Katie Lambert

Differentiation gives shoppers a reason to choose your dealership from among other options in the market area. It may also give you the ability to compete on features other than price. In short, a well-differentiated dealership can attract more customers and charge more than their competitors.

How does your dealership stack up against your main competitors?

Ask yourself some questions:

1. What are the top 3 features or attributes that differentiate your store from your 2 or 3 most important competitors?
2. What are the top 3 features or attributes that differentiate each of your key competitors from your store?
3. Which of the features and attributes are most important or relevant to your customers?
4. How many of your customers and prospective customers are familiar with your differentiators?
5. How do you know the answers to these questions?

• We researched our customers
• Experience
• Gut Feel
• Guess

Differentiation versus Table Stakes

Dealerships can lose track of how their differentiation compares to that of their key competitors over time. What started as a highly differentiated feature loses that position as competitors find ways to emulate what once gave you a competitive advantage.

Differentiated features in automobiles offer a good example. In the 1940’s electric windows were found on a few luxury brands such as Packard and Lincoln.  It was an extra cost option that differentiated high-end models within these brands. Today virtually every car has electric windows. The feature is necessary but not different. Power windows are table stakes in the competition for car buyers. Manufacturers can’t charge more yet can’t sell a vehicle without this feature. Table stakes are what is required to “get in the game”. How many features does your dealership promote that are truly different versus those that are table stakes?

Make sure your differentiators are still different. Ask your customers what matters to them. For a more in-depth look at evaluating your differentiation try the PWC “Right to Win” calculator found online here. See the examples below and then enter your own differentiators.

E-Commerce in retail automotive is here. It works and a segment of car buyers are embracing it. Most of the innovation is coming from non-traditional disruptors such as Carvana. They are selling thousands of cars per month and they are doing it without a traditional storefront and with hourly employees who help facilitate the transaction over the phone. They do not employ sales people nor do they have expensive real estate and facilities.

Here are the key e-commerce success factors at Carvana:

Above average vehicles – Carvana sells only vehicles without reported accidents. They use both CarFax and AutoCheck to validate the vehicle history. While this limits the types of vehicles and price points they can offer, it does send a very powerful message: Carvana only sells good cars.

Great pictures and disclosures – Carvana went to great expense to create arguably the best online photo process in the retail automotive business. Features are called out and, most importantly, imperfections are disclosed. Unlike most traditional car dealers, they do not display cars online until they are detailed and standing tall.

Assurance – Confidence is built with a thorough, 150-point vehicle inspection, a 100-day bumper to bumper limited warranty and a 7-day money back guarantee.

Price integrity – Carvana features a no-haggle price. They put their best price on the vehicle and post Kelley Blue Book Retail as a comparison. They also show customers the interest rate up front and have a credible rate comparison tool. They can approve many customers for a firm rate in a couple of minutes. Because they are upfront with a non-negotiable price and firm interest rate they can display a very accurate monthly payment. Interestingly the monthly payment is in the largest font on the vehicle detail page.

Here are our thoughts for franchise dealers moving towards e-commerce.

Transition to a one-price business model – To succeed in e-commerce, dealers need to build trust. Transparent pricing is the foundation of online trust. Without a firm price, why would a customer commit to a car online? How useful is a payment calculator if the payment is based on a fictitious price? A major benefit of moving part of the transaction online is saving the shopper time. Does it really make sense to have the customer use the online tools only to start over in the store with price negotiations? Not only are time savings an illusion but the online shopping tools turn out to be a just conversion tactic. Without a transparent price, there is friction in the shopping process which ultimately doesn’t make car buying less painful.

Stop putting ugly pictures online – Taking cell phone snapshots of non-detailed cars reflects poorly on the dealership brand and overall impression of quality for the vehicles you sell. I can’t think of another retailer who puts their “worst foot forward” by rushing a sub-standard product image online. Yes, we understand that a used car goes down in value every day and that you are anxious to offer the vehicle for sale. Either fix the recon process or use a “coming soon” image. Check out sonicautomotive.com for a good example of “coming soon” images. Sonic’s Echo Park dealerships, echopark.com, are doing a great job presenting used cars. They do it with an affordable photo studio, a consistent photo layout and process and no amateur cell phone images. The first impression they make is pride in their merchandise and that they sell top quality used cars. Echo Park’s vehicle images communicate trust.

Stand behind your product in writing –  To encourage shoppers to commit online reduce the risk. If you are selling new or quality reconditioned vehicles go ahead and offer a money back guarantee. Most people don’t want to return a car unless there is something very wrong. It’s just too much hassle. Be honest, whether you have a written policy or not, don’t you usually take care of customers with legitimate issues? Since you are going to do it anyway why not get credit for it? My personal experience working for some very high volume one-price stores is returns happen very infrequently. Once again, you are building trust by reducing perceived risks.

Franchise dealers are facing a big opportunity

Franchise dealers have a unique opportunity to embrace the future and deliver a shopping experience that puts customers first. Delivering the best customer experience by reducing friction throughout the purchase process is the key. When dealers combine high tech with high touch they build a human experience that technology enhances.

Five Steps to a Better Customer Experience

1. Start with a website that is easy to navigate with real prices and payments.
2. Let shoppers calculate their own monthly payments for finance and lease transactions.
3. Take beautiful pictures.
4. Stop negotiating and eliminate the four-hour marathon car buying process.
5. Create a culture that values being helpful and persuasive not manipulative.

Your customers are searching for a better way to buy a car.

Ryan Adams Group is here to help you. We are committed to a better customer car buying experience. Call if you are curious or visit us at RyanAdamsGroup.com.