DealerExec Magazine Q4 2016

DealerExec A DrivingSales Publication • 4th Quarter, 2016

A DrivingSales Quarterly Covering Dealership Brand, Capital and People.

Walser Automotive Group

Doubles Down on

Training

BY JOY HANNEMANN • PAGE 12

Visit DrivingSales.com to view more than 30,000 verified dealer ratings of over 800 vendors in 23 categories. de_q4_1011b.indd 1

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WHAT DOES THE NEW DEALERSOCKET LOOK LIKE?

Configurable Homepage Elastic Search Multi-Layout Responsiveness Per User Widget/Profile Settings Automated Status Updates Full CRM Tablet Browser Support Multi-Option Task Completion Website Shopping Behavior Customers in Equity Position Lease Customers at End of Term Serviced Not Sold Customers Walk-Around Videos Inventory Search VIN Scan of Trade-In Mobile Driver’s License Scan Month-to-Date Ups Customer Loyalty CSI Cases to Resolve Upcoming Appointments

YOU DECIDE. YOU SPOKE. WE LISTENED. The new DealerSocket is designed around your day with easy workflows that make sense.

WATCH THE VIDEO : DealerSocket.com/EasyWins

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866.523.8807

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F O U N D E R ’ S

L E T T E R

Dealership Executives,

A

t DrivingSales, we drive innovation and excellence in the retail auto industry by optimizing a dealership’s greatest asset, its people. It’s what drives us everyday!

This is one of the reasons why we made a major investment

to create the industries first and only comprehensive resource for researching products for your dealership this year. Our independent dealer-savvy experts have written Buyer’s Guides to help you focus on the key differences between products and how to find the best match for your store. Detailed product reviews then help you quickly narrow your evaluation to a short list of the best products for you and your team.

We would hope you find our Vendor Ratings on DrivingSales.com to be an essential resource to you and your team in all your purchase decisions. Q4 is a great time to find the resources and tools you need to plan your 2017 forecast.

We wanted to take this a step further by changing our quarterly magazine to

DealerExec The Team Jared Hamilton FOUNDER

@jaredhamiltonDS

Mike Jeffs EDITOR

mike.jeffs@drivingsales.com @mikejeffs3

Steve McFarland DIRECTOR, MEDIA SALES

steve.mcfarland@drivingsales.com

Jeff Lasson MEDIA SALES EXECUTIVE

a bi-annual Buyer’s Guide with more in-depth product listings and review. We

jeff.lasson@drivingsales.com

have extended our team in order to randomly call dealerships and collect more

Brent Noble

reviews in additional categories. Remember, each dealership employee review has been verified via phone call from a member of our team.

We will be publishing more Vendor Ratings than every before. The new Buyer’s Guide will be sent to dealerships in February 2017. To subscribe for the Buyer’s Guide visit: http://go.drivingsales.com/buyersguide

MEDIA SALES EXECUTIVE

brent.noble@drivingsales.com

Justin Rhoane MEDIA SALES EXECUTIVE

justin.rhoane@drivingsales.com @JRhoane

We at DrivingSales remain committed to your success. Good luck gearing up for a successful 2017.

Sincerely,

Jared Hamilton Founder, DrivingSales, LLC

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Thanks to our Sponsors!

DealerExec ABOUT THIS PUBLICATION DealerExec is published quarterly

by DrivingSales, LLC featuring executive resources for automotive retail leaders covering dealership Brands, Capital and People, and a quarterly ranking of dealership vendors as rated by dealers themselves. Within the first issue of each year, DealerExec announces the annual winners of the the Dealer Satisfaction Awards from several Vendor Rating category.

SUBSCRIPTIONS To subscribe, visit DealerExecMagazine.com. Printed in the United States of America.

Copyright Š DrivingSales, LLC 2016. All rights reserved. No part of this publication may be reprinted or otherwise reproduced without publisher’s written permission. DealerExec and DrivingSales, LLC assume no responsibility for unsolicited manuscripts or photographs.

LETTERS TO THE EDITOR DealerExec and DrivingSales, LLC welcome letters to the editor.

If you have questions about the publication, or would like to make a comment, or voice an opinion about the magazine, DrivingSales, LLC, or the industry in general, please feel free to write us.

Please send letters to mike. jeffs@drivingsales.com. Include a phone number and email address.

Letters may be edited for clarity or space. Because of the high volume of mail we receive, we cannot respond to all letters.

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C O N T E N T S

News 10 DrivingSales News

DrivingSales News features exclusive reporting on dealership tech trends and innovations in automotive retailing directly from the DrivingSales editorial team

Features

20

12 Walser Automotive Group Doubles Down on Training

Centralized training department stimulates constant learning & delivers foundations for career growth at Walser

24

BY JOY HANNEMANN

16 Protecting Your Profits

How to address margin compression in an age of slowing auto sales

BY ALEC GUTIERREZ

20 Peter Cooper ‘Sticks His Neck Out’ to Stay Competitive Facing Industry Disruption

How did Lexus of Lehigh Valley achieve #1 in owner satisfaction in their region, #6 in the nation?

BY JOY HANNEMANN

24 Influencing a Car Shopper’s Journey: Leveraging CPO

Attention needs to be given to CPO and service programs at the dealership

BY MICHAEL SOLHEIM

30 Dealer Guide to Engaging Millennials in the Dealership Workforce

34

What do they value from employers?

34 Back to Basics: 3-Point Digital Marketing ‘Stress Test’ Champion communication between stake holders of each department to promote marketing synergy.

42

BY MATHEW CLIFT

38 Are You Maximizing Your Fixed Ops Revenue?

Create a win for the department and for your dealership

BY SEAN UGRIN

42 Artificial Intelligence Coming Your Way

How Chatbots could change dealership’s online or website chat system

BY CLIFF BANKS

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On DrivingSales.com, dealers can rate their vendors. All reviews are verified to be legitimate and posted for you to learn who the best vendors are – directly from your peers.

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Over 30,000 unbiased vendor ratings submitted by verified dealers.

CATEGORIES 6 Chat Tools & Services CRM/Sales Department Dealership Management Systems (DMS) Internet Lead Management (ILM)

8 New Car Leads Owner Marketing/Equity Mining SEM - PPC Used Car Advertising Websites

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Chat Tools & Services

Solutions that allow conversation / interaction with individuals while they interact with a website.

COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

Contact At Once!

Chat + Text Digital Connections Platform

1

100%

CarNow

Visual Sales Messenger

2

100%

Gubagoo

ChatSmart

3

97%

CRM-Sales Department

Customer Relationship Management (CRM) systems track and maintain all customer / employee interactions throughout the life cycle of the client.

COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

ELEAD1ONE

ELEAD1ONE CRM

1

99%

DealerSocket

DealerSocket CRM

2

98%

VinSolutions

Connect CRM

3

95%

Dealership Management Systems (DMS)

Dealership Management Systems (DMS) provide Accounting, Service, Parts and Sales/F&I Department systems to support dealership operation.

COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

Autosoft

FLEX DMS

1

Auto/Mate

AMPS

2

94%

Dealertrack

Dealertrack DMS

3

87%

97%

Internet Lead Management (ILM)

Products designed to assist dealerships in handling internet inquiries.

COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

ELEAD1ONE

ELEAD1ONE ILM

1

100%

CallSource

CallTrack

2

100%

b

Category scores are computed per category and are not comparable across the board. For questions about Vendor Ratings, please email to bart.wilson@drivingsales.com

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BUILT TO PERFORM

THE BENCHMARK IN AUTOMOTIVE SOFTWARE

CRM

CONTACT

SERVICE

TRAINING

GENERATE MORE PROFIT FOR YOUR DEALERSHIP "The reason we chose ELEAD1ONE is because we wanted a full circle CRM. With ELEAD1ONE, it integrates seamlessly with our DMS, and allows us to centralize everything — our Desking, our CRM, our phone calls, our follow-up – into one vendor."

Schedule a Demo Today! www.elead-crm.com l 888.989.8077

-Steven Hoggle, General Manager Camp Chevrolet Cadillac, Spokane, WA

© 2016 Data Software Services, L.L.C. All Rights Reserved.

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New Car Leads

Lead provider services that aggregate customer inquirers from owned and third-party web properties and sell these leads to dealerships.

COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

Autobytel

New Car Leads

1

96%

Car Gurus

Listing Packages (New Car Leads)

2

93%

Owner Marketing/Equity Mining Data segmentation and analytics tools that help identify and target potential customer opportunities based on lifestyle and historical purchase patterns.

COMPANY

PRODUCT

ELEAD1ONE

GoldDigger

OVERALL RANKING

RATING

1

REC.

100%

SEM - PPC Search Engine Marketing (SEM) and Pay-Per-Click (PPC) solutions that help determine investment in display and paid ad campaigns.

COMPANY

PRODUCT

Dealer eProcess

Digital AMMP

OVERALL RANKING

RATING

1

REC.

100%

Used Car Advertising Third-party consumer-facing websites designed to display dealership inventory to in-market consumers.

COMPANY

PRODUCT

OVERALL RANKING

RATING

REC.

Autotrader

New, Used, and CPO Inventory Listings

1

85%

CarGurus

CarGurus Listing Packages (Used Car Leads)

2

85%

Websites Digital solution providers that create full-service website products designed to be the primary digital marketing presence for a dealership.

COMPANY

PRODUCT

Dealer Car Search

Responsive Websites

OVERALL RANKING

1

RATING

REC.

98%

Category scores are computed per category and are not comparable across the board. For questions about Vendor Ratings, please email to bart.wilson@drivingsales.com

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How Do Vendor Ratings Work?

The DrivingSales Vendor Ratings site is the first formal mechanism for dealers to rate and review their vendors in a comprehensive, real-time vendor directory. It empowers dealers by allowing them to learn about all the solutions available and to view actual customer feedback, both good and bad, about how each solution actually performs.

Rules •

Only dealership employees can post ratings and reviews. Reviewers are verified to ensure they are valid and eligible to leave reviews.

