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Embraching Online Selling Offers Advantages Far Beyond the Obvious

Feb 3, 2020 | Dealer Ops & LeadershipTrending Industry News

By Jack R. Nerad, Writer, Author, Radio Host, North American Car of the Year Juror

Car buyers are more sophisticated than ever before, and with that added sophistication has come higher expectations. Many car buyers want a complete end-to-end online buying experience. Millennials, who have recently vaulted to the top of the car acquisition “generations,” have difficulty understanding why they can’t buy a car the way they buy everything else — with a few clicks of a mouse or a couple of taps on a smartphone. And they aren’t the only buying group asking that question.

Many traditional car buyers who plan to visit a showroom, kick some tires, engage with a salesperson and complete the transaction there would like to get a head start on the process by doing much of the dreaded “paperwork” online at home before visiting the dealership. And pretty much nobody — even the oldest Baby Boomer who fancies himself a great negotiator — wants to spend hours in the store getting the deal done, especially when they know it doesn’t have to be that way.

Making things simple for the consumer has always been a magic formula for retailers from the days of the 5 and 10-cent store and the self-service “supermarket” to Amazon and eBay.

Now, finally, that realization is hitting car retailers, and they are making the turn toward online retailing, some jumping all in, some hedging between a fully online buying experience while retaining some traditional processes.

This environment of change has been a difficult one for most dealers to work through. And in many instances, the “if-it-ain’t-broke-don’t-fix-it” philosophy has prevailed. But one place where the most hidebound, old-school dealership cannot avoid crossing over into the online retailing world is the use of third-party lead-providers, classifieds, and aggregators. If that dealership uses any of those services, that dealer is not only online, but the odds are the dealership’s ads contain price quotes. So, whether it wants to be or not, that dealership is in the online retailing business.

Of course, there are thousands of stores that have an online presence — their own website, subscriptions, and affiliations with third-party sites, and an internal process for online-generated sales. They might think of themselves as progressive, and in many ways, they are, but they haven’t embraced all the aspects of online sales that will change their in-store business for the better. They are represented online in numerous places, and often their inventory is listed online with accompanying prices and terms.

While that has its advantages, it can also provide problems. Why? The prices and terms are inaccurate or don’t represent a deal the dealer wants to consummate.

“Most of the time, the payments that are quoted online through digital retailing companies aren’t remotely similar to the payments that are presented to the consumer when they enter the dealership,” said Rusty West, co-founder of Camarillo-Calif.-based Market Scan, a leading automotive data and retailing solutions’ provider. “If you talk to any dealership today, and ask them which is their biggest source of heartburn in their online digital retailing efforts, they’ll tell you: “a customer comes in, and the payments aren’t right.”

The reason that it is so important is, in true online retailing, consumers expect to see price and associated terms upfront, right now. And they depend on the fact the price and terms presented to them are accurate and, equally important, that they can complete a deal with the dealership using precisely those terms. You immediately can grasp in light of those expectations how critical it is to deliver real “contract-ready” price and terms (initial payment, monthly payments, number of payments, etc.) In the absence of that degree of specificity, it is impossible to complete a transaction online.

While not every car buyer is a price buyer, study after study has indicated the consumers will pay a higher price for what they see as a better level of service (like saving time, for instance) — in an online selling environment, getting the price right is paramount. Set the price/terms too low, and you’ll get a lot of consumer interest, but if you can’t meet your business goals at those prices, you’ll have to do a lot of in-store negotiation to make sales, and it is likely the customers will be disgruntled, resulting in a hit to CSI, negative word of mouth, and perhaps bad online reviews. Set the price/terms too high and many consumers who might otherwise consider your store will shop elsewhere.

5 Best Practices for Selling to Online Buyers

1) Transparency and consistency
Online buyers demand to see real pricing and terms.

Terms must be spelled out clearly, giving the consumer choices representing deals that the dealership will consummate “as is.” In other words, pricing presented online can – and must – be identical to pricing presented in the store.

2) Visuals
Online buyers want to see what they are buying; provide online shoppers with dozens of photos of each vehicle.

3) Stop/Start Functionality Online
Online shoppers want the ability to “save their work” by archiving their research and their form-filling.

4) Single Point of Contact
Online consumers want to interact with decision-makers who can help them all the way to de-livery.

5) Make It Quick and Complete
Enabling a quick, easy buying process is the number one desire of most car buyers.

If you work with multiple lenders and are located in a state and locality with complicated tax and fee rules, how do you arrive at the right price/terms for every stick of inventory on your lot? The answer is – you need technology.

