Tag Archive | "online retail"

Digital Retailing Solves Top Consumer and Dealer Issues

The automotive industry is in a frenzy over selling cars online. Pure online retailers and rising consumer expectations are applying enough pressure for traditional dealers to know that they have to add the online option for car buyers. However, when dealers hear Cox Automotive Chief Economist Jonathan Smoke say that we are moving into a “post peak period” for the U.S. auto industry, they may wonder how a tightening market and digital retailing can coexist.

What’s Next, a Car in a Shopping Cart?

Let’s face it, ordering Thursday night’s dinner or a pair of shoes online does not begin to approach the complexity of a vehicle purchase. Why can’t automotive easily replicate that success? We can definitely learn from these nonautomotive examples and integrate some of the consumer-friendly options offered in other retail categories. However, it is up to the automotive industry to meet consumer expectations for making car buying easier, more efficient and fun.

Consumers are in the driver’s seat when it comes to how they want to purchase vehicles. As a result, dealers need to adapt or they will get left behind. In recent years, Cox Automotive research has shown the persistent frustrations car buyers have with the F&I process, which includes negotiating the purchase price, finding a good deal, and valuing the trade-in.

So if dealers do nothing other than address these ongoing frustrations, they will be miles ahead on the journey to provide consumers with a superior buying experience. In other words, putting the paperwork online isn’t the first place dealers should look to begin their journey into the digital retailing transformation.

What Consumers Want vs. What Dealers Provide

Consumers want a convenient (and that means digital) buying experience. Research proves this over and over. For now, let’s focus on millennials. It might not be the greatest generation, but it is certainly the largest, comprising 75.4 million potential buyers. This generation was shaped by the smartphone and has never lived without the internet. They account for 29% of new car sales today and will make up 40% in 2020. Perhaps wiser from recent student debt, millennials are driven by budget more than any other generation, and 83% say that an affordable monthly payment is very important.

Across all generations of car buyers, we find that 61% want dealers to allow them to review prices, payments and add-ons before the F&I process begins. A convincing 83% are interested in learning about F&I products before entering the dealership. Finally, 63% are more likely to buy F&I products if they can learn more about them on their own time, before finalizing the vehicle purchase.

Since we already know what consumers want, what is the problem? The problem is what most dealers provide. By not adapting their sales process and operations, dealers put consumers on an emotional instore roller coaster. Most of the time in the dealership is spent in a valley of negative emotion during a prolonged and stressful buying process.

The Way Forward

Dealers should embrace digitizing the buying process to meet consumer expectations. Digital retailing is a win-win because it can vastly improve dealership efficiency — and profitability — by enabling dealers to work deals, not leads.

As a first step, dealers need to replace the payment calculator on their dealership website with a self-penciling tool on the vehicle display page (VDP) in order to start deals online. Basic payment calculators give buyers bad information because they have an uncontrolled tool that allows them to enter unrealistic deal terms.

Shifting the conversation from price to payment meets 90% of consumers’ needs who buy based on their monthly budgets. And because buyers lead themselves to the “Yes” through a more comfortable and convenient online process, dealers can achieve higher profits when the conversation shifts off price to payment.

A digital retailing self-penciling experience on the VDP allows the dealer to control the parameters that build the deal structure and the vehicle-specific advertised monthly payments. When shoppers select their credit tier and/or finance or lease term, enter their trade information and adjust their preferred cash down, they are leading themselves to the right amount of car and farther down the path to the purchase.

This self-directed part of the journey is happening before dealers invest the time and money of the traditional labor-intensive sales process — a process that consumers would rather fast forward through online. With a self-penciling tool, dealers and consumers can avoid payment misunderstandings because the consumer is seeing a real payment based on real terms.

