If you’re over 45 years old, you probably remember the first remote control you ever saw – I sure do. Even though wireless remotes for televisions had been commercially available since the 1950s, I didn’t see my first one in someone’s home until 1978. I was in high school, and my buddy Brad’s family had one for their living room TV. It had just two buttons: one for volume and one for channel selection. It really was very cool; but because it worked by generating certain sound frequencies, you could actually change the channel by jangling your keys.
The reason that I bring this up is that Brad’s dad proudly paid more than $600 for their television set with remote – despite the fact that the screen measured less than 23 inches and the picture quality was still dependent on the set-top rabbit ears. Today, a 23″ LED HDTV can be yours for under $160. More than the difference in cost, today’s 23” TV is lighter, uses less energy, has a better picture, has the capability to display more channels, comes with stereo sound and has a multi-function remote. Plus, let’s not forget that $600 in 1978 would be equal to more than $2,000 today.
In short: technological advances in electronics have resulted in televisions that provide better performance and quality at a much lower price. The question for you is simple: is the same true for the technology-impacted products you buy for your dealership?
Let’s start with costs…
Has your overall technology spend per vehicle sold decreased over the past twenty years? How about what you spend on advertising?
The Internet brought with it the promise of lower overall marketing costs, yet according to NADA, dealers continue to spend several hundred dollars per vehicle on advertising. In fact, the marketing cost per new vehicle sold has increased by more than 70% since 2000 – despite the move from traditional to digital.
Email is cheaper than direct mail. Banner ads are cheaper than billboards. Websites are cheaper than real estate. Given all these digital means for marketing and the shift from traditional, why are dealers still spending so much more per car today? I think the answer to that is two-fold: first, many dealers didn’t fully shift all of their spending to digital – they added digital marketing to their overall spend; and second, dealers continue to overbuy marketing that doesn’t drive sales. The old adage of “fifty percent of my advertising is working; I just don’t know which half” still holds true today; though fifty percent now represents a much larger number.
What about your DMS costs? Have these decreased over the past twenty years? In 1992, a personal computer like the IBM PS/2 with 4 MB of RAM and a 160 MB hard drive sold for $5,995 (without a monitor, of course; for that you had to add $950 to get the 15” model). Today, you can get an all-in-one desktop computer with 1,000 times more RAM and 4,000 times more hard drive space for under $600.
Now, while I don’t expect that your overall DMS costs should have decreased by the 91% that this PC example shows, I certainly expect that what you pay for the hardware itself should reflect this. Additionally, while your DMS software can and should provide more utility today that it provided in 1992, those costs should have decreased relative to everything else you buy. This, of course, begs the question: have these expenses decreased? If they haven’t, then your dealership is not gaining the cost benefits that technological advances bring to every other business.
What about utilization?
Having technologically advanced products is one thing; actually using them is another. One of the hardest ideas for me to wrap my head around (especially given the current recession) is why any business would pay for something and then never use it. With underutilization, you not only fail to reap any of the benefits that new technologies bring, you really are just wasting money.
What do I mean by underutilization? Well, if you’re an average dealer, then probably some of what you’re paying for from your DMS or CRM provider(s) is going unused in your store. For many dealers, this might specifically mean that you’re paying for a DMS shop capacity planning module that’s intended to help you maximize your billable hours, but your service advisors are still using a pen and paper to schedule customer repairs. Additionally, underutilization might be something as common as buying an expensive CRM tool that can help you manage customer relationships across the entire store, though using it solely for your Internet team to manage inbound email leads. In either scenario you are wasting money and losing revenue since the unused tools were created to help you maximize revenue with minimal effort.
Of course, underutilization issues don’t just affect DMS and CRM installations, but also simple and often overlooked technology-driven marketing like your website’s specials pages, vehicle comments on AutoTrader.com, or the number of images you display of your used inventory. When your team fails to exploit every possible digital advertising medium, you’re missing great opportunities to stand out, drive leads and increase sales.
Are you overbuying?
