Forward-thinking dealers are well into digital transformation
Lori Wittman believes that although vehicle inventory levels are improving, they might never return to what they used to be. Wittman, who is president of retail solutions for Cox Automotive, says every piece of dealers’ inventory on their lots and in their pipelines is extremely important.
“Establishing a long-term vision and data-driven inventory strategy is a hallmark of forward-thinking dealerships,” Wittman said.
In an emailed Q&A, Wittman commented on the Cox Automotive Forward-Thinking Dealership Study released in December, stating that when dealers possess data insights that can accurately predict demand, those dealers can more confidently value a vehicle. They can have more confidence in making a decision whether to keep it, send it to auction, move it to another store, or adjust pricing.
The study found that about 59% of forward-thinking dealers are more likely to have a long-term vision for inventory in place.
But the inventory piece was just part of the Forward-Thinking Dealership Study, which found that dealers who embrace data science and automation have achieved better results than other dealers.
It’s Cox’s first Forward-Thinking Dealership Study, and Wittman said that the company decided to conduct the study during what she described as an important time to study the behaviors and attitudes of its top-performing clients. The study researched 449 dealers that Cox said are “blazing a trail to help the broader retailing industry address rising consumer expectations and positively impact their sales volume and profitability.”
Those and other forward-thinking dealers have succeeded in a very challenging market, Wittman said.
“Because 2023 looks equally challenging, we felt other dealers could learn from and find encouragement from their success,” Wittman said.
Researching dealer operations in sales, marketing and inventory management, the study found that forward-thinking dealers are well into their digital transformation and employ integrated technology, automation, and data throughout their operations.
Data informs all aspects of forward-thinking dealers’ operation
But the study first provides a definition of what Cox considers forward-looking dealers. The company describes them as “a resilient group of automotive dealers that are weathering the headwinds of a challenging automotive industry marked by the ripple effects of a global pandemic, inventory shortages and economy constraints.”
Wittman expanded on that definition, saying that a forward-thinking dealership relies on data to inform all aspects of its operation. Those dealers believe that improves the car buying experience for their customers and their staff.
“Forward-thinking dealerships aren’t bound by ‘the way things have always been done,’ and they aren’t afraid to embrace new tools and processes that consumers and their employees want,” Wittman said. She added that allowing car buyers to shop, negotiate, and transact through digital tools or via phone, e-mail or text instead of insisting they make an appointment to visit the store in-person is a good example.
“Traditionally, sales reps avoided giving out pricing or specific vehicle details unless the customer committed to coming to the store in-person,” Wittman said. “That just won’t work going forward. You’ll miss at least a quarter, if not a third of your customers if you do that.”
Forward-thinkers invest in CRM, dedicated marketing staff
Cox said the study unveiled four takeaways, and the first is that a dedicated marketing staff and investment in customer relationship management software, or CRM, are crucial.
The study showed that almost two-thirds of forward-thinking dealers employ a dedicated marketing staff and leadership team, including a chief marketing officer. Only 18% of static dealers — or dealers that take a more traditional, manual approach to operations — do that, according to the study. Forward-thinking dealers are two times more likely to say they “live by their CRM,” according to the study.
“The CRM should be a window into each and every customer,” Wittman said.
Approximately 56% of forward-thinking dealers market their service department to local car owners who didn’t purchase a vehicle from them. The study shows that only 17% of static dealers do that.
The study found that 82% of forward-thinking dealers mine their CRM to send out personalized emails to customers. That is the case for only 36% of static dealers.
“Think about the difference having accurate information about who is most likely to buy and what they are mostly likely to buy and how much the customer can afford could make to a sales rep and to that customer,” Wittman said. “Having a modern CRM is only one part of equation. You must have the data and have it in the right place at the right time.”
Inventory: A long-term vision is essential
Although the previously mentioned stat showed that about 59% of forward-thinking dealers are more likely to have a long-term vision for inventory in place, that is the case for only 12% of static dealers.
Similar to the dedicated marketing function, almost 99% of forward-thinking dealers use a dedicated resource to manage inventory. And about 57% of forward-thinking dealers merchandise their inventory by adding enhanced details for each vehicle, such as video or 360-degree views. Only 33% of static dealers do that.
Going the extra mile with digital tools
About 70% of forward-thinking dealers use electronic libraries to automatically generate contracts and forms to be sent to the lender. Only 17% of static dealers do that.
Cox said two out of three forward-thinking dealers go the extra mile in monitoring search performance. Advanced search filters on their websites such as monthly payment, distance, fuel type, and miles per gallon to allow shoppers to focus on a specific unit they are seeking. That is the case for only 17% of static dealers.
About 82% of forward-thinking dealers mine their CRM to send out personalized emails to customers. Only 36% of static dealers do that, according to the study.
Wittman said digital tools, presence and engagement are crucial to used-vehicle operations as well as new.
“With affordability in question for a lot of car buyers, dealerships need to give both new and used inventory the same digital benefits, and new and used customers the same improved experiences.”
Forward-thinking dealers seek improvement in tactical operations
The study highlights “additional tactics dealers plan to double down on.”
Those include service pricing transparency, advertisements of personalized monthly payments and more automation. Some of those areas of automation include direct integration with DMVs for title and registration processing, remote contract signing and AI-enabled deal structuring.
Wittman mentioned Tom LaPointe, Internet director at Preston Automotive Group, as an example of a forward-thinking dealer. The group operates 15 stores in Maryland.
“With [Cox Automotive] data at their fingertips connected across their sales, marketing, service and back-office and connecting their process, Preston Automotive Group has done much more than modernized their business,” Wittman said. “They’ve leaned into what it means to be a forward-thinking dealer.”
She said the most recent Cox Automotive Dealer Sentiment Index, which examines the pulse of how franchise and independent dealers are feeling about their businesses, illustrated the downward pressure the industry is currently feeling in the current environment of market volatility and the threat of a recession. That study showed U.S. automobile dealer sentiment in the fourth quarter of 2022 dropped to the lowest level since the start of the COVID-19 pandemic.
“But the Forward-Thinking Dealership Study shows us that success is out there,” she said. “Whether the annual sales volumes are up or down in any given year, I think we can count on the American car buyer because they need the cars and trucks that power their everyday lives. And the American car buyer relies on their local dealership to sell and service those vehicles.”