Automotive is cluttered with old-time assumptions and inherent tendencies that “appear” to hold back a lot of dealerships. Many people wonder if a data-driven only approach could yield a higher competitive advantage than one with old-time thinking? Sometimes ego clouds judgment to the point of thinking analytics is predictable and holds little relevance. Could a complete dashboard of analytics somehow hold power over the experience of long-time industry pros?
The main obstacle with many dealerships is the plethora of numbers; there are so many numbers, do we know the true value of all these numbers and do we have a complete view of these numbers? Paralysis of numbers has overtaken to a point where the majority of data is used for monitoring (or just glancing at) and not striving to grab market share. The intrinsic value of data and having a real understanding what to do with it has diminished – or was it there in the first place, maybe. There are many factors that feed into this paralysis that I’ll address later.
Yesteryear, there was a powerful medium called newspaper that had a HUGE influence on the shopping process for buyers. It was like a funnel, where all these people jumped into the wide part of a plastic cylinder that guided them down to 1 spot – the local newspaper. I think it’s fair to say that automotive alone could have kept the newspaper industry afloat during these times. Then 1 day the funnel flipped, the skinny part of the cylinder was at the top and the massive end was at the bottom. Each individual had their own funnel to jump in, as they slid down the funnel it expanded and dropped people into this thing called the internet. The internet wasn’t just 1 source to get information, but an endless black hole of information overload. This is the point where power transferred. Many people say that the power transferred from the dealer to the consumer, but I say that’s the easy answer. Keep in mind that you are a part of this time in history that many people in the industry will look back to.
The true shift of power went from the newspaper to the internet. The internet opened up boundaries, people could now search as far out as they were willing to drive. As far as gross goes, the internet didn’t have magic prices that exposed secret knowledge to the masses, competition drove prices down - the internet forced this competition. The power of the internet was evolving and growing, it grew from a 1-dimensional platform to a 3-dimensional powerhouse. In the midst of this transformation from 1D to 3D, it gobbled up market share from TV, radio and other mediums. The beast was for real and screaming "FEED ME". Consumers are using this power called the internet, dealers are just trying to adapt at this moment. Before, dealers had at least a 100 years of experience in mastering newspaper on their side, that mastery disappeared overnight.
The reality of this beast scared some of the bigger players in the internet kingdom. I was working for one of these giants during its infancy and watched REAL power of the internet in action. Our sales district traveled to a quarterly meeting at the regional office, where the regional manager was set to talk to us. He unveiled a plan that was going to test the power of our relevance – massive price increases. Price increases that had us salespeople looking at each other saying “holy crap”. Typically, salespeople aren’t intimidated by modest price increases, but these were nowhere near modest and we weren’t really coming to the table with a new and improved product. This company was about to flex its power and muscle because of time and the lack there-of. The regional manager went to the dry erase board and outlined one big column and beside it outlined a little column. There was a huge gap in space between the height of these 2 columns and that gap represented a fear. These 2 columns represented the average monthly spend of newspaper and the internet (this meeting was around 2005) for a dealership. He said we no longer consider any other of the automotive internet company’s competition anymore, we were going after newspaper dollars. He went on to say “when you are sitting with the dealer you have to transition the pitch from competing for internet dollars to taking newspaper money”. The company made the decision that they had to get the internet as close to the newspaper spend as possible, it had to be done quick before the dealer knew what hit them. They expected cancellations and cancellations is what they got. But you see, this giant was willing to re-adjust pricing knowing that dealers would come back after time if they just stayed the course. An online market-place was created on the internet and massive amounts of marketing dollars were behind it. The clever part of this plan showed some forward thinking and deep knowledge of the dealer base. If cancellations were to happen, that meant more traffic and sales for the existing dealers on the platform – supply and demand. The internet giant knew the word would travel around and dealers would jump back on - now that’s power.
The internet is like a wave of water, always conforming to the forces in and around it, engulfing things in its way due to the sheer power of its momentum. My company surveys roughly around 4,000 automotive dealer customers a month, I can attest to the force that the internet is. This force encompasses 86.4% of shoppers, this number represents the people who touched the internet before walking into a dealership (in a weird way this number seems low to me). With this number, a gold rush in automotive digital has erupted. You have dealerships being called on to spend dollars on every new silver gadget available. Hey, 86.4% of your customers are using the internet, you need to spend 86.4% of your budget on internet marketing. Not so fast, vendors can’t be allowed to hang on to that number, dealers need to stand up. If you dive deeper into the consumer and ask them “what was the biggest influence that brought you into the dealership”, the numbers change. The number drops from 86.4% down to 41.3%, this number varies greatly from dealership to dealership – you need to learn YOUR number. 41.3% represents the greatest segment, but it’s still in the minority for overall influence. You have other influences such as family & friends, former customers, direct mail, TV, etc.
