Julia Manoukian

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February 6, 2019

How to Run an Operationally Efficient Dealership with Tech

Julia Manoukian

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It would be a fascinating puzzle if the stakes weren’t so high. Dealers everywhere are struggling to find a way forward as costs rise, margins shrink and the future of car sales fluctuate wildly.

KPMG's Auto Executive survey reported that:

  • 83 percent of leaders in the auto industry expect a major business model disruption by 2022.
  • 59 percent think that half of today's car owners won't want to own a car in 2025.
  • While 84 percent agree that data is the fuel for future auto sales, only 34 percent say that consumers will trust OEMs with their data.

Fortunately, there are a few best-in-class dealers who seem to have it all figured out, and you can learn from their successes as well as their mistakes.

Success in the auto industry means running at top operational efficiency, deploying the latest technology to seamlessly coordinate all the vital functions of your marketing team, specifically with brand experiences, including experiential marketing, auto shows and test drives. The results are better profits for your dealership and a better buying experience for the consumer.

Watch our latest webinar, "The Future of Experiential & Events: How Top OEMs  Leverage Digital To Impact Engagement & Bottom-Line Results," and learn what  major brands like Cadillac and GM are doing to deliver a rich brand experience  and drive sales across tiers. 

Betting on the Auto Trifecta: Dealers, Dealer Groups and OEMs

There has been a lot of media coverage over how dealers, dealer groups and OEMs jockey for markets and margins, but the reality is that when you ramp up consumer demand, all three win. All players in the auto industry should realize that you are not really competing against each other. You are in fact competing for the consumer’s attention with a million other modern day distractions.

Successful, operationally efficient dealers work closely with tier 2 dealer groups and OEMs on initiatives where their interests coincide. The same is true of successful dealer groups. Make the pie bigger and everyone gets a bigger piece of the pie.

Deloitte's dealer services group found that Millennial car buyers chose the buying experience as 3X more influential than the car design in influencing buying behavior. That experience depends on a close working relationship all the way down the supply chain, from the buyer's initial research to the final test drive.

Relationships between these groups are often strained, but they don’t have to be, and conflict can drain critical resources. The secret to working collaboratively in a vertical where priorities often conflict is metrics, according to Dan Schneider, Director of the change management firm The Rawls Group. Find out which factors matter most to your partners, then “put metrics around what you want to have happen in your dealership,” Schneider advised.

“The key to maintaining rapport [with the manufacturer] is to realize each party has reasonable expectations of the other.” Data shows you what you have accomplished and where you’ll have to go next.

Consider these best practices for the business continuity of auto dealers and dealer groups in the new economy:

1) Investigate the existing marketing materials, data management tools, and lead strategies of your partners

There are tons of creative, practical ideas out there for events, contests, and other forms of lead capture that have already been battle-tested in the market. One winning idea was based on dialing up the dealer’s social media presence while taking an active role in local teams and sporting events.

Phil Nightingale, general manager of Mel Hambelton Ford in Wichita, KS, sponsored a local high school football team and showed up at the games in a helicopter. Another of their special events involved working with his contacts at Ford to offer a 2 year lease on a new Focus as a prize. The expense of putting on, managing and following with customers after the events on social media can be shared by all participants at multi-dealer events.

Key Benefit: You don't have to devote huge amounts of cash or time in creating marketing assets like registration sites, creative materials for kiosks, ideas for contests, test drive sign-ups paperwork, etc.

Your dealership or dealer group can showcase the creative work that an OEM has already put thousands of dollars into producing and promoting. Despite the success of XM and social media, dealers still spend nearly three out of four marketing dollars on old school advertising channels like TV, radio, direct mail and even newspapers. That’s not where the buyers are.

2) Get to know your customer better using existing data available at the OEM/Tier 2 level

In EY’s report on the Future of Automotive Retail, survey data revealed that 72 percent of consumers would visit dealerships more often if the buying process was easier. More than half of new and used car buyers visit the dealer’s website at critical moments in the purchase decision.

Insights like these imply that customers are seeking a less complicate, more integrated online/offline buying process. Research like this can only be collected from macro-scale market research.

Key Benefit: You’ll never know what’s working until you find a way to start measuring it. Leading dealers use data analysis, but collecting that data requires the resource of a tier 2 or an OEM marketing group. Data analytics help dealer design more efficient operations, and improve customer personalization, boost conversions, and fill up the lead pipeline from OEMs. In the end, all that really matters is that better use of data correlates to higher revenues.

3) A closer collaboration among dealers, tier 2, and OEMs provide a better, more cohesive experience for the consumer

Every player brings their own strengths to different parts of the buyer’s journey. Even though 70 percent of auto buyers begin their research online, 52 percent say that in-person dealer visits are still an essential step in the purchasing decision.

Best-in-class dealers offer the consumer the experience they expect and feel they deserve. Revenues and referrals follow the customer’s perception of the buying experience. To test out the value of the customer experience, KIA conducted an experiment with a chatbot on Facebook Messenger that could answer questions and develop customer relationships. The result was a conversion rate 3X higher than that of visitors to Kia’s main website.

Key Benefit: The old ways of high pressure sales don’t work anymore. Dealers, tier 2 and OEMs all win when they customer feels comfortable enough to stay will their preferred suppliers and recommend them to network connections. This improves customer’s lifetime value because when you have the data and the relationship in place, you can better predict when a consumer's will be in the market for a new vehicle and send them relevant messaging.

Tonight’s Winning Numbers

Wasting money on traditional marketing channels and intra-vertical conflict has hurt dealers, tier 2 and OEM companies alike. A new world of digital-first buyers and data driven customer experience campaigns define where the auto retail is headed in the years ahead.

Revenue leaders in the auto industry are already collaborating on experiential marketing materials, using data to better understand the contemporary buyer, and creating unified consumer experiences that increase lifetime value. Put the three together and that’s a winning ticket.

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