402.427.0157
In Praise of a Balanced #AutoMarketing Strategy (It's about more than your website)
I’ve made people that I actually like and respect very angry with me because I’ve questioned their belief system. No, not their religion; their belief that developing their primary website – at the expense of almost all other digital marketing – is a laudable goal. They even have data to back up the argument, but I will argue that their analysis of the data is fundamentally flawed for a couple of very important reasons –
Reason Number One – Automotive is not ecommerce. They analyze the data as if they were analyzing an ecommerce site and that will inherently lead them astray. Let’s look at the ecommerce model for moment; everything must eventually funnel into the primary website to sell the product – to gain the conversion. With automotive that is not the case. With automotive, everything must eventually funnel into the physical dealership – not the digital one. Let’s face it, we’ve been talking about the website as being the ‘Digital Showroom’ for so long that we’ve lost sight of one very real fact; you can’t sell a real car in a ‘Digital Showroom’.
So the analysis they apply to the data is flawed. Multi-channel funnels, digital attribution, assisted conversions, etc. are all useful – no vital – when analyzing ecommerce websites. The website acts as a pinch point where the conversion happens. Indeed HAS to happen. That isn’t the case in automotive marketing. The real conversion in car sales happens on the showroom floor, not on a website. Automotive is not ecommerce.
The automotive shopping process is complicated and is different for every shopper. The journey has different starting points and different touchstones along the way. Ending up at a dealer’s website and submitting a lead is just one path. I can argue that it isn’t even the most preferable path.
Reason Number Two – Automotive is a ‘high involvement buying decision’. I will argue that it is one of the most complicated shopping journeys that most people make. “In Winning the Zero Moment of Truth – ZMOT”, Jim Lecinski made the observation that people’s buying process had been changing. But that change was one where they were applying the same shopping process they had traditionally used on their high involvement buying decisions (cars, appliances, etc) to their lower involvement buying decisions (chewing gum, soap powder, etc). In effect, the way people had begun to shop for “a $5.99 bottle of dandruff shampoo or a $3.29 box of cereal or that 39-cent pen” was becoming more like what we had always seen in our business – people doing research, looking at multiple sources, reading reviews, etc.
Frankly, I think the PPC and/or SEO > primary website at the expense of all other digital marketing model is better suited to lower involvement buying decisions – the bottle of dandruff shampoo – and think that building and maintaining a credible presence across the variety sources used by consumers to research a car buying decision is the smarter way to go. And yes, that would include third party sites. As Jim Lecinski says, consumers love comparison shopping online – but not just comparing pricing (although that is a part of it), comparing products, comparing dealerships and even comparing salespeople. Broadening your presence across platforms makes sense while narrowing it doesn’t – at least in my mind. The idea is to be on the sites where they are conducting the research. That is where and when you can begin to influence the decision.
In the interest of full disclosure, I spent a decade working for one of large automotive classified sites, leaving in 2009. I am proud of what I helped build. Third party sites like this are perennially cited by consumers as being important and useful to their research and shopping process – even more than dealer websites.
Now it’s important to note that I’m NOT arguing that these third party websites are more important than your dealer website, only that they deserve a place in a balanced marketing mix. I’m also not arguing that you ignore the R.O.I. that these sites deliver, only that the R.O.I. not be measured by looking at what they drive to the primary dealer website – that is not their job. Their main job is to carry your marketing message and get that message in front of researching consumers. That message can and should go beyond a simple advertisement and at its best, can be a real differentiator. And I’ll grant you that the classified sites aren’t great lead generators (and I’ll also argue the fact that most dealership websites aren’t great lead generators either). Both the third party sites (Edmunds, Autotrader, Cars.com, etc.) and dealer websites can do a great job at generating purchase intent that carries over to a showroom visit. And it’s also important to note that I’m not advocating buying traditional leads – and I don’t consider either Costco or TrueCar referrals to be analogous to traditional leads.
It's all about BALANCE -
402.427.0157
In Praise of a Balanced #AutoMarketing Strategy (It's about more than your website)
I’ve made people that I actually like and respect very angry with me because I’ve questioned their belief system. No, not their religion; their belief that developing their primary website – at the expense of almost all other digital marketing – is a laudable goal. They even have data to back up the argument, but I will argue that their analysis of the data is fundamentally flawed for a couple of very important reasons –
Reason Number One – Automotive is not ecommerce. They analyze the data as if they were analyzing an ecommerce site and that will inherently lead them astray. Let’s look at the ecommerce model for moment; everything must eventually funnel into the primary website to sell the product – to gain the conversion. With automotive that is not the case. With automotive, everything must eventually funnel into the physical dealership – not the digital one. Let’s face it, we’ve been talking about the website as being the ‘Digital Showroom’ for so long that we’ve lost sight of one very real fact; you can’t sell a real car in a ‘Digital Showroom’.
So the analysis they apply to the data is flawed. Multi-channel funnels, digital attribution, assisted conversions, etc. are all useful – no vital – when analyzing ecommerce websites. The website acts as a pinch point where the conversion happens. Indeed HAS to happen. That isn’t the case in automotive marketing. The real conversion in car sales happens on the showroom floor, not on a website. Automotive is not ecommerce.
The automotive shopping process is complicated and is different for every shopper. The journey has different starting points and different touchstones along the way. Ending up at a dealer’s website and submitting a lead is just one path. I can argue that it isn’t even the most preferable path.
Reason Number Two – Automotive is a ‘high involvement buying decision’. I will argue that it is one of the most complicated shopping journeys that most people make. “In Winning the Zero Moment of Truth – ZMOT”, Jim Lecinski made the observation that people’s buying process had been changing. But that change was one where they were applying the same shopping process they had traditionally used on their high involvement buying decisions (cars, appliances, etc) to their lower involvement buying decisions (chewing gum, soap powder, etc). In effect, the way people had begun to shop for “a $5.99 bottle of dandruff shampoo or a $3.29 box of cereal or that 39-cent pen” was becoming more like what we had always seen in our business – people doing research, looking at multiple sources, reading reviews, etc.
Frankly, I think the PPC and/or SEO > primary website at the expense of all other digital marketing model is better suited to lower involvement buying decisions – the bottle of dandruff shampoo – and think that building and maintaining a credible presence across the variety sources used by consumers to research a car buying decision is the smarter way to go. And yes, that would include third party sites. As Jim Lecinski says, consumers love comparison shopping online – but not just comparing pricing (although that is a part of it), comparing products, comparing dealerships and even comparing salespeople. Broadening your presence across platforms makes sense while narrowing it doesn’t – at least in my mind. The idea is to be on the sites where they are conducting the research. That is where and when you can begin to influence the decision.
In the interest of full disclosure, I spent a decade working for one of large automotive classified sites, leaving in 2009. I am proud of what I helped build. Third party sites like this are perennially cited by consumers as being important and useful to their research and shopping process – even more than dealer websites.
Now it’s important to note that I’m NOT arguing that these third party websites are more important than your dealer website, only that they deserve a place in a balanced marketing mix. I’m also not arguing that you ignore the R.O.I. that these sites deliver, only that the R.O.I. not be measured by looking at what they drive to the primary dealer website – that is not their job. Their main job is to carry your marketing message and get that message in front of researching consumers. That message can and should go beyond a simple advertisement and at its best, can be a real differentiator. And I’ll grant you that the classified sites aren’t great lead generators (and I’ll also argue the fact that most dealership websites aren’t great lead generators either). Both the third party sites (Edmunds, Autotrader, Cars.com, etc.) and dealer websites can do a great job at generating purchase intent that carries over to a showroom visit. And it’s also important to note that I’m not advocating buying traditional leads – and I don’t consider either Costco or TrueCar referrals to be analogous to traditional leads.
It's all about BALANCE -
3 Comments
402.427.0157
From the Moz blog today - This is a MUST READ Why I Stopped Selling SEO Services and You Should, Too - https://moz.com/blog/why-i-stopped-selling-seo-services-and-you-should-too * Search "best headphones" - No product pages, all articles * Search "restaurants in Miami" - Not a single result on the first page is a restaurant's website. * Search "plumbers in San Francisco" - Not a single result on the first page is a website
402.427.0157
Dealers: Say Hello to the Bell Curve (and embrace its fat, juicy center)
Over the years I’ve had the pleasure of working with dealers who have embraced a dramatically different sales process – one that doesn’t start off by asking for all the money and then negotiating down. My friends who are traditionalists say, “you need the homeruns so you can afford to take the skinny deals” – not so fast, let me introduce you to the bell curve.
We always like to talk about extremes, the laydowns and the grinders. But in actuality the 80/20 rule applies; we spend 80% of our time talking about the 20% of deals at the ends of the spectrum. The dealers that I opened up talking about who start by advertising an initial lower price – by giving away profit up front – are giving up the potential homeruns. They do this to increase their ‘at bats’. Imagine if you were able to change the rules of baseball to give your team more ‘at bats’ than the competition. Let’s say four outs per inning instead of three. You wouldn’t have to hit homeruns to win the game.
So yes, these dealers are giving up on some potential profit, but I would argue that in the Internet age, the homeruns are coming farther and farther apart anyway. And yes, they probably walk away from a few more of the ‘grinder’ deals. But if they are able to increase their ‘at bats’ even 10%, they win – and win big. Because they are seeing more of their business coming from the ‘fat, juicy center’ of the bell curve.
These newer process dealers aren’t necessarily one-price stores, but when they negotiate, they do it within a fairly narrow range. They make “Asking Price Justification” the cornerstone of their process instead of negotiation. For old school managers and car guys that is a shock to the system. But the increased traffic is worth it. This process isn’t right for every dealership, but I do believe it is the future.
20 Comments
Hawkins Chevrolet
Stirring the pot again, Ed? I tend to agree with you, but others can make it work in the traditional way still. So much has to do with store culture and how customers are handled. I just don't believe there is ONE right way. Eternity...yeah...only one way. :)
402.427.0157
"This process isn’t right for every dealership, but I do believe it is the future." I did mean my last sentence Tom - it's is a definite culture shift.
Spork Marketing, LLC
I love the point of the article, and I'd simplify it thusly: It's all about total revenue. There's a finite supply of buyers in market at any given moment. Of these buyers, a high percentage are price driven (wrongly so, but it is what it is). The people in this group will immediately dismiss options that they view as "overpriced," unless they have some other reason to consider the product. Therefore, dealers who price their products above the going rate either a) need something else to sell or b) sacrifice an opportunity to do business with members of this group.Are their buyers who are not price driven, and who therefore not going to automatically dismiss options? Sure. But what percentage are they of in-market buyers? What's more, can we prove that these people aren't actually influenced by some other factor (previous positive experience, relationship or affinity, etc.)? None of this is revolutionary stuff. Whether you're selling cars or sneakers, price drives a lot of buyers to take (or not take) action. If you're a retailer willing to sacrifice those opportunities, more power to you. But it's probably not sound business in markets that are particularly price driven...
Auto Industry
RE: "Say Hello to the Bell Curve"Hello to the false analogy. What is laughable is the thought that this "concept" is "new." Most green peas start in the business with the idea of treating everyone "fairly," which is to say that everyone should pay about the same margin. Most of us outgrow that, especially when we inherit P&L responsibility. That changes one from idealist to pragmatist in a hurry. You take gross profit where ever you can find it.I started in the auto business in 1970 in a store that did business exactly this way. We had an established margin for each make/model and eagerly quoted price to anyone who asked, and many who didn't. The label "traditionalist?" Now that's a hoax. There are many dealerships that operated based on the idea that everyone should pay about the same margin decades ago. To try to paint previous iterations of auto retail as "all the same" is the mark of someone who not only wasn't there, but who didn't do his homework. There is, however, a difference between the so called old days and today. Sales people stayed around in the old days and repeat business was a much more important element in auto retail. If you want to change today's auto retail for the better, why not start there instead of trying to get everyone to discount their new vehicle inventory up front? Work on sales person training and retention. Work on producing enough gross profit so they can thrive. Another thing, why not replace the IVR system answering telephones in dealerships with a real human being before trying to persuade to arbitrarily give up gross profit out of fear of the consumer?What isn't a hoax is the math. The idea that so called "traditionalist dealers," whomever they are, start everyone at MSRP is another hoax. Many post price leaders priced at extremely low prices, perhaps even loss leaders. Regardless, the idea of giving away available gross profit upfront as a matter of regular process and making it up in volume is as old as the hills. Trying to paint that "novel" concept as new is ludicrous. To dealers who want to adopt such a sales process, I say, "Go for it." Your competitors will love you. But then, there aren't a lot of dealers posting here.
