I am ready for my next engagement. This blog, together with my Linked-In profile, gives some indication of what I have accomplished and what I can do for your business. There are also some case studies on my web site.
I am currently interested in digital retail, digital marketing, and artificial intelligence. I generally do contract work, but will consider salaried. If you have a job that requires my particular set of skills, please get in touch.
A User Story
I enter the PCI compliant cleanroom at eleven o’clock with only a quinoa bowl from Freshie’s, and log in to Salesforce on my locked down computer. No cell phone, no scratch paper – and there are cameras. I wave to Peter on Camera #1 and start to dial. I do not have high hopes of reaching anyone in the middle of the workday. Amid all the DNRs, I may catch an inbound call off of our direct mail campaign, or someone out on the floor may catch it while I am dialing.
I log in to the dialer and it presents my first call. To save time, I hit “dial” and the phone rings while I paste the number into Salesforce and search for the Opportunity. Our Cisco dialer has a predictive mode, but I am not using it. For low volumes, preview dialing is supposed to be a better experience. The Ministry of Commerce prefers it, too. This number is guaranteed to be in Salesforce, with a prospect status, because the dialer file is generated nightly from the Opportunity table in Salesforce.
Bonjour et félicitations pour votre achat d’un véhicule Nissan
My first call goes to voicemail, which is par for the course. I recite the voicemail script, which I know by heart, and log the status in Salesforce. I really wish the dialer could leave that damned message on its own. I must recite it a hundred times a day. I will dial this number three times before dropping it from the file, spread over a two-week period, in case my prospect is away on vacation. Salesforce applies this business logic when it generates the dialer file.
For the next few hours, I get voicemail, no answer, not interested, and never call me again, which I duly note in Salesforce. This last category will be added to the phone number filtering logic, along with the Do Not Call list we purchased from the Ministry. I recognize the next number. Merde! It’s Dave Duncan. I try to cancel the call, but too late.
Dave proceeds to grill me about my affiliation with Nissan. No, I do not work for your local dealer. If I did, we would have an “existing business relationship” and we wouldn’t have to honor the DNC list. No, I do not work for the factory, its captive, nor the captive’s department of protection products – but we are the one and only factory authorized direct marketer of said products. That’s why it’s their number on your Caller ID.
By six o’clock, I have a live prospect. I alt-tab to my SPP system, which allows me to quote rates as well as set up a payment plan. I also have a custom Product object in Salesforce which connects to the rating API, but I find it easier to work in SPP because most customers will want a payment plan anyway. SPP calls the same API.
Things are going well until my prospect insists upon seeing the contract. I recite the talk track about cancellation and full refund within thirty days, but to no avail. I can also email a specimen contract and we can review it right now while he’s on the line (better odds of closing). I end up emailing a custom link, or PURL, from SPP that will open right to the rates and contract we discussed.
I flag this one for callback in a few days. It’s possible he will self-close on the SPP site, and then Salesforce will close the Opportunity automatically when it receives the file from SPP. In any case, I now have an email address we can use for the next digital marketing campaign. Speaking of digital marketing, whenever a voicemail greeting begins, “the Rogers mobile customer you’ve dialed,” I flag those as numbers to which the digital team can send text.
My next prospect, I actually close on the call. I am sitting in this fakakta cleanroom just in case I have to handle credit card information which, at last, I do. My guy buys a 72-month plan, which I set up for 24 monthly payments on SPP. Then, I download both contracts – the protection plan and the payment plan – and attach them to the Opportunity.
Salesforce won’t close the Opportunity, though, for another day until it receives confirmation from SPP that all is well with the credit card. If not, it will indicate that status, send an email, and I will have to call him back. Once the Opportunity does close, as a win, Salesforce Connector will pick it up and Marketing Cloud will include both contracts in a direct mail welcome package, ending the Customer Journey.
