independent dealership action report

2016INDEPENDENT DEALERSHIP ACTION REPORT

Table of Contents

Introduction 4

The Why 8

Initial Research 12

Vehicle Equity 16

Purchase Process 20

Financing 26

Conclusion 30

AT A GLANCE

Data Sources DealerSocket Data

DealerSocket Independent Dealer Survey

Google Consumer Survey

Google Insights

NIADA Used Car Dealer Industry Report

BHPH NABD Benchmarks

J.D. Power: Power Information Network (PIN)

Experian Data

The car buying process has changed dramatically the past few years.

It is crucial that dealers constantly reevaluate their processes to ensure

they are evolving with the times. For this year’s Independent Dealership

Action Report, we set out to take a closer look at the fact and fiction of

the car buying process. By juxtaposing consumer perceptions against

those of independent dealers, we can understand the customer better

and identify areas of opportunity to meet their needs.

We will reveal our findings and make key connections using survey results, DealerSocket data (compiled from more than 4,000 independent dealerships that utilize our software), and data from several industry partners. The purpose of this report is to aid dealers in identifying and prioritizing processes and technologies that will be most impactful to their customers and their businesses. These recommendations will help dealers save time and money, and make a significant impact on their bottom line.

IN SUMMARYDealerSocket conducted consumer research using Google Consumer Surveys to reach more than 2,000 consumers who purchased a vehicle in the last 12 months.

We asked them about their attitudes toward the following stages

of the car buying process:

• Research

• Dealership communication

• Vehicle purchase

• Vehicle equity

• Financing

We surveyed independent dealerships across the United States

and Canada, asking how they believed their customers felt

about the same questions we posed to our consumer pool and

compared the results.

We collaborated with our data partners, NIADA, NABD, and J.D.

Power to examine industry trends.

We poured over a wealth of product information pulled directly

from the DealerSocket platform, including operational and trend

data from our CRM, DMS, DealerFire websites, and Inventory+

inventory management solutions.

Do you enjoy the car buying process?

INTRODUCTION

Knowledge Is Power

Why does this matter? The more a dealer understands consumer

perceptions, the more he or she can tailor the dealership’s sales and

marketing strategy to its customers’ unique needs.

For example, a female in her 50s visits a dealership. Data shows that she

more than likely does not enjoy the car buying process. Her presence

indicates a high probability that she is in a position to buy. Knowing this,

the dealer should take extra care to provide the best experience possible,

perhaps employing mobile technology to make the process as seamless

as possible.

GOOGLE CONSUMER SURVEY

DEALERSOCKET DEALER SURVEY

Q: Do you enjoy the car buying process?

LEADING “NO” CONSUMER RESPONSES:

85% 45–54 years old

85% Female

82% Income between$25K and $50K

LEADING “YES” CONSUMER RESPONSES:

29% 18–24 years old

24% Male

32% Income greaterthan $150K

Inside the numbers:

2

1

Yes

19%

No

81%

CONSUMERS

INDEPENDENT DEALER PERCEPTION

1

Yes

32%2

No

68%

Age, gender, and income affected results

INDEPENDENT DEALERSHIP ACTION REPORT FALL 2016

PAGE 7

Dealer Confidence

Overall, used car dealer confidence has tapered slightly with a

recent 4% drop. This includes:

“Dealers must continue to manage cash flow, improve efficiencies,

embrace new digital technology, and take a measured approach to

expanding their market opportunities as resources allow in an ever

changing, dynamic auto retail industry.”

NIADA USED CAR INDUSTRY REPORT J.D. POWER: POWER INFORMATION NETWORK (PIN)

DEALERSOCKET DATA

USED TRANSACTIONS FOR FRANCHISE DEALERS IN 2015–2016

8% Total used car sales down

27% Lease maturities up

4% Increase in average days to turn (from 48 to 50)

7% Decrease in days to turn using DealerSocket CRM

11% Gap from independent dealers

CRM InsightsIndependent dealers using DealerSocket CRM saw an average decrease

of 7% in days to turn from 21 days in 2015 to 20 days in 2016. Franchise

dealers saw a 4% increase — an 11% gap from independent dealers.

Independent dealers that leverage technology are turning vehicles faster

than their franchise counterparts.

Increase in number of independent dealerships with 1–4 employees

Decrease in number of independent dealerships with 20+ employees

A historical trend of downsizing:

Internet-sourced vehicles saw the greatest decrease in days to turn — four days or 17% — which highlights the importance of investing in online strategy to quickly turn inventory.

DECREASE IN DAYS TO SOLD FROM 2015–2016

A 4-point increase over the previous quarter in dealers who do not anticipate hiring new staff over the next year

76%

4%

Drop in dealerships that plan to expand their business over the next quarter

6%

5%

Floor1 Internet2 Phone3

5% 10% 15% 20%

6%17%

3%

01 THE WHY

What don’ t you like about the car buying process?