402.427.0157
@David - This isn't about treating people "fairly", it's about generating traffic, grabbing market share from your competition, and total revenue (as Jason Lancaster states). There are certainly different strategies at play and all work best in different environments and at different times. I used to supply conversion vans to a large dealership, back in the day. We'd set up one van as an "ad van" - as bait. It had a mismatched tape package, no TV and no rear sofa. We'd advertise it in the newspaper as a loss leader. When customers showed up and saw how ugly and poorly equipped the van was, they'd be switched to a more expensive, better equipped, better looking unit. A classic bait and switch. It wouldn't work nearly as well today for a couple of reasons; 1.) It's no longer the 'Newspaper Era', shoppers expect to see your entire inventory online today. 2.) The Internet has given customers a bigger voice to express displeasure - a way to amplify their thoughts - and a dealer who did the same thing today would see their reputation suffer. You suggest posting "price leaders priced at extremely low prices", Is that the only inventory you put online? Do you put the rest of your inventory up with "Call for Price"? Price is important, but so is selection. I fear this old newspaper tactic is past its "sell by" date. At the beginning of my original post I stated I've worked with dealers who have employed this strategy for years, but like all successful strategies continues to evolve as conditions change. You complain about giving away "available gross profit", but you don't acknowledge that this is only potential profit. In the age of the Internet, home runs are few and far between. I'm suggesting that Market-Based Pricing and minimizing (not necessarily eliminating) negotiation makes more sense in today's market - and generates higher volume and makes more profit to boot.
Spork Marketing, LLC
@David - You said "Most green peas start in the business with the idea of treating everyone "fairly," which is to say that everyone should pay about the same margin." First, this is condescending. Second, the concept being discussed is not about "fairness." Not even a little bit. The concept is related to capturing as much revenue as possible in a market where the consumer can *easily* compare pricing on a little thing I like to call "the Internet." (OK, that was condescending too.) You go on to argue that fair pricing is a hoax, that dealers who don't ask for all the money up front can't make enough to train staff, and that people with experience know you have to take profit wherever you can get it. Perhaps you'd care to explain how CarMax works? Or why AutoNation and Sonic have embraced this very model wholeheartedly? Or why these companies are enjoying fantastic profits and growing rapidly? Those companies are traded on the stock exchange - is your dealership traded on the NYSE? Might that be a sign of them knowing something you don't? As I said in my previous comment, dealers certainly CAN ask for full MSRP on every car every time. But they must do so with the understanding that they will lose the opportunity to sell a car to a big percentage of in-market buyers...because price comparisons are as easy as clicking a mouse button.
Auto Industry
RE: First, this is condescending. And accurate. RE: "Second, the concept being discussed is not about "fairness." Not even a little bit. The concept is related to capturing as much revenue as possible in a market where the consumer can *easily* compare pricing on a little thing I like to call "the Internet." (OK, that was condescending too.) You make the mistaken assumption that because consumers today have more information because of the Internet, they know more than they did in previous generations. Nothing could be further from the truth. If you are attempting to make the case that consumers know everything so we have to compete with other dealers in terms of "fair pricing," that is based on consumer perceptions, and they don't share the same perception. I suggest we help them to their perception one customer at a time. In the case of the pre-owned business, it is absolutely true that page views is dependent on how a dealer prices his/her inventory online. I'm not addressing that. Dale Pollak and others are certainly correct. But Dale brought the subject of efficient markets up in his first book without taking the discussion to its logical conclusion. In a transparent/efficient market, both buyer and seller have not only the same information, but equal ability to interpret that information. That results in disintermediation. That's elimination of the middle man. So if we are looking to cause our own demise, continue pushing for transparency. As it regards "fair" If your objective is to be fair with consumers based on their perceptions, try posting your triple net cost on new vehicles and ask them to name their fair margin. Now that would also be truly transparent. You're free to try that. Please report back with your results. Until then, transparency is a word that has actual meaning. Using it as a euphemism to try to appeal to consumers isn't transparent or even honest. Besides, they don't believe it anyway. RE: "You go on to argue that fair pricing is a hoax, that dealers who don't ask for all the money up front can't make enough to train staff, and that people with experience know you have to take profit wherever you can get it." When did I EVER say we should ask for all the money up front. What I've said is that trying to appeal to a consumers sense of fairness by providing across the board discounts from MSRP on new inventory isn't a winning formula, but those who want to try should by all means do so. Once your competitors learn to sell against you, you might want to reconsider. But you might have an expense structure that allows you to use your version of "fair pricing" (their is not single definition) and survive. I started in the auto business in such a store and worked there for 7 years. We called ourselves Moral Motors. We didn't have the Internet to hastily provide everyone with a new car discount, but the intent was to try to appeal to consumers based on fairness. I spent 7 years getting my leg pissed on. I achieved real success when I learned to take profit wherever I could without automatically providing unnecessary discounts. Once you've given it away, its hard to get it back. RE: "Perhaps you'd care to explain how CarMax works?" CarMax doesn't sell new cars. RE: "Or why AutoNation and Sonic have embraced this very model wholeheartedly?" Why not let some time go buy before using terms like wholeheartedly. The Ford Collection embraced their concept wholeheartedly too. Instead of coming out publicly and admitting they were wrong, they sold their stores back to real dealers. I know plenty of dealers who still use fair price/one price, etc. as part of their marketing strategy. Pretending not to negotiate is simply another strategy of negotiation. Sonic seems to be floundering and flailing these days. I don't have time here to get into Sonic particulars. They are NOT rolling their new deal out to all of their stores. It is supposedly in pilot in a couple of places where simple research shows they don't have a handle on things yet. For example, they hadn't even considered the compliance angle of having sales people do their own F&I. In fact, he person running the new initiative didn't even know who or what AFIP is when I asked. If I get a chance to mystery shop some AutoNation stores I'll be glad to report back as to how closely they adhere to whatever it is they say they do. RE: "Or why these companies are enjoying fantastic profits and growing rapidly?" Which companies are you saying are enjoying fantastic profits and growing rapidly? Sonic? Their net just dropped 45% from an already low level. "One Sonic-One Experience offers no-haggle pricing and has a goal of completing a purchase in 45 minutes or less with one sales rep using an iPad. Sonic is betting that by eliminating car-buying pain points, it will become a preferred place to shop and thereby gain market share." Perhaps you should wait until this is complete and actually successful before touting yet another claimed triumph in auto retail that shortly thereafter comes tumbling down. Don't confuse buying new dealerships with public money with year to year same store growth. They aren't they same thing. Using size and growth as a proof of concept isn't always valid, especially when Amazon hasn't yet broken black after years in business. Those companies are traded on the stock exchange - is your dealership traded on the NYSE? Might that be a sign of them knowing something you don't? RE: "As I said in my previous comment, dealers certainly CAN ask for full MSRP on every car every time. But they must do so with the understanding that they will lose the opportunity to sell a car to a big percentage of in-market buyers...because price comparisons are as easy as clicking a mouse button." Dealers can only take skinny deals when they have some fat ones to maintain a reasonable average. You need the skinny deals to achieve market penetration. You need market penetration to keep your OEM off your back. Skinny deals often pay off with a large back end or trade profit. Skinny deals are often all that can be had because of consumer trade negative equity and lender advance calls. You need some fat ones to offset them. If you think you can get those by giving away premature discounts on your website, I say "Go for it." Its your choice, not mine. For my part, I'd prefer to do aggressive price leader advertising on specific models and not address discounts until its appropriate and/or necessary. RE: "But they must do so with the understanding that they will lose the opportunity to sell a car to a big percentage of in-market buyers...because price comparisons are as easy as clicking a mouse button." And, of course, you must think everyone does exactly that on new vehicles so you beat them to the punch? Now there's a novel strategy. We used to provide upfront discounts without provocation out of fear of the customer in 1970. And now that mindset is back and called "new?" Really?
Auto Industry
@ Ed - RE: "We'd set up one van as an "ad van" - as bait. It had a mismatched tape package, no TV and no rear sofa. We'd advertise it in the newspaper as a loss leader. When customers showed up and saw how ugly and poorly equipped the van was, they'd be switched to a more expensive, better equipped, better looking unit. A classic bait and switch." https://www.ftc.gov/public-statements/1983/10/ftc-policy-statement-deception You might want to review this. Advertising new vehicles for cheap prices when you have them in inventory and list them by stock number along with their equipment, and make no misrepresentations is NOT a UDAP. If a consumer decides they want one with more equipment, it is the consumer doing the switching. If a consumer wants a better equipped vehicle for the same price as a stripped one, who is being unreasonable? RE: "Over the years I’ve had the pleasure of working with dealers who have embraced a dramatically different sales process" Are you trying to say this is "new?"
Auto Industry
The only definition of "transparency" that counts is that of the consumer, regardless of what it means in economics. Does anyone really think consumers believe dealer claims of "transparency?"
Spork Marketing, LLC
David - You lost me here: "You make the mistaken assumption that because consumers today have more information because of the Internet, they know more than they did in previous generations. Nothing could be further from the truth." If you're honestly arguing that consumers don't have more information now than they did 20 years ago, I don't see any reason to continue this conversation.
402.427.0157
@David - Please note that I didn't say it was illegal - I said that strategy doesn't work well for two reasons (you didn't address these in your response) 1.) It's no longer the 'Newspaper Era', shoppers expect to see your entire inventory online today. 2.) The Internet has given customers a bigger voice to express displeasure - a way to amplify their thoughts - and a dealer who did the same thing today would see their reputation suffer.
Auto Industry
RE: "My old friend David Ruggles still contends you HAVE to make home runs and take some really skinny deals to maintain market share, while I contend that advertising a discounted price and minimizing (or eliminating) negotiation is the best way to increase volume, total profit, and market share." I guess it might be better if I state my own position since some people tend to misrepresent it. First, I have been on record for YEARS about the Internet's impact on the pre-owned business. In fact, I have been writing columns in support of "market based" pricing on pre-owned from my first book review of Dale Pollak's first book written for Wards in about 2009. I can't lay my hands on the first column I wrote on the issue but I did run across this one that references the issue in a piece on a backwards practice I call "retail recon." http://autosandeconomics.blogspot.com/search?q=from+the+front+line+to+the+bottom+line I might add that Dale and I were in perfect alignment at this point other than the fact that I advocate dealers identifying opportunity vehicles and stocking them for particular purpose. Dale and I talked at length on this and ended up disagreeing. I believe you can make a market for a particular make model if you can buy it right and for a specific purpose. Since I was the guy who conceived a software product originally called "Arbitrage," I probably know a little more about how the process works than Dale does. And he knows more in his area of specialization than I do. Bottom line, I believe a dealer should absolutely make vAuto or a similar program the FOUNDATION for their pre-owned operation but also look for opportunities based on specific criteria I won't go into in detail at this writing. Those opportunities recognize the fact that consumers still buy based on monthly payment REGARDLESS of how they get to your store. If you make payment part of your message you can build more traffic than merely trying to attempt to attract buyers based on a page view strategy. I will again mention the fact that Dale neglected to complete his discussion of efficient markets in his first book, leaving out the entire topic of disintermediation. Since his pitch is to dealers, I can understand why he did that. But dealers need to be aware of the economic realities of an efficient market in the auto business. Be careful what you wish for. So much for pre-owned. Where I diverge is in the area of NEW VEHICLES! Coincidentally, after being bought out by AutoTrader/Cox, vAuto began to advocate for a practice of discounting new vehicle inventory on the web using an approach similar to what they use on the pre-owned side. Ed, why must you try to say that dealers have to abandon your juicy center to get the fat deals as well as the skinny ones? You can have it all. The math on this is simple. Throwing in CarMax as something that supposedly supports your view is entirely invalid. First, my position is on NEW VEHICLES!!!! Second, CarMax recons at an internal cost of zero markup, so trying to compare their numbers to the average new car franchise pre-owned department is invalid on its face.
