV see significant improvement in the performance of their overall media mix and experience a positive impact on their cost per unit sold and serviced.  Increases in target markets The first CTV benefit is scale, where dealers can leverage large programming opportunities and access across major recognizable logos that has strong coverage across networks and devices. Secondly, dealers and their partners in CTV are continuously working to understand the market penetration they are gaining or losing, and have access to unique data technology to ensure campaigns are on par with the reach of top cable providers. These partners also offer dealers access to digital media purchase technology that leverages a Demand Side Platform (DSP), which is software that allows media buyers to buy each impression based on whether the viewer meets their audience parameters. They can also help ensure ad content is not played along side or in tandem with violence or other sensitive subjects that would be detrimental to a dealer’s overall brand values. Driving greater bottom-line results While all of this sounds promising, results are what matters. One mid-size regional dealer in Florida recently tested an Amazon DSP against other traditional media platforms and ran a two-week CTV campaign, directed to in-market shoppers on FireTV, within their store’s PMA. Their campaign measured correlative metrics holistically against all digital media channels including search, fixed ops, social, sales, and ROs. The dealer saw significant gains in performance across every measured metric when looking both at period-over-period and month-over-month. Furthermore, to test the fidelity of the data, they also measured key metrics when the campaign was terminated and saw almost a 15% decline in impressions and clicks in search, coupled with a distinct drop in shopper engagement on the website. This included a +57% increase in sales, +17% increase in closed ROs, and a +16% month-over-month increase in dealership revenue, according to data from PureCars. Dealers are naturally hesitant to jump into the CTV pool all at once. However, with the results from this dealer’s trial along with the ongoing growth of the CTV category, this disruptive platform will continue to grow as a viable alternative providing a competitive edge to those dealers that explore their options early on.   1:  https://www.leichtmanresearch.com/39-of-adults-watch-video-via-a-connected-tv-device-daily/
Inventory Trends

By

Ups and downs on the road to more normal inventory levels How long have we been waiting for inventory levels to return to normal? At this point, the ongoing inventory crunch in both new and used cars is just part of the environment, but we know it’s not permanent: while we’re not seeing much concrete evidence of an easing of supply pressure, there are indications that it’s not too far off. That said, there are multiple factors that seem poised to  delay  a return to normal. In addition, “normal,” when we do get there, might not look the same as it used to. The days of a 60+ day supply being the standard might be behind us, as industry-wide changes like the rise of digital retail and build-to-order continue to evolve.  Here’s a look at some of the factors we’re seeing and what they will mean to dealers, with one small warning: they all change quickly, and the picture may have changed between writing and publication. What does the data say now? To answer a question like this, we first turn to the data. At CarGurus, we’re lucky to have a huge amount of real-time data on vehicle availability, pricing, and time to turn, which our Industry Analyst Kevin Roberts uses to publish the monthly  Vehicle Availability Index .  