Community

Share your automotive expertise

2 Write a Blog Post

Filed in: Marketing, Internet/BDC

The Differential Advantages that made Cobalt the "Elephant" of Automotive Digital Marketing…

By Jeremy Alicandri on Nov 13, 2013

 

If there’s one thing that I learned from NADA’s Dealer Academy, it's that technology cannot replace the sales effectiveness of strong and embedded processes within a dealership. While I’m generally quick to buy into the benefits of new technology, my background in management consulting compels me to first analyze the “business case” of every possible decision.  Technology can lead to a sustainable competitive advantage in certain industries, but in the franchised and territorially restricted auto franchise sector, technology is only a tool.

When I decided to switch digital solution providers last year, "technology" was just one component of my decision. I found that Cobalt could handle virtually every aspect of my group’s digital marketing initiative - SEM, Behavioral, SEO, Website, Mobile, Social, and E-mail Marketing – therefore addressing brand consistency as a component. In addition, Cobalt promised enterprise level “integration,” something no other BMW approved website vendor was able to offer. Finally, there's the financial component; Cobalt offered the most BMW approved co-op options of any digital marketing vendor. After looking at all the components of a solution, and not just the "technology," the business case became substantiated and I switched my entire group’s digital marketing to the Cobalt platform.

Last month, as a follow-up to my decision to switch, I visited Cobalt’s Seattle Headquarters for one long week; I had several goals for my trip. First, I wanted to visit, in person, the company responsible for my group’s digital marketing platform. Second, I wanted to learn the differences that led to Cobalt becoming the largest automotive digital solution provider.  And third, I was there to provide Cobalt Management with my “2 cents” on improving their product offerings and product relevancy for dealers.

Cobalt’s Uniqueness – “Who says elephants can’t dance?”

As Lou Gerstner, the former CEO of IBM proved when he turned around IBM in the nineties, “elephants can dance.” Despite Cobalt’s size, the company deployed a business development strategy that generated a unique suite of products backed by solid OEM relationships.  These strategies and relationships, that have been cultivated over the past 15+ years, rewarded Cobalt with a differential advantage today.

What differences did Cobalt combine to create a competitive advantage in digital marketing?  

1. Advanced Development Capabilities and New Technologies

Cobalt’s dealership website platforms, analytics, and other tools are all built in-house by Cobalt engineers with an automotive focus.  Cobalt also follows an “agile development” model – allowing them to make enhancements and bug updates to their product offerings quickly. However, Cobalt’s programming superiority is recognized by the achievement of one major industry accolade that no one else in automotive has – the certification by the IAB (Interactive Advertising Bureau).

What does this mean?

In a nutshell, Cobalt became one of only a handful of tech companies (joining the ranks of Google, Yahoo!, and others…), in being able to provide premium ad space for car dealers(and OEMs). This is a huge benefit for dealers as it provides much more “bang for the buck” with digital ad spend. Additionally, this certification brings further efficiency to the SEM bidding process, by implementing technologies to reduce SEM waste and overbidding – a major issue for dealers.The IAB certification was a major technology win for Cobalt, that brings recognizable and “pragmatic” benefits for dealers.

Outside of explaining the details on the IAB certification, Cobalt also allowed me to view some of their newest products during my visit. I’m going to skip the specs on these tools, and instead discuss their business importance:

