dealerexec magazine | q1 2016

DealerExecA DrivingSales Quarterly Covering Dealership Brand, Capital and People.

A DrivingSales Publication • 1st Quarter, 2016

Visit DrivingSales.com to view more than 28,000 verified dealer ratings of over 800 vendors in 28 categories.

Exposing FTC Biases AgainstDealership Franchise LawsBY MARYANN N. KELLER • PAGE 12

© Data Software Services, L.L.C. 2016

866. 989.8077 | [email protected] | elead-crm.com

THANK YOUFOR Making ELEAD1ONE

The Highest Rated In Dealer Satisfaction

ELEAD1ONE introduces TRM, the next-level modern CRM that brings all your sales tools together in one solution that connects dealers with consumers in a smarter way to generate more business, increase retention and recapture lost opportunities. Total Relationship Management is the only platform that bridges the gap between marketing, sales and service – all from a centralized view. From first impression, consumer interaction and marketing tools to sales, service and training solutions. One platform. Unlimited possibilities.

The Benchmark in Automotive CRM Software

NADA Booth # 1540C

Dealership Executive, t DrivingSales, we seek to drive innovation and excellence in the auto industry by optimizing a dealership’s greatest asset, their people.

Whether it’s through providing visibility into the future of auto-motive retail through the stories in this edition and our news ser-vice, hearing from visionaries inside and outside the industry at our

conferences, upgrading store execution with research-based process training with our university, or connecting with peers through our leading dealer community, we are here to help you take your dealership to the next level.

This edition of the magazine is about innovation in the industry. I’d like to alert you to three innovations of our own we are bringing you over the next few weeks.

First, we have evolved our successful Presidents Club event into a highly inti-mate and interactive format connecting you one-on-one with some of the most advanced dealers in the country as well as leading researchers to provide you practical insights to move all your departments to the highest level of performance. It’s going to be a lot of fun to dig into the biggest challenges we face as dealership executives. I’d like to invite each of you to join us May 4-6 at the Ritz-Carlton in South Beach, Miami. Learn more at DrivingSalesPresidentsClub.com

Second, we have made a major investment to create the industries first and only comprehensive resource for researching products for your dealership. Our indepen-dent 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 expect you to find our Vendor Ratings on DrivingSales.com to be an essential resource to you in all your purchase decisions.

Finally, I’m excited to share with you we have redesigned the DrivingSales Community (DrivingSales.com). We’ve spent the last year or so redesigning and building a better tool for you and your teams to connect, share and learn with your peers to excel in automotive retail. We’ve enhanced the user profiles, made is easier for you to post and view content, and added Vendor Rating tools to find the solutions you need to improve your dealership. We hope the new Community will be very useful tool for you and your teams.

We at DrivingSales remain committed to be your partner in your personal and business success.

Sincerely,

Jared HamiltonFounder, DrivingSales, LLC

Jared HamiltonF O U N D E R

@jaredhamiltonDS

Chris ReedP R E S I D E N [email protected]

Mike JeffsE D I TO [email protected]

@mikejeffs3

Steve McFarlandD I R E C TO R , M E D I A S A L E [email protected]

Josh PhelonM E D I A S A L E S E X E C U T I V [email protected]

@joshphelon

Justin RhoaneM E D I A S A L E S E X E C U T I V [email protected]

@JRhoane

F O U N D E R ’ S L E T T E R

DealerExecThe Team

© Data Software Services, L.L.C. 2016

866. 989.8077 | [email protected] | elead-crm.com

THANK YOUFOR Making ELEAD1ONE

The Highest Rated In Dealer Satisfaction

ELEAD1ONE introduces TRM, the next-level modern CRM that brings all your sales tools together in one solution that connects dealers with consumers in a smarter way to generate more business, increase retention and recapture lost opportunities. Total Relationship Management is the only platform that bridges the gap between marketing, sales and service – all from a centralized view. From first impression, consumer interaction and marketing tools to sales, service and training solutions. One platform. Unlimited possibilities.

The Benchmark in Automotive CRM Software

NADA Booth # 1540C

DRIVINGSALES, LLC | 1ST QUARTER - 2016 1 DEALEREXEC

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ABOUT THIS PUBLICATIONDealerExec 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.

SUBSCRIPTIONSTo subscribe, visit DealerExecMagazine.com. Printed in the United States of America. Copyright © 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 EDITORDealerExec 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 [email protected]. 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.

DealerExec

1ST QUARTER - 2016 | DRIVINGSALES, LLC2 DEALEREXEC

Features

12 Exposing FTC Biases Against Dealership Franchise Laws

Arm yourselves with the factsBY MARYANN N. KELLER

16 What Does Your Employment Brand Say About Your Dealership?

How focusing on employment branding will improve recruiting, retention and employee engagementBY CANDICE CRANE

20 Do You Value Your Online Real Estate? You Should.

Exploring new web address options for your brandBY MIKE AMBROSE

24 Why Consumer Experience Matters How to create the right environment for your dealership

BY TODD MARCELLE, CEO AND FOUNDER GOMOTO

28 An Incredible Year in the Buy-Sell Market Several large transactions, and entry of new players

will impact our industry for years to comeBY RYAN J. KERRIGAN, KERRIGAN ADVISORS

32 Technology Leadership ‘Need to haves’ versus ‘nice to haves’ technology

BY DAVID KAIN

36 One Price Selling – What Are You Waiting For? Four reasons why being a ‘One Price Store’ is advantageous

BY MARK RIKESS

38 Innovation: Go Fast or Go Home How removing friction can improve the customer experience

BY PROFESSOR JAY RAO

43 Get Ready for the Modern Dealership Digital signage and virtual realty: poised to improve your dealership

BY CLIFF BANKS

C O N T E N T S

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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rivingSales Vendor Ratings has long established itself as an essential resource for dealers researching their next product purchase. With individually

verified reviews from dealer users at its core, Vendor Ratings is the only site dealers can turn to for objective peer-to-peer opinion and a comprehensive view of the solutions available.

The best has just got better. DrivingSales Vendor Ratings has been expanded to include buyers guides written by industry experts to help you determine the solutions that best fit your dealership profile, compre-hensive and consistent product reviews for easy product comparison, engaging media and blog content, as well as a collaborative user-interface designed to make engage-ments with peers dynamic and informative.

DrivingSales Vendor Ratings is your trusted partner for all your product pur-chase decisions.

How to Buy:Expert-written buyers guides provide in-

depth insight into the key factors to consider when making a purchasing decision, and what you should focus on based upon the type of dealer you are.

Who to Consider:• Hear directly from users on their

experiences with different products. • See who has won awards and other

recognition.

• Compare products using consistently formatted reviews written by our independent editors to develop your short list.

• Review information provided by vendors on their products.

• Connect directly with the vendors on your list.

Collaborate and Decide:Use the integrated networking tools

to solicit peer input during your evalua-tion process.

Share your experiences using the prod-ucts and working with the vendors to inform your peers and help the vendors serve you better.

With Vendor Ratings you get the informa-tion at your fingertips to make the best pos-sible product decision for your dealership with the least effort.

The NEW DrivingSales Vendor Ratings

DrivingSales

Vendor

Ratings…

The Essential

Resource for

all Dealership

Purchase

Decisions.

Visit drivingsales.com/ratings to get started.


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Over 28,000 unbiased vendor ratings submitted by verified dealers.

CATEGORIES6

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Call Management

Chat

CRM/Sales Department

Dealership Management Systems (DMS)

Fixed Ops Solutions

Internet Lead Management (ILM)

Inventory Pricing

New Car Leads

Owner Marketing

Reputation Management

SEM - PPC

Search Engine Optimization (SEO)

Used Car Advertising

Websites


Call Management

Solutions that track inbound calls through designated tracking phone numbers so that you can manage your marketing spend and increase ROI.

COMPANY PRODUCT OVERALL RANKING RATING REC.

CallSource CallTrack 1st 100%Gubagoo TalkSmart 2nd 100%Century Interactive Car Wars 3rd 100%

Chat Products

These solutions allow you to meet, greet and converse with customers who visit your website, as well as set appointments, generate leads and provide better customer service.


ContactAtOnce! Chat Connect + Mobile Text Connect 1st 99%Gubagoo Gubagoo 24/7 Behavioral Live Chat 2nd 100%ActivEngage ActivEngage Managed Chat & Web-based Chat 3rd 100%CarChat 24 24/7 Fully Staffed Chat 4th 100%

CRM-Sales Department

These are Customer Relationship Management (CRM) systems that track all your walk-in, phone and Internet customers through the complete sales funnel and owner life-cycle. They allow for advanced customer segmentation and marketing and track your sales activities by employee to make your team more effective at attracting customers and managing relationships.


ELEAD1ONE ELEAD CRM 1st 99%DealerSocket DealerSocket CRM 2nd 71%VinSolutions VinSolutions MotoSnap CRM 3rd 78%CAR-Research XRM CAR-Research XRM 4th 50%

Dealership Management Systems (DMS)

Dealership Management Systems connect all your dealership departments with accounting and maintain your dealership data in one central place. These ratings are for the DMS systems themselves, NOT the solutions that plug into the DMS systems such as a Desking or CRM solution.


Autosoft, Inc. Autosoft FLEX DMS 1st 98%Auto/Mate Dealership Systems AMPS 2nd 98%PBS Systems Inc. Aristo Gold - DMS 3rd 40%Dealertrack Technologies Dealertrack Dealer Management System 4th 67%


*Category scores are computed per category and are not comparable across the board. For questions about Vendor Ratings, please email to [email protected]

Fixed Ops Solutions

Products and/or services designed specifically for Fixed Operations.


ELEAD1ONE AutoPilot 1st 100%ELEAD1ONE Service1One 2nd 100%CIMA Systems CIMA Car Care Service Menus 3rd 100% Internet Lead Management (ILM)

These Internet Lead Management solutions are built exclusively to handle incoming Internet leads and manage your Internet sales process. Many full-service CRM systems include Internet Lead Management features, but the ILM systems listed below are stand alone utilities built exclusively for managing Internet Leads.


ELEAD1ONE ELEAD ILM 1st 100%VinSolutions VinSolutions MotoSnap ILM 2nd 100% Inventory Pricing

With market volatility and transparency increasing online, knowing how to price your inventory is a science critical to increasing your store’s profitability. These Inventory Pricing tools collect various forms of market data to help define the optimum pricing for your inventory to maximize both Gross and Turn.


vAuto vAuto Pricing & Merchandising 1st 100%VinSolutions MotoSnap Market Pricing Analysis 2nd 83%ACE Tech LotPro 3rd 100% New Car Leads

These providers collect and aggregate leads from their web properties and from partner sites, then distribute these hot leads to dealers. Currently this category is for both finance and vehicle leads.


