By Matt Copley
The objective for today’s automotive retailer is the same as it’s always been – sell as many cars as possible each month. However, times have changed. Today’s retailer must sell differently – Providing choices and information, empowering their shopper to self initiate their deal online, and explore payments and deal structure from the comfort of their own home is critical as the competitive marketplace is rapidly changing.
Furthermore, today’s dealership operates with different challenges when compared with even five or ten years ago. Unlike even a few years ago, today’s retailer is not lacking leads or potential buyers, and in many cases is short on new (and even used/CPO) vehicle inventory to fulfill customer demand.
This means today’s dealership must accomplish a few new strategies to effectively meet their monthly objectives:
1: Overcome Blindspots: The majority of car buyers will finance and new competitors are dumping millions into redefining customer expectations of what the purchase and finance process should look like.
2: Overcome Blindspots: Wasted media budgets are still a very real problem for dealers, and efficiency of large media investments directly impacts the bottom line.
3: Focus on the right marketing and media mix investment: One that not only drives traffic to sales and service but helps in the acquisition of additional inventory.
4: Leverage the right tools that go beyond traffic: While traffic is great, it’s necessary that we focus on increasing conversions on the right targeted buyers, and begin to benchmark the connection between media investments and operational outcomes the way big ecommerce companies do.
Overcoming Blindspots: The Majority of Vehicle Buyers Finance
80% of vehicle buyers financed at the dealership last year. And with low auto rates, it’s likely that another 10-15% brought outside financing. Understanding what they qualify for, and being able to shop by accurate monthly payments is critical to the car buyers’ digital retailing experience. Dealers that can make the process easy for shoppers will not only create efficiencies within their sales teams, they’ll also continue to build trust and higher take rate on financing through the dealership.
Dealerships and digital retailing startups realize this and over the last 2 years an arms race has emerged in delivering financial tools that help enable consumers to initiate and carry transactions seamlessly from home to the showroom.
While there are a number of digital retailing tools available, there are key differences between them and more often than not, there is a disconnect between the payments delivered through these tools and the actual payments calculated once a shopper gets to the dealership. This disconnect creates a poor experience for the shopper and erodes their trust in the dealership.
Meanwhile, disruptors like Carvana and Vroom continue to highlight the inefficiency of dealerships’ technology and the outdated sales processes that are lagging perilously behind their offerings, and are actively exploiting long standing stereotypes around the retail automotive industry in their media messaging. While this may have been simply a nuisance 4 years ago, these players are having a real impact on market share today, and their efficient models represent a real threat to the long term stability of every dealership if they do not rapidly adapt to the new competitive reality the disruptors have defined.
Overcoming Blindspots: Elimination of Media Waste
Reducing advertising waste is a key element to boosting dealership profitability. It is estimated that the automotive industry will spend approximately $13.4 billion on digital advertising, and nearly 40% of that expenditure will be ineffective due to the wrong strategy, bad data, or both. When applied to cost per sale, this often leaves dealerships paying hundreds of dollars more to sell a car than their online competitors and leaves them handicapped in their ability to effectively compete.
Today’s advanced advertising data and marketing technology can help dealers follow and capture demand by identifying which vehicles they should be aggressively marketing, which target markets they should be marketing to, and which media channels will be most effective in reaching those markets — all with the goal of optimizing to the lowest cost per sale and RO, rather than vanity metrics like cost per click and impression volume.
This presents an exciting opportunity. For the first time, dealers can begin to approach their marketing in a similar fashion to true ecommerce retailers. In ecommerce, retailers look at their marketing from 2 fundamental pivot points: Target cost per sale, and available inventory. As long as inventory supply is available, and cost per sale targets are in line, marketing budgets are unlimited.
Wait, did I just say unlimited? Did your brain glitch for a moment? Of course the budgets are unlimited. Why? Because with a predictable cost per sale, demand, conversion path, and inventory to sell… the retailer wins every time.
Target.com knows that a particular 75 inch TV has say $400 dollars in margin, they also know that their average cost per sale is say, $23 dollars. They also know that they will predictably convert a given amount of all the traffic driveN to to the product. At that point it’s a cash machine. Put $23 in, $400 comes out. Why would they ever cap a monthly budget unless inventory is sold out?
Focus on the Right Marketing Investments
Leveraging all of the available data and marketing technology can help dealers make the right marketing investments in selling and servicing new and used cars, but also in identifying and acquiring the right used vehicles through direct from consumer purchasing at a price point where they can effectively maximize profits.
Leveraging these new tools helps dealers easily identify – on a daily basis – which new vehicles in inventory require more or less marketing investments, as well as delivering insight on the right media mix models to deliver the most efficient returns. Automotive groups who identify and adjust their media mix across search, social, streaming television and traditional media channels can often realize millions of dollars in efficiency gains that go straight to profitability.
