Autos, White Papers

Does Automotive Social Media Spark Influence or Action?

The answer is both, but the real surprice is the degree to which the positive actions outweigh the negative actions. This article on DrivingSales.com uses new industry research to demonstrate the difference. http://www.drivingsales.com/blogs/InvestigativeReporting/2012/01/03/automotive-social-media-influence-vs-action

 

Profiting from Sales Integration

Sales Integration was published over one year ago, yet its sales are hotter than ever. The ZMOT concept described in the book by Google's Jim Lecinski, ZMOT, is very similar to my book, Sales Integration. The core differences are that the foundation of ZMOT sprung out of consumer packaged goods. I first approached Sales Integration from a durable good perspective. Thursday, I'll conduct a webinar showing auto dealers how to profit form the Sales Integration concept. I'll also reconsile the two books for the first time in a way that delivers immediate action items for greater bottom-line results. All webinar participants will receive a free, autographed copy of Sales Integration. Follow this link to register http://mywebinarsonline.org/Sessions_PUQ5.html

 

The New Wave of Sales and Marketing Tools

Classification is important to understanding, and I'm concerned our industry is off on the wrong foot. I'm hearing a lot about new mobile applications, but apps fall into a number of tool classifications. Some simply do what you tell them to do; some help you remember how to do it, and others extend your management programs to guide or control the work of others. Here are the four categories as I see it:

1) Wrenches and typewriters have no memory. There is nothing about them that can help the user understand the process of tightening bolts or writing letters. These non-memory tools are great for users who know or can figure out the process of completing the task without assistance. The user works the tool.

2) Many software products come with a help button. The process for completing a task is recorded in the help menu and can be called up when needed. The user accesses additional process memory within the tool.

3) Everything in Microsoft office has a multitude of features, but does not memorize processes unless a macro is created to do that. Macros do tasks according to a recorded process. The user starts the process as recorded within the tool.

4) A GPS determines the process for getting somewhere, then tells the user what to do. This is what some of the new apps coming out offer, and it is a boon to areas like sales and marketing involving complex processes. The tool directs the user.

I'm going to call this fourth group management tools, because they manage the actions of others. This is often essential for process control.

Configurator tools guide shoppers through the path of designing their dream car. More recently, apps are being sold that guide the salesperson through the sales process or guide the F&I manager through the menu process. The if-then nature of computer programming allows for branching, making it possible for the system to design a nearly infinite number of process combinations. Each solution is produced to optimize the process based on the situation as input. The user is guided through a process of information inputs, and those inputs optimize the remainder of the process.

A Canadian company, cDemo, caught my eye in Dallas several months ago with their Mobile Inspector Application. It guides the user through a process that simultaneously develops vehicle photos, live video, and a vehicle condition report. That process varies from vehicle to vehicle. The photos for a pickup truck are not the same as for an SUV or a sedan. If something is found to be wrong in the vehicle condition report, additional detail is captured on that item. There must be millions of combinations, but the user doesn't have to remember any of them. Just about anyone can complete the process. In fact, cDemo asserts it's so easy a monkey could do it, and it all happens on an iPhone or Droid based smart phone.

This is a radical departure in the purpose of tools, yet it is not entirely new. Twenty years ago, I had a sales interview that involved me giving a sales presentation on the product of my choice. I sold them on buying my Hewlett Packard 19B programmable calculator for each sales person. Buy programming in the formulas for quoting rates, no salesperson would ever again need to remember the variables, the formulas, or how to execute. The program tells them what variables to entry and takes care of everything else. No more missed information, no more miscalculations. Sales people could function faster and more perfectly by letting the tool direct them. I provided break-even analysis to demonstrate the how quickly this simple management tool could pay for itself. The interviewing team quickly understood the importance of management tools in sales and marketing. Needless to say, I was offered the job.

If you can hire highly skilled professionals, it may make sense to give them tools they control, and maybe even tools with additional memory support. However, if the process and discipline is more than your people can live up to, then put a tool in place that runs the employee the way you want them to be run. Most of these tools can be modified by the manager. For example, the cDemo tool allows steps to be added or deleted from the process by the manager or through company support.

In many ways, these new tools are an extension of management, and it is badly needed. The cars we sell and merchandise are more complex than ever. The buyers are more knowledgeable than ever. But the people selling and merchandising vehicles are generally not any more talented than those we worked with ten years ago. These management tools are not coming out a moment too soon. If you want to insist that vehicles be sold or merchandised the way you want it done, then consider duplicating yourself through one of these new tools that manage your people in your absence.

Yes, I do practice what I preach. I've developed internal tools to guide myself, preventing mistakes when I'm working tired. I've talked to several companies about helping them develop and/or market management tools and will remain involved in this growing field as it relates to the marketing and sales of durable goods. I recently lured my brother, Gary Galbraith, into the auto industry to help cDemo introduce their new tool in the United States. As I look at the collision course of product complexity, product proliferation, transparency to the consumer, and an undereducated workforce, these tools appear essential to the future profitability of retailers. Management tools cannot be looked at as just another kind of application.