  • The “FLEX” Websites
    • By now, the new “FLEX” sites have been discussed and viewed by many in the industry, but yet a full rollout still isn’t complete. To recap, FLEX allows dealership staff to customize their own websites on the fly; whether it’s adding pages/content to the site, updating specials, or just the ability to change the look/feel of the site – Cobalt’s FLEX websites allow all these changes while also maintaining OEM brand compliance. In addition, FLEX sites also create seamless mobile equivalents of the newly created pages, making it easy to keep up with mobile users.
    • Benefit: Allows dealership staff to seamlessly customize the site based on individual preferences/needs – saving time and money. Moreover, when combined with “heat mapping"(visual mapping of user activity), dealership staff can optimize the site based on clicks/mouse hovers – thus maximizing the content on each website and increases conversions.
  • Personalized Websites
    • Personalized websites are dealership websites that dynamically update to reflect the consumer’s referral or past shopping behavior for a specific vehicle model. For example, if a customer clicked a SEM ad for a Chevrolet Tahoe and was directed to the dealership’s website, Cobalt personalization will automatically change the dealership’s website to showcase Tahoe Inventory and also make the site more “SUV centric.” While I feel the name of this product is misleading, as it’s not truly personalized and merely just behavioral, I’m told future versions of this product will be tailored to specific consumers. Thus, genuine personalization is coming – and I’m looking forward.
    • Benefit:  Consumers find the information on the preferred model more quickly, therefore improving conversions rates and lowering abandonment rates for the dealership site.
  • New VDP Pages
    • Amazingly, the last time Cobalt updated their standard VDP was in 2008 - a lifetime ago in “Internet” time! In fairness, there are several valid reasons for this delay (notably stubborn OEMs), but Cobalt is finally releasing new OEM specific VDPs as I write this post. To oversee this massive project, Cobalt recruited a former Senior Product and User Experience Manager from Amazon.com, a gentleman named Ben Herd. Ben is a very experienced tech veteran with a track record that traces back to being one of the first developer’s for Microsoft's AdCenter( a billion dollar revenue channel for Microsoft).  Prior to launch, Ben’s team at Cobalt researched the ideal VDP. They held several user experience sessions in their Seattle headquarters and performed detailed research that’s on par with the standards of Amazon and Microsoft. While still overdue, the end result is a well-researched and robust VDP that should be “hitting the shelves “in time for Christmas. (of course; OEM approval required).
    • Benefit: Consumers have more options and a better layout to search inventory and research models on dealership sites. This should increase conversions on the dealership website and provide dealers with more insights into the behaviors of consumers.

 

Above are the technology highlights that I reviewed during my visit. I’ll spare you the minute details of each Cobalt product, but it’s important to understand that while the Cobalt technology landscape is very advanced, it is also slowed by OEM gridlock. Regardless, as I explained earlier, dealers shouldn’t get “lost” in technology - it's only one component of a solution.

2. Account Advocates (aka “Cobalt Procare”)

In 2005, Cobalt introduced the “ProCare” Service to assist dealers with managing their websites by assigning Cobalt staff to do the “legwork.” The ProCare Service was a critical value added service for many dealers because it made the process of updating and maintaining the website much simpler. Many dealerships have onsite staff that is responsible to perform updates to the site (e.g. change specials, staff bios, holiday graphics, etc…). However, this can be an unneeded expense or produce undesirable results at times. The Advocate Team addressed a major pain for dealers by no longer forcing dealership staff to be the “do it yourselfer.”

 

3. Talent & Culture
One unanticipated surprise of Cobalt was the company’s collection of top talent. When I visited Cobalt, I expected the staff to mostly consist of recent college grads. I was surprised to find many highly qualified and educated tech veterans – that have worked at companies such as Microsoft, Google, and Amazon.com – and attended universities such as Yale and Harvard. The entire staff, including John Holt (Cobalt’s CEO & Founder), works in an open floor cubicle atmosphere with no dedicated offices. Finally, I was also impressed with Cobalt’s commitment to diversity, which is found in all ranks, and has helped cultivate a workplace that is regarded as one of the best in Seattle.

 

4. Leveraging OEM Relationships

Beginning in 1996 with Lexus, Cobalt made the fateful decision to focus their business development efforts on OEM relationships. Cobalt strategized the obvious in 1996; if OEMs endorse or mandate Cobalt dealership websites, then Cobalt’s path to success would become guaranteed. Cobalt felt they could offer both dealers and OEMs more value by ensuring brand compliant design and consistent brand elements – while also providing the OEMs with detailed analytics from the dealership’s sites. The OEM relationships allowed Cobalt to gain special treatment as a “co-opable” and preferred vendor with most major OEMs, therefore mandating or incentivizing dealers to choose Cobalt for their dealership websites. However, this huge advantage is not without downsides, as dealing with OEMs can cause development bottlenecks (e.g. the VDP delays explained earlier).But to be clear, while OEM mandates can prove to be both a curse and blessing at times, overall, they are benefit for dealers as they create marketing baselines and also provide expanded opportunities for co-op.

