AZ 08/17 by NIADA

INDEPENDENT DEALER

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A R I Z O N A I N D E P E N D E N T A U T O M O B I L E D E A L E R S A S S O C I AT I O N A U G U S T / S E P T E M B E R 2 0 17

Now What?

Facebook Organic Reach is Near Extinction

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INSIDE

07................................................. Rejoice in ROI from Training 08....................... Facebook Organic Reach is Near Extinction 10.................................................NIADA Government Report 12................................. Longer-Term View of Digital Retailing 14......................................................No Compliance Training? 16...........................................Avoid Common Sales Mistakes

WHAT’S NEW NIADA.TV

Once again NIADA.TV presents the NIADA Online Convention, a website that includes every session and special event of the 2017 NIADA Convention and Expo, held in June in Las Vegas. The NIADA Online Convention, available at www.niadaconvention.tv, is free for convention attendees. Dealers and others who did not attend can access the site for a one-time yearly fee of $149. In addition, the NIADA Virtual Trade Show is available free at NIADA.TV. Viewers can see videos of convention exhibitors’ product and service offerings from the vendors’ Expo Hall booths.

ADVERTISERS INDEX

AmTrust Financial.....................................................................5 Black Book............................................................................ IBC BMW Group Direct .............................................................. IFC Lobel Financial..........................................................................3 Manheim ................................................................................11 NextGear Capital ...................................................................12 PassTime ................................................................................15 Reynolds and Reynolds........................................................... 9 The Warnock Agency.............................................................. 7 VAuto...................................................................... Back Cover

OFFICE

For information on how to become a member of AIADA, please contact Dave Warkentin at (602) 246-1498, aiada@aiada.net or www.aiada.net.

NIADA HEADQUARTERS

NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 Arizona’s Independent Dealer is published bimonthly by the National Independent Automobile Dealers Association Services Corporation. 2521 Brown Blvd., Arlington, TX 76006-5203. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the authors and do not necessarily represent the views of AIADA or NIADA. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2017 by NIADA Services, Inc.

STATE MAGAZINE MGR./SALES

Troy Graff • troy@niada.com EDITORS

Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT

Christy Haynes • christy@niada.com PRINTING

Nieman Printing

INDEPENDENT DEALER August/September 2017

LEGAL NEWS

BY JEREMY GOODMAN

FAILURE TO RETURN VEHICLE AN ARIZONA CLASS 6 FELONY Lenders Allowed to Report Vehicles in Default as Stolen

Arizona, unlike most states, makes it a felony to refuse to return a vehicle to a lender with a security interest in that vehicle when the borrower is in default. It also allows lenders to report such vehicles as stolen. This, in turn, results in entries in Arizona Crime Information Center and National Crime Information Center. Therefore, virtually every law enforcement official nationwide will be aware the vehicle is stolen, which often results in rapid recovery of the vehicle at relatively limited cost to lenders. This is obviously very helpful in cases where the vehicle is being hidden from the lender. However, to take advantage of this provision, lenders must have a simple, one paragraph provision in their original security agreement stating the following: • It is unlawful to fail to return a vehicle subject to a security interest within 30 days after receiving notice of default. • Notice of default will be mailed to the address on the loan agreement and it is the responsibility of the borrower to keep the listed address current. • The maximum penalty for unlawful failure to return a vehicle subject to a security interest. Once a borrower has been in default for 90 days, the lender must then send notice stating, at a minimum, that: • The borrower is over 90 days late making any payment under the security agreement and the borrower is now in default under the security agreement.

• If the borrower fails to return the vehicle within 30 days he or she will be subject to criminal prosecution. • What time and where the vehicle may be returned. • Under Arizona law, failure to return a vehicle subject to a security interest is a Class 6 felony which may subject the borrower to a fine and an imprisonment sentence. • A vehicle not returned is a stolen vehicle according to Arizona law and the lender will promptly report the vehicle stolen to law enforcement. Lenders are certainly welcome to handle these matters themselves. However, in our experience, the Class 6 felony demand letters are more meaningful and effective if sent by an attorney. Additionally, various law enforcement agencies are known to refuse accepting such stolen vehicle reports without the aggressive intervention of an attorney. Goodman Law PLLC might dramatically increase the effectiveness and cost-efficiency of this process for our dealer clients. As a benefit offered to members of the Arizona Independent Automobile Dealers Association, Goodman Law PLLC will send and track the required Class 6 felony demand letter for a flat fee of $100, plus out of pocket costs such as postage and copies. The stolen vehicle reporting is at the hourly rate of $150 for paralegal and $250 for attorney. However, from our experience, this is not typically a time intensive matter. JEREMY GOODMAN is an attorney with Goodman Law PLLC. He has extensive experience representing independent auto dealers in collection, bankruptcy, replevin, and other vehicle default litigation and matters. Disclaimer: This information has been prepared for informational and educational purposes only. It does not constitute legal advice and should not be relied on as legal advice because the information is general in nature and may not apply to particular factual or legal circumstances. No attorney-client or any other relationship is created or intended to be created by the dissemination or receipt of this information.

