Sun Tzu for Car Dealers

“The opportunity to secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.”                   --- Sun Tzu

Sun Tzu was an ancient Chinese warlord that lived 2,300 years ago.  The lessons he passed on are numerous and are still widely quoted and taught in strategy courses.

As a leader in your car dealership it is your responsibility to ensure that you are aware of the changes going on in your marketplace.  It is also your responsibility to drive your organization to be prepared for what is coming.  It is not the soldiers who are at fault when the battle is lost; it is the generals who have the control over how they engage and hence are solely responsible for victory or defeat.

As a leader, externals trend needs to be filtered through your own "assessment meter."  This process has nothing to do with managing your current state.  Management gurus everywhere will offer this warning:  Expending ALL of your effort, money and time to maximize efficiencies around the way things are done today or worse, how they used to be done, is a sure path to irrelevance and oblivion.

I have this mental image of horse-drawn carriage builders at the beginning of the 20th century.  The automobile was just starting to be a viable alternative transportation source, yet the consumer needs of instant convenience without having to care for a live animal due to mass urbanization had set the conditions for a massive shift in "how it is done."  There were probably some excellent buggy makers... but no one cared.  The crowd had moved on.  It didn't happen overnight, the buggy makers had plenty of time to be aware of the trend and to respond, but they didn't.  Then one day they woke up and their world had changed.  Just being an efficient buggy maker no longer defined success no matter how good they were at it.

Think of newspapers today.  Who cares if they have low rub ink and use recycled paper?  Do you know anyone under the age of 40 who reads a newspaper?  And the newspaper industry isn't alone.  Listen to Edgar Bronfman, the Chairman and CEO of the Warner Music Group.  This quote was from this week...

"We used to fool ourselves…We used to think our content was perfect just exactly as it was [encoded with DRM so it couldn't be shared.  We promoted our artists on radio stations, and built our business around sales in retail stores with music taking physical form]. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong.

How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find... And as a result of course, consumers won."

But this probably doesn't apply to car dealers right?  Car dealers haven't been ignoring what consumers want, maintaining a tight control over the buying circumstances for vehicles the way dealers prefer it to be?  Car dealers haven't been primarily driving online consumers to call or email them so they can get consumers in to the showroom and close them out the old fashioned way?

http://www.youtube.com/watch?v=DG8cdMutLwA&feature=related 
(I'll warn you, you are going to laugh + get lost here... there is a whole series of these videos).

But the type of video viewable on the link above doesn't reasonate with consumers today!  Now that dealers have websites with VIN decoder level information and where the consumers can email the store when they are interested, consumers don't feel that way anymore!

So what is a poor car dealer to do?  To update Sun Tzu's quote, here is Mark Twain:

"The best swordsman in the world doesn't need to fear the second best swordsman in the world; no, the person for him to be afraid of is some ignorant antagonist who has never had a sword in his hand before; he doesn't do the thing he ought to do, and so the expert isn't prepared for him."

As a dealer of XYZ franchise, your medium-term success will follow your manufacturer's product design, marketing and execution success up and down.  Yes you need to be able to manage and execute too.  That drives your short-term success.  It is within these timelines that issies such as having too many dealers for too little market share is a problem.  But there is a far greater long-term problem lurking over car dealers in this market.  It is not brand to brand competition.  Nor is it dealer to dealer competition.  It is the consumer disenfranchisement with the current buying process.  How many thought I was going to say the Internet?  To me anyway, consumer use of the Internet is merely the manifestation of the problem.  The symptom of the problem, not the problem itself.  Besides, even if it was the problem, consumer use of the Internet is not going to go away.  The Internet is merely allowing car-buying consumers to express the way they really feel and they are acting accordingly.

Put on your long-term, Sun Tzu strategy hat and consider:

• The fundamental lack of trust driving consumers' disenfranchisement with the current car buying process is not a new issue.
• Nor is the trend of car-buying consumers using the Internet.

