DealerExec A DrivingSales Publication • 1st Quarter, 2015
A DrivingSales Quarterly Covering Dealership Brand, Capital and People.
Capitalize on the Consumer Revolution in Retail BY MIKE HUDSON • PAGE 16
Building a Dealership Culture That Thrives on Employee Satisfaction BY RON HENSON • PAGE 22
Everything We Know About Great Workplaces is Wrong BY RON FRIEDMAN • PAGE 30
Visit DrivingSales.com to view more than 21,000 verified dealer ratings of over 800 vendors in 28 categories.
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Founder’s Letter Dealership Executive,
W
elcome to the reinvented version of DrivingSales’ magazine, DealerExec! Our team put a lot of hard work into creating a publication that focuses on the needs of dealership business leaders like you. DealerExec’s content will mainly focus on the three core topics that you, as a business owner and leader, concern yourself with each and every day you walk into your store: Your Brand, Your Capital, Your People. These pillars represent what you’ve built and what you continue to oversee and develop on a daily basis. The premise for these three pillars comes from our DrivingSales Presidents Club event. In 2013 we introduced this event to the industry in New York City at the Waldorf Astoria. This event, only open to Dealer Principals and General Managers, focuses on these three topics and has been sold out each year since. This year’s Presidents Club will be held at the Grand Hyatt in NYC on April 1. Please join us as we talk about your brand, capital, and people in this exclusive “club” environment – drivingsalespresidentsclub.com. Next I’d like to introduce you to our latest news site, DrivingSales News – drivingsalesnews.com. This site, launched last August, features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team. The information is timely, relevant and purposeful. Check it out and sign up for our eNewsletters if you’d its content delivered to your in box bi-weekly. Finally, let me take a moment to introduce one of the newest members of the ever-growing DrivingSales team, Chris Reed. Chris is DrivingSales’ President, Media & CMO. Chris has been an advisor to DrivingSales since our earliest days and, in his former role as CMO of Cobalt, someone I found to be committed to supporting dealer success and industry progress– even winning our 2013 Most Valuable Insight competition. We’re honored to have him on the team. We’re honored to have him on the team. All of us at DrivingSales hope you enjoy the inaugural issue of DealerExec. What separates our publication from others is that you will not find “advertorials” or sales pitches from vendor companies. We know that you need and deserve real information to help you make difficult business decisions and we recognize that it is our responsibility to provide straightforward news and information. Drop us a line and tell us how we’re doing. Any team member listed to the right of this column would love to hear from you. Happy New Year! Sincerely,
DealerExec The Team Jared Hamilton FOUNDER
@jaredhamiltonDS
Kevin Root P R E S I D E N T, C O O
kevin.root@drivingsales.com
Chris Reed P R E S I D E N T, M E D I A & C M O
chris.reed@drivingsales.com
Larry Schlagheck VP OF MEDIA
larry@drivingsales.com @larryschlagheck
Mike Jeffs MEDIA MANAGER
mike.jefs@drivingsales.com @mikejeffs3
Steve McFarland DIRECTOR OF ADVERTISING
steve.mcfarland@drivingsales.com
Josh Phelon ADVERTISING & SPONSORSHIP SALES MANAGER
josh.phelon@drivingsales.com @joshphelon
Justin Rhoane ADVERTISING & SPONSORSHIP SALES MANAGER
justin.rhoane@drivingsales.com @JRhoane
Jared Hamilton Founder, DrivingSales, LLC
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Thanks to our Sponsors!
DealerExec ABOUT THIS PUBLICATION DealerExec is published quarterly by DrivingSales, LLC featuring executive resources for automotive retail leaders covering dealership Brands, Capital and People, and a quarterly ranking of dealership vendors as rated by dealers themselves. Within the first issue of each year, DealerExec announces the annual winners of the the Dealer Satisfaction Awards from several Vendor Rating category.
SUBSCRIPTIONS To subscribe, visit DealerExecMagazine.com. Printed in the United States of America. Copyright Š DrivingSales, LLC 2013. All rights reserved. No part of this publication may be reprinted or otherwise reproduced without publisher’s written permission. DealerExec and DrivingSales, LLC assume no responsibility for unsolicited manuscripts or photographs.
LETTERS TO THE EDITOR DealerExec and DrivingSales, LLC welcome letters to the editor. If you have questions about the publication, or would like to make a comment, or voice an opinion about the magazine, DrivingSales, LLC, or the industry in general, please feel free to write us. Please send letters to mike. jeffs@drivingsales.com. Include a t elephone number and email address. Letters may be edited for clarity or space. Because of the high volume of mail we receive, we cannot respond to all letters.
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Contents News 14 DrivingSales News
DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team.
Features 16 Auto Dealers: Capitalize on the Consumer Revolution in Retail
16
Mobile devices give auto consumers ultimate shopping power at their fingertips. How can dealers make that count? BY MIKE HUDSON
22 Building a Dealership Culture That Thrives on Employee Satisfaction
How do we begin to build the foundation that will support our culture of “Employee Happiness and Job Satisfaction?” BY RON HENSON
26 DrivingSales Executive Summit 2014 Best Idea Winner Robert Karbaum 30 Everything We Know About Great Workplaces is Wrong
22
Here are five great workplace myths we routinely get wrong. BY RON FRIEDMAN
34 NADA Retail Market Update – 2014 Recap
Chrysler, Kia, Ram, and Buick lead sales gain winners in 2014.
40 Are Salespeople Managing Software or Selling Cars?
30
Determining when full-service makes more sense than self-service. BY ALLEN LEVENSON
44 The Era of Big Money
According to data compiled by The Banks Report, there were 532 dealership buy-sells between January 2013 and December 2014 (202 in 2013, 330 in 2014). BY CLIFF BANKS
6
DEALER EXEC
On DrivingSales.com, dealers can rate their vendors. All reviews are verified to be legitimate and posted for you to learn who the best vendors are – directly from your peers.
DRIVINGSALES, LLC | 1ST QUARTER - 2015
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Over 16,000 unbiased vendor ratings submitted by verified dealers.
CATEGORIES 8 Call Management Chat CRM/Sales Department Dealership Management Systems (DMS)
9 Fixed Ops Solutions Internet Lead Management (ILM) Inventory Pricing New Car Leads
1 0 Owner Marketing Reputation Management SEM - PPC Search Engine Optimization (SEO)
1 2 Used Car Advertising Websites
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DEALER EXEC
DEALER EXEC
DRIVINGSALES, LLC | 1ST QUARTER - 2015
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Call Management Solutions that track inbound calls through designated tracking phone numbers so that you can manage your marketing spend and increase ROI. COMPANY
PRODUCT
SCORE RATING
CAR-Research XRM
Call Tracking / Ad Sourcing Solution
132.43
CallSource CallTrack
REC
90%
132.13 100%
CallRevu
CallRevu 360
70.26
94%
Car Wars
Century Interactive
34.66
100%
Call Recording
800response
17.6
100%
Chat Products These solutions allow you to meet, greet and converse with customers who visit your website, as well as set appointments, generate leads and provide better customer service. COMPANY
PRODUCT
SCORE RATING
ContactAtOnce!
Chat Connect & Mobile Text Connect
243.03
99%
ActivEngage
ActivEngage Chat
82.86
98%
CarChat24
CarChat24 - 24/7 Fully Staffed Chat
28.85
100%
Gubagoo
Gubagoo 24/7 Behavioral Live Chat
6.19
90%
0.33
100%\
Dealer e Process
CRM-Sales Department Dealer e Process Live Chat
REC.
These are Customer Relationship Management (CRM) systems that track all your walk-in, phone and Internet customers through the complete sales funnel and owner life-cycle. They allow for advanced customer segmentation and marketing and track your sales activities by employee to make your team more effective at attracting customers and managing relationships. COMPANY
PRODUCT
SCORE RATING
ELEAD1ONE
ELEAD CRM
263.76
DealerSocket
DealerSocket CRM
25.66
98%
CAR-Research XRM
CAR-Research XRM
4.06
99%
VinSolutions
VinSolutions MotoSnap CRM
2.39
85%
iMagicLab DealerCRM
REC.
100%
1.07 87%
Dealership Management Systems (DMS) Dealership Management Systems connect all your dealership departments with accounting and maintain your dealership data in one central place. These ratings are for the DMS systems themselves, NOT the solutions that plug into the DMS systems such as a Desking or CRM solution.
8
COMPANY
PRODUCT
SCORE RATING
Autosoft, Inc.
Autosoft FLEX DMS
534.23
100%
Auto/Mate Dealership Systems
AMPS
374.68
97%
Dealertrack Technologies
Dealertrack Dealer Management System
6
60%
Meadowland Systems
AutoMan
2.09
100%
CDK Global
CDK Drive
1.15
60%
1ST QUARTER - 2015 | DRIVINGSALES, LLC
REC.
DEALER EXEC
Fixed Ops Solutions Products and/or services designed specifically for Fixed Operations. COMPANY
PRODUCT
SCORE RATING
REC.
ELEAD1ONE
AutoPilot (ELEAD)
206.82
99%
DealerSocket
DealerSocket Service
5.53
100%
CIMA Systems
CIMA Car Care Service Menus
4.01
100%
CIMA Systems
CIMA CarView
1.48
100%
Adworkz
Service Scheduler
0.09
100%
Internet Lead Management (ILM) These Internet Lead Management solutions are built exclusively to handle incoming Internet leads and manage your Internet sales process. Many full-service CRM systems include Internet Lead Management features, but the ILM systems listed below are stand alone utilities built exclusively for managing Internet Leads. COMPANY
PRODUCT
SCORE RATING
ELEAD1ONE
ELEAD ILM
124.31
100%
CAR-Research XRM
Internet Lead Manager
1.79
100%
DealerSocket
DealerSocket ILM
1.02
98%
VinSolutions
VinSolutions MotoSnap ILM
0.07
50%
iMagicLab
Internet Lead Management Tool
0.02
33%
Dealer e Process
Dealer e Process Live Chat
0.33
100%\
Inventory Pricing
REC.