Auto Industry
David - You lost me here: RE: "You make the mistaken assumption that because consumers today have more information because of the Internet, they know more than they did in previous generations. Nothing could be further from the truth." If you're honestly arguing that consumers don't have more information now than they did 20 years ago, I don't see any reason to continue this conversation." If you read what I wrote it is VERY clear. But I will elaborate. There is a HUGE difference between having more information and knowing more. Consumers have to unpack all of the information available. Its like drinking from a fire hose for them. Over the course of the last few years I have visited hundreds of dealerships. I find a lot of things that haven't changed over the 40 years I've been participating in the industry. First, a large number of consumers still leave with a completely different vehicle than they came in to buy. Second, perception of the deal is what makes consumers buy. The list goes on, but human nature is still driving the bus. The biggest difference I see these days is that consumers think they know a lot more than they do and it is a HUGE challenge to convince them they are wrong and still be able to do business with them. Our industry has made a concerted effort to try to convince consumers we are being more transparent with them when the opposite is true. Why? Because transparency isn't the objective. Gross profit is. In the following column I itemize some auto industry history. For those who weren't around in 1970, consumers had less information because there was less to be had. There were fewer OEMs. Business was transacted OVER INVOICE. Invoice was a real number. The complexity of "trunk money" via "stair step" barely existed. Joe Garagiola had yet to utter his famous line, "Buy a Car, Get a Check." Over the years the industry has shortened over invoice markup substantially, while moving it to "trunk money" in a concerted effort to keep cost information from consumers. Hence, it isn't so rare for a dealer to lead with invoice these days. After all, there could be thousands of dollars of gross profit still available at invoice. I'll be glad for you to tell me if a consumer would think this practice is more or less transparent. And I'll be happy for any dealer who wants to discount his/her new vehicle inventory up front on the web. And so will that dealer's competitors. Go for it! CONSUMERS HAD LESS INFORMATION BUT "KNEW" A LOT MORE. http://wardsauto.com/industry-voices/enough-transparency
Spork Marketing, LLC
You said: "The biggest difference I see these days is that consumers think they know a lot more than they do and it is a HUGE challenge to convince them they are wrong and still be able to do business with them" That's my point. As I said in my first comment: "Of these [in-market] buyers, a high percentage are price driven (wrongly so, but it is what it is). The people in this group will immediately dismiss options that they view as 'overpriced,' unless they have some other reason to consider the product." The Internet makes it very difficult to convince anyone of anything. This means that 'Joe Consumer' isn't going to see a vehicle priced at MSRP and think "Hmm, I wonder why they're thousands higher than everyone else - I have to go visit that dealership!" Instead, they're just going to find a lower price. They "think they know", and they also think that a low asking price is really, really important. Next, your straw man arguments about 'transparency' and 'fairness' are ridiculous. The ONLY person that's used the word transparency is you, and you were also the first person to use the word "fair" in this context. Please don't apply your contrived logic to my argument (where it does not belong) and then refute it. Summing up: The first problem with the Internet and vehicle pricing is that consumers - who often don't know any better - let price guide their decision making about which dealers to call, which dealers to go visit, etc. It sucks, but it's reality. People who argue for listing inventory online (new or used) at anything other than market price are fools of the highest order.
Auto Industry
RE: ""The biggest difference I see these days is that consumers think they know a lot more than they do and it is a HUGE challenge to convince them they are wrong and still be able to do business with them." That's my point. Then we have the same point, but you have been saying consumers "know" more than before, and they don't. They "know" less. Consumers have always thought they know more than they do. The Internet has exacerbated that situation, along with our industry's strategy of obfuscation (opposite of transparency) over the last few decades. RE: "As I said in my first comment: "Of these [in-market] buyers, a high percentage are price driven (wrongly so, but it is what it is). The people in this group will immediately dismiss options that they view as 'overpriced,' unless they have some other reason to consider the product." And this became "new" when the Internet was invented? Sounds to me like one needs to have enough imagination to deal with this "new thing" you mention. Is that posting discounts on new inventory on line? If so, I say "Go for it." Your competitors will love you. But don't call it new and innovative, because it isn't. RE: "The Internet makes it very difficult to convince anyone of anything." I have to ask you this question. Are you old enough to have done business BEFORE the Internet era, say before 1993? RE: "This means that 'Joe Consumer' isn't going to see a vehicle priced at MSRP and think "Hmm, I wonder why they're thousands higher than everyone else - I have to go visit that dealership!" Instead, they're just going to find a lower price. They "think they know", and they also think that a low asking price is really, really important." So you want to "compete" by posting discounts on every piece of new vehicle inventory? And you think that's a winning strategy? If so, I say go for it. Your competitors will love you.... but I repeat myself. Are you selling this as a strategy as Ed is, or used to? Every green pea I ever had working for me wanted to win over consumers by being "reasonable" with them from the start. ANd now we've come full circle to where this is the "new and winning formula?" RE: "Next, your straw man arguments about 'transparency' and 'fairness' are ridiculous. The ONLY person that's used the word transparency is you, and you were also the first person to use the word "fair" in this context. Please don't apply your contrived logic to my argument (where it does not belong) and then refute it." You must have missed the entire discussion as you missed by clear statement about the difference between more information and knowing more. RE: "Summing up: The first problem with the Internet and vehicle pricing is that consumers - who often don't know any better - let price guide their decision making about which dealers to call, which dealers to go visit, etc. It sucks, but it's reality. People who argue for listing inventory online (new or used) at anything other than market price are fools of the highest order." Anyone selling new vehicles who arbitrarily provides discounts on a per vehicle basis is a fool of the highest order. I know plenty of dealers who want their competitors to do just that. But I say, "Go for it if you think its a winning formula." But I repeat myself.
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"Anyone selling new vehicles who arbitrarily provides discounts on a per vehicle basis is a fool of the highest order" - David Ruggles I agree. There is nothing 'arbitrary' about the pricing decisions being made by dealers who are SUCCESSFULLY employing these strategies.
Auto Industry
Successfully? Arbitrarily discounting your inventory is arbitrary, and it is foolish. But if you think its a winning formula, why not put your own money up for grabs in a deal and see how long you stay with it. Until then, its an abstraction to you. There are a lot of dealers doing a lot of different things. There are dogs of all colors. Seeing one of a certain color doesn't mean they are all the same color. Identifying some that might be surviving using a particular strategy doesn't mean it is a strategy that is viable across all franchises and geographic areas. Take Tammy LeBleu or Greg Rietz, two top performers making real gross. You want to check their websites to see if they list their new inventory with discounted prices? If you want details of success I'll give them to you. Rietz's dealership used to be One Price. Then they decided that wasn't working and tried a variation. A knew owner stopped the One Price/No Negotiation strategy and put the emphasis back on gross profit. Either of these sales people sell more units on their own than a lot of dealerships. Yet, you say consumers are turned off if they can't get what they want at first glimpse, without even asking for it. I know hundreds of sales people like these two. I know a bunch more who left the business when their dealerships went with a voluntary discount on posted inventory, including a friend I sold with 45 years ago who has been making big money for decades while also enjoying some leisure time. You have any $150K sales people selling in stores where they just give the gross away on posted new inventory? I can give you hundreds, if not thousands, making actual gross profit. Again, you claim that one has to give away your so called juicy center is just fabrication. There is no reason one can't get the center, and the highs and lows too. You're giving us a false narrative.
402.427.0157
**Arbitrary - based on random choice or personal whim, rather than any reason or system** I stand by my statement that there is nothing nothing arbitrary about the pricing decisions being made by dealers who are SUCCESSFULLY employing these strategies. They make the decisions for a reason and using a system. I'm NOT claiming that "one has to give away your so called juicy center ", simply that you can grow deals in the center (where the vast majority of deals lie) by advertising a more competitive price AND then minimizing negotiation - thereby growing profits, volume, and market share. "One Price" requires a dramatic culture shift and won't be right for every dealership. I don't think it is the best strategy for most dealers. There are as many different strategies as there are dealers; I simply feel the strategy I outlined above is one of the best - and it does NOT involve "One Price". And finally, I too have seen a "bunch of people" leave the business when they couldn't/wouldn't adapt to change - change is hard.
Team Toyota
Consider this point of view: The presumption that $150K sales professionals are unwilling to change is not justified from this viewer... What is lost in the math is that dealers adjusting to these proposed transparent sales processes with minimal negotiation band width... also are adjusting their sales pay plans. As more dealers do the same the 20 group and manufacturer comparison costs of sales skew pay plans lower and lower. So the sales professional leaving is based on reduction of pay vs. their unwillingness to adjust to a new sales process. DTG
402.427.0157
DTG - I do agree with the idea that some dealership's pay plans haven't kept up with the process changes that they've implemented. And I also agree that those pay plans have sometimes become less transparent for the sales folk because of the "trunk money" and dealer packs that have become mainstays of the business over the past 40 years or so. Mr. Ruggles correctly points out the rebate has been around since 1975. I agree completely that a dealership would be better off designing a pay plan around what they wish achieve today and the processes and strategies that they are going to employ to reach their goals, rather than trying to shoehorn an old pay structure onto a new process - and trying to MAKE it fit - losing employees in the meantime.
402.427.0157
Dealers: Say Hello to the Bell Curve (and embrace its fat, juicy center)
Over the years I’ve had the pleasure of working with dealers who have embraced a dramatically different sales process – one that doesn’t start off by asking for all the money and then negotiating down. My friends who are traditionalists say, “you need the homeruns so you can afford to take the skinny deals” – not so fast, let me introduce you to the bell curve.
We always like to talk about extremes, the laydowns and the grinders. But in actuality the 80/20 rule applies; we spend 80% of our time talking about the 20% of deals at the ends of the spectrum. The dealers that I opened up talking about who start by advertising an initial lower price – by giving away profit up front – are giving up the potential homeruns. They do this to increase their ‘at bats’. Imagine if you were able to change the rules of baseball to give your team more ‘at bats’ than the competition. Let’s say four outs per inning instead of three. You wouldn’t have to hit homeruns to win the game.
So yes, these dealers are giving up on some potential profit, but I would argue that in the Internet age, the homeruns are coming farther and farther apart anyway. And yes, they probably walk away from a few more of the ‘grinder’ deals. But if they are able to increase their ‘at bats’ even 10%, they win – and win big. Because they are seeing more of their business coming from the ‘fat, juicy center’ of the bell curve.
These newer process dealers aren’t necessarily one-price stores, but when they negotiate, they do it within a fairly narrow range. They make “Asking Price Justification” the cornerstone of their process instead of negotiation. For old school managers and car guys that is a shock to the system. But the increased traffic is worth it. This process isn’t right for every dealership, but I do believe it is the future.
20 Comments
Hawkins Chevrolet
Stirring the pot again, Ed? I tend to agree with you, but others can make it work in the traditional way still. So much has to do with store culture and how customers are handled. I just don't believe there is ONE right way. Eternity...yeah...only one way. :)
402.427.0157
"This process isn’t right for every dealership, but I do believe it is the future." I did mean my last sentence Tom - it's is a definite culture shift.
Spork Marketing, LLC
I love the point of the article, and I'd simplify it thusly: It's all about total revenue. There's a finite supply of buyers in market at any given moment. Of these buyers, a high percentage are price driven (wrongly so, but it is what it is). The people in this group will immediately dismiss options that they view as "overpriced," unless they have some other reason to consider the product. Therefore, dealers who price their products above the going rate either a) need something else to sell or b) sacrifice an opportunity to do business with members of this group.Are their buyers who are not price driven, and who therefore not going to automatically dismiss options? Sure. But what percentage are they of in-market buyers? What's more, can we prove that these people aren't actually influenced by some other factor (previous positive experience, relationship or affinity, etc.)? None of this is revolutionary stuff. Whether you're selling cars or sneakers, price drives a lot of buyers to take (or not take) action. If you're a retailer willing to sacrifice those opportunities, more power to you. But it's probably not sound business in markets that are particularly price driven...
