Technology
Technological innovation is affecting dealers in two areas. The first is the impact of technology on increasing efficiencies in the dealership. We've begun to see this impact with the Internet, new computer systems, and tracking software. The captive finance companies have had online application processing for a few years, and now through systems developed by Credit Management Solutions (Credit Connection), LoanData, and Experian, dealers can electronically submit credit applications and receive credit decisions 24 hours a day, 7 days a week. Software programs that compare lenders and lessors are also becoming more popular.
The second area of technological impact is customer service. Here is where the Internet, E-mail, and fax machines can provide a smoother, more efficient line of communication. As the public becomes more comfortable communicating by E-mail, dealerships need to respond in kind. Don't fall into the trap of using these new mediums and then switching to traditional sales methods. One sure way to lose prospects is by calling them up and saying, "Why don't you come into the dealership and let me earn your business."
These prospects use E-mail because they are not at the point where they want to come into the showroom. Streamlining the sales process is their goal. They want answers to their product inquiries, quotes on vehicles, or other general information; and they want it promptly. Dealers need to set up a process that will enable their staff to respond within two to three hours to every E-mail inquiry. If that is not possible, get an auto-responder program that acknowledges receipt of the message and lets the prospect know when he or she can expect an answer to their question. Dealers shouldn't fear this technology. You should use it to build relationships with your prospects. Use this technology to notify prospects about unadvertised specials such as a lower price on the blue model since you have four in stock, discounted coupon prices for service work, and any other part specials or amenities you may be offering. You will quickly see that this process can be a strong sales advantage.
Challenges
A dealers' biggest challenge may be marketing. In an ever-increasing competitive environment, dealers will be called upon to become more resourceful in their overall marketing efforts. Managing their advertising expenses and tracking their best returns will become a major focus. In many markets, the days of just "throwing an ad together" for the Saturday paper won't get it any more. If your service and sales department is not collecting E-mail addresses on repair orders and sales lead forms, it should start immediately. Targeted programs performed in cooperation with lenders, as well as marketing to existing customers via E-mail or traditional means, will deliver a message to the people who can most impact your dealership's profitability. Manufacturers and dealers often talk about "owning" their customers. A mechanistic approach to marketing--including quarterly mass mailings and frequent buyer programs--doesn't always build customer loyalty. What dealers really need to do is understand their customers, listen to them, and learn from them. Implementing these initiatives with a solid marketing plan will help improve a dealership's overall success.
Internet
You don't necessarily need a website to profit from the Internet. You do need to be visible on the Internet. Too many companies are selling website templates and encouraging dealers to "build their own site and identity." Many of these dealers' sites are not very customer friendly and most are nothing more than an online brochure. There's a large dealer in Florida with a very pretty website, but it makes the consumer work too hard to find any valuable information. It has lots of "bells and whistles" (translation: graphics and logos) but little meat for a prospect to digest. Consumers are short on time and want to browse inventories, make service appointments, get a price for a specific part, or get a quick quote for a new or used vehicle. Most dealer sites just don't provide that kind of information.
When consumers go online, they go into a Net-Think mode. That is, they act and behave in a manner completely different from traditional shopping patterns. They're empowered by anonymity, they're inquisitive, and they're not afraid to ask for things over the Internet that they would never ask for in person. They compare vehicles and specs, browse loan rates, and use dealer locators. Too often they get information overload. They desperately want guidance and advice. This presents an opportunity for the dealer to become a trusted adviser and guide them through the sometimes-intimidating process of purchasing a car.
So how does a dealer without a website establish a presence on the Web? One option is to post your inventory with an "aggregator" site such as AutoByTel, Cars.Com, CarPoint, GetAuto.Com, or Auto-Connect, to name a few. These sites have large advertising and promotional budgets that drive traffic to their sites. You'll pay a monthly fee for an affiliation, but if you generate additional sales it could be a good investment. Be sure to include a sales price with the vehicles you post--"contact us for price" will severely reduce the amount of leads you get. Simply participating on websites does not guarantee success, but it's a good starting point. Over the next year or so, more regional vehicle shopping sites will debut. These will offer local dealers an opportunity to increase their visibility with their "local online" customers.
I view the current Internet situation as similar to the development of vehicle leasing back in the early 80's. Initially dealers and manufacturers didn't grasp the potential of leasing, and there was an explosion of independent leasing companies serving the public. Then by the end of that decade the manufacturers and dealers saw the benefit of providing subsidized and aggressive lease programs to their customers. As a result of that shift, there are very few independent leasing companies still in business. On the Internet today, the manufacturers, lenders, and dealers haven't been able to crack the formula for transactional success on the Web. Once they figure it out and start working in sync, many of the current Internet car buying sites will be just a memory.
Lender Relationships
Many dealers and lenders are rethinking their relationships. The captive finance companies are increasing their market share as some banks try to determine what direction they want to take in this industry. Often, lenders see a trend towards their products becoming commodities, and don't know how to break out of this mold. The successful lenders are finding niches that will help them carve out a share of the dealer's business with minimal risk and servicing. With declining efficiencies and credit losses, institutions are re-evaluating each dealer relationship. No lender wants to look at a hundred applications and book one loan.
Dealers have an opportunity to better leverage their banking relationships, but they first need to perform audits of their lenders. Too often dealers will have 20 to 40 prime lenders in their system. Dealers can't be efficient and build relationships when its lenders get only a few deals here and there. Invite lenders in, and fully explore the resources they can provide to your dealership. After meeting with and evaluating "lending partners," your management team should be able to whittle down your financial relationships to five to seven prime lending sources, four or five leasing sources, and no more than five sub-prime lenders. Whenever a new lending relationship is established, remove an old one. This will allow the staff to know each lender's program, its strengths and weaknesses, and provide an opportunity to build a relationship with the sales and credit buying team of that lender.
Many of the challenges facing dealers over the next few years will be daunting. Further consolidations in the manufacturing, retail, and financial arenas will make the marketplace more efficient and offer consumers various market channels. The successful dealers will be innovators who focus on their core competencies and forge alliances to maximize their resources, efficiencies, and profits.
Mark Dubis is Vice President of Marketing for KeyBank USA, a national lender that provides financing for dealers in 45 states. He has worked at four of the top auto dealerships in South Florida and has owned a leasing company for 8 years. mdubis@dealeronline.com