Autobytel Inc. Autobytel New Car Leads 1st 91%OnlineBKManager.com Bankruptcy Lists 2nd 73%TrueCar TrueCar New Car Leads 3rd 67%AutoTrader.com New Car Avertising 4th 50%

DRIVINGSALES, LLC | 1ST QUARTER - 2016 7

Owner Marketing

These targeted solutions help you mine and segment your customer database, and then market to them successfully. These solutions can market to your customers through email/direct mail/phone and other means.


ELEAD1ONE GoldDigger 1st 100%AutoAlert Automotive Data Mining Software 2nd 83%CIMA Systems Complete Virtual BDC 3rd 100%

Reputation Management

These products and services help a dealership manage its reputation. They may assist with review collection, monitoring, resolution, and promotion of online reviews.


DealerRater DealerRater Certified Dealer Program 1st 100%eXtéresAUTO Online Reputation Management 2nd 100%Digital Air Strike Reputation Logix 3rd 100%Cars.com Cars.com Dealer Reviews 4th 100%

SEM - PPC

Search Engine Marketing (SEM) and Pay-Per-Click (PPC) solutions help you determine how to invest in and execute a display or paid ad campaign on the major search engines for greatest ROI.


Dealer e Process Digital AMMP 1st 96%Dealer.com Dealer.comUnifiedAdvertisingExchange 2nd 100%Showroom Logic AdLogic 3rd 100%PureCars PureCars SmartAdvertising 4th 100%

Search Engine Optimization (SEO)

Search Engine Optimization (SEO) solutions work to optimize your websites so that they show up higher in the search engine rankings. These services generally include both on-page and off-page optimization. This category also includes Website Conversion Tools.


Customer Scout, Inc. Customer Scout SEO 1st 100%All Auto Network Marketing 2nd 100%Dealer eProcess Power PageRank SEO 3rd 100%Dealer.com Dealer.com SEO 4th 50%


Used Car Advertising

These consumer-facing websites allow you to display your inventory to in-market consumers. They make huge media buys to attract customers to your inventory, and to increase your walk-in, phone and web leads.


Autobytel Inc. Autobytel Used Cars 1st 100%All Auto Network Inventory Management Applications 2nd 100%Cars.com Cars.com Online Advertising 3rd 75% Websites

Website solution providers create full-service websites built to be the main hub of your dealership’s online presence. These sites are central to your dealership’s marketing, branding and customer service. Micro Sites and Mobile Sites are rated in their own categories.


Dealer Car Search Responsive Websites 1st 100%DealerOn DealerOn - Chamelion Responsive Websites 2nd 100%Dealer e Process Dealer eProcess Responsive Websites 3rd 88%Dealer.com Dealer.com Core 4th 80%DealerFire DealerFire Responsive Websites 5th 100%


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

How Do Vendor Ratings Work?

TheDrivingSalesVendorRatingssiteisthefirstformalmechanism 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.Reviewersareverifiedtoensuretheyare 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. Whywouldorwouldn’tyourecommend 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 RankingIn 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 aboveacompanywith4starsifmathematicallythefirstcompany 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 AwardsThe 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.Theseawardsreflectproductsandproviders 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 theirvendors on DrivingSales.com and all submitted ratingsareverified.Finalrankingsaremathematicallycalculated 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 avendor 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 to December 31, 2015. *CATEGORY SCORES ARE COMPUTED PER CATEGORY AND ARE NOT COMPARABLE ACROSS THE BOARD. FOR QUESTIONS ABOUT VENDOR RATINGS, PLEASE CONTACT [email protected]


C A P I T A L

n November the Federal Trade Commission invited me to participate in a panel discussion on direct sales of vehicles. This would be

one session in an all day event exploring state franchise laws. Before the event, I was assured both sides would be equally represented and have the same opportu-nity to express their opinions on RMAs and terminations, warranty reimbursement and direct sales. But the Jan. 19 event was any-thing but fair, with participants opposed to franchise laws (including all of the panel moderators and academics) outnumbering those in favor, by about 3 to 1.

The situation confronting dealers is challenging because of the parties aligned against franchise laws. The FTC’s opposi-tion to franchise laws has dominated the public debate. The agency relies upon the “research” of their chosen academics that delight in uttering inflammatory phrases like “dealer lobby,” “crony capitalism” and “monopoly pricing power.” It doesn’t mat-ter that these economists demonstrate total ignorance of the operation of the automobile and vehicle distribution indus-tries. Nevertheless, this agency and its academic cohorts influence decision mak-ers and the general public. As a society, we automatically assign credibility to university professors and assume neutrality in schol-arly research. By contrast, advocates in favor of franchise laws are fewer and often linked to dealers through their associations

or legal representatives and therefore are seen as protecting the status quo for their own benefit. The media also hold an anti-dealer bias and repeat the claims of the pseudo research.

The second keynote speaker of the morning, Francine Lafontaine, the former FTC Director of the Bureau of Economics, provided us with examples of her academic sloppiness. In 2010, Ms. Lafontaine pub-lished her report “State Franchise Laws, Dealer Terminations, and the Auto Crisis.” She concluded in that report that having too many dealers caused market share losses, which contributed to the bankruptcies of GM and Chrysler. Apparently Ms. Lafontaine reached her conclusions without reading any of the many books or the business press that chronicled decades of inferior products, failed acquisitions and investments, expen-sive labor contracts, stock buy backs, etc.

She concluded that her solution to ter-minate dealers so that sales per dealer by brand equaled that of the Asian com-panies was stymied by franchise laws. Simultaneous with the publication of her report, the Special Inspector General for TARP issued its report on dealer termina-tions during the bankruptcy restructur-ings of GM and Chrysler. This thoroughly researched report concluded that the auto companies derived no financial benefit from the dealer terminations. The FTC, of course, has clearly, if not deliberately ignored the SIGTARP findings.

Ms. Lafontaine used the Jan. 19 forum to


Arm yourselves with the facts

BY MARYANN N. KELLER

Exposing FTC Biases Against Dealership Franchise Laws

I

again use long division to calculate sales per dealership of luxury brands. Since the data showed lower Cadillac sales per dealer compared to its rivals, she concluded that Cadillac has too many dealers! I am certain that she never heard of Cimarron, Allante, the Cadillac diesel, high defects per vehicle, faster depreciation, and lack of innovation in the long product drought from which Cadillac is now emerging. I would argue that it has been the long suffering Cadillac deal-ers that kept the brand alive through this sorry period.

Finally, in an attempt to discredit the auto dealer com-munity, Ms. Lafontaine insinuated the industry is hiding data and that was hampering her research. According to her, no one had been able to explain why there are two numbers referencing dealers: 17,000 (NADA) and 21,000 (U.S. Census Bureau). She obviously didn’t bother to contact either source to understand how the data is gathered.

The direct sales panel was the highlight of the day with Tesla and Elio Motors (which has never even built a work-ing prototype) in starring roles. Proponents of direct sales channels argue that 1) direct sales eliminates a middleman and generates savings to be passed onto car buyers; and 2) that there are no benefits to consumers from competition among same brand dealers.

Critics bellow the franchise laws that have balanced the power between the huge OEM and the smaller dealer are an anachronism; that dealers are unnecessary and the direct sales offer a better customer experience. The anti-dealer forces make the assumption that automakers, who have been notorious in circumventing emissions laws and paying fines for delaying recalls, would share any hypotheti-cal savings with customers.

About two decades ago major consulting firms dissected the costs associated with the production and distribu-tion of vehicles. This breakdown spurred auto company managements to explore build-to-order assembly and other initiatives to supposedly lower distribution costs and capture post factory profits. A 2000 Goldman Sachs report titled “eAutomotive” memorialized these “savings” and predicted the near-term reality of build-to-order, the end of car dealers and billions of dollars in additional profits for the Detroit Three.

The fact that none of the predictions happened and most of the Internet companies lauded in its pages disappeared has not stopped academics from using the “savings” data as if they were proven fact. So fictional data is being widely used to vilify the dealer as an unnecessary middleman. The academics conveniently ignore the disaster that was the

Ford Retail Network, an experiment hatched in the late 1990s that aimed to shrink the number of stores while giv-ing the factory control over pricing, marketing, inventory management, compensation, etc.

The Department of Justice published its anti-franchise paper in 2009, using the “General Motors do Brasil” build-to-order/online sale channel launched in 2000 as proof of the greater efficiency of a direct sales channel. The aca-demics and Tesla have referenced this report repeatedly. But what Mr. Gerald Bodisch, the author of the report, forgot to do was to ask GM “How’s the Celta online channel doing in Brazil?” Had he asked, he would have gotten the same response I did when I posed that exact question. GM answered my inquiry in two days saying, in an email, that because “of the high costs associated with online sales and distribution, the program was canceled in 2006. This was three years before the DOJ report lauded Celta as model for direct sales. Bodisch’s now invalidated conclusions are still used by the FTC and anti-dealer advocates including Ms. Lafontaine and others to support their bias.

Moreover, knowing how much capital is tied up in factory or store inventory, personnel costs and facilities don’t mean those costs go away in a direct sales channel. High volume assembly does not lend itself to build-to-order and, since a car weighs 4,000 pounds, takes up 50 square feet of space and involves a complex purchase process, unique in some way to each buyer, there are comparable expenses no mat-ter who does the selling.

Tesla’s distribution expenses are rising and the company says it will open 80 locations this year. These are costs and risks normally absorbed by a dealer. And these expenses and working capital requirements will escalate when Tesla enters the mass-market. Then it will need expertise to man-age trade-ins, credit issues and customers who have a low tolerance for long waits for a car or service. Tesla now finds itself in the used car business having to retail used Teslas taken in trade along with off lease units and cars in loaner and demo fleets. In early February there were some 400+ used Teslas tying up capital, taking up space in physical locations and requiring staff to handle sales.

In 2014, NADA published my report titled “The Consumer Benefits of the Franchise System.” This report articulates the real benefits to consumers from an independent net-work of franchise dealers. I doubt anyone can argue with its conclusions. Dealers compete with each other and the con-sumer gets the benefit. That has to be better than a system of fixed factory set prices.