The VAI compares month-end inventory per dealer to a starting point of November 2019. The most recent index, for February 2020, showed new car availability barely down over January, but still down almost 70% YoY. Prices were just slightly up for the month and sit 25% higher than last February. The picture is better on the used side, with the index up 2% over January and up about 5% YoY. As with new vehicles, prices were barely up over January, but YoY used prices are up 39%. What was interesting on the used side was that we saw the first signs of declining prices throughout most of the month, which made sense given that used inventory was back to pre-pandemic levels. However, the decline didn’t hold as consumers continued to snap up vehicles across a wide range of prices and styles. What could lead to a continued rebound towards more normal inventory levels? Early in the year, there seemed to be more potential positive factors that would help get more vehicles back on dealer lots. Here’s some of what we’re watching that could help the rebound, in a rough order of most to least likely impact. By far the most impactful factor would be new vehicle production levels getting back to target. LMC Automotive’s forecast originally expected that in Q3, but a combination of circumstances has pushed it back to at least Q4. Keep in mind that pent-up demand will probably absorb the beginnings of increased production, so inventory won't instantly rebound as manufacturing ramps up.  The potential for more interest rate hikes in the US to counter inflation would reduce demand fairly quickly as loan rates go up, and lower demand would give dealers a chance to restock.  As businesses continue to develop return-to-office plans, commuters may start to get over fears of rideshare, carpooling, and public transport. That would also reduce demand, although it could take a long time to set in. Rental companies could also get back to more normal operations, focusing again on building their fleets with new cars and offloading highly in-demand late-model vehicles into the used car market. What could prolong the situation even further? Unfortunately, as we’ve gotten through Q1, it seems like those positives are starting to get outweighed by an accumulating pile of negative factors. Supply chain issues continue to be the biggest threat – and it’s not just about chips anymore. Industry analysts downgraded production forecasts in response to two big developments in Q1: Russia’s war on Ukraine disrupting supplies of both raw materials and automotive parts  A new round of COVID-based shutdowns in China shuttering critical factories Those two factors, combined with ongoing semiconductor shortages, have the potential to push out the return to normal inventory levels to the end of 2022 or longer. But they’re not the only threats: Ongoing economic improvement would be a good news/bad news situation for dealers: if a small bump in interest rates keeps inflation down and employment continues to expand, that’s great for the country as a whole – but it puts more pressure on inventory as consumers have more buying power and more need for vehicles.  Good old seasonality could also drive up demand. While tax season looked a little delayed this year, the typical refund/warm weather buying patterns are likely to bring more customers in looking for both new and used vehicles.  Other more general factors could improve consumer sentiment: if the Ukraine conflict comes to a reasonable resolution and COVID fears and restrictions remain low in the US, we could see more buyers out there competing for a limited inventory pool.  Gas prices could have an impact as well, but that’s more likely to shift demand to smaller or alternative powertrain vehicles than it is to reduce demand entirely. That could increase competition even further in the EV/hybrid market, but it’s also probably a short-lived impact.  Finally, and I can’t believe I have to say this, we’re also hoping no more container ships full of cars catch fire. It might not have had much real impact on the market, but the symbolism was just a bit too much.  So, what does it all mean? Over time, we know that consumer demand, OEM production, and dealer pricing will return to a more normal balance. It might not be the same as it was in 2019, but it won’t look like the craziness of the last two years. Overall, it seems like the return to normal is being delayed by the combination of new economic, supply chain, and political factors. We expect markets to head towards more typical levels late in the second half of 2022, but we’re going to keep an eye on those negative factors to see if that gets pushed out further. 
connected car
Connected Car Helps Drive Automotive Retail Consolidation