Today’s more progressive dealers are also activating creative, new ways of sourcing used cars, and with auctions at a premium, buying directly from consumers who live in their vicinity has become an attractive avenue to build customer relationships and outpace competitors vehicle acquisition in a sustainable way. By first leveraging market days supply, market days on lot, and scarcity insights, dealers can determine which vehicles are the most likely to sell quickly and at a premium in their market. Then, dealers can activate multi channel ads featuring “We’ll Buy Your Car” or “$1,500 Over Kelley Blue Book Value for Your Trade” messaging. Consumers are highly engaged with these ads and convert at a consistent clip, ultimately filling used car inventory for dealers at a more affordable price point than the dealer can acquire at auction. Not to mention the opportunity to build a relationship with these customers in the store during appraisal, and the additional sales velocity gained by adding an additional inventory source.
Going Beyond Just Traffic
With the current high demand, low supply market many dealers have grown complacent. With record grosses and strong unit counts, retailers are bringing in more leads and foot traffic than ever before. The common stance in dealerships today is “why should we change anything?, business is better than ever before.” However, when light is shed on their market share, many actually realize that they have lost 5-20% in their own backyard when compared to just a few years ago. Smart retailers today are realizing they need a better engagement and conversion strategy, and tools that help them to efficiently align with internal processes to super serve their customers in a fashion that is directly competitive with their disruptors.
Dealers who are brave enough to recognize the importance of integrating a seamless ecommerce style deal conversion strategy with their lead-gen strategy, and media mix allocations, are reaping the rewards in drastically lower cost per sale, more efficient process routing, increased customer satisfaction, and surging service retention. And while there are a litany of available SaaS-based tools centered around digital retailing, solutions leveraging payment-first technology give dealers a truly transformational resource to deliver a joyful vehicle shopping experience for consumers, and ensure that their internal processes make good on that promise when the customer hits the showroom for delivery.
These payment-first technologies are critical because a growing number of car shoppers today want to shop online or in-store based on monthly payment. In fact, a recent survey shows that 42% of car shoppers today budget by monthly payment, and 46% of car shoppers say they include the value of their trade-in when budgeting for their next vehicle.
Payment-first technologies provide a one-to-one personalized shopping experience, allowing consumers to shop simultaneously for their vehicle and financing across a retailer’s entire inventory and finance programs, for all available terms, with rebates, incentives, specials, ePrice, trade-in equity, etc. calculated and applied. Furthermore, the one-to-one nature of these platforms allow dealers to take the customer past MAP pricing restrictions and deliver a captivating experience that accurately reflects their most competitive pricing.
This enables a friction-less shopping experience, and it helps dealers increase the quality of their leads so that they can pinpoint the customers who are qualified, ready, able, and willing to buy now, as well as which customers may need to be directly routed into a special finance conversation, ensuring that the right customers are paired with the right people to handle their unique needs.
Where the Magic Happens: Connecting the Dots
While the transformation to customer first digital retailing experiences is critical and urgent, simple integration of a tool will not solve the competitive deficit. It’s imperative that dealers explore the necessary process changes to deliver the customer a seamless buying experience however they choose to engage and transact, and that redundant processes are removed so that the consumer experiences significant acceleration in the purchase process end-to-end.
Furthermore, digital retailing will be commoditized within 12-18 months, and will be as commonplace as a basic payment calculator. With this in mind, the solution you choose needs to not only align with process, but also integrate with your advertising and conversion paths in a way that drives efficiency in your media allocations and empowers you to connect advertising to operational outcomes. Find a media mix that is predictable from a cost per sale perspective, and if you’re feeling bullish, open up budgeting to work with fluidity across available inventory and respond to market fluctuations.
When the three pillars of advertising, conversion, and transactional operations align, dealers will realize significant efficiencies that make today’s performance look pedestrian by comparison. The future is bright.
About the Author
Matt Copley brings deep experience from sales floors, internet departments, BDCs, and sales desks; he’s been challenging traditional schools of thought in the automotive industry since long before Facebook or Google were on the radar of most dealers, and worked with dealerships for over 20 years across merchandising, advertising, and customer experience optimization. After exiting the retail automotive business in 2009, Matt worked his way up the media ladder, challenging multibillion dollar broadcast companies to rethink the way they serve the automotive industry. Working his way to Director of Automotive at the largest privately held broadcast media company in the US, Matt helped identify strategic roadmaps and target acquisitions that led to the $125 million acquisition of PureCars in 2015. Matt has led growth initiatives within PureCars, helping to grow a visionary tech startup from South Carolina, to the leading technology disruptor in Tier 3 Automotive. Currently, Matt oversees Product Marketing and Sales Enablement for a team of 75+ sellers and digital strategists, manages PureCars’ Dealer Advisory Boards, and collaborates with industry partners to advise product development and software offerings for thousands of dealers, agencies, and OEM partners.