Over the next five years, the automotive retail landscape will change dramatically for both consumers and dealers. Utilizing U.S. Census Bureau data, J.D. Power and Associates estimates that by 2015 more than 25% of the “car buying” U.S. population will be Millennials and younger. By 2020, this number will increase to 38%. Further, research shows that these new buyers interact and shop differently than previous generations. According to a recent J. Walter Thompson survey, tomorrow’s car buyers find it easier and more convenient to interact digitally. So, what does this mean for dealer retailing strategies?
Clearly, the automotive industry has made significant progress in the area of digital marketing, where dealers make it easier for their inventory to be found via the Internet. In fact, according to Cap Gemini’s 2011-2012 Cars Online report, over 90% of car buyers use the Internet in some form or another to research and shop for their next vehicle. Yet, there has been little or no innovation around the decade old methods of generating and handling online consumer leads.
The conventional wisdom has been to get a shopper’s contact information and start working the deal using offline methods. While this has worked so far, it tends to drive focus on quantity over quality of leads, ultimately resulting in fatigue within the sales person ranks and numerous unanswered sales opportunities. This problem will be further exacerbated when the Millennials start to become serious buyers. They will demand better tools that allow them to complete more of the buying process online with a view towards efficient buying. Tomorrow’s consumer will also demonstrate reduced emotional attachment to their cars. According to CNW research, cars have significantly fallen in the “what’s impressive” list for the 16-21 old demographic.
Progressive dealers now recognize that “digital marketing” and “digital retailing” provide two different experiences for the consumer. While digital marketing focuses on marketing dealer inventory and driving traffic to the dealership’s virtual lot leading to the showroom, digital retailing aims to deliver intuitively designed online tools that allow the consumer to go deeper into the buying process online before coming to the showroom. Digital retailing tools typically allow (1) a buyer t0 understand realistic payments on a specific VIN based on dealer controlled lender rates, current incentives, and specials (2) play around with affordability based on major variables such as trade-in values, down payments, terms, credit , and (3) submit an instant pre-qualification or pre-approval for financing request. The goal of digital retailing is to deliver a “1st pencil” online and convert a consumer from a “shopper” to a “buyer,” while interacting with the dealer’s website in a self-service or remotely assisted manner.
Qualified leads perform better
We have found that dealers using digital retailing tools offered approximately 8% of their unique website visitors the opportunity to start the financing process online (vs. the usual finance page visit benchmark of three to five percent). Further, on average these visitors resulted in a thirteen percent visitor-to-finance lead conversation rate (vs. the eight to ten percent industry standard). Finally, lead-to-sale conversion data showed that over 23% of the leads generated using digital
retailing tools resulted in actual sales, compared to the typical 15% on basic website leads.
Increased online engagement
It has also been shown that shoppers spend an average of five minutes per session on an accurate and intuitive monthly payment tool linked to dealer inventory. Digital retailing tools allow shoppers to conveniently interact with the dealer’s real loan and lease rates, and combine them with current incentives, while understanding the financing and affordability options that suits a given customer’s needs. All this occurs with the dealer maintaining control of their financing process and reserve settings.
Helping consumers become comfortable with their online 1st pencil and then nudging them towards online financing not only improves lead quality, but it also increases the modern consumer’s propensity to do business with one specific dealer versus the competition. When this consumer comes to the showroom, they have an idea of the vehicle they want, can afford and have been approved for. By offering a context sensitive chat session during the five minutes that the shopper spends using digital retailing tools, a dealer increases the chances of bringing that shopper into their showroom!
Improve sales workflow
Well-constructed digital retailing tools should also integrate directly into the dealer’s in-store systems. For example, these tools allow information such as the stock number, payments ranges and the consumer’s credit application/results to be directly deposited into the dealership’s management system as well as the CRM system. Since the shopper’s bureau has already been securely pulled, the sales person understands the shopper’s credit worthiness and can focus their energy on pitching inventory that the shopper can actually afford. This consistency of process and reduction of data re-entry improves speed of transaction and improves CSI.
As dealers continue to shift marketing spend from offline to Internet channels, they also need to start thinking about next generation retailing strategies for the oncoming “Millennial” shoppers. Going beyond digital marketing and adopting online buying workflow/digital retailing tools help setup the dealership for the future while delivering competitive advantage and ROI along the way.
Amit Maheshwari is responsible for Dealertrack’s digital retailing business, which delivers consumer facing solutions to dealers, portals and manufacturers. He also directs Dealertrack’s corporate strategy development and planning process, as well as the company’s OEM relationship management group. You can reach Amit at: firstname.lastname@example.org.