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ASSOCIATION NEWS

NIADA CONVENTION AND EXPO 2017 71st Annual Event Draws Another Record Turnout

The voyage to success is not always smooth sailing. In fact, it is often anything but. But for the record number of independent used vehicle dealers who attended the 2017 NIADA Convention and Expo, the course to that ultimate destination of success might be just a bit less stormy. The theme of the association’s 71st annual Convention was “Chart Your Course,” and an education agenda featuring more sessions on more topics than ever before provided tools and ideas designed to allow dealers to do just that – chart a course to their unique definition of success for their dealership. Not to mention a sold-out Expo Hall filled with products and services aimed at enhancing all areas of dealership operations. “An awesome investment in my business,” Larry Schmidt of Countryside Auto and Cycle in Fond du Lac, Wis., called the Convention. “Four days of industryspecific training along with trade vendors to improve my business – that’s an investment every dealer should be making.” As it turns out, more dealers are making that investment. The 2017 Convention drew more attendees than any other NIADA Convention in history, breaking the record set by the 2016 event. In fact, overall attendance was up for the fifth consecutive year, and the number of dealers was also up from last year. And just as in 2016, nearly 20 percent of those attending the 2017 convention did so for the first time. In addition to the used vehicle industry’s strongest dealer training program, there was plenty more available for all those dealers. For example, keynote speaker Captain Richard Phillips, whose amazing story of survival in a dangerous encounter with Somali pirates in 2009 inspired the hit movie Captain Phillips, recounted his five-day ordeal and the lessons learned from it. Phillips stressed the importance of preparation and offered three takeaways that can apply in any difficult situation, telling the overflow crowd, “You are much stronger than you know. … Nothing is truly lost until you choose to give up. … And a dedicated and motivated professional team, working together, can overcome almost any obstacle or solve almost any problem.” Attendees also had a chance to celebrate, dance and loosen up at the Cigars and Martinis welcome reception in a lush, tropical setting at poolside, and at a pirate-themed After Party following the crowning of Texas’ Robert Blankenship as the 2017 National Quality Dealer of the Year. In addition to the NQD ceremony – webcast live as always on NIADA.TV – the previous night’s National Leadership Awards Banquet introduced new NIADA president David Andrews as well as honoring NIADA scholarship recipients and the winners of awards for the top performers within the association and the used vehicle industry. For 2018, the NIADA Convention and Expo will be moving away from Las Vegas for the first time since 2009 – it’s scheduled for June 18-21, 2018 at the Rosen Shingle Creek Resort in Orlando, Fla. Save the date and don’t miss your chance to be part of the used vehicle industry’s biggest event of the year!

INDEPENDENT DEALER August/September 2017

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ACCELERATE

BY GWC WARRANTY

REJOICE IN ROI FROM TRAINING A Wise Investment Think about all the investments you make in your business. Perhaps it’s new advertising. Maybe it’s new technology or signage on your building. And, of course, there are investments in people and inventory. But how much do you know about the return on investment from each of these? Sure, you know how much profit you clear on a car. But do you know how much business you gained from expensive new advertising or a new fancy piece of technology? One activity that can drive added profits and is easily trackable from an ROI perspective is dealership training. Perhaps more so than any other investment you make in your dealership, the effects of training are measurable and profitable – especially when it comes to F&I training. First, you’ll need to start with a baseline. For instance, if your training is aimed at selling more vehicle service contracts, know the percentage of deals on which you sell a VSC today. Set a target, and seek out the tools you need to get there. Next is finding the right training approach. For dealers on the run, online,

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WITH F&I PRODUCTS, IT CAN EVEN BE EASIER THAN TRACKING HOW MANY MORE CARS YOU SELL BECAUSE OF A NEW APPROACH OR TRAINING STRATEGY. BY KNOWING YOUR PENETRATION RATES UPFRONT, INSERTING F&I TRAINING CAN MAKE FOR A CLEAR CAUSE AND EFFECT WITH MORE SERVICE CONTRACTS SOLD. interactive options often work best. When you can train on your schedule as time allows, it’s easier to make your way through coursework at your own pace. Not to mention that if your service contract provider can offer a discounted or no-charge training option, it’s a major savings compared to paying full freight for a training platform or sending staff away for conferences or seminars. Finally, you’ll need to track your results. With F&I products, it can even be easier than tracking how many more cars you sell because of a new approach or training strategy. By knowing your penetration rates upfront, inserting F&I training can make for a clear cause and effect with more service contracts sold. From there, you’ll be basking in the ROI benefits from your new F&I training strategy – bottom-line bonuses like increased back-end profits, higher profits per unit and even longterm repeat and referral business.

August/September 2017 / INDEPENDENT DEALER

SOCIAL MEDIA BY KATHI KRUSE

FACEBOOK ORGANIC REACH IS NEAR EXTINCTION Now What?

Facebook organic reach refers to how many people you can reach for free on Facebook by posting to your page. Organic reach has been declining for years, and it’s a common misperception that Facebook is doing this to make more money. While it’s true they need to make money (like all businesses), the decline in organic reach can be attributed to more complex issues faced when exponential growth occurs. Why is Facebook organic reach declining? There are two main reasons. The first reason involves a simple fact: More and more content is being created and shared every day. You’ve probably felt this change yourself. There’s now far more content being created and shared than time to absorb it, something Mark Schaefer talked about in his book The Content Code. On average, there are 1,500 “stories” (posts) that could appear in a person’s newsfeed each time they visit Facebook. For people with lots of friends and liked pages, as many as 15,000 potential stories could appear any time they log on. As a result, competition in the newsfeed is increasing, and it’s becoming harder for any “story” to gain exposure in the newsfeed. In addition to the growth in content, people are also liking more pages. The number of pages liked by the typical Facebook user grew more than 50 percent last year. With each new page like, competition in the newsfeed increases even further. The second reason for declining organic reach involves how the newsfeed works. Rather than showing people all possible content, the newsfeed is designed to show each user the content most relevant to them. Of the 1,500-plus stories a person might see whenever they visit, their newsfeed displays approximately 300. To choose which stories to show, the newsfeed ranks each possible story by looking at thousands of factors relative to each person. This is what’s known as the Facebook newsfeed algorithm. The Facebook algorithm roller coaster. I was recently asked by a potential client to help create an “organic strategy” to market their business on Facebook. I thought it was an important topic to discuss since there really is no such thing as organic reach anymore. Each social media channel has its own algorithms, and since the introduction of Facebook ads, organic reach has all but evaporated.

