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Pain Points: Buyers have changed and dealers should too

Pain points, obstacles blocking car buyers from the market, have changed so fast that many tactics used by dealers are now outdated

Dealers understand the importance of excellent customer service more than anyone. But under the influences of technological advancements and financial crises, consumer needs have transformed faster than retailers can accommodate. This reality is reflected in market research. In its most recent Car Buyer Journey Study, Cox Automotive revealed that consumer satisfaction with the dealership experience had declined for the second consecutive year, from 72% in 2020 to 61% in 2022. 

There is clearly a growing disconnect between what consumers need and what dealers provide. With the market slowly recovering from post-COVID disruptions, now is the perfect time to analyze what shoppers need from their dealer and which solutions are best suited for today’s consumer.

Pain Points

In terms of automotive retail, pain points are key factors which have a negative impact on the buyer experience. While not every issue in the vehicle shopping process can be fixed without broader economic change, two major variables directly under dealers’ control can be quickly addressed.

Efficiency

People are busier than ever, which means they have less time to spend online and in-store. Although one would expect to see customers spending less time shopping for vehicles in the wake of digital retail, research has discovered that the car buying process is not only taking longer to finish, it is also increasingly frustrating for shoppers. A 2023 friction points study coordinated by CDK Global and the National Automobile Dealers Association discovered that the share of car customers who spent more than two hours completing their in-store purchase rose from 43% in 2021 to 46% in 2022. “In nearly every way of measuring the customer feedback, breaching that two-hour mark lead to diminished [customer satisfaction] scores,” notes the report. This evidence on reduced efficiency also correlates with Cox Automotive’s estimate that the total average dealer visit increased by 20 minutes year-over-year.

Apart from causing lower customer service ratings, inefficiency with the in-store experience can actually stunt a business’s growth by impacting their word-of-mouth recommendations. According to CDK Global’s research, only 53% of consumers who spend between two and three hours at a dealership would recommend its business, compared with 63% who spend one to two hours, and 70% who spend 30 minutes to an hour. Worse, the longer their stay, the more likely buyers are to become “detractors,” former customers who try to convince others to avoid the business.

To make in-store visits more manageable for customer schedules and prevent even worse customer satisfaction declines in 2023, dealers will need to focus on trimming the car buying process where it hurts buyers the most. So which step is most to blame? The data overwhelmingly suggests that the longest, most frustrating step in the car buying process is price negotiation. As noted in the CDK Global report, “Price negotiation was not only rated as taking the most time, it was also one of only two tasks that saw an increase over 2021’s survey.” Furthermore, surveyed customers ranked price negotiation highest on CDK Global’s list of most troublesome tasks.

Transparency

Dealers overwhelmingly support full transparency in the car buying process. But in the wake of price and interest rate hikes, heavy fluctuations in car values and internet-accessible market research, the industry has yet to realize how difficult earning the customer’s trust has become.

Data reveals a vast disconnect between automotive consumer and retailer perspectives on transparency. In the 2023 Capital One Car Buying Outlook report, researchers noted that 68% of dealers believe that the car buying process is “very or completely transparent,” but this sentiment is only shared by 21% of buyers. In further analysis, Capital One also discovered that while consumers experience a lack of transparency in the areas of final sales prices, price negotiations, unlisted fees and deal fairness, 80% of dealers “believe that all individual aspects of purchasing a car are transparent.”

Meanwhile a survey conducted by digital finance platform eLEND Solutions discovered that a concerning number of dealers use payment calculator tools providing “inaccurate or unrealistic monthly payment expectations.” Of automotive retailers who provide quotes through their websites, 69% confirmed that over half of the payment estimates they provided online were inaccurate. When asked what amount of discrepancy they felt was acceptable between the initial quote and final deal, 52% of dealers responded with a range of $50.  “This [last] result we did not expect,” said Scott Tracy, Chief Marketing Officer of eLEND Solutions. “Most car buyers, especially during these economically challenging times, are payment sensitive. $50 is a lot of money and definitely can be a deal breaker.” This is especially true when considered against the lifetime cost of the loan. “$50 every four weeks, over the course of 72 months, equals $3,600 more than the payment estimate of the same loan term,” concludes Tracy.

These findings suggest that dealers, being unaware that customer expectations for transparency increased, have yet to properly adjust their tools. So, what could have caused this shift? While multiple factors have made consumers far more cautious with their money over the last three years, the main contributor is likely digital retail. Many retailers added online services with the hope of accommodating the needs of modern car buyers. Unfortunately, this created two issues. On the one hand, dealers began to rely on digital products which were more convenient but lacked accuracy and transparency, such as online payment calculators. On the other hand, shoppers, who suddenly gained access to dealership data and industry information, became more confident. Tim Mullins, National Digital Product Sales Lead at Capital One, confirms this shift in consumer attitude. “The vast majority of car buyers now begin their research online, so they come into the dealership with increased expectations.” However, he adds that, “If the dealer can meet those expectations, the buyer gains trust in the process.”

Solutions

So what can dealers do to improve their efficiency and transparency? Since these two pain points apply to both in-store and online aspects in the car buying process, retailers will need to adopt strategies which transform face-to-face interactions with customers and tools which provide better services to web-users.