•

Dealership employees can only rate and review the products they have experience using. The ratings are a chance to hear from actual customers with live experience using the solutions in their stores.

•

Each reviewer must answer three questions to complete their rating: 1. How many stars does the solution deserve?

2. Would you recommend the solution to a friend?

3. Why would or wouldn’t you recommend the solution?

•

All three components of the review, along with the job title of the reviewer, are posted live to DrivingSales.com for all to reference when selecting new vendors.

Safeguards •

DrivingSales.com protects the anonymity of each dealer employee who leaves a rating and review.

However, DrivingSales requires valid name and contact information for each reviewer so that each reviewer can be validated.

•

Each review is passed through a variety of technological checkpoints to ensure vendors are not gaming the system. Furthermore, DrivingSales staff calls to verify a large percentage of the reviews.

Vendor Ranking In each product category the vendor solutions are ranked in real-time as each new dealer rating is submitted. The vendor products are ranked based on a weighted Bayesian Algorithm. This is a standard mathematical calculation that looks at the number of stars the reviewer gave as well as the statistically valid sample size needed, relative to the competitive set, to create a ranking based on the statistical accuracy of the results. Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews.

We encourage all dealers to rate and review their vendors by visiting DrivingSales.com/Ratings

Dealer Satisfaction Awards The DrivingSales Dealer Satisfaction Awards recognize those solutions with the highest vendor ratings. For each category within the vendor ratings there are three award winners, the “Highest Rated” vendor and two “Top Rated” vendors. These awards reflect products and providers with a proven record of success and excellence in serving their dealer clients. The Dealer Satisfaction Award trophies are presented annually.

Learn more at DealerSatisfactionAwards.com

Rankings Only dealership employees are allowed to rate their vendors on DrivingSales.com and all submitted ratings are verified. Final rankings are mathematically calculated on both the average user star rating as well as the intensity of dealer support for the vendor (number of reviews). Sometimes that will result in a vendor with a lower average star rating but a high volume of reviews being ranked higher than a vendor with more stars but fewer reviews.

The Vendor Ratings in this issue are based on the aggregate of all dealer ratings submitted from January 1, 2016 to October 1, 2016. *CATEGORY SCORES ARE COMPUTED PER CATEGORY AND ARE NOT COMPARABLE ACROSS THE BOARD. FOR QUESTIONS ABOUT VENDOR RATINGS, PLEASE CONTACT BART.WILSON@DRIVINGSALES.COM

View detailed vendor reviews written by verified dealers at DrivingSales.com/Ratings

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DrivingSales News features exclusive reporting directly from the DrivingSales editorial team. We cover important issues facing dealerships, with a focus on innovations that impact dealership operations.

Here is a recap of the top stories from 2016 impacting your dealership. You can find all these stories and more on DrivingSalesNews.com

Recalls Continue to Grow With over 100 million cars recalled between the years 2014 and 2015, those numbers continued to grow in 2016. The largest single recall in U.S. history, Takata, has continued to wreak havoc creating tense relationships between consumers who want their vehicles fixed and their dealers who lack the parts to fix them. The NHTSA is increasingly criticizing manufacturers for low recall repair completion rates and threatening everything from increased regulatory actions, allowing independents to complete recall work and, in the case of Takata, potential criminal action. The topic of recall repairs has dominated most dealership, and consumer, conversations and will likely continue to do so for the forseeable future.

In the case of Takata specifically, many manufacturers continue to install defective Takata airbags into cars on the assembly lines

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knowing that they will need to be recalled in 5-7 years for lack of a viable alternative.

FCA Sales Reporting January saw a lawsuit brought against FCA which alleged that FCA paid dealers to falsify sales figures by reporting units as sold at the end of the month then reversing the sales a few days later in order to inflate sales figures. It then escalated to include FBI, SEC and DOJ investigations for securities fraud and potential criminal wrongdoing. FCA has since revised all of its sales figures dating back to 2011. This revision showed that FCA’s sales increases actually ended in late 2013 rather than the previously reported 6-year streak of year-over-year sales gains. Most recently, it was reported that FCA’s head of U.S. sales, Reid Bigland, may face personal criminal charges over these alleged fraudulent activities.

Volkswagen Emissions Scandal The investigation into whether Volkswagen cheated on emissions testing by installing devices came to a head this year with a $15 billion settlement to drivers of affected vehicles. In this settlement, Volkswagen will either buy back or fix approximately 475,000

vehicles. Owners have the option of selling back their vehicles to Volkswagen at the pre-scandal valuation along with a cash payment of 20 percent of the vehicle’s value or keep their vehicles and have them fixed. Leased vehicles are eligible for immediate termination without penalty. The settlement also saw Volkswagen agreeing to pay $2.7 billion in fines to the EPA and California’s Air Resources Board as well as an addition $2 billion towards zero emission vehicle research. In October, Volkswagen then agreed to pay dealers up to $1.2 billion for losses suffered as a result of the scandal with dealers expected to receive $1.85 million each. Dealers have the choice to either accept the settlement amount or pursue individual legal action against Volkswagen.

Tesla Keeps Fighting; AutoPilot Feature Blamed for Deaths Tesla continues to attempt to bring its direct-to-consumer sales model to states across the country facing heated battles with auto dealer associations and dealers.

It has applied for dealer licenses, been granted (and denied) showrooms in some cities in which to showcase its vehicles without any direct sales, it has seen grassroots movements by

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Tesla owners supporting it as in Michigan where 400 Tesla owners banded together to give test drives to prospective Tesla buyers in the state. This year has also seen Tesla seen some fairly large bumps in the road with vehicles catching on fire as well as several deaths blamed on the AutoPilot feature it rolled out to vehicles allowing drivers to drive hands-free. Tesla claims driver error and that the feature was never meant to be used without an actual driver paying attention. In the most visible case, a man was killed due to the vehicle’s sensors not detecting a truck crossing a road. There are allegations that the driver had been watching a Harry Potter movie at the time of the accident.

Cadillac’s ‘Project Pinnacle’ and Buyout Offer Cadillac announced in Quarter 3 the roll-out in early 2017 of “Project Pinnacle,” a tiered system that it would assign dealers to based on various factors such as sales volume, CSI and their implementation of certain technology, individual salespeople dedicated only to selling Cadillacs and concierge services such as roadside assistance and pick up and drop off service for service customers. The lowest tier would no longer be able to physically stock new Cadillacs and would only be able to house virtual showrooms. The tiers would offer different compensation via higher margins and incentives going to dealers in the higher tiers. Dealers that would be in the lower tiers have argued that the investment

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required to qualify for higher tiers is substantial and would put them at a competitive disadvantage as higher volume dealers would be able to sell vehicles at lower prices. Amid dealer pushback, in September Cadillac chose to offer to buyout dealer franchises to almost 400 dealers if they chose not to make the necessary upgrades and adopt the new tiered system being implemented. The buyout offers range from $100,000 to $180,000 and were made to dealers who sold less than 50 new Cadillacs to consumers in 2015. Dealers have until Nov. 21 to make a decision on whether to accept the buyout.

Complete Online Retail Sales Push Increases With Silicon Valley continuing to birth new entrants into auto retailing offering customers the ability to buy vehicles from start to finish online, major industry companies along with startups have responded by providing their own solutions for dealers. Even OEMs are dipping their feet in the online consumer sales process with GM’s launch of its Factory Pre-Owned Collection in which consumers can browse an inventory of 30,000+ vehicles housed by GM, select one and then have it delivered to the dealership of their choice.

Everything from negative consumer perception of the car buying process to the time involved in buying a car has seen companies react by increasingly rolling out both companies and solutions that shorten the process and/or move of it online.

Some studies suggest that only a

small percentage of consumers actually want the ability to buy a car completely online while others suggest the opposite. The same polarization exists when discussing the optimal time to complete a sale with some saying 90 minutes or less and others placing the optimal time at around three hours.

The Race to Autonomous Cars Everyone from tech companies to OEMs are announcing their entry or initiatives to build and roll-out mass produced autonomous cars.

In fact, some are already being tested on roads in various states and there’s even a self-driving Uber roaming the streets of Pittsburgh. While some companies are indicating autonomous cars are right around the corner, many are indicating that fully autonomous cars that are 100 percent safe won’t exist for another 10 years. Problems preventing earlier roll-outs include everything from vehicle cybersecurity to current road infrastructure. Existing vehicles being driven by people co-existing on the same streets as autonomous vehicles pose their own potential hazards as while autonomous vehicles may be predictable in their responses to perilous situations, humans can be unpredictable. Then there exists the argument over whether consumers actually want to give up control of their vehicles in the first place. Regardless, autonomous cars continue to be in the forefront of the initiatives of many companies and will probably be so for some time.

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P E O P L E

Walser Automotive Group

Doubles Down

on Training Centralized training department stimulates constant learning & delivers foundations for career growth at Walser

BY JOY HANNEMANN

12

H

ey, KJ did a great job today,” Bob “Spike” Spicher said as he greeted a member of Walser Automotive Group’s corporate training team. DrivingSales News was accompanying the trainers on a tour of Walser Toyota, the group’s highest volume dealership in Bloomington, MN. Spike is a car sales veteran – employed

by Walser for 28-years. That afternoon, he had been seated at one of many tables with chairs scattered in an open sales floor.

He stood neatly dressed with a crisp collar under a sweater embroidered with the organization’s logo. He had fists-full of papers and laptop in hand. Earlier that day, Spike attended a monthly training session on F&I sales process at the corporate office located just one mile from the store.

Kaneeshia “KJ” Johnson is a Corporate Trainer at Walser Automotive Group and she specializes in finance sales process. She was hired as a CST (Customer Specialist Trainee) just two years ago.

Spike’s praise for KJ’s class is not anecdotal. As the corporate trainers make their way from headquarters into the stores, the enthusiasm seems contagious and emails about the session’s success have already started flying. The finance training offered that day is one of many courses offered each month of varying topics and levels of employee expertise/performance.

