- Customer expectations are adding pressure in the current market environment. They’re demanding a convenient and transparent sales process, with multiple options.
- Sales are slowing to a steady 17 million SAAR, squeezing margins and making every car sale count. On top of that, F&I products are undergoing a consumer-driven transformation of their own that will (and is) making a severe impact to one of your most trusted profit centers.
- The service drive is on a high-wire act, where delivering a convenient and efficient service appointment is the most important differentiator. Customers want an effortless “don’t make me think” service experience.
Here’s why things are changing and why connected retail operations are so important to your business
These are challenging times for dealer operators.
Business is good, but that doesn’t mean there aren’t issues keeping you up at night, bedeviling today’s profitability and compromising your store’s future. At issue is a conundrum with no easy answer: the need to reduce costs and improve the efficiency of the sales experience – even though every sale matters more than ever. A recent dealer operations study found that 69% of franchise dealers are concerned with increasing the efficiency of their sales process.1 That makes sense when you consider consumer response to the existing process: Customer satisfaction declined from 77% (after the test drive) to 59% after interactions with the F&I department were included. When asked about the length of time it took to complete the transaction, customer satisfaction dropped even further – to 46%.2
Clearly, a 46% satisfaction rate is unsustainable and unacceptable. So what takes so long?
It’s not a people problem. The same study pegs satisfaction with sales people at a steady 73%.2 In fact, multiple studies point the blame at negotiations and paperwork. In other words, it’s a process issue, where wasted time tangles with old-school methods to create an average transaction time of 5.4 hours.1
That’s two hours on top of the three your team has already spent with the customer! It’s hard to gain market share and escape the clutches of margin compression with a process that takes the air out of the room and leaves all parties deflated.
Change, Meet Intractable Problem
Problem is, there’s another one of those intractable problems that has everything to do with trying to change. The cost and disruption of new technology, from implementing a new way of doing things to adjusting a well-worn process, can jangle nerves across the dealership. Employees get frustrated, customers impatient, and confusion reigns.
Thing is, all three aspects represent an evolving world. In a market of flattened sales, within a culture driven by the relentless need to make the consumer experience more convenient, the dealership model is changing. It’s very survival requires it. Here’s how:
- Customer expectations are adding pressure in the current market environment. They’re demanding a convenient and transparent sales process, with multiple options. Meanwhile, you have an entire team of people selling new cars at a virtual loss just to maintain market share and keep the rest (and more profitable) areas of the dealership open for business.
- Sales are slowing to a steady 17 million SAAR, squeezing margins and making every car sale count. On top of that, F&I products are undergoing a consumer-driven transformation of their own that will (and is) making a severe impact to one of your most trusted profit centers. According to Automotive News, today’s F&I profit mix is around 70% products to 30% reserve – a much different story than just 10 years ago.3 At the same time, customers are clamoring for a change in the way they’re presented: The Online Retail F&I Study advises dealers that buyers prefer F&I educational resources on the dealership website, and are more likely to purchase, when they are familiar with product offerings – before arriving at the dealership.
- The service drive is on a high-wire act, where delivering a convenient and efficient service appointment is the most important differentiator. Customers want an effortless “don’t make me think” service experience. Consider the recent findings from J.D. Power’s 2018 Customer Service Index (CSI): Customers across all generations prefer online service scheduling capability. Among premium brands, convenient services such as pick up and drop off significantly improves loyalty. The study found that 68% of premium customers would “definitely” return to the dealership. And increasingly, if they don’t get it, they’ll head off down the round to the lower-priced competitor, call in sick and drink the bad coffee in their waiting room.
Clearly, each of these three critical aspects of your business are closely bound. Market forces and the rising cost of business — driven by increasing customer expectations — has placed renewed emphasis on how efficiently you operate, and how connected your operations are. The emergence of technology is a clear sign: optimize today to reduce margin compression and maintain market share; streamline for the future to increase all-important retention in a slowing market that demands cost scrutiny. According to the 2017 Blue Sky Report from Kerrigan Advisers, a dealership consulting firm, it’s a trend so transformative that it’s driving some generational dealer operators to rethink future plans due to “concerns about the next generation’s ability to manage and retain enterprise value in a changing auto retail market.”
It’s a Brand New Rodeo
The solution isn’t just to toss more technology into the ring. In fact, that’s part of the problem. According to the 2018 Cox Automotive Dealer Communication & Operations Study, franchise dealers have already made significant investments in technology, to the point where the typical store has an average of 6.8 disparate and disconnected tools. Some even have more than 10, with separate log-ins – none of which are integrated toward the sales process.
All this technology has created a new layer of complexity that kills efficiency, hurts employee morale and depresses CSI scores.
It also underlines the importance of having connected tools that make for a seamless operating experience. Not as a nice-to-have, but as a necessity. Simple and connected operations, driven by intuitive and transparent technology, is what will help dealerships grow market share regardless of sales projections or service pressure. Connected operations result in an optimized consumer journey, one that delivers the most important and sought-after result: effortless convenience. Today’s key to retention is to surprise and delight customers during the sales experience, then create a seamless transition to an effortless level of convenience that anticipates needs and arranges solutions – in advance.
See the Total Picture
Think about it holistically, from the start of the connection (digital retailing) to that initial greeting and information capture at the dealership. At each point, there’s an opportunity to capture data and integrate that into the process. From appraisal to credit pulls, desking and app submission, the ability to connect each step is possible with the right approach.
But what about the real pain point here? Those long minutes and hours stuck in the F&I office, the Bermuda Triangle of paperwork and hard-sell tactics? That too can be connected and optimized, straight through from product presentation to contracting and reg/title processing. The key to retention, however, is in connecting service to the transaction by booking the customer’s first appointment. According to the Cox Automotive Maintenance and Repair Study, customers who are introduced to the service department at the time of purchase are two and a half times more likely to come back for service.
Points of Connection
Is it possible to align all these very important points of connection and do it in a seamless manner that makes life simple for employees and more profitable for the store? Is it possible to increase market share when profit per new car is disappearing and the cost of technology continues to climb?
It is. Customers simply want convenience and options. At the same time, dealers need efficiency to scale to meet this transformative market. The two aren’t exclusive, but it takes technology that connects, rather than disrupts.
Learn more about how your dealership can reduce transaction time while increasing customer satisfaction. Cox Automotive’s Connected Operations is the industry’s only solution that integrates trade-in appraisal, CRM, DMS, F&I and Fixed Ops into an easy-to-use connected workflow. Boost efficiency with a process that gives your customers a faster, more enjoyable car-buying and service experience that drives profitability.