INDEPENDENT DEALER August/September 2017

Social media is a pay-to-play environment now. As you may know, 10 percent of Kruse Control profits go to animal welfare. The conduit for my cause is Hanaeleh Horse Rescue, for which I volunteer my time on the board, do marketing and personally help with the horses every weekend. We have a lively Facebook page with over 65,000 fans. As a volunteer-run non-profit, we have very little budget to spend on Facebook ads so I’ve become quite creative over the last few years to grow our community of like-minded horse lovers and advocates. It’s amazing to see what you can do with entertaining, informative content when you have zero budget to work with. The page is my bellwether that signals me when Facebook shifts their algorithms. Regarding content, we are a horse rescue so we have that going for us, which many independent dealers don’t. Who doesn’t love horses, right? Our organic reach is always above average because people like horses and we provide awesome content to keep them engaged. For an independent dealer, it’s tougher to come up with awesome content, which is why I recommend starting with a written content strategy. Up until a few months ago, the Hanaeleh page was still getting about 20-30 percent organic reach. But in the last few months I’ve seen it drop to 10 percent, and in some cases even lower. Can dealers succeed on Facebook with decreased organic reach? Currently, according to optimistic data, an average Facebook post reaches around 5 percent of page fans. However, there are other stats available claiming the average organic reach of a Facebook post can be as low as 2 percent. So if your Facebook page has 1,000 fans, your new post will be seen by 20-50 people on average. Facebook ads solve the problem of declining organic reach. Here are four fantastic ways to leverage Facebook ads to reach more people and engage more customers. 1. C reate brand awareness. Reach people more likely to pay attention to your ads and increase awareness for your brand. 2. Increase engagement and/or page likes. Get more people to see and engage with your post or page. Engagement can include comments, shares, likes, event responses and offer claims. 3. Lead generation. Collect lead information from people interested in your business. 4. I ncrease conversions. Get people to take valuable actions on your website or app, such as adding payment information or making a purchase. Use the Facebook pixel or app events to track and measure conversions.

EACH SOCIAL MEDIA CHANNEL HAS ITS OWN ALGORITHMS, AND SINCE THE INTRODUCTION OF FACEBOOK ADS, ORGANIC REACH HAS ALL BUT EVAPORATED.

Important note: If you don’t have a Facebook ads strategy as part of your social media strategy, you will not get the traction for which you’re looking. Without a solid strategy and Facebook ads to promote your content, many of your entertaining and intriguing content will never see the light of day. Now that you know Facebook ads solve the problem of declining organic reach, commit to taking the next step of putting them into action. KATHI KRUSE is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc. Kruse Control coaches, trains & delivers webinars focused on integrating social media and online reputation management into dealership operations.

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PRODUCTS AND SERVICES

BY NICK ZULOVICH, SUBPRIME AUTO FINANCE NEWS

EFG COMPANIES ROLLS OUT VIRTUAL F&I SOLUTION Simplicity Finance and Insurance

EFG Companies recognized independent stores that turn about 50 vehicles monthly need the same F&I resources as franchised stores that watch two, three or four times that many units roll over the curb each month. It’s why the company announced the launch of its virtual F&I model, Simplicity Finance and Insurance. With Simplicity Finance and Insurance, EFG Companies said dealers can expect to generate upwards of $1,000 per retailed unit, get more paper bought, increase product penetration, and make F&I compliance a non-issue. Mark Rappaport, president of EFG’s Simplicity Division, acknowledged many independents struggle to generate F&I profit with inventory that does not meet finance company requirements, limited financing options, little investment in F&I training in a high-turnover industry, and inconsistent dayto-day staffing.

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“As you know, the employees and teams at the independent dealerships have to wear a number of hats. Wearing all of those hats sometimes doesn’t make you the most effective in all the facets tied to running an automotive dealership,” Rappaport said. “Often we found, on the independent side, it’s the salespeople handling the F&I business and often the salespeople are really good at sales but don’t have the time, ability or expertise and background to be able to support the F&I process, where a franchised dealership would have the significant bench strength to be able to do that. “At the independent level, when you’re doing 25, 50, 75 units a month, it becomes a little more difficult to support that from a resource standpoint and get the bench depth to make it in a profitable and functional manner. We decided there was an opportunity here to help support our dealers at the independent level to provide them with a service that offers them access to the bench strength on retail operational hours basis and gives them the ability to be sure we’re doing everything compliant and we’re doing it in the most effective format to add more profit to their back end.” EFG Companies has developed a way to leapfrog over these issues without adding a single F&I person to staff. Simplicity Finance and Insurance can give dealers instant F&I expertise and improves the customer

experience, while increasing F&I profits. This virtual F&I model enables dealers to focus on the front-end process, while a team of expert F&I personnel take care of the finance process from EFG’s headquarters, streaming live into the dealership. EFG’s professionals handle the financing, deal structure, product sales, contracting and funding to drive back-end profit on each vehicle sale. Rappaport explained all the independent dealer needs is a private room with high-speed dedicated Internet access to get started. An EFG representative will come to the store, set up the equipment and provide multiple days of training. Within a short timeframe, the store can be finalizing deliveries with Simplicity Finance and Insurance. According to Autotrader, the average time spent in the F&I process is 61 minutes. However, the average consumer wants that time cut in half. With Simplicity Finance and Insurance, the F&I process takes just over 30 minutes. EFG Companies president and chief executive officer John Pappanastos said, “We developed Simplicity Finance and Insurance to enable these dealers to evolve the F&I process from a basic transaction to a highly lucrative profit center that enhances the consumer experience.” To learn more about Simplicity Finance and Insurance, visit www.efgcompanies.com.

August/September 2017 / INDEPENDENT DEALER

WASHINGTON UPDATE BY SHAUN PETERSEN

NIADA GOVERNMENT UPDATE Latest Government Issues and Activity

NIADA is your voice in Washington D.C., advocating for independent dealers, the used vehicle industry and small business. Here’s a look at the latest news and NIADA efforts regarding legislative, regulatory, PAC and grass roots activities. REGULATORY The Consumer Financial Protection Bureau issued a final rule prohibiting the use of class-action waivers in arbitration agreements. The ill-conceived rule is disappointing and shows the CFPB has decided to put the interests of class-action lawyers above those of the very consumers the bureau is mandated to protect. Arbitration has proven to be a faster, less expensive and more effective way of resolving consumer disputes than classaction lawsuits. Consumers who receive an award in arbitration almost always receive more than they would in a class-action suit. That was the conclusion of the CFPB’s own study, which found consumers receive on average more than $5,000 in arbitration hearings compared to roughly $32 in classaction litigation. The new rule will force small businesses to bear additional costs in defending classaction litigation, particularly meritless suits. Those costs will ultimately be borne by consumers, and in the case of those who are credit-challenged, it could prove to be too much. From the beginning of the rulemaking process, NIADA voiced concern about the proposal’s poor policy to both the CFPB and to members of Congress. As Congress considers CFPB reform, we will be urging lawmakers to overturn this anti-consumer rule. LEGISLATIVE NIADA’s Legislative and Regulatory Committee has identified tax reform as one of its key priorities to monitor and engage on to protect the interests of independent dealers and other small business owners. Among the priorities for comprehensive tax reform outlined by House Republicans last fall was a border adjustment tax – a tax on goods manufactured in whole or in part overseas and imported into the U.S. A significant number of retailers, including auto manufacturers and parts suppliers, have pushed back against the concept, as have many members of Congress from both parties. For the auto industry, a tax on imported goods, including autos and auto parts,

