October 09 2018

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The Decision to Digitize your Dealership Could Make 2020 Either your Best Year or a Hindsight Regret!

MaximTrak F&I Menu Technology

Dealer operations can often be a big ship with a small rudder. With all this movement in the technology revolution, what does it take to change course? The answer depends upon the lens through which you view technology, change, and what is happening in the industry.

When implementing technology, or deciding whether to, do you see such decisions as ornamental or systemic?

The answer is revealed, in part, by how much you budgeted this coming year to grow your dealership’s ability to connect with consumers digitally. If you made no change, you’re not unique.

A new study from EY (Ernst & Young) tells us only 20 percent of dealers plan to invest in their digital presence through 2020.

That’s not prudent, the research firm suggests, if dealers want to remain viable connection points for consumers.

“Dealers need to redesign their value proposition adapting digitalization to provide an engaging interaction and compelling experience across all touch points,” noted EY’s new report, Automotive Retail 2030 – Evolution of dealerships and potential new roles in retail.

Consumers continue to perceive and engage dealerships as their primary way to buy a car, the EY study noted. Does this information mean the calls to digital retailing have fallen and are falling on deaf dealer ears? The industry is nearing a jumping off point as dealers observe trends and their influence on dealership practices:

  • Cars as a Service (CaaS) model
  • Ride-share and Ride-hailing
  • Autonomous Vehicles
  • Electric Vehicles
  • Worker Robots
  • Used Car Sourcing
  • Vehicle Affordability
  • Finance Interest Rates

Digital technologies can help a dealer engage each force reshaping the industry. Digital does so by eliminating the obstacles, redundancy, delay, and error that can encumber traditional practices. For instance, having in place a digital, subscription model platform will help dealers streamline, manage, control, and ensure customer satisfaction from this new profit center.

Modernizing F&I to enable online consumers to obtain financing information, evaluate trades, and learn about extended warranties and other aftermarket products will help make the dealership more profitable and a more accessible and comfortable choice for customers to buy a car.

We know dealers are embracing digital technologies of all sorts to help them serve customers better. The herd of technology vendors at the annual NADA exhibition would have been culled out by now if dealers weren’t buying their wares, one would think.  We know this is not the case.

Dealer adoption of digital F&I menu systems is a good example. As we’ve reported before, dealers using a digital F&I menu versus no menu to present F&I products realize a:

  • 58% increase in profitability
  • 50% increase in service contract penetration
  • 35% increase in GAP penetration
  • 60% increase in other products

These performance gains result in a $537.50 average increase in PVR — $500 per new car and $575 per used car – for a $967,500 F&I profit per year on an annual volume of 1800 cars.

The need for dealer expansion in all channels that reach potential customers is high. EY noted the progress OEMs, captives, and brokers are making to reach customer throughout this sales funnel. It emphasized, from separate studies it had done around online sales, that these entities are improving how they reach and engage customers along their sales funnel by providing:

  • Product information, including digitized brochures, videos, and product specs using downloads, chat, and texts
  • Product engagement, using online interactive tools, videos, and virtual reality experiences
  • Purchase engagement, by making available online vehicle reservation tools, accessibility of virtual documentation, e-signature, and delivery options

Up funnel engagement practices as described by EY cannot be understated. Use these channels to educate consumers about not only vehicles and services, but about the various F&I products you sell. The data show a significant percentage of consumers who will sit in your F&I office will not understand the value or benefit to them from purchasing the service contracts, maintenance plans and similar budget-protection products you sell.

We’ve shown often that when customers don’t understand these products or their value, they decline to purchase them. A little product value-based product education with customers can help counter this, whether you educate them online up funnel or in your office.

Finally, F&I continues to be a source of complaints from buyers, who grumble the process takes too long. Digital is the solution.

Using F&I interactive videos, virtual reality tools, and self-administered surveys that reveal consumer interests about the risks and rewards aftermarket products address helps to increase product sales, while digital lending, contracting, rating, and remitting speeds up transaction times to get the customer to delivery in less time.

Tools make the transaction experience easier and the relationship between F&I manager and customer more productive for everyone.

Having said that, consumers will move to complete retail product transactions virtually. The current usage rates may not be that convincing – through 2017, online insurance product sales accounted for 4 percent of all sales. But watch out. The segmented is expected to blossom, growing at 300 percent!

The evidence is sound, and the case studies are aligning around the same message. Perhaps the 80 percent of dealers interviewed for the EY study who did not plan digital presence investment are now awake, realizing 2020 is only 12 months away. If you plan today, 2020 could be the year you look back and see the benefits of a digitized dealership, or look back in hindsight and wish you had embraced the change more seriously.

 

Discover how dealerships like yours are using MaximTrak’s leading F&I menu technology to increase profits, reduce friction, and transform the customer experience! http://www.maximtrak.com/discover/