In a recent survey that Auto/Mate conducted, we asked 160 auto dealer general managers and senior managers about the perceived value they were getting from their dealership management system (DMS) vendors.

The exact question was, “On a scale of 1-5, rate the overall value of your DMS (does the amount you pay seem the right amount for overall functionality, customer service and training?)”

The disparity in the answers was surprising. A couple of vendors had fewer than 10% of their customers rate them as “good or excellent” value, while others had upwards of 80% of their customers rate them as “good or excellent” value.

I won’t name names because the goal here is not to promote one vendor over another, but to explore how managers determine whether or not a vendor is giving them appropriate value; and more importantly, what it takes on a vendor’s part to provide good value to its customers.

Cost: the cost of any product or service is an important consideration when it comes to determining value. Survey results revealed that the most expensive vendors were least likely to be rated as “good or excellent” value. However, as everyone knows going for the cheapest option isn’t always going to be what’s best for your store, either. Just as consumers consider what they’re getting for the price of a car, dealership managers consider the benefits from their technology in relation to the price they’re paying.

Functionality: When it comes to features and functions, one of the best exercises to determine value is to create a “must have” features list, and a “wish list.” To create your “must have” list, write down all the tasks in every department that you do on a daily, weekly, monthly and quarterly basis, then list all the associated functions in the software that allow you to do those tasks. The software features that don’t make it to the “must have” list, but that you enjoy using, will go on the “wish list.” Then compare the two lists and examine the extra costs associated with the “wish list” features. Is it worth it to pay double, or triple, for those features that aren’t absolutely necessary to run your business? Or would you rather add that money to your bottom line?

Customer Service: In our survey there was a close co-relation between the quality of customer service and perceived value. The good news is that only 7% of respondents rated their vendor’s customer service as “poor” or “very poor.” The majority at 37% rated their vendor as “average/OK,” while 31% rated “good” and 26% rated “excellent.”

How do you define good customer service? Being able to get a live person on the phone within five minutes, or getting a call back within hours? Do your vendors listen to you and do what it takes to solve your problem? Do they follow up afterwards to make sure everything is still OK?

Training: The more employees are trained to use a technology, the more value they can get out of that particular system. The quality and amount of training that a vendor provides is a critical piece to the value puzzle. Providing training manuals, online video tutorials, phone training, live chat and/or interactive help options allows users to choose the method that is best suited for them, and allows them to proceed at their own pace.

If auto dealerships don’t provide good value to their customers, chances are those customers won’t return to purchase another vehicle. So why should auto dealers expect any less from their vendors? How do you define value and is value the overriding factor in choosing a vendor or is there something else?

This week’s Automotive News features a story about a DMS vendor that, in the name of protecting the dealer’s data, doesn’t allow third-party vendors to have access to that data without going through an expensive certification process. This issue was also recently addressed in a Woods & Seaton briefing posted on the Standards for Technology in Automotive Retail (STAR) web site.

In the last decade, the issue of data ownership has been raised many times and all DMS providers agree that dealerships own their own data. However, apparently all DMS providers do not agree that dealers control their own data. To assume that you as a DMS provider know more than the dealer about what is good or bad for his/her business is ludicrous.  

The question of liability is often raised by DMS providers who are reluctant to let third-party vendors have access to data. If the third-party vendors use this data for nefarious purposes, the argument goes, that it opens the DMS provider up to potential lawsuits. Yet, if that DMS provider certified a vendor and the vendor did the same thing, wouldn’t the provider be MORE liable, since they actually certified the vendor? The liability issue is truly a red herring.

Another issue to be addressed when talking about control of data is the certification process. A certification process in and of itself is fine; but when a DMS provider uses that process as a roadblock to competitors, who are they really serving—their customers’ best interests, or their own best interests?

Some DMS providers have a certification process, but they don’t hinder third parties who aren’t certified, from extracting data from a dealer's system. In some cases, they may have the dealer indemnify them in case there is an issue with the non- certified vendor, but in this case it’s the dealer who’s calling the shots—not the DMS vendor.