01

CH.1THE WHY


Q: What don’t you like about the car buying process?

TOP CONSUMER RESPONSE

29% Don’t trust sales people


32% It’s too time consuming

Transparency Builds Consumer TrustConsumers need to feel engaged throughout the entire car buying process. Every time a salesperson excuses him- or herself to privately negotiate with a manager, consumer confidence takes a hit as they feel growingly disconnected from the process.

Mobile technology reverses this effect by allowing salespeople to manage the entire transaction without stepping away from the consumer, thus increasing efficiency, transparency, and trust.

Notice the disconnect between consumer opinion and independent dealer opinion. Whereas dealers believe the problem is a time-management issue, the reality is it’s a trust issue.

Inside the numbers:

Don’t trust sales people

Too time consuming

Worry about getting a fair price

Negotiation process

Too much pressure to buy

Lack of knowledge about the process

15% 35%

Consumers1 Independent dealer perception2

29%16%

32%19%


PAGE 11

Interestingly, although it seems obvious that the use of mobile technology should be common practice in the business-to-consumer world, our data suggests that the majority of dealership users still complete tasks via desktop.

J.D. POWER: POWER INFORMATION NETWORK (PIN)

DEALERSOCKET DATA

Rating Technology During the Sales ProcessAccording to J.D. Power, the use of technology, specifically the use of tablets during the payment presentation process, improves customer satisfaction ratings significantly. On the other hand, negative satisfaction ratings result in negotiations using handwritten figures and verbal quotes.

CRM Desktop Versus Mobile UsageDealers have not fully embraced mobile technology, deferring instead to desktop. This presents a great opportunity for tech-savvy dealers to differentiate themselves from their competition.

Mobile app1 Desktop2

POSITIVE SATISFACTION RATINGNegotiation figures where displayed using...

500K 1M 2.5M 5M

5.1M

466,000

43%Users logged into mobile some time during the last year

30%Use the mobile application (CRM) 20 days or more per month

5

10 SCALE 10 Truly exceptional 7 Outstanding 4 Average 1 Unacceptable

8.127.08

6.92

Tablet device1

Verbal quotes2

3 Handwritten figures

SALES OPPORTUNITIES CREATED ON DESKTOP VS. MOBILE APP Based on a three-month data sample

02 INITIALRESEARCHPath to Purchase

02How many dealership websites did you visit

before physically visiting a dealership?

CH.2INITIAL RESEARCH



Q: How many dealership websites did you visit before physically visiting a dealership?

Q: Do you consider dealership websites to be resources for information or simply places to shop?

Once again, dealers do not demonstrate an accurate understanding of the consumer car buying experience. At zero to two websites visited, a dealership’s margin for error is slim to make a business-generating impression.

The higher positive response from dealers indicates a false confidence that they provide all of the information and resources consumers are searching for online.

Increase Visits to the Dealer WebsiteMost consumers visit only one or two dealer websites (if any) prior to

visiting just one or two dealerships during the car buying process. This data

suggests that a buyer who visits the website is likely to visit that dealership.

It becomes vital, then, to invest in an effective website with targeted digital

marketing to reach each consumer at as many touch-points as possible

throughout the car buying process.

0–2

3–5

6–10

11+

25% 50%


44% 0–2


63% 3–5

Independent dealers think consumers see them as both

Consumers see them as both

53% 74%

Provide Better Information Create valuable digital content that consumers can digest from any

device. Better content helps increase digital touch-points, which drives

researchers to your website and ultimately to the sales floor.

Inside the numbers:

44%33%

15%

8%


PAGE 15


Q: Do you like to receive personalized emails based on your online research on a dealership’s website for specific vehicles?

75% Of auto purchaser research time is spent on digital

19/24 Of consumer touch- points are digital

Over 33%

Of auto research occurs on a mobile device

1–2 The number of dealers consumers visit (vs. five in 2005)

GOOGLE INSIGHTS

Automotive Path to Purchase, 2015

18–24 year-olds picked YES more than those 65+

Of consumers age 65+ answered YES

30% 16%

DEALERSOCKET DATA

DealerFire Digital Insights

New leads come from organic search (ranked No. 1)

Paid ads results in a new lead

1 in 3 consumers who submitted a lead interacted with auto dealers via two or more channels

48% 1/52+

NIADA USED CAR INDUSTRY REPORT

Membership DataNIADA dealer members overwhelmingly

rely on online as their main advertising

avenue, although there was a nearly 10

percent drop from 2014 to 2015.

Newspaper

Radio

Specialty pubs

Online

Magazine

Mobile

Other

50% 100%

20141 20152

Television

Accounting for only 2% of page sessions, email will result in very few

leads if not properly leveraged. To get more leads through email,

messaging must be as personalized as possible for each recipient

with landing pages that are specific to email content. An integrated

website and CRM can allow dealers to target online visitors with

customized messaging specific to their online behavior.

