“He that is good for making excuses is seldom good for anything else.”
— Benjamin Franklin (1706-1790), Statesman, Inventor, and Monetary Star
When Joe and I did our Creation vs. Evolution presentation at the 13th Digital Dealer Conference, all the way back in 2010, I drove the point home that even the best technology in the world is useless unless you have people who can use it. This assertion came immediately from the lead scoring work I had walked away from. The technology itself could create a 67% improvement in closing ratio by itself (taking aggregated third party leads from an average 6% to a guaranteed 10% gross conversion ratio). However, those dealerships who had PEOPLE using the technology yielded a 284% improvement in closing ratio (from an average of 6% to 17% gross conversion ratio using those same aggregated third party leads). Despite the SpaceX BFR level of lift, the technology itself could not force the people to use it.
Around that same time, vehicle sales had rock bottomed to the lowest levels that anyone could remember. But, the recession of 2008 was starting to give way to optimism, and the thousands of people who skipped a buying cycle started to buy vehicles once again. Over the next five years, vehicle sales would practically double. Consumers had a practically insatiable appetite to get into a new vehicle. Many dealerships felt the spoils of success much in the way some bar patrons benefit from beer goggles. As of September 2019, the beer goggles are starting to pop off, and things are about to get real ugly.
More than 20 years after the Internet changed car sales, I think we’ve earned the right to be honest with ourselves. More empty opportunities aren’t the answer. As I submitted in Part I, at any given time, there are only so many people who are actually going to buy a car. Since it’s a matter of economics, no amount of dealership technology is going to fix that. It’s just varying sizes of a really big pie.
Instead of thinking with our brains, riding the predictable tide, we let our grumbling bellies make the decisions for us. In Part 2, we discuss the appetite for throwing resources into technology to acquire an even more expensive fractional portion of a dealership’s future bite-sized piece of pie. Instead of focusing on retaining today’s customers to treat the future buying cycle as an annuity, dealerships are happy to disrupt that buying cycle, ready to gamble on having enough pie to share with themselves at a later date. As the defaults are now starting mount on 72+ month financing, maybe chasing the OEM targets wasn’t such a good idea after all.
If dealerships aren’t content with stealing from their future pie, they can invest in taking a bigger piece of their competitor’s share of the pie. In Part 3, we introduced the idea of using technology to dig into the market share of both on and off-brand competitors. By utilizing new technologies and services, we create sustainable ways to acquire incremental sales, as opposed to creating a dustbowl out of our own local market.
For my money, dealerships should focus on technology that helps them gather all of the ingredients to their own pie, then keep it all to themselves. In Part 4, we introduced the idea of defining your own markets, independent of geography, then building your business to support those markets. Simply put, this means defining clusters of people who find value in the services and experience that only your business can offer. This is, by far, the most efficient way to deploy resources, thus increasing profitability to the point where OEM reimbursements and bonuses are no longer necessary to keep the lights on.
Use It or Lose It
In any one of the three scenarios introduced, technology creates tremendous leverage to make the most of what is available. Whether it’s equity mining, defector identification, behavioral profiling, or persona creation, technology by itself cannot make the difference. No manufacturer, consultant, trainer, or vendor has the ability to make dealership personnel use any technology that they do not want to use. They cannot decide for you what your image is. They cannot create your history. They cannot make your employees conduct their jobs with pure authenticity and sincerity. They can’t force you to make videos about all the things that make your store different from the one down the road. The only thing they can do is help facilitate those actions. It’s still up to each and every user to apply the technology, training, and everything that goes with it.
If any conventional belief has been held steadfast for my nearly two decades in the car business, it is that people still buy from people. It has been the battle cry since the Internet permanently disrupted the car business, along with the rest of retail as we know it. It’s been the rallying point for dealer principals. It’s the mantra of sales managers, as the vendor conglomerates and Silicon Valley continue their relentless assault on the fortress car dealerships built over the last 120 years. If dealerships actively rely on technology, advertising, and vendor partners to sell cars, it directly, and unequivocally, opposes the foundational principle that people still buy from people. So with that logic, if the expectation is that something besides the dealership is to sell more cars, it means that the people inside of the dealership are no longer important.
So, let’s ask the question again. When you are having that Webex with a vendor, discussing co-op partners with your OEM district manager, or chatting up a booth babe at a conference, and you ask “does it sell more cars?” Be careful about how you interpret the answer. You may not be in the same position to ask again.