Vertical Focus: How Auto Dealers Drive Relationships

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Growing up, children are taught the importance of playing nice with others and sharing. CRM solutions are helping teach auto manufacturers and auto dealers the same lesson. Historically, the two entities have had a somewhat contentious relationship. Forrester Research senior analyst Mark Bunger puts it like this: "Automakers want you to buy their brand and don't care which dealership gets the sale, while dealers don't care what brand you buy as long as you buy it at their dealership." For automakers the relationship with customers is over at the sale. However, for dealers that's where the relationship starts, since most of them are making money on after-sales add-ons and service. The average dealership sale is $23,000 and customer lifetime value is into six figures. That's pretty much been the crux of the relationship. But CRM is changing that. Automakers using CRM are getting savvier about their customers, which are essentially the dealers. Dealers using CRM are also getting a better handle on their customers and prospects. And both groups are realizing that each has information that could benefit the other if they worked together. It's called two-to-one commerce, when the manufacturer and dealer share a single customer, according to Bunger. Serving the Dealers Strategic Connections Inc. of Markham, Ontario, is among those developing solutions that tie dealers and automakers together with a single view of a customer. "We go in and tie them together as a portal," says Chris Cawston, president of Strategic, "providing a consolidated single view of the customers' finance, warranty history, and buying history. This is built at the dealership level and allows a customer to move from dealer to dealer. For the automakers the information provides key data about lifetime value, market segmentation, and buy preferences." Many automakers are using CRM analytics packages to bring their own data and data from dealers into a data warehouse for forecasting. Most are attempting to reduce inventory and better meet customer demand. And although only some automakers and dealers are using analytics, nearly all dealers have dealer management systems (DMS) at their franchises. The average dealership spent $5,000 to $75,000 for technology, before CRM. Major players in that space include ADP, Reynolds & Reynolds, UCS, Cobalt, and SoftAd. According to Bunger there is also a large group of second tier players that cater specifically to dealerships, including AutoBase, AutoSoft, and Strategic Connections. In addition, there are a slew of smaller companies that have applications that address specific parts of the CRM equation in the auto industry, including outbound sales, lead management, campaign management, and contracts. A Tenuous Start
Attempts between auto dealers and manufacturers to work together are an emerging trend, but Bunger admits there are still some CRM basics that dealerships need to understand. There are approximately 22,000 car dealerships across the United States, and Bunger estimates that 50 percent to 70 percent of those are using CRM. Of those that don't have CRM, most are very small or sole proprietorships that are likely using just a contact management application, Bunger says. Eighty percent to 90 percent of U.S. dealers have a presence on the Web--even if it's just an informational page with hours, location, etc.--but "most dealerships are not technically sophisticated," he says. Bunger cites an example of how CRM is not serving a dealer. "A dealer spent more than $300,000 on a CRM system that can only manage show room leads and will not manage Internet leads. So, the dealer hired a junior level assistant to pass out printed versions of the more than 600 Internet leads the company receives per month. Then the salesmen manage those leads on paper. If I were the head of that dealership, I'd be looking for a throat to choke." The JD Power 2003 New Autoshopper.com Study reported that nearly one half (49 percent) of the new vehicle buyers surveyed say the Internet made an impact on their make/model purchase decision, up from 40 percent in 2002. The study also found that 63 percent of new vehicle buyers used the Internet during the shopping process, up from a two-year plateau of 60 percent in 2001 and 2002. That trend illustrates that tying the Internet to CRM-related solutions is instrumental in keeping and growing customers. Dealers also need to integrate their CRM systems with their back-end systems, because most dealers have more than one store, according to Mark Przybylski, CRM expert at ADP. "You don't want to have to enter data twice across franchises," he says. "One problem is that there has been a rapid increase of technology at dealerships. Now dealers are looking for that to be consolidated from several piecemeal solutions to integrated systems, where data entered populates a single database but is used by a variety of applications and systems." Getting Results Przybylski also noted that CRM in dealerships provides immediate payback. He says ADP expected to find that ROI increased over time, but that was not the case. "ROI levels at one year are the same as after six months," he says. "Payback is immediate." Barbara Geller, a marketing consultant from Dallas, says, "It is easy to convince a dealer there will be a return on investment, but what you really want to do is increase sales and family ties to the dealership. It's all about retention and repeat business." Geller just finished the process of selecting a CRM vendor for Evergreen LLC, which owns five car dealerships, four in Minnesota and one in Wisconsin. Geller's brother is a co-owner of the dealerships. ChartThe group selected Boston-based Eleads to help run its call center. "Part of the decision was that we wanted them to manage the outbound calls and let us handle inbound calling," Geller says. "We chose them because they are ex-car salespeople, not a big player offering a vertical solution. And price was a huge issue. We like the attention we are going to get from a small company. With them we are a big client. With someone like Siebel or SAP, we would be a very small player, but paying a huge price for us." Industry snapshot
  • According to the National Auto Dealer Association, total dollar sales of all new car dealerships for 2002 was $679 billion, or approximately 16 million units.
  • The average dealership sale is $23,000, but customer lifetime value is into six figures.
  • Of the approximately 22,000 car dealerships across the United States, 50 percent to 70 percent of those are estimated to be using CRM.
  • Eighty percent to 90 percent of U.S. dealers have a presence on the Web.
  • Sixty-three percent of new vehicle buyers used the Internet during the shopping process.
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