03 VEHICLEEQUITY

03How do you feel about knowing whether or not you’re in an equity position before

shopping for a car?

CH.3 VEHICLE EQUITY



Q: How do you feel about knowing whether or not you’re in an equity position before shopping for a car?

Q: If you want to sell your car, do you consider a car dealership as a potential buyer?

Providing equity awareness is more important to consumers than dealers realize.

Independent dealers need to position themselves as a buying power.

Equity-mining technology enables dealers to identify customers in their

database that are in a position to buy. Most likely, these customers

have not quite started shopping yet. And once they are in the store, the

likelihood they purchase a new vehicle and trade in their old one in is

very high.

Identify Customers in an Equity PositionAlthough dealers have realized that the majority of shoppers start online,

it is worth noting that it’s not always the case. There are other ways to

initiate the car purchase process.

With more than a third of consumers claiming they would like to be

notified when they are in an equity position, dealers should invest in

equity-mining software that identifies customers in their database that

are in a position to buy.

Very important

Moderately important

Not important

CONSUMERSINDEPENDENT DEALER PERCEPTION

Inside the numbers:


36% Consumers feel it is very important


35% Dealers think consumers find it moderately important

1

2

Yes

48%

No

52%

Men aged 25–34 years picked YES

Women aged 25–34 years picked YES

64%

45%

57% Visits sold Sourced through Revenue Radar,

DealerSocket’s robust equity-mining

tool, this lead type is as likely to close

and include a trade-in.


PAGE 19


Q: Do you believe you get fair value for your trade-ins at dealerships?

Inside the numbers:

With inventory management technology, dealers can create transparency for trade-in customers by illustrating the specific costs of vehicle sales, including reconditioning.

According to NABD BHPH benchmarks, inventory reconditioning costs rose from 7.63% in 2014 to 8.31% in 2015.

“Operators who embrace technology can increase efficiency and market share without increasing operating costs. Technology has never been more beneficial for those who implement it properly.”

DEALERSOCKET DATA NABD DATA

CRM and Inventory+ Insights

2

1

Yes

25%

No

75%

Of sold deals include a trade-in (CRM data)

Increase in gross per vehicle (Inventory+ data)

Faster vehicle turn (Inventory+ data)

National average of reconditioning costs per vehicle (Inventory+ data)

21%

$500

35%

$908

SOLD WITH TRADE

15%

30%Floor – 20%1

Phone – 22%3

Internet – 21%2

04 PURCHASEPROCESS

04When consumers are in the market to purchase a used car, where are they

more inclined to go to purchase it?

CH.4 PURCHASE PROCESS


Q: When consumers are in the market to purchase a used car, where are they more inclined to go to purchase it?

Q: What do you value more during the car buying process?

Inside the numbers:

The used car landscape is highly competitive. Independent dealers must compete to be top-of-mind. The demographic sweet spot for independent dealers occurs in lower income members of Generation X (ages 35–55).

Consumers make it clear that they want to love the car buying experience

just as much as the vehicle they’re purchasing. There is no sacrificing one

for the other. Dealers can’t afford to focus solely on inventory; customer

experience must also be a priority.

1

1

2

2

Brand-specific dealership

48%

Other

44%

Independent dealerships

52%

High-quality customer experience

Getting the vehicle they set out to buy

56%

Consumers aged 35–44 prefer independent dealerships

Consumers who prefer independent dealerships earn $24,999 or less annually

24%

22%

Elevate Customer Experience

Establish a franchise feel through stellar

customer experience. According to

J.D. Power data, handwritten figures

and verbal quotes produce some of

the lowest customer rating scores.

Customers prefer to transact using

technology that is familiar to them,

such as tablets.


PAGE 23


Q: Do you usually end up purchasing exactly the type of vehicle you set out to buy?

Q: Why don’t you purchase exactly the type of car you initially set out to buy?

Inside the numbers:

The discrepancy between consumer and independent dealer opinion shows that while used vehicle selection may be more limited, customers don’t actually settle as much as dealers think. When consumers do settle, however, it’s usually due to price or inventory.

1 1

2 2

2

3

4

1

Yes

65%Yes

74%

No

35%No

26%

Inventory

25%Price

49% Features

15%

Financing

11%

An Inventory Management System Is Key

Employing an intelligent inventory management system is vital to

balancing customer satisfaction and dealer confidence. Inventory

intelligence tools take into account both specific dealership sales history

as well as general market trends. When these factors align, a dealer can

acquire vehicles that perform the best on his or her specific lot, and price

them at the most optimal price.

Dealers should monitor aging inventory weekly on the search results

pages (SRP) and vehicle details pages (VDP) of their websites as well as

third-party sites.