With market volatility and transparency increasing online, knowing how to price your inventory is a science critical to increasing your store’s profitability. These Inventory Pricing tools collect various forms of market data to help define the optimum pricing for your inventory to maximize both Gross and Turn. COMPANY
PRODUCT
SCORE RATING
REC.
vAuto
vAuto Pricing & Merchandising
672.79
98%
VinSolutions
MotoSnap Market Pricing Analysis
37.64
89%
Black Book
Used Car Guides, Internet and PDA
8.84
100%
ACE Tech
LotPro
5.76
100%
FirstLook
FirstLook -- 360º Market Pricing
3.2
67%
New Car Leads These providers collect and aggregate leads from their web properties and from partner sites, then distribute these hot leads to dealers. Currently this category is for both finance and vehicle leads. COMPANY
PRODUCT
SCORE RATING
REC.
Autobytel
Autobytel New Car Leads
529.7
93%
Dealix
Dealix New Car Leads
208.2
74%
TrueCar
TrueCar New Car Leads
18.89
44%
Cars.com NewLeadsPlus
10.84 100%
AutoTrader.com
10.04
New Car Advertising
*Category scores are computed per category and are not comparable across the board. For questions about Vendor Ratings, please email to bart.wilson@drivingsales.com
80%
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Owner Marketing These targeted solutions help you mine and segment your customer database, and then market to them successfully. These solutions can market to your customers through email/direct mail/phone and other means. COMPANY
PRODUCT
ELEAD1ONE GoldDigger J&L Marketing
bLinked
CIMA Systems
Complete Virtual BDC
SCORE RATING
REC.
483.22 100% 12.6
100%
6.6
100%
OneCommand OneCommand
5.03 94%
VinSolutions VinMarketing
0.58 83%
Reputation Management These products and services help a dealership manage its reputation. They may assist with review collection, monitoring, resolution, and promotion of online reviews. COMPANY
PRODUCT
SCORE RATING
DealerRater
DealerRater Certified Dealer Program
345.47
100%
eXtĂŠres Creative
Online Reputation Management
205.54
96%
Slipstream Auto
SlipStream Reputation Enhancement
65.99
100%
Digital Air Strike
Reputation Logix
46.88
73%
Cars.com
Cars.com Dealer Reviews
3.08
67%
Dealer e Process
Dealer e Process Live Chat
0.33
100%\
SEM - PPC
REC.
Search Engine Marketing (SEM) and Pay-Per-Click (PPC) solutions help you determine how to invest in and execute a display or paid ad campaign on the major search engines for greatest ROI. COMPANY
PRODUCT
SCORE RATING
REC.
Local Search Group
Search Engine Advertising
947.38
100%
Dealer e Process
Process Digital AMMP
859.95
100%
DealerFire
DealerFire SEM/PPC
191.81
88%
Showroom Logic
AdLogic
155.37
100%
CDK Global
Power Search, Power Display, Remarketing
103.67
83%
Search Engine Optimization (SEO) Search Engine Optimization (SEO) solutions work to optimize your websites so that they show up higher in the search engine rankings. These services generally include both on-page and off-page optimization. This category also includes Website Conversion Tools.
10
COMPANY
PRODUCT
SCORE RATING
Customer Scout, Inc.
Customer Scout SEO
927.17
100%
DealerFire
DealerFire SEO
570.96
100%
Dealer.com
Dealer.com SEO
113.34
71%
PCG Digital Marketing
Search Engine Optimization
112.78
100%
CDK Global
PowerSEO
87.24
100%
1ST QUARTER - 2015 | DRIVINGSALES, LLC
REC.
DEALER EXEC
2015
SCHEDULE ENROLL
ANNOUNCED NOW JULY 6
SEPTEMBER 28
ATD Truck Dealer Academy
Dealer Candidate Academy
SEPTEMBER 14
OCTOBER 5
General Dealership Management
Dealer Candidate Academy
OCTOBER 19
General Dealership Management
SKILLS TO BE A
LEADER KNOWLEDGE
TO DO THE JOB Complete 2015 schedule available at www.nada.org/Academy
800.557.6232 • www.nada.org/Academy
#NADAacademy
Used Car Advertising These consumer-facing websites allow you to display your inventory to in-market consumers. They make huge media buys to attract customers to your inventory, and to increase your walk-in, phone and web leads. COMPANY
PRODUCT
SCORE RATING
REC.
AutoTrader
Used Car Advertising
127.31
76%
Dealix
UsedCars.com by Dealix
32.17
100%
Cars.com
Cars.com Online Advertising
21.99
70%
TrueCar
TrueCar Used Car Leads
3.19
50%
Websites Website solution providers create full-service websites built to be the main hub of your dealership’s online presence. These sites are central to your dealership’s marketing, branding and customer service. Micro Sites and Mobile Sites are rated in their own categories. COMPANY
PRODUCT
SCORE RATING
REC.
Dealer Car Search
Responsive Websites
785.15
99%
DealerOn
DealerOn - Flex Sites
281.26
97%
Dealer e Process
Dealer e Process
87.69
100%
DealerFire
DealerFire Responsive Websites
79.29
100%
Slipstream Auto
SlipStream Websites
1.69
100%
Engage with DrivingSales Quarterly Magazine Find in-depth analysis and information covering what dealers care about most: Capital, Brand and People.
Subscribe for a free digital copy at DealerExecMagazine.com
Largest Dealer Community More than half of the nation’s dealerships share best practices, rate vendors and connect with other professionals on DrivingSales.com
Create a profile, establish connections and personalize news feeds at DrivingSales.com
Retail News Exclusive reporting on dealership tech trends and innovations in automotive retailing
Discover the latest retail news at DrivingSalesNews.com
How Do Vendor Ratings Work? The DrivingSales Vendor Ratings site is the first formal mechanism for dealers to rate and review their vendors in a comprehensive, real-time vendor directory. It empowers dealers by allowing them to learn about all the solutions available and to view actual customer feedback, both good and bad, about how each solution actually performs.
Rules •
Only dealership employees can post ratings and reviews. Reviewers are verified to ensure they are valid and eligible to leave reviews.
•
Dealership employees can only rate and review the products they have experience using. The ratings are a chance to hear from actual customers with live experience using the solutions in their stores.
•
Each reviewer must answer three questions to complete their rating: 1. How many stars does the solution deserve? 2. Would you recommend the solution to a friend? 3. Why would or wouldn’t you recommend the solution?
•
All three components of the review, along with the job title of the reviewer, are posted live to DrivingSales.com for all to reference when selecting new vendors.
Safeguards •
DrivingSales.com protects the anonymity of each dealer employee who leaves a rating and review. However, DrivingSales requires valid name and contact information for each reviewer so that each reviewer can be validated.
•
Each review is passed through a variety of technological checkpoints to ensure vendors are not gaming the system. Furthermore, DrivingSales staff calls to verify a large percentage of the reviews.
Vendor Ranking In each product category the vendor solutions are ranked in real-time as each new dealer rating is submitted. The vendor products are ranked based on a weighted Bayesian Algorithm. This is a standard mathematical calculation that looks at the number of stars the reviewer gave as well as the statistically valid sample size needed, relative to the competitive set, to create a ranking based on the statistical accuracy of the results. Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews. We encourage all dealers to rate and review their vendors by visiting DrivingSales.com/Ratings
Dealer Satisfaction Awards The DrivingSales Dealer Satisfaction Awards recognize those solutions with the highest vendor ratings. For each category within the vendor ratings there are three award winners, the “Highest Rated” vendor and two “Top Rated” vendors. These awards reflect products and providers with a proven record of success and excellence in serving their dealer clients. The Dealer Satisfaction Award trophies are presented annually. Learn more at DealerSatisfactionAwards.com
Rankings Only dealership employees are allowed to rate their vendors on DrivingSales.com and all submitted ratings are verified. The vendors are then scored and ranked using a weighted Bayesian Algorithm (shown below). Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews.
w = (m*v 2 )*r+(v 2 *m)*c
The Vendor Ratings in this issue are based on the aggregate of all dealer ratings submitted from September 1, 2013 to August 31, 2014. *CATEGORY SCORES ARE COMPUTED PER CATEGORY AND ARE NOT COMPARABLE ACROSS THE BOARD. FOR QUESTIONS ABOUT VENDOR RATINGS, PLEASE CONTACT BART.WILSON@DRIVINGSALES.COM
View detailed vendor reviews written by verified dealers at DrivingSales.com/Ratings
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DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team.
Here is a recap of the top stories from 2014 Q4 impacting your dealership. You can find all these stories and more on DrivingSalesNews.com.
Google Penalizes Unsecure Websites, Boosts Secure Sites In Search Rankings Google is now penalizing websites that do not provide secure connections to their visitors by lowering their search rankings and giving preference to those that do. According to Google, this algorithm addition is designed to motivate webmasters to decrease security risks and provide safer experiences for searchers.
FTC Ramps Up Social Media Use and Compliance The FTC has begun paying closer attention to how dealerships use social media in their marketing– including employees sharing advertisements on their own personal social media accounts. Whereas in the past, the FTC has been vague in their opinions regarding social media, that position is
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slowly becoming more apparent. The FTC’s position is that social media marketing is no different than any other traditional form of advertising and requires all of the same disclosures. In addition, any bias must be disclosed in social media posts regardless of whether it is done by the dealer itself. Dealerships can now be held liable for social media posts made by employees, agencies and vendors if bias is not transparent in the posts even if those posts are made on personal accounts.
Facebook to Begin Decreasing Organic Reach of Promotional Posts by Pages In a further blow to Facebook page organic reach, Facebook announced in November that Page owners would see “a significant decrease in distribution” for unpaid promotional advertising businesses post on their Pages. Facebook believes this will force brands and businesses to provide more engaging content to its users rather than simply using Facebook as a free platform for advertising. With organic reach already around 1-2 percent, Page owners will need to be more conscientious of the content they are posting or risk losing their audience even further.
Google Mandates Transparency for Clients of Third-Party Agencies Google announced policy changes which will now require thirdparty Google AdWords vendors to disclose management fees separate from ad spend on invoices in an effort to bring more transparency for their clients. In addition, Google began requiring third-party agencies provide customer IDs for AdWords accounts when requested.
Court Rules Yelp Can Legally Add or Remove Reviews Based on Ad Purchases The 9th Circuit Court of Appeals ruled in September that Yelp has the legal right to manipulate reviews and ratings based on a business being an advertiser. The Court concluded that Yelp never threatened businesses with harm for failure to advertise, the removal of positive reviews is within their legal right since they have no obligation to publish them and that they also have the right to post and sequence the reviews in whatever manner they choose.