Preference for the Vehicle and the Store

My friends Ed Brooks and Eric Miltsch caused me to think deeper regarding preference for the vehicle and preference for the store. Many shoppers scan through inventory for a vehicle they prefer before contacting the seller it happens to belong to. Other shoppers have sufficient preference for a store -- either from experience, reputation, or branding -- to go to the dealer's website to hunt for a vehicle they might prefer from the dealership they already prefer. There does not seem to be much controversy about the need to maximize both preference for the store and preference for the vehicle, a subject I began writing about on Revenue Guru two years ago.

What these gentlemen caused me to consider was the impact of pricing a vehicle significantly above market. Even if the shopper prefers the store and the vehicle, they are likely to check the value against competing offerings. Being off by too much on the price could not only cost the dealership the sale at hand but the entire relationship. Sadly, this could take place without a single word being exchanged between the shopper and the store.

The Zero Moment of Truth (ZMOT) is complicated. Dealerships need to defend against losing customers with a preference for the store at several steps. The first may be their Page One Defense (POD) score, but it is foolish to think luring the shopper to your own site will insulate you from competition. You still need to have the right vehicle at the right price, or at least an acceptable vehicle at an acceptable price.

Measuring the ROI from Social Media

Download the deck from Dennis Galbraith’s presentation at DrivingSales Executive Summit. The full formula for measuring the ROI from social media is broken down to be immediately usable for auto dealers.

Will Dealer Trades Be Replaced By Dealer Group Selling?

Many consumers are expanding their shopping radii, the distance they are willing to travel to buy a new vehicle. As the shopper's radius expands, more stores fall into the shoppers consideration set and out of the potential dealer-trade zone. The further dealers need to go for a trade deal, the higher the shipping costs. In some cases, the relationships between dealers dissipates with distance as well. (More than a few dealers have been burned in trade situations.) As costs and difficulty associated with dealer trades goes up, shoppers intent on the perfect vehicle become more likely to expand their shopping radius. The worse it gets the worse it gets.

In theory, the expanding shopping radius of the consumer is a huge threat to dealer trades. Despite my best efforts, I could not find hard numbers on the quantity of dealer-trades completed each year. However, as availability and pricing become transparent across any market, economic reality moves closer to economic theory. Automotive retail is not immune.

As consumers are looking further for their new cars, dealer groups are pooling their inventory across common sites. AutoNation.com has nearly 3,000 Toyotas; SonicAutomotive.com has 1,200, and LithiaDirect.com over 900. Those levels are way beyond what single stores carry. Even Penske's mighty Longo Toyota has fewer than 700 new Toyotas in stock today, while PenskeCars.com has all those and 3,000 more. Dealer groups are in the best position to help shoppers obtain the exact right car for them. Chances are, the vehicle exists within the family of stores, and the terms for swaps between stores can be prearranged. In some cases, the shopper is dealing with a centralized BDC that may be indifferent regarding which store the vehicle comes from.

Dealer groups that are spread out across the nation will not be able to capitalize on this advantage in all cases. Clearly, a trade from Florida to California is generally out of the question unless it uniqueness demands a handsome premium. However, regional sites have this capability in spades. AutoNation's PowerDirect.com lists nearly 700 new Fords available in Southern California from its stores in Valencia, Tustin and Torrance. Faulkner Auto Group confines itself to the greater Philadelphia market and lists inventory on ToBeSure.com. Combining the inventory of three small GMC stores gives the group an inventory of over 200 vehicles. That's not setting the world on fire, but it's darn better than most single-points can provide for this brand.

Price differentials have shrunk and market pricing statistics are now public information. The decision regarding which store to buy from moves from price (I can get a great price anywhere) to other variables, like selection. Every organization needs to win online in order to have the opportunity within the store, and dealer groups are well positioned to compete on selection in the online marketplace. No dealer group has fully capitalized on the potential advantages of being a dealer group. Nonetheless, the potential exists for expanded profits as consumers expand their shopping range.

The Government Crackdown on Auto Dealer Advertising and What It Means to You

Government lawyers are out to make names for themselves at the expense of auto dealers, accept it and adjust. Nick Zulovich's article today in the Auto Remarketing newsletter, "Hudson Offers Advice as Attorney General Actions Against Dealers Heat Up," is a warning shot, but the meat of the issue lies beneath this soft tissue. Lawyers have learned to use the search tool. There are key words and phrases that trigger investigation. Just as the majority of IRS audits are triggered by computers, auto dealer advertising is quickly coming under the same automated supervision.

Any advertising agency or advertising director who tells you they have this all figured out is full of beans. The target is constantly moving. What flies under the radar one day may be shot down the next. State attorney generals don't just fight for justice, they fight for recognition. In many ways, states compete against one another to show they are doing a superior job of looking out for consumers. The bar on what is deceptive and what is not will continue to move downward in ways that are not predictable.