Additionally, you have to question whether any DMS provider should make profit on the certification process. Most third-party vendors understand there are costs associated with the certification process; such as specification development, set up and testing. But when a DMS provider charges exorbitant certification fees both from an upfront basis and on a monthly basis, and refuses to allow access to the dealers data to anyone who isn’t certified, then isn’t that DMS vendor making money from the dealer's data? If a DMS vendor made millions a year by selling the dealer data (past history) or makes millions a year by controlling access to a dealer’s data (present situation) is there truly any difference?

Most dealers I know are intelligent and savvy business men and women. They make decisions every day that impact their dealership. This is why I continue to advocate open standards for all aspects of data exchange between OEMs, DMS solutions, and third-party vendors. Don’t let the issue of data security fool you into letting someone hold your data hostage. The more dealers continue to demand secure and open standards, the more they will benefit. 

I’m not a gambling man, but I bet if I asked100 dealers on the street what they thought about STAR, the majority would think I was asking about science fiction, entertainment or even some sort of new hybrid. However, what I would really be asking about is what they thought about the Standards for Technology in Automotive Retail (STAR) developed by NADA.

When it comes to technology standards, the retail automotive industry has lagged behind many other industries. But standards are important. Think about how you can plug any electrical appliance into a wall outlet. The 110-volt standard means that appliance will work anywhere nationwide (but not in Europe which has a different standard). Now imagine if different brands of appliances had different electrical standards. How inconvenient would that be?

Many years ago OEMs developed their dealership communications systems (DCS) using closed, proprietary interfaces. The result of this was that many technology vendors were left out in the cold because they weren’t allowed to develop these interfaces. But in recent years, many manufacturers have implemented STAR into their DCS. This benefits dealerships in several ways:

Increased Competition. Open standards literally open up the field to more technology vendors, which means more choices for dealers. For example, before Toyota implemented STAR in its DCS, there were only two DMS vendors that had proprietary interfaces. Now, Toyota dealers can choose from between four approved DMS vendors. Kia dealers can currently choose from more than seven DMS vendors. More choices means that vendors must compete for the dealer’s business, which lowers costs for dealerships.

Better Communication. Standard formats enable dealerships to easily connect with manufacturers, third party application providers and other business partners, from banks to parts suppliers. This seamless data exchange allows for real-time transactions in daily business, with more reliable and accurate data. For example, before STAR a dealer may have had to manage several vendor relationships for leasing and lending purposes, but a standard format has led to the development of web portals that aggregate data from multiple lenders in one place.

Reduced IT Costs. The STAR Dealer Infrastructure Guidelines (DIG) establishes a best practices checklist to develop a common network infrastructure. By using these best practices, dealers can significantly lower IT operating costs. Now dealers may choose from a wider variety of software, hardware and communications solutions. Open standards also make it easier for IT personnel to understand and fix any IT issues that occur.

Increased Productivity. Standards help eliminate redundancies, which leads to greater productivity. For example, dealers can download vehicle invoice information directly to the DMS inventory system, eliminating the need to manually enter the information. An office manager can download warranty payments directly to the DMS accounting system, saving time and eliminating errors.

Rapid Development of New Products. Use of the STAR standard allows for rapid implementation of new computer and communications applications. Since all the OEMs and vendors are writing to the same standard, they can introduce new interfaces quickly, which in turn enable faster throughput for daily business transactions such as parts orders and credit applications.

Access to Information. Seamless integration with a manufacturer’s communications system provides dealers with access to more information about prospects and customers than they previously had. For instance, Toyota’s interfaces now make it possible for dealers to see all the services ever performed on a vehicle, not just the service history in their dealership (even if the vehicle was purchased in a different dealership). This type of information may make it easier to sell a particular service, or a service contract.

More than 20 manufacturers are now members of STAR, including BMW, Volkswagen, Kia, Honda, Toyota, Nissan, Ford, General Motors and Chrysler. NADA is the representative body for dealerships, and nearly a dozen DMS vendors have implemented some form of STAR standards in their software solutions.

Although STAR focuses on IT standards, the real benefits come from streamlined business practices, increased competition and reduced costs for dealerships.

This blog was condensed from the article “STAR Standards Lighting the Way” which appeared in the July issue of Digital Dealer magazine.