The argument that same brand dealers in a given market area do not promote competition, and engage in monopoly pric-ing, is ludicrous. Yet, that is FTC dogma and articulated by professor Dan Crane, a mem-ber of the direct sales panel and professor Fiona Scott-Morton, a member of the final panel on future trends. Crane postulates that competition at the OEM level is suf-ficient to ensure competitive marketplace and states that he knows of no empirical study proving that same brand dealers compete with each other to the benefit of consumers. Professor Crane has chosen to ignore the rigorous study of the impact of intra-brand competition on vehicle trans-action prices published in 2015 by The Phoenix Center.

The Phoenix Center report analyzed hundreds of thousands of transactions and concluded that just two same brand deal-ers within 25 miles of each other resulted in lower prices. Once again, the authors of a thorough and accurate analysis that made the case for dealers were excluded from the panel.

OEMs compete to get their vehicles on the shopper’s consideration list. But it’s the dealers who compete with each other for each sale. Price shopping among two or more same brand dealers is the norm for the majority of car buyers and it is as easy as sending off a few emails. The willingness of dealers to compete on price is fundamental to the business models of third party lead generation sites from Autotrader.com to TrueCar. That competition extends to used cars and service as well as other benefits including free loaner cars, shuttle services, weekend and even 24-hour service and fully equipped waiting lounges.

Unfortunately, the direct sale debate has largely been framed around Tesla’s challenges to franchise laws. Many of Tesla’s arguments make little sense, but they have rarely been challenged. There is nothing in franchise laws that would

force Tesla to award franchises to existing dealers or sell its cars next to gasoline-powered vehicles, yet this nonsense was uttered again during the FTC event by Tesla’s general counsel. Does Tesla management really think that any luxury automaker would welcome a competitor in showrooms that were built to meet that OEM’s specific brand image requirements?

The Tesla 2014 10K report includes this amazing defense of its direct model. It says that it wants “to avoid the conflict of interest in traditional dealerships…where the sale of warranty parts and repair by the dealer are a source of revenue for the dealer but are an expense for the vehicle manufacturer.” Taking this statement at face value, Tesla is saying that the manu-facturer should control what is spent on warranty work because the dealer is more likely to do more. But an independent dealer network where dealers receive pay-ment for warranty work and depend on the goodwill of their customers provides the best outcomes for car owners.

Even though the facts are on the side of the current auto retail system, dealers need to get those facts out. Dealers can-not rely on their local charitable and civic contributions to influence the debate. Opponents see this as buying favors, not being good citizens in your communities. The FTC wants the public to weigh in on this issue. But such a survey is likely to produce results comparable to Tesla’s sur-veys of unanimous support for direct sales simply because of who would participates in such a survey. The public simply doesn’t understand the complexity of automotive retailing and the many responsibilities and services provided by a dealer. Dealers should not be afraid of a fair and balanced debate on franchise laws. But to make that happen, dealers have to be willing to educate opinion leaders, including the media, investment community and other decision makers.


MARYANN N. KELLERMaryann is a principal of the automotive consultancy, Maryann Keller & Associates, serving clients in the auto, auto parts and aut o retail industries. During a 28 year career on Wall Street, Maryann was named one of the top three auto analysts on Wall Street.

Maryann was a member of the Board of Directors of Dollar Thrifty Automotive Group, Lithia Motors and Sonic Automotive. She is a member of the board of DriveTime, a major used car retailer in the Buy Here Pay Here business and AutoCanada, the only public dealer group in Canada.

In 2014 NADA published Maryann’s report on the Consumer Benefits of the Franchise System. The report addresses the many roles dealers play in facilitating competition.

P E O P L E

eadlines seen around the world showcased the excep-tional year retail automotive experienced in 2015. With a record setting 17.5 million

cars sold there is no doubt the industry has experienced a revival post-recession.1 With this kind of revenue momentum, retail auto-motive should be a magnet for talented pro-fessionals looking to capitalize on increased profits and volume. This outcome was vis-ible during the U.S. housing boom. California

alone saw a 46 percent increase in the number of active real estate agents from 2002 to 2008.2 The lure of opportunity and autonomy attracted sales professionals away from other industries into real estate. So, why isn’t this

same concept holding true for sales profes-sionals in retail automotive?

The answer to this question can be uncov-ered by examining the labor market. During the recession while most dealers were strug-gling to survive, a major shift was occurring in the labor market. Baby Boomers, who

were the largest generation in the work-force in 2009, were at the sunset of their career. They were no longer interested in building a book of business. If they contin-ued working during the recession, it was only because they had to. Similarly, Generation X was going through a shift of their own. Many Generation Xers gravitated to a career of high-commission sales due to the low entry barriers and uncapped potential. Earning six figures a year was a reality for this generation, with or without a college degree. Then the Great Recession hit. While Baby Boomers watched their 401(k) decline, Generation X felt it in their paycheck. Advertising sales, mortgage, real estate, car sales, all came to a screeching halt. The entrepreneurial careers suddenly stopped paying the bills. The prior attrac-tion to commission plans now seemed like a guaranteed way to go belly up.

With baby boomers exiting the market and Generation X becoming more risk adverse, the only generation left to recruit was the Millennials. By 2010, Millennials accounted for almost 40 percent of the workforce. The older Millennials, born in the early to mid-1980s, most likely were born to Baby Boomer parents. They grew up with parents who sacrificed time with the

What Does YourEmployment Brand

Say About Your Dealership?

How focusing on employment

branding will improve recruiting,

retention and employee

engagement

BY CANDICE CRANE


H

family to chase the “American Dream.” Their parents may have pushed off retirement, but for the most part, the older Millennials learned that hard work would result in financial pay off. The younger Millennials, born in the late 1980s to early 1900s, were most likely born to Generation X parents. This demographic of Millennials did not experience the finan-cial stability of their older cohorts. Although their parents may have attended more of their sporting events, this group of Millennials came of age during the recession to parents who were not as financially established. They were more aware of the pitfalls of a down economy and entered the job market during a time of high unemployment.

By 2015, the Millennials took over as the largest genera-tion in the workforce. Given the personal sacrifice their parents made away from family, coupled with the instability they witnessed in the economy and the financial and social atrocities they grew up with, it is no surprise that Millennials value growth potential, pay and hours in that order.3

Millennials are just as goal oriented as previous genera-tions, but not nearly as patient. Growing professionally is their expectation. They want to know how they will grow and in what time frame. They want to make money, but not at the cost of stability. They look for a balanced com-pensation plan that rewards them for exceptional perfor-mance, but protects them from the peril they witnessed in their adolescents. They also demand a form of work-life balance. This does not automatically translate to less hours per week. What they are looking for is flexibility, autonomy and the ability to make smart decisions about how to spend their time.

Unfortunately, retail automotive does not have the best

reputation for providing the kind of opportunity Millennials are looking for. According to the 2015 NADA Dealership Workforce Study, sales turnover increased 6 points to 72 percent annually, 80 percent non-luxury. Only 33 percent of sales consultants will reach their three-year service anni-versary even though compensation rose 3.3 percent to $68,823. Not surprisingly, the study also found the number of Millennials hired by dealerships increased one point to 48 percent while annual turnover of this generation remains the highest at 54 percent in comparison to Generation X at 36 percent and Baby Boomers at 29 percent. If these trends continue, Millennials will take over as the largest generation being hired by automotive retail and will continue to turn-over the fastest.

So how do we turn the ship around? We can’t avoid hir-ing Millennials yet early indicators tell us they are the riski-est. How does retail automotive compete with programs that are designed to attract Millennials? How do dealer-ships, whether single point or multi-store groups, create a defined career path for Millennials to grow? As we think about ways to transfer autonomy back to the customer to improve their buying experience, should we be doing the same for our employees?

The first human capital strategic exercise should be to determine your employment brand. Similar to defining your inventory and pricing strategy, you need to define why your opportunity is unique.

Employment Brand Variables• Are you the market compensation leader or do you provide

stability in pay?


• Do you provide an aggressive benefit program that lowers cost to the employee?

• Do you provide flexibility in scheduling or hours? • Do you empower your employees? How is this defined?• Is your training and development program strong enough

to attract candidates?• Are you passionate about promoting from within and have

the results to back it up?• Are you growing in volume or by number of rooftops?• Do you currently have above industry retention? • Do you have a preference of industry or non-industry

candidates?

Obtaining multiple points of view on your employment brand is important. What your senior leadership team thinks may or may not align with what your employees think. Personally conducting an employee assessment may produce surprising results.

Assessment Questions1. Ask your employees why they joined the company and

what they enjoy most.2. Do you get employee referrals? If so, what do your

employees tell their friends about working for your dealership or group?

3. Schedule exit interviews with employees that put in their notice to leave. Find out where the disconnects are. Why were they originally attracted to your company? Was the opportunity what they thought it was going to be? Is there consistency to why people are leaving? The purpose of both these exercises is to define who

your organization is today and who you want it to be. You can’t build a house without first laying the foundation. Recruiting the right people starts with identifying what kind of opportunity you have. From there you can define your ideal profile of candidate and determine the best way to attract those people.

Retaining your employees is easy if your managers under-stand and buy into the same vision. For example, if your employees are attracted to your company because you provide flexibility in scheduling and you have a great devel-opment program, your managers better allow the flexibility and reinforce the importance of development. Making deci-sions to keep employees in the store when they should be at training or not adhering to a pre-defined schedule will, in the short term, negatively impact morale, and in the long run erode your employment brand. Similarly, if you tout growth and opportunity but fill leadership positions externally or promote based on subjectivity or seniority, new employees will take note and quickly disengage and start looking out-side your company.

An 11 store group in Minnesota went through this exercise in 2009. They were unable to attract salespeople due to the changing labor market and weak employment brand. They did not have the highest paying dealerships in the area and chose to pursue non-industry sales candidates due to their one-price selling model. As a result, the candidate pool was very small and their opportunity was not strong enough to attract career sales people outside of automotive.

This group decided to redefine their employment brand by recruiting recent college graduates and focusing on promot-ing from within to fuel their company Continued on page 27


B R A N D

f you were a first mover, your online marketing pres-ence likely began in ear-nest in the late 90s. After online car buying sites like

Autobytel.com, Autoweb and CarsDirect had firmly established themselves, it became clear to savvy dealers that it was important to have a Web address to capture the, at the time, “handful” of consumers who were turning to the Internet to start their car shopping process.

Nearly 20 years later and probably every-one reading this will agree that the Internet has become the biggest driver of online car sales – whether customers come direct via your own website or a third party site. Of course, just as your prime physical real estate plays a key role in capturing drive-by consumers, your online presence must be con-tinuously honed and improved to meet the changing needs of the digital landscape.