  • OEM Relationships Lead to Expanded Co-op Opportunities for Dealers

Before switching to Cobalt, nearly 50% of my dealership’s co-op budget was unused. BMW’s restrictions limited the funds to mostly traditional media(e.g. print, TV, radio); certainly less effective and more costly than digital advertising (at least for most dealerships). However, Cobalt was able to negotiate a deal with BMW that allowed co-op reimbursement for digital advertising services (another example of why OEM relationships are good).

 

Dollars & Sense Example:One of the main reasons I switched my digital marketing to Cobalt was to take advantage of the BMW co-op opportunities. At the time of my decision (and to my knowledge this is still the case), Cobalt was the only vendor recognized by BMW for seamless reimbursement of SEM/consumer behavioral ads. While every dealer’s co-op needs may vary, and every OEM’s policies will differ, one major advantage for Cobalt is their ability to provide a variety of “co-opable” digital advertising options for dealers. By switching to Cobalt, and obtaining co-op for an expense which previously was not covered, I was able to save my group over $150,000 in one calendar year.

 

5. Future Integration (The sustainable and most important competitive difference for Cobalt/ADP)

The full and seamless integration of a dealership’s digital marketing platform, DMS, CRM, and F&I tools will prove to be a paradigm shift for retail automotive. When the data silos are removed, these disparate systems have the ability to provide dealers and OEMs with a wealth of information and analytics – while also allowing both the dealer and OEM to provide their mutual customer with a truly personalized and differentiated customer experience. Moreover, the resulting efficiencies of full integration will improve the profits of OEMs and dealerships by enhancing the quality and speed of interacting with the retail customer. So when will this happen? According to Chris Reed, CMO of Cobalt, Cobalt/ADP expects to begin delivering the benefits of seamless integration within two years.  While I’m not sure if Cobalt/ADP will reach this goal as quickly as Chris suggested, when they get there, it will be a huge boon for dealers and OEMs – I’m really looking forward to it.

 

The five strategies above led to Cobalt’s current differential advantage.  While Cobalt’s management exercised many successful tactics that included OEM relationships, recruiting talent, and selling to ADP, the company also benefitted from being one of the first companies to enter the digital automotive marketing space – giving them the first-mover advantage.

Is it bad for a digital solution provider to be as big as Cobalt?

There are several industry “experts” that cite Cobalt’s size as a weakness.  Specifically, many detractors feel it’s impossible for Cobalt to fairly promote a dealership client, if a dealership’s same brand competitor is also signed up with Cobalt (as is the case when OEM mandates require all dealerships to sign up with a particular website provider). Indeed, from the surface, this seems like a valid concern. However, when you dive into this topic, you’ll learn that Cobalt’s size allows the firm to divvy up clients and mitigate this conflict – so competing clients are not represented by the same Cobalt reps. In fact, in addition to addressing this obvious conflict of interest, Cobalt also measures and challenges their employees to maximize the marketing effectiveness of their specific dealership portfolio – therefore creating an internal competition within Cobalt to ensure each dealership’s marketing potential is maximized. Regardless, Cobalt allows other vendors, including Cobalt competitors to customize or integrate with a dealership’s website. Therefore, allowing a dealership a level of autonomy while also ensuring brand compliance.