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It’s a generally accepted practice in the auto retail business: the service department offers the used car department discounted rates. Doing so keeps the recon cost of the vehicle low, which makes the resulting margin and gross higher.

But does it really? I would argue that dealerships as a whole would reap more profit if the service department charges the used car department “door rate.” How so?

First of all, the used car department is a high volume customer. Think of all the additional gross that could be generated in the service department if they charged more for their services.

Plus, charging a higher rate should eliminate the all-too-common side effect of used vehicles being stuck in service because service management perceives they don’t make as much gross on used vehicles as they do on customer vehicles.

Let’s look at an example. Two cars come into the service department at the same time: one internal car at a rate of $65/hr and a customer’s car at a rate of $100/hr. Which car will be serviced first? If the service department is busy, the used car may sit there for days.

As any GM or sales manager knows, the majority of gross is made on a car the first five days the dealership has the car. Therefore it’s critical that every car gets out on the front line within a day or two. Every day that a used car sits in the service department is a day the potential gross to be made on that car drops.

Now, I know what the used car managers are thinking. If they were charged full rates by the service department, they would not be able to charge a competitive price and their gross will drop. But again, that reasoning is flawed.

In my experience—and there have been studies published on this—it is a proven fact that “the gross you get is the gross you get”. If you average $1,800 front gross per used vehicle this number will not change just because the recon cost has gone up. Most used car departments work from cost up. So the cost of the car plus the cost of repairs becomes the base cost, and the desired gross is added to that along with any market conditions. Sales Managers know the bottom line gross they need. The salespeople may have to negotiate a little harder but they will still make the desired gross.

So if you follow my theory, every department makes more gross: the service department because of the increased rate, the parts department since parts are not discounted, and finally, the used car department since the vehicles are coming to the line and being turned faster.

For the intrepid souls who want to test this theory, results can be tracked via reporting tools available in a DMS with integrated fixed ops and sales modules. I am confident that not only will the reports show the RO dollars on used cars going up, but the average age (when sold) will decrease and the gross in the used car department will be unchanged, if not higher. Overall, this combination results in higher gross for the dealership.

Do you know any dealerships that have tested this theory? What were the results?

Certain technologies lend themselves really well to mobile application use. Consumers download millions of mobile apps related to gaming, weather, social networking, navigation, travel, restaurants and other forms of entertainment.

But when it comes to business, and dealerships in particular, the market for mobile apps is a little more uncertain. Not all business applications lend themselves well to mobile apps use. For instance, in our business we use a contact management software. When the company came out with a mobile app, we thought it was a good idea and installed it on our salespeoples’ smartphones. The problem is, the screens on the phones are so small that it’s difficult to read anything. Besides, our salespeople have access to the software through their laptops, which they bring with them wherever they travel.

Which leads me to wonder, are mobile apps for business more hype than substance? A report from mobile analyst firm Localytics.com found that 26% of mobile apps are used only one time, and a Pew Internet study last year reported that just 24% of adults use their mobile apps. I would be very interested to know how many dealership employees would use dealership management system (DMS) applications in the following departments if they were available as mobile apps?

CRM

Would extensive CRM functionalities be useful in a mobile app? While out on the lot, would a salesperson use a tablet device to enter a customer’s information, search for a vehicle or calculate an estimated monthly payment?

Sales

I could see salespeople using tablets to show customers inventory and give them quotes. And in F&I, tablets with e-signature capabilities would enable a more interactive and paperless process, which would save a dealership both time and money, along with speeding up the process for the consumer. What do you think?

Service

A rugged tablet device would be useful in the service lane, when customers arrive with their cars, as service employees could enter all the RO information on the spot. But most service departments now have terminals mounted in various places that are easily accessible to both technicians and service advisors. Do we need both?

Parts

Mobile apps are available that allow customers to order parts, but what about parts department employees? Would they use their smartphones or tablets to order parts or update inventory?

Dealership employees, which mobile apps would you be most interested in, and in what format: on the smartphone or on a tablet device?

DMS vendors offer many methods of training. I’ve listed several here because I’d like to know which methods you prefer and which are the most effective.

In-House Training: This hands-on vendor/employee training is typically offered after a DMS data conversion, or on a continuing basis if the dealer is willing to pay for it.