would lead to increased costs and could be devastating for dealers, employees and communities across the nation. On April 26, President Trump announced his tax plan, which does not include a border tax. House Ways and Means Committee chairman Kevin Brady (R-Texas) proposed a five-year transition period for the border adjustment tax after previously indicating a phased-in border adjustment provision seemed to be a plan to tamp down opposition. The House Freedom Caucus remains divided over its approach to tax reform. The group has debated its official stance in recent weeks, with caucus chairman Mark Meadows (R-N.C.) and former chairman Jim Jordan (R-Ohio) attempting to steer the group toward unified opposition to the plan favored by Speaker Paul Ryan, which includes a border adjustment tax, and in favor of tying welfare reform to tax reform. NIADA will continue to monitor the debate. GRASS ROOTS The Colorado IADA’s lobbying efforts in the state house have impacted three recent bills that affect the used vehicle industry. In the 2017 session, CIADA was the primary force behind a new law that requires any total loss vehicle, except for hail or theft, to be branded with a “salvage” title, preventing dealers from suffering a monetary loss by purchasing a clean-titled vehicles that turned out to have suffered a total loss. It also prevents the problem of a consumer finding out after a sale that a purchased vehicle was a total loss. In addition, CIADA worked with legislators on a bill that included proposals recommended by a Department of Regulatory Agencies review. The recommendations included a repeal of the state’s prohibition on Sunday sales, but CIADA, with the help of other associations and the Senate Business, Labor and Technology Committee’s understanding of the auto industry, successfully worked to pull that recommendation from the final legislation. And last year CIADA was instrumental in the passage of a bill that allows dealers an affirmative defense if they are unable to provide title within 30 days, provided they took the necessary steps to obtain the title – removing the threat of severe penalties. That bill also clarifies that a lien can be perfected without the title if necessary, using just the title application, financing document and payment of fees. PAC Rep. Mike Kelly (R-Penn.), co-chairman of the Congressional Automotive Caucus and an auto dealer himself, held a fundraising event July 17 in Washington, D.C., and NIADA was on hand to present him with a check for $995 – a campaign contribution

INDEPENDENT DEALER August/September 2017

FROM THE BEGINNING OF THE RULEMAKING PROCESS, NIADA VOICED CONCERN ABOUT THE PROPOSAL’S POOR POLICY TO BOTH THE CFPB AND TO MEMBERS OF CONGRESS. from the NIADA-PAC. Rep. Kelly, a member of the powerful House Ways and Means Committee, is a strong advocate for the auto industry and small business. He was a featured speaker at the 2015 NIADA National Leadership Conference in Washington. The PAC got a boost from some additional donations from attendees of the NIADA Convention and Expo in June, which included a maximum $5,000 contribution from Shawn Richardson of Express Credit Auto in Oklahoma City. The additional funds brought the amount raised from the Convention to $20,000. SHAUN PETERSEN is NIADA’s senior vice president of legal and government affairs.

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ONLINE MARKETING BY DALE POLLAK

M RE 2

LOCATION

INDUSTRY EXPERTISE FOCUSED ON HELPING ME EXPAND MY BUSINESS* OTTO HAHNE CITY OF CARS, INC. TROY, MI

Smart. Simple. Fast. Learn how Otto gets MORE at nextgearcapital.com

*This testimonial was received via interview, audio and/or video submission. This testimonial is based on this dealer’s individual experiences, reflecting real life experiences of a NextGear Capital dealer. NextGear Capital does not claim they are typical results that dealers generally will achieve. This dealer’s experiences may not be indicative of future performance or success of any other dealers. Some of the testimonial has been shortened so the whole message is not displayed due to length and/or relevance.

A LONGER-TERM VIEW OF DIGITAL RETAILING FOR DEALERS Don’t be Short-Sighted Dealers often have an “all or nothing” view of digital retailing. That is, to them, digital retailing represents the full monty of selling a vehicle online. You’d have a “buy it now” button on every vehicle details page for every vehicle, customers would work their deals, and dealers would deliver sold cars to customers at their homes. These dealers also often dismiss this concept of digital retailing as unrealistic – as something too few customers are willing to do today. In turn, dealers make a critical mistake: They put the whole idea of digital retailing on the shelf until the time comes when they’re fully convinced more customers would actually “buy it now” for their next vehicle. This viewpoint isn’t necessarily wrong. In fact, these dealers are absolutely correct that a majority of vehicle buyers today wouldn’t want to buy their next vehicle completely online. Studies show that maybe 10 to 15 out of every 100 people might be ready for this kind of vehicle purchase experience. It does seem a bit ill-advised to invest in an end-to-end digital retailing experience when the vast majority of buyers wouldn’t use it. But here’s the big miss for dealers who shelve digital retailing on these grounds: The “all or nothing” view is a bit shortsighted. It undercuts your ability to serve the remaining 85 percent to 90 percent of customers who are, in fact, receptive right now to taking part in at least a piece or two of a digital retailing experience. These are customers who want more convenience and a greater sense of control as they purchase a vehicle. They don’t want to spend hours in a dealership to complete a purchase transaction. They might even pay more for the privilege of completing some part of a deal – such as negotiating a payment, purchase price or trade-in value – from the comfort of their own homes. “I’m getting an additional eight to 10 deals a month because I offer the option of working out deal terms online,” said the general manager of a Southeast Volkswagen store. “We do things differently than other dealers and we’re getting better at telling

INDEPENDENT DEALER August/September 2017

the world about it.” I hear similar stories from other dealers. Even if they aren’t adding a “buy it now” option to their website, they are fostering a different type of engagement that speaks to the needs of today’s increasingly me-focused and time-addled buyers. In other words, they’re working deals while “all or nothing” dealers aren’t getting any of the action. The general manager for a Midwest Lexus store noted his dealership continues to see a growing number of customers take advantage of his digital retail offerings. He added every one of the customers who negotiates a payment or trade-in value online still wants to “come in and take delivery in person.”