“We were founded under the premise that there is only one scientifically perfect solution for any automotive transaction, and any solution that’s less than perfect negatively impacts four different sectors of the market: the consumer, the dealer, the lender, and the manufacturer,” West said. “From a dealership standpoint, any solution that’s less than perfect invariably results in lost revenues or overlooked opportunities. So, for us to calculate the scientifically perfect solution for every transaction, we have to consider five classes of data. That’s the manufacturer, the lender, the municipality, the dealership, and the consumer. And the consumer is a wild card. Every consumer has their own budget, credit profile, and appetite for a particular vehicle.”

In putting all this together, it is critical to build into the price/terms everything the dealership wants to achieve for the transaction, including a gross profit and fee structure that achieves the profitability the dealer needs from that sale. A Market Scan tool automates this process into a set-it-and-forget-it cornerstone of the process, though exceptions — a potential high-profit over-MSRP opportunity — are easy to make. Of course, the price/deal for each individual consumer must match perfectly with their credit score, credit history, and other circumstances that could affect the deal.

“The goal is to make sure that every contract or every payment quoted to a consumer is not just 100% accurate based on the information that’s out there, but it’s also compliant with the lending institution, the manufacturer, everything,” West said. “It’s a contract. It’s a payment that could be contracted and get funded, so we could get this contract done.”

Once you have a solid price and set of associated deals that are competitive in the marketplace, meet the store’s business goals, are lender-compliant, and square up with the tax/fee environment in which the dealer is located, you have a gateway to a whole new way of doing business. Not only can vehicle sales be completed end-to-end online, but also the in-dealership sales process can be altered for the benefit of consumer, dealer and dealership personnel.

Take the same process, for example. By enabling each salesperson to access the very same data available to the online shopper, the salesperson can adopt a much more professional, consultative approach with each client. Based on various iterations of the same “deal,” different upfront payments, monthly payments, and term lengths, the salesperson can help the customer determine which is best for her or his needs, knowing that each of the choices is an equally good deal for the store.

Another opportunity is for the salesperson to present other purchase and lease opportunities that match the buyer’s desires in an upfront payment, monthly payment, and term length. West calls that the “question that historically has gone unanswered in the automotive space, and that is – ‘what can I drive’?”

By keying in those parameters and the customer’s credit score and associated data, the system can identify every vehicle in inventory that meets all the criteria with associated, transaction-ready deals. If the store is part of a larger dealer group, the system can additionally identify other qualifying vehicles in that inventory.

Rather than having to leave the customer multiple times during the typical sales process, salespeople can be equipped with all the information they need to take the sales process from the greeting at the front door through the delivery in far less time than ever before, with far less friction and distrust and all the while with the knowledge that the dealership’s business goals are being met.

At the same time, an online buyer can start the process at home on their couch on a Friday night at 11 and walk into the store the next day able to pick up the process where they were with the help of a salesperson, who can essentially “join the deal in progress.” Rather than doing a traditional F&I process, introducing a new person to the transaction after the customer has developed a level of rapport with the salesperson, the “add-ons” process can be facilitated by the salesperson.

One thing many seem resigned to in this brave new world of online auto retailing is an erosion of gross profit. Putting the price upfront seems to some like the beginning of a race to the bottom. So, we asked West how he felt technology would affect grosses.

“I think they probably can improve,” he told us. “I think there are a million studies that show that a consumer will pay a premium for a streamlined, super pleasant buying experience. They’ll pay a few extra bucks if they don’t have to go through the four-hour sausage-making process that everybody hates. And the dealers that are doing a good job recognize that.”

As to the future, better sales, marketing, and analysis techniques are introduced every day. Those who have adopted an online buying model, changed their organizations to accommodate that and adopted tools to facilitate it are prospering. Their through-put is better and their customer satisfaction in better.

As West said, “There are those dealers who say, ‘Look, we don’t quote payments online. Shoppers need to call us, or they need to come in and we’ll show them payments at the dealership.’ I think those dealers’ longevity in the marketplace, at least in the digital retailing marketplace, will be short-lived. We believe the winners will be those dealers who adopt a ‘Let’s be transparent and ask a fair price – that’s neither abusive nor a giveaway – and offer a superior buying experience.’”

West continued, “Throughout history, particularly in retail, those retailers who offered selection, transparency, fair pricing, and ease of doing business always gained market share – at the expense of those retailers who failed to adapt to what customers wanted. Today’s car buyers want a complete, end-to-end buying experience that is informative, accurate, consistent, transparent, and easy.”

About the Author: Jack Nerad, an award-winning writer, published author, editor, and spokesperson. Jack caters to the automotive consumer through digital and print media. He has contributed to Forbes.com, autobytel.com, caranddriver.com, and car.com, and was executive editorial director of Kelly Blue Book.
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