As it did to much of society, COVID-19 changed consumers’ habits—among them how they purchase a vehicle. Assuming that consumers aren’t returning to old habits, how should retailers rethink their operations? Jeff Williams, founder and CEO of Absolute Results, provides training and consulting to dealers in 28 countries. He offers insights on the tools, trends and technologies that will be essential in the changing retail landscape.
Expert Insights: How Dealers Can Navigate Changing Consumer Behavior
Q: What kinds of digital tools are consumers using to engage dealerships?
Williams: Online retailers like Amazon have raised the bar on the convenience of online purchase. Automotive consumers today expect to be able to build and price, search inventory, compare models, book test drives, calculate payments, apply for credit and get an accurate trade evaluation with ease online—and certainly before visiting a dealership. In addition to the traditional retailing tools, consumers are using online reviews as a qualifier before they inquire with a dealership. A recent study shows that 58% of consumers use third-party online pricing services to compare offers and avoid cumbersome negotiation processes.
Q: How are these tools changing the ways consumers interact with dealerships?
Williams: The online inquiry has become the digital meet-and-greet. If consumers don’t get a quick, personalized and somewhat sophisticated response within minutes, they likely won’t give the dealer a second chance. Yes, digital sales teams need to respond quickly, and they need to be able to provide accurate and transparent answers to pricing questions. But they must also be able to engage customers in conversation, asking consultative questions, providing purchase options, sending videos that educate, all while making the online purchase experience fun. Dealers also need to have a “buy online now” option. It builds consumer confidence. Conversely, if a dealer doesn’t offer an online purchase experience, and the digital sales team appears to be solely focused on trying to “get the customer to the dealership,” they will drive customers away.
Q: What are the implications of this trend—is it a good or bad thing for dealers?
Williams: I don’t think it’s a trend—it’s the future. The traditional sales model was based on withholding information and using information as leverage to gain commitment. To succeed, dealers must focus on helping each consumer to complete as much of the purchase transaction online as the customer desires, before securing a commitment to visit the showroom or make the purchase. Car buyers want the online resources to find and educate themselves on vehicle pricing and information. But they likely also want that dealership connection, with a trustworthy salesperson who can stick with them through an efficient and comfortable transaction.
Q: How have these trends altered traditional geographic barriers for dealerships? Do you see consumers shopping in geographic areas that they couldn’t access before?
Williams: The current inventory shortage, combined with ease of online shopping, has driven consumers to consider two things: a much larger geographic search area and brands that they previously wouldn’t have considered. The biggest threat to dealers is no longer a competing dealer across the city. It’s the 25 new brands and 100 new models coming into their market, and it’s the competing dealer 100-plus miles away who offers a better online experience and free delivery. The internet not only allows consumers to go farther but also dealers. It has provided the capability for channel marketing on a national or even international scale, attacking further the value of the traditional, geographically defined channel.
Q: What are forward-thinking dealers doing to position themselves to capitalize on this trend and meet customers where they are? Is there any low-hanging fruit here?
Williams: Dealers need to embrace a mentality of “let’s go to the customer virtually and earn their business,” rather than “let’s get them to come to us, and then we will work for them.” They also need to think of their showrooms as guest experience centres rather than sales centres and staff them appropriately. As for low-hanging fruit, the average dealer in Canada has about 9,200 active customers, yet they sell less than 250 vehicles annually to these past customers. I can’t think of a better audience of ready-to-purchase customers to engage with your digital sales process, especially when more than 800 of a dealer’s past customers will purchase a new vehicle this year.
Q: What key technology platforms or capabilities are critical to supporting this new consumer approach to automotive retailing?
Williams: Certainly, having a quality digital sales and communication platform is essential. But every platform must be staffed by quality people who are trained to a proven and consistent process. Does a dealer have a digital team capable of engaging customers in interactive conversation by text, email, online chat, etc.? Do they have a process to respond to leads within minutes and then send each customer a personal video within 15 to 30 minutes? And do they have a process to follow up the large number of online shoppers who take more than three weeks from their first digital inquiry to make their purchase? Ideally, dealers should also be able to use a customer profile to see what a customer has explored online, to customize the experience. Ideally, they should also have insights into what they like and don’t like, how much money they have to spend and a range of other things. But dealers can only leverage these insights when they have the basic processes mastered.
Q: How have nontraditional automotive retailers taken advantage of changes in consumer preferences and behaviors?
Williams: The new changes in consumer preferences and behaviors have amplified the pain points in the traditional retailing model. These include inconsistent pricing, the complexity of vehicle configuration and the inability to compare products across multiple brands. The new EV retailers have leveraged a one-price selling model. They also have the advantage in that their models and trim levels are simplified. While this is a huge advantage when it comes to speed of manufacturing, it also drastically reduces the complexity for consumers who wish to build and price and ultimately purchase online. In the used-car market, we are now seeing new online retailers who have been able to underinvest in physical facilities while they overinvest in their digital sales team, both from a technology and people perspective, and they seem to be getting traction.
Q: Will adapting to these changes require dealers to make considerable investments in new processes and/or systems? If so, what kind of return on investment can they expect?
Williams: Dealers who want to succeed in automotive retail past the next two to three years will need to make substantial investments. The entire business model of automotive retail is changing with EVs, the agency model, mobility as a service, connected car, etc. Dealers have now experienced two years of high profits. Are they willing to double-down on investing in their people and processes for the next two years in order to secure their business for the next five years and beyond? I think that’s the question.
ABOUT THE PANELIST
Founder and CEO, Absolute Results
Jeff Williams heads a global automotive company that delivers portfolio management, leadership training, appointment-driven experiences and tech consulting to more than 9,000 dealer clients in 28 countries. Jeff founded Absolute Results in 1997 in British Columbia.