Conclusion:

As I gain more experience in the industry, I’ve become increasingly skeptical of the myriad of vendors that product push dealers into costly mistakes; by either providing redundant tools or simply producing products with minimal value. There are many variables that affect a dealership’s sales effectiveness – but the most effective dealers have consistent processes for handling leads, showroom traffic, phone ups, and the existing customer database. In the dealership world, I feel dealers should follow a pragmatist’s approach and choose a digital solution vendor that can provide a “holistic” solution that maximizes co-op, believes in democratization, and can deliver future integration.  (See my post: Using a Cheeseburger to help explain Cobalt as “Holistic”…)

As for my group, we’ll continue to add ingredients to our “secret sauce” and perfect our internal processes. However, the promise of a fully integrated digital/DMS/CRM platform remains at the forefront of our strategic initiatives.

Stay tuned...

 

Interesting Facts about Cobalt:

  1. Cobalt is located in the former headquarters of Amazon.com in an earthquake proof building.
  2. Cobalt is known by the Seattle tech crowd as the “automotive company” of Seattle.
  3. At night, Cobalt’s Headquarters becomes the “Land Down Under.” Literally, a night staff of native Australians work to solely support Holden Automotive (GM in Australia).
  4. In 2010, ADP purchased Cobalt for $400 Million in cash. This was an inflection point for the company, paving the way for a truly integrated dealership marketing, DMS, CRM, and “big data” platform.
  5. Internally there is a term called the original “50” employees which represents employees that have been with the firm since 1996. Today, there are over 1,000 Cobalt employees worldwide.
  6. Cobalt went public in 1999 with the ticker symbol CBLT. The company quickly decided to take the firm private again. Now, Cobalt is a wholly owned subsidiary of ADP (which is publically traded under the ticker ADP with a market cap of $36.45B).

Questions? Comments? Please post below or e-mail me: JA@Alicandri.com

 

Comments

Nice sales pitch in direct violation of the Terms of service here. I guess this site has gone to the birds now. This crap and SEO spam has overrun drivingsales.com. It, drivingsales.com, will be an afterthought before we know it if this keeps up

Nov 19, 2013

Paul,

Thank you for the comment. I apologize; I should have added the disclaimer that "I have not received financial compensation in connection with this blog."

To be clear, I'm a dealer advocate, and if I recognize the strengths of a company then I'll point them out. However, if you've read any of my past and well-known posts regarding CARFAX or TrueCar, you'll confirm that I only write my honest opinions. HOWEVER, I provide my opinions based on my insights and experience as a former management consultant, dealer executive, NADA graduate, and as an industry technology advisor â and in this case, a Cobalt/ADP customer. I don't expect everyone to agree with my opinions, nor is anyone required to do so.

With that said, I'm not qualified to address your concerns that other posts on this site are SPAM or product pushes. But to be unequivocally clear, my post is my opinion. If you would like to discuss this further, please feel free to contact me directly.

Nov 19, 2013

Nice outline of what Cobalt brings to the table Jeremy. My group uses Dealer.com for 8 of our stores and Cobalt's DAP for our VW store and I agree 100% that the value you get with Cobalt is very strong. I'm not a huge fan of the VW website design but as Cobalt refreshes it's websites, the value they offer dealers will only get stronger.

Nov 19, 2013

Michael,

Thank you for reading my post and sharing your experience. Value should be one of the key objectives for dealers, and as I explained earlier, technology alone won't sustain a competitive advantage for any vendor in this space. The automotive franchise model is over 100 years old!

Thank you,
Jeremy

Nov 20, 2013

Comments 1 - 4 of 4

You must be logged in to comment

Login Create an account

Add your comments:

   

Jeremy Alicandri's Recent Posts

Related Posts

  • Presidents Club 2014: Most Valuable Insight Competition

    This grouping of ten-minute presentations is intended to give speakers an opportunity to reveal new data and research techniques or findings germane to the automotive industry. Kevin Root, President of Driving Sales explained that, “Research, it’s a word that’s tossed out a lot and it means a lot of different things to different people.”Read post

  • Further Changes to Twitter Interface Looking A Lot Like Facebook

    The new Twitter profile look features a header photo that spans the width of the page, appearing very similar to the Facebook cover photo. The new profile also has an in-set user photo above the bio summary, which is also similar to the design of Facebook profiles. Read post