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The continuing education calendar is just one piece of a grand training program that is foundational to the “transformational change” that Walser has earned the industry’s attention for. In under a decade, the group has gone one-price, eliminated F&I, implemented team-based selling, and modernized their HR processes with strategic initiatives in management training and career progression, centralized recruiting geared toward millennials, and restructured pay plans with living base wages and modified incentives.

Building foundations for individualized career growth “I dropped the seed early on that I wanted to be in a training role,” Kaneeshia “KJ” Johnson said. “I got after it and here I am.”

Hers is one of many fast-track success stories since the groundwork and processes for growth were put in place.

The 8-person training team works as a support function to the stores, so twoway communication is imperative to the department’s effectiveness. Responsibilities include: organizing and administering new hire orientation, a 13-week program for sales, delivering classroom training at the corporate headquarters (examples: Motivating Employees, Warranty Compliance, Learning to Excel), on-the-job training, dealership audits, individual proficiency evaluations, and constantly writing,

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Kaneeshia “KJ” Johnson, Corporate Trainer at Walser Automotive Group, delivers a one-hour finance class for 4-star customer specialists and account executives.

A defunct used car store was repurposed as Walser Automotive Group’s simulation dealership.

Sales and service team members practice their classroom skills in the distraction-free environment.

BELOW Training Director Kane Lindsay (left) and Finance Center Manager Cathy Wilsey (right) pose for a photo at corporate headquarters. By afternoon, the work stations pictured behind will be filled with finance staff reviewing and preparing finance menu presentations for sales teams across the platform.

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WALSER’S “DRIVEN TO LEAD” BASICS Level 1

6 Courses: Management Basics

Level 2

Understanding Walser’s Business Model, Interdepartmental Communications, Assignment: Business Plan Development and Presentation to a manager in the company

Level 3

Experiential Learning, for example: sitting in on financial meetings, marketing planning, or terminations

Level 4

Shift in focus to development of personal strengths to improve management capability

revising and improving curriculum. The training department consists of a training director, a sales and finance training manager, a service training manager, two sales and finance trainers, two service trainers and a floating role.

In addition to courses offered at the corporate office and on-the-job, Walser has a dedicated simulation dealership. The epitome of making lemonade out of a lemon, the nowtraining facility was a defunct used car dealership; group ownership considered turning it into a parking lot.

The simulation dealership allows new hires to practice their sales processes on real cars in a distraction-free environment. Service and lube tech training also takes place in the facility.

“We proved the design worked when we realized that even though a sales trainee is polished and graduates from the classroom, they go backward when they’re thrown into the dealership,” Kane Lindsay, Director of Training said. “It can be awkward at first! Here, at the simulation dealership, we can laugh about it and improve before they’re face-to-face with a customer.”

As part of the comprehensive training design, Walser has an online learning management system (LMS) hous-

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ing a training library and on-demand videos for employee access. This is also the online registration tool for any classroom offerings.

With all these tools available, senior leadership advocates that each customer interaction or survey response can create a training opportunity and each leader should understand their employees’ career aspirations and help guide their path. A system Walser calls “Driven to Lead” tracks a team member’s successful completion of a series of milestones on the path to management; Level 4 is reserved for GM/Directors.

“One of things we’ve struggled with is developing sales people beyond the sales team lead role. Right now, they’re people managers but if they want to be a new or used car manager… how do they get there?” Chris Hondl, Sales and Finance Training Manager said. “Driven

to lead solves for that.”

Hondl says the goal is to develop bench strength two-deep, which will greatly assist as the group continues to grow.

“Walser has created a culture of training. While all the curriculum and programs weren’t built overnight, we have had support of all since day one,” Lindsay (Director of Training) said. “We have an organization where employees seek training, managers hold teams accountable to attendance, and senior leaders promote the opportunities.

Training is not optional.”

Effectiveness of a training department Each store has a per-employee training expense, depending on their job class. While the training department does end the year in the black, its goal is breakeven and budget is 0.6 percent of the group’s gross.

Walser’s training team relentlessly tracks what they call “touchpoints” or any time an employee attends a classroom training session or an on-the-job session facilitated by Walser Training.

The size of the dealer group undoubtedly has a centralization advantage. In 2015, the corporate office was implemented and it serves the stores with accounting, IT (including development), marketing, project management including acquisition and process improvement, inbound/

ANNUAL TOUCHPOINTS SINCE TRAINING DEPARTMENT INCEPTION 2014

4296 touchpoints

2015

5315 touchpoints

2016

5993 touchpoints (on pace for 7990)

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WALSER AUTOMOTIVE GROUP SNAPSHOT Walser Automotive Group has been family-owned and operated in Minnesota for over 50 years. The group has 15 franchises and two used car stores in the Minneapolis-St. Paul area and recently added 10 luxury brands with the acquisition of Wichita Luxury Collection.

GROUP METRICS (EXCLUDING WLC) New Car Volume (2015)

13,000

Used Car Volume (2015)

12,311

CSI

Sales: 8 of 8 Walser stores are above national 90-day score Service: 8 of 8 Walser stores are above national 90-day score

Total Employees Corporate Office Employees Training Team FTEs

outbound sales and service BDC, finance, recruiting, training, and owner’s and senior management offices. Over 300 of group’s nearly 1,500 employees work from headquarters.

“The dedication to training is an immense attraction to people coming into our organization, and ultimately a key to our success story,” Co-owner Paul Walser said. “Our willingness to dedicate resources to our training department, to take this great raw material coming to us and mold it into something that can be productive for Walser and also allow people to achieve their own goals in terms of their careers, is unique and embodies our business philosophy.”

A culture of learning “Every single employee is a trainer.” – from Walser Automotive Group’s Operating Principles Manual Spend a day among Walser Automotive Group staff and it’s clear – the group is practicing what they preach and they are bought-in to the advantage of both foundational and continued learning. The breadth of tools at the disposal of employees has

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JOY HANNEMANN

1437 309 8

given many new hires opportunities that they could not have imagined and their stories serve as inspiration for the newbies.

Ellie Swenson is Dealership Operations Manager at the Toyota store in Bloomington. She said, “One of the great things about this organization is that if you have the right attitude, and a company-first attitude, they’ll teach you everything you want to know. The only thing that holds you back is your desire to grow.”

Both internal and external factors play a part in the urgency of this change for auto retailers nationwide. Internally, turnover is a problem and many dealers recognize it. Consolidation will continue and dealer groups will inevitably get larger – if only a few employees are growing in the organization, how will dealers continue to meet hiring demands if they aren’t investing in their bench?

The recent acquisition of Wichita Luxury Collection will test Walser’s ability to replicate their fresh ideas and enthusiasm in a new market and with new products. Note to the fast-followers: keep a close eye on Walser Automotive Group!

In her role at Lancaster Investments, Joy Hannemann supports Jon Lancaster’s start-up investments, real estate development, and worldwide speaking engagements. Joy writes for DrivingSales Vendor Ratings and is also a regular contributor to DrivingSales News on the topics of dealership best practices, employee development & engagement, leadership & culture, branding & social amplification, and customer experience.

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C A P I T A L

Protecting Your Profits How to address margin compression in an age of slowing auto sales

BY ALEC GUTIERREZ

16

F

or the past several years, it’s been a good time to be an auto dealer. With year after year of strong sales and comfortable profits, it’s tempting to think that the good times will just keep rolling. But you know as well as I do that the market’s hot streak has started to cool. To keep your dealership growing profitably, it’s time to really think about how to approach the needs of a quickly evolving market that has potentially peaked.

I know, compressing margins aren’t exactly news. Over the last five years, the average margin on new cars decreased by 30 percent, while used car margins dropped by 20 percent. And during that same time, profitability remained flat at 2.2 percent.2 Still, most dealers I know haven’t been too concerned about this so far. Sales volumes have been high, so per-unit margin compression isn’t too noticeable. Fast forward to today, though, and that could all change.

Auto sales have always been cyclical, and the momentum of the last few years is beginning to slow. In August, U.S. automotive sales dropped by 4.1 percent, and the seasonally adjusted annual rate (SAAR) came in at 17.0 million – the third-lowest total of 2016 so far.3 We expect to see 2017 end the year with sales having dipped slightly from the all-time record of 17.5 million in 2016, to around 17.3 million units overall. While volume will remain healthy, even a modestly declining sales environment in an ultracompetitive marketplace like we’re in today will mean margins continue to face downward pressure.

Lowering your prices might be the first

thing that comes to mind to counteract stagnating sales, but that’s not necessarily the answer. You can only discount so much before your margins feel the squeeze – and the race to the bottom isn’t one you want to win. Luckily, heavy discounts haven’t been required across the board as of yet, especially with new car transaction prices rising to an all-time high in excess of $33,000 over the past several months, however there are signs that consumers are reaching their budgetary limit. In August, manufacturer incentive spend was up more than 10 percent, a strong indication that consumers may be seeking deeper discounts as prices rise.

Even the latest auto lending stats point to downward pricing pressure at retail as indicated by longer term loans and record high leasing. Don’t panic, though! There are plenty of other ways you can close the sale in a lower-volume industry, and none of them involve damaging your profits.

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1. Embrace what sets you apart

The pressure

With fewer customers in the market to buy a vehicle, the landscape is more competitive than ever before. The pressure is on to make sure customers choose your dealership when they’re ready to purchase. So how should you convince them you’re the best choice?

To bring in customers without throwing away your profits, differentiation is the name of the game. Customers don’t buy cars based on price alone. They’re also looking for an outstanding experience – something that puts your dealership head and shoulders above the competition. Your job is to decide what the most effective way to differentiate your dealership is, and then execute it effectively and consistently.

I know too many dealers who cast their net too broadly when trying to differentiate. They end up doing a decent job at most things, but “decent” won’t bring in customers. Think carefully about what you want your dealership to be known for specifically. Is there a niche you want to cater

is on to make sure customers choose your dealership when they’re ready to purchase.

So how should you convince them you’re the best choice?

to? Will you specialize in luxury vehicles, or position yourself as a family dealership? Will you offer no-haggle pricing? Whatever you decide, make sure it’s specific and compelling to your target customers.