Mercedes-Benz Shifts Focus to Training Mercedes-Benz announced in
DEALER EXEC
October the creation of a $30 million training program they call their “Brand Immersion Experience” in effort to increase product knowledge and customer service through extensive training at their Alabama factory. The program’s goal is to provide this training for all 22,000 franchised dealer employees along with 4,000 corporate employees over the next four years.
Video Marketers Shift from YouTube to Facebook As Preferred Content Platform In the past, marketers have used YouTube as their primary video hosting platform, Facebook’s campaign to capture more of that traffic through higher organic reach and autoplay within newsfeeds has prompted many marketers to upload video content direct to Facebook rather than simply posting a link to the content on YouTube. Facebook’s efforts to retain user traffic are providing marketers with increased organic reach on native video over links to external sites.
AutoTrader Partners with DealerRater to Integrate And Solicit Reviews Autotrader announced in December that it would begin integrating DealerRater reviews on dealer profile pages within its site as well as direct its visitors to leave reviews for dealers on their Autotrader dealer profile pages. This partnership brings
DEALER EXEC
AutoTrader into conformity with its competitors and increases the value of DealerRater’s review platform to dealers.
AutoNation Moves to Shift Sales Process Online In an effort to make the car buying process easier for consumers, AutoNation announces they will bring virtually the entire buying process online. AutoNation believes this is a natural move given the increase in consumer online purchase behavior and will provide a better overall car buying experience for consumers.
Warren Buffet Buys Van Tuyl Group, Creates Berkshire Hathaway Automotive In what many are calling the automotive industry’s largest acquisition to date, Warren Buffet purchased the Van Tuyl Group in an estimated $4 billion deal. Berkshire Hathaway Automotive enters the space as the fifth-largest automotive group in the country with Buffet saying the Van Tuyl Group can be “scaled up a lot from where it is.”
Volvo Shifts Marketing Budgets Towards Customer Retention & Experience Volvo announced in December that it would be shaking up traditional automotive marketing by eliminating price-based advertising in favor of branding messages, reducing sponsorship activities
and almost completely withdrawing from auto shows. Instead, it plans to spend that money transforming customer experience by implementing a program that will see new cars delivered personally by personal service technicians which will remain on call to the customer seven days a week for the life of ownership. Volvo believes this shift will allow them to be more competitive by providing a better customer ownership experience which will translate into increased brand loyalty rather than continuing to spend money competing for consumer attention against competitors with larger ad budgets.
Takata Airbag Recalls Affect Millions of Vehicles Across Dozens of Brands In a still developing story, Japanese supplier Takata is under intense scrutiny for supplying airbags which contain defective devices, which may cause vehicle occupants to be injured by shooting metal fragments in the event of an airbag deployment. The New York Times reported in November Takata knew about the issues since as early as 2004. The NHTSA has called for a nationwide recall of vehicles equipped with Takata airbags while several U.S. Senators are urging a criminal investigation be opened by the Department of Justice. Congressional hearings involving Takata and automakers are prompting more automakers to join the recall and/or expand their existing recall actions.
DRIVINGSALES, LLC | 1ST QUARTER - 2015
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Cover Story
Auto Dealers: Capitalize on the
Consumer Revolution in Retail
Mobile devices give auto consumers ultimate shopping power at their fingertips. How can dealers make that count?
BY MIKE HUDSON
16
U
S. consumers’ dislike of the car shopping experience is the stuff of legend, and any survey on the topic inevitably reveals a level of distaste that borders on the comical. A sign of just how bad things have gotten: One in three car buyers surveyed in May 2014 by Edmunds.com preferred preparing their taxes, going to the DMV or sitting in the middle seat of a commercial flight than buying a car through the typical process. The study also suggested nine out of 10 buyers wanted the process to be easier, and would prefer to purchase a vehicle with a set price agreed upon before enduring a dealership haggling session. Auto retailing today is structured to serve the industry rather than the consumer. Yet, disruptive business forces, technological changes in the product and a newly smartphone-empowered consumer have already upended the dealership model. In the face of flat profits, a flawed retail model, a lack of ecommerce solutions and a glaring disconnect with consumer expectations – especially those of millennials – the auto industry should be ripe for disruption. With new
1ST QUARTER - 2015 | DRIVINGSALES, LLC
technological tools in tow, consumers are taking center stage, exerting more control over the automotive transaction, either away from the dealership or on their own terms on the lot. Access to product research, test drives, negotiation, financing and service will become more frictionless and mobile, helping shrink the window from intent to transaction. How can auto dealers leverage new consumer communications channels – chiefly mobile devices – to influence sales? Can digital media and marketing help dealers achieve the noble goals they often profess – earning trust, delighting customers and winning their loyalty for repeat business – but on which they regularly fail to deliver? Only time will tell. Meanwhile, I’ve detailed two scenarios below. One, a picture of the alreadyevolved mobile consumer and how their demands are shaping a new retail experience, which directly affects how they want to shop for cars. And two, a world in the not-so-distant future where dealers take control of the purchase funnel by leveraging one-to-one communications with their customers.
DEALER EXEC
“Access to product research, test drives, negotiation, financing and service will become more frictionless and mobile, helping shrink the window from intent to transaction.�
17
“Just last year, U.S. adults spent an equal amount of
How Changing Consumer Behaviors Affect Auto Dealers
S
urprising to no one, mobile devices are becoming the technology of choice among American consumers. Yet how quickly that shift has occurred remains striking. According to
time each day
Average Time Spent Per Day With Major Media By U.S. Adults, 2014
on desktops and laptops as they did
two hours, 19 minutes. In the span of just one year, mobile devices stole 32 minutes more each day, while time on PCs fell. That TV viewing – the most popular medium – has remained flat speaks to the continued power of the big screen; however, more and more studies show that people like to shop and surf on mobile devices with the TV on as background noise.
Figure 1.
Hours : Minutes
on mobile devices – 2 hours, 19 minutes.”
Note: Ages 18+; time spent with each medium includes all time spent with that medium, regardless of multitasking; for example, one hour of multitasking on desktop/laptop while watching TV is counted as one hour for TV and one hour for desktop/laptop; *includes magazines and newspapers; offline reading only; **includes all internet activities on desktop and laptop computers. Source: eMarketer, September 2014 | 179598 | www.eMarketer.com eMarketer, U.S. adults on average spent nearly three hours each day with tablets and smartphones in 2014, trailing only time spent watching television (see figure 1.). Just last year, U.S. adults spent an equal amount of time each day on desktops and laptops as they did on mobile devices –
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To cope with this change in consumer behavior, many parties within the automotive space are looking outside the industry for inspiration, hoping to circumvent legacy issues with fresh thinking. In general, consumers are clearly in favor of spending more
DEALER EXEC
through ecommerce, and as a result, the way consumers shop and buy other products is directly affecting the way they would like to purchase vehicles. Overall, eMarketer forecasts online retail sales in the U.S. to reach nearly $500 billion by 2018, up from just over $300 billion in 2014. (see figure 2.) Just a fraction of that spending currently goes toward the auto industry, chiefly
with rapid advances in financial services offerings and used-vehicle valuations, an ecommerce solution is not so farfetched, provided the industry wants it. At the forefront of disruption is Tesla, which has challenged the franchise dealership model in court. Victories in Massachusetts and Nevada open the door to direct sales to consumers. In other states, like Michigan, the emerging “Tesla
fraction of online spending currently goes toward the auto industry,
U.S. Retail eCommerce Sales, 2013-2018 Figure 2.
“Just a
Billions, % Change and % of Total Retail Sales
chiefly due to the fact that new car sales almost never occur online.”
Note: Includes products or services ordered using the internet, regardless of the method of payment or fulfillment; excludes travel and event tickets. Source: eMarketer, September 2014 | 178638 | www.eMarketer.com
due to the fact that new car sales almost never occur online. Not long ago, industry officials considered direct sales, especially online, a flight of fancy. They cited the complexity of the new vehicle purchase process, involving trade-ins, financing and other hurdles. But as it stands in 2014,
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model” has been explicitly banned by legislation. But industry players expect the issue to evolve in coming years depending on consumer response. Innovations extend to mcommerce as well. Beepi, a mobile-app startup firm, offers a business model based on selling
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“Retailers have made online shopping easy for their customers, yet more than 93 percent of retail sales still occur in stores, according to eMarketer’s estimates.”
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used cars directly via smartphones. The company recently took in $60 million in investment capital to pursue the concept. Mobile remains an area of distinct opportunity for dealer innovation, especially as consumers have yet to fully integrate smartphones and tablets into the car-buying process. Any player in the automotive space that can reduce friction in the buying process – think what companies such as Uber and Lyft have done with on-demand transportation – stands to make significant headway with reluctant shoppers. For now, however, most auto research time still occurs on PCs. Research from xAd and Telmetrics found that techsavvy auto consumers – specifically those that own mobile devices – spend nearly 75 percent of their time researching car purchases on a desktop. The survey’s results show a disconnect between consumer demand for information and what the auto industry is supplying, and nearly one in five polled for the same study use their mobile devices at the dealership for auto information. In fact, auto dealerships over-indexed every other vertical included in the survey as a place where shoppers would want to use their devices for purchase information in-store. The culprit for this disconnect may be content. Few dealer sites provide the information the customer is looking for on-site – pricing, inventory data, special offers. Worse still, many dealers don’t have a mobile-optimized site at all. As a result, consumers are finding their own way, often one that doesn’t involve the dealership. In-store customers are more apt to use an OEM or a third-party site. Data from a November 2013 Placed and Cars.com survey shows only 25 percent of car shoppers used dealership apps or websites, compared with 56 percent who used third-party apps or sites and 28 percent who went to OEM apps or sites.
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How Dealers Can Take the Lead
S
ince the dawn of the Internet, auto shoppers have wielded pricing and product information to match wits with dealers. As a result, automotive retailing has devolved into bare-knuckled digital tactics designed to do little more than win a shopper’s attention at the moment just before purchase. An inconsistent purchase path experience is a byproduct of these shifts, with the consumer oscillating between glossy Tier 1 brand-level national content aimed at generating interest and gritty Tier 3 local dealership efforts designed to spur action. Whereas these are normal components of any retail marketing effort, the automotive industry is distinguished by the lack of coordination between the two tiers. The goal of the Tier 3 dealership site is to garner as many leads as possible, or, at the very least, engagements that convince shoppers to submit contact information to the dealer. This generally results in a jarring experience for the auto buyer, involving a flood of phone calls, emails and aggressive sales tactics. The modern auto shopper has responded by going on the defensive, putting the dealership visit off as long as possible and arriving armed with aggressive pricing expectations. For now, the system has settled into an unhappy détente, with dealers seeing margins on sales shrink, manufacturers struggling to institute modern digital initiatives and customers roundly abhorring the experience. In today’s automotive retail ecosystem, dealers are the only player with which car buyers must engage to complete a purchase, and this “captive audience” dynamic has yielded as much pain as satisfaction for dealers and shoppers alike in what has become a competition between consumer and auto seller.