By

Automotive Retail is Consolidating It’s no secret that significant consolidation of automotive retail is underway. Every week, Automotive News reports additional acquisitions by the leading retail consolidators. Earlier this year, Automotive News reported that the consolidation trend has continued steadily over the past 10 years – even through the pandemic. At the end of 2020, the Top 150 Dealer Groups owned 21% of all dealership locations and represented 23% of industry sales volume. This is up from 13% of locations and 16% of volume ten years earlier.   The need for significant technology investments is one driver of consolidation. Smaller dealers are faced with large investments to enable digital retailing to meet customer expectations. Dealers are also facing new investments in electrification technology to accommodate the industry shift to EVs. And some dealers are choosing to sell rather than make the investments. For example, approximately 20% of Cadillac dealers are reported to be walking away from their franchises, rather than make required investments in selling and servicing Electric Vehicles.   Tesla’s Retail Approach Shows What is Possible Tesla’s retail network shows that technology can not only be a driver of consolidation, but also an enabler. Tesla has fewer than 200 Sales Galleries and fewer than 150 Service locations. Connected Car technology is one of the keys that makes it possible for Tesla to service its customers with so few facilities. On the sales side, Tesla enables comprehensive on-line shopping. In service, Tesla says that it can accurately diagnose 90% of all issues remotely and that it can repair 80% of problems without a visit to a service center. Connected Car technology makes this possible by allowing Tesla to remotely connect to its vehicles for diagnosis and for ongoing insights into real-world customer usage. Tesla can also determine the customer’s location if it needs to dispatch a remote repair and Tesla can often repair vehicles with an over-the-air software update. It is safe to say that Connected Car technology is the only way that Tesla could operate with so few physical locations. As this technology becomes more widely used by all OEM’s, there will be growing opportunities for other OEMs to consolidate sales and service facilities. Lessons from the Pandemic and the Chip Shortage Both the pandemic and the chip shortage have accelerated trends toward digital retailing and reduced inventories. As reported in Car and Driver , Ford has concluded that the pandemic accelerated customer interest in shopping and ordering vehicles on line. Many dealers successfully responded by offering at-home test drives and deliveries. A build-to-order mindset for consumers has been further accelerated by the chip shortage, which has made it difficult for dealers to hold inventory and for customers to shop from inventory on the dealer’s lot.   Connected Car Technology Will Enable Further Consolidation Connected Car technology will further enable the trends toward retail consolidation and digital retailing. As Tesla has demonstrated, a well-connected OEM and Dealer network can easily provide remote sales and service to customers without needing so much real estate. As customers become more comfortable with online ordering and remote service, the most successful dealers will be those who make the best use of technology to serve customer needs.   We will soon see dealers making extensive use of Connected Car tech in their sales and service operations. For example: In Sales, vehicles can be made available for any-time test drives and parked inaccessible locations. Vehicles can be electronically disabled to prevent theft and only enabled for prospects with a valid authorization code. Also in Sales, a limited test drive can be extended to a short- or longer-term rental, with data collected to make effective suggestions to the customer for a customized vehicle, accessories, and software. In-Service, ongoing monitoring of vehicles will create increasingly sophisticated predictive models. These will allow Dealers to contact customers long before a failure occurs and offer either a physical repair or a software update. Also in Service, Dealers can monitor vehicle diagnostics trends, and can proactively schedule vehicle maintenance to be done at a time that is most convenient for the customer and also the most efficient for the dealer. The bottom-line result will be continued consolidation and more efficient use of real estate to meet the needs of automotive shoppers and owners. 
google game
Dealer Websites: When Gaming Google Hurts