Auto Industry
RE: "Say Hello to the Bell Curve"Hello to the false analogy. What is laughable is the thought that this "concept" is "new." Most green peas start in the business with the idea of treating everyone "fairly," which is to say that everyone should pay about the same margin. Most of us outgrow that, especially when we inherit P&L responsibility. That changes one from idealist to pragmatist in a hurry. You take gross profit where ever you can find it.I started in the auto business in 1970 in a store that did business exactly this way. We had an established margin for each make/model and eagerly quoted price to anyone who asked, and many who didn't. The label "traditionalist?" Now that's a hoax. There are many dealerships that operated based on the idea that everyone should pay about the same margin decades ago. To try to paint previous iterations of auto retail as "all the same" is the mark of someone who not only wasn't there, but who didn't do his homework. There is, however, a difference between the so called old days and today. Sales people stayed around in the old days and repeat business was a much more important element in auto retail. If you want to change today's auto retail for the better, why not start there instead of trying to get everyone to discount their new vehicle inventory up front? Work on sales person training and retention. Work on producing enough gross profit so they can thrive. Another thing, why not replace the IVR system answering telephones in dealerships with a real human being before trying to persuade to arbitrarily give up gross profit out of fear of the consumer?What isn't a hoax is the math. The idea that so called "traditionalist dealers," whomever they are, start everyone at MSRP is another hoax. Many post price leaders priced at extremely low prices, perhaps even loss leaders. Regardless, the idea of giving away available gross profit upfront as a matter of regular process and making it up in volume is as old as the hills. Trying to paint that "novel" concept as new is ludicrous. To dealers who want to adopt such a sales process, I say, "Go for it." Your competitors will love you. But then, there aren't a lot of dealers posting here.
402.427.0157
@David - This isn't about treating people "fairly", it's about generating traffic, grabbing market share from your competition, and total revenue (as Jason Lancaster states). There are certainly different strategies at play and all work best in different environments and at different times. I used to supply conversion vans to a large dealership, back in the day. We'd set up one van as an "ad van" - as bait. It had a mismatched tape package, no TV and no rear sofa. We'd advertise it in the newspaper as a loss leader. When customers showed up and saw how ugly and poorly equipped the van was, they'd be switched to a more expensive, better equipped, better looking unit. A classic bait and switch. It wouldn't work nearly as well today for a couple of reasons; 1.) It's no longer the 'Newspaper Era', shoppers expect to see your entire inventory online today. 2.) The Internet has given customers a bigger voice to express displeasure - a way to amplify their thoughts - and a dealer who did the same thing today would see their reputation suffer. You suggest posting "price leaders priced at extremely low prices", Is that the only inventory you put online? Do you put the rest of your inventory up with "Call for Price"? Price is important, but so is selection. I fear this old newspaper tactic is past its "sell by" date. At the beginning of my original post I stated I've worked with dealers who have employed this strategy for years, but like all successful strategies continues to evolve as conditions change. You complain about giving away "available gross profit", but you don't acknowledge that this is only potential profit. In the age of the Internet, home runs are few and far between. I'm suggesting that Market-Based Pricing and minimizing (not necessarily eliminating) negotiation makes more sense in today's market - and generates higher volume and makes more profit to boot.
Spork Marketing, LLC
@David - You said "Most green peas start in the business with the idea of treating everyone "fairly," which is to say that everyone should pay about the same margin." First, this is condescending. Second, the concept being discussed is not about "fairness." Not even a little bit. The concept is related to capturing as much revenue as possible in a market where the consumer can *easily* compare pricing on a little thing I like to call "the Internet." (OK, that was condescending too.) You go on to argue that fair pricing is a hoax, that dealers who don't ask for all the money up front can't make enough to train staff, and that people with experience know you have to take profit wherever you can get it. Perhaps you'd care to explain how CarMax works? Or why AutoNation and Sonic have embraced this very model wholeheartedly? Or why these companies are enjoying fantastic profits and growing rapidly? Those companies are traded on the stock exchange - is your dealership traded on the NYSE? Might that be a sign of them knowing something you don't? As I said in my previous comment, dealers certainly CAN ask for full MSRP on every car every time. But they must do so with the understanding that they will lose the opportunity to sell a car to a big percentage of in-market buyers...because price comparisons are as easy as clicking a mouse button.
Auto Industry
RE: First, this is condescending. And accurate. RE: "Second, the concept being discussed is not about "fairness." Not even a little bit. The concept is related to capturing as much revenue as possible in a market where the consumer can *easily* compare pricing on a little thing I like to call "the Internet." (OK, that was condescending too.) You make the mistaken assumption that because consumers today have more information because of the Internet, they know more than they did in previous generations. Nothing could be further from the truth. If you are attempting to make the case that consumers know everything so we have to compete with other dealers in terms of "fair pricing," that is based on consumer perceptions, and they don't share the same perception. I suggest we help them to their perception one customer at a time. In the case of the pre-owned business, it is absolutely true that page views is dependent on how a dealer prices his/her inventory online. I'm not addressing that. Dale Pollak and others are certainly correct. But Dale brought the subject of efficient markets up in his first book without taking the discussion to its logical conclusion. In a transparent/efficient market, both buyer and seller have not only the same information, but equal ability to interpret that information. That results in disintermediation. That's elimination of the middle man. So if we are looking to cause our own demise, continue pushing for transparency. As it regards "fair" If your objective is to be fair with consumers based on their perceptions, try posting your triple net cost on new vehicles and ask them to name their fair margin. Now that would also be truly transparent. You're free to try that. Please report back with your results. Until then, transparency is a word that has actual meaning. Using it as a euphemism to try to appeal to consumers isn't transparent or even honest. Besides, they don't believe it anyway. RE: "You go on to argue that fair pricing is a hoax, that dealers who don't ask for all the money up front can't make enough to train staff, and that people with experience know you have to take profit wherever you can get it." When did I EVER say we should ask for all the money up front. What I've said is that trying to appeal to a consumers sense of fairness by providing across the board discounts from MSRP on new inventory isn't a winning formula, but those who want to try should by all means do so. Once your competitors learn to sell against you, you might want to reconsider. But you might have an expense structure that allows you to use your version of "fair pricing" (their is not single definition) and survive. I started in the auto business in such a store and worked there for 7 years. We called ourselves Moral Motors. We didn't have the Internet to hastily provide everyone with a new car discount, but the intent was to try to appeal to consumers based on fairness. I spent 7 years getting my leg pissed on. I achieved real success when I learned to take profit wherever I could without automatically providing unnecessary discounts. Once you've given it away, its hard to get it back. RE: "Perhaps you'd care to explain how CarMax works?" CarMax doesn't sell new cars. RE: "Or why AutoNation and Sonic have embraced this very model wholeheartedly?" Why not let some time go buy before using terms like wholeheartedly. The Ford Collection embraced their concept wholeheartedly too. Instead of coming out publicly and admitting they were wrong, they sold their stores back to real dealers. I know plenty of dealers who still use fair price/one price, etc. as part of their marketing strategy. Pretending not to negotiate is simply another strategy of negotiation. Sonic seems to be floundering and flailing these days. I don't have time here to get into Sonic particulars. They are NOT rolling their new deal out to all of their stores. It is supposedly in pilot in a couple of places where simple research shows they don't have a handle on things yet. For example, they hadn't even considered the compliance angle of having sales people do their own F&I. In fact, he person running the new initiative didn't even know who or what AFIP is when I asked. If I get a chance to mystery shop some AutoNation stores I'll be glad to report back as to how closely they adhere to whatever it is they say they do. RE: "Or why these companies are enjoying fantastic profits and growing rapidly?" Which companies are you saying are enjoying fantastic profits and growing rapidly? Sonic? Their net just dropped 45% from an already low level. "One Sonic-One Experience offers no-haggle pricing and has a goal of completing a purchase in 45 minutes or less with one sales rep using an iPad. Sonic is betting that by eliminating car-buying pain points, it will become a preferred place to shop and thereby gain market share." Perhaps you should wait until this is complete and actually successful before touting yet another claimed triumph in auto retail that shortly thereafter comes tumbling down. Don't confuse buying new dealerships with public money with year to year same store growth. They aren't they same thing. Using size and growth as a proof of concept isn't always valid, especially when Amazon hasn't yet broken black after years in business. Those companies are traded on the stock exchange - is your dealership traded on the NYSE? Might that be a sign of them knowing something you don't? RE: "As I said in my previous comment, dealers certainly CAN ask for full MSRP on every car every time. But they must do so with the understanding that they will lose the opportunity to sell a car to a big percentage of in-market buyers...because price comparisons are as easy as clicking a mouse button." Dealers can only take skinny deals when they have some fat ones to maintain a reasonable average. You need the skinny deals to achieve market penetration. You need market penetration to keep your OEM off your back. Skinny deals often pay off with a large back end or trade profit. Skinny deals are often all that can be had because of consumer trade negative equity and lender advance calls. You need some fat ones to offset them. If you think you can get those by giving away premature discounts on your website, I say "Go for it." Its your choice, not mine. For my part, I'd prefer to do aggressive price leader advertising on specific models and not address discounts until its appropriate and/or necessary. RE: "But they must do so with the understanding that they will lose the opportunity to sell a car to a big percentage of in-market buyers...because price comparisons are as easy as clicking a mouse button." And, of course, you must think everyone does exactly that on new vehicles so you beat them to the punch? Now there's a novel strategy. We used to provide upfront discounts without provocation out of fear of the customer in 1970. And now that mindset is back and called "new?" Really?
Auto Industry
@ Ed - RE: "We'd set up one van as an "ad van" - as bait. It had a mismatched tape package, no TV and no rear sofa. We'd advertise it in the newspaper as a loss leader. When customers showed up and saw how ugly and poorly equipped the van was, they'd be switched to a more expensive, better equipped, better looking unit. A classic bait and switch." https://www.ftc.gov/public-statements/1983/10/ftc-policy-statement-deception You might want to review this. Advertising new vehicles for cheap prices when you have them in inventory and list them by stock number along with their equipment, and make no misrepresentations is NOT a UDAP. If a consumer decides they want one with more equipment, it is the consumer doing the switching. If a consumer wants a better equipped vehicle for the same price as a stripped one, who is being unreasonable? RE: "Over the years I’ve had the pleasure of working with dealers who have embraced a dramatically different sales process" Are you trying to say this is "new?"
Auto Industry
The only definition of "transparency" that counts is that of the consumer, regardless of what it means in economics. Does anyone really think consumers believe dealer claims of "transparency?"
Spork Marketing, LLC
David - You lost me here: "You make the mistaken assumption that because consumers today have more information because of the Internet, they know more than they did in previous generations. Nothing could be further from the truth." If you're honestly arguing that consumers don't have more information now than they did 20 years ago, I don't see any reason to continue this conversation.
402.427.0157
@David - Please note that I didn't say it was illegal - I said that strategy doesn't work well for two reasons (you didn't address these in your response) 1.) It's no longer the 'Newspaper Era', shoppers expect to see your entire inventory online today. 2.) The Internet has given customers a bigger voice to express displeasure - a way to amplify their thoughts - and a dealer who did the same thing today would see their reputation suffer.