The first trend has been around for decades, the second for at least 10 years.  If you are done chuckling about the badger video, I'll offer this up... there is a wrinkle in the usual technology adoption curve that is fairly unique in our industry.  Other than the largest dealership groups (which at 15 or so years are still a fairly new trend of their own), car dealers primarily depend upon technology vendors to build the tools that they use.  Got it.  Doesn't change a thing about your Mark Twain or Sun Tzu responsibility.

If you landed on this page because in my newsletter on this topic I promised you some ideas about what you can do differently in your dealership, here are those ideas:

• Online you can't tell consumers what to do.  You have to build your online strategies so they want to do what you want them to do.  This is called a scent-trail and doing it well is both a science and an art.
• Most car dealers and their staff are not technologists, but that is not necessary to be good at this exercise.  All you have to know is how a car dealer makes money and how car buying consumers think.  You speak to enough of consumers that you should be able to do this.  If not, grab a few and ask them some questions.
• Look at your dealership's website.  Assume consumers aren't going to read it end to end.  Pick the top 3-5 reasons why you think consumers come to your website.  Look to the search terms they used to get there for clues if you need some help.  Now visually look at your site.  Is the instant orientation, layout and navigation supportive of these reasons or did you build your website (or allow your vendor to give you a cookie-cutter design) as if consumers want to hear your TV commercial?
• If you are doing the latter, stop as quickly as you can.
• Here is the other side of that coin.  If you don't choose which consumer needs your website speaks to, you will end up not speaking to any of them.  Consumers won't pick through the navigation and conform to your process.  Even though through some miracle they are on your website, they just aren't the least bit committed to doing business with you yet.  One click and they are gone to look for someone, anyone who will give them what they want.
• Let's say you think speaking to a consumer who has come to your website looking for a new car is one of your important consumer profiles to consider in your website design.  Does your website have instant recognition of where there should go and what they should do?  When consumers go to your vehicle inventory page, do you have a quick reinforcing message about how buying a car from you will result in a better car buying experience or do you just shove cars at them?  Do you propose marriage on the first date?  Do you only provide your reinforcing messages about how buying a car online from you confined to your About Us or Internet Department page? 
• The science of the scent trail is to anticipate what the consumer need is at each exact moment based upon where they are in the process and then provide it when they need to experience it so they continue to move forward and do what you want them to do.
• What would you say if you wanted to convey "We are a better dealership to do business with online?"... in terms that the consumer cares about.
• Next steps... do you think it is important to communicate that you can get just about anything if they don't see the exact vehicle that they would like or would you like to assume that they know that?
• Here is the next thing to wrap your mind around.  Online consumers do not want to think, so you need to anticipate.
• Do you ask them to tell you what is important to them on the vehicle they are considering or do you allow the technology to dictate the scope of the communication they are able to provide to you?
• Do you shove an instant online coupon or trade evaluation at them without any sort of confirmed relevance as to why they should do that and what they will get if they do (and again in language validating their purpose on your site)?  Don't get me wrong.  I like those as website tools which drive conversion (consumers willing to identify themselves as leads).  I just don't like them presented without What's In It for Me (WIFFM) language.  For example... value your trade... okay... that's nice... Will you buy it from me for that?  Guaranteed?  Whether I buy from you or not?  Your answers to these questions have quite a bit to do with how many consumers will use the service + how they will respond when you contact them to follow up.
• Got the idea?  Good.  Explore it in your next manager's meeting.  Do one department / week since it takes time to do well.

Now back to Sun Tzu and Mark Twain.

