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Jared Hamilton
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Lindsey Auguste and Dennis Galbraith

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Profiting from Product Integration

On October 13, 2009, Dennis introduced the spaghetti chart in a keynote presentation at the first ever DrivingSales Executive Summit. As the slide built out with 18 animations, it became clear to the dealers in attendance just how complex their business had become. Today, there are even more products and services available and more services and activities dealerships must engage in to maximize profitability. Yet some of the spaghetti is beginning to straighten out into something more akin to a designed enterprise architecture.

There is no single right way of mapping out a plan for enterprise architecture, except that it must begin with the objectives of the organization. Here are examples of both cost reducing and revenue increasing objectives in automotive retail over which increased integration can have a dramatic influence:

Ø  Elimination of data reentry and manual transfer of data

o   Profit is enhanced directly through labor savings and indirectly through cleaner data being used for selling and decision-making. Reentry of data doubles or triples the chance of incorrectly adding or omitting a digit.  The latter may be far greater than the former.

Ø  Consolidation of customer shopping and purchase activity

o   Revenue is increased when BDC agents and salespeople can see all of the customer's shopping activity and past purchase activity during preparation and/or engagement. They better understand the shopper's needs and desires, resulting in more sales.

o   A more complete understanding of the customer, combined with proper training, leads to higher customer satisfaction, more loyalty, and better advocacy.

Ø  Better planning and decision-making

o   Planning and decision-making are improved when relevant information is derived from various bits of data from across data tables.

Ø  Accountability

o   Efficiency and effectiveness are improved when both vendors and team members are held accountable with a complete bundle of metrics.  When management lacks complete transparency into the business, the focus can easily drift from achieving the objective to gaming the metrics.  Effective management of an incentivized team cannot be achieved without broad-based accountability.

Ø  Consistent user experience

o   When everything has a similar look and feel, users are able to work more efficiently and effectively.  They tend to explore software tools and reporting more completely and extract more benefit from the products they purchase.

At NADA, we interviewed some of the largest vendor organizations to find out what they are doing to help dealers achieve these objectives and how they are going about it.  What we found was a mix of acquisitions, development of new product categories, and development of new products spanning the gaps between former product categories.  We found that integration can reduce the need for training on software usage and increase the need for training on how to get the most out of new software capabilities.  We found a variety of philosophies and approaches to product integration.  We found tools for centralization within dealer groups, and tools easy enough to use at the store level to reduce the need for centralization.

Most of all, we found a great deal of promise for dealers. The age of product integration has just begun in automotive retail, but the change it brings must be adapted to quickly. Dealers don't all need the same solutions, and vendors won't all provide the same approach. However, margins are too thin for inefficient practices to compete alongside those who fully capitalize on the changes ahead. There will be carnage among those slow to adapt, but that merely adds to the opportunity for those who adapt best.

Over the days and weeks ahead, we will continue to explore the emerging area of product integration and what it means to dealers. As always, we look forward to your comments, questions, and concerns.

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