In the second step, car buyers and dealers agree on terms and make deals online. This is when dealers negotiate price and consumers fill out their finance application and receive approval. This step should include a full protection product catalog and monthly payments. In today’s virtual world, it is possible to build strong online relationships. Using tactics and tools to nurture a good virtual relationship will translate to a strong in-person relationship when the customer comes into the store to confirm the deal, test-drive the vehicle and sign the paperwork.

Contrary to what some people might lead you to believe, the final step in digital retailing is not putting a car in a shopping cart. There has been much fanfare about the prospect of buying online, but consumer research doesn’t support the idea of end-to-end click-to-buy for the majority of consumers. However, most consumers will appreciate — and expect — the convenience of electronic paperwork and esignature after test-driving the vehicle.

By digitizing the F&I process, dealers can simultaneously solve the top car buyer frustrations, achieve higher F&I product penetration, and become more efficient and profitable. While we are still in the early adoption phase of digital retailing, we have surveyed people who have used existing digital tools and they report being two to three times more satisfied with the process. They are more satisfied with virtually communicating with the salesperson, negotiating the deal, and the amount of time spent in the dealership.

Research says that, rather than being a concern, online F&I presentations are an opportunity. Most consumers report that they are more likely to purchase certain F&I products if they do part or all of the research at home or online. Additionally, digital retailing can be a profit center for dealerships because we found that cars sell faster and average more gross profit. And, by eliminating that “valley of negative emotion” for consumers, you will have happier and more loyal customers who enjoy visiting the dealership for the delivery and service.


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Embracing Digital F&I

2016 will be another year of accelerated growth in the ongoing shift toward online retailing. Thousands of auto dealers are already taking advantage of this evolution in the car-buying experience, and thousands more are sure to follow this year.

Consumers can buy nearly everything online, from TVs to paper towels, an experience we call “shopping cart ecommerce.” And those expectations of convenience are translating to auto retail and finance experience as well. However, cars don’t fit in shopping carts and the shopping cart ecommerce model doesn’t work for automotive retail.

Selling cars is a relationship business. It always has been and it always will be. The personal connection will always be an integral part of the equation. For F&I specifically, the Internet is a communication power tool that enables consumers to research products and put them in their consideration set before going to the dealership to verify and buy.

Frustration With the Buying Experience

For most people, the car purchase is the first or second largest investment they’ll ever make. Despite the size of this purchase, the top five frustrations of car buyers are all related to the buying experience. Research from MakeMyDeal and Autotrader provides us five important insights:

  • Less than 1% of consumers prefer today’s car-shopping process.
  • 54% of consumers will pay more for a better experience.
  • 84% of consumers say they would rather learn about F&I products at home.
  • 63% of consumers are more likely to purchase F&I products if they learn about them before visiting the dealership.
  • 72% of consumers find online F&I paperwork appealing, particularly in order to save time and avoid pressure when filling out paperwork.

When looking at these insights together, it’s clear dealers have a huge opportunity to improve the customer experience by digitizing the F&I process. Dealers are already using online menus and econtracting, and some have added esignature to their growing list of digital tools. These improvements not only provide an experience consumers are expecting but also reduce errors in data entry and simplify recordkeeping.

But focusing exclusively on digitizing paperwork leaves out what is perhaps the biggest opportunity to increase profit: It’s time to take the F&I product sales process online, starting with product presentation and pricing.

Prominently displaying product information, benefits and pricing within the inventory pages of dealers’ websites provides vehicle-specific information that will improve the consumer’s shopping experience. More importantly, it also enables the dealer to educate and inform consumers early in the buying decision, which increases profitability.

Without an online approach, the F&I product sales process is compressed into a high-pressure process amidst confusing paperwork during the hour or more the customer spends in the F&I office. Decompressing the F&I process by bringing product information to the consumer early and often allows them to self-educate and build interest in products before the F&I conversation, which in turn shifts this activity to an upsell instead of just a discovery process.