By

It’s been nearly 6 years since “Dieselgate” broke and Volkswagen was busted by the EPA for gaming their diesel car emissions tests. When the vehicle emissions were tested, the vehicle software adjusted the emissions to be “clean”, when in reality they were anything but. The result of this scandal ranged from lawsuits to government fines. The lesson, aside from the various ethics debates we could have over beer, was that gaming the EPA might have seemed like a good idea at the time, but when they got caught it cost Volkswagen its reputation and a carload of money. “Gaming” Google” But what if I told you that I can show you that at least 3 website vendors are gaming Google in a similar fashion. Is this a victimless act or does it potentially cause problems for dealers? What’s the game? It’s simple: Some vendors serve up an amended version of their website when Google’s tools evaluate the website’s performance. While you’re seeing a fully functioning website, Google “sees” a bare-bones fraction of the real thing. The result is that Google thinks that the site is extremely fast, when the truth is something else. How’d We Get Here? I imagine that you are now wondering how we discovered the “game”. It’s pretty straightforward. Part of the work that we have been doing for the last 21 years is creating performance optimized websites for dealers. This means that we have a lot of experience building websites that work as well as possible for dealers given the constraints sometimes imposed by OEMs, and the myriad of third party apps and code embedded on websites. As our work evolved, we started using Google’s algorithm as a benchmark for success through its Google Lighthouse Chrome extension and its Google PageSpeed Insights tool (they both basically do the same thing, but GPSI is easier to use). How did we do this? A couple of years ago we built a tool called SurgeRecon that, among other things, evaluates website performance for a range of factors. For the purposes of our conversation here, the analysis gives us information on mobile page speed and SEO, two things that are critical to website success for a dealer. This data, drawn from Google Lighthouse or GPSI, can identify the probable causes of a slow website thus giving you a checklist for potential success. Time to Test and Validate We decided to test Google’s recommendations over a year ago on a bunch of our dealer websites and the data was compelling.   When we compared the performance of these Google optimized websites to their unfixed earlier versions of a year before, we discovered significant improvements: Page speeds had been cut in half to about 3.8 seconds Sessions had increased and their average duration had improved by 27 seconds Bounces had significantly decreased And, most importantly, organic leads had increased by an average of over 30/month  This data tells us that Google’s recommendations work. Therefore, ignoring Google’s evaluation, or gaming it so that one’s mobile speed appears better than it really is, risks lost opportunities for the dealer. ( Follow this link to read our full post about our work on this subject written by me with David Kain and Tom Kline , both industry heavyweights.) What Your Customer Sees vs What Google Sees Let’s now take a look at what “gaming” looks like. We’ll start with a simple Google Lighthouse analysis of a buy here/pay here dealer (seen below).   Check out those stats!!! This dealer’s mobile website is rated 100/100 ( #1 ) for performance. That’s incredible, but it is just too good to be true. If you look at #2 below, you see that the “largest contentful paint” (when the site is ready for interaction) is 6.6 seconds. Not good. But when you look at #3 , you see that the reported time is only .8 seconds. Oops. Those are the reported numbers. What you might ask now is what do the actual “websites” look like? For the dealer website that we’re showing here, here is a comparison between “What you see” and “What Google sees” when the website gets tested by Google. This difference is massive. The gamed version on the right lacks images and third party apps and code that can slow down load time. In order to serve up the abbreviated site on the right, the website code does something called “user agent sniffing”. In this case, it identified that Google Lighthouse was testing the site, and then served up a different batch of code. It might be a mistake or intentional. You decide. But remember: The most important lesson here is that the mobile website does not take .8 of a second to load before it is usable; it actually takes over 6 seconds. This is important because according to a Forrester study (from over 10 years ago), 40% of consumers won’t wait more than 3 seconds for a web page to load before abandoning the site. Add on more seconds, and even more people abandon the site. Get to 10 seconds, and many won’t ever return. So What Can You Do? Test with Google PageSpeed Insights Testing with Google is very easy. All you have to do is follow this link , enter your dealer website’s URL, and select the “ANALYZE” button.   Don’t be surprised if the results are poor, say 30/100 or lower for your mobile page speed (how long your mobile website takes to download to a mobile device). That’s very common, and even high when you look at the industry average of 13/100 (from a test we did with over 10,000 dealer websites).   However, if your results seem really good, say 80 or higher, then getting a second opinion is advised. To do this, you can download another extension called User Agent Switcher for Chrome and add it to Chrome.     Once loaded, find the extension, click your right mouse button on the extension, select Options, and then add this information to the User-Agent list: Mozilla/5.0 (X11; Linux x86_64) AppleWebKit/537.36(KHTML, like Gecko) Chrome/61.0.3116.0 Safari/537.36 Chrome-Lighthouse . Once done, save the item, open the extension, and then load your website.   Of course, if you want to skip the work to set up User Agent Switcher, then just use our free SurgeDective app . It just takes a few seconds to test. Hopefully, when you run your test, the website will look like your existing site. If it doesn’t, has less content, or is just a bunch of text, then you have a problem. You should talk with your vendor to see what’s going on or contact us for help. Where Do We Go From Here? Testing your website every quarter is a good idea. Websites can collect code and other things that slow down its performance over time. Getting the test done lets you know how well your site is working, or if it has problems, it tells you that you better get your vendor on the line to do some improvements.   To encourage improvements, you can request that your vendor run the GPSI test, and then discuss the results with you. Or, if you find out that your vendor appears to be gaming Google, then you can have them use our SurgeDective tool, and Google PageSpeed Insights, to make improvements. Whatever you do, paying attention to your site speed is critical. Every second above 3 seconds can cost you a customer. And that means potentially lost money for you.
zero click searcg
Zero-Click Search Is Important, but Web Clicks Have Not Gone Away