When you took the plunge into digital marketing, the first thing you did was secure a URL to host

your website on. This likely means your domain name is 10 or 20 years old; a lot has changed since then.

At the time, you probably grabbed the best dot-com domain you could find – and that didn’t necessarily mean it was the best for your business.

The reality was that many of the best dot-com domains were already taken – either by cyber squatters or by someone who just happened to have the same, or similar, brand name and got there before you. A great example of this: Nissan.com is not owned by the automaker, but, instead, by Uzi Nissan, a reseller of computer hardware and peripherals, who swooped in early and registered Nissan.com in 1994.

In the dawning days of the Internet, domain names were obviously important but, it was new to everyone, so consumers were far more forgiving when they encoun-tered long, clunky URLs. Today, consumers are savvier, less patient – and far more likely to be doing most of their Web browsing on a smartphone. Which means their “thumbs do the walking.”

Let’s face it: what worked for desktop computers does not work for smartphones. Think about your domain name. If it’s 10 or more characters long, then it’s probably difficult to type on a smartphone – can you imagine the aggravation of typing “DealerNameAutomotive.com” into your

Exploring new web address options

for your brand

BY MIKE AMBROSE

Do You Value YourOnline Real Estate?

You Should.

“I really believe

‘search’ is the

only way people

are going to find

our dealership

in the future –

likely from their

smartphone.”


I

phone or sending an email to [email protected] – not to mention how hard it would be to remember from a passing billboard, radio commercial or newspaper ad.

That’s why taking control of your online real estate is so important. The world has changed a lot in 20 years – includ-ing a new twist: dot-coms are no longer the only URL choice avail-able to businesses. With the advent of new domain ext ensions, or top-level domains (TLDs), like .college, .property, .xyz and 100s more, includ-ing .car, .cars and .auto, there are many more choices and opportunities to extend your brand online and cre-ate a memorable and easy to locate Web address.

But really, why should dealer executive’s care, isn’t this an issue for the digital marketing guy? Well yes, but it is also critical if you value your dealership’s iden-tity and brand … it is as important as your physical address. Imagine if your competitor one day magically took over your physical address?

As Karn Jajoo wrote in an illuminating article on The Next Web (thenextweb.com) about the costs of losing your digital address: “Perhaps if new TLDs [top-level domains] had existed back then [in 1994], Nissan.computer and Nissan.auto would have solved this contention without the lengthy legal dispute that has allegedly already cost Mr. Uzi $2.2 million in legal fees.”

Upgrading your Web address will not only help your marketing materials with shorter, more distinctive – and memorable – domains, but it should also give you the ability to capture more organic search engine traffic. Again, according to Jajoo’s The Next


Web article, “Google, which owns some of the new TLDs, is attempting to rank (them) appropriately. Already some generic TLDs are ranked higher than a .com.”

Our early research proves this point. Take for example, Scholfield Automotive, who very recently launched a website on the new domain www.Wichita.cars. After a month, Wichita.cars already ranks on page 3 for the search term “Wichita Cars” while the 15-year-old .com equivalent, WichitaCars.com, ranks on page 6.

Another opportu-nity for expansion is in “regional” Web real estate. For example, a Los Angeles dealer could display their pre-owned inventory on LosAngeles.Cars, and then start to capture search engine traffic for competitive keywords like “los angeles cars” and “los angeles used cars.” The dealer could then run search engine marketing, TV, print, and radio cam-paigns and track the results on their new Web address.

This is exactly what early adopter St. Louis Motorcars is doing. The Midwest-based luxury car dealership rebranded from STLMotorcars.com to STL.Cars – and with the money saved by registering STL.Cars over the comparable dot-com domain, the dealer was able to launch a new ad cam-paign to promote his business.

“I can’t think of a better or clearer domain name for my dealership than STL.Cars. It’s short, memorable and relevant to my busi-ness, geography, and industry,” said Graham Hill, Dealer Principal, St. Louis Motorcars. “Almost all of a dealer’s digital market-ing efforts are directed to their domain.

Creating a short, memorable domain like STL.Cars reinforces all that investment. Think about a billboard on the side of a busy highway that simply reads “www.STL.Cars” – that’s far more likely to create a lasting impression than www.STLMotorcars.com.”

Another forward thinking dealer is Karen and Sammy Quraan of Brilliance Auto, a New Jersey-based seller of pre-owned cars. The Quraan family is not only migrating from their long URL – currently, www.brilianceauto.com (with just a single “l” because a Chinese automo-tive company already had the .com domain they wanted) to www.Brilliance.Auto but has obtained some very spe-cific URLs to extend their online presence, includ-ing Certified.Car, Shop.Auto and Safe.Car.

“The Internet is such a huge and global place – we recently shipped a car to Dubai! –and it seems obvious that it will continue to segment into different “neighborhoods” so consumers can easily find your business,” says Sammy Quraan. “And, as third-party leads continue to decline, I really believe ‘search’ is the only way people are going to find our dealership in the future – likely from their smartphone. I want to be sure I’m where my customers can find me and I think these new industry-specific domains will take over as the default way of doing business on the Web.”

Maybe it’s time to start looking into how your dealership can extend its online foot-print to better reach and appeal to today’s Web-savvy, mobile consumers? It could be as simple as securing a prime piece of virtual real estate like YourCity.Cars.

Maybe it’s time

to start looking

into how your

dealership can

extend its online

footprint to better

reach and appeal

to today’s Web-

savvy, mobile

consumers?


MIKE AMBROSEMike Ambrose is the COO of XYZ and Cars Registry Limited. With 15+ years of domain industry and digital marketing expertise, Mike specializes in building authoritative online presences through branding, SEO, and SEM best practices. He is best known for launching the world’s most popular new domain extension, .xyz, as well as industry-specific domains .College, .Rent, .Security, .Protection, and .Theatre. Most recently, Mike introduced .Cars, .Car, and .Auto: the complete line of new domains developed specifically for the automotive industry.

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B R A N D

How to create the right environment

for your dealership

BY TODD MARCELLE, CEO AND FOUNDER GOMOTO

Why ConsumerExperience Matters

s consumers have grown more dependent on the Internet and technology in every facet of their lives, nearly every industry has had

to adapt to meet the demands and needs of the public. The auto dealership industry should not and cannot be any different if it intends to compete with the onslaught of online disruptors.

By the time a consumer has entered a dealership, they’ve already done their homework online and are looking for an expedited sales process. In fact, according to a 2015 Accenture survey, 75 percent of driv-ers polled would consider the entire car buy-ing process online – a changing sentiment that has not gone unnoticed by a number of new companies that are offering just that.

So how do brick-and-mortar dealerships compete? They do it by utilizing the right technology that combines the online shop-ping and the in-dealership experience, offer-ing consumers an efficient, transparent and pressure-free shopping

Current Consumer Sentiment2015 DrivingSales Consumer Experience

Research found that 56 percent of buyers said they would buy cars more often if the experience at the dealership were better. Additionally, the J.D. Power 2015 U.S. Sales Satisfaction Index (SSI) Survey findings noted that, “Given an increasingly tech-savvy consumer, dealerships that integrate technology tools into their sales process

deliver a superior customer experience. Dealers that fail to invest in consumer-facing technologies risk being trumped by competitors.”

The SSI Survey also found that customers preferred interacting with sales person-nel who used a tablet to guide the sales process from start to finish. When it comes to finance and insurance (F&I) products, consumer satisfaction rose significantly when dealerships present these options on a computer or tablet screen, compared to printed materials, verbal quotes and descriptions and handwritten figures. Conversely, customers had a negative reac-tion to handwritten price quotes, clearly pointing to a desire for slick, seamless and technology-driven car buying process.

These and other similar findings should serve as a wake-up call to dealerships and force change in their practices and process-es. Dealerships must understand customers want and trust technology and that it can enhance efficiencies and above all, technol-ogy will ensure their survival.

Integration of Online and Offline Experiences

By integrating technology into the sales process through the use of cloud-based, customizable software dealers can revo-lutionize their entire sales process and create the experience that will excite customers and keep them coming back. The right type of technology platform bridges the gap between online shopping


A

and the in-dealership experience, offer-ing consumers efficient, transparent and pressure-free shopping. These platforms can capture customers’ contact informa-tion from the start, assign salespeople, track ad sourcing, research vehicles, value trades, browse dealer incentives and con-nect directly to a dealer’s CRM.

As a result, buyers can take immediate action while on the showroom floor, dur-ing the test drive or in the service lane, translating to real-time results for dealers.

One company that has taken consumer sentiment to heart and revamped the way they do business is Sonic Automotive, one of the nation’s largest auto dealers. With three locations already up and running in the Denver area and several others planned for this year, Sonic has developed a revolutionary concept that combines technology with the personalized and seamless experience consumers crave.

However, there are plenty of disruptors vying for their place in the market – such as Beepi, Carvana and Vroom. They each have differing business models, but all offer consumers a way to purchase used vehicles without stepping foot inside a dealership. After all, a recent Frost & Sullivan study suggests that about 5 per-cent of all cars will be sold online by 2020.

Dealerships Must Adapt or DieThe fact that a customer can expect

to spend approximately four hours or more at a traditional car dealership to complete their purchase is one that gives online companies the fuel they need to lure customers away. Many auto deal-erships have recognized the tide shift, but are still figuring out the best way to adapt because they may not be in the position to make significant changes in a short period of time.

While they must make the necessary investments into their infrastructure to redesign and enhance the brick and mor-

tar stores to meet the 21st century car buyer, these investments need not all happen at once.

Dealers can future-proof their dealer-ships in a number of ways depending on the size of dealership and the investment dollars available, but they must begin to implement even the smallest of changes over time.

For example, some dealers choose to completely eliminate the F&I office or include desking – a solution that mines, tracks and analyzes the billions of combi-nations and iteration of lease and finance lender programs available in the market-place. Others arm salespeople with iPads which allow customers to easily conduct their vehicle search, negotiation and transaction finalization with a salesper-son’s guidance. The simple goal is to bring the negotiation process out of the back room or integrate the use of tablets and touch kiosks to transform the showrooms into something enjoyable and seamless.

