Dealership Marketing

The Missing Ingredient To Automotive Enterprise Software Recipes

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In recent months there has been a renewed effort by some of the largest automotive software providers to entice dealers to sign enterprise business agreements. These contracts bundle products and services to offer considerable savings to dealers who are willing to standardize on the vendor’s product suite.

The largest software companies serving franchise automotive dealers include CDK Global, Cox Automotive, Dealertrack Technologies, Dominion Dealer Solutions, and Reynolds & Reynolds. Some of these companies offer dealers a complete operating platform that includes the DMS, CRM, Inventory Management, Websites, Desking, F&I, and Fixed Operations software while others have a few key software pieces to offer.

Is an enterprise software agreement practical for finicky auto dealers? Could forcing the dealer to abandon a “best of breed” solution from their current multi-vendor configuration negate any potential savings of an enterprise contract?

The answer will vary based on the dealership’s needs and their vendor partner. However, this is a conversation that dealers should be having with their management teams before signing enterprise or strategic marketing agreements.

The Software Is Not Ready

It is my position that our industry is not ready for enterprise software licenses. Let me build my case by first addressing the “stickiness” of popular software products used by franchise auto dealers. I will define stickiness to be the time any one software product stays in the dealership before it is replaced by a competing solution.

To simplify the discussion, I will focus on the three main pillars of the dealership’s sales and marketing automation: the DMS, CRM, and their dealership website software.

Dealers rarely switch Dealer Management Software (DMS), which is a customized financial accounting system integrated with their manufacturer and service drive. If a dealer changes their DMS, it might be changed every 10 years. Dealers also hate to change their CRM software, because they have to retrain their staff.

If a dealer changes their CRM it might be considered every 3-5 years. It could be shorter if a new General Manager (GM) comes into the dealership with a specific CRM experience from their previous employer. In these cases, the decision to change CRM can happen on the first week that the new GM is in place.

Dealership websites have the least stickiness; influenced in part by exclusive OEM website requirements. Dealers have demonstrated their willingness to change their website platform every 1-2 years. These changes can based on quantitative data that reveals that they can do better with another website provider.

In many cases, changes to website provider occur from a 20 Group testimonial or just a great demo at a trade show. So much for website vendor loyalty!

The reason why dealers are so fickle with their websites is easy to understand. The cost of a dealership website, on a monthly basis, is really quite low. The average dealership website runs $1,200 a month. Since the cost of the website is so low, if a website provider is late to market with critical website technology, it is easy for a dealer to break an enterprise agreement. They will be quick to insert a more competitive website, and more than likely, an advertising technology package matched to the website platform.

To the software company, losing a website contract is not an insignificant matter. The profits of the website are not substantial in the bigger picture. The larger prize is the advertising revenue generated by integrated advertising packages that drive traffic to a dealership’s website.

With direct fees charged to the dealer and financial incentives from Google, the cash flow from digital advertising is at risk when a company loses control of the website platform.

Products Without Stickiness Will Not Stay Bundled

If the largest automotive software companies are serious about creating true enterprise value, the missing ingredient to their recipe is tighter integration between their own products. There is no downside for a dealer to change their website platform when integration with their CRM and DMS is weak and/or presents no real value.

In many cases, there is also no downside to changing their CRM platform. This fact speaks to the state of software integration in the auto industry.

If software companies presented true innovation across their interconnected software products for DMS, CRM, Inventory, and Websites, dealers would be reluctant to switch to competing solutions. If the enterprise software package was really helping a dealer sell more cars, then dealers would be reluctant to change. If there were significant time savings with an enterprise software solution, dealers would be more reluctant to change. Right now, dealers are not seeing a clear value proposition from enterprise software agreements.

So why are dealers signing enterprise software and services contracts?

Good sales presentations and the inability for dealers to evaluate the integration claims made by their vendor partners. This is where dealers need to invite neutral third parties into the discussion that can be a technical advocate for the dealership.

Enterprise agreements need to come with a clear list a Key Performance Indicators (KPI) and a roadmap of when they will be realized, who will inspect them, and a fallback plan when the KPIs fail to improve.

I believe that automotive software companies have been so focused on building a large portfolio of products that they have delayed the integration to make them sticky. This is their Achilles heel. This is also the next battleground for software providers. The winner of the battle will be determined not by a shiny new feature. The victor will deliver attractive, exclusive, and powerful innovation that is woven between individual software products.

Enterprise agreements will not hold water if the sum of the parts is not greater than the whole. Each piece of a software vendor’s portfolio must be competitively strong but it must create a greater competitive edge when integrated into a larger vendor suite. Will this challenge the open architecture movement? It may but dealers need to consider the tradeoffs that impact the bottom line of their business.

Without the proper due diligence and proper technical knowledge, dealers who sign enterprise agreements will just be taking a step backward, not forward.

Community Feedback

One a scale of (1-10) with 10 being highly valuable to the business, how would you rate the value of the software integrations in your dealership across DMS, CRM, and Websites?

Is there a better solution on the market today?