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MIKE HUDSON Mike Hudson has covered the automotive industry for nearly 15 years, starting as a reporter at The Detroit News, then as an editor at Edmunds. com followed by roles with various OEMs in public relations, social media and digital marketing. As eMarketer’s lead auto expert, Mike forecasts growth trends for spending, sales and technological changes in the industry.
Luckily for dealers, the source of this pain point is also a knock of opportunity: Precisely because dealerships are the only places for consumers to have access to the product inventory itself, this gives dealers a highly compelling advantage. No matter where innovation in the industry originates, the power of personal services is expected to grow in the mobile era as consumers are able to investigate purchases from anywhere. If dealers can decrease consumer apprehension about visiting the lot and friction once they arrive, Tier 3 marketing could become a transformative force in new-vehicle retailing. Retailers have made online shopping
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easy for their customers, yet more than 93 percent of retail sales still occur in stores, according to eMarketer’s estimates. Even when retail ecommerce in the U.S. reaches nearly half a trillion dollars in 2018, that figure will still account for fewer than 9 percent of all retail sales. In other words, retailers have doubled down on digital and mobile marketing, embracing their consumers’ behaviors, and in-store sales have not immediately eroded. A digitalfriendly auto buying process will certainly not destroy the dealership model, and mobile devices give dealers the power to improve new vehicle sales through a direct connection with their customers – if they’re willing to seize that power.
ABOUT EMARKETER eMarketer is the authority on digital marketing, media and commerce, offering insights essential to navigating the changing, competitive and complex digital environment. By weighing and analyzing information from different sources, eMarketer provides businesspeople, marketers and advertisers with the most complete view of digital marketing available. www.emarketer.com
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People
Building a
Dealership Culture That Thrives on
Employee Satisfaction
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he process of building a culture within any business is an arduous task that requires consistency, resolve, endurance and persistence. One of the major challenges when formulating your game plan is determining how to mold your business in a way that not only attracts a wide swath of customers, but you also want to foster an environment that attracts the top talent available to staff each and every department in your dealership. Easy, right? I believe a happy & healthy employee environment is very transparent to customers who visit your dealership and that should be the starting point to your task. Customers will very quickly determine whether or not your staff enjoys their jobs based on their conversations and interactions as well as the body language that exists in your store. Remember, some of the most powerful communication is non-verbal. So, how do we begin to build the foundation that will support our culture of “Employee Happiness and Job Satisfaction?”
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Create a vision statement
for your team that communicates the overall direction the business wants to move toward. This is different than a mission statement that typically is a wordy explanation of a business utopia that is almost impossible to achieve and becomes the running joke amongst the staff. A vision statement should come from the leader of the dealership (Dealer Principal or General Manager) and should explain the desired destination of the dealership in the future. Employees love being a part of a team that is striving to make a difference and that is working toward a common goal. It enables them to feel like they are pulling their share of the load and that everyone is pulling in the same direction. Think of this as pouring the concrete for the foundation of the culture you want to foster.
How do we begin to build the foundation that will support our culture of “Employee Happiness and Job Satisfaction?” BY RON HENSON
Establish hiring practices that
attract candidates with positive attitudes. Let’s face it, dealerships don’t have the shiniest of reputations when it comes to providing a “Positive Attitude Work Environment.” Management sets the tone
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Create a customer focused dealership environment When a leader communicates there is absolutely nothing more important to the business than it’s customers, the members of that team will adopt the same philosophy. This certainly won’t happen overnight, but it will happen. The most effective way for a leader to communicate this culture is to live it. Your employees are watching every move you make when you are within eyeshot of them and they will definitely “follow the leader.” This is the secret sauce to blending a culture of employee satisfaction with an environment of customer satisfaction. Your customers will absolutely notice how your employees interact with each other and with them. One of the best compliments I ever received was when a customer said, “This service advisor helped take care of my problem as if he owned the dealership.” Grand slam! And the reason that service advisor was able to resolve the problem and win a customer for life was because he had seen his leader do the same thing. It works!
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for the attitude in your store, and in many will assist in making them feel like they cases your managers are the ones making are an integral part of a bigger cause. the hiring decisions. Build a script for the When that happens, magic happens! interview process in your dealership and gear it toward discovering the acumen Build a team that works hard that the candidates possess in regards together and plays hard together. I have to attitude. Once you build the interview always felt the team that plays together, scripts, role play them in management stays together. Hard work in a business meetings...often! We spend a lot of time environment is always expected and even role playing with our sales consultants, our demanded. The key to achieving this high service advisors and our F&I personnel, level of productivity is to create a culture but we hardly ever implement the same of constant stimulus change to keep people practice with our management team. engaged and alert. It’s not uncommon Taking the initiative for forward thinking to do so will assist in companies to have ping building the culture that pong tables or foosball “When team you’re looking for. When tables to help their interviewing candidates employees get up on members look for an upbeat occasion and get the personality and a friendly blood flowing, which genuinely like smile. Ask questions that fosters creativity. A help discover how the visit to the DrivingSales each other they individual perceives their corporate office will value to a team not only reveal we have both. tend to work in their specific role, but When team members in the area of attitude genuinely like each other harder for one projection. We all know they tend to work harder another and to that one bad apple can for one another and to ruin the whole barrel, assist in goal completion. assist in goal but one good apple Granted, you can’t force can raise the level of people to get along completion.” everyone around them. or be friends outside Also, if you already have of the workplace, employees on staff with but you can provide negative attitudes, pull them aside and opportunities for them to get to know initiate a course correction. Make it clear each other as people, as individuals, you are establishing a positive work culture and as human beings, which will help and that negativity is no longer allowed. them to develop those relationships.
Empower your employees
to be part of the day-to-day decisions in the business. Employees often feel far removed from the things that are happening within the company that directly impact their specific department. Opening up the discussions and soliciting input from a wide cross-section of employees
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Celebrate individual and group
successes. Often leaders focus on finding people doing things wrong rather than looking for people doing things right and highlighting that behavior. Study after study has shown employees crave recognition as much as, if not more than money. A team that feels appreciated and receives public
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recognition from their leaders is a team that thrives in their work. I also caution the opposite is also true. Nothing demoralizes employees more than not feeling like the management team has any regard at all for the work they are doing. I have seen many businesses default to this type of culture because they haven’t paid attention and they have a whole team of employees simply going through the motions and counting the minutes until the workday ends. This culture also puts valuable employees in jeopardy when an offer comes along from someone who will appreciate and recognize them.
take place in a dealership very often, but if you make a conscience decision to make it happen in your dealership, the benefits will come to light quickly and tangibly. Try it.
S
ometimes a culture emerges in a business organically while nobody is paying attention. More often than not, it does not completely align with an ideal culture that satisfies both employees and customers alike. Steering your business toward the culture you want is certainly something “Imagine if your that can be done, but Communicate it takes rolling up your team had multiple often with your entire sleeves and getting team as well as with into the trenches. It experiences the individual members takes persistence and within the team. Nothing understanding, and of being instills more fear and through time, trial and anxiety in a person than error, you can emerge congratulated hearing the phrase, “The with the desired boss wants to see you.” result. There will on what a Why is that? Generally it certainly be challenges valuable member is because most people along the way and only get called in to see you will certainly of the team the boss when they are have to “weed the doing something wrong garden” when it they truly are.” or underperforming and comes to employees they immediately flash that simply can’t back to bad memories eliminate negativity of the last time they were sitting in front from their lives. As we all know, misery of the desk getting a lashing. Now imagine loves company so negative people love if your team had multiple experiences of to infect everyone around them with getting called in to see the boss and during the same outlook. Some of them might that meeting they were praised for a job even be managers. Take a step back and well done and being congratulated on what remember what it was like when you a valuable member of the team they truly began your career and were working hard are. Creating this experience also gives you to make your mark. Think about what an opportunity to suggest course corrections would have represented a perfect culture to an employee that is much more likely for you to work in and grow from and then to be receptive to doing anything they go to work to create that in your business. can to be able to repeat this experience. Your employees will respond as will your Unfortunately, this experience doesn’t customers and your bottom line.
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RON HENSON, DRIVINGSALES Ron Henson is the Director of Dealer Services for DrivingSales and DrivingSales University. Prior to joining the DrivingSales team, he spent over 20 years in the retail side of the industry, most recently as the General Manager of a very successful Honda dealership. Ron is an accomplished dealership operations expert and trainer and has a passion for the car business that he willingly shares by speaking at many industry events, conferences, and 20 groups in the United States and Canada. Ron is an avid sports enthusiast and spends much of his free time watching his kids play football and soccer. He lives in Bountiful, Utah with his wife of 23 years and three children.
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DrivingSales Annual
BEST IDEA CONTEST
DrivingSales Executive Summit 2014 Best Idea Winner:
Robert Karbaum
What is the DSES Best Idea Contest? The DrivingSales Best Idea Contest is designed to uncover The Most Innovative Dealership Strategy of the Year. The session is structured similarly to a highpowered 20 Group idea session, with dealership executives presenting an innovative best practice/strategy that is delivering significant results for their store at DSES. Automotive dealers are invited onstage to present their strategy and compete head-to-head with other dealers. A panel of dealer judges reviews each strategy with each competitor, then determines a winner. Cash and prizes totaling over $10,000 are awarded to the finalists and winners of this event!
YouTube Postal Service – Why it Matters to Your Business ROBERT KARBAUM, E-Commerce Manager, Weins Canada Inc. / Don Valley North Toyota, was the 2014 winner. Here’s a summary of his idea…
C
ontacting customers today is more difficult than ever. You are vying for your customer’s attention against the barrage of content hitting them from all corners of the globe. It’s not just setting yourself apart from your competitor down the road, you are competing against their
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day-to-day activity: Facebook messages, tweets, news alerts, stock updates, calls from parents, SMS messages from children, emails from work, videos from YouTube, and a squirrel running across the road.1 The average consumer is bombarded with content relentlessly, and it’s only getting worse. In 2015, it is estimated the average American will be exposed to thousands of advertising messages while consuming 15.5 hours of media per day.2 If getting a customer’s attention wasn’t hard enough, there are also technical
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“By sharing the videos directly from our dealership’s YouTube page, we are able to laser guide the message directly to the customer.”