Phone support: Probably the most widely used by dealership employees, this is most effective if you can get a real customer support person on the phone within five minutes.

Chat support: Similar to Instant Messaging (IM) software, this form of training is ideal for quick “how to” questions.

Just in Time Training (JITT) – a help system integrated into the software, where users can click on a question mark from any screen in the system to get “how to” information for the particular system feature they are using. JITT responds with the exact data required to easily and quickly complete the task, offering tutorials that include short videos, PDFs, text and URL links.

Video Tutorials: Watching someone else perform a task can be very helpful for people who have trouble visualizing how something should be done based on text-only tutorials.

Which method of training do you prefer and use most often, and why? 

Last week Automotive News reported TrueCar Inc.’s purchase of Automotive Lease Guide from DealerTrack Holdings Inc., with plans to incorporate ALG’s residual values into TrueCar’s price information. Dealerships will sell about 250,000 new cars and trucks on TrueCar.com this year, but they are required to post no-haggle vehicle prices with their listings. In return TrueCar sells leads to dealerships for about $300, which result in a sale 25-35% of the time. Scott Painter, CEO of TrueCar Inc. says “by the time the consumers get to the dealership, no selling is required.” All that’s required is to sign the paperwork, pick up the keys and go, basically eliminating the need for salespeople.

DealerTrack retains 15 percent stake in TrueCar Inc., and of the deal DealerTrack CEO Mark O’Neil said, “We are making an investment in a high-growth progressive company that is positively impacting the ways cars are retailed.” DealerTrack must view the automotive retail world in much the same way as Mr. Painter… in the future sales managers and salespeople will be superfluous.

Do you feel this is a positive trend? Personally, I disagree with this future vision of car retailing. No doubt a small percentage of consumers will pay for a car unseen, but this being the 2^nd largest purchase a person will make in their lifetime I believe that most people will want to look the person in the eye from whom they are buying the vehicle. I agree with Mr. Painter on the point that the days of the high pressure salesperson are over. But this is not new news. This has been happening over the last 5 -7 years. Currently the role of the salesperson has changed to more of a customer relations manager. Even if it does get to a point where the vehicle becomes a commodity the Sales Manager and salesperson will still be needed to differentiate their dealership from other dealerships of the same brand. And we are not even talking about when the customer wants to trade their current vehicle in on the new vehicle. Financing and lease options? Sales Manager and F&I manager will still be need to handle these. People these days want convenience and having to search for the best deal on the car, sell my trade by myself, search for the best deal on financing and leasing and then pick up the car at some dealership is not in any way convenient.

The fact is, salespeople, sales managers and F&I managers will always be needed to create differentiation and value in the purchasing process. What do you think? Do you think in the future dealerships will be nothing but depots where consumers pick up their vehicles, with no salespeople to be seen?

Link to Automotive News article

When I became general manager of a large, multi-line dealership years ago, my first goal was to cut costs. One of the first outside vendors I reviewed was a company who came and put stickers on our used cars. At that time they charged about $7 to $8 per sticker for an average monthly cost of $500. I thought we could save money by purchasing a $200 software package and bringing this operation in house. The first couple months were great; the used car manager put out all the stickers. The third month we were missing some stickers, and the fourth month maybe 25% of the used cars had stickers. It kept getting pushed back as a priority. So guess what? By the eighth month I re-hired that company to come back in and do the stickers.

In manufacturing, this decision is referred to as “make or buy.” Is it cheaper to produce this product in-house, or to hire an outside vendor? In the case of the stickers, I had to look at not just my out of pocket cost, but at what it was costing the dealership to NOT have those stickers on the cars. How many sales did we lose because a customer wasn’t patient enough to wait for a salesperson to provide them with information? How did customers perceive us as a dealership because we didn’t have stickers on most of the used cars, and would they have referred their friends to us?

The advantage to hiring outside vendors for a task is that typically this is their only job and focus. Every month they have to continue to “win” your business, so they get the job done. Whether it’s hiring appointment setters in sales or service, or an outside company to clean up your database, it’s important for dealers to look beyond their out of pocket cost. It may be cheaper to assign a task or responsibility to internal employees, but are those employees getting the job done?