Busting the Trust Gap

From the time a customer enters the dealership until they complete the purchase, the main question on their mind is, “What’s your best deal?” Their sales professional knows, but they hold back until they get well beyond the meet-and-greet, qualify, walkaround and test drive.

From the time they shake hands with the customer, the sales team’s behavior is primarily driven by the need to get as much information about the consumer as possible —name, contact information, credit situation, cash on hand, monthly budget, trade-in — all the information the CRM and the DMS software need to book the sale.

With both parties doing their best to pry information loose from the other one, the stage is set for destroying trust between the customer and the dealership. This is a relationship dynamic you read about in major publications under headlines like “People Would Rather Go to the Dentist Than Buy a Car.” I call this phenomenon the “trust gap.”

Why is trust so important? Research from Autotrader shows over half of consumers won’t buy from a dealer that delivers the wrong customer experience, even if they do have the lowest price. After all, the car-buying process is a relationship process, and what’s a relationship without trust?

About one in five customers do make it through the sales process to the finance office, where this process continues. Buyer and seller continue to pull in opposite directions, with the customer primarily interested in leaving as quickly as possible and the finance manager working hard to spend as much time selling as many F&I products as possible. This process only reinforces the lack of trust in the process.

Busting this trust gap is surprisingly simple and profitable but requires a change in perspective about the sales process. Rather than hold back information as a means to try to control the customer, sharing product information and estimated pricing upfront and online gives consumers the feeling of control in their buying process and builds trust.

Giving customers pricing information and the ability to personalize their monthly payments doesn’t give them control of profitability, only a feeling of control over their buying decisions. When dealers stay in control of the deal structure (and profitability) and consumers have a feeling of control, both parties win.

The commonplace tools today are payment calculators and pricing promises. Payment calculators give consumers bad information about car payments and pricing promises focus on third parties as the source of truth instead of dealers. These tools widen the trust gap between consumers and dealers.

As for F&I products, a quick Google search for “extended warranties” reveals plenty of reports on whether the products are really worth the investment and warnings from consumer advocate groups about potential “rip-offs.” At best, consumers might find a website with direct-to-consumer sales of aftermarket products that short-circuit the dealer’s profit opportunity.

Rather than leave the airwaves open for negativity, dealers can flood their customers’ screens with relevant and positive messages about the coverage, benefits and pricing for available protection products. Replacing negativity with straightforward information builds the dealer as a trusted relationship and source of information. But that battle begins online, not in the finance office.

Converting the Dealership Visit From a Negotiation to a Confirmation

When dealers offer information upfront, the in-store visit totally transforms. Dealers cause this transformation by providing online vehicle payments and F&I product information and pricing.

When the consumer engages in an online deal-making experience, this shifts the uncomfortable price negotiation and budget conversation to a place where the consumer feels totally at home: the sofa in their living room. Getting customers past the unpleasant part of the purchase puts them at ease before they arrive at the store and reduces time spent at the dealership.

Connecting with customers and leading them to a “Yes” online involves receiving their first pencil, then answering their questions and responding to their proposal. Simply gathering customers’ contact information and working to set appointments is not enough to build a relationship and earn their trust. Actually engaging in the deal-making process with the customer while they are still at home earns their trust and shifts their state of mind for the in-store visit.

The in-store experience thus becomes a confirmation rather than a negotiation. Instead of coming to the store with their guard up, customers visit with their estimated deal structure in mind. They’ll be looking to validate those numbers, and if everything checks out, then the transition to the finance office is a seamless one. Customers will enter the finance office more relaxed, more comfortable and more receptive to a conversation about the F&I products that might be best for them.

As with any significant industry shift, digitizing the sales and F&I process will take a commitment to change and some trial and error. But it will ultimately result in more satisfied customers and higher profits. I firmly believe that online deal-making can close the trust gap and improve the overall car shopping experience for consumers. We can build an interactive conversation that starts online and ends in the dealership with the consumer driving away thinking, “That was the best car-shopping experience I’ve ever had!”

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