“Any customer can have a car painted any color that he wants so long as it is black” – Henry Ford, 1909
A lot has happened in the automotive dealership world over the 115-year time span since Henry Ford and William Hughson of San Francisco signed the first franchise deal; Hughson purchased and sold twelve Ford vehicles at his dealership in his first year. (Fred Koller opened the first automotive dealership in 1898 but did not have a franchise deal). Over the next few years Hughson would own 120 dealerships along the West Coast, and Ford Motor Company employed a business manager to maintain brand standards and success.
So began the dealer and auto manufacturer partnership that now constitutes a massive enterprise of providing goods and services to tens of millions of consumers annually.
But manufacturers and dealers each have their own, separate interests at stake, and it’s up to dealers to forge their own destinies, even in the face of monumental challenges. The Great Recession stalled car sales and wiped out thousands of dealerships, now there is the Great Technological Disruption.
Digital technology has distorted the marketing and sales funnel and frayed the previous connections that kept dealers tethered to car shoppers and provided reliable ties for relationship-building and customer-keeping.
OEMs still create the product but now they provide several versions and colors. Ford once offered a Model T in black, but today Ford offers the Fusion in twelve different models and nine different colors. And buying a Model T in just black didn’t involve much research, just the means; however, with the glut of options and features, the average amount of time a customer spends researching their next vehicle today nears 15 hours! Very little of that time is spent at the dealership.
How can dealers continue to thrive in an environment where customers can come to the point of purchase perhaps without ever actually visiting a dealership?
By “owning” the customer experience.
This means presenting a responsive and inviting website – essentially, the first impression, a positive atmosphere in the showroom and a purchase and delivery experience that exceeds expectations. The customer is not likely to visit more than two dealerships on their journey to purchasing a vehicle so if they enter your dealership, the sale is all but yours to lose.
But, if you think the point-of-sale is the finish line, you’re leaving money on the table. A lot of money.
When your dealership owns the customer experience, you can increase revenue, lower marketing costs and boost retention. By nurturing one-to-one relationships, you increase your odds of winning customer loyalty for life.
Beware: The road is bumpy and there are factors in the marketplace that strain the bonds that typically have tied owners to dealerships:
Only 30 percent of total service visits now occur at dealerships, and just over half of those are at the same store of purchase. Of a dealership’s sales customers, 72 percent now use third-party mechanics for service even though 53 percent expect dealerships to offer higher-quality service than these competing stores.
Salespeople now share multiple responsibilities. Intensive training to understand all the features on today’s vehicles impedes on a salesperson’s time for cold calling or follow-ups. Even then, when today’s consumers do receive phone calls or e-mails, often they are quick to ignore or even resent them.
A significant majority of surveyed dealerships say traditional marketing is no longer as reliable for engaging the customer.
Millennials are distinct from previous generations in one important respect: their reliance on digital and mobile communications, and they will be 40 percent of the car buying customers by 2020.
When it comes to automobiles, they prefer to manage everything digitally: purchase research, financing alternatives, dealership appointments, maintenance scheduling, etc., making it increasingly difficult to build loyalty.
There are two areas where dealers can build customer loyalty. The first is the service department – a place where a dealership can show expertise, reliability, care and trust. The second is through digital means. Auto retailers proactively engaging with their customers by providing relevant and timely digital messaging are significantly more likely to see them return for service, refer a friend, and purchase their next vehicle from the dealership.
Owning the Experience
Dealers must own the customer experience as much as they can. In an era when shoppers increasingly want to be “in charge” of their own purchase process, the showroom is an increasingly difficult place to impress consumers.
Dealers have to make sure their digital experience is proactive, relevant and continuous as well as emotionally engaging.
“Connected consumers are in charge,” says the consulting firm Capgemini. “They are confident about what they want and how they want it, secure in using technology to increase their power as car shoppers and owners, and comfortable driving innovation in the industry.”
Unfortunately, at many dealerships, the purchase or lease of a vehicle is often the final point of interaction between a customer and a dealership until the customer is interested in another vehicle. Customers can seek out and find just about any car they want; it’s no longer about proximity.
Customers who are introduced to the service department when they purchase a vehicle are 1.5 times more likely to return to that same dealer for service. Service retention rates plummet after one or two service visits because nearly all of their repair and maintenance work is covered under warranties and dealership programs. Once the cost is on them, the customer feels they can go somewhere else.
Bringing It Together
Selling an existing customer is eight times less expensive than acquiring new ones, so dealers need a strategy to drive sales and expand relationships through customer retention.
If dealers can get that person engaged digitally and accustomed to a regular cadence of informative and valuable communications, it presents the dealership with more opportunities to build effective customer relationships.
As OEMs continue to extend their reach, after-market competition becomes increasingly tighter and customers are seeking alternatives to the traditional path to vehicle ownership, it’s up to the dealer to look out for their best interests and the overall satisfaction of their customers.
Originally, manufacturers sold their vehicles direct to the consumer. When dealerships started dotting the landscape, the likes of Ford ensured business advisors were sent to keep their franchised dealers on-brand. OEMs have a vested interest in their products, but dealers must remain vigilant in their pursuit of the customers as they are the last mile in the purchase process and must look out for themselves to ensure they don’t just survive, but thrive.
Author: Paula Tompkins
Paula Tompkins, CEO of ChannelNet, is a digital marketing and sales expert. ChannelNet (http://www.channelnet.com) has helped hundreds of the world’s leading companies use technology to sell their products and build customer relationships.