Digital Retailing will likely not reach full adoption in the next 3 to 5 years. There are just too many variables in car buying to say that all vehicles will be bought on line. But it seems to me it isn’t a question of if, but a question of when Digital Retailing will become the norm and face-to-face showroom sales the exception. I can say our “digital dealers” are seeing the Digital Retailing mentality, culture, and processes improve CSI and online reviews, enable the sales teams to get in front of the best customers more frequently, and significantly reduce the leader to sales staff ratio (and cost). So the benefits of Digital Retailing are clear.
That’s all fine and good, but in order for the statement “It’s Time to Close Your Variable Ops BDC” to make any sense we need to go back in time about 20 years to evaluate what precipitated the development of Digital Retailing’s precursor: The Business Development Center (BDC).
When asked why they implemented BDCs in the first place most dealers say something like, “Salespeople were not effective at setting appointments with prospective customers,” or, “Salespeople were poor at following up with customers after they left the dealership.”
However, when we investigate the real reason BDCs were established we see it was a response to the fact that customers were changing how they went about shopping for vehicles. This of course was directly related to the increased use of the Internet for selecting both vehicles and dealerships.
Unfortunately, as an industry we reacted poorly and placed a very costly band aid on the underlying problem, not atypical in most industries. Instead of responding to changing customer expectations by updating salesperson hiring, training, procedures, and tools, we responded by creating a superficial fix that didn’t establish the people skills or processes consumers wanted (and were finding in every other retail industry). BDCs, of course, consisted of an entirely new group of people tasked with doing what the sales team was already doing, which ended up adding process steps, time, complexity, and cost while creating both customer and employee dissatisfaction.
Setting aside these customer and management issues for a moment, the extra cost of a typical sale involving a BDC is in the $100 range. That in itself is a reason to seriously consider closing the department. More importantly, however, the ever-increasing margin compression experienced in all dealerships makes this expense unsustainable. This however is not the primary reason the Variable operations BDC needs to be closed…
Let’s fast forward 20 years to today, where the typical consumer is far more informed not only about the vehicle they want to purchase, but the value of their existing vehicle, transaction incentives and financing, inventory availability, and the amount they are willing to pay for the vehicle prior to contacting any dealership. Today’s consumer holds all the cards, and we know that. Our industry has reached the point where we can no longer force the consumer to do business our way. We know that as well. So now we’re playing catchup to provide our customers the Amazon.com experience they’ve become accustomed to and expect. We also know this is something we have to do.
If you subscribe to these “new consumer reality” conclusions—and you likely do or you wouldn’t be reading an article like this—you already understand that when a customer does reach out to your dealership digitally—by phone, e-mail, text, chat, or social media—they are not doing it to set an appointment. They want to buy a vehicle. This of course suggests that most, if not all, have completed much of the journey through the purchase funnel and are ready to buy.
And here’s the rub. Diligent though they may be, BDC reps are trained to set appointments, not answer tough questions. They usually don’t have the product knowledge or ability to answer the kinds of questions they get from consumers who have already researched product, pricing, financing, trades, and inventory. This causes a breakdown in communication that frustrates the customer. So what do customers do? They move on to the next dealership and the next until they get what they’re looking for, most often from a trained automotive salesperson. Carvana is another example of a low-cost solution consumers are being driven to because they offer exactly what customers want: on-line purchases, at-home deliveries, total transparency, and a complete absence of roadblocks.
Now, I have had dealers tell me their BDC staffs are empowered to answer tough questions. Assuming that is true, the obvious question is: why pay twice for a delivery? Furthermore, why live with artificial complexity when you can meet customer needs more efficiently and profitably? I’m reminded of the first of quality guru W. E. Deming’s 14 Principles:
Create constancy of purpose toward improvement of product and service:
- Plan for quality in the long term
- Resist reacting with short-term solutions
- Don’t just do the same things better – find better things to do
- Predict and prepare for future challenges, and always have the goal of getting better
The Rikess Group can help you implement a Digital Sales system that will improve sales operations efficiency and profitability, employee effectiveness, and customer satisfaction.
Please contact me directly at 404.805.5009 or manderson@rikessgroup.com for more information.