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2. Master your message Once you’ve chosen your dealership’s differentiating factor, the next step is to communicate it to customers. After all, it doesn’t matter how great you are if no one knows about it! And be proactive – because if you don’t communicate your differentiator until customers show up on your lot, it’s already too late. 71 percent of today’s automotive customers buy exactly what they intended when they arrive at a dealership.4 Once you see them in person, they’ve already made up their minds. You have to prove you’re their best choice while they’re researching their options, and are still open to being convinced.

The average automotive customer spends 59 percent of the buying process online,5 so the internet is a powerful place to target your messaging. Of course, there’s a complication: Not everyone browsing the internet is ready to buy a car now. You should be spending your valuable advertising dollars on in-market, buy-ready customers.

Otherwise, you’re throwing away money on people who aren’t even interested.

To achieve this, I recommend a tactic called behavioral targeting. Behavioral targeting collects real-time browsing data from major third-party industry sites, which dealers can use to create targeting lists for online advertising. By tracking what customers visit online, you can determine who’s in-market, where they are in the buy cycle, and even what vehicles they’re interested in. No more wasting your budget on people who won’t buy – and no more losing profit by letting inmarket customers slip through your fingers.

ence, too. In fact, 54 percent of customers will pay more for a car if a dealership provides an outstanding experience6 – and 53 percent would purchase more often.7 Unfortunately, most dealers are a long way from reaping those benefits. Currently, only 22 percent of customers say their carbuying process was never frustrating.8 It’s your responsibility to remove as much friction and frustration from the buying process as possible. If you do, both your customers and your bottom line will thank you.

I recommend starting by addressing most customers’ top concern: time. 44 percent of customers believe the car-buying process takes too long.9 And no wonder. On average, it takes three hours to purchase a vehicle at a dealership, and over half that time is spent on negotiations or paperwork.10 Getting customers into the car they want faster will drastically improve their experience – and your margins.

4. Validate your pricing Many dealers I’ve spoken to are hesitant to charge more for a high-quality experience. “My customers expect the lowest price!” they tell me. “If I don’t price lower than my competitors, I’ll lose business.” I get it; we’ve all been warned about today’s price-conscious customers. And your customers do care about price. Just not in the way you might think.

3. Focus on the experience If your messaging brings the right buyready customers into your dealership, you might think your profit’s in the bag. After all, they’re obviously interested in your inventory. Can’t your sales team take it from here? But in fact, your customers are deeply invested in the quality of the buying experi-

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Believe it or not, only 20 percent of customers are looking for the lowest available price when they buy a car. The other 80 percent are satisfied with fair pricing. In other words, there’s no need to sacrifice your margins to steep discounts, so long as customers believe your price is fair. That belief is key, though. Without it, customers will over-negotiate to make sure they’re getting a good deal, and your profits will suffer for it.

To prove that your prices are right on the money, turn to the sources your customers trust. Use third-party vehicle valuation data to show customers what a given car is worth on the market, and how your price stacks up. Showing customers that your prices are within a fair market range helps nurture their trust, and makes them less likely to fight you for every dollar.

5. Don’t neglect the long term Even after you’ve perfected your pricing and closed the sale, your profit-protecting work isn’t done. A sale shouldn’t be the end of the road. It should be the beginning of a long-term relationship, one that leads to retention, referrals and repeat sales. And because it costs 10 times less to retain a customer than it does to win a new one,11 it makes sense to hold onto every customer you have.

The F&I office is a great place to focus your retention efforts and start your customer relationships on the right foot. Being fully transparent and allowing customers to research their options ahead of time improves customer trust. Even better, it increases F&I sales by an average of 31 percent per contract.12 Providing detailed information about add-ons like service contracts, prepaid maintenance or gap insurance gives customers more confidence in the value you’re providing – the kind of confidence that leads to loyalty.

Your service department is another great place to nurture customer relationships. In

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fact, when it comes to retention, the service experience often matters more than the quality of the vehicle. A customer who is dissatisfied with their vehicle but has an outstanding service experience has the same repurchase potential as a customer who loves their vehicle but has an average service experience.13 Providing a convenient, valuable, transparent service experience will bring customers into your service drive – and later on, back into your showroom.

Even though a new customer might not need another vehicle for several years, an excellent purchase experience increases the odds that when they do buy again, it’ll be with you. 73 percent of customers say they’re willing to drive farther to work with a great salesperson.14 And even if they aren’t ready to purchase again for a while, a great experience makes them more likely to refer friends and family, giving you a leg up on your next sale.

The automotive industry might be turning a corner, but that doesn’t mean your days of profitable growth have to end. Compressing margins are a challenge, but by differentiating your dealership, providing a transparent and valuable experience, and nurturing longterm relationships, you’ll be on the right path to a successful 2016 and beyond.

REFERENCES 1. NADA Data 2016 2. Ibid.

3. Automotive News Data Center: September 2016 4. 2016 Car Buyer Journey: Autotrader 5. Ibid.

6. 2015 Car Buyer of the Future Study: Autotrader 7. Ibid.

8. 2016 Autotrader Automotive Buyer Influence Study, IHS Automotive 9. Ibid.

10. Ibid.

ALEC GUTIERREZ Alec Gutierrez is director of valuation product for Kelley Blue Book. In this role, Gutierrez oversees vehicle values from a product perspective, ensuring the integrity of Kelley Blue Book values as presented to consumers, dealers, lenders and other constituents.

Gutierrez is responsible for optimizing the current valuation product portfolio and bringing new valuation products to market.

Gutierrez often speaks on behalf of Kelley Blue Book to various media outlets concerning automotive industry trends and analysis, such as Fox Business Network, CNBC, The Wall Street Journal, MSNBC, USA Today, Automotive News, Reuters and MarketWatch. Gutierrez holds a Bachelor’s degree in Business Finance and MBA from Chapman University.

11. eMarketer 12. 2016 Del Grande Case Study 13. OEM data based on >500,000 customer responses 14. 2015 Car Buyer of the Future Study: Autotrader

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C A P I T A L

Peter Cooper ‘Sticks His

Neck Out’ to Stay Competitive Facing Industry Disruption

How did Lexus of Lehigh Valley achieve #1 in owner satisfaction in their region, #6 in the nation?

BY JOY HANNEMANN

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hen aged business practices prove their obsolescence in the form of both customer and employee pain – watch out for industry disruption. It is a rising theme for auto dealers, OEMs, industry vendors and the non-traditional innovators within the greater

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“mobility” space. Uber and Tesla have led the way and exposed the ability to circumvent government regulation when customer frustration fuels surprising willingness to bypass traditional models.

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It’s clear that untraditional investors’ intentions are to get in and change the face of retailing; and they have tremendous amounts of visionary capital that they can invest in their businesses.

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JOY HANNEMANN In her role at Lancaster Investments, Joy Hannemann supports Jon Lancaster’s start-up investments, real estate development, and worldwide speaking engagements. Joy writes for DrivingSales Vendor Ratings and is also a regular contributor to DrivingSales News on the topics of dealership best practices, employee development & engagement, leadership & culture, branding & social amplification, and customer experience.

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Change is inevitable and auto retailers know it – so why is industry change so isolated and slow moving? In an interview with DrivingSales News, Peter Cooper said, “Everybody says, ‘Sounds good… but you go first.’” Cooper is owner of Lexus of Lehigh Valley, one of the 11 dealerships in the Lexus Plus program.

Lexus Plus kicked off in May 2016. The program incorporates no-negotiation, up front pricing, and one dedicated consultant through the entire purchase process of both new and used inventory.

“I used to believe that the consumer’s single biggest asset was their time,” Cooper said. When we opened the store over 25 years ago, he made convenience an integral piece of customer interactions and designed processes with the ease of a convenience store at the forefront. Pickup and delivery helped the store to achieve high customer satisfaction scores and repeat fixed ops business.

“Today I look at it slightly different, and I don’t believe their biggest asset is their time – I believe it’s the emotional energy it takes to spend that time,” he said. With this purview, Cooper’s goal is to remove the hassle and capitalize on exceptional customercentric service in his Lexus store.

Even before Lexus Plus (two years before – to be exact), the store moved to a negotiation-free environment with single-point of contact. The team didn’t achieve No. 1 in owner satisfaction in their region (sixth in the nation) without pain and investment. Cooper says he lost around 45 percent of sales staff and 100 percent of sales management.

“Future-proofing” requires capital, in the eyes of Cooper. He told a group of auto dealers at the DrivingSales President’s Club in May that his most recent modernization was a $1.5 million education.

Today, Cooper says they no longer keep and promote the best “persuader.”

Specific pre-hire assessments weed out

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individuals that don’t display high levels of both empathy and ambition. Once they’re in the door, the management team is feeding employees constant training on topics like customer engagement and discovery, product presentations and technology. Sales consultants are even compensated based on their ability to pass a monthly technology test.

“Warren Buffet didn’t spend $3 billion to get in this business because he wanted to do everything that’s already been done the exact same way,” Cooper said. “It’s clear that untraditional investors’ intentions are to get in and change the face of retailing; and they have tremendous amounts of visionary capital that they can invest in their businesses.”

At Lexus of Lehigh Valley Cooper calls himself the CIO, or Chief Imagination Officer and “visionary capital” is deployed based upon his research and observation of consumer behavior. “It’s my responsibility to build a better business,” Cooper said.

Cooper and Lexus of Lehigh Valley were selected to participate in Lexus Plus because they have a history of being at the forefront of development in the auto retail industry. “We built a business around common sense,” Cooper said. “It became part of our organization’s culture and with that, we built loyalty in our customers.”

Despite record SAAR, most dealers do not have the scale and capital to compete dollar-for-dollar with the disruptors and untraditional investors. But, capitalizing on exceptional customer experience with a loyal customer base and tried and true vehicle service infrastructure is the dealer’s edge. “We’ve got to take our profits right now and have the guts and courage to stick our necks out with change that can sustain our businesses,” Cooper concluded with advice to his dealer-peers. “Implementing tech to push an additional $300 in F&I profit is just not going to cut it.”

