A few years ago, we saw headlines on the impending demise of traditional dealerships. Some news outlets predicted the Internet would soon supersede and possibly eclipse the automotive retail channel. These headlines went so far as to claim that most consumers would do just about anything to avoid the traditional car-buying experience.
There was just one problem with that scenario: consumers themselves didn't buy it.
Not only have traditional retailers survived, they've thrived. For example, in the past two years, customer satisfaction with dealers ranked the highest it has been in more than a decade. In fact, 92% of new-car consumers say they're satisfied with the dealerships they bought from. Not bad for an industry on the brink of extinction.
How did this about-face happen? As in many technological revolutions, the answer is that customers want multiple sales channels. They want all the options. They want “clicks”: the Internet, as well as phone and fax. But they also want “bricks”: a dealership where they can look at and test-drive cars and service their vehicles.
Even more important — and challenging — they want to tailor their own blend of those channels. That requires retailers to integrate all touch points to ensure a seamless experience for customers.
In other words, the retailer has to connect the dots. If a customer makes an inquiry on the Internet, and then shows up at the dealership, the sales team should know why the customer is there. Many auto retailers have adopted customer relationship management (CRM) strategies to deliver the hybrid, multi-faceted buying experience that consumers want.
Retailers who embrace CRM concepts and technology will improve the entire retail experience for the consumer. As a result, the retailer will remain a trusted partner in the buying and servicing of motor vehicles, which is critical to long-term financial success. Several statistics highlight the opportunity:
Within five years of selling a vehicle, a typical dealer loses 80% of the highly profitable service and parts business to after-market competitors, according to the National Automobile Dealers Association. That lost business represents more than $67 billion annually.
A 5% increase in customer retention can increase a dealer's operating profit by 25%, according to Deloitte & Touche. The increase in net income could be as much as 85%, according to Bain and Company.
CRM strategies such as service reminders have produced impressive results by generating up to $207 in revenue for every dollar spent.
More comprehensive CRM solutions, often combining CRM software, consulting and training services, have produced a 50% increase in customer retention. That's why I refer to CRM as “capturing real money.”
More robust, innovative solutions are on the way to widespread use.
Expect to see in-vehicle telematics devices that monitor general diagnostic data and a variety of other systems including malfunction codes, fuel systems, brake systems, transmission systems and emission systems.
Consumers who use the service will receive tailored correspondence (voice, e-mail, letter) about vehicle 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 creates and maintains 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 is developing and requires service or repair.
The full benefits of CRM in the auto industry are still ahead with a massive shift in marketing focus already underway.
The total auto industry marketing spend by manufacturers and dealers is currently $20 billion annually, with the vast majority focused in mass media, according to J.D. Power & Associates.
By 2005, $5 billion is expected to shift to one-to-one marketing. Quantifiable returns will drive this transfer.
As this shift occurs, 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.
And remember the true concept behind capturing real money. CRM isn't magic, hype or technology alone. It's simply sound, proven business practices deployed and reinforced. Retailers who embrace this concept will, indeed, capture real money from CRM.
Greg Collins is senior vice president of Reynolds and Reynolds Co.'s Reynolds Transformation Solutions (RTS). It provides e-business and customer relationship management (CRM) solutions in the automotive retail marketplace.