• What are you doing online to secure yourself against defeat?
• How much of what you do online is a sustainable competitive advantage?
• What do you think will happen to car dealers who continue to:
• Primarily advertise in traditional media?
• Who give consumers a "badger" experience when they come in to the showroom?
• Who "badger" their Internet consumers?
• Who continue to only optimize their online selling efforts around calling Internet lead customers to drive them in to the showroom?
• Who are hostile to the Internet because it threatens the way they like to do business?
• Do you think consumers will want to continue filling in inquiry forms (leads) when they can use a shopping cart and build their own deal?
• AutoNation and Lithia are both piloting services (not Ai-Dealer's) that do this
• Cars have been sold online using the shopping cart service.  Many more have been sold based upon the follow up that occurs from consumers who started out with the shopping cart (consumers have to identify themselves in order to access it), the lowering of trust barriers once they get in to the shopping cart, and those that come in to the showroom and buy as a result.  One of the dealers using Ai-Dealer's shopping cart is averaging a 50-60% closing rate of consumers who buy cars from them vs. the total number of those who use the shopping cart.
• There aren't multiple choices of car dealer shopping cart services for vehicles on the market.  Having built one, I'll share with you that it will take a couple of years for any new entrant who wants to get in to the space to even begin piloting one.  Don't believe me?  If you've been through the Ai-Dealer system (complete demo available here), you may think it is pretty easy from the consumer experience (and I am not saying it is perfect, it is not, but once familiar with the basic navigation, consumers do rave about its usefulness).  So while it looks easy, what is going on behind the scenes is complex.  F+I system companies know this, yet none of them have written a pro-active consumer selling system for car dealers to make available to online consumers (this is what a shopping cart for vehicles means to a car dealer).  Want more proof, pull out your rebates sheets and extended service contract pricing.  Focus on that fine print.  Envision what it takes to provide an online scent trail to a consumer with just the correct information at just the right time in the build your own car deal process.  One store, one jurisdiction, one franchise?  Or consider all franchises, all states (sales tax rules, state franchise legislation) and even the Canadian market.  Now consider that as a software vendor you have to sell, set up, manage and maintain it at a profit such that you can make money as a business at rates car dealers will pay for your service.
• Still think there will be a plethora of vendors any time soon?  A female friend of mine that I used to work with told me once that "9 ladies can't make a baby in a month."  When it comes to software, I'll vouch for the fact that you can only design, test and shift so many walls around at once without destabilizing or ruining your product... and like any sophisticated system, it takes time to get right.

I also promised in the newsletter that brought you here, that I would share a secret I hadn't shared before about the second half of the Sun Tzu quote and why you should care.

I already know how this battle ends for car dealers who remain mired in a nostalgic view of the past.  Regardless whether you call them transactional car dealer websites or shopping cart ecommerce systems for car dealers, the impact on how cars are sold is just beginning to be felt.  Ai-Dealer sells a 30-50 mile franchise-exclusive territory with its shopping cart ecommerce service for car dealers to sell cars online.  The systems AutoNation and Lithia have, you can't buy.  They paid for custom development of those services and only they have the rights to use them.  I don't say this because I harbor any ill-will towards anyone, but it is not my responsibility to make sure you can buy a shopping cart for vehicles when you want one.  Already I have dealers complaining that their territory with us is gone and to be honest, we are up to our collective eyeballs in installations (hence the slowdown in these articles). 

Why am I sharing all of this with you?  I genuinely like car dealers.  My experience is that most are extremely caring, generous, genuine individuals in their communities and really try to do everything they know how to do in serving their consumers' car buying and owning needs.  There is nothing wrong with making a profit whle doing so.  As business owners, they have a responsibility to do so.  No profits, no payroll.  No profits, no customer service.  No profits, no reinvestment back into the business.

That being said, evolution is not kind to those least adaptive to change.  So why don't I open up the Ai-Dealer shopping cart to all dealers?  I believe it dilutes the shopping cart brand if every dealer has one (unless it is adopted at the manufacturer level as a competitive factor).  The shopping cart doesn't sell any additional vehicles in the market, it just gives those marketing it the ability to attract and obtain selling opportunities and sales they otherwise may not have had. 

Which is the answer to my secret and depending upon how you feel about it, the answer what you should do about the second half of the Sun Tzu quote"...the opportunity of defeating the enemy is provided by the enemy himself."

Think about it.  Talk about it.  Share how you feel about it.  I'm not asking you to agree with me.

Love to hear your thoughts and comments on our forum.