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2782_2

THE SUCCESS OF YOUR BUSINESS IS OUR BUSINESS. THE NADA ADVANTAGE When it comes to automotive 20 Groups, NADA offers unrivaled expertise and resources. In addition to unparalleled auto retail experience, NADA consultants have the associations resources at their fingertips. Learn more about the NADA advantage by attending an upcoming 20 Group meeting.

ATTEND AN UPCOMING INTERNET MANAGERS MEETING January 16-17 Hilton Scottsdale Resort Scottsdale, Arizona January 23-24 Sheraton Sand Key Resort Clearwater Beach, Florida January 29-31 Sheraton New Orleans New Orleans, Louisiana (NADA Convention) February 16-17 Doubletree Guest Suites Tampa, Florida

Stop by our booth at #DSES and pick-up a selfie stick!

Visit nada.org/20group to learn more.

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C A P I T A L

Influencing a Car Shopper’s Journey:

Leveraging CPO

Attention needs to be given to CPO and service programs at the dealership

BY MICHAEL SOLHEIM

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utomotive shoppers have always set out to find the best deal when looking for a new or used vehicle. Many of us in the industry have tirelessly researched, studied and surveyed every approach consumers take when purchasing a new vehicle so we can target the right consumer with the right message in the right place. In fact, in our own research, finding the best deal for their money is what consumers told us they are ultimately looking for when purchasing a vehicle.¹ This isn’t groundbreaking, but how do they get there and, more importantly, how can dealers help them get there?

One thing is clear: Now is the time to start optimizing CPO business. According to Borrell Associates’ latest report, “2016 Auto Outlook, The Thinning of the Media Pack,” a six-year growth in new-vehicle sales is coming to a head having seen an average of 11 percent growth per year since 2010. However, 2016 is looking to have only a 0.5 percent increase in new vehicles sold. It’s forecasted to continue to drop through 2018 and slowly creep back up thereafter.² If new vehicle sales do indeed drop over the next few years, attention needs to be given to CPO programs and service programs at the dealership. This requires more training for dealership employees on the benefits of CPO and more education for consumers so they realize why a CPO vehicle could be the “best deal” for them. Additionally, it will require branding support to OEMs from third parties like Cars.com.

Some dealers aren’t maximizing their CPO offerings for various reasons. “Cost” is the overwhelming frustration expressed when deciding whether or not to certify a used vehicle³. This leads us to believe that education around the ROI of CPO vehicles is an opportunity for growth. Indeed, our research suggests that the estimated average cost spent getting a vehicle reconditioned and certified as CPO is $820.³ Other examples holding back vehicle

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Consumer mindset suggest indecision on new vs. used through the shopping process with CPO considered less as a shopper’s intent moves toward a purchase.

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certification included a lack of inventory to certify, space and staff availability at the dealership, OEM requirements for certification and market conditions to name a few³.

There is significant value in building up a CPO program, if done right. But how do we know when a consumer is willing to go down the road of purchasing a CPO vehicle?

How dreaming and hunting result in buying In working at Cars.com, we’ve done extensive research into the consumer journey to offer our customers the latest insights and trends to better reach and influence shoppers. Our most recent study, “Differentiating 3 Car Shopper Journeys,” yielded a great deal of insights into the new, used and CPO car shopper journeys.

There are three primary “modes” consumers go through when buying a car, regardless of stock type¹. That journey includes different tipping points to move to purchase and while consumers make shifts by stock type for sure, it’s important to understand the baseline to see the differences. Consumers begin their entry into the car shopping journey in either the Dreaming (Plan), Hunting (Discovery + Vetting) or Buying (Decide) stage. It’s important to note that these various modes are not linear but cyclical. This means the “Buying” mode can lead back to the “Hunting” mode and even “Dreaming” mode based on obstacles or new information the consumer encounters on his or her journey. When in the Dreaming mode, the idea of buying a new car starts to circulate in the consumer’s mind. As a consumer enters the Hunting mode, commitment kicks in and the customer is in preparation, learning, researching, and exploring mode. The final mode of Buying is when the customer narrows down, sees, touches and feels and finds the car that is right for them¹.

This presents an opportunity for dealers

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by knowing what mode a consumer is in when they walk onto the lot. We know all consumers have the same goal – to get the best deal¹ – but how they succeed varies by stock type.

The best deal for new car shoppers has to do with “the car I want.” These shoppers like to have make and model options, know the type of car and features they want, and know they want a good price.

Used car shoppers seek the best deal for them around the idea of “the best I can get for my money.” This includes considerations around the vehicle being in their price range, the style of car they want, and the most features they can get for the right price.

What about CPO shoppers? Their best deal is “a car I can rely on.” CPO shoppers are looking for reliable ratings when considering make and model, the nicest vehicle they can afford, and the right features.

Growing your CPO lane It’s safe to assume then, that while demand for new vehicles drops, it will rise for CPO and used. Or as Borrell puts it: “a new breed of high-quality, low mileage used cars²” will be front and center. Those who know this can gear up their CPO, used and service sides of the business.

We know from our own research in conjunction with Placed that new vehicles are considered less as shoppers move closer to purchase⁴. In Figure 1, we see that as consumers move closer to a purchase decision new vehicles slide below consideration of used vehicles with consideration of CPO being in slight flux.

Note that the percent of people considering a used vehicle is much higher than the percent of purchasers. In part, this is because our research only includes people that visit a dealership; used buyers from private parties are not represented, but in the moment of decision, shoppers also have a tendency to ‘buy up’ based on our research, which explains why we see a spike in new

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vehicles bought. How will this change as we move into 2017? That remains to be seen.

We also know that consumer mindset suggests indecision on new vs. used throughout the shopping process with CPO considered less as a shopper’s intent moves closer toward a purchase³.

If we know consumers aren’t necessarily set on a specific stock type, there’s room to influence their decision when they visit a dealership regardless of which part of the shopping journey they are in because, again, consumers are searching for their own “best deal¹.”

When it comes to CPO, Cars.com falls in the middle of three major stakeholders with an interconnection of relationships; consumers, franchise dealers and OEMs³. We see our biggest areas of opportunity and influence in educating consumers on CPO and providing support to franchise dealers and OEMs by way of branding support.

Internally, we see value in creating content around the options CPO offers a consumer and the benefits of the franchise experience and a sort of ‘white glove’ treatment it offers a consumer. Many options exist for dealers to educate consumers on

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CPO by way of advertising content or on the lot information into what a consumer receives from a CPO vehicle. One example could be information booklets of a specific make’s CPO program made available in the vehicle itself made with a comparison to a new or used vehicle. There are many possibilities available to the dealer wishing to grow their CPO sales.

Figure 1. Placed Dealer Walk-In Analysis Report.

CARS.COM DATA INSIGHTS, 2016

Luxury versus non-luxury But, there is a current worry that CPO sales may be cannibalizing new car sales, a worry that may dissipate in the coming years if forecasts for new car sales do drop².

This is understandable, and when you think about the dichotomy of non-luxury versus luxury vehicles, CPO offers another sales option for consumers who may not have considered it at the onset of their search.

Our research indicates that non-luxury sales have the goal of selling used inventory and to convert to CPO intenders secondly³.

Luxury sees getting aspirational buyers into new vehicles and use CPO as an entry into a luxury brand³. So, what can be done?

Education on CPO programs and branding

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Placed Dealer WalkIn Analysis Report.

CARS.COM DATA INSIGHTS, 2016

support can go a long way as CPO helps shoppers by giving them a car that offers value as well as peace of mind. By helping support franchise dealer and OEM CPO programs’ brand building and providing more education on CPO within the industry, we can help shoppers make the right purchase decision.

CPO and the service lane How does this relate to the service lane? We know from our research that 49 percent of new vehicle buyers had prior service interaction at the dealership where

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they ultimately made their last purchase⁴.

Furthermore, 6 out of 10 customers that walk into a dealership are headed for the service department⁴. These service customers will spend money today, and come back in the future as potential sales leads, so loyalty needs to be fostered driving sales retention (Figure 2).

Welcoming back existing customers as a part of the sales process can foster this loyalty. Do we know how many used and CPO vehicles were purchased by a returning customer that had service before their

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MICHAEL SOLHEIM

Placed Dealer Walk-In Analysis Report. CARS.COM DATA INSIGHTS, 2016

next purchase? Yes, we do. Based on our own surveys and intercepts done March 2015 - February 2016, we know that 4 out of 10 CPO buyers previously had service at the same dealership (Figure 3). Although a CPO and a new vehicle consumer are relatively the same depending on the specific CPO program, CPO intenders are more price sensitive and slightly more interested in luxury brands³, but they may be more willing to gain entry into a luxury brand from a CPO purchase versus an outright new vehicle purchase. This is where your influence can

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come into play. Selling more CPO and used vehicles could show more returning customers to the service lane as well.

Continuing to support the service lanes at dealerships can foster that customer loyalty that influences future sales leads from existing customers. In the end, we all want to help the customer make the right vehicle choice. It’s a matter of figuring out what influences them, listening to them, and then giving them the best service possible so consumers feel they got their best deal and keep coming back.

Michael Solheim, senior insights strategist at Cars. com, specializes in consumer and market research to inform product innovation and strategy for the company. The Strategic Insights team aims to help Cars.com better align to the needs of today’s consumers and customers while preparing for what’s to come.

Before joining Cars.com, Solheim worked in research and innovation consulting, partnering with clients across a number of industries, including Nike, FedEx, HP, Best Buy, Abbott and SC Johnson, to inform product development, consumer experiences and strategy.

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P E O P L E

Dealer Guide to Engaging Millennials in the Dealership Workforce What do they value from employers?

T

he NADA “Dealer Guide to Engaging Millennials in the Dealership Workforce” takes a look at the challenges of recruiting and retaining employees from Generation Y, otherwise known as Millennials. Over the past Millennials comprised 48 percent of new hires at dealerships, but also posted a 54 percent annual turnover rate, compared to 36 percent and 29 percent for Generation X and Baby Boomers, respectively. Here is an excerpt from the “Dealer Guide to Engaging Millennials in the Dealership Workforce DRIVEN” guide.