I discovered the other day that there are plenty of dealers who (believe it or not) are still overbuying. That is, they are paying multiple vendors for the same or similar product. I was training a large group of dealers, and during a break a dealer principal approached me to let me know she had just completed a technology audit on her dealership and found four CRM tools that all did essentially the same thing. The monthly costs for these four ranged from about $500 to over $2,000; yet as this dealer discovered, there was no correlation between price and quality (or features or ease of use).
If this is happening at your dealership, you’re in luck: this is an easy one to fix, though it probably should have been addressed a couple of years ago (during the height of the recession).
The dealer principal’s technology audit showed that she could drop three of the four CRM tools, buy a modestly-priced upgrade for the one she was keeping, and save over $3,500 a month. After the audit, she conducted a post mortem that uncovered four different managers had championed the four different tools for four very different reasons. Ultimately, had someone in the dealership been responsible for all technology purchases, I doubt they would have found themselves with four CRM tools that created this much redundancy.
What does accountability look like?
Not too many years ago, a smart general manager just had to mosey over to the desk and peer at the log for a couple of seconds to see how the day was going. With just a quick glance, he could get an overall sense of whether or not the dealership was maximizing its opportunities with floor ups so far that day. By spending just a couple more minutes studying the desk log, the GM would know exactly which salespeople were successfully following the road to the sale and which ones were not. For those salespeople who were falling short, the good GMs would provide coaching and/or ensure that their desk managers were holding everyone accountable.
Today, because of technological advances, the desk log should be electronic and can include information on floor ups, phone ups, Internet ups, be-backs, appointments and even current and future activities due for all of the above. With all of this additional information at their fingertips, this must mean that managers are experts at providing coaching and holding folks accountable today… If only.
Even more maddening to me than the thought of a dealership purchasing redundant technologies, is the concept that there are managers out there who cannot hold their teams accountable because they steadfastly refuse to fully use the tools and reporting that is literally at their fingertips. This is not the same as underutilization, where you forgo an opportunity to use something that you’re paying for (like shop capacity planning). This, you see, goes to the heart of accountability and execution – and your managers are giving it lip service (at best).
One of the biggest areas of opportunity I see again and again in dealerships today concerns managing activities and results more efficiently using technology. From simply using the reporting that you already have available, to making informed and meaningful decisions based on the data in your CRM and DMS; general managers can instantly go from being clueless about what happens in their stores to seeing and knowing all. If there was one thing that every successful general manager whom I’ve ever met has in common, it is that they know everything that is going on in their stores at any given moment. In the past, this meant lots of walking around and engaging everyone; today it might mean just pulling up the electronic desk log on their iPad.
Brad’s dad’s TV…
Part of the reason we don’t take full advantage of technology in our stores today likely comes from a combination of a fear of technology and a simple lack of understanding of how these tools can help us make more money. The reason that a GM studied the paper desk log years ago is because the generation before him did the same thing. Your service advisors are more comfortable writing down their appointments than they are using a shop capacity planning module because it’s the way they’ve always done it (and the way it was done by the generation who preceded them).
While I expect the next generation of leaders in our industry to fully embrace technological advances as a way to more efficiently drive down costs and increases revenues; the need is already upon us, and your current managers need to ensure everyone (especially themselves) is taking full advantage of all that you’re currently buying. Advances in technology are great, but if your team is spending more money to be less efficient and sell fewer cars, then they’re missing the advantages that technology brings to all other industries.
Brad’s dad wasn’t a jetsetter or even a first-adopter, but he enjoyed sitting in his recliner and he didn’t like getting up from it “to change the damn channel,” as he put it. He spent his money wisely and brought efficiencies into his life by fully utilizing the technological advances of the day. Interestingly, Brad’s living room TV would never have been updated to the fancy remote model if not for the fact that Brad’s younger sister became a cheerleader in high school. It seemed she was beginning to spend so much time away from home that Brad’s dad no longer had anyone around to get up and change the channel for him.
In other words, there was something in it for Brad’s dad to upgrade his television. Until your team finds something in it for them to become proficient with your technologies, they’ll continue to have their daughters changing channels for them.