Setting Up Your Dealership for Success with Digital Retailing
Retail Automotive, as an industry doesn’t make meaningful change or advancement until placed under immense pressure from outside forces. True to form, digital retail was certainly a buzz prior to the global pandemic, but COVID-19 has forced us to do business differently, smarter, more remote, and empowered by new technology. There is no shortage of digital retail products on the market today. Dealers must make a choice first about how their sales operation and the process will evolve to the new norm before selecting a provider that best enables their team.
We know that technology can exponentially improve the results of a sales operation, as seen with CRMs, ILMs, and Menu services. This is further backed up from other industries as outlined in a Harvard Business Review study that showed businesses who embrace technology to enable process improvement to see seven times the return of those who don’t. The key is to fully understand that process you are enabling first.
So, let’s take a look at some of the key things to consider.
These questions are critical to understanding what will be important to you in technology and there are many more we can ask. But I believe there are five critical questions that you really need to answer before you take this journey.
This is a place where dealers really need to do some soul searching. If you don’t think that it is critical to have your sales managers treat your online customers with the same level of urgency and sincerity as your showroom customers, then you should be looking for a more basic solution. Something that generates leads, not deals. This will have limited success and the process will fall to the team handling the Internet Leads in the store. You will be reaching back out to customers after they have left the site and the shopping mode, setting appointments to bring them in to close deals, and operating a traditional sales process. No real change has occurred.
This should be an area where dealers would want their entire variable ops team involved. Digital retail doesn’t just mean customers on the website. Links can be added to equity mining tools, sent to other internet customers via email, sales teams can invite old showroom prospects to work number remotely, and even show phone ups real info on the fly. The dealers who are gaining meaningful market share right now, are fully embracing digital retail at all levels.
For digital retail tools, there are two main types; active and passive.
Passive digital retail tools are those where the customer is 100% self-guided. The dealer doesn’t get involved until after the lead has been generated and is unable to intervene in real-time. Passive tools can be successful, but don’t give dealers the opportunity to do what they do best, advise and sell.
Active digital retail tools, like BuyNow, are those where the dealer can negotiate in real-time, answer questions via live-assistance, and/or create video conference sessions to review the vehicle, the deal, and other deal specifics. Active digital retail tools can be successful, more successful than passive tools in fact, but they take commitment to process change.
We analyzed over 270,000 digital retail sessions to find the conversion difference between passive and active digital retail sessions. What we found is that there is a 2.5x increase in completion rate when a dealer is actively engaged with a customer! Those who commit to this process change and implement the right technology are winning.
Simply adding the tech and making process change doesn’t mean that customers will fall in line. You have to educate the market. Find a way to brand yourself, your process, and your store. We see that the most successful dealers are the ones who support online efforts with website content and traditional advertising.
This is a part of the digital retail process that I am personally passionate about as are most dealers. What you need to consider is how automated do you want the online buying process. A completely automated, or as some are calling it, a true end-to-end digital retailing process relies solely on the software to perform all actions related to profitability. While theoretically possible, you have to be comfortable with the outcomes.
So, let’s look at the outcomes. This morning, I pulled an analysis of how many completed deals had F&I products added to them over the last week. That rate is the equivalent of product penetration per unit and is at a rate of 17.91%.
We should be afraid of this number as an industry! But that doesn’t mean we should be afraid of digital retailing. If you look at digital retail as the front end of the deal, then it is actually employing a best practice of introducing F&I products earlier in the process. As an industry, we know that when you do that, product penetration goes up because the customer is made more familiar with the types of products, their costs, and what they mean to them before they enter the signing process.
Dealers that employ a strategy to (1) get more involved in the process online while the customer is viewing these products, and (2) create a separate signing event where you still present the full menu and give your team and ability to manipulate different deal factors like the term, rate, and down payment see much higher product penetration per unit numbers than their competitors. We see these numbers in the 65% to 70% range! That is a number we can be excited about.
This is one of the biggest issues we see in digital retailing and such a simple one to solve! Really consider this as part of your process review before deploying a tool. Nothing is worse than a customer who completes a large part of the deal online and comes into the store with the expectation of an expedited process only to be asked to start over from scratch. This is kin to not reading the comments of an internet lead before calling the customer. You have to have continuity in the conversation and show the customer you care.
There are a lot of ways to do this and a lot of great companies out there that will help you design and implement these processes, including some of the digital retail providers themselves, like CarNow. Here are a few things that we have seen be successful and help our dealers think through before we install.
So, as you are preparing your dealership for 2021, don’t just think about the tech, really consider how you are going to deploy this process and find the tech partner that works best for your setup. But those who commit fully are the ones who reap the most benefit. Digital retail has proven that deals can be more profitable, faster, and provide better customer service. If you have any questions about your process, how to think through each of these individual areas, or just want someone to bounce ideas off, please don’t hesitate to reach out. At CarNow, we are passionate about serving the automotive community.