The Bottom LineThe industry will continue to see new

industry disruptors, grapple with various factors such as gas prices, and changing consumer sentiment – the fact remains that many car customers still want to physically touch the cars and take them for a test drive even after they’ve con-ducted their research online. However, what they no longer want is the tired, old showroom experience which takes up their entire weekend. Instead, they want a seamless, personalized experi-ence from the time they walk into the dealership until they drive off the lot; an experience that will save them time and give them a sense of control in choosing their dream car. The dealerships who fig-ure out how to provide this experience with the use of technology will quickly outpace their competition and ensure their own survival.


TODD L. MARCELLE Todd L. Marcelle is the CEO and Founder of GoMoto, a leading provider of cloud-based customer engagement solutions designed to enhance customer experience in automotive showrooms and service waiting areas. Todd holds a degree from Fordham University and is a GLOBE International Business Scholar. In addition to GoMoto, Todd has founded three previous startups.

growth. Their goal was to reduce turnover and increase bench strength. They defined a career path in sales, implemented small teams, extended the training program from 1 week to 12 weeks and transitioned to an hourly pay plan with opportunity to bonus based on team productivity. The dealer principals led this transformational change and invested in a small recruit-ment team to ensure the correct message was being delivered to the market and the right hiring process was being followed.

Once the employment brand was defined, the recruiting team worked with the gen-eral managers to define ideal profiles for each store. Candidates that enjoy the outdoors and had a passion for travel would be sent to the Subaru deal-ership. Candidates with high attention to detail that prefer a faster pace were sent to Toyota. By continuing to refine the profile, this group was able to give each sales candi-date a better chance of success by aligning the candidate’s style to the customer profile and dealership culture.

Five years after the initial launch of this transformational change, the group has improved sales retention, reduced the time it takes to find sales people, and developed a strong culture of promoting from within. Sixty-four percent of the sales people that started with the company since 2010 are still employed with the group today, many in leadership positions. Since they rede-fined their employment brand, they have filled all front-end leadership positions internally throughout all dealerships. A significant milestone occurred in December 2015 when one of the first hires in the new model was promoted to general manager. He went from recent college graduate to

dealership GM in just under six years. This example shows you don’t have to

have the perfect opportunity for everyone, but you do need to understand who your opportunity is perfect for. If you want to be the highest paid dealership in the market,

go for it. Just make sure your employ-ees know they will earn more with

you and hold your leadership team accountable to that strat-egy. If you want to be known as the best place for training and

growth, then ensure your career path is defined and invest

resources into a well-rounded development pro-gram. If you are a small family run store that prides itself on life long

relationships with custom-ers, treat your employees as if they are part of the family. Provide them with low cost benefits and reward their contributions and tenure with a personal “thank you.”

Human capital strategy isn’t a soft and fluffy HR initiative. Defining your employ-ment brand is a complex exercise that requires focus and commitment. Once created your employment brand can sig-nificantly improve recruiting, retention and engagement but only if everyone under-stands and adheres to the same message. Start the discussion today.

REFRENCES1. Spector, M., Bennet, J., & Stoll, J. (2016, January 5). The

Wall Street Journtal. Retrieved Feburary 1, 2016, from www.wsj.com: http://www.wsj.com/articles/u-s-car-sales-poised-for-their-best-month-ever-1451999939

2. First Tuesday Editorial Staff. (2016, Feburary 7). journal.firsttuesday.us. Retrieved from First Tuesday Journal; the california real estate news sources: http://journal.firsttuesday.us/the-rises-and-declines-of-real-estate-licensees/2983/

3. Crane, C. (2015). Help wanted: How social media and employment branding impact recent college graduates.

P E O P L E | E M P L O Y M E N T B R A N D | continued from page 19


CANDICE CRANE

Candice Crane is a human capital strategist specializing in recruitment, retention and talent management strategies. As a passionate change agent, she is working with progressive dealers to restructure sales process, improve recruitment strategies and reduce turnover within automotive retail. Candice was previously the head of HR for the Walser Automotive Group and is currently the Principal Consultant at Crane Automotive Resources. She completed her undergraduate degree from the University of Wisconsin-Madison and holds a Masters Degree in Organizational Development.

C A P I T A L

wo thousand fifteen marked an epic year in this multi-year boom of auto retail merger and acquisition activity. The year opened with the closing

of Berkshire Hathaway’s acquisition of the Van Tuyl organization, the single largest acquisi-tion in auto retail history. And, four additional new entrants made acquisitions, marking the formal arrival of private equity and family offices to auto retail. Overall, transaction activ-ity set new records with 242 dealership buy/sell transactions in 2015, a 17 percent increase over 2014. These transactions were accompa-nied by booming real estate prices, attractive financing and continued strong SAAR. But, the story can never be that simple. All of this activity occurred as the stock market trended down, and the public auto retail stocks fell 29 percent from their 2015 recent highs. In

this annual recap of the buy-sell market, we’ll review each of these dynamics.

Total Acquisition ActivityTransaction activity increased by 17 percent

in 2015 according to “The Banks Report,” representing a record year for auto retail buy/sells. There were 242 dealership buy/sell trans-actions in 2015, compared to 206 during the same period in 2014. (Note: A transaction is defined as a sale between one buyer and one seller. By way of example, Berkshire Hathaway Automotive’s acquisition of Van Tuyl is consid-ered a single transaction, although it included 78 dealerships and 116 franchises.)

Among the franchises being acquired, import franchises saw their market share increase by nearly 10 percent, while the domestics lost similar market share as compared to 2014. Kerrigan Advisors attri-butes this shift to an increase in supply of top import sellers, luxury and non-luxury. Though domestic franchises represent 67 percent of all U.S. franchises, they account-ed for only 36 percent of the franchises sold in 2015. This discrepancy is a result of the large number of domestic franchises that are smaller, and located outside of the major metro and suburban markets where buy-sell activity is concentrated.

The public retailers’ acquisition spending has decreased an estimated 43 percent in 2015 (final numbers not released, as this is being written) compared to 2014. Last year, the publics surpassed their annual pre-recession acquisition spending and

Several large transactions,

and entry of new players will impact

our industry for years to come

BY RYAN J. KERRIGAN, KERRIGAN ADVISORS

An Incredible Year inthe Buy-Sell Market


T

reached their highest U.S. acquisition spend-ing in auto retail history at $1.45 billion. For the year, public acquisitions spending was almost entirely focused in the U.S., a notable shift from a few years prior when nearly 30 percent of acquisition spending was outside of the U.S. That said, the strength of the U.S. dol-lar may have prompted the recently announced acquisition by Group 1 of Spire Automotive, a 12 dealership platform that will expand their presence in the United Kingdom.

Though the public com-panies increased their acquisition spend, the private buyers, including new market entrants, continued to dominate the buy/sell market in 2015. Private buyers represented 91 percent of franchise transac-tions, and are generally less constrained than public companies, many of whom are subject to framework agreements which limit their ability to purchase certain franchises or make large multi-dealership acquisitions.

Family Offices and Private Equity

After two years of discussion, 2015 marked the entry of significant outside capital into the auto retail industry. As noted earlier, the Van Tuyl transaction by Berkshire Hathaway was finalized in the first half of the year, and was soon fol-lowed by the announcement of additional large, private acquisitions. For example, Mark McLarty purchased (backed by George Soros’ family office) Joe Machens Dealerships, a 14 store platform in Missouri, and Fremont acquired Morrie’s Automotive Group in Minnesota. New dealership buyers comprised of family offices, private equity firms and public conglomerates acquired 30 percent of the franchises sold in 2015,

a remarkable new development. Kerrigan Advisors believes these and other new entrants will increasingly shape dealership consolidation and meaningfully impact the

future of auto retail.

Importance of Real Estate

In recent transactions, we have seen the new, outsized importance of real estate in automo-tive retail transactions. Appraisals are consistent-ly coming in well above expectations, which has the benefit of increas-ing transaction sizes and allowing for additional buyer financing. When real estate appraisals

are higher than anticipated, we generally increase the rent factor for the dealership, and reduce the store’s profitability. Because real estate trades for a higher multiple than dealerships, this has the net effect of increas-ing total transaction proceeds for the seller. And, given low interest rates and aggressive financing options for real estate, buyers are generally willing to accept the higher real estate costs in order to get the deal done.

In some cases, buyers are basing their pricing on a multiple of EBITDAR (earnings before interest, taxes, depreciation, amor-tization and rent), offering a single price for an entire transaction including real estate. This approach recognizes the importance of real estate to dealership operations. As com-mercial real estate prices continue to rise and image requirements expand, Kerrigan Advisors believes transaction pricing will be increasingly affected by real estate values.

Publics’ Capital Acquisitions are Driven by Stock Price

The publics’ stock prices plummeted an incredible 29 percent since 2015 (see chart

Private buyers,

including new

market entrants,

continued to

dominate the

buy/sell market

in 2015.


below). This decline has resulted in a sig-nificant decline in their valuation metrics. Generally, the publics only make acquisitions which are accretive to earnings. In order for an acquisition to be accretive to earnings, the buyer’s P/E multiple (stock price/earnings per share) must be higher than the seller’s P/E multiple (asking price of a transaction includ-ing blue sky, fixed assets and working capital divided by the dealership’s earnings).

The collective P/E multiple for all of the publics reached a peak in 2014. Given this, it is not surprising that public acquisition activ-ity recently reached historic levels – public companies’ strong valuations increased their ability to pay up and still do transac-tions very accretive to earnings. However, at the end of 2015, the publics’ P/E multiple is expected to decline, reflecting the indus-try’s slowing growth rate. Similarly, in the

private market, as the growth rate of dealer-ship earnings declines, valuation multiples will begin to come down. Kerrigan Advisors has noted that both buyers and sellers are becoming increasingly aware of the interplay of earnings growth and valuation multiples, prompting more sellers to come to market and more buyers to sharpen their pencils.

In this light, the valuation metrics of the public companies are an important indica-tor for future private dealership valuation

trends. The six public dealership groups are marked to market every business day by thousands of investors who buy and sell their stock. The efficiency of the public stock exchanges, relative to the private dealership buy/sell market, informs franchise valuation trends and should be closely watched.

In summary, 2015 was a momentous year in the buy-sell market for auto retail. Large transactions, a large number of transactions, and the entry of significant new players will impact our industry for years to come. We believe that the buy-sell market will remain strong in 2016, and – in particular – foresee the announcement of multiple large trans-actions that have been in process for many months, if not quarters. But, we anticipate the public companies will be less active acquirers in 2016, and may portend slowing buy-sell activity in the years ahead.