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challenges to deal with. Over 20 percent of marketing emails never make it past the spam filter, click-to-open rate is down 61 percent since 2008 to a mere 13 percent in 2014, 33 percent of emails have images blocked and Gmail now puts your marketing emails in the “Promotions” tab with the other advertisers.3 That’s if you do everything right, any design mistakes will dampen your marketing results further. So what’s a dealer to do? For starters, you need to realize how complex the digital advertising world is, it is miles away from the days of your newspaper rep putting together a “Sale-A-Thon” advertisement. Everything you do has to be creative, captivating and targeted if it has a hope of reaching the customer and getting their attention. This isn’t just for sale promotions, simply responding to a lead requires the same level of personalized attention. If this all sounds overwhelming and you do not have someone in your organization that can
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handle this task, you are long overdue in finding someone. Having a digital marketing team is not optional anymore … it’s a necessity. When we don’t have a dedicated digital marketing team, our competitors such as Uber, CarMax, and Carvana gain more and more of our marketshare. My winning Best Idea was developed to solve the problem of how to deliver engaging content to customers that is both timely and impactful. What I developed, was the YouTube Postal Service; a creative way of ensuring the deliverability of messages and effectively grabbing the attention of customers. Two specific problems that required a singular solution: 1) how to cut through the email clutter and bypass spam filters, and 2) how to best get the attention of the customer. It is estimated that in 2015, the average user will send/receive 125 emails per day, and even without worrying about spam filters it is difficult to stand out amongst the competition.4 Creative subject headlines are a valued asset, but often not enough to cut through the clutter. I looked to see what worked best at solving these two problems already, and that search brought me to Google. Anything sent from Google’s servers has a 100 percent deliverability rate and avoids all spam filters. Like a phone call from the President, no one in their right mind would attempt to block it. Conveniently, if you share something from one of Google’s services like Google+ or YouTube it delivers it to the “Social” tab where messages from friends and family arrive as opposed to the advertiser’s bucket, “Promotions.” Once I had the delivery method, I needed to come up with a way of delivering fantastic content in a timely manner. I knew video was the answer for many reasons, and not just because YouTube is the second largest search engine in the world.5 Video marketing is soaring and for good reason, it simply works better at engaging and converting customers.
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Driving “Video promotion is 600% more effective than print and direct mail combined. They also found that, before reading any text, 60% of site visitors will watch a video if available.” 6 The problem with video is time, the biggest enemy of any dealership. If you’ve never done video production before, I can understand why it seems easy. After all, we capture videos on our phones all the time, right? I’m here to tell you that it isn’t easy, and it takes a lot more time than you would expect. The reality is, when creating video to send out on behalf of a dealership everything gets harder and more time-consuming. Making decent video is a time/quality proposition. The higher quality, the more time and vice versa. I wanted to find a happy medium. To create an experience that looked and felt like we recorded a video for each individual customer request, without the time associated in doing so. To accomplish this, I used the “pre-personalized” video approach. Instead of recording videos live, we pre-recorded videos based on the lead request type, the time of day and whether or not there was a phone
number. Once recorded, these were all stored as unlisted videos on YouTube and within moments of receiving a lead we could send out a pre-personalized video tailored to that customer’s specific needs. By sharing the videos directly from our dealership’s YouTube page, we are able to laser guide the message directly to the customer. No need to worry about spam filters or other competitors. It’s like having a backstage pass to your customer’s email inbox. Furthermore, the messages they receive are highly engaging and we include the answers to the customer’s questions in addition to a vehicle quote in the written component of the shared message. The end result is an overall better customer experience to start off their car buying journey. Understandably, this idea is hard to visualize just by reading about it, so I created a web page that showcased exactly what it is, how it works and how you can implement it in your store. To view and learn more about implementing the 2014 DSES winning Best Idea, The YouTube Postal Service, please visit youtubepostalservice. com or hit me up on Twitter@Karbaum.
FOOTNOTES 1. Potratz, P. (2012, November 13). Don’t distract your visitors with squirrels. Retrieved from https://twitter.com/POTRATZ/ status/268450676554739713 2. Zverina, J. (2013, November 6). U.S. Media Consumption to Rise to 15.5 Hours a Day – Per Person – by 2015. Retrieved from http://ucsdnews.ucsd.edu/pressrelease/u.s._media_consumption_to_rise_to_15.5_hours_a_day_per_person_by_2015
Donovan, B. (2014, July 14). Top 30 Email Marketing Statistics for 2014. Retrieved from http://compu-mail.com/ blog/2014/07/14/top-30-email-marketing-statistics-2014/#EmailStatCenter
3. Jennings, J. (2014, August 4). Email Benchmarks: Highest Open Rate in Years – Again! But All Is Not Rosy... Retrieved from http://www.clickz.com/clickz/column/2357616/email-benchmarks-highest-open-rate-in-years-again-but-all-is-not-rosy
Beechler, D. (2013, December 13). Mobile Email and Market Share Trends and Stats for 2014. Retrieved from http://www. exacttarget.com/blog/mobile-email-and-market-share-trends-and-stats-for-2014/
Pinola, M. (2013, June 7). Everything You Need to Know About Gmail’s New, Super-Confusing Layout. Retrieved from http:// lifehacker.com/everything-you-need-to-know-about-gmails-new-super-co-511765933
4. Gehman, R. (2014, August 19). The Rising Importance of Video in Economic Development. Retrieved from http://www. aboutdci.com/2014/08/the-rising-importance-of-video-in-economic-development-why-moving-images-should-be-in-yournext-marketing-strategy/ 5. Just The Stats: The Science of Video Engagement. (2014, May 6). Retrieved from http://www.singlegrain.com/blog/just-statsscience-video-engagement/ 6. Change the privacy settings for your video. (2014). Retrieved from https://support.google.com/youtube/ answer/157177?source=gsearch
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BEST
ROBERT KARBAUM Robert Karbaum arguably has the best name in the automotive industry. His combined experience over the past decade in E-Commerce and the automotive industry has allowed him to master the art of “AutoSpeak”; the ancient language that bridges the gap between internet geeks, the showroom floor and everything in-between. Robert manages the E-Commerce operations at Weins Canada Inc. (formerly Don Valley North Automotive Group); a prestigious automotive group in Canada since 1973 which includes the #1 volume Toyota and Lexus dealerships in the country. In 2013 & 2014 he won the Best Idea competition at the DrivingSales Executive Summit. Catch him on Twitter: @Karbaum where he commonly tweets the latest automotive news and pictures of his dog.
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People
Everything We Know About Great Workplaces is Wrong Instead of espousing positivity at all costs, leaders are better off recognizing that top performance requires a healthy balance of positive and negative emotions.
BY RON FRIEDMAN
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S
uppose that later this evening, after you have stepped away from your keyboard, put on your jacket, and traveled home for supper, your organizations underwent a magical transformation, reshaping itself into the world’s best workplace. How would you know? What would be different the next time you entered the building? When we think about extraordinary workplaces, we tend to think of the billion dollar companies at the top of Fortune magazine’s annual list. We picture a sprawling campus, rich with generous amenities; a utopian destination where success is constant, collaborations are seamless, and employee happiness abounds. But as it turns out, many of the assumptions these images promote mislead us about what it means to create an outstanding workplace. In recent years, scientists in a variety of fields have begun investigating the conditions that allow people to work more successfully. What they have discovered is that in an astonishing number of cases, not only are the factors that contribute to creating a great workplace not obvious— they are surprisingly counterintuitive. Here are five great workplace myths we routinely get wrong.
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M Y T H #1
Everyone Is Incessantly Happy
Research suggests that when people are in a good mood, they are friendlier, more helpful, and more creative. It’s therefore become fashionable at many companies to promote happiness at work. But happiness also has a surprising dark side.1 When we’re euphoric, we tend to be less careful, more gullible, and more tolerant of risks. Not only is workplace happiness occasionally counterproductive, there is also value to so-called “negative” emotions, like anger, embarrassment, and shame. Studies indicate that these emotions can foster greater engagement by directing employees’ attention to serious issues and prompting them to make corrections that eventually lead to success.2 Instead of espousing positivity at all costs, leaders are better off recognizing that top performance requires a healthy balance of positive and negative emotions. Pressuring employees to suppress negative emotions is a recipe for alienation, not engagement.
M Y T H #2
Disagreements Are Rare
Workplace disagreements, many of us implicitly believe, are undesirable. They reflect tension in a relationship, distract team members from doing their jobs,
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“What employees need are experiences that fulfill their basic, human needs. We perform at our best when we feel competent, autonomous, and connected to others.”
and therefore damage productivity. But research reveals just the opposite: in many cases, disagreements fuel better performance.3 Here’s why. Most workplace disagreements fall into one of two categories: relationship conflicts, which involve personality clashes or differences in values, and task conflicts, which center on how work is performed. Studies indicate that while relationship conflicts are indeed detrimental, task conflicts produce better decisions and stronger financial outcomes. Healthy debate encourages group members to think more deeply, scrutinize alternatives, and avoid premature consensus. While many of us view conflict as unpleasant, the experience of open deliberation can actually energizes employees by providing them with better strategies for doing their job.4 Workplaces that avoid disagreements in an effort to maintain group harmony are doing themselves a disservice. Far better to create an environment in which thoughtful debate is encouraged.
on each team’s performance during the past year. One statistic immediately jumps out: In the average month, Team A reports five errors, Team B reports 10. On the surface, Team A appears better. After all, they commit half the number of mistakes. But is that the best metric of a team’s success? Before you decide, consider the results of a Harvard University study on the performance of nurses.5 Nursing staffs with the best colleague relationships reported significantly more drug treatment errors, but not because they were worse at their job. They were simply more comfortable admitting mistakes when they occurred. For employees to willingly acknowledge errors, they need an environment in which it feels safe to have honest dialogue. Instead of treating mistakes as a negative consequence to be avoided at all costs (thereby making employees reluctant to acknowledge them), organizations are better off making improvement rather than perfecting a primary objective.