Efficiency

Since price negotiations cause customer headaches and slow down the in-store experience the most, the most practical way to improve efficiency is to shorten this process. Here, dealers have two tactics at their disposal, both of which can work simultaneously: price flexibility and sales technique.

1: Price flexibility

When asked what dealers can do to speed up the price negotiation process in-store, Jason Swiech, Product Marketing Manager at CDK Global, had this to say: “Dealers need to be flexible in their price negotiations, meeting customers at the complete price points that best fit their needs and lifestyle.” To expand on this, rigidity during price negotiations not only ruins the customer experience, it also prolongs the interaction. While dealers cannot afford to acquiesce to every unreasonable demand, they can always be more empathetic, giving buyers access to better deals and payment plans which work for their needs. Above all, they can avoid creating tension, and prolonging discussions more than absolutely necessary.

But what about profits? Going back once more to the Capital One study, “a majority of car buyers say they are looking to build a long-lasting relationship with a dealer they can trust (58%) and over three-quarters say that they will want to use the same car dealership for future purchases if they have a positive experience (76%).” Furthermore, “nearly all dealers [agree] that repeat customers are important (99%).” While flexible pricing may have some short term impacts on a dealer’s wallet, the long term benefits are more than worth it.

2: Sales technique

The amount of time spent on price negotiations can also be reduced by more efficient sales-client interactions. Jennifer Suzuki is the President of eDealer Solutions, a guest NADA Academy instructor, and has years of experience coaching successful sales teams. She recommends that sales professionals learn how to ask the right questions from the moment they sit down with customers. “Sales questions must evolve to be relevant, with a focus on efficiency and a great client experience,” she explains. 

Of course, this skill does not come naturally, and no salesperson, however insightful, is clairvoyant enough to predict what a customer needs with perfect accuracy. This is why Suzuki also suggests that managers help their teams with training and on-the-floor surveillance. “Helping them know the right fact-finding questions to ask, and checking in on the client experience before negotiations” are simple ways that department leads and dealers can speed up the process, she explains.

Transparency

Since technology is the most responsible for the sudden increase in transparency concerns, it makes sense to focus on digital solutions. Again, dealers have two options both of which can work on their own or together. This time, they can merge experiences, or ask the right questions.

1: Merge experiences

One method for improving transparency is to merge the buyer’s online experience with the in-store process. For example, Capital One’s Navigator Platform allows buyers to access updated inventory, rates and monthly payments for businesses in their local market. Once they find their preferred deal, they can send this information to a dealer prior to setting an appointment, letting the dealer know exactly what their expectations are. This not only sets up the perfect transition from their online research to their dealership visit, it also alleviates transparency concerns by giving dealers better information about what their client’s need and the credibility of a trusted third-party organization. 

Another option which blends the digital and physical shopping process is CDK’s Modern Retail Suite, specifically the upcoming Sales Express platform addition. This tool ensures pricing consistency throughout all in-store and online buyer interactions, and allows dealers to tailor deals based on the client’s needs. According to Sweich, the tool gives dealers “one system that follows the customer journey to the salesperson, and manager to the completed car-buying experience.”

2: Ask the right questions

Given that many of the payment calculator tools they use are inaccurate, dealers can also pave the way for improved pricing transparency by increasing the standards they set for their online quote providers. Since it can be difficult to know what these standards should be, eLEND CMO Tracy has written a handy list of filtering questions. By using these to judge prospective partners, not only can dealers avoid future headaches, but they can also earn their customer’s trust with consistently accurate information.

  1. “Can you put the customer in the right car with the right deal structure matched to the right lender programs rates, terms, payments, advances with a fundable deal?”
  2. “Are you certified from a security compliance standpoint by the credit repositories?” 
  3. “Do you have access to raw credit report data and the certifications & technology to parse it out?”
  4. “When quoting payments, whether your solution offers a payment calculator or self-penciling desking tool, does the quote include all dealer & OEM incentives/rebates down to the rooftop and VIN, dealer specific fee structures and all applicable taxes tied to the jurisdiction, plus interest rates, money factors and residuals down to the trim level model ID of the vehicles, at each credit tier and monthly term?  And then matched to the customer’s credit, ability, and stability qualifications?  Matched to your actual lenders’ underwriting and advance guidelines?”
  5. “Do your online payment quotes waterfall to best payment for customer or profit to you from your Lender’s Standard Rates Sheets, Special Incentive Rate Sheets, and Regional Rate Sheets simultaneously?”
  6. (Final question if answers to one through five are yes) “Are you integrated with, or open to collaborating with my existing vendor partners that fill the gaps in my digital buying journey?”

2023 is likely to be the make or break year for the automotive industry. Signs of economic recovery are starting to appear, but there also remain many problems which, if left unchallenged, could undo these long-awaited normalizations. By reducing the impact of customer pain points, dealers can ensure their business is well-protected against future surprises, and be the first in line to catch the first wave of consumers.

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Colin Velez
Colin Velez
Colin Velez is a staff writer/reporter for CBT News. After obtaining his bachelor’s in Communication from Kennesaw State University in 2018, he kicked off his writing career by developing marketing and public relations material for various industries, including travel and fashion. Throughout the next four years, he developed a love for working with journalists and other content creators, and his passion eventually led him to his current position. Today, Colin writes news content and coordinates stories with auto-industry insiders and entrepreneurs throughout the U.S.

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