For many years, price was the most important deciding factor in picking a DMS system. As a consultant, I’d do a detailed “apples to apples” comparison of a dealer’s R+R bid to the ADP proposal. It wasn’t an easy task because these bids were complicated. As they say in real estate, the most important decision factor is location, location, location and in the DMS world it was price, price, and price. The DMS world changed when various “alternative” DMS systems came to market and their prices were a fraction of the R+R and ADP bid. For example an average DealerTrack/Arkona bid came in at about $1,500 a month in the early days compared to an average of $9,000 for R+R or ADP. AutoSoft was normally $800 a month without F&I and $1200 after getting a 3rd party F&I module. The only problem was that the alternative systems didn’t have all the features of ADP and R+R. For some dealers, they jumped from a Tier 1 system like ADP and R+R down to a Tier 2 or Tier 3 system to reduce expenses. But for many, these new low-priced DMS systems caused them to write off balances, lose out on service up-selling opportunities, increase their parts obsolescence and even hire more staff. The price of new technology wasn’t a bargain anymore. You might ask if your dealership should be using a Tier 1, 2 or 3 DMS system.
First, let’s discuss how the Tier system was designed. It was easy. When I was selected to give a workshop at NADA over 20 years ago about DMS systems, I had to break up the current choices of DMS systems into 3 equal slides. I called them Group 1-3, but then changed it to Tier 1 – 3 to make it more technical sounding. I put into Tier 1 the systems with the most features. These features included things like price escalators on ordering and selling parts, dispatching based on multiple variables, and modules like Time Clocks and Report Builders. Tier 1 systems were also fully integrated and had all the basic modules. Tier 2 systems normally lacked features, but were also fully integrated and had the basic modules. In Tier 3 were systems that were missing modules or features. For some in Tier 3, they didn’t have payroll– or like AutoSoft, didn’t have a fully integrated F&I module. Some were in Tier 3 because they were for small dealers only.
When you’re trying to decide if you should have a Tier 1, 2, or 3 DMS system, it is best to start with your current system and determine what features you’re currently using. During my years of evaluations, I found that on an average the Parts and Accounting departments use over 90% of their features. Service comes in next, using about 50% and last is sales, using less than 30%. Many dealers would ask, “If I’m only using a fraction of the DMS – why pay for a Tier 1 system?” The problem with that logic is that if the Accounting and Parts department needs that 90% to retain profit and prevent write-offs, and you get a system that only provides half that amount, what will be the real price of your technology? I’m not saying that a DMS decision should be made solely on the input of your Accounting and Parts department, but their cooperation is imperative in any computer conversion. I have seen DMS systems fail because these two departments were against the new systems. During my workshop, at the Digital Dealer Conference in Tampa this April, I’ll discuss the five major factors you should consider when selecting a new DMS and end the session with a quiz to determine if your dealership is ready for a change or should stay with a legacy system. Over the past 20 years, I’ve helped over thousands dealers pick the best DMS at the best price and I know the different features of each system. I’ll discuss which systems are in each of the 3 Tiers and how you can pick the right Tier and DMS system for your situation. Hopefully price will be a factor, but not the only factor in picking your next DMS.