THE TAKEAWAY HERE FOR DEALERS IS THAT DIGITAL RETAILING SHOULDN’T BE VIEWED AS AN “ALL OR NOTHING” PROPOSITION. RATHER, IT’S MORE OF A “HAVE IT YOUR WAY” APPROACH, WHEREIN DEALERS PROVIDE THE DIGITAL RETAILING TOOLS, AND CUSTOMERS USE AS MUCH, OR AS LITTLE, OF THEM AS THEY PREFER. Such is the nature of digital retailing today. The vast majority of vehicle buyers aren’t really looking for a “buy it now”based, end-to-end digital car deal. They simply want to carve out the parts of buying a car they perceive as potentially problematic and time-consuming, and complete them in a way that’s more convenient and easier for them. The takeaway here for dealers is that digital retailing shouldn’t be viewed as an “all or nothing” proposition. Rather, it’s more of a “have it your way” approach, wherein dealers provide the digital retailing tools, and customers use as much, or as little, of them as they prefer. I understand how and why some dealers have landed on an “all or nothing” view of digital retailing. I would simply encourage them to consider the business they’re probably missing as they hold out for a complete, end-to-end digital retailing solution the majority of buyers may never want, and might never arrive. DALE POLLAK is founder of vAuto and has published several books on his Velocity Method of Management.

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INDUSTRY NEWS

BY JOE OVERBY, AUTO REMARKETING

NEW ECONOMISTS AT COX AUTOMOTIVE Smoke and Chesbrough

By now, you probably realize Cox Automotive has some new faces on its analytical front to replace longtime chief economist Tom Webb, who officially retired June 30. Jonathan Smoke is Cox Automotive’s new chief economist. Smoke’s lieutenant is Charlie Chesbrough, senior economist and senior director of industry insights at Cox Automotive. Smoke had most recently held the same position with Realtor.com and had worked in the housing industry for 21 years. Before his time with Realtor.com, Smoke was chief economist at media and market intelligence company Hanley Wood. He also served in various roles at Beazer Homes. Chesbrough was most recently executive director and senior economist for the Original Equipment Suppliers Association, and also spent time as senior principal economist and director of industry analysis at IHS Automotive. Together, they’re leading the company’s new analytical front. Each will be involved across the board in the company’s analytical and economic activity, but

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in general, Chesbrough will focus more on new vehicles and “big picture strategies” from the automakers with Smoke focusing more on the used car side, auctions and so forth. “We’ll be collaborating and working together on a lot of the aspects, because the two parts of the business are certainly related to one another,” Smoke said. “And so as Charlie’s working on the new vehicle SAAR forecast, it’s important to then understand what the implications might be to the used vehicle market, to used vehicle values, to changes that we see happening in the dealer landscape, especially between franchised dealers, who are of course impacted by the OEMs, but then seeing how that’s also transitioning into the independents, who don’t deal with those pressures.” Smoke’s background is in the economics of the real estate business. Being relatively new to the auto industry, Chesbrough – given his experience in automotive – has helped him learn more about the car business. And they got the chance to work with Webb in preparing for their roles. “It’s a very complicated business and industry, and so the ability to soak up a historical perspective from him has been immensely valuable to me because he’s clearly lived through and seen many different cycles,” Smoke said of Webb. “And he’s seen aspects of the business today that in some ways are same as they were, but in other ways, they’re very different.” One example of something Webb gave him some good perspective on was automotive

leasing, a topic that doesn’t have an exact parallel in the real estate market. Smoke gained understanding of leasing’s growth in the new car market, how it has changed significantly since the late 1990s and early 2000s and its current impact on the used car market. “That’s helped me really get a grounding in the appreciation of how those aspects of the business relate to one another, but also how the wholesale market is a really perfect position to bridge those two worlds, because you see it coming through the commercial volumes that are dominating the auction landscape today,” Smoke said. “And of course, you see it in terms of what dealers are purchasing and how prices are playing out very differently across the different vehicle segments. “So to me, that’s been invaluable to be able to sit down with Tom and ask a few what I would characterize as ‘stupid questions’ to a master who could really walk me through a deeper understanding.” Chesbrough added that the Manheim Used Vehicle Value Index has long been the “go-to measurement” to keep track of the goings-on in the auction market, calling it “cutting-edge.” “It’s quite remarkable. It’s organized chaos,” Chesbrough said of auction sales. “To see all of these vehicles going through and quick auctions going on… as an economist, you’re really seeing the real value of a vehicle out in the marketplace. “And this is going on, every week all around the country. What Tom’s been able to do is encapsulate all of that into this overall measurement.”

August/September 2017 / INDEPENDENT DEALER

MARKET WATCH

BY AUTO REMARKETING

CAR DESCRIPTION WORDS MOST ENTICING TO KEY DEMOGRAPHICS New Research on Key Words Particular car shoppers respond better or worse to different words when debating which car to buy, according to new research recently released by CDK Global. The company’s latest edition in its Language of Closers series provides demographicspecific intel valuable to dealers seeking out ways to most effectively describe inventory on their vehicle description pages. “Our research examined the words that would eventually lead buyers of different demographics to leave a review website and head to a dealership site,” said CDK Global lead data scientist Jason Kessler. “In our most recent analysis, we were able to

pinpoint specific words that shed valuable light on what vehicle traits matter most to women, Generation-X consumers, recent college graduates, and parents.” CDK found a number of words that resonate with multiple demographics heavily. For example, the research revealed mentioning the word “power” attracted several groups. CDK suggested it helps illustrate the experience of driving a vehicle in a relatable way. Conversely, certain words fell flat and failed to lead prospective buyers to a dealership site. Women responded negatively to “bigger,” Generation-Xers would rather read “performance” over “design” and most parents felt that both “sound” and “tech” were low priorities compared to others. Below is a list of the top and low performing words associated with four demographics that CDK highlighted. WOMEN Top: drive, power, trip, comfortable, luxury. Low: bought, transmission, owned, bigger, cargo.