What do Millennials want?

Rick Durren, the president of Jim Prohaska’s 20 Group, said that dealers need younger people who can learn the product because the product has become so complicated.

Dealer Tony Brenengen of Sparta, Wisconsin, turned to Millennial Ashley Kreuer, a NADA Dealership Operations employee who was sitting in on the meeting. She was about to become a spokesperson for her generation.

“Ashley, when you consider a career, what entices you?” Brenengen asked.

Kreuer had plenty to say. She told Brenengen that when considering jobs she looked for “flexibility and a results-driven

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environment. Do you really want me to sit at a desk twiddling my thumbs or can I go home and come back much more energetic tomorrow? I like to have my weekends off.

I’ve left a higher-paying sales job for a more flexible job. The perks in my marketing job outweigh the money in my (previous) sales job. I can take a day off. We only work 7.5 hours a day, and I like being able to leave before 5. I get comp days! I worked last weekend, so I get a comp day. These incentives have motivated me more than a commission check.”

Brenengen asked Kreuer, “If you had a position with the flexibility to leave (when you’re caught up on your work), would it be an intrusion to get work-related texts and emails?”

Said Kreuer, “No, because I have my work email on my phone.”

Rick Durren, of Biggs Cadillac in Elizabeth City, North Carolina, lobbed another question to Kreuer. “If you get your job done, do you think of new things to do or do you just sit there?”

Kreuer had the right answer to that one: “I think of more things I can do.”

Dealer Justin Tapper said if his employees “want to work two or three days a week, I’d give them my expectations and say the hours you work are fine as long as you meet” the goals.

Tapper said, “If techs want to work

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Tuesday, Wednesday, Friday, Saturday 10 to 4, we want to keep them, so we figure out the structure of the shop.”

He says it’s like a jigsaw puzzle, putting all these creative Millennial schedules together, along with the Boomers’ more traditional ones.

His employees get a total number of personal days, Tapper said. They can use these days for annual leave or sick leave. He said, “Nobody shuts down with the availability of cellphones.”

Rick Durren said that once employees of his dealership have put in 52 hours, they’re done for the week. “If they don’t have the hours, they can’t leave,” Durren said about the technicians.

They and all his other employees get five days off their first year. “Not everyone does that” in the industry, Durren said.

Durren noted he bought a dealership for $50,000. Now, he said, you pretty much have to be born into the business, because a down payment for the average dealership is easily $300,000 or $400,000. Most Millennials will never be able to build up that kind of capital, Durren said.

Knowing how many hours their dad had to put in for 20 years to work his way up from car mechanic to owning a dealership, Durren’s three young adult children work pretty hard, Durren said.

But his kids will never work the kind of hours he did, he added; they don’t have that kind of drive.

20 Group member Kirk Carroll of Carroll’s Auto Sales in Presque Isle, Maine said that last year, one of his Millennial employees took a week off to participate in a wilderness walk to benefit a veteran organization. “He took the time off with no pay,” Carroll said. “This year he wants a week off to have a vacation with his family” (with-

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out having accumulated the necessary leave).

“What should I do about granting people these favors?” Carroll wondered. Not an easy question, because saying yes to one person sets a precedent that may result in other employees clamoring for similar favors.

“If you open up the door, you’ll be leaving it open,” Carroll said.

Different pay plans for different generations?

Tony Brenengen asked the rest of Jim Prohaska’s 20 Group, “Do we need to think about restructuring these jobs? Millennials are cutting back on hours. They won’t work 9 to 9 every day. They’re not working the hours because they want to be at home with their family. Money doesn’t excite them. They won’t work six days a week. What are we going to do?”

Jeff Schimmer had an interesting suggestion for Brenengen: “Have a Millennial pay plan versus a traditional pay plan. That way, some people can choose fewer hours and make less money. They can get unpaid time off.

Older people want to work the hours and make more money.”

Les Mack of Lancaster, Wisconsin said, “We’ve been trying to hire a D tech. One that we have started in ’90, the other in ’95. They’re there early, they want to make money. If one of these guys wanted a week off, I’d give it to him, because I want to keep them.” Mack explained the urgency of keeping his techs happy: it’s hard to hire D techs. “There’s no one out there that’s any good.”

The manufacturers, with their tight rules for service techs, are not helping. During the 20 Group meeting in Georgetown, John Klein of Clintonville, Wisconsin said his older techs were

rebelling against the strict procedures the OEMs had created to prevent theft. “They’re being treated like thieves and it’s one of the things that makes it hard to find new techs,” Klein said.

The group discussed how to identify “the right kind of people.” HR specialists could help with that, and there are personality tests that could help pinpoint people with strong people skills, Jim Prohaska said.

Kirk Carroll was skeptical: “People can spin those. My daughter is in psychology; she could tell us about that.”

Not money-motivated?

Scott Kostus of Bay City, Michigan, a member of another 20 Group, wrote that social media has played a major role in degrading work habits: “With the Internet available on every phone, the Millennials feel that they need to be in touch with everyone every waking minute of the day. The hours that they’re expected to work can also be a challenge. It seems that they really only want to work as little as possible because of all the activity in their lives.”

Kenny Powers of Ourisman Chevrolet in Marlow Heights, Maryland said one of the greatest chal lenges of employing Millennials was “aligning their needs with the needs of our business. Weekend and evening hours are not something they are interested in working. The car business has never been a 40- hour workplace, but Millennials are unfortunately ‘40-hour people.’ ” In an online post, Powers told a tale of woe about a…

21-year-old tech we lost a year ago.

He was a talented young technician who would work 8-5 every day and one Saturday a month. He was making

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a flat rate of $24 an hour, which was our “B” level pay. He would produce roughly 40-45 hrs a week, which was good considering he had only been with us for two years. He had all the ability to progress to “A” level (master) in no time. He decided to leave us and go work for Pepco, which is the local electric company here in the Washington D.C. area. Pepco would be paying him less hourly, but he would not have to “sweat” the flat-rate system (since it was clock hours) and would have more vacation time, sick time and general leave. Also had better medical and retirement plans.

In the past we would never lose a tech to less pay. It was always easy to sit them down and show them how much more money they could make over their career with us over a career change like this one. This 21-year-old Millennial was more interested in security. We as dealers and our industry as a whole need to look at this hard.

Millennials are not interested in flatrate pay. They are not interested in sales bonuses. They are interested in putting in 8 hrs (or less) and go home.

They are not money-motivated.

No generalizations are universally true, of course. But we’d say most Millennials are more motivated by jobs with a livable salary than jobs offering the possibility of high commissions but no base salary.

Wired Millennials are famously the most wired generation ever. Many of them would have gladly Instagrammed their own births, if Instagram hadn’t waited till 2010 to be created. As Grant Gooley wrote in a DrivingSales blog, “Millennials have technology at their fingertips; they understand technology, and it gives them an edge.”

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Gooley noted that Millennials may roll into work late because they’ve been texting to customers from their smartphone for hours at home. Or, it could be that they slept in after another long night of connecting with their friends. It’s good to know which type of Millennial you’re dealing with.

“The Millennials who understand, respect, and use technology to help your business grow and make more money are the ones you want,” wrote Gooley. He continued that the other kind of Millennials – the ones who don’t produce the required results, no matter what work hours they keep – should be shown the door.

Stigma versus status Millennials’ avoidance of dealerships during the buying process is reflected by this demographic’s skittish attitude toward working in those dealerships.

“There are lots of negative connotations about service jobs,” said NADA’s Szakaly. “If you look at an Apple store, there are no ‘salesmen’; only product specialists, associates, and geniuses at the Genius Bar. “I think the automotive industry is far less prestigious than it used to be,” said Szakaly. “A lot of the younger generation view it as a has-been. There’s a stereotype. Everything good is online; everything tangible is not so good.”

Millennials’ negative attitude toward dealerships might be influenced by the fact that the auto industry had to be bailed out by the federal government. But Szakaly points out that the industry is the highest-paying sector of the retail industry; that should interest younger job-seekers.

On the other hand, luxury brands are very important to Millennials, said Szakaly. Lexuses and Mercedes are far more than commodities, and so are

jobs at luxury car dealerships, Szakaly noted.

It’s not surprising that economist Szakaly would compare how Millennials view jobs at dealerships to the way they see cars: as commodities, i.e., interchangeable.

“If you as a consumer view cars as interchangeable, it’s going to be the same thing as an employee. What’s the difference between a Honda and a Toyota and other non-luxury brands?”

Szakaly said. That’s why Millennials equate working at a non-luxury dealer with buying a non-luxury brand: as nothing special.

A. Scott Kostus of Bay City, Michigan, thinks sales careers could benefit from better marketing. Talking to high school students about sales careers would help, says Kostus, a member of NADA 20 Group Consultant Mark Rogers’s NADA 20 Group.

Joe Smith of Rogers’s 20 Group would agree. Said Smith, “Selling cars is not perceived as glamorous.

(Millennials) don’t gravitate toward selling. Commission structure probably doesn’t help.”

NADA represents all franchised newcar dealers — domestic and import — before Congress, federal agencies, the media and the general public; provides education and guidance on regulatory matters; represents dealers’ interests with automobile and truck manufacturers; develops research data on the retail automobile industry; offers extensive training programs to improve dealership business operations, sales and service practices; and operates a charitable foundation that distributes funds donated by dealers and friends to emergency/medical and educational organizations and privatesector colleges and universities.

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B R A N D

Back to Basics: 3-Point Digital Marketing ‘Stress Test’ Champion communication between stake holders of each department to promote marketing synergy.

BY MATHEW CLIFT

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E

very year we are facing new challenges in the automotive retail market, 2016 is proving to be no different.

No one could have predicted the unprecedented election coverage and how it will continue to impact the automotive retail market after the decision is made November 8. The Stock Trader’s Almanac cites an average of 10.4 percent gains in the year before an election, with 6 percent during an election year compared to 2.5 percent and 4.2 percent gains in the first two years after an election since 1833.

