CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
Dealers are constantly looking for ways to get an edge in the digital age, yet many continue to follow the same sales and advertising practices that they’ve been using for decades. The problem is that the game has changed and consumers have access to much more information and choices than ever before. In the past the dealer controlled all of the information, but today it’s just the opposite. Any information you offer is now carefully scrutinized and validated by a vast amount of online data. As a result, the likelihood of old-school sales practices backfiring has increased substantially.
So what type of “old-school” practices am I talking about? How about pricing vehicles without disclosing that there are rebates that most people don’t qualify for; trade-in values where the selling price is increased; trade under-allowances; withholding information on phone pops and internet leads (“just get ‘em in”); write-ups and F&I presentations (four-squares & payment packing); bait & switch advertising; and non-disclosure of vehicle histories and add-on fees?
I have spoken to many people who think this new-fangled transparency talk is just nonsense. After all, we’ve been doing business the same way for decades and it’s been wildly successful. If it ain’t broke we’d be stupid trying to fix it.
I get it. I’ll be the first to admit that I spent most of my career as a poster child for the “but we’ve always done it this way” mindset. My thinking has changed though. I’ve had the privilege of meeting some amazingly-smart automotive thought-leaders who have taught me that there’s more to success then the “whatever it takes to make a deal” mentality. While the business-as-usual way of thinking sure is comfortable, I’ve come to realize that it’s probably not the key to long-term success. So before you discount the idea of transparency in your dealership, you may want to consider these 10 potential benefits.
Increase Lead Conversion - The ultimate goal is still to “get ‘em in” and close the deal, but for an increasing number of shoppers, transparency is the only thing that will get them in. Not being upfront about details used to have its benefits. Up until recently, the salesperson could control the selling process because he or she controlled the information. Today, it’s just the opposite - consumers have all the information they need at their fingertips. If you resist answering customer’s questions, chances are you’ll never hear from them again.
Increase Closing Ratios - Higher levels of satisfaction with the selling process result in higher closing rates and higher sales. A recent survey by Maritz Research of over 163,000 Americans found that 64.0% are completely satisfied when one person with pricing authority negotiates a car deal vs. 20.7% when two or more with no pricing authority are involved.
Improve Your Reputation (your REAL reputation, not necessarily the one you “manage” online) - A dealership’s reputation is difficult, if not impossible, to maintain when staff members depend on “old school” practices. Customers often make decisions during a vehicle sale transaction that they come to regret after the “ether has worn off”. You can be sure they’re telling somebody about the transaction. Or perhaps they’re telling thousands of people online?
Avoid Legal Problems - State & federal regulators frequently target “non-transparent” dealer practices as unfair and deceptive. These practices include bait and switch advertising, failure to sell at advertised prices, payment packing, vehicle history disclosures, yo-yo financing, improper fee disclosure, and misleading pricing.
But it ain’t illegal if you don’t get caught, right?
The new reality is that “getting “caught” is no longer likely to be just a fine and slap on the wrist. Regulators now have a new trick up their sleeve - using the media to humiliate those dealers caught in order to intimidate others. There’s plenty of political capital in going after car dealers for ambitious regulators. These regulators want press, and the tougher and more far-reaching the press the better. As a result, the severity of the offenses is often exaggerated (think about what the FTC did to those 5 unfortunate dealers last year). You need to ask yourself what the cost of that kind of negative publicity would be.
Increase Customer Satisfaction - Lack of transparency and old school tactics invariably diminish the customer experience. Nobody likes surprises. Sure, you made the deal but are your customers truly satisfied with your processes or do you just wear them down?
At the end of the day higher customer satisfaction translates into more repeat and referral business.
Increase Customer Loyalty - Customers only have loyalty if you earn it from them.
Transparent processes help build customer loyalty and retention. You’ll find that customers will be willing to spend more when they feel they’re buying from a business they can trust.
Your Customers Have Unprecedented Access to Information in Real Time - A recent JD Power report highlights a growing trend called 'Showrooming' where prospects sitting in your showroom are actually price competing your deal with another dealership using their mobile devices. Consumers not only have more access to information but also have access to more dealers. In the past, consumers were limited to dealers in their local area. The increase in the amount of information available to consumers has brought consumers a quick and easy way to analyze not only different prices via internet quotes but also to identify who they want to do business with. Customers simply have too many choices and will quickly discard dealers they feel are hiding something. Holding back information will only make them trust you less.
Reduce Chargebacks – What happens after the ether wears off and the customer goes home and reads the contract? I’ve found that the percentage of chargebacks and cancellations is directly related to transparency in sales and finance processes. For instance, staff members who participate in payment packing typically have a much higher chargeback rate. Once customers figure out that the “protection package” wasn’t really only a “few extra bucks a month”, they want to know why. You can only hope they don’t ask an attorney that question.
You’ll Stand Out From Your Competition – Let’s face it, there just aren’t a great number of dealers who are transparent yet. Progressive dealers can easily differentiate themselves by marketing their transparent processes and demonstrating their honesty. Consumers will respond - after all, how many consumers prefer old-school tactics?
Transparency is what consumers have been begging for so why not treat them the way they want to be treated? – Here’s a hint: it’s happens to be the right thing to do. In my opinion, subjecting customers to old-school processes doesn’t give them the respect they deserve. Just because you can doesn’t mean you should.
The good news is that transparency can be the pot of gold at the end of the rainbow. A transparent business model can greatly enhance your sales, reputation, customer retention, and bottom line. But first you must find the vision and courage it takes to break down deep-rooted stereotypes and embrace transparency.
I’ve said it before and I’ll say it again: Transparency is not a dirty word but complacency is. Do you have the vision and courage it takes to embrace transparency and go from being good to being great?