  • Help Your Dealership Bloom with Purchase Options

    Have you ever really explained to your customers the difference between leasing and purchasing a vehicle? Do your customers really understand all their purchasing options? Are your customers opting to purchase a more economical vehicle because they don’t understand they could pay practically the same monthly payment by leasing a higher quality vehicle? Well, don’t you think it is time to explain to them the difference between buying and leasing the vehicles on your lot? Today, you’ll learn some important things to communicate to customers to help them understand their purchasing options. Driving Style Another thing consumers don’t typically think about when purchasing or leasing a vehicle is their driving style. For consumers who will drive their vehicle to work and around town on the weekends, a lease is the perfect option for them. If the consumer wants to use their vehicle for vacation trips, weekend trips, or commutes a long distance to work, they’ll probably want to opt...Read post

  • Stealing Customers From Your Competitors Showroom

    Mobile is all around us, digital technologies are changing faster than we could ever imagine, and smart marketers are faced with the task of using this to our advantage! Along with the rise of smartphone usage, GPS enabled devices and location based services, smarter apps, and our seemingly overwhelming desire to share every move publicly (Facebook, Twitter, Foursquare) has resulted in a massive amount of behavior-based-geographical-data. Let it be known, wherever there is big data in play, it’s not too long before it’s leveraged using the latest technology for marketing!Read post

  • Improve Your Results with these Top 5 Best Practices for Following Up

    New month, new blog series. This is a topic that is near and dear to our hearts -- following up on leads. Sure, we deliver car buyers to you, but we that's as far as we can take it. Then we have to put these consumers into your capable hands and let your sales process take over from there. (Any sales rep will tell you that this is where the real magic happens.) We've come a long way from our humble beginnings as 1-800-CAR-LOAN in 1989, and during that time we've collected some recommendations for best practices that will give you, our dealer partner, the best results.Read post

  • Want the REAL Reasons Women Buy from their Salesperson?

    Welcome to Women’s Wednesday! Dealers who “get it” know that the key distinction in optimizing sales to women is having exceptional sales advisors who offer exceptional service. But what does that really look like? Women tell us directly through our car dealer review platform what works for them when interacting with a sales agent. Below are their top 5 reasons for buying a car from them: Trust 52.3% Being Respectful 52.1% Likeable 47.8% Knowledgeable 45.6% Understanding 40.6% These percentages add up to more than 100% because reviewers can submit multiple answers. NOTE: Coming in at 34% was the ‘price of the vehicle’. It is important, but ranks 6th overall. Clearly, connection and relationship are pivotal, outranking price. Trust: Women buy from those they trust. It’s essential to build trust – that rapport can take just a matter of minutes to create. The best way to build trust is to provide valuable and relevant information, quality guidance and advice. Be h...Read post

  • Top 5 Best Practices when posting to eBay classifieds

    With any new product and marketplace there’s a learning curve and we’ve recently gained more knowledge about what it takes to manage the “art” of posting to eBay classifieds. We want to share the Top 5 Best Practices we’ve learned over the last few weeks with you...Read post

  • New Research: 1 in 6 Car Buyers Skips Test-Drive; Nearly Half Visit Just One (Or No) Dealership Prior to Purchase

    DMEautomotive study provides fresh evidence that dealership avoidance is a new car buying “normal” DAYTONA BEACH, Fla. – April 15, 2014 – It may be the second most expensive purchase of most people’s lives, but new research from DMEautomotive (DMEa) reveals that a growing number of Americans are bypassing test-drives – and making strikingly few visits to dealerships – in their car-buying process.   The latest survey of roughly 2,000 automotive consumers1 found that, before purchasing, 16% took no test-drive, and 33% test-drove only one car. And more than two-thirds (68%) reported that they visited only two dealerships or fewer before buying - with 40% visiting only one dealer.   The survey also measured consumer trust of dealer salespeople, and the results were sobering: only 21% claimed they perceive them as “trustworthy,” a lower trust rating than reported for lawyers, mortgage brokers and insurance salespeople.   “This avoidance of physical dealerships ...Read post