CONSUMERSINDEPENDENT

DEALER PERCEPTION



GOOGLE INSIGHTS

Q: Do you like to negotiate or be given the “best price” up front?

Q: When you’re given the best price up front, do you trust it?

Consumers checked the price of a vehicle on a mobile device while on the dealership lot to make sure they’re getting a good deal

The average profit per used vehicle sold in DealerSocket CRM in 2016

2015 Automotive Path to Purchase

1

2

Yes

12%

No

88%

36%

$2,905

CH.4 PURCHASE PROCESS

1

Best price

57%2

Negotiate

43%


PAGE 25


DEALERSOCKET DATA

DEALERSOCKET CRM VS. NIADA DATA

Q: Where do you prefer to have negotiation take place?

The average cars per month sold by independent dealers using DealerSocket CRM in 2016

NIADA members surveyed reported an average of 31–50 vehicles in inventory

Inside the numbers:

A significant portion of consumers still prefer to negotiate face to face in the store. Conscientious consumers come armed with mobile technology, empowering them with information to readily verify what they are being told. Dealers must be cognizant of this and embrace technology that promotes transparency and trust.

71 30%

CRM Insights

As sales processes become optimized with a CRM, dealer inventory

needs to rise in lockstep.

VS.

1

In store

71%2

Elsewhere

29%

05 FINANCING

05How confident do you feel about

your level of knowledge about the financing process?

CH.5 FINANCING




Q: How confident do you feel about your level of knowledge about the financing process?

Q: Why through an outside lender?

Q: Where do you prefer to secure your financing? (Through the dealership or an outside lender)

Inside the numbers:

Mistrust continues to rear its head as both an obstacle and opportunity for dealers. On the other hand, with only 15% of consumers citing “credit score” as their reason for choosing an outside lender, there still remains opportunity for a portion of customers to opt to finance with an in-house BHPH.

Age affects a consumer’s answer to this question. Younger consumers may feel less confident in their knowledge of the car buying process, so they rely on the dealership to make it easier. Income also most likely plays a significant role.

18–24 year olds are not confident in their level of knowledge about the financing process24%

2

2

1

Dealership

48%

Outside lender

52%

18–24 year olds prefer to secure financing through the dealership

Consumers who earn $25K–$49K per year in the South prefer to secure financing through the dealership

62% 53%

3

1Mistrust

36%Loyalty to bank

49%Credit score

15%

Transparency and education helps consumers feel more confident to finance through the dealership.


PAGE 29

DEALERSOCKET DATA

DMS Insights

The financial benchmarks for 2015 reflect significantly increased competition within the deep subprime marketplace

Experian market data indicates that BHPH deep subprime used vehicle financing declined in 2015 in favor primarily to franchise dealers

BHPH dealers are advised to implement technology that will improve operational efficiencies

BHPH Benchmarks

State of the Automotive Finance Market

Loan amounts continue to grow while the

gap between new and used payments rise

despite an increase in terms.

NABD DATA

EXPERIAN DATA

1

2 3

4 5

Local lender

35%

BHPH

27%Wholesale

20%

Cash

17%Lender portal

1%

$4,702

$1,869

UNITS SOLD BY TRANSACTION TYPE

GROSS PROFIT AVERAGE

3K 6K

BHPH1

Q4 20141 Q4 20152

Local lender2

35% of units sold in 2015 were financed through a local lender. Yet,

DealerSocket data shows that independent dealer gross profit margins

are 250% higher with BHPH deals.

Independent dealers should leverage technology that positions them to

better capitalize on the profit opportunities of the BHPH market.

20K

NEW USED

40K

AVERAGE AMOUNT FINANCED

IN CONCLUSIONToday’s automotive consumer is an elusive creature. While dealers

may think they know their consumer, the data shows that there are

some real disconnects between perception and reality. Despite

dealers’ best efforts, these disconnects can erode the very

foundation of the customer experience. If independent dealers

mean to compete with their franchise counterparts, the onus is on

them to adapt one consumer at a time.

Bolster customer confidence with mobile technology by conducting the whole sales/negotiation process without stepping away

Increase customer satisfaction ratings and establish a franchise feel with tablets

Reach consumers at as many touch-points as possible by investing in an effective website with valuable digital content that drives researchers to the sales floor

Prioritize customer experience as readily as stocking the right inventory

Invest in equity-mining software to engage and cash in on customers who demonstrate a high likelihood of purchase and trade-in

Keep customers loyal; address their biggest pain points and lead customers to take advantage of in-house BHPH financing

100 Avenida La PataSan Clemente, CA 92673

855.296.5249DealerSocket.com

Facebook: Facebook.com/DealerSocket

Twitter: Twitter.com/DealerSocket

LinkedIn: LinkedIn.com/company/DealerSocket

YouTube: YouTube.com/DealerSocket

independent dealership action report

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