When It Comes To The Internet, Are Some Car Dealers Missing The Point?
By Mike Bowers
This kind of thinking reminded me of the classic business book Super Money written under the pseudonym Adam Smith. The author recounted a story about his own investment experience. Mr. Smith wanted to expand his investment horizons and decided to invest in commodity options. Mr. Smith chose cocoa futures as his arena simply because he liked chocolate. In no time at all, Mr. Smith's investments were wiped out. When he asked his broker what happened, the broker explained that there were companies in the food business like Hershey and Nestle that took cocoa prices very seriously, while Mr. Smith was merely "dabbling." And it has become conventional wisdom in business that serious players will always crush the dabblers.
Car dealers who think in terms of the Web only for its potential to generate conquest sales are missing the point of the Internet's real potential. They are merely dabbling.
Two points to keep in mind: First, think of the Internet's money-making potential as an old fashioned pie chart, with a slice equal to about one-eighth of the pie representing online vehicle sales. That means 87.5 percent of the Web's business potential will not be directly related to increasing unit sales volume. Second, take a look at what the serious players in the automotive Internet realm are doing. Serious players will be those older, established firms with a large vested interest in the outcome. We are not talking about the recently established companies trying to carve a niche out of the business and we are certainly not talking about companies that have merely added a lower case "e" or a dot.com to their names.
So firms like Reynolds and Reynolds, ADP, General Motors, Ford Motor Co., and Toyota, among others, would qualify as serious players. It is instructive, then, to look at how these companies are approaching Web-based business. Remember, they are not affected by the giddiness that accompanies spending OPM (other people's money). Therefore, they have been more cautious. The serious players first studied the layout of the game board before plunging in. Now that they are committed, it is obvious that they too see the potential of the Internet as a pie chart. Vehicle sales applications get only short shrift, if they get any attention at all. Sure, there is gmbuypower, forddirect, as well as the other factory sites. But these investments are minimal compared to the energy being spent on supplier and manufacturing applications. That's where the big payoff is for the factories. The implications for productivity gains and cost savings are enormous.
Likewise, Reynolds and ADP are quickly converting their product offerings into Internet or Web-enabled services. In interviews with representatives of both companies I found virtually no interest in vehicle sales applications. Neither ADP nor Reynolds has a sales lead generation service or even a lead management system, although both companies have small divisions that conduct Internet training for their dealership customers.
Instead, product development resources are being devoted to improving data flows and communications between dealerships and their manufacturers and customers. Other products in the pipeline involve F & I and aftermarket services. Most importantly, all of these new communication techniques and product offerings are being organized under the rubric of electronic customer relationship management (eCRM). eCRM is where the money will be made in reduced expenses and increased productivity.
What's In It For Me?
Dealers who remain skeptical about the Internet would do well to remember the days before computers and fax machines. Many dealers, and you know who you are, resisted buying fax machines because they couldn't see the benefits in transmitting letters and documents over telephone lines. Indeed, as recently as six years ago, I was aware of stores that still used handwritten repair orders and sale contracts. Who can imagine going back to those days?
Car dealers are serious players too, of course. But some dealers are more serious than others. The dealers who are concentrating all of their online efforts toward selling cars will be disappointed with the results. The more serious dealers are looking for ways to integrate Internet technology into the other operating departments. The key is to concentrate on improving productivity. Here's an example:
Service advisors have a difficult job, not just because they deal with the public under stressful conditions, but also because the nature of the job imposes firm limits on their income. Competition limits customer-pay labor rates, which in turn limits warranty reimbursement rates. Internal work is nothing more than moving money between "different pockets on the same pair of pants," as they say. Moreover, service advisors can effectively handle only about 20 repair orders a day. And there is an upper limit to how many labor hours can be sold on one ticket without gouging the customer. So how can beleaguered service advisors improve their earnings? By improving their productivity. If there were a way to handle 30 repair orders a day effectively, service advisors would have an opportunity to increase their incomes by as much as 50 percent. The Internet is the engine that will drive that production.
There are systems in the pipeline that will free up as much as two hours in the service advisor's workday. These programs take over much of the routine customer contact that takes up so much of an advisor's time. Through the Internet, a computerized system will call or e-mail customers to let them know the status of their vehicles. Sophisticated versions of these systems will even handle basic upselling. Customers will be able to log on to the dealership computer system to find out if their cars are ready, to view their bills, and even pay the bill through a CyberCash system. Both the dealer and the service advisor are better off because of the improved productivity.
F&I is another example of how the Internet can improve dealers' financial results. By adding available systems like ProfitWare or MACRO System, customers who wish to complete a vehicle purchase online will automatically see a non-confrontational, interactive presentation of finance and aftermarket products. The strength of these systems is that they present the same information, the same way, to every customer. And they allow a single manager or sales rep to make multiple presentations simultaneously. That's productivity.
End Game
The end game for car dealers and the Internet is eCRM. Customer relationship management is done in various forms by all car dealers. eCRM combines all of the direct mail and telephone contact, the service reminders and sales follow-up into an automatic computerized program. The Internet makes it possible. Ultimately, the dealers who embrace eCRM are the ones who will standout from the competition.
Don't take my word for it. Watch the news from Reynolds, ADP, and Electronic Data Systems. Watch the Internet announcements from the factories and see how frequently the information involves interaction with the suppliers. These folks are betting the house on the Internet. And they are deadly serious.
Mike Bowers is managing editor of WD&S Publishing, Metuchen, New Jersey, producers of the industry publications Auto Retailing on the Web, Dealer's Edge, Warranty Dollars & Sense, Fixed Coverage, and The Parts Manager. mbowers@dealeronline.com