GEN-X Top: truck, power, luxury, package, performance. Low: back, seat, design, built, difference. COLLEGE GRADS Top: buy, work, truck, power, highway. Low: company, designed, inside, warranty, light. PARENTS Top: truck, leased, row, nice, purchase. Low: sounds, buying, control, tech, company. “As a leading provider of websites and digital advertising for dealers and OEMs, we are always looking for the best ways to help our customers bring the right buyers into their dealership. By making subtle changes to the language used on vehicle description pages, dealers can help customers easily identify cars that they both connect with and fit their lifestyle needs,” Kessler said. “Ultimately, these changes will prime both dealers and customers for success.”

ACCELERATE

BY GWC WARRANTY

NO COMPLIANCE TRAINING? It’s All Risk, No Reward

Few things in the automotive industry can be more fluid than federal regulations and their corresponding compliance requirements. It’s so complicated and confusing that – according to Total Dealer Compliance – just 37 percent of dealers offer comprehensive compliance training to their employees. Furthermore, the same survey found just 23 percent of dealerships employ a dedicated compliance officer. This means nearly two thirds of dealers are putting their entire businesses at risk by not implementing a formal employee compliance training program. How, you might ask? The same research we mentioned earlier found that lack of compliance costs dealerships an average of $792,000 in lost profit. Could your dealership withstand such a blow? Rather than talking about the potential cost of penalties, let’s talk about the profit you’re putting at risk by not enlisting compliance experts in your dealership. There are plenty of dealers out there who do it on their own. They research regulations, build out processes to remain compliant and stay on top of changes to laws. But this takes up countless hours

INDEPENDENT DEALER August/September 2017

IF YOU’RE NOT UTILIZING COMPLIANCE TRAINING, YOU’RE NOT ONLY PUTTING YOUR BUSINESS AT SERIOUS FINANCIAL RISK, YOU’RE ALSO TAKING AWAY FROM PROFITABLE TIME SPENT ELSEWHERE IN THE DEALERSHIP AND LOSING OUT ON A SERIOUS AMOUNT OF REFERRAL BUSINESS. of your time – hours you could be spending on your lot, selling cars and attracting new business. If you’re one of these dealers, the time you’re losing acquiring and moving inventory could easily outweigh any money spent on compliance training. Let’s not forget about customer perception. Total Dealer Compliance also found 77 percent of customers would refer a friend or family member to a dealership that makes compliance a priority. That is a lot of potential repeat and referral business. So let’s recap. If you’re not utilizing compliance training, you’re not only putting your business at serious financial risk, you’re also taking away from profitable time spent elsewhere in the dealership and losing out on a serious amount of referral business. If you haven’t already, it’s time to make compliance a priority – a top one. Register for an AIADA Dealer Compliance Class today at www.aiada.net.

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AUCTION NEWS

ADESA NAMES NEW GENERAL MANAGERS Rance Rudy GM at ADESA Phoenix ADESA recently announced management changes at three of its 77 North American auction locations. The company promoted leaders in Arizona, Tennessee and Florida. In the west, Rance Rudy has been named general manager of ADESA Phoenix. “Rance brings to his new role extensive experience in auction operations and management, along with strong sales and customer service skills,” said ADESA regional vice president Jay Hinchman. “These unique qualifications will allow Rance to make an immediate, positive impact on the auction experience at ADESA Phoenix and greatly benefit our valued customers.” Rudy has over 20 years of experience in the auto auction industry, including more than 14 years with ADESA. He has served as assistant general manager at ADESA Phoenix since 2015. Previously, he was fleet/lease manager at ADESA Golden Gate. Rudy also has prior experience as fleet/lease manager and assistant general manager at ADESA Dallas and as executive sales

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director, national accounts, for ADESA. He holds a bachelor’s degree from Texas Tech University. Jay Smith will serve as general manager of ADESA Knoxville. “Jay’s management style was key to his selection,” said ADESA regional vice president Geoff Parker. “He is a natural leader who is well-liked and respected by employees and customers alike. His significant background in dealer consignment and strong relationships with fleet accounts will also be an asset to our customer base at ADESA Knoxville.” Smith joined ADESA in 2005 and has nearly two decades of industry experience overall. He has served in a variety of roles at ADESA Cincinnati/Dayton, including management positions in sales, marketing, fleet/lease, accounts and dealer sales and services. He oversaw daily operations at ADESA Queen City, a satellite location, as auction manager. Smith was promoted to assistant general manager at ADESA Cincinnati/Dayton a year ago. He holds a bachelor’s degree from Ohio Christian University. At ADESA Sarasota, Lisette Minton has accepted the position of general manager. “Lisette has developed exceptional operational and customer service skills from the broad range of management roles she has held within the industry and across our company,” said ADESA executive vice

Rance Rudy

president Mike Caggiano. “She is a perfect fit to lead the team at ADESA Sarasota and help our customers achieve their business results. I look forward to working with her.” Minton has more than 25 years of experience in the auto auction industry. She began as a dealer registration clerk at Bayside Auto Auction and by 1999 had been promoted to fleet manager at ADESA Tampa. She spent nine years at ADESA Atlanta as commercial accounts manager before transferring to ADESA Sarasota in 2013. Minton was most recently assistant general manager at ADESA Atlanta.

August/September 2017 / INDEPENDENT DEALER

SALES MATTERS BY JOHN CHAPIN

THE BIGGEST MISTAKES SALESPEOPLE MAKE Avoid These Common Mistakes

Mistake: Thinking that servicing accounts is more important than selling new ones. I once had a client show me a stack of folders and say, “This is why I can’t be out calling on new clients.” When I asked what had to be done, she picked up the first folder and said, “I’m waiting for a number from the State of Rhode Island on this one.” I responded, “Really? A salesperson is sitting in the office waiting for a number from the State of Rhode Island? No one else can handle that?” That is akin to a pilot saying they don’t have time to fly the plane because they are serving passengers drinks. I’ve heard every excuse for servicing accounts from “they’ll only deal with me” to “I want to make sure it’s done right.” These are simply excuses to avoid the hard work of going out and making calls. Salespeople are hunters, service people are gatherers. Outside of renewals, scheduled service calls, and emergencies, clients should be dealing with CSRs and other support people. Not only are the support people more readily available than the salesperson, who should be out chasing new business, they also handle the dayto-day service items more efficiently and effectively than a salesperson. As a salesperson your job is to sell, not service. If you are hiding behind the excuse your clients will only deal with you, that’s because you’ve trained them to do that. It’s time for retraining. If you think you are the only one who can do it, you’re wrong, so get over yourself. Any time you are servicing, outside of renewals, scheduled calls, and major issues, you are doing yourself, your company, your client, and your future clients a disservice. It’s a lose/lose situation. Go sell and stop hiding behind service. Mistake: Majoring in minor things and finding other time wasters. I once had a sales manager say, “During the major snow storm last week, when people were confined to their houses, my top salesperson was calling people at home because he had a captive audience. My other salespeople were baking cookies and posting pictures on Facebook.” This, along with chatting with friends and colleagues, checking email more than four times a day, taking 10 coffee breaks and, in general, finding things to do other than calling on prospects and customers, are examples of time wasters. Spending two hours looking up prospect information