So, to summarize my workflow, I am manually pasting phone numbers into Salesforce and VINs into SPP. Salesforce and SPP are each capable of rating and contracting via API, and the customer can check out with or without my assistance. These tasks could be improved with some Computer Telephony Integration and an SPP interface. Instead of sending data directly to SPP, all I really need is the logic to generate that PURL and then Salesforce could either launch it for me or send it to the customer as needed.
At eight o’clock, the end of my shift, I doff my headset and run the job to generate tomorrow’s dialer file. This is basically a query against the Opportunity table, applying the “next date to call” rules. Without CTI, the best time to call is not supported. Jeanette will have to pick those out of the comments manually. Tomorrow is my day off.
A while back, I wrote a survey of Direct to Consumer VSC Sales. This was a “how to,” and today I am writing about the “why.” The short version is that D2C is a large and unserved market. Franchised dealers sell service contracts with 47% of new vehicles, which is great, but that leaves the other half unprotected.
Add 6% to reported F&I gross, plus 4 to 5 times that amount for the backfile
Depending on which “touchpoint” you wish to pursue (see here) this market includes roughly 67 million vehicles. That’s how many are on the road, less than six years old, with no coverage. Dealers are the group best positioned to serve this market. Of course, a dealer can only address his local share of the market, not the whole 67 million. See Profit Opportunity, below.
To succeed with D2C, you must have an existing relationship with the customer. That’s because success requires digital marketing, and anti-spam laws limit what you can do without a relationship. For example, an OEM can email their customer a solicitation for their factory-label protection products, but a TPA cannot.
So, the dealer has the inside track. He has the relationship, the contact info, and a service department to verify eligibility. Plus, every additional VSC aids in service retention. Depending on the dealer group, it may also have the other ingredients. Here’s the parts list:
Depending on the dealer group. Obviously, if you’re Lithia, you already have a finance arm which could (with training) handle bounced Visa charges. They’ll need to comply with the PCI security standards. Maybe that’s best left to PayLink.
There is a host of such decisions, for which you will need expert assistance – but let’s get back to the “why.” We are going to make a gross profit calculation in three steps:
Let’s look at AutoNation. Sorry, NADA Average Dealer doesn’t provide enough detail. Even the AutoNation data doesn’t provide much detail on product sales. Still, we can draw some inferences using the 2019 annual report, industry norms, and these remarks from then-CEO Cheryl Miller.
AutoNation reported sales of 283,000 (new) and 246,000 (used) with F&I PVR of $1,904. That’s the headline figure, including finance reserve. Owing to adjustments, the figure in the annual report is a little higher, and the calculation based on Miller’s summary is a little lower.
The $1,350 (new) and $1,050 (used) are averages across all units. We can infer that product gross was roughly $2,580 (blended) on 47% of units. That leaves the other 280,000 vehicles unprotected, with a potential gross of $720 million, equal to 71% of AutoNation’s reported F&I gross.
You can use 75% of F&I gross as a rule of thumb. In general, product gross is two-thirds of F&I gross, and this is derived from fewer than half of the vehicles sold (omitting ancillaries). The ratio of D2C opportunity to instore penetration is 53/47 of the two-thirds, which makes 75%.
This $720 million is the potential gross AutoNation left on the table in 2019. Okay, that’s not fair. It’s only on the table assuming every one of the D2C prospects will buy the product, which they won’t. Most won’t, in fact. The conversion rate is the product of three factors:
The conversion rate is what counts, but we break out the components for management purposes. For instance, maybe the take rate is high but your closers are weak. Success requires a lot of contacts, with compelling CTAs and good closers.
Let’s say we utilize all of our advantages as a dealer – an aggressive journey on all touchpoints – bringing our contacts to 10. Multiply this by a conservative 20% close rate and 4% take rate. This gives us a conversion rate of 8%.
In our AutoNation example, this would mean roughly $58 million of additional gross. All of this arithmetic generalizes, too. Simply take reported F&I gross and multiply by 6% (8% of the 75%, above, makes 6%). So, now I can crack the Lithia annual report with F&I gross of $580 million, and reckon that D2C could mean $35 million to them.