Auto Industry
RE: "My old friend David Ruggles still contends you HAVE to make home runs and take some really skinny deals to maintain market share, while I contend that advertising a discounted price and minimizing (or eliminating) negotiation is the best way to increase volume, total profit, and market share." I guess it might be better if I state my own position since some people tend to misrepresent it. First, I have been on record for YEARS about the Internet's impact on the pre-owned business. In fact, I have been writing columns in support of "market based" pricing on pre-owned from my first book review of Dale Pollak's first book written for Wards in about 2009. I can't lay my hands on the first column I wrote on the issue but I did run across this one that references the issue in a piece on a backwards practice I call "retail recon." http://autosandeconomics.blogspot.com/search?q=from+the+front+line+to+the+bottom+line I might add that Dale and I were in perfect alignment at this point other than the fact that I advocate dealers identifying opportunity vehicles and stocking them for particular purpose. Dale and I talked at length on this and ended up disagreeing. I believe you can make a market for a particular make model if you can buy it right and for a specific purpose. Since I was the guy who conceived a software product originally called "Arbitrage," I probably know a little more about how the process works than Dale does. And he knows more in his area of specialization than I do. Bottom line, I believe a dealer should absolutely make vAuto or a similar program the FOUNDATION for their pre-owned operation but also look for opportunities based on specific criteria I won't go into in detail at this writing. Those opportunities recognize the fact that consumers still buy based on monthly payment REGARDLESS of how they get to your store. If you make payment part of your message you can build more traffic than merely trying to attempt to attract buyers based on a page view strategy. I will again mention the fact that Dale neglected to complete his discussion of efficient markets in his first book, leaving out the entire topic of disintermediation. Since his pitch is to dealers, I can understand why he did that. But dealers need to be aware of the economic realities of an efficient market in the auto business. Be careful what you wish for. So much for pre-owned. Where I diverge is in the area of NEW VEHICLES! Coincidentally, after being bought out by AutoTrader/Cox, vAuto began to advocate for a practice of discounting new vehicle inventory on the web using an approach similar to what they use on the pre-owned side. Ed, why must you try to say that dealers have to abandon your juicy center to get the fat deals as well as the skinny ones? You can have it all. The math on this is simple. Throwing in CarMax as something that supposedly supports your view is entirely invalid. First, my position is on NEW VEHICLES!!!! Second, CarMax recons at an internal cost of zero markup, so trying to compare their numbers to the average new car franchise pre-owned department is invalid on its face.
Auto Industry
David - You lost me here: RE: "You make the mistaken assumption that because consumers today have more information because of the Internet, they know more than they did in previous generations. Nothing could be further from the truth." If you're honestly arguing that consumers don't have more information now than they did 20 years ago, I don't see any reason to continue this conversation." If you read what I wrote it is VERY clear. But I will elaborate. There is a HUGE difference between having more information and knowing more. Consumers have to unpack all of the information available. Its like drinking from a fire hose for them. Over the course of the last few years I have visited hundreds of dealerships. I find a lot of things that haven't changed over the 40 years I've been participating in the industry. First, a large number of consumers still leave with a completely different vehicle than they came in to buy. Second, perception of the deal is what makes consumers buy. The list goes on, but human nature is still driving the bus. The biggest difference I see these days is that consumers think they know a lot more than they do and it is a HUGE challenge to convince them they are wrong and still be able to do business with them. Our industry has made a concerted effort to try to convince consumers we are being more transparent with them when the opposite is true. Why? Because transparency isn't the objective. Gross profit is. In the following column I itemize some auto industry history. For those who weren't around in 1970, consumers had less information because there was less to be had. There were fewer OEMs. Business was transacted OVER INVOICE. Invoice was a real number. The complexity of "trunk money" via "stair step" barely existed. Joe Garagiola had yet to utter his famous line, "Buy a Car, Get a Check." Over the years the industry has shortened over invoice markup substantially, while moving it to "trunk money" in a concerted effort to keep cost information from consumers. Hence, it isn't so rare for a dealer to lead with invoice these days. After all, there could be thousands of dollars of gross profit still available at invoice. I'll be glad for you to tell me if a consumer would think this practice is more or less transparent. And I'll be happy for any dealer who wants to discount his/her new vehicle inventory up front on the web. And so will that dealer's competitors. Go for it! CONSUMERS HAD LESS INFORMATION BUT "KNEW" A LOT MORE. http://wardsauto.com/industry-voices/enough-transparency
Spork Marketing, LLC
You said: "The biggest difference I see these days is that consumers think they know a lot more than they do and it is a HUGE challenge to convince them they are wrong and still be able to do business with them" That's my point. As I said in my first comment: "Of these [in-market] buyers, a high percentage are price driven (wrongly so, but it is what it is). The people in this group will immediately dismiss options that they view as 'overpriced,' unless they have some other reason to consider the product." The Internet makes it very difficult to convince anyone of anything. This means that 'Joe Consumer' isn't going to see a vehicle priced at MSRP and think "Hmm, I wonder why they're thousands higher than everyone else - I have to go visit that dealership!" Instead, they're just going to find a lower price. They "think they know", and they also think that a low asking price is really, really important. Next, your straw man arguments about 'transparency' and 'fairness' are ridiculous. The ONLY person that's used the word transparency is you, and you were also the first person to use the word "fair" in this context. Please don't apply your contrived logic to my argument (where it does not belong) and then refute it. Summing up: The first problem with the Internet and vehicle pricing is that consumers - who often don't know any better - let price guide their decision making about which dealers to call, which dealers to go visit, etc. It sucks, but it's reality. People who argue for listing inventory online (new or used) at anything other than market price are fools of the highest order.
Auto Industry
RE: ""The biggest difference I see these days is that consumers think they know a lot more than they do and it is a HUGE challenge to convince them they are wrong and still be able to do business with them." That's my point. Then we have the same point, but you have been saying consumers "know" more than before, and they don't. They "know" less. Consumers have always thought they know more than they do. The Internet has exacerbated that situation, along with our industry's strategy of obfuscation (opposite of transparency) over the last few decades. RE: "As I said in my first comment: "Of these [in-market] buyers, a high percentage are price driven (wrongly so, but it is what it is). The people in this group will immediately dismiss options that they view as 'overpriced,' unless they have some other reason to consider the product." And this became "new" when the Internet was invented? Sounds to me like one needs to have enough imagination to deal with this "new thing" you mention. Is that posting discounts on new inventory on line? If so, I say "Go for it." Your competitors will love you. But don't call it new and innovative, because it isn't. RE: "The Internet makes it very difficult to convince anyone of anything." I have to ask you this question. Are you old enough to have done business BEFORE the Internet era, say before 1993? RE: "This means that 'Joe Consumer' isn't going to see a vehicle priced at MSRP and think "Hmm, I wonder why they're thousands higher than everyone else - I have to go visit that dealership!" Instead, they're just going to find a lower price. They "think they know", and they also think that a low asking price is really, really important." So you want to "compete" by posting discounts on every piece of new vehicle inventory? And you think that's a winning strategy? If so, I say go for it. Your competitors will love you.... but I repeat myself. Are you selling this as a strategy as Ed is, or used to? Every green pea I ever had working for me wanted to win over consumers by being "reasonable" with them from the start. ANd now we've come full circle to where this is the "new and winning formula?" RE: "Next, your straw man arguments about 'transparency' and 'fairness' are ridiculous. The ONLY person that's used the word transparency is you, and you were also the first person to use the word "fair" in this context. Please don't apply your contrived logic to my argument (where it does not belong) and then refute it." You must have missed the entire discussion as you missed by clear statement about the difference between more information and knowing more. RE: "Summing up: The first problem with the Internet and vehicle pricing is that consumers - who often don't know any better - let price guide their decision making about which dealers to call, which dealers to go visit, etc. It sucks, but it's reality. People who argue for listing inventory online (new or used) at anything other than market price are fools of the highest order." Anyone selling new vehicles who arbitrarily provides discounts on a per vehicle basis is a fool of the highest order. I know plenty of dealers who want their competitors to do just that. But I say, "Go for it if you think its a winning formula." But I repeat myself.
402.427.0157
"Anyone selling new vehicles who arbitrarily provides discounts on a per vehicle basis is a fool of the highest order" - David Ruggles I agree. There is nothing 'arbitrary' about the pricing decisions being made by dealers who are SUCCESSFULLY employing these strategies.
Auto Industry
Successfully? Arbitrarily discounting your inventory is arbitrary, and it is foolish. But if you think its a winning formula, why not put your own money up for grabs in a deal and see how long you stay with it. Until then, its an abstraction to you. There are a lot of dealers doing a lot of different things. There are dogs of all colors. Seeing one of a certain color doesn't mean they are all the same color. Identifying some that might be surviving using a particular strategy doesn't mean it is a strategy that is viable across all franchises and geographic areas. Take Tammy LeBleu or Greg Rietz, two top performers making real gross. You want to check their websites to see if they list their new inventory with discounted prices? If you want details of success I'll give them to you. Rietz's dealership used to be One Price. Then they decided that wasn't working and tried a variation. A knew owner stopped the One Price/No Negotiation strategy and put the emphasis back on gross profit. Either of these sales people sell more units on their own than a lot of dealerships. Yet, you say consumers are turned off if they can't get what they want at first glimpse, without even asking for it. I know hundreds of sales people like these two. I know a bunch more who left the business when their dealerships went with a voluntary discount on posted inventory, including a friend I sold with 45 years ago who has been making big money for decades while also enjoying some leisure time. You have any $150K sales people selling in stores where they just give the gross away on posted new inventory? I can give you hundreds, if not thousands, making actual gross profit. Again, you claim that one has to give away your so called juicy center is just fabrication. There is no reason one can't get the center, and the highs and lows too. You're giving us a false narrative.
402.427.0157
**Arbitrary - based on random choice or personal whim, rather than any reason or system** I stand by my statement that there is nothing nothing arbitrary about the pricing decisions being made by dealers who are SUCCESSFULLY employing these strategies. They make the decisions for a reason and using a system. I'm NOT claiming that "one has to give away your so called juicy center ", simply that you can grow deals in the center (where the vast majority of deals lie) by advertising a more competitive price AND then minimizing negotiation - thereby growing profits, volume, and market share. "One Price" requires a dramatic culture shift and won't be right for every dealership. I don't think it is the best strategy for most dealers. There are as many different strategies as there are dealers; I simply feel the strategy I outlined above is one of the best - and it does NOT involve "One Price". And finally, I too have seen a "bunch of people" leave the business when they couldn't/wouldn't adapt to change - change is hard.
Team Toyota
Consider this point of view: The presumption that $150K sales professionals are unwilling to change is not justified from this viewer... What is lost in the math is that dealers adjusting to these proposed transparent sales processes with minimal negotiation band width... also are adjusting their sales pay plans. As more dealers do the same the 20 group and manufacturer comparison costs of sales skew pay plans lower and lower. So the sales professional leaving is based on reduction of pay vs. their unwillingness to adjust to a new sales process. DTG
402.427.0157
DTG - I do agree with the idea that some dealership's pay plans haven't kept up with the process changes that they've implemented. And I also agree that those pay plans have sometimes become less transparent for the sales folk because of the "trunk money" and dealer packs that have become mainstays of the business over the past 40 years or so. Mr. Ruggles correctly points out the rebate has been around since 1975. I agree completely that a dealership would be better off designing a pay plan around what they wish achieve today and the processes and strategies that they are going to employ to reach their goals, rather than trying to shoehorn an old pay structure onto a new process - and trying to MAKE it fit - losing employees in the meantime.
402.427.0157
What Lexus Could Learn From the Failure of Saturn
Lexus recently announced that they are experimenting with a negotiation-free model; they piloting a haggle-free program at 12 stores nationwide. But, you might say, Saturn already tried that and failed, this is bound to fail as well. The big question is; why did Saturn fail? Was it because of the one-price model?
A quick look back - Roger Smith, GM CEO, and Donald Ephlin of the UAW got together back in the 80’s with the idea of reinventing the automobile business to stave off Japanese competition. This is was a pretty complete reworking of the model from manufacturing to sales and one small component of that reinvention was a one-price, no-negotiation sales philosophy.
Customers loved it - Saturn consistently ranked in the top tier for Customer Satisfaction (behind Lexus). The folks who sold Saturns liked the process and made money. The workers that built the cars were proud of what was rolling off the line. Who didn’t like it? There was resentment from the other GM brands and from the more traditional dealerships. They saw Saturn as “moving their cheese” and they didn’t like it.