M Y T H #3
They Hire for Cultural Fit
Mistakes Are Few
Suppose you’ve just been hired to oversee two teams. You get a report
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M Y T H #4
The last few years have witnessed an intriguing new trend in hiring: Organizations no longer select job candidates solely
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on the basis of their skills or experience. They hire those whose personality and values are consistent with their company culture. Among the more vocal proponents of this approach is Zappos, the online shoe distributor.6 The idea holds intuitive appeal: When employees share similar attitudes, they’re more likely to get along, and more likely they are to produce. Right? Not necessarily. There’s a point at which too much similarity can stifle performance. For one, similarity fosters complacency. We get stuck doing things the way we’ve always done them because no one is challenging us to think differently. Similarity also breeds overconfidence. We overestimate the accuracy of our opinions and invest less effort in our decisions, making errors more common. In a 2009 study, teams of three were asked to solve a problem with the help of a new colleague who was either similar or dissimilar to the existing group.7 While homogenous teams felt more confident in their decisions, it was the diverse teams that performed best. The newcomers pushed veterans to reexamine their assumptions and process data more carefully – the very thing they neglected to do when everyone in their group was similar. Finding the right degree of cultural fit in a new hire is tricky. When the work is simple and creative thinking is rarely required, a homogenous workforce has its advantages. But the same can’t be said for organizations looking to be on the forefront of innovation. Here, exposing people to different viewpoints can generate more value than ensuring that they gel.
M Y T H #5
They Have a Ping-Pong Table, Swimming Pool, or Volleyball Court
On every list of great companies to work for, the top organizations offer lavish amenities. Twitter, for example, has a rock-climbing wall. Zynga lines its hallway with classic arcade games. Google provides a bowling alley, roller-hockey rink, and volleyball courts, complete with actual sand. Given the frequency with which resort-like workplaces are recognized, it’s become easy to assume that to build a great workplace, you need to turn your office into an amusement park. Not true. To thrive at work, employees don’t require luxuries. What they need are experiences that fulfill their basic, human needs. As decades of academic research have demonstrated, we perform at our best when we feel competent, autonomous, and connected to others. What differentiates great workplaces is not the number of extravagant perks. It’s the extent to which they satisfy their employees’ emotional needs and develop working conditions that help people produce their best work. How do you build an extraordinary workplace? The answer is no longer a mystery. For the first time in history, we have thousands of scientific studies providing direction, telling us exactly what works, and exposing what doesn’t. For too long, we’ve relied on assumptions when it comes to improving our workplaces. Isn’t it time we looked at the data?
FOOTNOTES 1. http://pps.sagepub.com/content/6/3/222.abstract 2. http://www.ncbi.nlm.nih.gov/pubmed/21766997 3. http://www.ncbi.nlm.nih.gov/pubmed/21842974 4. http://psycnet.apa.org/journals/apl/99/3/451
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5. http://jab.sagepub.com/content/32/1/5. short?rss=1&ssource=mfc 6. http://psp.sagepub.com/content/35/3/336.abstract 7. http://www.selfdeterminationtheory.org/SDT/ documents/2000_DeciRyan_PIWhatWhy.pdf
RON FRIEDMAN Ron Friedman, Ph.D. is an award-winning psychologist and founder of ignite80, a consulting firm that helps smart leaders build extraordinary workplaces. An expert on human motivation, Friedman has served on the faculty of the University of Rochester, Nazareth College, and Hobart and William Smith Colleges. Popular accounts of his research have appeared on NPR and in major newspapers, including The New York Times, Washington Post, Boston Globe, Vancouver Post, the Globe and Mail, The Guardian, as well as magazines such as Men’s Health, Shape, and Allure. He contributes to the blogs of Harvard Business Review, Fast Company, Forbes, and Psychology Today. To learn more about his work, visit ignite80.com and connect with him on Twitter @RonFriedman.
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Market Data
NADA Retail Market Update – 2014 Recap
Chrysler, Kia, Ram, and Buick lead sales gain winners in 2014.
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New Vehicle Deliveries Climb by 11 Percent, SAAR Comes in at 16.8 Million Units
T
he industry enjoyed a strong finish to 2014 with deliveries in December up almost 11 percent, which extended the streak of year-over-year sales increases to 11 months. Yearly volume, at 16.44 million units, came in 5.8 percent higher than 2013’s 15.53 million units and was the highest annual total since 2006 when the industry hit 16.5 million sales. Although December’s seasonally-adjusted annual rate of 16.8 million units was 300,000 units below November’s, it marked a 10-year high for the final month of the year.
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Domestics Perform Well Behind Fiat Chrysler Automobiles and General Motors Growth U.S. automakers outperformed imports for the second straight month after improving sales by 13 percent in spite of slow growth once again from Ford Motor Company. Domestics finished the year with deliveries up 6 percent, slightly above the industry’s pace, however, the U.S. Big Three’s performance varied considerably. Like November, Fiat Chrysler posted a 20 percent sales gain year-over-year as its only brand to see sales decline was Dodge. Jeep growth slowed a tad with deliveries up only 19 percent, while Ram led all brands with sales up 34 percent. Leading all domestics, Fiat Chrysler deliveries grew by 16 percent in 2014 and more success is expected to come in 2015 with the revival of the Alfa Romeo brand in the U.S. market. General Motors came in just behind Fiat Chrysler as its sales were up over 19 percent in December, with Chevrolet, Buick and GMC all realizing gains of over 20 percent. The majority of those three brands’ models exhibited strong sales improvements, but the most significant movers were Chevrolet’s Silverado and Colorado pickups, which achieved 45 percent sales growth combined. For the year, General Motors increased
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deliveries by a respectable 5.3 percent. Ford Motor Company managed to post a scant 1.1 percent sales increase in December after struggling for much of the year, with Ford deliveries up only 0.3 percent. Sales of many Ford models were down, including the F-Series; however, Lincoln grew sales by over 21 percent as the new MKC gains traction in the marketplace. Unlike its domestic counterparts, Ford Motor Company was unable to improve its total deliveries for the year, which were down a disappointing 0.7 percent.
Led by Asian Brands, Imports Post Solid Growth
Deliveries of import makes rose by 8.9 percent year-over-year, with Asian automakers achieving a 9.8 percent sales improvement versus 5.6 percent for European brands. The 5.8 percent yearly sales rate for imports was nearly identical to the industry’s pace and trailed domestics by only the slightest of margins. Japanese automakers were up a healthy 9 percent in December and were led by Subaru, which repeated its performance from November with sales up 24 percent once again. With regards to yearly performance, the biggest mover in 2014 was Mitsubishi, with deliveries up 25 percent, while Subaru followed closely behind with 21 percent growth. The nation with the fastest auto sales growth was South Korea, which was up 14 percent year-over-year. Kia led the industry with its 36 percent sales improvement for the month as all of its models (except the Rio and Cadenza) increased deliveries. After seeing mixed results throughout the year, Toyota Motor Sales ended 2014 on a high note by growing sales by nearly 13 percent for the month. The Corolla, 4Runner and Highlander helped push the brand to a 13 percent sales gain while Lexus deliveries were up 15 percent thanks to the addition of its RC and NX models.
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Consequently, the company finished the year with sales up a respectable 6.2 percent. Although deliveries were up 6.9 percent in December, the result was a bit underwhelming by Nissan North America’s standards after the company succeeded in
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year, having sold 32 fewer vehicles versus last December, while Acura was able to deliver 13 percent more vehicles due to improved sales from the RDX and new TLX. German makes improved sales by a collective 5.9 percent as Audi stayed atop the pack with 13 percent growth, resulting from gains achieved by its A3 model. The X5 and 4-Series helped BMW sell over 11 percent more vehicles this December while Mercedes-Benz can thank its new GLA for the additional sales needed to realize 4.1 percent growth. Volkswagen claimed a minor 0.1 percent sales increase, which was made possible only because of relatively high demand for its new Golf and GTI models. Overall, German brands saw deliveries improve by 2.3 percent in 2014, but that figure would be much higher if not for the 10 percent sales drop realized by Volkswagen.
December Marks 23 Straight Months of Incentive Growth
increasing sales by a solid 11 percent for 2014 as a whole. Nissan brand deliveries were up 9.1 percent for the month due to strong performances by the Sentra and Altima while Infiniti sales were down 9.3 percent as nearly all of the brand’s models performed worse than a year ago. American Honda Motor Co. increased sales by 1.5 percent, which greatly lagged many of its competitors for the month; however, the automaker can at least say that it is heading in the right direction, with total deliveries up 1 percent in 2014. Honda sales were basically flat year-over-
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Per Autodata, average incentives per unit were just below $3,000 for the month. Auto manufacturer spending climbed for the 23rd straight month. Incentives were 7 percent higher than last December, while incentives rose by over 8 percent on a full-year basis. Fiat Chrysler continues to receive praise for its persistent sales growth; however, the company’s spending increased by over 31 percent in December, which was well above its Big Three counterparts, as incentives per unit for Jeep and Ram were up 20 percent and 15 percent, respectively. The uptick in spending was not isolated to this month either as the automaker’s incentives jumped by nearly 22 percent for the year, 13 percentage points greater than Ford Motor Company and over 18 percentage points higher than General Motors. General Motors achieved roughly the same year-over-year gains as Fiat Chrysler, but its incentives per unit rose by less than 15 percent in comparison. GM’s Buick was
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its only brand to spend more, with a 22 percent increase. Additionally, GM exhibited a rather minor 3.1 percent increase in spending for all of 2014, which was among the lowest figure of any automaker. Ford Motor Company’s quiet December was due in part by its dip in spending, which was 7.8 percent lower than a year ago, highlighted by the Ford brand, which reduced incentives by 10 percent. The Blue Oval’s disappointing sales year is another story, however, as deliveries were down even though its incentives were 8.5 percent higher year-over-year. Although it spent 17 percent more than it did 12 months ago, Volkswagen was again the industry’s worst performer for the month. Looking at 2014 as a whole, the picture does not get much better as the German brand’s sales dropped doubledigits despite its incentives growing by over 16 percent and the automotive landscape having bounced back to pre-recession levels. Land Rover and Subaru exhibited the lowest spending per unit once again at $417 and $769, which were both down from a year ago. Subaru, in particular, was the toast of the industry in 2014 as the Japanese automaker’s sales skyrocketed while its incentives fell by over 16 percent for the year.