It's time to stop playing games with the price of the vehicle. If Dale Pollak's books Velocity and Velocity 2.0 were not enough to convince you that you need to price your vehicles according to the market and advertise them as such, the AG in your state will be happy to straighten you out. But good as they are, the answer to huge profitability cannot be found in Dale's books, it is in the profit-filled backend of velocity. Price discrimination is alive and well in vehicle service contracts, and getting retail price for high-margin accessories is as easy as falling off a log. Virtually all the legal scrutiny facing the auto industry is focused on vehicle pricing and financing, and the biggest potential for increased profit lies in everything else.

I've said it before and I'll say it again, "Price the vehicle for show, and work the backend for dough." Nearly every vehicle for sale is posted online. Of the 1.3 million used cars listed on Cars.com, 93% of them have the price clearly listed. Of the 1.4 million new cars on this site, 90% have the price listed, as of today at 11:18 AM EDT. It is hard to imagine any industry with greater price transparency across new and used products, online and off, than exists in the auto industry today. Just who in the world do you think you are fooling with 50-year-old pricing gimmicks?

In 2011, the primary reason for retailing cars is the same as it is in every other durable goods industry from washing machines to motorcycles, to get the opportunity to sell service contracts, high-margin accessories, and other backend opportunities. Yes, you can still make a profit on the sale of the vehicle, but it is a profit margin that is restricted by a free market economy with information availability to all parties that is approaching perfection. Make yourself one of the outliers who still wants to deceive consumers in this area and you have painted a bull's-eye on your back. Price for show (transparently marked to the market), and you have positioned yourself for more profit-filled backend opportunities. 

Download the related white paper for more on this subject.

Will social media bring the death of commission plans?

Compensating sales primarily through commission has always been controversial. To those who love it, this is the free-market system at work. Many who sell on commission compare it to owning their own business. Indeed many managers try to spur their commissioned teams with the notion that they are in control of their own destiny. That is what lures so many people into selling on commission, but it also may be what leads to its eventual death in automotive retail.

I've had many sales jobs that were purely commission based and also owned several businesses, the difference is essential to understanding the problem. When you own a business you control your equity, not just your income. The value of the business is partially a function of the assets minus liabilities and partially a function of the brand value. Business owners care about the value of their brand, because they own it. Commissioned sales people are free to take risks that may trash the brand, because they can move on virtually without recourse. Just as individuals on Wall Street can no longer be permitted to  risk entire companies for their own short-term gains, commissioned sales people cannot be left free to risk the reputation of the entire store in order to gain an extra $1,500 in gross profit.

The blue sky portion of a dealership's value has fantastic growth potential. The number of franchised dealers is at a historic low; the driving population is at a historic high, and the nation has an incredible amount of pent-up demand for automobiles. Any boost in the economy will bring a fantastic boost to auto sales.

Many dealers are using social media to grow the value of their store name or group name to levels never before seen. The flip side is that social media can kill in a matter of hours the store value that took generations to build. Catastrophic risk is in this area is something dealers cannot insure against and must diligently work to avoid.

Telling a commissioned sales team to "just get them in" or "just get 'em closed" can be a recipe for disaster. Commissioned sales people will do exactly what they are incentivized to do, close deals for short-term gain by any means necessary. Managing commissioned sales people is extremely hard, precisely because they feel as though they are running their own business their own way. As long as the sales come in, everyone should just shut up and cash the checks. But that is the kind of thinking that jeopardizes all that beautiful brand value. If you can keep the store or group brand strong, it will continue to generate additional sales each month for years to come. But your commissioned sales team isn't being paid on brand value, and they darn well know it.

Recent industry shifts combined with the growing importance of social media place great emphasis on retailers' reputations. Those with extremely strong management teams may be able to keep the incentivized actions of sales people within the parameters of the store reputation. Those with weak management teams must invest in training, bring on a new team, or consider a more controllable compensation model. I don't know whether compensating sales primarily by commission will ever die across the entire industry. I do know that it needs to be seriously reconsidered at thousands of stores with practices that are all but inviting a social media catastrophe. 

Does Elegance Matter?

Manufacturers are forcing dealers to spend money on upgrading their facilities, largely to create a more elegant environment rather than adding functionality. Although many of us feel these demands are excessive, there is a high correlation between the elegance of the retail environment and the price shoppers are willing to spend. More elegant jewelry stores command higher margins. More elegant casinos receive higher average bets. Some businesses have even reached the status of having their names used as synonyms for elegance: Ritz-Carlton, Nordstrom, and Tiffany.

The reason there is so much dealer resistance to these huge fixed cost investments is the increasing portion of the auto shopping process that takes place on line. It begs the question, would shoppers using an automotive shopping website or application that was extraordinary in its elegance cause more people to contact the store more ready to buy what they really want instead of just focused on price and payments? Revolutionary design can have a tremendous impact on markets, and it can impact the prices people are willing to pay, just ask Apple. But will it make a profound difference in automotive shopping? If elegance matters so much in the environment of human touchpoints, will it matter with the technological touchpoints?

The guessing stops on Thursday, September 15th, when the world's most elegant automotive shopping tool is revealed. 

The Profit Filled Back End of Velocity

This paper, reveals the real profit-making potential within the velocity pricing strategy. The paper is proudly sponsored by Continental Warranty.