When comparing costs of a certain task or product, dealers shouldn’t just look at what the monthly vendor charges. If the task is assigned to a person in-house, that cost should be included in a side-by-side comparison. Is this the employee’s only responsibility? What percentage of their time is spent on this task? If it’s 20%, then write down what 20% of that person’s salary is plus 20% of the dealership’s cost of having that employee. Then you have to ask, is this person getting the job done 100% of the time, to 100% satisfaction? Or, are they only performing this task to 80% of expectation? Or 50%? What is the cost associated with having the task performed to only 50% efficiency? Then add that cost to the cost associated with the salary, and see whether that figure is getting close to what it would cost to hire a vendor.

Is it worth it to pay someone $50,000 per year to manage the customer database, run queries, and set up effective marketing campaigns? What are the measurements of their success? Or, is it better to hire outside vendors like a data cleansing service and email marketing company, because that’s their only focus?

Dealers, what make or buy decisions have you made lately and how do you determine the costs associated with those decisions?

Your DMS reporting tools can be used to run a variety of queries for targeted e-mail marketing campaigns. I’d like to know what the most innovative queries are that resulted in a successful e-mail marketing campaign. Here are a couple of examples:

• An F&I manager could run a query for all customers that bought a car in the last six months, but did not buy a service contract. Then they could design a marketing campaign to promote a service contract.
• A Sales manager could run a query for everyone who bought a car in the last five years with a finance end date within the next six months. Then create an e-mail marketing campaign offering a trade-in special or other new or used car promotion.

Now it’s your turn! Share your most successful DMS query and e-mail marketing campaign, or suggest one that may work!

Every so often I hear from GMs who insist their salespeople must have the latest, greatest CRM with every bell, whistle and thing-a-ma-ding ever invented. My advice to them is to ask themselves this question: is it the CRM that’s the problem, or is it the sales process?

Process does not have to involve advanced technology. One of the most successful car salesmen I ever knew worked in the late 1980’s, before computer systems had CRM capabilities. Every customer that walked in the door, he took their name and information and entered them into his own database on his own computer. The minute the prospect walked out the door, the salesperson printed out a letter and mailed it to them. Then he followed up on every letter with a phone call. He did this with every customer, repeatedly. After several years he never had to prospect for another customer. This person devised his own CRM and was successful because he was committed to the process. Which leads me to my point:

Commitment is the Most Important Feature in a CRM

CRM vendors have done a fantastic job of getting dealership management feature-obsessed. I am asked all the time what features our CRM has. Does it have the ability to generate birthday and anniversary letters? Can I use it to e-mail a newsletter to our customers? Do I need a BDC? What are the reporting tools? What are the tracking tools?

My answer is this: our CRM has the same features as most other CRMs. One feature or another isn’t going to make a salesperson successful. A salesperson’s commitment to process is what is going to make them successful.

By commitment I mean that dealership staff must be committed to not only using the CRM, but following the process established when the CRM was first implemented. Before buying a new CRM, a dealer should find out whether the salespeople are using the current system to its fullest potential. If not, then the dealer should invest some time in trying to understand why.

One of the problems many sales managers share is that their top salespeople refuse to use the CRM because they would rather do things the way they’ve always done. And who’s going to reprimand a top producing salesperson and risk making them unhappy? Nobody.

Unfortunately, their behavior can set a precedent with other dealership staff, i.e. if he doesn’t have to use it, why should we?

In order to prevent this attitude, a sales manager or GM may have to get a little creative. Perhaps an assistant can be assigned to help the top salespeople enter the appropriate information into the CRM. Or, perhaps additional incentives could be offered for comprehensive CRM entries. Another option would be to hire a BDC Manager or Internet Manager to manage all the leads, including showroom leads, and all the salespeople would have to do is fill in a form.

So, how do you know when the time is right to buy a CRM? If your current system is outdated and does not have some of the advanced features available, or does not integrate well with the dealership’s DMS.

“My staff doesn’t use it,” is NOT a reason to buy a new CRM. If they don’t use the current one, what makes you think they’ll use a new one? A CRM is simply a tool to help salespeople follow the process.