Technology Opens Up Huge CRM Opportunities for Retailers

With the rise of the Internet as a selling tool in the late 1990s, many traditional retail channels were branded as "dinosaurs" and were thought to be facing certain extinction. While the effect of the Internet was exaggerated substantially, most of its impact is here to stay. A closer look at the automotive retailing industry provides valuable insights that can be applied across many industries. Auto retailers were listed among those considered "doomed" by the Internet as a result of increased competition from online car-selling services. According to conventional wisdom, most consumers would do just about anything to avoid the traditional car-buying experience. However, in the past two years, customer satisfaction with dealers ranked the highest in more than a decade. In fact, a survey published last year in Automotive News found that 92 percent of consumers were satisfied with the dealership where they bought their car. How could that be if the Internet is "taking over" the automotive retailing industry? The answer is that although customers are becoming more informed and more empowered by the Internet, they still want options. They want the option to point-and-click, phone, fax or e-mail. But they also want the option of walking into a dealership where they can touch, feel and test-drive cars. Even more important-and challenging-is that customers want to tailor their options to what they want, where they want it, and when they want it. To meet these needs, retailers must integrate all touch points to ensure a seamless experience for customers. For example, if a customer makes an inquiry on the Internet then visits the dealership, the sales team should know what the customer is interested in based on the Internet inquiry. A recent study by J.D. Power and Associates showed that nearly two-thirds of consumers begin the car buying process by doing research on the Internet. By the time these savvy consumers reach the show room, they know the makes, models and options they want, as well as how much they can expect to pay. Interestingly enough, the same study shows that only five percent of Internet shoppers actually purchase a car online. As much as the customers used the Internet, they still wanted the face-to-face experience. Many auto retailers have adopted customer relationship management (CRM) strategies to deliver the hybrid, multifaceted buying experience consumers want. CRM provides the tools and processes that meet the basic customer needs that have been shaped, in part, by smart CRM strategies consumers have experienced in other buying situations: * Fair price: customers know what they should be paying because they've done their research * Good service: if you don't provide it, they'll find someone who will * Respect for time: they want it now * Easy buying process: no hassles, no long forms, no Q&A sessions; they've done their homework - and the salesperson should have, too Opportunities Abound Retailers who embrace CRM concepts will improve the entire retail experience for the consumer. As a result, the retailer will remain a trusted partner, which is critical to long-term financial success. Several statistics highlight the CRM opportunities for automotive retailers, but statistics in other industries would most likely show similar benefits: * Within five years of selling a vehicle, a typical dealer loses 80 percent of the highly profitable service and parts business to after-market competitors, according to the National Automobile Dealers Association (NADA). That lost business represents more than $67 billion annually. * A 5 percent increase in customer retention can increase a dealer's operating profit by 25 percent, according to Deloitte & Touche (2000). The increase in net income could be as much as 85 percent, according to Bain and Company (2001). The automotive retailing industry reports that CRM strategies, such as timely service reminders, can generate up to $40 in revenue for every dollar spent. A pilot study of e-service reminders showed a $207 return on every dollar spent. More comprehensive CRM solutions, often combining CRM software, consulting and training services, have produced a 50 percent increase in customer retention in some cases. More robust, innovative CRM solutions are on the way to widespread use in the automotive industry. For example, consumers can expect to see more use of in-vehicle telematics devices that monitor general diagnostic data including malfunction codes, fuel systems, brake systems, transmission systems and emission systems. Consumers that use the service will receive tailored correspondence (voice, e-mail, letter) about the vehicle's condition and service needs. They will also have their own personalized Web pages that include full performance and maintenance information on their vehicles. For retailers, telematics create and maintain a direct electronic link with customers that can drive future revenues and build stronger relationships. CRM and customer loyalty solutions need no longer be based on "guesstimates" concerning driving habits, mileage patterns and vehicle condition. Dealers will know exactly when a vehicle is due for standard maintenance, as well as when a problem develops that requires service or repair. Full-scale CRM Retailers of any type must consider a number of issues in adopting full-scale CRM solutions. To meet the challenge of serving today's customers while driving bottom-line results, a comprehensive CRM strategy should include: Protection of investments in existing software Information technology spending is a huge line-item in most any budget. CRM technology should be able to build on legacy systems. A flexible, tiered approach A flexible, tiered approach enables retailers to focus on critical needs first and add features as needed. Total integration of information systems The success of CRM rests on the ability to collect, analyze and use information to better serve customers. Systems should be able to talk to each other internally and externally, as well as to customers, suppliers and partners. For example, in an average car-buying situation, four or five people might be involved in addition to the customer: the salesperson, the used-car manager if a trade-in is involved, the finance manager, and, in many cases, the sales manager. All of these people need the ability to access the same information about the customer to provide a better buying experience for that customer. Leveraging the Internet With so many customers shopping the Internet for information, it is critical that retailers be able to transform Internet shopping into qualified leads and profitable sales. A technology partner that ensures ongoing training and services Ongoing training is needed to establish a new mindset among employees. With continuing education and coaching from the right technology partner, employees will learn new processes critical to full-scale CRM. The Value of CRM One of the key advantages of CRM is that it enables companies to quantify their return on investment of marketing expenditures. For example, a retailer who begins reminding customers that it's time for routine maintenance can almost always directly attribute the rise in maintenance service revenue to these reminders. CRM tools can also help retailers understand the lifetime value of a customer, and, as result, target their efforts to the most profitable customers. Mass media advertising just does not produce the quantifiable results or the personalized communications enabled by CRM-focused strategies. The dynamics between retailers, manufacturers and consumers have fundamentally shifted as a result of technology. Consumers are more powerful and demanding than ever. In some industries, manufacturers are seeking more control of the retail process - and the customer - as part of their brand management strategies. Retailers have a critical window of opportunity to strengthen their position among consumers and manufacturers in an ever-changing marketplace. As in many industries, the full benefits of CRM in the auto industry have yet to be realized. In the auto industry, as in many others, a massive shift to one-to-one customer relationship marketing (and in some cases, 2 to 1 marketing, involving a joint effort on the behalf of retailers and manufacturers to market to consumers) is under way. As this shift occurs in all industries, expect the quality of buying experiences - and customer expectations - to rise steadily. The ability to capture, use and manage customer information across multiple channels will be an important competitive advantage. [Greg Collins is senior vice president for The Reynolds and Reynolds Company.]