RYAN KERRIGAN Ryan Kerrigan is Managing Director of Kerrigan Advisors, where he oversees international transactions and private equity/family office outreach in addition to US auto retail buy-sell transaction work. His business experience includes transaction work, executive leadership, private equity investing and management consulting. Ryan has an MBA from Stanford University’s Graduate School of Business, an MSFS degree from Georgetown University’s School of Foreign Service and BBA in Finance from the University of Notre Dame.

C A P I T A L

ome dealerships are just naturally on the cutting edge with technology while others are always the ones getting cut. You

likely already know which group you are in. Nowadays, the technology edge seems to change weekly, which makes even the most tech-savvy among us a bit uncom-fortable. I’ll use this article to express my opinion on the technologies that you must become skilled with in order to survive and alert you to those you will want to learn in order for your dealership to thrive.

For the purposes of this article, I am going to talk about technology in a broad sense, which will include both software and hardware. For the most part, software and hardware go hand in glove as it’s difficult to operate one without the other.

Technology companies are always try-ing to outdo one another while asking their clients to adjust to the latest and greatest and also compensate them for the cost of research and development. Seldom do I actually hear dealers request-ing software or hardware updates as they are usually just trying to figure out how to use their current ones to boost sales and profits. Rarely do I witness a technol-ogy in use today that blows my mind or truly enhances the dealership employee or customer experience. I usually just see technologies introduced that complicate the processes for buyers and sellers with very, very few exceptions.

I remember years ago one glorious exception. While negotiating with the

CEO of an upstart dealership website company to secure our client the best possible deal, he told the dealer principal and I that as they make updates that every client will benefit from the updates and there would be no extra cost. This was a magic promise as updates at that time were happening on a monthly basis. It was circa 2004 and I encouraged my client to sign up and enjoy the ride. They did and the company, Dealer.com, fol-lowed through as the CEO promised.

Mark Bonfigli, the CEO and co-founder of Dealer.com, was a pioneer with this “buy it one time and get all the updates” strategy. I thought it was brilliant at the time and I believe it was a key reason for their rapid growth and remarkable client loyalty. Dealers appreciated the fact that they would benefit from every upgrade as a loyal client. The proof was in their valu-ation when they were eventually sold and made the founders very well-to-do. Given their focus on doing business for the ben-efit of their clients, I think the payoff was well deserved.

You would be hard pressed to find that kind of deal available today as we are finding the prevailing model is to provide a low cost entry model and then charge $299 for each up and add-on. This is equivalent to the Apple app store where you can purchase in-app upgrades after being lured in with a free app. In Kentucky, where I am from, the cheapest part of owning a horse is the horse. It’s the feed, the housing, the vet, the trailer, the tack, etc. that is expensive.


‘Need to haves’ versus ‘nice to

haves’ technology

BY DAVID KAIN

Technology Leadership

S

I remember a marketing executive with a leading automotive technology company telling me that dealer’s won’t blink an eye at a product as long as it is $299 or below. As such, all their ups and add-ons were in that range even though the total cost to dealers when all was totaled was above market cost for one price includes all options. I would recommend you pull out your invoices and scrutinize whether you really are receiving any value for items in that cost category. Due to inflation, you may want to look at $499 and below.

Beyond the dollar expenditure of tech-nology, I would like you to consider one other real cost you have to contend with when considering the vendor race for new technologies. There is the very real cost of learning for your team members and the lost productivity cost when it takes them out of their comfort zone – aka: their pro-ductive zone. There is always a learning curve when a button is added, moved or perhaps removed from software. There is also a potential cost in productivity when a monitor becomes smaller or the bandwidth to surf online becomes overburdened and the Internet response capacity is hindered. Dealership employees have to constantly adapt to these “new and cool” technologi-cal updates that may have negligible or no positive impact.

So … what are the “need to haves” com-pared to the “nice to haves?” Let’s break this down by category:

Need to HavesDealership/OEM Collaborative Websites

A website is essential to your success, but do you really need your required OEM website and an independently developed website? The truth is, it depends on the brand you represent and how rigorous their requirements are for brand compli-ance. If your OEM has difficult standards to meet and they employ outside vendors

to act as the brand police and fine you for violations, then it’s likely best to just walk the straight and narrow and go with one brand compliant site. On a side note, how can an OEM be a dealer’s partner and then fine them for noncompliance when all it would take is a friendly call to address the issue? For the record, dealers that work with these brands need an effective Dealer Council to address these brutal tactics.

If your OEM is more concerned with sell-ing vehicles than website branding, then I would recommend you maintain the OEM site as well as your own independent site in most cases. This strategy may appear more expensive, but it is often a win-win for the OEM and the dealer as more oppor-tunities are generated which turn into car deals. I would also recommend that the OEM’s provide strategic marketing co-op to support the development and traffic generation to the independent dealer sites instead of just promoting the OEM site with these funds. Oftentimes, the most progressive dealers in the market are uti-lizing the two-site strategy and the OEM that holds out funding to support SEM generated traffic is only hurting them and themselves. Progressive OEM’s realize this and don’t inhibit or prohibit this strategy, rather, they support it and benefit.

Effective CRMAlthough CRM’s are commonplace in

the market, what is not common is the full utilization throughout the dealership. It is typical to find several salespeople and the Internet/BDC team members using the CRM, but oftentimes floor salespeople do not use the tools to their full effect.

The reason I recommend an effective CRM is because a CRM that the full sales team, including managers and less techy sales-people, don’t use is not in my opinion an effective CRM. I often refer to the need for a “1 button CRM” (an exaggeration) whereby every employee can instinctively navigate

If your OEM is

more concerned

with selling

vehicles than

website branding,

then I would

recommend you

maintain the

OEM site as well

as your own

independent site

in most cases.


and not only enter data, but track their ongoing process and sales results without having to have a degree in “Reportology” (this is a made up degree). A CRM should be the most simple tool in the dealership, and yet, even so called industry experts (like me ) often have trouble navigating even the most popular CRM’s.

The crazy part about this is we often hear managers say, “If it’s not in the CRM, it didn’t happen.” Heck, I’ve said it myself. However, when I am honest with myself, I have to admit today’s CRM are designed like a junk drawer and have no flow or logic. They are essentially a technology design by committee. That committee is usually someone who has not had to use them on a daily basis. As a result, most sales/internet/BDC managers produce their own reports on a spreadsheet even after spending upward of $3,500 for a full suite CRM. Absolutely ridiculous!

Fortunately, leading CRM providers are coming to their senses and developing a more simple and user-friendly interface in future designs. This can’t happen soon enough. This wasn’t such an issue when 20 percent of car buyers used the Internet to shop for vehicles, but with upward of 90 percent going online to research and start the buying process, we need CRM’s that every person can become an expert in min-utes. Think Apple when considering what I am getting at. Any 3-year-old can pick up an iPad and within minutes be navigating, while even CRM support agents often don’t know how to design work flows in their own CRM’s. As Thoreau said “Simplify, simplify” and then his friend said …”One simplify, would have sufficed.”

Tablet Equipped Sales TeamsTo call this a “need to have” will really

frustrate a lot of old school dealership employees, but I really think it is way past time for this to be the “pen” equivalent for progressive dealers and salespeople.

If I were shopping dealerships today for a career move, I would want to see sales managers using/requiring the use of tablets in the selling process. These are trust-build-ing devices and they are simultaneously confidence boosters for salespeople and customers alike.

I enjoy listening to and reading the thoughts of Generational Expert Jason Dorsey, who is well-known for his book “Y-Size Your Business.” Jason talks about how Gen Y shoppers love to engage with salespeople with a tablet and it is more of a shared decision device instead of a one-sid-ed approach conveyed with a desktop. The impact on trust when you are co-navigating with a buyer and even handing them your tablet during the process is amazing. This nuanced approach breaks down barriers and encourages team-based selling/buying.

There is compelling evidence that con-vinced me shoppers involved in buying with salespeople using tablets will buy sooner and will actually pay a higher price because they were part of the process. In my 20 years in automotive retail, I found sitting on the same side of the desk with shoppers worked wonders and this is just today’s equivalent. The software systems offered by companies many manufactur-ers that empower salespeople seals the deal for me. Especially when you see com-plete novice salespeople feel like experts within days. This translates to earlier suc-cess and more likely longevity in their job. It also is an effective recruiting tool when you are able to show how progressive your dealership is compared to less tech-savvy competitors.

In summary, I would just like to encour-age you to choose your vendors wisely, motivate your OEM’s to support your progress and provide the best possible tools for your sales team to succeed. One tool you may want to consider looking at before making a purchasing decision is the DrivingSales Vendor Ratings.


DAVID KAIN

David is President of Kain Automotive Inc. a training/consulting company that specializes in Automotive Internet Sales, Business Development Centers, Digital Marketing and Social Media. He has a unique background that includes Automotive Retail and OEM Executive Leadership. During his 20 years in retail he served in various positions including General Manager at Jack Kain Ford, where he remains a Dealer Partner today. His OEM experience includes being a co-founder and previous COO of FordDirect.com.

B R A N D

ost Dealers are closer to a One Price Selling sales process than they may realize. If you’re an excel-lent pre-owned dealer

you’re basically not negotiating. You must price your cars to market to get leads. On the new car side, the customer is setting the prices. With new tools that allow prospects to literally buy the car from home, negotiating power is shifting to the consumer.

The number one reason to go to One Price is the vast majority of customers want to conduct business in a transparent man-

ner. Women register over 50 percent of vehicles and they dislike negotiations. Gen Y now makes up almost 30 percent of the market and they also dislike negotiations.

Add in others who don’t like to negotiate and you have at least 80 percent of the mar-ket who will pay a slight premium for a fast, simple and transparent purchase experience in which they feel they are being treated fairly. Why employ a sales process that appeals to only 20 percent of the market?

The second reason to adopt a One Price process is it increases your ability to attract a younger, gender diverse sales

Four reasons why being a ‘One

Price Store’ is advantageous

BY MARK RIKESS

One Price Selling – What Are You Waiting For?


M

force. How many of you did a great job of attracting salespeople in their early to mid-20s 10 years ago? If you did, you would have the majority of your sales staff in their mid-30s with a 10 year book of business and a management team that looks more like your customers.

Look around your showroom floor. Does the majority of your staff look like your customer base? The market is rapidly get-ting younger while most stores sales staff are going in the opposite direction. You’ll never attract and retain a youthful sales force with the traditional, “desking” sales model that leaves sales people unempow-ered and required to haggle over every sale.