By

There has been an increase in discussion of late (blog posts, conference sessions, etc.) talking about the Zero-Click search trend related to Google My Business, and the impact it is going to have on your business. For those of you not in the loop on this, Zero-Click searches are those where a consumer conducts a search on Google (or other search engine but really, almost all searches go to Google) and then never clicks through to any website.  Sometimes this is not a bad thing.  Consumers conduct a search to find a phone number and if they click to call, that counts as a zero-click search. They might also be checking your business hours or your reviews, and again, they can get that information right from your Google my Business page with no need to visit your website.  The concern though is, that as Google adds more content to the GMB pages, such as Products, and Cars for Sale, will your GMB page (or pages, assuming you have at least one for Sales, one for Service) essentially steal traffic that would have otherwise gone to your website? It is a justified concern, at least enough so that you should be optimizing your Google My Business pages as consumers spend more time there, but have web clicks really disappeared? Re-strategizing I propose that people still visit the dealer website prior to purchase even if they start their process on Google My Business, and that web clicks are, for the most part, alive and well. To check my theory, I actually looked at 100 dealers and the interactions from their GMB page, specifically, how are web clicks trending compared to Click to Call, and Direction Requests. (on a side note, 100 dealers out of approximately 18,000 is a 90% confidence level with a 8% margin of error.) Seasonality and the variance in demand over the last year make the numbers challenging to compare, so more research is needed, over a longer period of time to truly determine a trend, but here is what we can see today: Comparing 100 dealers, between 2nd quarter 2021 vs 3rd Quarter, 2020, we see that Phone Calls are up 9.2 % and Direction Requests are up 13.4%, so if Zero Click is impacting how consumers engage, we would expect the Web Clicks number to have decreased, or at least see a lower increase than the other interactions. However, Web Clicks actually fall in the middle with an 11% increase during the same period. This would lead us to believe that the Zero-Click trend has not impacted auto dealers' web clicks, at least as of yet. Even looking at the chart above, we see Web Clicks growing steadily along with other interactions. Why do we care so much about Zero-Click? You always want to have a deep understanding of how consumers buy your products, this includes: how long is the buying process? What triggers start the process? And where do they start their research? What is critical to understand is at what point consumers are making a decision on which vehicle they intend to purchase and from which dealer. If you understand this, it can tell you when you need to be in front of the consumer with marketing messages so you are included as one of the purchase options. Once consumers have decided, at least on the model they want, we want to know where they go to find the relevant information they need to decide where to buy. That is where the Zero-Click conversation comes into play.  Will they go to your website to get the information they need? Third-party websites? Or as the Zero-Click trend would suggest, Google My Business. Wherever the consumers spend their time researching to make a decision, is where you what to invest your time and marketing resources. Google does dominate in consumer searches, but what we see from is the data above is they have not abandoned dealer websites as of yet. 
effort results
What Dealers Want From Their OEM Programs

By

Automotive manufacturers create programs for their dealers to improve operations, drive up sales, and increase customer loyalty. But how successful are these programs in actually driving results for the dealers? RevolutionParts conducted a survey asking hundreds of dealers how effective they thought their OEM programs were and what areas they felt needed the most improvement. As a whole, dealers who adopted their OEM programs generally liked them, which is great news for manufacturers. This means their dealers see value in adopting and running these programs. Currently, OEM programs permeate the entire dealership, but more so in the parts department than anywhere else. In fact, a whopping 84% of dealers use OEM programs in their parts department. The three most significant considerations dealers take into account when deciding whether to adopt an OEM program are:  The overall cost of the program Overall sales impact and life directly from the program The success of other dealerships using this program Although dealers were generally satisfied with their OEM programs, they also reported that they wanted these programs to provide more resources and incentives to help drive their sales more effectively. More than half of them also felt like the program was designed to be more beneficial for the manufacturer than for their dealership. Areas of Improvement for Manufacturers One of the biggest concerns among dealers was program communication. Up to 50% of dealers reported that manufacturers needed to improve communication around their programs to help and provide more employee training and support. Nearly 45% of dealers said that manufacturers needed to expand OEM programs to better reflect current and future business models.  When asked what manufacturers needed to work on, dealers said they wanted:   Easier to use programs (especially for online sales) Higher-quality training for employees Better customer service support Consistent inventory tracking Offer higher-value incentives for dealers to drive sales Improvements made to each of these areas will help dealers improve their eCommerce sales, help them engage with their customers more positively, increase customer retention, and build customer loyalty.  Dealers Want More eCommerce Support Today, most dealers understand that the way people do business is changing, as more people are going online to shop for cars, parts, and accessories, and to schedule service appointments. Dealers today are looking for eCommerce solutions to help them expand their business online and reach their overall goals, an area most dealers feel their programs are lacking.  While most dealers are willing to adopt their OEM programs to support their eCommerce goals, dealers felt that these programs could use some upgrades. This is a big opportunity for manufacturers to change along with their dealerships to offer better eCommerce solutions.  Get the Full OEM Program Satisfaction Survey Results The RevolutionParts OEM Program Satisfaction Survey gives insight into the needs of dealerships across multiple areas of OEM programs, overall OEM program satisfaction, and what OEMs can offer their dealers to help drive their business growth goals. View the full report here .