Days’ Supply Drops by Nine Days from Prior Month
Inventory levels fell by nine days monthover-month to 61 days in December, which is three days fewer than last year. General Motors went from having the biggest inventory among domestics a month ago to having the smallest, with 70 days’ supply. Comparatively, Ford Motor Company and Fiat Chrysler exhibited respective supply levels of 72 and 73 days. Having all reduced inventory by several days’ worth, Toyota, Honda and Nissan finished December with 44, 53 and 67 days’ supply, respectively. Subaru ended the month with 20
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days’ supply, which was up a day from November, but down six days yearover-year. Among luxury makes, Jaguar Land Rover and BMW have the leanest inventories, at 21 and 27 days, respectively.
Used Market Review
P
“December’s strong performance lifted NADA
lummeting gasoline prices and a dealer body anxious to secure inventory for the fast-approaching tax refund season closed out 2014 with one of the strongest Decembers on record, as wholesale prices of used vehicles up to eight years in age ticked up by 0.3 percent compared to November. For context, used vehicle prices fell by an average of 1.4 percent in December from 2003 – 2013 and it’s been more than 20 years since used vehicle prices actually increased during the month. December’s strong performance lifted NADA Used Car Guide’s seasonally adjusted used vehicle price index to 124.2, up nearly one percentage point from November’s 123.4. The index also stood at 123.4 in December 2013. The year 2014 started off with used vehicle prices closely following a typical seasonal path before they rose sharply through the spring due to supply disruptions
Used Car Guide’s seasonally adjusted used vehicle price index to 124.2, up nearly one percentage point from November’s 123.4.”
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caused by severe winter weather and a historic series of vehicle recalls. New market pressure and recovering wholesale supply caused prices to tumble through the summer and early fall, before depreciation all but disappeared over the last two months of the year. All told, the spring’s strength held depreciation to an exceptionally low 12.7 percent on an annual basis last year, which is both an improvement over 2013’s rate of 13.9 percent and one of the lowest figures on record. At 14.1 percent, depreciation on a Q4-to-Q4 basis was a bit more severe, but
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1ST QUARTER - 2015 | DRIVINGSALES, LLC
still ranks low from a historical perspective, nonetheless. From an index standpoint, prices rose by 1.1 percent on a full-year basis in 2014, however, the steep losses that occurred through the middle part of the year brought prices back down to Q4 2013 levels – which were among the highest ever recorded – by year’s end. At a segment level, large SUVs and big luxury cars fared the worst in December, although prices for the two fell by a combined average of just 1.2 percent. At the opposite end of the spectrum, prices for luxury compact utilities increased by 1.3 percent, while prices for remaining segments changed little from November (within +/- 0.8 percent). At 21.7 percent, depreciation for luxury large cars was the highest of all segments from Q4 2013 to Q4 2014, followed closely by a 19.4 percent loss for luxury mid-size cars. Depreciation for compact and midsize cars, mid-size vans, large SUVs and luxury mid-size utilities ranged between 14 to 16 percent, while losses for compact utilities (mainstream and luxury) and mid-size utilities averaged a lesser 12.5 percent. Large pickup depreciation was the leanest of all segments for the third year in a row, reaching a scant 6.6 percent. In index terms, last year’s 9.5 percent rise in large pickup prices exceeded the 8.5 percent rate of growth recorded in 2012 and 2013. Combined, used large pickup prices have risen by an astounding 29 percent since 2011, which is more than eight times the overall market increase of 3.5 percent. Prices for the mid-size truck, large utilities and mid-size vans grew by a combined 3.2 percent last year, while compact utility (again, mainstream and luxury), mid-size car and compact car prices increased by roughly 1 to 2 percent. Subcompact and luxury cars fared poorly last year, with prices for the small car segment dropping by 2.7 percent, while prices for compact, mid-size and
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large luxury cars fell by 2.2 percent, 4.9 percent and 6.1 percent, respectively.
January Use d Price Forecast
Coinciding with the steady receipt of tax refund checks, used vehicle prices gradually improved over a given first quarter before tapering off as spring transitions into summer. We expect to see a similar pattern play out this year. In addition to seasonality, used vehicle prices will be most influenced by low gas prices, rising supply and increased new market pressure in 2015. While there is a great deal of uncertainty inherent in the future direction of energy prices, increased domestic production, lower global demand, and OPEC’s reluctance to cut production make it likely that crude oil prices, and thus gasoline prices, will stay well below last year’s levels for an extended period of time. In fact, the U.S. Energy Information Administration (EIA) predicts that regular grade gas prices will average $2.60 per gallon in 2015, or nearly 80 cents lower than last year’s $3.37 per gallon average. The drop in pump prices will support demand by leaving more money in consumer wallets. In turn, this will help counteract – but not eliminate – the drag on used vehicle prices. The drag stems from an expanding supply of used vehicles and a new vehicle market that is sure to lean even more heavily on incentives than it did last year when discounts grew by 8 percent. As far as the first quarter is concerned, NADA’s current forecast has prices flat to up slightly in January with more pronounced increases occurring in both February and March. By the end of the quarter, market prices are expected to be 1.5 to 2.5 percent higher than they were in December. Truck demand will benefit most from the drop in pump prices, and as a result, mid-size and large utility, van and pickup prices are expected to rise
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“Coinciding
by 4 percent or more through March. By comparison, subcompact, compact and mid-size car prices are scheduled to improve by 1 percent or less over the period, while luxury car and truck prices should grow by roughly 1 to 1.5 percent and 2 to 2.5 percent, respectively.
January Official Used Car Guide Value Movement
with the steady receipt of tax refund checks, used vehicle
Trade-in values in January’s edition of the Official Used Car Guide increased by 1.2 percent relative to December. In January, car values were increased by a combined average of 1.3 percent, which outperformed the truck segments combined average of 1.1 percent. Large cars performed the worst for the month and prices for the segment were adjusted downward by 0.9 percent, while luxury compact utilities performed the best and values were raised by 3.1 percent. Luxury vehicles once again performed much better than their non-luxury counterparts. As a result, luxury segment values were increased by a combined average of 2.1 percent compared to the mainstream segment average of 1.1 percent. Luxury vehicles have performed better than non-luxury vehicles since October 2014’s edition.
prices gradually improved over a given first quarter before tapering off as spring transitions into summer.”
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People
Are Salespeople
Managing Software or Selling Cars? Determining when full-service makes more sense than self-service
BY ALLEN LEVENSON
40
W
hen deciding how to generate and manage leads for your dealership, you have two options: put software in place that your frontline team is responsible for running, relying on them to manage all aspects of the process (“self-service software”) or outsource the functions to a service provider who can do most of the heavy lifting (“full-service” or “turnkey” or “managed solution”). Self-service options demand the installation of comprehensive, often complex, software that requires training and hands-on daily use to be effective, while a turnkey provider takes over the day-to-day tasks, delivering qualified leads to your sales force. Both approaches have their pros and cons, but the biggest issue is the “people” part of this equation. All dealerships face a common truth: there is a lot of good software that has been bought and paid for that doesn’t get used to its fullest advantage for one simple reason - salespeople either don’t have the training or time to use it effectively or they work hard to avoid it because it’s usually not a lot of fun. When it comes to customer retention and lead generation in any business, it’s human nature to prefer to work the leads that walk into the showroom versus digging in, running a query
1ST QUARTER - 2015 | DRIVINGSALES, LLC
to a database, finding a prospect and then picking up the phone to call that person. So, before committing to a self-service option, ask yourself, will you be able to get your team to work the program effectively? In addition, consider these specific questions: • Staff: Stability, Size and Expertise – does your staff turnover mean you’ll be training and retraining often? Do you have enough manpower to handle another in-house solution? Could a third party handle the task at hand perhaps even better than inhouse staff? • Cost and ROI – are there any unforeseen/ hidden costs? • Vendor Reputation – do they have a solid track record? Do they offer good training/ support?
Staff Considerations
This is the biggie. Ask yourself honestly: Do your sales people have the talent and dedication to do the legwork themselves? Similarly, is management willing to hold the sales team’s feet to the fire, day after day, month after month, REQUIRING them to USE the system? If you can answer yes to both of these questions, then you have a shot at success with a self-service solution. Initially, this is likely the desired approach for most dealerships, as you want your sales people
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to be actively working their leads/customers – that’s one of things you pay them for! However, high staff turnover (up to 100% at new-car dealerships1) in our industry means that most dealerships are at a disadvantage. So you need to ask yourself an additional question: will you invest the time and resources to constantly train (and re-train) your sales team on how to use the product? The biggest advantage of a turnkey solution is that you aren’t relying on front line employees to take action, and don’t need to worry about the software sitting idle. And, of course, if your dealership has minimal manpower, it makes sense to adopt a managed solution for very similar reasons. And, the truth is, even a very dedicated salesperson or Business Development Manager often lacks the bandwidth/ knowledge required to run an in-depth CRM software AND another lead generation tool, like equity-mining and/or service drive lead generation. This is a real consideration – many stores with multiple products have a problem getting their sales force to use just one of them consistently. Dealerships often implement software that loses its punch after the initial rollout and never see the light of day after the first six months.
Cost and ROI
Of course, cost and ROI are key considerations when investing in any new solution. And when evaluating managed versus self-service, it’s important to consider any hidden costs that might exist. For example, self-service solutions will boast a well-developed software platform that will have required considerable investment to build and maintain – a cost that will typically be passed on to the dealer in the form of a significant monthly fee. Then there’s the staff required to run the software. In addition to front line sales people or BDC reps, given the complexity,
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“All products
many dealerships often hire dedicated personnel to administrate different software solutions. And, given the high turnover rates in our industry, one of the biggest hidden costs in self-service solutions is the training and retraining of new staff to run the software and the “lost” time/ opportunities during this process.
during a demo,
Vendor Reputation
in practice; and,
It’s important to consider the vendor – not just the solution they are touting. Have they been in the industry long or is it a newbie promising to deliver in almost impossible ways? If it’s a self-service option, do they offer solid and quick tech support? Do they have automotive experience and what is their training like? Is the system user-friendly? All products look great during a demo, but many are difficult to use in practice; and, as we all know, sales people will give up if the software is too difficult or confusing. If they are full service, do they have people on board who have worked at dealerships and understand instantly the challenges and needs of your business? Word of mouth is one of your best friends - get a handle on what other dealers are saying about the vendor – ask around!
look great but many are difficult to use as we all know, sales people will give up if the software is too difficult or confusing.”
