If you haven't begun the process of building "brand identity" for your dealership, it's not too late, but don't wait any longer to start the process of focusing on your "brand", and exactly what it stands for in your advertising. Even more importantly, get everyone in your organization focused on your brand and conveying the value clearly to potential customers. If you think today's consumer is disloyal and demanding, "you ain't seen nothing yet." The age of information has created an entirely new breed of shopper. Often customers not only know the invoice price of a vehicle, the current dealer incentives and the days supply available, they also possess better product knowledge than most salespeople.
What does "branding" have to do with all of this? You'll have to do a lot more than promotional gimmicks and the "salesmen's shuffle" to gain market share with informed, confident customers. It's a good bet that many, if not all, of the prices advertised in your local newspaper today are at invoice, even below invoice. And while it's true those vehicles may be advertised leaders, this type of price competition has cut deeply into margins. Where do you start when shoppers bring you invoice prices?
You must pre-sell your value story in your advertising by building your brand value in the customers mind. Strong brand recognition builds trust and helps your customers develop a comfort zone with your company even before they walk through the door. Positive perception of your "brand" gives your salespeople the support they need to reinforce your brand value at point-of-purchase.
Don't count on great selection, super service, convenient location and 50 years in business to hold a shoppers interest if most of your competition offers the same basic elements of service. You need to be appreciably "different" in the public's eye to elevate your "brand value." Are you the only dealer in your market offering lifetime oil and filter changes to your customers at no charge? That's a brand enhancement. Do you offer special "family" discount programs for several vehicles sold to the same family? Do you pick up your customer's vehicle at their home when service is needed? Do you guarantee delivery of a new vehicle in ninety minutes? Now is the time to define your value story and clearly communicate it through "brand advertising".
Republic Industries, now the nation's largest automobile retailer, has made their "brand identity" plans perfectly clear. In case you missed the news, Republic plans to put all of their dealerships under one banner, "Auto Nation" in the very near future. In some cases, they may join the Auto Nation, name with a strong local dealership entity such as John Elway/Auto Nation in the Denver market.
If Republic's planned "one-price" concept, soon to be introduced in the Denver market, goes as planned, they may roll it out nationwide. But Republic knows name, selection and price won't be the main game. It's no secret that Republic plans to introduce a membership-style portfolio of services and special offers to their customers, possibly discounts on rental vehicles from the rental companies they own and discounts on service. Who knows what a company the size of Republic may be able to package? Low insurance rates? Cheap gas? The possibilities are endless just as they are for you right now.
Now is the time to reassess the overall value you offer to your customers. Are you offering your current customers special incentives and discounts? Have you considered cross-retail promotions such as offering baby seats at cost or discounts on automobile insurance through a cooperative program? Do you stay in touch with your customers through newsletters, direct mail or even e-mail? How about useful information and interesting "links" on your web site? In some cases you may not have to add any additional services, you simply need to tell your story better. You have to find ways to convey the enhance value of your brand vs the competition. Here's a hint: big price ads in the newspaper won't do the trick.
Even if you are confident of your value position in the market, you've got to make sure most of the people in your market are aware of that perception. Customer research will help you determine if you are hitting the mark and areas you might improve in. In a recent survey one large mega-dealer found out, much to his dismay, that after over fifty years in the same market, 63% of the people surveyed in that market were not aware of the dealership's location or franchises.
Spend at least as much of your advertising budget on "share of mind" as you do on "share of market" promotions, building your "brand". Your very future depends on it.
Jim Boldebook is President of Creative Broadcast Concepts (CBC), an Advertising/Marketing agency working with some of America's most successful dealerships. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3.
F&I How The Internet Can Be Harnessed For More Profitable Auto Financing Michael Hucks Many mark the beginning of the automobile industry from the time the first wheel was used for transportation. This happened in India, more than 4000 years ago. Between then and now, the evolution of the industry has been fostered by more and better technology. More efficient engines heightened the transaction from horses to cars at the turn of this century. Automotive designs were expanded by the use of computers in the 1980s. The latest cars are equipped with cellular telephones and computerized navigation systems. Technology continues to form the kind of vehicles the world will be driving and it creates a market need for more. Experts predict the car of the not-too-distant future will feature on-board computer systems to obtain information automatically over the Internet.
As most dealers are aware, the global and real-time dimensions of the Internet are being applied to more than auto design. Customers are turning on their computers to shop and price vehicles, as well. For better or worse, electronic communications have become an integral part of the industry today. This article concerns the Internet's impact on yet another aspect of the automotive market, automobile financing. Specifically, it discusses how this type of technology impacts today's new car dealer at the bottom-line from relations with financial lenders to a value-added service for customers.
An overview of industry factors
The most superficial review of the automobile and financial industries uncovers several facts. One, automobile dealers are competing for every sale. U.S. and foreign sales are slowing for virtually every vehicle model and make, while customer satisfaction with auto dealerships dips to an historic low. Two, lenders also are seeking to capture and process as many credit applications as possible. Loans remain a major source of income for today's financial institutions, accounting for over half of the total bank assets in the current U.S. commercial banking system alone. Three, as stated, the Internet is dramatically changing the way business does business in virtually every market. The automotive industry is no exception. It is entirely likely that Internet-based technology represents an opportunity for an auto dealership to realize process efficiencies and capture new accounts in ways not possible in the past.