before you call, servicing clients on routine items as in the mistake listed above, and spending time practicing your call 400 times before the call, are all examples of majoring in minor things. Your highest priority is to spend time with prospects and sometimes your top 20 percent of customers (again, renewals, scheduled calls, and emergencies). You should be talking to, or on your way to talk to, prospects and customers 80 percent of the time during prime calling hours. Mistake: Focusing on reactive versus proactive marketing. The fastest and best way to build business is by making phone calls and knocking on doors. It is the most effective and only one in which you have almost complete control. Going to a Chamber of Commerce event, BNI, or similar networking event, hoping to get a lead is reactive. In those situations you are relying on others, whose first priority is to get business for themselves, to give you business. Worse yet, hanging out on social media or sending blind, unsolicited emails in hopes of getting business is also reactive. Mistake: Not being prepared for and not practicing sales situations. If you are in leadership, I dare you to walk up to one of your salespeople who has been with you a while and ask, “What do you say when someone says…” and then give them a common objection such as “they’re not interested.” Nine times out of 10 the first verbal sound out of their mouth will be “Ahhhh.” It happens to me all the time. Just last week at an insurance sales meeting, I asked an agent who’s been there 17 years, “What do you say when someone says I can get my insurance cheaper down the street?” The response? You guessed it: “Ahhhh.” Game over. You have to be prepared for every sales situation you’re going to encounter and you have to practice ahead of time. Ideally practice with another human, but if not, by yourself. Each answer has to be scripted and committed to memory so you know it verbatim and can respond immediately in a real-life sales situation. Mistake: No goals, no plan, and no clue how much activity has been done, or needs to be done, to be successful. Whenever I begin working with someone one of the first questions I ask is, “How many calls did you make last week on brand new prospects?” As with the objection above, I am usually met with “Ahhhh.” Usually followed by a guess, such as, “Um, I think about four.” “You think four? Is that number too big to count?” The truth is: they didn’t keep track and it wasn’t four. It may have been two, or even zero.

INDEPENDENT DEALER August/September 2017

YOU HAVE TO BE PREPARED FOR EVERY SALES SITUATION YOU’RE GOING TO ENCOUNTER AND YOU HAVE TO PRACTICE AHEAD OF TIME. To be successful, you have to have annual, monthly, and weekly goals, along with knowing the daily activity necessary to make those goals a reality. Then you have to make the calls. Mistake: Giving up too soon. Eighty-one percent of sales are made after the fourth contact. Roughly 20 percent of salespeople make it past the fourth contact. Mistake: Not doing the work necessary. Ninety-nine percent of the time a salesperson fails it’s due to a lack of activity: Not making enough calls to talk to enough people to make enough sales. The other 1 percent of the time, the salesperson got hit by a bus. Since activity is the primary reason for success or failure, I could have led off with it, but it’s so obvious you probably would have stopped reading. JOHN CHAPIN is a sales and motivational speaker and trainer. He has over 27 years of sales experience as a number one sales rep and is the author of the 2010 sales book of the year: Sales Encyclopedia. For more information, visit www.completeselling.com or email johnchapin@ completeselling.com.

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ORDER YOUR S TAT E REQUIRED FORMS FROM A IA DA

We carry all of the forms you need - that the State requires for YOUR dealership. 3 Day IM147 Disclosure Application Automobile Financing Arizona Secure Power of Attorney Authorization to Release Auto Recycler Inventory Bill of Sale Buyers Guide As Is Buyers Guide Implied Warranty 1 part form Buyers Guide Implied Warranty 2 part form Customer Proposal Cost Dealer Acquisition Contract Disability Hearing Application Good Will Repair Acknowledgement Guta Del Comrador (Spanish Buyers Guide) Insurance Confirmation of Translation Lessor Authorization Motor Vehicle Installment Contract Notice of Co Signer One and the same Certificate Privacy Policy Release of Interest Repossession Affidavit Retail Deal Jacket Envelope (Larger Jacket) Secure Odometer Sold Notice Spanish-Confirmation De Entregay Reconicimento Spanish-La Declaration De Dias IM147 Special Plate Application Spot Delivery Agreement Statement of Error Temp Lic. Plate Holder Test Drive Agreement This Vehicle Not for Sale Labels Title and Registration Application Trade in Vehicle Appraisal Used Vehicle Implied Warranty Disclosure Used Vehicle Implied Warranty Disclosure Vehicle Purchase and Delivery Confirmation Vehicle Purchase Order Waiver of Implied Warranty Wholesale Deal Jacket Envelope (6x9) Wholesale Purchase Order and Ododmeter Statement