How does a dealer split up the marketing budget? I think dealers need to examine their budget through a new set of eyes. First and foremost – your website is an extension of your brick and mortar, it is your online store. This sounds like a broken record but it’s true and if you look at it this way, you acquire a great benefit of insight that you didn’t have before. Your website is not a “marketing source”, it’s an end to a means – the shopper had to get to your website somehow and that is where the real value is, that’s the highest weighting source for your marketing dollars. Dealers also need to start labeling their line items differently for digital, it needs to be broken up into marketing and technology. If you are adding a spend that is purely technology driven and is on your website to enhance a feature or try to capture a lead, that should not be in the internet marketing budget, but it should represent a new line item for internet technology. That technology is not bringing people to your website, it’s enhancing the experience or it is a new function. Technology should be compared to having nice furniture in your waiting area or supplying your dealership with paper and electricity. This is going to give you a clearer view of ROI. Unlike having a nice plush couch in your showroom, technologies can have a direct ROI or value. It gives you a balance of funding new internet marketing initiatives or putting more money into technology – once you attack this and make the clear distinction, it literally is a game changer.
Now, how do you maximize the spend? You must first collect feedback from your customers, otherwise you are guessing. Again, somehow or someway everything has to be tied to a sale or influence the thinking of the local market, otherwise it’s worthless. You cannot equate traffic (analytics) to a sale or any other metric except a lead. If you base your marketing decisions off leads, you are alienating 80-85% of the shoppers out there that want to remain anonymous until they show up to the dealership. All things have to show their value; it is a culture shift that has to happen in automotive at some point or the marketing spend will remain cloudy. Things would be much easier if automotive was completely e-commerce, but it’s far from that – it’s a people business. Tying a customer to a marketing source is the number 1 process that dealers use to get some idea of ROI – but that is nowhere near enough but at the least, it shows some sort of value – that’s why it’s popular. There needs to be a determination and methodology to get more information, more knowledge of places that impacted the customer as they were shopping, insight on what the customer is doing and knowing the evolving trends of the customers’ needs and expectations. Marketing spend should be centered around accountability and value, do not get caught up in the fight to be sourced. There is a great amount of your inventory that is going to sell, no matter what.
Marketing Meeting example: “our website traffic grew 3.8% and that equated to 16 more leads which yielded 2 more sales”. “ATC sold x amount of cars and so on”. Poof, that’s it. Where do you go from there? How accurate are those traffic numbers, is it real traffic? Leads can be competitor and vendors shopping your process, especially if you are a highly successful dealership in the area. The metric that is the holy grail for your website is returning visitors, that’s it. That is the number 1 metric to drive success and build correlations around. What does traffic mean if it doesn’t result in sales? How do you know it results in sales? You need to know and find out. It’s not easy, but neither is chess or any game of competition. Your baseline metric should center around people who come back to your website.
Dealers need to hold themselves accountable also and probably to a greater extent than you do a vendor. Are you doing everything in your power to make every marketing initiative successful? Are you testing your creative, do customers have recall of your messages? Are you merchandising past the customers’ expectations and would you select your dealership, if an unbiased viewpoint is attainable? Some dealers use consultants, be careful because there are prominent opportunist out there using this new method of influencer marketing – it just leads you down paths where the consultant has a new relationship with a vendor and they can make your numbers say anything. The highest value I see in dealerships concerning consultants are the ones who focus on process, many great ones out there that touch all points of the dealership. When you are making a decision to rid yourself of a marketing initiative, you must exhaust all avenues in trying to correlate some value. Dig deep and try to prove at all costs that you need to keep that vendor. If you still come up empty you need to move on. Keep a look out for high duplicity percentages with direct sale initiatives.
To answer my original question if a data-driven dealership could outperform a dealership cluttered with old time gut predictions… I say who cares, why be cornered into only 2 choices. Of course dealerships have prejudices, but those prejudices need to be confirmed. I believe all dealers can use better data than what is shown to them now, intelligent data from your customers. By doing this I believe you can work with your customers to harness real power and use the internet and everything available to you instead of the internet and vendors using you. Think about your KPI’s, you are sold by vendors and engineering geeks on what holds value with the internet. Everything at some point has to be attached to a sale, KPI’s should change every month. Your only baseline of success is sales and market gains. Establish your own guidelines that evolve every month matching your local market.
Data is useless without the feedback of your customers. Analytics IS important, but it has it's place.
Your data can only be used as benchmarks without the feedback of your customers. You can’t deem ANYTHING successful without feedback. That’s why sourcing a single source holds the most value at most dealerships and dealers need to expand upon this. EVERYTHING should somehow be sourced to a sale. YOU don’t need to change; you just need to get a new pair of glasses so that your perception can work better with your gut feelings. Put yourself in a position to make the best decision faster. Somehow, someway, everything needs to show ROI at some level. You will never get complete attribution but you need to get as close as possible to it.
I believe most dealers can cut a good portion of their market dollars, re-invest those dollars into technology and give back to your customers (they do represent a high percentage of influence). After that, I believe you will still be saving money and gaining market share.
My goal in 2017 is to build a network of dealers that share data anonymously, giving more power to the dealer body and less to the vendors. Right now in automotive history, there is a power grab for the internet, vendors are working diligently to get it.