The general electronic product offering
Not all electronic services are created equal. A certain number of services promise to speed the transaction of automobile loans. Not every one uses the Internet in the same way. First and foremost, the electronic environment should operate as an independent forum where dealers can have unlimited access to competitive capital sources. In other words, it should be designed for automobile dealers as much as the lending institution.
For example, dealers should be able to choose the best financial product from all lending sources in real time. The technology implemented through an electronic site should allow the new car dealer to point and click through the best loan/lease arrangement on a deal-by-deal, day-by-day basis. This means the filters must be adjustable in real time. In this way, the dealer is assured even customers with the most unique financing characteristics have an optimal chance of approval. And the lender has the ability to communicate the financial institution's most up-to-date criteria or needs.
The credit transaction also should conclude quickly and easily. Once the F&I manager has selected an offer, the customer's application should be automatically removed from the site.
The specific electronic transaction model
To ensure that the new electronic lease offering is optimal for dealerships, the electronic service should include certain characteristics. As mentioned, the dealer should have unlimited access to the capital sources, reviewing and choosing financial products in real-time. Further, the F&I manager should be able to configure which financial institutions may view the application: all those participating; certain ones selected by name or geography; those with established lender/dealer agreements; or any other criteria as selected by the dealership. This creates a more active and dynamic environment for the acquisition of loans and leases, and for dealership profits to grow.
For optimal results, the service should allow for an ongoing exchange of credit application information in the fastest, most efficient manner possible. A model electronic loan/lease arrangement encompasses the following steps:
* Upon authorization from the customer, the F&I manager should be able to enter information from the credit application into a highly secure Internet website.
* The application should appear with all appropriate dataFICO score and appropriate NADA vehicle loan informationfor viewing by financial institutions.
* The financial institution's response to these available applications should be flexible enough to accommodate both bulk product offerings and specific application offers. For bulk products, a standing offer can be configured to immediately appear on all credit applications meeting those criteria. Or, as credit applications appear on the screen, a specific loan/lease offer can be submitted on a real-time basis.
* As responses electronically appear from financial institutions, the F&I manager should have the ability to review each for its suitability to closing the deal.
* A credit application should be removed from the site immediately upon becoming a closed transaction; in other words, right after the offer is selected by the automobile financial manager.
The electronic relationship
Some of the largest banks in the country have engaged in a policy of acquisition and merger to create a strong presence in a local market. Virtually all lending institutions have relied on a business model built upon relationship-as-a-result-of-geography with auto dealers. By necessity, dealerships have been locked into this model as well. Dealers participating in this electronic environment are open to serving more customers, with a broader credit profile, than ever before. They can process these applications faster and in the most secure environment to date. And, they can process them in the most cost-efficient manner possible. Without the preliminary faxing and telephoning necessary to process tradition methods of auto financing, efficiencies are improved. The electronic delivery of transaction data also reduces data entry costs significantly.
Security issues
The existing process of loan transactions involving the automobile dealership and their credit sources not only are labor-intensive and cumbersome. They are not secure transactions. Each presentation of a consumer credit application by the dealer to a single lender requires open fax lines at both ends. Each follow-up discussion further "opens" details of the credit application, after the F&I manager negotiates the voice mail and administrative assistant maze in place in today's largest financial institutions.
An electronic transaction, by comparison, provides a certain level of security by automatically and instantaneously posting the loan information. Yet precautions must be in place to ensure the site is a secure environment for the financial institution as well as the credit applicant.
The electronic service should provide as a matter of course:
* Password-controlled access into the site
* A site that uses Internet-based technology but is necessarily maintained as a separate entity from the Internet at large
* A site that has been built with security in mind this includes imbedding "fail safes" and barriers to unauthorized access
Profit leveraging
Aside from the actual loan transaction itself, credit arrangements within an electronic environment can decrease a dealer's marketing costs, increase market share, and enhance profit margins. Electronic loan processing enables dealers to expand the number of lending institutions included in a particular loan process in a way that's impractical with traditional time and process constraints. Allowing automobile dealers to publish credit applications to lenders simultaneously around the country provides the most profitable kind of loan or lease arrangement imaginable. In this way, this new technology represents a strategic partner for the dealership, certainly for the F&I manager. Without investing in additional dollars, an electronic strategy provides a low-cost alternative to some marketing and sales efforts. For example, advanced services such as e-Fin "capture" and maintain customer profiles each time an application is entered into the system. Whether or not the application is approved or the sale is finalized, that information becomes a valuable database of a highly specific market (i.e., people interested enough to submit a credit application). This database can then be used by the dealership in a host of highly targeted marketing and sales campaigns.
From the earliest days of transportation through decades of advanced design to today's electronically-savvy auto shopper, technology has become an integral part of the automobile industry. The Internet's impact on the contemporary dealership is again changing to include financing. Ultimately, the rise of electronic automobile loan processing will create a major shift in the basis of dealer and lender interaction. It will shift away from the existing relationship-as-a-result of geography strategy of many large lending institutions and toward a more consistent method of automobile loan transactions in which every dealer can participate and profit.
Michael Hucks is vice president for e-Fin Electronic Financial Marketplace. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3.