CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
These days many people in the car business seem to believe buying a car should be more like a visit to www.amazon.com and less like a visit to your dealership.
We’re seeing a rapid proliferation of tools and services designed to wage a triangular war between dealers, customers and other dealers; services and software designed to “help” you offer the lowest prices, carry the right inventory, list your inventory in all the right places and capture the greatest number of customer reviews.
Here’s what most dealers don’t know: these people (the companies offering these tools and services) are not your friends. They are parasites, feeding off of the relationship that exists between dealer
Consider this: the dealer pays a service provider so the customer can find the lowest price? That seems
backwards. We’d prefer the dealer pay the provider to find the customer who’s willing to pay the most. Quoting Rich Dealers VIP member Tom Ring, “It’s a game to see who will spend the most to sell the least.”
The worst part is that dealers themselves are financing their own demise and commoditization. What’s the worst thing that happened to the airline industry (besides unions)? Online ticketing. Who got hurt worse than the airlines?
The travel agents (i.e. dealers). As any industry moves closer to commoditization, where the widget being offered is so easily compared and considered without actually being seen or touched or
interacted with by the customer, there is a reshuffling of power, value and profit. When is the last time you went to a travel agency and sat down with an agent to book a trip? Why would you? The agent has been replaced by www.expedia.com.
For you to give money to the soldiers of commoditization makes about as much sense as the travel agent of a decade ago shelling out money to have their name listed on Orbitz. Ultimately your own money is being turned against you. You should be piping mad about this.
If, thanks to specialized spy technology, you’re able to buy the perfect car at the perfect time and list it at the perfect price for quick movement (in other words, for a slim margin), who wins? You or the
customer? Of course, who’s to say you’re the only dealer with the spy tool? What happens when everyone relies on the same tool?
If your money fuels the growth of dealer review sites and then you end up getting whacked with bogus negative reviews, who wins? You or the customer?
If someday technology becomes so advanced that a customer could take a virtual reality test drive online, enabling them to smell the car, touch the car, feel the way it drives, then apply for credit online, plug in their credit card for the down payment, then receive the car via priority mail, who would win? You or the customer?
Reality is you’d both lose.
Clearly the dealer would lose to shrinking margins, negative perception and the customer’s ability to buy direct without the dealer. And why should you lose? As a dealer you bridge the gap between auction or factory and consumer. You take the risk on the property and the inventory and the staff. You have a lot on the line. Don’t you deserve to make a profit?
Perhaps not so clearly, the customer also loses. Have you walked into a big box hardware store recently? No help, no expertise. You’re on your own. Have you bought anything online? Sure you can get good deals…but what happens when something breaks or you have a complicated situation that you need to speak to someone about? It’s not such a great deal then.
The online buying environment is only suitable for the simplest transactions. And if dealers’ profits are cut in this digital price war, the customers will suffer right along side the dealers as quality, access and availability of service declines.
The only winners are the technology providers. Do you go into the dealership everyday to help them or to help yourself and your customers?
Buying a car is not like buying a book. Choosing a dealership is not like choosing a restaurant or booking a plane ticket. It’s time we, as an industry, wake up to that reality. The majority of customers don’t know what they want, don’t understand their current trade or credit situation, and don’t know how to go about getting what they need (which is help, from someone like you). All the low price and listing technology in the world won’t help connect you with that customer.
Of course there is a plethora of research that all indicates that buyers are spending more and more time researching online before buying a car. But there must be an important distinction between the role of the manufacturer and the role of dealer. It’s the manufacturers’ job to market and sell their products. It’s your job to market and sell your dealership.
But most online marketing paid for by dealers is all about the product with price as foundation. Why? Because the easy method of lazy marketers is to advertise price. It’s the most basic of all lures.
And true, advertising low price is a good way to get lots of customers. But then what? And what’s worse, there will likely always be somebody with a price lower than yours. And in the price war, if you’re not first, you’re last.
All of this amounts to the triangular war we mentioned earlier. It’s you against the other dealers against the customers. There can be no winners in this scenario. Everybody will lose long term.
In addition to the problems dealers are facing online, many are going so far as to actually remove selling from the car sales equation.
We suppose this is in keeping with being more like an online store or a big box retailer. You can walk in, browse around, take a test drive if you like without being bothered with a bunch of questions. There will be no pressure and no haggling. This is supposed to be for the customer’s sake. But does anybody really win?
In our recent car buying experience the “sales” process went on for 3 weeks with one dealership who insisted on applying no pressure. We wanted the cars, but were just waiting around for the right color to come in, waiting to turn in our existing leases. Then one day after being contacted by another competing dealer, we were SOLD in a matter of less than an hour. We drove away two cars a full month before our existing leases were up.
Practicality caused us to delay. Emotion caused us to act. All we needed was a little nudge (that’s what we call sales) and we jumped in. Haven’t looked back and have been completely happy with our decision. The dealer who sold us, helped us. The dealer who is limp and impotent did us no favors.
In retrospect, we have a favorable opinion of the dealer who sold us but the meek dealership who wouldn’t pressure us would not get our recommendation. No pressure doesn’t equal a better online review.
Having just completed a renovation of my pool deck, I believed a new grill was in order. I’m not just talking about your ordinary Char-Broil grill from Home Depot. I wanted the S Class of grills, the Weber S-670. Naturally, I went online to do research (about the grills, not the dealers). I found a number of online stores selling the grill I wanted at a substantial discount. But I couldn’t see it or touch it. And I
needed to get a sense for how big it was, and how it would fit into the space I had picked out for it.
So I drove to an independent hardware store that happened to be the regional Weber service provider. I had no intention of buying that day. Though I clearly wanted the grill, my sensible side suggested I should order online and wait for it.
When I showed up I was given an enthusiastic demo of the grill and all its features. I was told stories of other customers who had bought this same grill. I was treated well and politely…and I was PRESSURED to buy the grill that day, from there. And I did. I was SOLD. And I paid more for it than I needed to. But I really liked how informative they were and I appreciated their expertise…and I WANTED it. Immediately.
So what does that say? It says that even a high-end customer has wants, desires, emotions. Even a high-end customer can be sold. And though I did my research online to start with, my final purchase was made offline. The relationship is with the Weber dealer, not Weber. And that hardware store owner made and earned a healthy profit, whereas the online store would have made very little.
So really, this is a call to arms. Join us and other dealers in rejecting that “best practice” that suggests you offer your cars at the lowest prices and compete with other dealers for the now buyers at the expense of your profit. It’s not worth it.
Of course, you still need to sell cars. And that’s what we do. As all Rich Dealers members know, there is a wide sea of potential buyers waiting to be sold. And that sea is largely uninhabited and uncluttered by other dealers.
While most dealers are scurrying around chasing after the thin deals of today, you can and should be directing your efforts toward accelerating tomorrow’s buyers to create your own evergreen crop of “solutions” buyers who value your help and the service you provide and are happy to pay more for it. It’s the biggest opportunity in the car business and the most untapped source of customers. Happy hunting!