There are two things we can do; sit and watch it happen or be prepared to operate efficiently through the tough times.

Before we start let’s quickly define the generic term of “marketing.” Google, with help from Webster’s, defines marketing as the action or business of promoting and selling products or services, including market research and advertising. By that definition, we cannot solely rely on our advertising efforts to generate traffic. The goal of a good marketing strategy will dig into our daily routines and should cause us to measure those efforts in a variety of ways. The customer experience plays as much of a role in marketing as the advertisement that initiated contact in the first place.

It’s almost unreasonable to ask a Dealer Principal, Executive Manager, or General

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Manager to dig into the granular level of activity within the store, in-fact it’s unhealthy. The executive role should champion in developing a higher level of communication between stake holders of each department to promote marketing synergy.

Quick assessment: • Is the store’s marketing strategy clearly stated, documented, and available for everyone to reference?

• Did we communicate the intended purpose of a specific process within the store?

• Is anyone held to a level of accountability for not maintaining a specific process?

Answering “no” to any of these questions identified the origin of our problem that should be addressed before a crisis develops. In some cases, it may help avoid the impact of a crisis altogether.

After the financial crisis of 2008, the United States Congress approved a series of “stress tests” on the banking industry to prevent future financial meltdowns. The automotive retailer industry has also proven to be susceptible to meltdowns; market corrections, OEM recalls (sorry, VW dealers!), and even something as common as employee turnover can affect our business. We have developed a few exercises for you to conduct a simulated “stress test” on your dealership.

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Warning: what you are about to witness may be shocking, do not over react while conducting this test at the store. We always recommend that you assess, discuss, and develop a game plan to avoid this from happening again in the future. The key take away is to develop a plan of attack (strategy) rather than to react with a series of misaligned knee-jerk reactions.

Stress test #1 – metrics Dealership metrics are the equivalent of a doctor collecting your vital statistics during each doctor’s visit.

For this example, we are primarily talking about the metrics collected within the CRM. All CRMs provide metric reporting in different but similar ways. We recommend utilizing CRM metrics to tie our work product into tangible opportunities that will increase buy-in based on proven results while creating value to move the performance needle.

Laws of metrics according to Traver’s Business Optimization University (BOU): • Get the right data at the right time to the right person.

• Data is a result of actions NOT mathematics.

• Metrics don’t make decisions, people do.

• Metrics won’t fix opportunities, rather they expose them.

What are we looking for?

First and foremost, we are looking for the reporting data to pass the sniff test. Reporting data can identify if vendor costs are being associated with incoming customer contacts such as phone calls and lotups. Trends in the data may reveal an impact from changes that have been

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made within the store, most common is employee turnover. Sourcing a trend in this data will assist in quickly identifying areas of concern.

Key Performance Indicators (KPIs): • Develop a trend in the data by looking at current month-to-date, last month, rolling 3-month and longer if need be.

• Review appointments set/show/ sold • Return on Investment (ROI) calculations help identify which sources are working well or not working at all. Spend your money in areas that are most effective for your store.

• Average Response Time is an old metric that has not been very effective. A more appropriate measure is the percentage of leads contacted <=30 minutes, 31-60 minutes, and 60+ minutes.

• Close Rate is a byproduct of the other metrics. Although close rate is important I would not recommend a myopic focus on this KPI. The CRM reports may be incomplete to a point where you can’t develop a trend in the data, which is normal for a store lacking a strategic vision. Lack of accountability to metrics or process is most likely the root cause of non-determination of data found within the ROI report.

We rely on the role of a sales manager to build, maintain, and deliver the right data to the right person at the right time.

Stress test #2 – CRM deep dive CRM by definition: a term that refers to practices, strategies and technolo-

gies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention and driving sales growth. – TechTarget

What are we looking for?

Third party leads are generic in nature whereas a lead submitted from the dealership website may be conducted at the VIN level. In either case, it’s best to refer back to the definition “…with the goal of improving business relationships with customers.”

As a best practice we always recommend reading the lead in its entirety.

Read the lead, not just once, but each and every time before contacting the customer to ensure a relevant response. Leads may contain subtle clues rather than obvious statements, reviewing the lead prior to each contact may reveal the customer’s buying motivation(s) and help build rapport with the potential buyer.

We recommend viewing 3-5 random leads per salesman to provide a baseline of overall performance and activity. Follow each action within the CRM using these tips: • First Personal Response (FPR) by phone or email should be conducted within 30 minutes of receiving the lead.

• Did the FPR contain pricing, availability, and a compelling reason to buy?

• The customer would have called into the dealership if they preferred to talk on the phone. Did we communicate with the customer by using phone calls to support the email content?

• How many days have passed before pricing, availability, and

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According to Walker-Smith a customer was exposed to 500 ads per day in 1970 compared to nearly 5,000 times a day today.

Advertising is complex and tends to involve dozens of vendors working in synchronous harmony just to develop, produce, and deploy a single ad campaign into the marketplace. All of those efforts direct a customer into a choreographed path of lead conversion that is sent to the dealership within the blink of an eye.

is transparent enough to provide an honest answer.

• Example: Quiz your staff by asking them to identify which vehicle matches the OEM national ad for $299/mo for 36 months with $1200 due at signing.

• Review your digital advertising Search Engine Marketing (SEM), banner ads, direct-mail and email blasts. Is there a clear call-to-action or emotional response that is invoked? Does the advertisement direct the customer to the correct destination?

• Setting a regular weekly cadence to your mini-blast email campaigns that highlights a maximum of 500 shoppers of one specific model per campaign will garner 10 times the response then sending 7,500 shoppers an impersonal email blast. Ask yourself and your team: Does it align with the Tier 1 Marketing plan for my region?

This will create consistency with the OEM efforts and strengthen your message. Ensuring your marketing strategy always aligns with Tier 1 advertising continuously maximizes your marketing dollar.

• Third party vendors such as TrueCar, Autobytel, AutoTrader, KBB, OEM thirdparty programs are also an extension of your marketing campaign. Does the correspondence between the customer and sales team match the advertisement message of the vendor you are choosing to participate with?

What are we looking for?

Conclusion

Each advertising effort has intent: we intend for the customer to react with an emotion or call to action. This is one of the most common areas that customers are testing the trust level of your dealership every day. Customers see the advertisement; they are motivated to contact a dealership from the ad, now they want to know if the dealer

Over the course of my 10-year retailer experience and 8-years consulting with over 200+ dealerships I have witnessed the same pattern of failure; poor CRM utilization and lack of marketing comprehension. An ounce of preventative maintenance before a crisis occurs may be exactly what you need to avoid the impact from a crisis altogether.

Get ready and happy selling!

a compelling reason to buy have been given?

• Was the prescribed CRM process followed and documented by the salesmen?

• Every customer is different and we expect the salesmen to use critical thinking skills to adjust the verbiage to meet the needs of each customer.

The process should be the same regardless of the granular details. Is the store consistently delivering the same information on the same schedule to every opportunity?

• A dealership website may allow customers to submit other types of leads such as; employment, financial applications and fixed ops requests. Are these lead types being delivered to the other departments or are they dismissed by the salesmen?

Stress test #3 – customer experience and marketing alignment

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MATHEW CLIFT Mathew Clift is a Digital Marketing Consultant for CDK providing consultation to the Nissan and Infiniti retailer network. Over the course of 8-years with Nissan North America, he has consulted with dealers in over 200 stores throughout LA, Phoenix, Chicago, D.C., the Mid-West territories, and most recently San Francisco.

Prior to CDK Mathew began his career in sales then began working his way through the ranks of Internet Director, Finance Manager, and Sales Manager for Honda, Cadillac, Hummer, Saab, GMC/Pontiac/Buick, and Chevrolet in Oregon and Southern California.

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C A P I T A L

Are You Maximizing Your

Fixed Ops Revenue?

Create a win for the department and for your dealership

BY SEAN UGRIN

O

EMs and vendors allocate incentive funds to promote sales of parts, products and services they provide to your dealership and service drive. A large percentage of these funds go unused. The question is why? What decisions do you have to make regarding this incentive money and how can you benefit?

Good breakage versus bad breakage The unused portion of a sales program incentive fund is referred to by vendor and OEM sales & marketing departments as “breakage.” As with most things there are the good and the bad.

Positive breakage – sales targets achieved and a percentage of the funds remain because the breakage was planned. You count on it. Breakage was factored into your program as X%.

Negative breakage – allocated funds did not get put to work and targeted sales volume was not achieved. All funds had to be spent in order to succeed.

Example of good breakage You budget $1,000 for a 15-day “fast start” program that focuses on tires. Your people build up momentum quickly but they are only fast enough to claim $600 of the total spiff budget of $1,000. However, the momentum they built carries past the 15th day and continues for the rest of the month.

The $400 breakage is positive because it is

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viewed as savings that protect margin.

Example of bad breakage You budget $1,000 to target alignments.

Your goal is to sell 100 customer pay alignments. You put a $10 spiff on each ALIGN4 sold and run the program for 30 days. The scenario is the same – $600 of the budget has been claimed. This time the breakage is negative and the “savings” are detrimental.

The goal was to sell 100 alignments and you missed that goal by 40 percent.

OEMs & vendors OEMs and vendors are looking to minimize bad breakage. They are calculating how much money they want to allocate to a sales program incentive fund to move a specific amount of products and services. Once that money is allocated they don’t want it back, they want it put to work. This is where the dealership and service department come in.

There is available money coming from various sources. How do you access it, deploy it and claim it?

Where do you look for these third party funds? Some examples include: • Factory programs • Fluid programs • Tire programs • Parts programs If there is a consumer-facing marketing campaign or consumer incentive on an item (“the pull’) then there is a good chance there is also a spiff available behind the scenes to

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increase program conversion (“the push”).