The third reason to go to One Price is to elimi-nate wasted time in the sales process. When a dealership is busy it takes at least three hours to buy a car plus delivery time. About half of that time the prospect is not engaged in the sales pro-cess. They are waiting while salespeople line up to talk to a man-ager – and then comes the T.O., which backs the process up even further. Negotiating F&I also slows down the process.

The traditional sales process needs an abundance of managers to handle negotia-tions. The average store has one manager (including F&I, BDC and Sales) for 2.5 sales people. If you have 20 salespeople, you will have at least eight managers. Bottom line: In an era of margin compression this is no longer a financially sustainable sales model.

And finally number four: Shoppers look for a dealer based on social media. Yes, they go right to Yelp and see which deal-ers in their area have the highest ratings. Like it or not, this is true. Inventory, pric-

ing and location won’t help dealers that have less than a 4-star rating. One Price Dealers get significantly better (and often glowing) 4+ star reviews.

Is transitioning to One Price easy? No, it’s not. Is it worth it? Absolutely.

To be successful, the store’s leader must have a very strong commitment to changing the culture to one that is cen-tered around transparency – what most customers want. Change is hard. This is not for the weak or lazy.

A number of sales managers don’t have the right belief sys-tem and skill sets. We understand. They have been doing things one way for years. And again, change is hard. We get that. Still, I’m amazed when a sales manager tells me he believes “customers like to negotiate!” Because customers are compelled to negotiate due to an archaic sales process doesn’t mean they like it.

Sales managers will need to move from “deal managers” to developing, training and coaching their sales staff so they can be empowered to conduct the transac-tion without help of sales management on virtually every deal. This empowerment results in less overall managers in the Variable Department.

It’s Inevitable. You can’t defeat the Internet. It’s here to stay. Today’s highly informed consumer has already done their homework to determine what they should pay for the commodity you sell.

Those dealers that become One Price Stores have a competitive advantage over those who are trying to improve the tradi-tional process for a shrinking owner base.

With new tools

that allow

prospects to

literally buy the

car from home,

negotiating power

is shifting to

the consumer.


MARK RIKESSPresident, The Rikess Group

Mark Rikess’ career as a successful entrepreneur, auto dealer, consultant, and auto industry thought-leader has been the result of his lifelong passion for innovative thinking. As a second-generation dealer, Mark began with an early focus on dealership performance improvement, supported by well-documented implementation principles. The Rikess Group was founded in 1989 and Mark has been widely quoted in Automotive News, USA Today, The Wall Street Journal, Business Week, and The New York Times. Mark Rikess is a graduate of Arizona State University with a degree in Business Administration and is a resident of Hollywood, CA.

P E O P L E

onsumers’ increasing impatience and need for instant gratification has made “speed” a key stra-tegic weapon for firms to

innovate around, differentiate, and gain a competitive advantage.

Firms like Uber, Airbnb, Luxe, Hotel Tonight, Instacart, Zeel, Postmates, Netflix and others are driving us toward an on-demand, open-access, swift and easy, shar-ing economy. Several firms that are selling traditional goods and services do not believe they will be affected by these trends. But surely, customers’ brains are slowly getting rewired by these new-age trendsetters. Society will expect and demand the same sense of urgency, transparency, “do-it-now” experience from every business in every industry. If they don’t get it at your business, they will go elsewhere.1

FastCompany magazine last year cel-ebrated its 20th birthday. In the anniversary editorial, Robert Safian was looking toward the next 20 years and listing the probable key drivers of innovation and change.2 First on the list was “speed will triumph!” In the same edition, David Lidsky reminded us of how speed had prevailed in the past. Microsoft’s Internet Explorer killed pioneer Netscape, not because of the often-attrib-uted Microsoft’s anti-competitive practices. The Explorer was a much faster browser; period. Several years later, Facebook beat Myspace because it loaded pictures faster and easier on to the website. iPod beat dozens of mp3 players because its FireWire

cable was able to transfer hundreds of music files from the PC much faster than any other player in the market. In the year 2010, there were scores of photo sharing services. Instagram won because it uploaded and sent pictures faster than the others. Intel has been fervently making faster and faster microprocessors for the last 45 years.

Today, Uber is obsessed about getting a car as quickly as possible to the rider. Spotify will perhaps beat Apple Music because it loads the stations faster. Apple’s A9 chip for iPhone 6S and iPad Pro is faster than any other chip on the market. Google and Amazon’s innovations are solely driven around beating the clock. Amazon’s 1-Click is the model for Uber, Instacart, GrubHub, and Starbucks.3 Even Apple licenses the 1-Click from Amazon. In 2014, 50 percent of a survey’s respondents told Akamai, a Web performance firm, that if websites are too slow to load they will leave before finish-ing their task. And 22 percent would never come back.4 High frequency trading is wreak-ing havoc on Wall Street. A single investor can execute more than 1,000 trades a sec-ond and firms are investing millions to shave off a millionth of a second.

It is very easy to dismiss all this speed mania. I often hear executives give me the same list of excuses: (1) It is a Silicon Valley thing; (2) Our industry is different; (3) We are in a high-touch business; (4) The stakes are too high, we can’t be in a hurry; (5) Our customers aren’t asking for it and won’t pay for it; (6) Our competitors are not doing it any faster; (7) Our suppliers are holding us

How removing friction can

improve the customer

experience

BY PROFESSOR JAY RAO

Innovation:Go Fast or Go Home


C

back; (8) It is too expensive to be faster, etc., etc. Most managers and leaders always have 101 reasons for in-action and for pre-serving the status quo.

Let us look at two firms that would not be immediately associated with speed.

Domino’s & Disney: Fast and Frictionless

Domino’s has been passionate about speed for more than 30 years. In 1979 they started giving customers a service guarantee for pizza delivery – “30-minutes or its free.” It was dropped in 1993 after a couple of unfortunate accidents. Today, their digital strategy is again built around speed. They have reduced the pizza ordering process to less than 30-seconds; from 15 clicks to 5 clicks.5 Franchisees will soon be able to deliver up to 80 pizzas by driving the Domino’s DXP car that is fitted with an oven. Apparently they are also testing pizza deliv-eries via drones. Also, Domino’s hosts “The World’s Fastest Pizza Maker” competition. The winner gets $3,000.

Last year, Disney introduced the MagicBand – a stylish rubber wristband – for those visiting the Magic Kingdom. The MagicBand replaces virtually every transac-tion, removes all paperwork and reduces all waiting times once you touch down in Orlando. With the MagicBand, one can skip the luggage pickup at the airport carousel, board the park-bound shuttle at the airport, go directly to your room without checking-in at the hotel, enter the park, swipe to get on rides without waiting and pay for purchases.

Customers will see

through gimmicks

quickly and easily.

It only infuriates

them even more.


In short, the MagicBand makes the entire customer experi-ence “fast and frictionless.6”

Is your dealership fast and frictionless? Can car dealer-ships use speed as a strategic innovation weapon? How do you make speed a corner-stone of your strategy? How can you get your employees to embrace speed? How can you generate great innovative ideas around speed? How do you implement these ideas? What is the leader’s role in setting strategy and innovating around speed?

Two stories will probably provide some answers to many of these questions.

Southwest Airlines and Cleveland ClinicIn 1972, lack of funds was pushing fledgling Southwest

Airlines toward bankruptcy. To survive, Southwest sold one of its four planes. Instead of cutting service, leaders figured out that three planes could do the work of four if they could get in-n-out of the gates in 10 minutes. That meant, unloading the passengers and bags, cleaning the plane, fuel-ing the plane, and loading the new passengers and bags, all within 10 minutes. Magically, employees figured out quickly how to work together. Operations agents started multi-tasking – loading/unloading baggage, emptying garbage. Flight attendants, pilots, fuelers and baggage handlers all chipped in by going beyond their normal duties. Employees felt that they were fighting for their jobs. While Southwest did not always make the 10-minute turn-around, it did save the company. While security procedures and more hand-baggage has slowed this process today, at an average of 25 minutes, Southwest still has the fastest gate-turn in the industry.7 Even to this day, Southwest carries the maximum number of passengers per plane (i.e. the highest asset utili-zation in the industry).

More recently, the executives of the world famous Cleveland Clinic, employed a very similar tactic.8 With more than 5 million clinical visits, 150,000+ hospital admissions, 43,000 employees and 3,000+ physicians and scientists, Cleveland Clinic is regarded as one of the best hospitals in the world for medical excellence and keeping costs down. But in a 2008 U.S. government survey, the clinic ranked only in the 55th percentile for overall patient satisfaction among nearly 4,600 hospitals surveyed. The executives at the clinic then embarked on many initiatives to dramatically improve patient experience and satisfaction. One such initiative was to attack a common complaint among potential patients who had opted to go elsewhere, citing that the hospital was too big, too difficult to access and get an appointment

unless connected to someone within. So, the CEO, Toby Cosgrove, mandated that all patients have the option of getting an appointment the same day they call. A single phone number was created and a centralized scheduling was instituted across the enterprise. An advertisement pro-moting the new service level sent a clear message to poten-tial patients and employees alike. The “Be Seen Today” campaign was an overnight success when divisions, func-tions and employees all adjusted accordingly and stepped up to accommodate 20 percent more new patients. Within a few years, same-day appointments accounted for more than a million patient visits yearly.

Change Management: Fix the Outcome & Free the Process

In the Southwest Airlines and Cleveland Clinic examples, the leaders and executives identified and articulated the problem with great clarity. They made speed the primary purpose. In both these situations, the leaders did not have all the answers ex-ante to achieve the purpose or solutions to reach the goals. In fact, in most change management situations, the variety of underlying reasons for the lack of speed are mostly hidden and unknown to the leaders. While the outcome (need for speed) was known, the under-lying causes for the lack of speed, the solutions to address the underlying causes and the process to implement the solutions were all unknown. All the unknowns were uncov-ered and solved only through the knowledge and the cre-ativity of the employees. I call this the “Fix the Outcome & Free the Process” method of change.

So, the starting point for leaders is to articulate an out-come, such as halving the speed; a goal that is meaning-ful to the customers. Then, let the process go free. The employees will usually know all the fine and nuanced reasons that slow things down. They will identify the root causes of problems. They will find the best methods and solutions to get to the chosen outcome.

Within each of your dealerships, your employees will help you find ways to: • To cut the time needed to assign a sales person• Cut back on pointless questions your new customers have

to answer• Get customers to start a test-drive faster• Cut or delete many useless forms to be filled• Cut the number of dramatic interactions between the sales

person and the manager• Cut or delete annoying customer and manager interactions


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DealerSocket introduces Inventory+ inventory management services,

which can help boost your gross profits by $500 per vehicle.

