As a small child, I remember traversing the halls of the local Sears with my father who always acted like a little kid in the candy store when buying new tools. In my bright-eyed view, Sears was the place to go back then. They had the best selection and the best customer service for all of our home improvement needs. I remember how proud my dad was of his latest purchase, and how nice it was of the friendly cashier to hand me a lollipop.
Fast forward to today, and Sears has filed for bankruptcy, joining the graveyard of big box brands who have gone out of business, and the sad truth is that no one is terribly surprised.
So, what happened?
Reading the news, there are several speculations. One is that Edward Lampert was more interested in investments than building a brand. Another is that they were busy chasing Walmart while they should have been chasing Amazon. And yet a third says that they just needed to focus on making their brick and mortar stores more digitally connected. The truth is, it was most likely all of these things combined.
In my view, it is a lack of preparation and unwillingness to innovate to stay ahead of customer expectations that sunk the brand.
So, how does this relate to the automotive industry? Is this just another “innovate or die” example to prompt change? There are a lot of dealerships jumping into the e-commerce game these days, but if there is one lesson to learn from the fate of Sears, or Toys R Us for that matter, it’s that digitization is not a strategy unless you are willing to embrace it at the core of everything you do.
What is digitization?
Let’s first start with what it isn’t. Digital dealerships are not just dealerships that invest heavily in digital marketing. They are also not dealerships that just have a “buy it now” button on their website.
Digital dealerships are operators who leverage technology to streamline the entire sales process and are making changes to their value proposition, people strategy and pricing to create improved customer experiences. They are never satisfied & are constantly evolving. Digital dealerships don’t separate out the online experience from the in-store experience, they are continuously evaluating all of the different ways they can create more transparency and efficiency for everyone involved; and while technology is part of the solution (thus the digital reference), they are looking at everything that needs to be improved to make the process work flawlessly.
Companies like Sears and Toys R Us didn’t make it because they couldn’t embrace digitization to the fullest extent. They didn’t think through all of the ways they would need to embrace this to be successful. In today’s world, more and more consumers demand efficient online and in-store buying experiences. You don’t have to look that far to know that this is true. In today’s ecosystem we have millennials (estimated to be 40% of car buyers by 2020), who have specific expectations around digital capabilities, and companies such as Carvana, Amazon and Tesla who are radically changing the way people think about the car buying experience today. In fact, Industry consultant, Andrew Compton had a great quote recently about Carvana:
It’s less their [Carvana’s] digital retailing technology but how they harness the technology to connect marketing, sales, F&I and customer experience— in other words the entire company.
Digital dealerships are connectors, and it is these connections across the sales process that drive long term efficiency gains & higher CSI scores for their stores. While Digital Retailing tools, CRM companies and DMS systems play a role in helping to make these connections systematically, there are critical areas of your business that need to be thought through beforehand to ensure success.
First and foremost, start with your objectives. Being clear on your vision and what you are trying to accomplish with digitization is the first step to becoming a digital dealership.
Are you trying to reduce costs by moving administrative tasks to lower compensation roles? Are you looking to be more transparent so that you can increase your CSI score?
Whatever your objectives are, map out your vision and clearly communicate it with your employees and your partners so that they can rally behind it and provide solutions to support that outcome. Ephraim Barcelo of Crown Toyota holds a partner meeting several times a year to create this alignment of vision and strategy. I have been honored to participate and see firsthand the power of shared goals across a group of supporting vendors.
Once you understand your objectives clearly, it is time to evaluate your existing process and find opportunities to adjust where needed to best meet your goals. While there are many unique factors to consider at every dealership, I suggest starting with the following three areas as they are critical drivers to delivering a best of breed customer experience at your store.
Brand + People + Price = Customer Experience
Brand, people and price are all outward facing elements that your customer will experience, and it will set the tone on how they feel about your store. In order to get this right, you have to sweat the details. As such, here are a few tips to get you started in building your digital dealership playbook.
1. Identify your value proposition and ensure consistency at every touch point.
The important thing in picking a value proposition is looking at what your customer’s truly want from you (not just what your dealership wants) and then picking the one value proposition you can stand behind in a unique way. Today’s consumers care most about convenience, ease of use, knowledge and transparency, this is where Digital Retailing can help, but you have to look at every element of your dealership to ensure you are consistently living those values every day in every customer interaction.
2. Review your employee hiring profile & compensation plans for goal alignment
With turnover costing dealerships an average of $500k per year, it is no wonder that there is so much focus on recruiting the right people. But when was the last time you took a hard look at the type of employees you need to be successful based on your longer-term vision? There is a whole generation of millennials on the market and their profile could very much match what you need in your store. The point here is to figure out what your objectives are, how you might recast roles, develop new job descriptions and align pay plans accordingly. Equitable compensation plans that eliminate rivalry and reward for meaningful results are not only more attractive to the labor market, but also get your team working together to accomplish a common goal.
When common goals are established it is important to step back and provide employees with the autonomy to get things done. You need to ask yourself – who can make decisions in my store? In the traditional world only managers could. In the new digital dealership, customer facing employees should be empowered to pivot along with the customer. Every sales team member can now have access to where the customer is in their journey and be empowered to assist them along the way.
3. Develop a consistent and fair pricing strategy to build customer trust
Consistent and fair pricing does not mean you have to be one price. There are many well-known stores with market-based pricing that customers love for their transparency. Building customer trust requires a fair price that you can stand behind and then showcasing it consistently throughout all of the channels where you display pricing information, including your showroom. While this might seem obvious, nothing loses trust faster than a perceived bait and switch.
Even for the most transparent dealers, inconsistent pricing displays can happen if they are not monitoring continuously and reviewing their message around pricing from a customer experience point of view. Check your website pricing, see how you are displaying your price versus discounts that are available, and then compare this price to the price you are displaying within your digital retailing tool, as well as across the Internet. Those that sweat the consistency factor have much higher trust levels overall.
Digitizing your dealership is not for the weak at heart. It takes the ongoing dedication to continuous review and improvement; Have a visual of what perfect looks like and recognize that the prize is in the progress not just the accomplishment. Brian Pasch did a recent survey to shed light on the top challenges people see in getting digital retailing implemented at a franchise dealership. It is enlightening to hear that the top three challenges had nothing to do with the technology itself. Culture change, transparent online pricing & management fear of losing gross made the top of the list.
Digital dealerships acknowledge the fear of change and put their game face on. It doesn’t happen overnight, but for those who get a head start the rewards will be exponential.