So what went wrong (and the lesson for Lexus) - There was regime change at both GM and the UAW and the buy-in from leadership at the top evaporated. The commitment, both financially and politically, had disappeared. After GM nearly went bankrupt in 1992, Saturn did not receive money to update its cars. As a result, sales fell considerably. GM, with the UAW’s obvious blessing, broke up the Saturn empire. Production was taken out of Spring Hill and divided among other GM plants. Saturn’s workers, now only one small piece of a larger population, became part of the larger GM workforce in their new locations and subject to the UAW International contract. The lesson is you need commitment to be successful.
I am not necessarily an advocate for one-price – I think there is room for different strategies and philosophies. There are customers whose number one priority is to get the possible deal and there is a growing segment of the market that prioritize saving time and avoiding aggravation above beating the dealership. There are different consumer buying processes, so there is room for different selling processes. But a dealer needs to identify their target market and then commit to their selling process.
It's all about the commitment.
11 Comments
Heritage Chevrolet
That's a refreshingly accurate recap of Saturn history. There's a lot of misinformation about Saturn "failing." It's never a simple story. "Saturn" didn't fail, but obviously the Saturn brand did not survive after a quarter centrury -- 25-some years -- in existence. Saturn dealers didn't fail. Saturn owners didn't fail. Saturn plant workers didn't fail. Saturn management didn't fail. General Motors did fail, and the interrelationships therein led to numerous issues affected Saturn.
DST Inc.
Ditto the emphasis on commitment! In 2015, commit to your customer. Commit to her satisfaction, and try to earn her loyalty. Jim Collins wrote a useful book years ago called "Good to Great". A lot can be learned from the book's "comparison companies." One of them, Warner Lambert, was a 7.5 billion dollar multinational drug company. After launching Lipitor in 1997, which achieved $1 billion in sales in the first 12 months, Warner Lambert was unable to remain independent. They were financially too weak to fend off Pfizer's hostile bid, and surrendered in 2000. In my estimation, WL doesn’t exist today because they were committed to a business model that was designed for the 1960s. Commit. But make that commitment to your customers.
Auto Industry
Yes, One Price was the reason Saturn failed. When its selling system failed to move the metal at a profit, GM stopped providing the division with hot products, understanding that other divisions would move the metal, keep the plants running, and profits flowing. When Saturn was first introduced, GM lost $1500. on every car. That helped the dealers a lot but didn't do GM any good. They hoped to be able to ratchet up margins, but that didn't work out. Toyota tried One Price in Japan about 12 years ago. I happened to be in Nagano for my yearly visit to a client there and Toyota sent out some of their execs from Nagoya to talk about One Price. I don't recall the exact timing but I believe it was about the time they launched SCION here in the U.S. I had told the SCION people they were barking up the wrong tree and I told the Toyota execs the same thing. I told them One Price would work out just fine as long as they (Toyota) limited their production to be slightly less than market demand. I told them that if they weren't prepared to do that, they should give up the idea. Of course, they were NEVER going to give up market share to Nissan and others by going to such a production model. The idea of dealer inventory buffering works entirely too well given their production philosophy. Shutting down assembly, and starting it back up to carefully balance supply and demand just isn't in the cards. Toyota abandoned their great experiment shortly thereafter, but combined two of their channels, Auto and Vista, into one called Netz. They then introduced Lexus in Japan. Netz was given all of the small low margin cars which have little dealer profit in them even when sold at MSRP. Thus, Toyota was able to claim a One Price victory of sorts. But its all bogus in reality. People keep trying to go back to that well. Go figure. We KNOW some people will buy that way. We also know there aren't enough of them to make for a viable business model in the real world. Wait until Tesla gets to a point where they have more supply than demand and see what happens.
Auto Industry
RE: "Who didn’t like it?" GM shareholders. Saturn lost money for GM from the git go. The money that went into that failed experiment could have and should have been poured into Oldsmobile, once GM's most profitable brand.
Auto Industry
RE: "The lesson is you need commitment to be successful." The lesson is you need profits to be successful. RE: "But a dealer needs to identify their target market and then commit to their selling process." Why limit yourself? Adopt a strategy that appeals to the most buyers, not just s single niche. If you want to try to appeal to a single niche, go for it. Skinny down your expenses so you can make money on the reduced volume and profit. Then be prepared to explain to your OEM why you aren't penetrating your market when it comes time to re-up on your sales and service agreement.
402.427.0157
David - Committing to a selling process will mean that you won't necessarily be all things to all people, but I will remind you that the bell curve exists and by embracing the "fat, juicy center", you will sell more cars and penetrate more of your market. https://dl.dropboxusercontent.com/u/76554925/534xNxbell-curve-chart-web-img.png.pagespeed.ic.dLn7sZh0sQ.png
Auto Industry
@ Chris - You have nailed it. It is the sales person who has received the shit end of the stick, which is why we have run so much talent out of our business and why most customers are meeting their sales person for the first time, the major reason for consumer dissatisfaction. It takes gross profit to compensate sales people. We have all of these people trying to overhaul auto retail while missing the 800 pound elephant in the room. Ours is a business of relationships. @ Ed - You seem to have a lack of understanding of good sales process. You seem to make false choices. You don't have to abandon your "fat juicy center" to also get those on either end. Who told you that? On our best day we only close 30% anyway. Why limit yourself. The so called "Bell Curve" is another false analogy. Try looking at the business from the concept of the total deal. Sometimes the fattest deals start off with the skinniest up front gross profit. These are the deals your process turns away "to maintain the credibility of your process." And the deals that make it possible to take some skinny deals to penetrate the market and gain the F&I turn? You don't get those because you are afraid to ask for them. You turn those fat deals into average deals and think you'll make it up in volume.
402.427.0157
David - When you start every negotiation at MSRP in order to hit a possible "Home Run", you first must understand the fat deals that you pine for are increasingly rare in the Internet age, you will see fewer and fewer of the customers that will put up with what they see as a traditional dealer runaround. You then end up with the extremes; a few fat deals and all the grinders you can handle. The "fat juicy center" will avoid your dealership.
Auto Industry
Who says you start every deal at MSRP? You might some higher? You need to get a better process. Inartful negotiation by green peas is just that, inartful negotiation. Just because you can't do it right doesn't mean you have to take the lazy person's way out. Work on your process. Keep your good people. You can't do that with a bunch of mini deals. Just because you don't know how to do it doesn't mean others don't.
402.427.0157
@David - I, too, miss the days before the Internet. The days when you could start a negotiation above MSRP. The days when you could pull traffic with loss-leader "ad car" in the newspaper. The days when the dealer and the salesman had all the knowledge and all the control. Those were some fun days. Unfortunately, if you continue you to play those same games today, you damage your store's reputation - both online and off. With a bad reputation, it will take more than a big inflatable gorilla on the roof to bring people in off the street.
402.427.0157
What Lexus Could Learn From the Failure of Saturn
Lexus recently announced that they are experimenting with a negotiation-free model; they piloting a haggle-free program at 12 stores nationwide. But, you might say, Saturn already tried that and failed, this is bound to fail as well. The big question is; why did Saturn fail? Was it because of the one-price model?
A quick look back - Roger Smith, GM CEO, and Donald Ephlin of the UAW got together back in the 80’s with the idea of reinventing the automobile business to stave off Japanese competition. This is was a pretty complete reworking of the model from manufacturing to sales and one small component of that reinvention was a one-price, no-negotiation sales philosophy.
Customers loved it - Saturn consistently ranked in the top tier for Customer Satisfaction (behind Lexus). The folks who sold Saturns liked the process and made money. The workers that built the cars were proud of what was rolling off the line. Who didn’t like it? There was resentment from the other GM brands and from the more traditional dealerships. They saw Saturn as “moving their cheese” and they didn’t like it.
So what went wrong (and the lesson for Lexus) - There was regime change at both GM and the UAW and the buy-in from leadership at the top evaporated. The commitment, both financially and politically, had disappeared. After GM nearly went bankrupt in 1992, Saturn did not receive money to update its cars. As a result, sales fell considerably. GM, with the UAW’s obvious blessing, broke up the Saturn empire. Production was taken out of Spring Hill and divided among other GM plants. Saturn’s workers, now only one small piece of a larger population, became part of the larger GM workforce in their new locations and subject to the UAW International contract. The lesson is you need commitment to be successful.
I am not necessarily an advocate for one-price – I think there is room for different strategies and philosophies. There are customers whose number one priority is to get the possible deal and there is a growing segment of the market that prioritize saving time and avoiding aggravation above beating the dealership. There are different consumer buying processes, so there is room for different selling processes. But a dealer needs to identify their target market and then commit to their selling process.
It's all about the commitment.
11 Comments
Heritage Chevrolet
That's a refreshingly accurate recap of Saturn history. There's a lot of misinformation about Saturn "failing." It's never a simple story. "Saturn" didn't fail, but obviously the Saturn brand did not survive after a quarter centrury -- 25-some years -- in existence. Saturn dealers didn't fail. Saturn owners didn't fail. Saturn plant workers didn't fail. Saturn management didn't fail. General Motors did fail, and the interrelationships therein led to numerous issues affected Saturn.
DST Inc.
Ditto the emphasis on commitment! In 2015, commit to your customer. Commit to her satisfaction, and try to earn her loyalty. Jim Collins wrote a useful book years ago called "Good to Great". A lot can be learned from the book's "comparison companies." One of them, Warner Lambert, was a 7.5 billion dollar multinational drug company. After launching Lipitor in 1997, which achieved $1 billion in sales in the first 12 months, Warner Lambert was unable to remain independent. They were financially too weak to fend off Pfizer's hostile bid, and surrendered in 2000. In my estimation, WL doesn’t exist today because they were committed to a business model that was designed for the 1960s. Commit. But make that commitment to your customers.
Auto Industry
Yes, One Price was the reason Saturn failed. When its selling system failed to move the metal at a profit, GM stopped providing the division with hot products, understanding that other divisions would move the metal, keep the plants running, and profits flowing. When Saturn was first introduced, GM lost $1500. on every car. That helped the dealers a lot but didn't do GM any good. They hoped to be able to ratchet up margins, but that didn't work out. Toyota tried One Price in Japan about 12 years ago. I happened to be in Nagano for my yearly visit to a client there and Toyota sent out some of their execs from Nagoya to talk about One Price. I don't recall the exact timing but I believe it was about the time they launched SCION here in the U.S. I had told the SCION people they were barking up the wrong tree and I told the Toyota execs the same thing. I told them One Price would work out just fine as long as they (Toyota) limited their production to be slightly less than market demand. I told them that if they weren't prepared to do that, they should give up the idea. Of course, they were NEVER going to give up market share to Nissan and others by going to such a production model. The idea of dealer inventory buffering works entirely too well given their production philosophy. Shutting down assembly, and starting it back up to carefully balance supply and demand just isn't in the cards. Toyota abandoned their great experiment shortly thereafter, but combined two of their channels, Auto and Vista, into one called Netz. They then introduced Lexus in Japan. Netz was given all of the small low margin cars which have little dealer profit in them even when sold at MSRP. Thus, Toyota was able to claim a One Price victory of sorts. But its all bogus in reality. People keep trying to go back to that well. Go figure. We KNOW some people will buy that way. We also know there aren't enough of them to make for a viable business model in the real world. Wait until Tesla gets to a point where they have more supply than demand and see what happens.
Auto Industry
RE: "Who didn’t like it?" GM shareholders. Saturn lost money for GM from the git go. The money that went into that failed experiment could have and should have been poured into Oldsmobile, once GM's most profitable brand.
Auto Industry
RE: "The lesson is you need commitment to be successful." The lesson is you need profits to be successful. RE: "But a dealer needs to identify their target market and then commit to their selling process." Why limit yourself? Adopt a strategy that appeals to the most buyers, not just s single niche. If you want to try to appeal to a single niche, go for it. Skinny down your expenses so you can make money on the reduced volume and profit. Then be prepared to explain to your OEM why you aren't penetrating your market when it comes time to re-up on your sales and service agreement.