866.523.8807 DEALERSOCKET.COM/DIG

The latest addition to DealerSocket’s comprehensive suite of dealership management products, Inventory+ can provide the backbone of your appraisal, pricing, and merchandising needs.

Plan your Inventory+ strategy at inventoryplus.dealersocket.com or call 866.523.8807 to speak to an Inventory+ specialist today.

• Delete the wait for managers to come say “goodbyes” and thank customers for their visit

• Delete stalling techniques, even if customers have clearly stated they will not buy today

• Have more customer interactions before they come into the dealershipSimilarly, you can leverage your employ-

ees’ knowledge and creativity to speed everything up in the service and body-shop sides of the dealership as well.

In addition to improved customer sat-isfaction and higher NPS scores, there are a few very gratifying benefits to this “Fix the Outcome & Free the Process,” method of instituting change within the enterprise: (1) Collaboration – challeng-ing problems brings people together; (2) Creativity – tapping into the natural creativity that resides inside each one of your employees; (3) Engagement – cutting bureaucracy improves employee initia-tive and morale; and most importantly (4) Innovative Culture – the more lead-ers adopt this process, the more it gets embedded into the values, behaviors and climate of the enterprise.

Some CautionThere are a few caveats the leaders

need to recognize before going into this change journey.

Customers do not always explicitly express the need for speed. They only know it when they experience the lack of it. They experience friction. They get overwhelmed and anxious. They may never express those either. Even to this day, the car buying pro-cess is still laden with a lot of friction and anxiety that diminishes the overall customer experience considerably.

Great customer experience is an outcome of the leaders’ maniacal obsession – intense and relentless focus on the customer. A business or dealership cannot get fanatical about the customer unless one has extreme

empathy and urgency toward the cus-tomer’s pain and experience. The biggest challenge lies in orienting enterprise-wide this empathy and urgency. As the leader, if you are not obsessed with the customer experience and the need for speed, then please don’t start the journey of change. Customers will see through gimmicks quickly and easily. It only infuriates them even more. In addition, you will lose your employ-ees’ trust as well.

Finally, it is not easy to dream, design and deliver great experiences for customers who are being programmed for heightened expectations. This is especially difficult for businesses in industries that have tradition-ally never been customer focused or speed driven. Don’t keep customers waiting. The big does not eat the small. The fast will kill the slow. The good news is that, as the lead-er, you do not have to have all the creative ideas and solutions for greater speed. “Fix the Outcome & Free the Process” change management will help your dealership to innovate and thrive.

Good Luck and Godspeed!

REFERENCES1 “How Uber is rewiring your customer’s brain and what

you can do about it,” by Peter Sena, Venture Beat, Oct. 4, 2015 http://venturebeat.com/2015/10/04/how-uber-is-rewiring-your-customers-brain-and-what-you-can-do-about-it/

2 FastCompany, http://www.fastcompany.com/3052872/twenty-predictions-for-the-next-20-years

3 ibid

4 “How Uber is rewiring your customer’s brain and what you can do about it,” by Peter Sena, Venture Beat, Oct. 4, 2015 http://venturebeat.com/2015/10/04/how-uber-is-rewiring-your-customers-brain-and-what-you-can-do-about-it/

5 How Domino’s Became a Tech Company, by Jeff Bear, http://www.fastcocreate.com/3030869/behind-the-brand/how-dominos-became-a-tech-company ; accessed on Jan. 3, 2016

6 Disney’s $1 billion bet on a magical wristbank, by Cliff Kuang, March 10, 2015, Wired Magazine

7 10 minutes that changed Southwest Airlines’ future, by Jennifer Schlesinger, July 15, 2011, CNBC http://www.cnbc.com/id/43768488

8 Health Care’s Service Fanatics, by James Merlino and Ananth Raman, HBR, May 2013

1ST QUARTER - 2016 | DRIVINGSALES, LLC42 DEALER EXEC

JAY RAOProfessor of Tech., Operations

& Info. Management at Babson College

Dr. Rao teaches extensively in the Babson Executive

Education programs. His executive teaching and

consulting is in the areas of innovation, implementation

of innovation initiatives within firms, corporate

entrepreneurship and customer experience

innovation. His research has appeared in The Sloan Management Review, The

European Financial Review, IESE Insight, Journal of

Innovative Management, and many others. He has written several business

cases that range in topics from Innovation, Innovation

Strategy, Customer Experience, Customer

Service, Operations Strategy, Strategic Alignment, Supply

Chain Management, and Quality Management.

Digital signage and virtual realty: poised to improve

your dealershipBY CLIFF BANKS

ver the next couple of years, numerous virtual and digital technology solutions will change the look and feel of the typical dealership.

Most dealerships today are configured to yesterday’s processes and experiences. The

environment hasn’t kept up with the digital age. While most dealerships have effec-tive websites and Internet processes, their store images don’t reflect the new realities of today’s society – touch screen mobile devices; interactive and personalized digital signage and virtual reality (VR) applications.

Digital SignageBut that should change this year, believes

Jerry Daniels, a former executive with Asbury Automotive. Digital signage adoption is going to explode within the next couple of years as more dealership groups begin to implement interactive digital screens into the customer experience inside the showroom.

Large scale adoption has taken awhile. In 2007, Daniels founded the Automotive Broadcasting Network, which provides digi-tal signage solutions to dealerships. The company now has several hundred clients. But that should increase significantly over the next couple of years.

The company is in discussions with numer-ous manufacturers regarding various solu-tions. It is partnering with General Motors to provide the digital signage, including digital menu boards, directional signage and video walls, as part of the OEM’s Revolutionize the Service Lane Experience initiative.

ABN also is working with various dealership architects to include video walls, signage, and large screen monitors for TV and advertising, as part of the initial dealership design.

The benefits to dealerships include creat-ing a modern look and feel in the dealership and can provide an environment that appears more professional and trust worthy. Having a modern showroom with advanced digital solu-tions can go a long way eliminating the typical stereotype customers have of dealerships.

ABN also provides video walls ranging from three to nine screens that show con-tent such as marketing messages for the brand and the dealership.

Audi already has incorporated video walls that extend from the floor to the ceiling at dealerships in Europe. Audi customers are able to configure vehicles using a mobile device or kiosk and view the configuration on the video wall. The video walls are three-dimensional. These are coming to Audi dealerships in the U.S. over the next several months.

Get Ready for theModern Dealership

B R A N D


O

ABN played around with 3-D video walls a few years ago, but the technology just wasn’t up to speed yet, says Daniels.

At the most basic level, large flat screen monitors today are showing content devel-oped specifically for the dealership providing information about the dealership. Applications are available today that allow dealerships to change content instantaneously based on whatever deals are in play or which inventory they need to move the fastest.

And in the service department, if it’s raining, dealerships can show specials for windshield wipers or snow tires, if it’s snowing. A dealer’s imagination is the limit of what can be shown.

Content also can help create a certain environment or mood within the store. Large monitors or video walls can show images designed by the dealership to match characteristics of the local market.

Meanwhile, beacon technology will help dealers personalize the in-showroom shop-ping experience for customers.

Virtual RealityWhile stores will be busy modernizing

their showrooms, other stores will be leap-frogging them by incorporating virtual real-ity (VR) technology into the showroom.

At a recent dealer meeting in California, Cadillac President Johan de Nysschen pre-sented his retail plan to elevate the brand’s premium positioning with potential customers.

The plan calls for approximately 400 of Cadillac’s smaller stores to adopt showrooms that rely on virtual reality (VR) technology. The showrooms would have limited – if any – inventory. Instead, they would rely on touch screen kiosks and virtual test drive technology, including headsets and VR systems that sales people could take to a customer’s office or home.

Obviously, dealers will need to buy into the strategy, and there are several questions that need to be answered regarding imple-mentation and what the long-term effect will be on retail networks.

But what de Nysschen is proposing is part

of what’s becoming a trend in the automo-tive retail space – adoption of virtual tech-nology into the retail network.

Audi has been piloting VR technology in some of their stores, but that has been in international markets such as Beijing and London. But applications are expected to be in U.S. dealerships this year.

At the Consumer Electronics Show in January, Audi introduced a virtual showroom that allows customers to explore Audi’s complete portfolio of vehicles using VR goggles. Customers will be able to configure Audi vehicles while virtually driving them in numerous environments. The solution is based on technology coming from Nvidia Quadro, Oculus and HTC.

In late 2014, Lexus introduced a VR driving simulator at several auto shows. Meanwhile, Mercedes-Benz and BMW have also experimented with virtual technology in their European networks.

At the recent Mobile World Congress, Accenture Digital revealed a VR initiative it is developing with Fiat Chrysler Automobiles. The first of the applications should be avail-able this summer.

Customers will be able to put on a head-set in the showroom and engage in a 360 degree walk around of the vehicle, including being able to view the interior.

Adoption in dealerships could explode in the next three to five years as VR applications become integrated into society. The technol-ogy has reached a point now where prices will start to come down in the near future.

For manufacturers, having virtual show-rooms could expand their reach without having to extend their retail networks. For dealerships, having some form of vir-tual technology in the showroom should enhance the customer experience.

Incorporating a modern look into the dealership while adding “wow” applications such as VR technology also should go a long way helping dealers create a more trustwor-thy image.

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.


Advanced Marketing

Process Optimization

Sales Readiness

Management Effectiveness

Car Sales

Optimize Your Sales FunnelWITH DRIVINGSALES UNIVERSITY

Your funnel of car buyers is the lifeblood of your dealership. DrivingSales University helps your team develop the skills to increase appointment shows, improve sales effectiveness and increase close ratios.

Get a Free Funnel Flow Evaluation at

DrivingSalesUniversity.com/Funnel

DrivingSales UniversityFuelling Excellence

May 4-6, 2016 Ritz-Carlton, South Beach, Miami

DrivingSales Presidents Club is the forum for innovative Dealers and General Managers to collaborate in shaping the future of automotive retail. This event allows you to engage at a deeper level with dealer executives, like yourself, who are pioneering new practices for their stores and groups.

Presidents Club 2016 is structured around indepth, facilitated conversations selected by our dealer panel as the most important for the health of dealer businesses. These interactive workshops will be led by dealers sharing their success in tackling the topic in their own stores with detail on their successes and their struggles. The sessions will be peer forums with open interactions to tackle burning retail issues.

Register now at DrivingSalesPresidentsClub.com

dealerexec magazine | q1 2016

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