As showroom footfall plummets,
now more than ever the importance of properly managing customers is
on dealer’s minds. Brian
Rogerson explores the ways dealers are coping.
Go deeper with GlobalData
The good news for motor dealers this
August is that new car registrations rose by some 2.4 percent over
the previous month – the first increase in sales for 15 months.
The bad news, however, was that the increase was
almost entirely due to the scrappage incentive programme which,
like most incentive schemes, will have had the inevitable side
effect of drawing sales forward.
The fact remains that the UK automotive market is
still down by almost 550,000 vehicles over the past 12 months.
At the same time, the majority of motor dealers
have reduced their staff and are pruning overheads – while motor
lenders are undergoing radical re-organisation as their banking
parents go through the painful task of reducing their balance
sheets.
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By GlobalDataHit by a double whammy
Motor dealers looking to after-sales to
remedy the falling footfall (and profits) in their showrooms are
likely to be disappointed.
“Franchised dealers do not earn much on selling new
cars and rely on their after-sales business for revenue,” one
dealer told Motor Finance.
“Modern cars, however, are of such superior build
quality that they hardly ever need check-ups in the first 60,000
miles or three years. In this ultra-competitive marketplace
independent workshops and fast fitters are quite successful in
seizing every opportunity to increase their market
penetration.”
He adds: “For franchised automotive dealers,
creating loyal customers is more important than ever and targeting
the right customers has become a key element in dealer profit. It
has never been timelier for dealers and lenders to work together on
customer relationship management (CRM) techniques.”
CRM no longer a soft
option
And yet much of the UK motor trade
believes that retaining customers involves nothing more than harder
selling.
“Nothing could be further from the truth,” says
Andy Tong, managing director of Profit Training Ltd. “Managing
relations with customers is not primarily a selling opportunity,
but rather a long-term objective to contact customers and build
relationships with them.
“As relationships build, dealers will find they are
front-of-mind for a customer in the market. The stronger the
relationship between dealer and customer, the stronger the profit
margin will be on each sale.”
Mark Liversidge of Damar UK comes with a
motor-trade background and now works at developing CRM systems.
“CRM,” he explains, “is a philosophy – not a
technology. Its success depends upon software for 20 percent,
policies and procedures for 30 percent, but people for the
remaining 50 percent. Without all three working in unison it won’t
work.”
Nick Crawford, CRM account manager at Mondial
Assistance tells Motor Finance: “A couple of years ago
when car sales were booming, CRM was looked upon as a ‘nice to
have’ tool rather than an essential one. Now, however, every sale
must count and customers must feel that you need their
business.”
Dealer Management Systems the
answer?
The UK motor trade often relies upon
investment in dealer management systems (DMS) to retain
customers.
The number of franchised dealers, independent
garages and fast-fits that use epyx’s 1link e-commerce system
surpassed 13,000 in August.
Ken Trinder, head of business development at epyx
says: “The past 12 months have seen an increasing interest from
dealers looking for new ways to maintain profitability as the
recession bites ever deeper. E-commerce is one of the solutions
they are adopting to retain customers.”
“The fundamental benefits of e-commerce make a lot
of sense in a recession,” he adds. “Our platforms provide a means
to reach a much wider pool of potential buyers than through any
other route, and business can be transacted at a very low cost.
“These principles apply to all areas in which motor
dealers operate – from new and used car sales through to
after-sales.”
Tong, however, criticises some suppliers of DMS for
providing highly-sophisticated technical systems that he believes
are too complex for showroom usage.
“In many cases,” he adds, “dealer staff don’t fully
understand, or have the skills to use, the DMS systems that often
seem to consist of a large number of tick boxes and buttons.”
The consequence, Tong believes, is that while
dealer principals are often willing initially to invest in a DMS
system – and pay the monthly charge and make its use mandatory –
they are unwilling to invest in staff training or even ensure that
staff are fully aware of the system’s potential to win them new
business.
“CRM is a philosophy – not a technology. Its
success depends upon software for 20 percent, policies and
procedures for 30 percent, but people for the remaining 50 percent.
Without all three working in unison it won’t work”
“Principals see DMS systems being used elsewhere,”
he says, “and take it on board as a ‘must have’ but end up using it
as nothing more than a blunt, expensive selling tool.”
Ken Trinder agrees and details cases where dealer
principals are unable to log onto their own DMS system.
“It is crucial,” he says, “that dealer principals
are totally committed and are prepared to work hard at committing
all their staff to its usage.”
Lenders suffering too
US motor dealers’ dissatisfaction with
finance companies has been starkly revealed in the JD Power and
Associates 2009 Dealer Financing Satisfaction Study.
It echoes frequently-heard criticisms in
the UK and points to a general need for improved customer-retention
service from motor lenders.
David Lo, director of financial services at JD
Power, explains that, overall, dealer satisfaction with lenders has
decreased considerably from 2008 in all four segments: prime,
sub-prime, retail leasing and floor-stock planning.
He says: “The service aspects of retail motor
finance experience account for more than two-thirds of dealer
satisfaction. Retail packages – including rates and terms – account
for less than one-third of overall satisfaction.
“This indicates an opportunity for lenders to
differentiate themselves through service,
notwithstanding that external market forces are driving a
more conservative lending approach.”
Lo argues that although the current economic
climate has intensified the effect of declined deals, tightened
lending and reduced stock levels on dealers, the fundamental
principles of service are unchanged.
“Lenders that focus on prompt application and fast
turnaround times have dealers that demonstrate willingness to work
with their clients, and employ sales representatives who are
skilled in relationship management, could well position themselves
to be a lender of choice,” he says.
The study finds that higher levels of satisfaction
may positively impact the amount of new business a lender receives
from a dealer.
For example, among lenders in the prime retail
sector whose satisfaction scores average at 712 (on a 1,000-point
scale), only 22 percent of the dealers say they “definitely will”
increase their business with that lender.
In contrast, for lenders whose satisfaction scores
average 886, some 46 percent of dealers confirm they “definitely
will” increase their business with that lender.
Lack of dealer/lender
teamwork
The recently-launched HPI Finance Gateway
is designed with a CRM bias. It promises an “instant” online
proposal from its panel of finance providers and, crucially, vows
to track future leads by notifying supporting dealers when finance
agreements on vehicles are coming to an end. This enables dealers
to re-solicit new business in good time.
Not that such a service from lenders is new.
Finance companies have been (intermittently) providing dealers with
timings on concluding agreements for many years – but recent
upheavals and consolidations among lenders have made many such
services lapse.
In any event, Tong believes that both lenders and
dealers are failing to operate together as a team.
“Both often claim that they are working closely
towards a common goal – but in reality they rarely are. The result
is that the skill sets of both partners are not utilised fully,” he
says.
“Many bank-owned finance companies exist to provide
contact names for their banking parent.
“The parent itself does not appreciate the motor
dealer connection sufficiently and invariably seriously underrates
the sector and fails to fully support it.”
Tong recalls a time when he was finance and
insurance director of a large motor group which, when he joined,
had some three supporting finance companies.
He got the three main lenders to ring-fence the
dealer’s customers in a way that only the dealer and the finance
company were permitted to resolicit existing customers.
“The result,” he remembers, “was an increase in
co-operation between dealer and lender and an increase in
profitable new business.”
Tong’s message regarding CRM is clear.
“Stay in contact with your customers,” he stresses.
“But don’t oversell to them. A selling call every six or seven
weeks is not CRM – it is a pain in the neck. All dealer staff must
be aware of the CRM system that is in use and how to use it. The
more it is used the more successful a tool it will be.”
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