402.427.0157
David - Committing to a selling process will mean that you won't necessarily be all things to all people, but I will remind you that the bell curve exists and by embracing the "fat, juicy center", you will sell more cars and penetrate more of your market. https://dl.dropboxusercontent.com/u/76554925/534xNxbell-curve-chart-web-img.png.pagespeed.ic.dLn7sZh0sQ.png
Auto Industry
@ Chris - You have nailed it. It is the sales person who has received the shit end of the stick, which is why we have run so much talent out of our business and why most customers are meeting their sales person for the first time, the major reason for consumer dissatisfaction. It takes gross profit to compensate sales people. We have all of these people trying to overhaul auto retail while missing the 800 pound elephant in the room. Ours is a business of relationships. @ Ed - You seem to have a lack of understanding of good sales process. You seem to make false choices. You don't have to abandon your "fat juicy center" to also get those on either end. Who told you that? On our best day we only close 30% anyway. Why limit yourself. The so called "Bell Curve" is another false analogy. Try looking at the business from the concept of the total deal. Sometimes the fattest deals start off with the skinniest up front gross profit. These are the deals your process turns away "to maintain the credibility of your process." And the deals that make it possible to take some skinny deals to penetrate the market and gain the F&I turn? You don't get those because you are afraid to ask for them. You turn those fat deals into average deals and think you'll make it up in volume.
402.427.0157
David - When you start every negotiation at MSRP in order to hit a possible "Home Run", you first must understand the fat deals that you pine for are increasingly rare in the Internet age, you will see fewer and fewer of the customers that will put up with what they see as a traditional dealer runaround. You then end up with the extremes; a few fat deals and all the grinders you can handle. The "fat juicy center" will avoid your dealership.
Auto Industry
Who says you start every deal at MSRP? You might some higher? You need to get a better process. Inartful negotiation by green peas is just that, inartful negotiation. Just because you can't do it right doesn't mean you have to take the lazy person's way out. Work on your process. Keep your good people. You can't do that with a bunch of mini deals. Just because you don't know how to do it doesn't mean others don't.
402.427.0157
@David - I, too, miss the days before the Internet. The days when you could start a negotiation above MSRP. The days when you could pull traffic with loss-leader "ad car" in the newspaper. The days when the dealer and the salesman had all the knowledge and all the control. Those were some fun days. Unfortunately, if you continue you to play those same games today, you damage your store's reputation - both online and off. With a bad reputation, it will take more than a big inflatable gorilla on the roof to bring people in off the street.
402.427.0157
3 Reasons Why Periscope ISN'T an #AutoMarketing Game-Changer
Periscope and Meerkat are being touted as #AutoMarketing game-changers, I think they are more likely this year’s QR Code. Three reasons why I think that is true:
- Car buying is an individual endeavor – These live-streaming services are basically ‘one-to-many’ services allowing one person to broadcast, live, to many people at the same time. That may be cool if you are introducing a new model, but doesn’t work as well if you are trying to sell a specific car to a specific buyer (or family). You CAN drive a nail with a crescent wrench, but Dude, why would you want to?
- Not mainstream yet – Two months ago a poll was conducted showing single digit adoption and only a little over one fifth of Internet users even had an interest in using Periscope and Meerkat. They require that users download an app (like you need for QR Codes – and we all saw how well THAT worked). The only saving grace is the apps are free.
- No search engine boost – Video is huge. YouTube is huge. Google owns YouTube, indexes YouTube videos, and just, loves them. As do most AutoMarketers – as they should! Periscope, not so much (if at all).
In a nutshell, use the right tool for the right job. YouTube is a MUCH better tool than Periscope for helping dealers sell cars.
8 Comments
Spork Marketing, LLC
I'd add another problem to your list - it's not "on demand." If someone is researching an auto purchase, are they going to set a reminder to attend your free periscope Q&A where you take questions about your inventory? Seems unlikely. However, integrating this system into web chat is logical, especially if the prospect is serious. But that's not a 'game changing' implementation, is it? :)
402.427.0157
Correct Jason! Google Hangouts has much broader adoption and they provide two way video. Seems to me that has more potential - but still not a game-changer.
Faulkner Nissan
I've found that these live-video-streaming-apps are good for Conferences, Concerts, Sporting Events, stuff like that. Great Insights, Ed! :-)
Launch Digital Marketing
I see Periscope and Meerkat as great complimentary apps to your marketing efforts. For example we're the main sponsor of an outdoor summer concert series at a local park. We'll be live streaming each show for anyone who cares to check it out. Just looking to use our available resources to build stronger connections with our community. Nothing more, nothing less. PS. I love the QR code analogy @Ed. I was ALL over QR codes when I first ran across them back in 2010. Started slapping those bad boys on everything I could. Oh well...you live and learn :)
402.427.0157
Stick a fork in Meercat as a livestreaming service - it's dead... http://recode.net/2016/03/04/meerkat-is-ditching-the-livestream-and-chasing-a-video-social-network-instead/
Launch Digital Marketing
Wow, from talk of the town to this ain't gonna work in less than a year. Thanks for sharing the link Ed, it's an interesting look into the live video streaming space.
DrivingSales
The future will include live video interactions throughout the sales and marketing processes. Are Meerkat and Periscope the platform to make that happen.... probably not. Totally agree with the QR comparison. For now, Hangouts is the best option, but other players like Facebook, Apple and Twitter have a foot in the game and may come up with the right solution for live video that easily adapts for wide adoption.
Great conversation!
Automotive Group
These tools were never built for brands or businesses. We try and act like there is a business need/case to use them which I find silly. It's not so much that "Live Streaming" is the future. It's never not been the future in my opinion. We just lacked the ability to do it because of.. well, technology.
We have to stop assuming we can integrate a strategy with these services and instead try and recruite talent (yes i am talking about vine stars, snapchat stars, etc.) and find ways to incorporate our brands into their celebrity.
402.427.0157
3 Reasons Why Periscope ISN'T an #AutoMarketing Game-Changer
Periscope and Meerkat are being touted as #AutoMarketing game-changers, I think they are more likely this year’s QR Code. Three reasons why I think that is true:
- Car buying is an individual endeavor – These live-streaming services are basically ‘one-to-many’ services allowing one person to broadcast, live, to many people at the same time. That may be cool if you are introducing a new model, but doesn’t work as well if you are trying to sell a specific car to a specific buyer (or family). You CAN drive a nail with a crescent wrench, but Dude, why would you want to?
- Not mainstream yet – Two months ago a poll was conducted showing single digit adoption and only a little over one fifth of Internet users even had an interest in using Periscope and Meerkat. They require that users download an app (like you need for QR Codes – and we all saw how well THAT worked). The only saving grace is the apps are free.
- No search engine boost – Video is huge. YouTube is huge. Google owns YouTube, indexes YouTube videos, and just, loves them. As do most AutoMarketers – as they should! Periscope, not so much (if at all).
In a nutshell, use the right tool for the right job. YouTube is a MUCH better tool than Periscope for helping dealers sell cars.
8 Comments
Spork Marketing, LLC
I'd add another problem to your list - it's not "on demand." If someone is researching an auto purchase, are they going to set a reminder to attend your free periscope Q&A where you take questions about your inventory? Seems unlikely. However, integrating this system into web chat is logical, especially if the prospect is serious. But that's not a 'game changing' implementation, is it? :)
402.427.0157
Correct Jason! Google Hangouts has much broader adoption and they provide two way video. Seems to me that has more potential - but still not a game-changer.
Faulkner Nissan
I've found that these live-video-streaming-apps are good for Conferences, Concerts, Sporting Events, stuff like that. Great Insights, Ed! :-)
Launch Digital Marketing
I see Periscope and Meerkat as great complimentary apps to your marketing efforts. For example we're the main sponsor of an outdoor summer concert series at a local park. We'll be live streaming each show for anyone who cares to check it out. Just looking to use our available resources to build stronger connections with our community. Nothing more, nothing less. PS. I love the QR code analogy @Ed. I was ALL over QR codes when I first ran across them back in 2010. Started slapping those bad boys on everything I could. Oh well...you live and learn :)
402.427.0157
Stick a fork in Meercat as a livestreaming service - it's dead... http://recode.net/2016/03/04/meerkat-is-ditching-the-livestream-and-chasing-a-video-social-network-instead/
Launch Digital Marketing
Wow, from talk of the town to this ain't gonna work in less than a year. Thanks for sharing the link Ed, it's an interesting look into the live video streaming space.
DrivingSales
The future will include live video interactions throughout the sales and marketing processes. Are Meerkat and Periscope the platform to make that happen.... probably not. Totally agree with the QR comparison. For now, Hangouts is the best option, but other players like Facebook, Apple and Twitter have a foot in the game and may come up with the right solution for live video that easily adapts for wide adoption.
Great conversation!
Automotive Group
These tools were never built for brands or businesses. We try and act like there is a business need/case to use them which I find silly. It's not so much that "Live Streaming" is the future. It's never not been the future in my opinion. We just lacked the ability to do it because of.. well, technology.
We have to stop assuming we can integrate a strategy with these services and instead try and recruite talent (yes i am talking about vine stars, snapchat stars, etc.) and find ways to incorporate our brands into their celebrity.
402.427.0157
Look Outside Automotive
While arguing with my dear friend Larry Bruce about the benefits of mobile (I'm very much for, he's more skeptical) I came across this AMAZING study from Deloitte. Of course he attacked it because isn’t automotive centered, but I’d argue that we can learn from looking at outside perspectives.
The study in entitled “The New Digital Divide - Retailers, shoppers, and the digital influence factor”. This report looks at how Digital influences in-store buying. In my mind this describes the current state of the retail automotive business to a ‘T’. We may being transformed into something more closely resembling eCommerce, but most dealerships are a long way from it today.
Here are a couple of pull quotes from the study;
“…the speed of the change is far greater than anything analysts predicted just a couple of years ago. The influence of digital devices on the shopping journey, a dynamic Deloitte calls the ‘digital influence factor,’ is not only shaping how customers shop and make decisions in-store. It is setting new digital expectations of retailers in terms of how they help their customers gather pertinent information to make shopping decisions and purchases.”
“Given this acceleration, we are at a tipping point in retail – a point where digital channels should no longer be considered a separate or distinct business. Instead, digital is fundamental to the entire business and the entire shopping experience, in and out of the store.”
“…you should stop viewing your customer and your digital strategies as distinct and separate issues. Today, people and their devices are wired as one. Integrating digital into the customer experience has become a business imperative, and retailers who ignore this fact will likely be trapped in the digital divide – the gap that separates shoppers’ digital needs and expectations from the experiences retailers are actually providing to them.”
Much of the report looks at what consumers are doing and then looks at what retailers are doing and then looks at how to bring the retailers efforts into closer alignment with the customers – Bridging the digital divide.
For instance;
In the area of Customer Experience
We see customers...
Using “screens” (desktop, mobile, tablet) very differently throughout their path to purchase.
We see retailers...
Creating sameness across “screens” by emphasizing functionality such as responsive design and failing to recognize these individual interactions as part of a larger journey toward the path to purchase.
Bridging the digital divide (Recommendation)
Customers want a shopping experience that “connects the dots” along their path to purchase. Viewed as discrete interactions across screens, these interactions are meaningless. Viewed as a holistic customer experience, these interactions become powerful predictors of preference and purchase intent.
In the area of Analysis/ Measurement
We see customers...
Signal a preference and purchase intent as a part of their pre-visit browsing activity
We see retailers...
Over-focus on “after the fact” measurement of online activity, such as channel attribution, conversion, and click-through rates.
Bridging the digital divide (Recommendation)
Customers who are pre-shopping an assortment before buying in-store have little/no intent of converting online. Consequently, their visits appear in most attribution and abandonment reporting as “failed” conversions. This significantly understates both the effectiveness and potential of your digital strategy
Which brings back to my buddy Larry. Larry always disparages the "Conversion Rate" of mobile, while this study is arguing that because the utility, convenience, and the functionality of mobile are important to consumers, they are converting where it really counts today – in-store to a sale! In fact the Deloitte study shows when shoppers combine desktop and mobile research they convert to a sale – in-store – 40% more often!