Real World Example – Pros and Cons
Most dealerships start out with the belief that they would prefer to have their internal teams do the work. Why pay for a turnkey solution when I can have my team do all the work?
1. 2014 CNW Retail Automotive Summary
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Managed Solution $600 $1,500 $0 $0 $2,100
Monthly Fee Mail/Postage/E-mail Dedicated Staff Training/Retraining TOTAL
ALLEN LEVENSON Allen Levenson has over 25 years of automotive and marketing experience. He is currently Vice President of Sales and Marketing for Prospect Vision. He also spent eight years as Vice President Sales & Marketing of Asbury Automotive Group. Earlier he was a consultant with both Bain & Company and McKinsey & Company. He holds an MBA from Wharton Business School and a BA from Tufts University.
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Self-Service Software $2,000 $750 $3,000 (est) +++ $5,750
But it’s important to dig deeper here to analyze what the results might be with either solution. Using the example of database mining/equity marketing (tools that rely on complex segmenting of databases to help identify in-equity customers), we can evaluate the pros and cons of managed vs self-service products. Self-service equity marketing software can either be a stand-alone product or directly baked into a CRM solution, giving the task of database mining (which can be complicated) to salespeople or an in-store marketing/ BDC manager. A full-service solution, on the other hand, handles the data mining and marketing for the dealership, relying on sales staff only to work the leads and close the deal. A knowledgeable account executive will mine the data on behalf of the dealership, doing the legwork. In terms of costs, they can appear to be somewhat equal when looking at the monthly fee combined with the delivery costs ($2,100 for the managed solution and around $2,750 for the self-service software). However, it’s worth noting that the cost of printing, postage and email delivery of the marketing campaign is the biggest expense on the managed solution side – at nearly $1/piece versus $.50/piece on the self-service side. But, the managed solution will give you a professionally designed and mailed piece, while the selfservice solution puts your team on the hot seat for this task. And, of course, there’s the very significant labor cost involved in a self-service program, in this example, the estimated cost is $3,000 per month. Dealers who choose a full-service program generally do so to take advantage of the expertise and knowledge provided by
1ST QUARTER - 2015 | DRIVINGSALES, LLC
account executives who run numerous equity marketing campaigns, as well as for the comfort of knowing that no matter how stretched the sales force is at any given time, all in-market prospects are being touched. Plus the vendor does the difficult task of querying the database, develops a campaign that can address the dealership’s specific inventory needs and current incentives, as well as printing and mailing letters, and developing and sending e-mails. The sales people/ BDC only come into play for follow-up phone calls (with a vendor-provided manuscript) and to set appointments. Interestingly, a recent study of over 200 dealerships using a managed solution for equity database mining and marketing showed that dealers, on average, reap thirteen incremental vehicle sales per month at a cost of $112 per car sold, and many volume dealerships experienced results two to three times this number.
Deal in Realities
Put simply, a self-service solution can make sense for dealerships that have a stable, well-trained, low-cost work force with low turnover, coupled with a management team that is willing to invest the time and money to hold the sales force accountable. The advantage is that, in theory, you’re doing everything yourself which is often the preference because you’re already paying your staff, etc. However you need to deal in realities when it comes to generating revenue so you have to really answer honestly if your staff is up to the task. A full-service solution, on the other hand, can work for just about any dealership and can be a safer bet because you know that, regardless of whatever fire drills might be happening inside the dealership, the business of generating leads from your customer database is still going on and those leads are being driven to the sale floor.
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“A 20 minute call led me to these results!” – Allen Turner, Allen Turner Hyundai
130% 14.7% 2.0% INCREASE
IN BDC SALES
INCREASE IN
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MARKET SHARE
INCREASE IN
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More accountability More appointment shows More sales opportunities Call us at (877) 943-8371 or email DSU@DrivingSales.com to learn more
Capital
The Era of Big Money According to data compiled by The Banks Report, there were 532 dealership buysells between January 2013 and December 2014 (202 in 2013, 330 in 2014).
BY CLIFF BANKS
44
B
ig Money. These two words will be one of the driving themes in 2015 for automotive retail. And for many, it’s going to be a party. Analysts are predicting more than 17 million sales this year. Realistically, 2015 could set a record for vehicle sales in a given year. And with low gas prices, many of those sales are going to be of trucks and SUVs – vehicles that drive big profits. For the first time last year, cross utility vehicles out sold sedans. That trend will continue this year. The potential for big profits for dealers is attracting significant attention from large outside investors. Warren Buffett will get the party started this year in early January when his Berkshire Hathaway company completes the acquisition of the 79-store Van Tuyl Group, the country’s top selling privately held dealer group (as of press time, the deal still had yet to be signed). We also expect Buffett and his newly formed Berkshire Hathaway Automotive Group to announce at least two more significant acquisitions in 2015. With more than $50 billion at his disposal, Buffett has significant leverage. It’s also likely this year that at least two – maybe three – large, well-known investment groups will announce acquisitions or investments in medium to large dealer groups. What hasn’t been well-reported yet, is the growing number of private equity investors that already have ownership in dealerships. The Banks Report’s November
1ST QUARTER - 2015 | DRIVINGSALES, LLC
Dealership Buy-Sell Update revealed at least two sizeable private equity groups have already been buying stores. One example is GPB Capital out of New York that has partnered with industry veterans Patrick DiBre, Jeff Nash and Scott Naugle. DiBre has put together several deals in recent years including buying stores in Virginia, New Jersey, New York and California including seven Nissan dealerships. He also acquired two Group 1 stores this year – Hassel Volvo (now Glen Cove Volvo in Long Island) and Honda of Freehold, NJ. Another private equity firm quietly buying stores is the Jordan Company based in Chicago. The firm manages over $8 billion in original capital investments in various sectors. It was founded in 1982 by John “Jay” Jordan and David Zalaznick. In January 2014, Jordan partnered with Rick Ford and formed RFJ Auto Partners, headquartered in Dallas, TX. Ford was a former vice president with the Sonic Automotive Group and most recently was the COO for Randall Reed’s World Class Automotive Group. Within the last 12 months, RFJ has acquired at least 11 dealerships in tier two markets in Texas and Alabama. According to data compiled by The Banks Report, there were 532 dealership buy-sells between January 2013 and December 2014 (202 in 2013, 330 in 2014). When we look back in 10 years at dealership consolidation trends, analysts will likely see 2015 as a continuation
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of the previous two years – an era that will prove to be pivotal in changing the face of dealership ownership. The single point or family-owned dealership is going away as rapid consolidation is creating local, regional – and even national – powerhouses. We’re seeing dealers in tier two and tier three markets buying out their friends and competitors, creating groups with three to five rooftops that can rule a local market. At the regional level, groups of 15 to 20 rooftops are gaining in number. Many are getting into that 30-50 store range. The regional level is where the significant acquisition activity will likely occur over the next year or two. Watch for groups to merge or be acquired by investors with deep pockets. The industry went through a similar phase in the mid to late 1990s which brought about the creation of the public dealer group – but after Asbury was formed in the early part of the last decade, that phenomenon came to a crashing halt. Framework agreements made it difficult for dealers or investors to continue the roll up strategy that made the creation of publicly traded dealer groups possible. Also, following the initial “craze” the concept proved to be a tough sell for both manufacturers and potential investors. Automakers were concerned – and still are – about private equity creating churn in the dealer base every three to five years. Investors, once they saw the power automakers have both in the buy-sell process and in the running of dealerships, tended to back away. That wariness appears to be subsiding. Furthermore, recent conversations with multiple manufacturers also indicate there is a growing willingness – or realization – that in many cases, having their dealers backed by outside capital can be a competitive advantage. But there has to be a proven operator
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with a long track record of running dealerships that are highly profitable sales juggernauts at the helm and who is the face of the investment group. The last 14 years or so, other groups began quietly adding to their portfolios and are now in position to be part of what likely will be a second round of major acquisitions. That second round has
Top 11 Private Dealer Group Buyers January 2013 – December 2014 Data compiled by The Banks Report
Group
No. of Acquisitions
RFJ Enterprises
11
Kendall Automotive
10
Larry Miller Automotive
10
Ken Garff Automotive
9
Geiger Bozich
8
AMSI/Terry Taylor
8
Suburban Automotive
7
Greenway Automotive
7
BW Auto Ventures
6
Manny Kadre
6
Victory Automotive
6
already started. There were 11 private dealer groups that have made six or more acquisitions since January 2013. The six public dealer groups have acquired 116 dealerships between 2013 and 2014. It will be increasingly more difficult for smaller groups – less than five – or
DRIVINGSALES, LLC | 1ST QUARTER - 2015
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Public Dealer Group Activity 2013 - 2014 Group
“While it’s been painful at times, adoption of technologies that can improve the buying process in the automotive retail space has
No. of Stores
No. of Franchises
*Group 1 Automotive
44
46
Lithia Motors
45
49
AutoNation
10
12
Asbury Automotive
7
9
**Penske Automotive Group
4
6
Sonic Automotive Group
6
6
116
121
Total
*Includes 22 stores (25 franchises) acquired in Brazil & Great Britain **Does not include Australian heavy truck distributor acquisition Data compiled by The Banks Report from co. presentations, press releases.
Public vs. Private Buy-Sell Activity
been slow.”
January 2013 - December 2014
PUBLIC 116 | 22%
PRIVATE 416 | 78%
Data compiled by The Banks Report
CLIFF BANKS Cliff Banks is an industry veteran of 24 years. A long time editor and analyst, he is the founder and president of The Banks Report, an online service that analyzes news and trends in the automotive retail sector. He is a regular contributor to the DealerExec.
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single point stores to compete in what will be a new era of automotive retail. The investments required in data security, facilities, software and regulatory compliance will convince many owners to exit the business. Also, turning down the money being offered for stores today is getting harder. For many dealers, 2015 will be a year of “take the money and run.” The consolidation will create larger groups with significantly more capital to invest in the business. This will drive a rapid adoption of technologies that moves the industry closer to true digital transactions.
1ST QUARTER - 2015 | DRIVINGSALES, LLC
Also, the adoption of the autonomous vehicle is going to demand another level of significant investment in technology that leverages the communication between the dealership and the vehicle. We’re 20 years into the Internet being part of the automotive retail space. While it’s been painful at times, adoption of technologies that can improve the buying process has been slow. The money coming into the industry at the retail level is going to move that adoption at a breakneck speed now. It’s going to be an exciting ride.
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