If an item is a commodity then there is also a good chance there is a spiff available. The vendor or OEM is looking to drive volume and when there are two similar products available they want to win “top of mind” with service advisers. For example, fluid exchange systems are really fluid consumption systems.

Pushing fluid is the name of the game. All the major players offer an incentive.

We know OEMs want to sell genuine parts and they often negotiate tire programs with specific brands. It’s the brakes, batteries and tires program.

Excellent results are realized when a spiff is used to complement a tire and alignment inspection system. Typically, there is a lift in sales when a system is installed, followed by a sales plateau or even a decline.

A recurring spiff provides the necessary motivation for service advisors to consistently optimize the use of inspection systems.

The result? A second lift in sales volume and a shortened payback period on the system investment.

Case Study – Liberty Toyota: In February, the service department sold 81 tires prior to implementing a sales program incentive fund to engage service advisers. The addition of an automated, recurring 30-day spiff program in March steadily increased sales to the point where the same dealer sold 304 tires in June – a 275 percent increase in volume from the pre-spiff month of February.

They consistently hit those numbers or better month after month.

Leaving money on the table So why do these programs experience a large percentage of breakage with the dealership leaving money on the table? Mainly it has to do with challenges, priorities and philosophy. Some common scenarios:

1. The spiff claim process can be cumbersome and opaque. Redemption of claims is viewed as “work.”

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Solution: The answer is to centralize and automate your programs, reconciling and reporting. Timely reporting allows for timely fulfillment. Your command of your programs will be noticed.

2. Managers may not be aware of all the money available because it is coming from various sources.

Solution: Make it a goal to learn what money is available and work it into your strategy and routine. Going a step further, you may be able to negotiate volume rebates and/or discounts with your vendors.

Remember that for them breakage tends to be negative, not positive. Volume and velocity are the name of the game.

3. Sometimes managers are out of the chain of communication. That is the incentive money is going around them and therefore the manager can’t leverage it.

Solution:This often occurs with OEM programs. OEMs have the authorization to go directly to your staff. It can be a point of contention but it is not going away. That said, there is nothing stopping a service manager from learning what is on-spiff and then tracking ROs and staff performance.

By being engaged you become part of the equation. Note: vendors should not be allowed to go directly to your staff without your knowledge and approval.

Preferred: the service manager should be the hub. The program and the money flows through you.

4. Philosophy also plays a part. For some the belief is that incentive programs disrupt pay plan and therefore it is not allowed. Or that the house earns and owns the spiff.

Solution:Whether the money is for your staff or for the house it exists and should be viewed as “found money.” To claim it your people still need to drive specific products and services. You can align strategy and pay

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plan so that you hit volume goals and you can factor that spiff money into your bottom line.

As stated before, holding the incentive funds for the house can create contention with an OEM or vendors (the reason OEMs tend to go direct). One way to avoid conflict is to support the initiative by running a points program rather than a cash program. Set aside a small fund to purchase merchandise or to pay for one of your advisers to attend a seminar. Get creative. Motivation and focus are the goal. Recognition is powerful.

Final thoughts Service advisers are salespeople. In light of declining new vehicle sales, fixed operations must carry the day for dealerships. 100 percent absorption is the goal.

There is a lot of incentive money available and a large percentage of it goes unused.

If you take time to understand your OEM’s and vendors’ goals you can use their money to drive increased volume and profitability. As you increase your volume you are increasing your leverage and negotiating power with your vendors or OEM. Quoting a General Manager from Denver: “My job is to find all the money that is available for my people. That is a combination of pay plan, factory spiffs and vendor spiffs.

I make sure I am aware and informed as to who is providing that money and who is receiving it. I am investing in my team in a measureable way that is meaningful to them. Take-home pay matters. When they believe they are pursuing a rewarding career, employee retention improves.”

OEM and vendor incentives will always exist. It is up to you to decide how and if to leverage them. Be sure that someone “owns” incentive strategy and processes.

The key is to be engaged and figure out how to use the funds to your advantage to create a win for the department and for your dealership. You’ll also be creating a win for your OEM and vendor partners.

That’s good business.

SEAN UGRIN Sean Ugrin is the CEO/ Founder of Colorado-based Spiffit, the sales performance dashboard solution. Sean’s automotive roots come from working globally with Bosch. As an adviser and consultant Sean designed and developed business solutions that tracked automotive production and drove sales efforts worldwide. Sean is driven to generate outstanding results for Spiffit’s customers.

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Artificial Intelligence Coming Your Way

How Chatbots could change dealership’s online or website chat system

BY CLIFF BANKS

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L

et me introduce you to Carla, who likely will be a critical member of your BDC and customer support team in the near future.

“She” is also a chatbot billed as being the customer’s friend who knows cars. Carla was designed by California-based startup firm CarLabs to assist people with anything having to do with cars – such as finding the right vehicle to buy; determining which automotive insurance is best; where to service the vehicle; and locating the nearest gas station.

Chatbots are software programs that gather data from numerous sources via API connections and integrates that data with artificial intelligence (AI) to conversationally respond to text requests for information.

Typically, chatbots are built to be used on messaging apps such as Facebook Messenger, Slack or Kik in addition to being used on websites or regular apps. For example, while on Facebook Messenger, you can message Uber for a ride instead of opening the Uber app.

Burger King is developing a chatbot that will let you place an order for pick up.

Because of recent initiatives from Facebook and Microsoft, chatbot hype has exploded over the last year. But, unfortunately, in many cases, the hype has exceeded capabilities as many firms have rushed products to market.

It’s important to remember, though, the technology is still in the early stages of development. Within three to five years, we’ll be having text conversations where we may not be able to discern whether we’re talking with a chatbot or a human.

Watching Carla in action, it’s clear CarLabs didn’t rush the product. Although, based on what we’ve seen, she is the first automotivefocused chatbot in the U.S. market, Carla isn’t the first automotive chatbot – that title may go to Fiat of Argentina’s Luigi, which was designed

by Avio, a Latin America firm that recently expanded to the U.S. Luigi is a Fiat-focused solution whereas Carla was designed to handle all brands and vehicles.

Conversica (formerly known as AVA) is another player with an established AI presence in the automotive retail space. The company has been around since 2007 and has about 15,000 different sales representatives globally across different industries using the solution.

The solution interacts with customers via two-way natural language until the customer opts out or decides to move forward with a purchase decision, at which time the AI will hand off to a live person at the dealership.

Operating under the radar, CarLabs took more than two years to develop Carla and her graphical counterpart AutoEQ. Carla is the conversational interface – text her a question and she’ll respond with the appropriate information. “Carla I’m looking for a safe SUV that seats five and gets better than 25 miles per gallon.”

Carla is viable on all messaging platforms, such as Facebook Messenger, SMS, or other AI-type platforms such as Siri, Cortana or Alexa.

AutoEQ provides the graphical interface and allows shoppers to express their preferences using natural language – instead of technical spec or automotive jargon. It’s a visual comparison tool that is designed to be informative and fun.

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CLIFF BANKS Cliff Banks is an industry veteran of 24 years. A long time editor and analyst, he is the founder and president of The Banks Report, an online service that analyzes news and trends in the automotive retail sector. He is a regular contributor to the DealerExec.

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The engine powering Carla and AutoEQ is both comprehensive and complicated.

The Lab, a cognitive database designed by CarLabs, gathers and sorts data from thousands of sources. Using algorithms, the Lab then normalizes the data which is then translated into conversational and natural language by CLAPI, CarLab’s API. CarLabs has set the bar high. Anyone can gather data, but the ability to process it and then respond with accurate answers using conversational and natural language or with an interactive graphical, image is what sets the solution apart. Furthermore, the engine is constantly learning. As she learns about each specific customer’s preferences – both in product and method of speaking – Carla’s responses only get better and more intuitive.

This is where the artificial intelligence – also known as machine learning – comes into play.

The product is constantly improving.

The company has backing it. The CEO Martin Schmitt, ran engineering at Shopzilla before founding NewCars.com, which he sold to Cars.com, where he subsequently led research and development. COO Isabel Sopoglian also was with NewCars.com and ran search marketing for Cars.com.

Co-founder and CRO Uzi Eliahou was in charge of Internet strategy for Packard Bell and NEC Computers before starting digital marketing firm Matchcraft.

Board members and angel investors include Mitch Golub, founder and former president of Cars.com, a $600 million firm when he retired when it sold to Gannett; Kevin Keegan, former president of Insweb and head of research at JD Power and Associates; and Tom McAlear, former COO and CEO of Daimler Chrysler Finance.

Frankly, they have created a “Wow!” product. The question now is, what about the applications?

CarLabs intends for this to be a B2B play and likely will white-label the product for multiple companies such as automakers, third party companies and dealers. So Carla likely

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will end up with numerous names or brands and will be tailored to fit the specific needs of each company employing the technology.

We know of at least one dealer group already piloting the product in some its stores.

When thinking about potential applications, let your imagination run wild. From a dealership perspective, being able to incorporate Carla into the dealership’s online or website chat system could be invaluable. Unlike a human who can only handle a small number of conversations at one time, Carla theoretically engage in millions of conversations simultaneously.

The information available includes make, model, year and complete product specifications on all new vehicles; real-time dealer inventory; comparison shopping; trade-in valuations; monthly payment calculations.

It won’t be long before customers will be able to set up a service appointment using Carla while in Facebook Messenger or some other messaging app. It’s going to be real 24/7 access all the time. Also key is the ability to capture those conversations and integrate them into the dealership CRM system.

CarLabs says the benefits of its solutions include: • Increase customer engagement and conversions for dealers.

• Improve customer service ratings of dealers.

• Assure the role of the franchise dealer in a transforming auto industry.

• Deliver the consistent brand experience the auto OEM wants.

• Capture unprecedented sales data about car buyer decisions and most desired vehicle attributes.

It’s important to remember, this technology is in the early stages of development. So there will be miscues or unrealized expectations – and some of the failures will be spectacular (Google Microsoft Tay for an example). But artificial intelligence is quickly becoming part of our everyday lives and companies that are able to handle a little bit of risk today are going to be the ones helping to write the future.

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