11 Comments
MicrositesByU.com
First let me say I am not attacking the study... In fact I agree with ALL of it... BUT the study has NOTHING to do with mobile marketing! It has to do with how customers USE their smartphones in a purchase situation and how retailers need to help them make better choices by allowing them to access rich information using all screens... whatever they want AND I COULDN'T AGREE WITH THAT MORE! HOWEVER.... When it comes to buying clicks, placing display banners the conventional forms of online marketing and mobile for the car business at this time these channels are the last channels in the budget you should be putting money towards. The context of the customer is not in a mode that the dealership can or should engage with the customer when they are truly mobile (Small Screen smartphone device). They are usually: 1. Looking for quick information on the go in which your chances of getting a click or even influencing are low. 2. Showrooming in which if they do click you ad all you are going to do is lower the gross profit for the store they are at. 3. Looking for your dealership number or directions which they will find just as easy organically (Just make sure you have a mobile site so that it is easy to get that info) So to sum up... Using mobile to enhance your customers shopping experience.... WAY GOOD! Using mobile as a online marketing channel... LAST THING YOU SHOULD BE DOING!
402.427.0157
You and I have very different definitions of "Mobile Marketing" Larry. I use my smartphone almost everyday to help me shop for something. I don't think I've EVER clicked on paid link or display ad on my phone. So if your definition of "Mobile Marketing" is limited to PPC > a landing page > form fill lead, then I agree, that is stupid.
Dealers Marketing Network
I am with Larry on this topic. And while a mobile marketing strategy is important it needs to work and integrate with a broad, focused ad program for the dealers. Too often dealers don't think about their mobile presence on the small screen.
402.427.0157
Fair enough Mark. A question: do you consider a dealer's mobile website to be a part of their "Mobile Marketing"?
Dealer e Process
Great stat about the importance of combined visits Ed! It's not enough for a dealer's website to be responsive, functioning properly on all devices. It also needs to function across devices. The "Send to Mobile" feature on SRPs and VDPs is essential for shoppers who think they've found the right vehicle from a desktop computer but need to have it on their mobile device when meeting up with their significant other. Most cars are not purchased by a single individual, and mobile has changed how they come together around the vehicle and store information online.
Dealers Marketing Network
Ed Brooks ?: So do you consider a dealer's mobile website to be a part of their "Mobile Marketing"? In that mobile marketing via ads, social media posts, etc links to the dealers website or a VDP page; mobile users will certainly click and see the mobile version of a dealers site/page, so it has to be mobile friendly, but also give the visitor ability to EASILY click over the the desktop version if on a tablet. In that the dealer's mobile site is a "door" to the dealership showroom, it's got to be a friendly door that is easy to open for everyone. Too much crap on the door will make visitors look for another door to open.
402.427.0157
Mark - I'd suggest that dealers view Mobile, Tablets, and Desktop as 3 distinct platforms (just like Google sees them as different). If you have a Responsive website, it will "re-configure" itself to display the same content regardless of the device - it's considered to be "Device Agnostic". Adaptive websites are designed for the device and can provide content tailored to the device. If you feel that your customers have different priorities - have different needs - based on the device, Adaptive may be the way to go.
Remarkable Marketing
Mobile will be the future, glass and touch will be right beside it. Meaning, that clunky thing that sits on everyone's desk with a keyboard and tower... won't be there in time. I believe if you want to stay on top, and be ahead of the curve, make mobile a priority. Explore all aspects and find out where you make gains. As devices become more intuitive consumer experience will be mobile and mobile only. It might be on your head, on your wrist, in your pocket or briefcase.. but it won't be plugged into a wall on your desk. (Unless it's charging)
PureCars
Totally agree with Ed Brooks! Adaptive is how we actually design especially when you are dealing with functionality rather than just content. As half the leads we generate come from mobile, our experience is first hand, not based on survey data. -Tarry
AutoStride
Yes, your answer is Smart Insights http://www.smartinsights.com/digital-marketing-strategy/
northtownautomotive
I think an important point that has not been mentioned is personalization, and I will qualify this point with I do not know if the technology solutions have advanced this far in the automotive space. The best customer experience will be determined by the sites that have the intelligence through behavioral data to serve up relevant content. This content can look different depending on the device, because people behave different on different devices and often are looking for different content on different devices. The majority of car shoppers are on mobile and desktop around 80% access both so as technology evolves so will the experience.
402.427.0157
Look Outside Automotive
While arguing with my dear friend Larry Bruce about the benefits of mobile (I'm very much for, he's more skeptical) I came across this AMAZING study from Deloitte. Of course he attacked it because isn’t automotive centered, but I’d argue that we can learn from looking at outside perspectives.
The study in entitled “The New Digital Divide - Retailers, shoppers, and the digital influence factor”. This report looks at how Digital influences in-store buying. In my mind this describes the current state of the retail automotive business to a ‘T’. We may being transformed into something more closely resembling eCommerce, but most dealerships are a long way from it today.
Here are a couple of pull quotes from the study;
“…the speed of the change is far greater than anything analysts predicted just a couple of years ago. The influence of digital devices on the shopping journey, a dynamic Deloitte calls the ‘digital influence factor,’ is not only shaping how customers shop and make decisions in-store. It is setting new digital expectations of retailers in terms of how they help their customers gather pertinent information to make shopping decisions and purchases.”
“Given this acceleration, we are at a tipping point in retail – a point where digital channels should no longer be considered a separate or distinct business. Instead, digital is fundamental to the entire business and the entire shopping experience, in and out of the store.”
“…you should stop viewing your customer and your digital strategies as distinct and separate issues. Today, people and their devices are wired as one. Integrating digital into the customer experience has become a business imperative, and retailers who ignore this fact will likely be trapped in the digital divide – the gap that separates shoppers’ digital needs and expectations from the experiences retailers are actually providing to them.”
Much of the report looks at what consumers are doing and then looks at what retailers are doing and then looks at how to bring the retailers efforts into closer alignment with the customers – Bridging the digital divide.
For instance;
In the area of Customer Experience
We see customers...
Using “screens” (desktop, mobile, tablet) very differently throughout their path to purchase.
We see retailers...
Creating sameness across “screens” by emphasizing functionality such as responsive design and failing to recognize these individual interactions as part of a larger journey toward the path to purchase.
Bridging the digital divide (Recommendation)
Customers want a shopping experience that “connects the dots” along their path to purchase. Viewed as discrete interactions across screens, these interactions are meaningless. Viewed as a holistic customer experience, these interactions become powerful predictors of preference and purchase intent.
In the area of Analysis/ Measurement
We see customers...
Signal a preference and purchase intent as a part of their pre-visit browsing activity
We see retailers...
Over-focus on “after the fact” measurement of online activity, such as channel attribution, conversion, and click-through rates.
Bridging the digital divide (Recommendation)
Customers who are pre-shopping an assortment before buying in-store have little/no intent of converting online. Consequently, their visits appear in most attribution and abandonment reporting as “failed” conversions. This significantly understates both the effectiveness and potential of your digital strategy
Which brings back to my buddy Larry. Larry always disparages the "Conversion Rate" of mobile, while this study is arguing that because the utility, convenience, and the functionality of mobile are important to consumers, they are converting where it really counts today – in-store to a sale! In fact the Deloitte study shows when shoppers combine desktop and mobile research they convert to a sale – in-store – 40% more often!
11 Comments
MicrositesByU.com
First let me say I am not attacking the study... In fact I agree with ALL of it... BUT the study has NOTHING to do with mobile marketing! It has to do with how customers USE their smartphones in a purchase situation and how retailers need to help them make better choices by allowing them to access rich information using all screens... whatever they want AND I COULDN'T AGREE WITH THAT MORE! HOWEVER.... When it comes to buying clicks, placing display banners the conventional forms of online marketing and mobile for the car business at this time these channels are the last channels in the budget you should be putting money towards. The context of the customer is not in a mode that the dealership can or should engage with the customer when they are truly mobile (Small Screen smartphone device). They are usually: 1. Looking for quick information on the go in which your chances of getting a click or even influencing are low. 2. Showrooming in which if they do click you ad all you are going to do is lower the gross profit for the store they are at. 3. Looking for your dealership number or directions which they will find just as easy organically (Just make sure you have a mobile site so that it is easy to get that info) So to sum up... Using mobile to enhance your customers shopping experience.... WAY GOOD! Using mobile as a online marketing channel... LAST THING YOU SHOULD BE DOING!
402.427.0157
You and I have very different definitions of "Mobile Marketing" Larry. I use my smartphone almost everyday to help me shop for something. I don't think I've EVER clicked on paid link or display ad on my phone. So if your definition of "Mobile Marketing" is limited to PPC > a landing page > form fill lead, then I agree, that is stupid.
Dealers Marketing Network
I am with Larry on this topic. And while a mobile marketing strategy is important it needs to work and integrate with a broad, focused ad program for the dealers. Too often dealers don't think about their mobile presence on the small screen.
402.427.0157
Fair enough Mark. A question: do you consider a dealer's mobile website to be a part of their "Mobile Marketing"?
Dealer e Process
Great stat about the importance of combined visits Ed! It's not enough for a dealer's website to be responsive, functioning properly on all devices. It also needs to function across devices. The "Send to Mobile" feature on SRPs and VDPs is essential for shoppers who think they've found the right vehicle from a desktop computer but need to have it on their mobile device when meeting up with their significant other. Most cars are not purchased by a single individual, and mobile has changed how they come together around the vehicle and store information online.
Dealers Marketing Network
Ed Brooks ?: So do you consider a dealer's mobile website to be a part of their "Mobile Marketing"? In that mobile marketing via ads, social media posts, etc links to the dealers website or a VDP page; mobile users will certainly click and see the mobile version of a dealers site/page, so it has to be mobile friendly, but also give the visitor ability to EASILY click over the the desktop version if on a tablet. In that the dealer's mobile site is a "door" to the dealership showroom, it's got to be a friendly door that is easy to open for everyone. Too much crap on the door will make visitors look for another door to open.
402.427.0157
Mark - I'd suggest that dealers view Mobile, Tablets, and Desktop as 3 distinct platforms (just like Google sees them as different). If you have a Responsive website, it will "re-configure" itself to display the same content regardless of the device - it's considered to be "Device Agnostic". Adaptive websites are designed for the device and can provide content tailored to the device. If you feel that your customers have different priorities - have different needs - based on the device, Adaptive may be the way to go.
Remarkable Marketing
Mobile will be the future, glass and touch will be right beside it. Meaning, that clunky thing that sits on everyone's desk with a keyboard and tower... won't be there in time. I believe if you want to stay on top, and be ahead of the curve, make mobile a priority. Explore all aspects and find out where you make gains. As devices become more intuitive consumer experience will be mobile and mobile only. It might be on your head, on your wrist, in your pocket or briefcase.. but it won't be plugged into a wall on your desk. (Unless it's charging)
PureCars
Totally agree with Ed Brooks! Adaptive is how we actually design especially when you are dealing with functionality rather than just content. As half the leads we generate come from mobile, our experience is first hand, not based on survey data. -Tarry
AutoStride
Yes, your answer is Smart Insights http://www.smartinsights.com/digital-marketing-strategy/
northtownautomotive
I think an important point that has not been mentioned is personalization, and I will qualify this point with I do not know if the technology solutions have advanced this far in the automotive space. The best customer experience will be determined by the sites that have the intelligence through behavioral data to serve up relevant content. This content can look different depending on the device, because people behave different on different devices and often are looking for different content on different devices. The majority of car shoppers are on mobile and desktop around 80% access both so as technology evolves so will the experience.
3 Comments
Ed Brooks
402.427.0157
From the Moz blog today - This is a MUST READ Why I Stopped Selling SEO Services and You Should, Too - https://moz.com/blog/why-i-stopped-selling-seo-services-and-you-should-too * Search "best headphones" - No product pages, all articles * Search "restaurants in Miami" - Not a single result on the first page is a restaurant's website. * Search "plumbers in San Francisco" - Not a single result on the first page is a website
Pam Russek
Cox Automotive
Well said Ed
Ed Brooks
402.427.0157
Thanks so much Pam