This incremental income recurs annually, since it’s based on one year’s volume – but we start the game with a backfile of unserved customers from prior years. We might reasonably want to go back five years for new vehicle buyers and three years for used.
AutoNation is a convenient example because they sell new and used in roughly equal parts, so this works out to (blended) four years’ worth of volume. If your mix skews more toward new vehicles, then your backfile opportunity will be richer.
In short, you can use the 6% rule to compute the annual recurring, and then add a one-time opportunity of 4 or 5 times that amount for the backfile. This more than pays for setting up the operation. So, is it worth the hassle to earn an extra 6% of F&I gross? Ponder that next time you see the Car Shield ad on television.
The tech buzz at NADA this year was Digital Retail. Tagrail has a new partnership, with dealer site provider Fox, and Moto showcased some of their OEM projects. Roadster has an aggregation marketplace, which I’ll get to in a minute, and Modal (Drive) was conspicuously absent. I hope they’re okay.
All dealer site providers are now claiming the hip acronym DR, including some that are way off the mark. This week I want to cut through the clutter and taxonomize a bit. We’ll see how well my predictions from five years ago have held up.
Dealers will migrate onto the most capable of the platform sites, and … the winning platforms will not be mere lead providers.
I am going to skip the consolidators and the used-car sites, to focus on DR solutions for franchised new car dealers. That was the context for the earlier article (and the pull quote). The grid above divides the DR space into four segments: True DR, Pivoters, TPC, and Marketplaces.
True Digital Retail
A true DR solution must handle the six canonical functions, do the paperwork online, and save the deal (not a lead) for use in the dealership. True, not many customers will do the full process online, but you have to offer the capability. Qualifying questions here are along the lines of “can you sell a service contract and book it online with the administrator?”
I don’t want to be pilloried for omitting someone, but my short list (when asked) goes: Roadster, Moto, Modal, Tagrail, AutoFi, and CarNow. I can find CarNow dealers pretty easily online, paired with a variety of site providers. Here in Atlanta, Ed Voyles is an example.
Pivoters
Anybody with a foothold in the dealer’s website is using it to pivot into DR. The first group of pivoters are what I call “finance first” sites. AutoGravity, DriveTime, and AutoFi are sites customers use to check their buying power before going into the dealership. Based on intel from Ricart Ford, I would say that AutoFi has successfully pivoted into the DR segment.
Gubagoo is using their foothold in chat to pivot as “conversational commerce.” SpinCar is adding protection products to their VDP real estate, which is right where they belong. Even popular F&I menu Darwin is moving online with Darwin Direct.
Third Party Classifieds
My model for a marketplace is Autotrader plus its DR feature, Accelerate. However, the other incumbents have not followed suit. In fact, Cars.com “does not sell vehicles directly and is never a party to any transaction between buyers and sellers.” This space is inhabited only by brave new entrants like Joydrive, GoGoCar, and Deliver My Ride.
As I wrote here, this model has plenty of challenges, like finding UX and services that will appeal to all dealers – not to mention the customers. Dealers may prefer a simple clickthrough to their own DR solution. This is the backdrop for Roadster’s Express Marketplace.
Roadster Marketplace
Roadster’s marketplace operates just like a TPC site. It has the familiar VSP/VDP with faceted search, but then it segues into a full digital storefront. The reference site I looked at, Cochran group in suburban Pittsburgh, lists 3,500 new vehicles in 18 makes, from 26 rooftops – with transparent pricing!
My first reaction, I have to say, was “Holy crap, they’ve actually done it!” They have made their own private Autotrader. Of course, the same market area lists ten times as many new cars on Autotrader but – funny thing – they all use Accelerate. Competition is wonderful that way.
The arrows on my grid suggest some strategic directions:
I guess the only remaining frontier would be for two unaffiliated groups to cooperate on a single platform, as I wrote in Toward a Digital Auto Marketplace, maybe in contiguous nonoverlapping markets. The eCommerce term is “coopetition.” Or, maybe Accelerate will gain some traction.
Virag Consulting 