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Your investment in the AIADA pays dividends to your business and the independent automobile dealer industry. The AIADA is the only business association in Arizona that has as its sole purpose to advocate for the independent automobile dealer industry. We actively find ways to help businesses in our industry do better business including: ADVOCACY • Maintaining regular contact with ADOT & DFI helping to ensure rules and regulations avoid hurting the good guys. • Lobbying for legislation that balances the needs of our industry with the needs of the consumer. • Echoing the voice of the many! SUPPORT • Dealer queries. • Legal advice from attorney on record. • Negotiating agreements with vendors to reduce the cost of their product or service to our members. • Ongoing communication about changes in industry. • Business referrals based on actual need. DISCOUNTS • 15% discount on forms. • 50% discount on compliance training. • Up to 14% discount on insurance. ACTUAL $$$ BENEFITS (totaling up to $4,760) • 2 buy fees at ADESA Phoenix (total not to exceed $450) or a monthly $100 rebate (must be used for transaction in applicable month). • 2 buy fees at Metro Auto Auction (total not to exceed $350). • 1 buy fee at Dealers Auto Auction Southwest (total not to exceed $150). • 6 month registration at Insurance Auto Auction (new members only) and one sell fee, new business only ($135 value). • 2 buy or sell fees at Manheim Phoenix (total not to exceed $500). • 1 buy fee at ABS Auto Auctions (total not to exceed $425). • 1 buy fee at Manheim Arizona (no limit). • 2 buy fees at Manheim Tucson (total not to exceed $400). • 1 ABS Finance Flooring Fee (must be pre-approved for flooring credit line). • $1,000 advertising with Republic Media (new members/ business only). • $1,250 advertising with Autotrader (new members/business only). • 3 administrative fees with AFC Flooring ($225 value).

August/September 2017 / INDEPENDENT DEALER

MANAGEMENT GAMEPLAN BY SCOTT BERGERON

SEX APPEAL STILL SELLS, BUT NOT IN THE WAY YOU’D THINK New Meaning for Today’s Consumer

Sex appeal has taken on a whole new meaning in dealerships, with female consumers dictating a new definition of what constitutes sexy. In part, this is because we are now, whether or not you want to admit it, living in a female decision-maker world, especially in the car business. So, the sex being appealed to is increasingly women – turning the stereotypical female sex symbol paradigm on its ear. Sure, you’ll still see female models next to this year’s new vehicles at the car show, and I really think that’s because most dealers are used to it. On the showroom floor, though, males still make up a larger percentage of salespeople. Working with clients is now very much a business transaction. Engaging the customer and respectfulness are absolute musts, no matter who you’re working with. Priorities are what they probably should always have been, but now it’s critical salespeople demonstrate an appreciation of how a prospect thinks instead of how they look. Yes, there may be exceptions – but I wouldn’t place a bet on testing it out. Smart consultants will be best served by prioritizing the business end of the deal over any flirtations, harmless or otherwise. Do good looks even matter on the showroom? That’s actually a trick question. It’s logical to assume an attractive salesperson will have a natural selling advantage because humans naturally are attracted to good looks. However, I wouldn’t put a lot of time into how a sales consultant looks but how they perform, and how they treat their customers and meet their performance goals. So, while good looking people shouldn’t be excluded from sales job considerations at all, it just shouldn’t be a priority. Instead, prioritize hires first and foremost for as many of the following attributes as possible: intelligence, integrity, common sense, good instincts, product knowledge, communication skills, closing ability or inability, likeability and the ability to serve with a smart, consultative approach. While each dealership’s priorities will be dictated by their specific situations, make sure job candidates get at least a passing score on each attribute. And for existing sales reps, reinforce solid performance in each of these areas as often as possible. As part of this, make sure they’re tuned into

WHEN A DEALERSHIP SALES FLOOR AND SERVICE AREA EXUDE CLEANLINESS AND CLASS, IT REASSURES CONSUMERS. IN CONTRAST, DINGY AND DIRTY ENVIRONMENTS CAN IN AND OF THEMSELVES BE DEAL-BREAKERS. the “little things” that can make or break a deal. For example, when the salesperson greets a prospect couple, he or she should be very deliberate about engaging both equally, shaking both of their hands. If a male salesperson only engages the man, he’s likely lost all credibility with the couple. Decision-makers have shifted from sexy figures to solid facts. Today’s car-buying culture has clearly shifted from shapely figures to solid facts. While sexy winks and stellar bodies may carry influence, buyers are much more about the facts behind pricing and performance. The majority of prospects have already made decisions about the makes and models they’re interested in and what the price point needs to be. They likely also know about performance plusses and minuses. They’ve checked reviews from multiple sources, and often know many details about key performance indicators and specific model idiosyncrasies. So, salespeople not only need to be well-informed about each make and model, but be able to add something to the conversation to help a prospect confirm their predetermined choice. For example, last year’s Consumer Reports – a respected and supposedly unbiased review authority – gave the Subaru Crosstrek less than stellar ratings about everything from lack of power to noise inside the vehicle. Yet consumers seem to love the brand, borne out by anecdotes detailing their three-word response when asked about it: “I love it.” This is a case where “facts” take on a new dimension – adding personal accounts and preferences to a long list of specs, performance ratings and reviews. The enterprising salesperson can direct consumers to some of this information and ask key questions, which can help cement decisions. One such question is the powertrain issue. If a prospect prioritizes power over handling in the snow, another make and model may crystallize as the best choice. If,

INDEPENDENT DEALER August/September 2017

however, snow maneuverability is a must, the Crosstrek may be just the right choice. As far as pricing, the days of pricing “car sharks” are all but gone, a concept reinforced by recent CarMax commercials. The slap-on-the-back, hard-negotiating sales processes are fewer and further between than ever before. Now, instead of base price, negotiation may revolve around such value-added options as premium interior extras like high-end car mats, or wheel and tire combinations to further customize a buyer’s selection. Also more than ever before, consumers are savvy about sales clearly aimed at liquidating inventory quickly, and are likely to push for the max. Salespeople need to be prepared to provide answers beyond, “Let me speak to my manager.” Emphasize sexy surroundings instead of people. One area where looks matter is the dealership décor itself. Dynamic and dramatic displays, conspicuous cleanliness, and a clear commitment to an upscale environment all contribute to a more effective selling stage. In facilities ranging from hospitals to government buildings, consumers have become accustomed to fancier, more contemporary and elegant surroundings. To the extent possible, your dealership should emulate this approach. When a dealership sales floor and service area exude cleanliness and class, it reassures consumers. In contrast, dingy and dirty environments can in and of themselves be deal-breakers. Bottom line, looks definitely matter, but not in the way they used to. Make the physical plant sexy while emphasizing smarts and sensitivity with your salespeople. Your bottom line will thank you for it. Former dealer executive SCOTT BERGERON is the founder of Daily Gameplan, a sales team performance company. Scott can be reached at 303.918.3169 or scott@dailygameplan.com.