Revamp Your Dealership’s BDC with These Proven Strategies – Mike Cavanaugh, MAX Digital


On today’s show, we’re pleased to welcome in Mike Cavanaugh, Executive Vice President for MAX Digital, who is here to discuss revamping your BDC in 2020 as well as the exciting releases at the upcoming NADA show. Be sure to check out their booth #3737C.


Jim Fitzpatrick: Hi everyone. Jim Fitzpatrick with CBT News. Thanks so much for joining us on today’s broadcast. We’re so excited to have with us Mr. Mike Cavanaugh, who is the executive vice president for a company called MAX Digital. I know that you know that name because it has been around retail automotive for a number of years now. These guys do a phenomenal job. Today we’re going to be talking to Mike about all things BDC. Should I have one? When should I have one? What’s it going to cost me? What are some of the advantages? And then what are some of the lessons learned by some of the bigger companies and other disruptors in the marketplace such as Vroom and Carvana? So welcome to the show, Mike.

Mike Cavanaugh: Thank you. Appreciate you having me.

Jim Fitzpatrick: Sure. Before we get started, tell our viewers a little bit about your background because you’re a car guy, right? At heart.

Mike Cavanaugh: Yeah, I am. Yeah. I grew up in the car business, worked with my dad at a dealership in Detroit.

Jim Fitzpatrick: Okay.

Mike Cavanaugh: I took a little break from the car business and went to the Marine Corps, did two tours in Iraq.

Jim Fitzpatrick: Thank you for your service.

Mike Cavanaugh: Thank you very much. I came back and dove right back into the car business. So I’ve worked in BDCs myself, ran BDCs, ran dealerships.

Jim Fitzpatrick: So you know the deal then.

Mike Cavanaugh: Yeah, absolutely, yeah. Before I worked at MAX Digital, I was the chief operating officer of a 25-store dealership group.

Jim Fitzpatrick: Wow.

Mike Cavanaugh: So yeah, car guy at heart. I was a MAX Digital customer before I worked for MAX Digital.

Jim Fitzpatrick: That’s cool.

Mike Cavanaugh: That’s how I got here.

Jim Fitzpatrick: That’s very cool. Well, let’s kind of jump right in here. What are some of the lessons and the takeaways from companies like Vroom and Carvana? We hear so much about them. We see consumers sitting on their couch in their pajamas ordering cars like they would a pizza. So talk to us about that.

Mike Cavanaugh: That’s a great question, and we’ve spent a lot of time doing consumer research over the last two years primarily. And those two names, Carvana and Vroom, have come up a ton over the last couple of years. We’ve noticed that the brand relevance and the brand awareness of those two companies is more prevalent with consumers than it ever has been right now. And I would say what those two companies do a better job of than anybody else is they really clearly communicate why they’re different and what they do. So they’ve communicated to consumers that you can buy a car, or get a lot of that process done from your couch, so to speak, you hear a lot. They can do a lot of the process kind of independent of interacting with somebody over the phone.

Jim Fitzpatrick: Right.

Mike Cavanaugh: So I think that’s probably a major differentiator we’ve seen. However, in a lot of this consumer research and following consumers online as well, what we’ve found is that these two companies have an incredibly good, what we would call a BDC in the industry.

Jim Fitzpatrick: Right.

Mike Cavanaugh: If there was no what we call a BDC at Carvana or Vroom, I can confidently say they would have sold far less cars over the last several years than they have because there’s still a lot of interaction that needs to go on with a trained professional on the other end of the phone.

Jim Fitzpatrick: That’s right. That’s what consumers want, right? And albeit that somebody is online and they’re using their app, they still want that confidence to be able to… That lifeline to say I need to call, I need to ask some questions and be walked through the process. What was the inspiration for MAX BDC?

Mike Cavanaugh: You know, the inspiration for MAX BDC came from a lot of that consumer research that I mentioned earlier. Over the last two years, we’ve spent time following thousands of customers through their online car buying journey and we’ve interviewed thousands of customers as well about their car buying journey from the time they were ready to start looking for a car through the time they purchased a car, and we learned a ton. Some things kind of reinforced what we already knew, and there were some other things that completely changed our perception of what consumers wanted. And I think the industry as a whole has been really focused on buy a car online, buy a car like you buy things on Amazon. However, what we found with consumers were that they weren’t ready to do that, or at least in mass they weren’t ready to do that yet. They still had a lot of questions that they wanted to talk to somebody about, and they needed to reach out to somebody at a dealership.

Jim Fitzpatrick: Sure. What did you focus on, or I should say why did you focus on those areas within the customer journey?

Mike Cavanaugh: Because if you think about the process as a whole right now, there’s a lot that consumers can do online on a dealership’s website, but there’s still a lot of interaction that needs to happen and whether that happens on the showroom floor when they show up or more commonly happens via the email or the phone with the consumer before they come in. The most critical piece right now that we’ve found through this journey is in that BDC area because if somebody has a great experience the first time they interact with the dealership, be it on the phone or via email, they’re very likely to come to the dealership. If they don’t have a good experience there, they’re not going to come in.

Mike Cavanaugh: On the other side, if they show up at the dealership and they have a bad experience, maybe they don’t come back.

Jim Fitzpatrick: Yeah, it’s true.

Mike Cavanaugh: If you think about the BDC, they never show up if they have a bad experience.

Jim Fitzpatrick: That’s right. That’s right. For sure. Yeah, the BDC and the value of it and it being done properly is just really front and center now.

Mike Cavanaugh: Right. Correct.

Jim Fitzpatrick: I mean that’s where the rubber meets the road. What is the value of the technology to aid the quality of the interaction?

Mike Cavanaugh: So there’s a few things and this is what we focused on through what consumers really wanted and where there was a gap in the BDC process right now, and what we found was that common questions that consumers had that weren’t able to be answered very quickly and easily, first and foremost were with the actual vehicle, and as common sense as this sounds, most dealership BDCs or even sales teams for that matter, couldn’t quickly and easily answer questions about the vehicle. So does this vehicle, does this truck, for instance, have a six foot bed or an eight foot bed? Does this SUV have third row seats or captain’s chairs in the second row?

Jim Fitzpatrick: Or towing capacity.

Mike Cavanaugh: Towing, right 4 x 4. If it wasn’t easily able to see that on the dealership’s website through their merchandising then they missed that. So the other thing was is that dealership websites were the primary means that BDC personnel looked up this information, and because there’s different features with chat and popups and different things that are meant to help a consumer, when it’s a BDC agent working to answer a question online, it slows the speed of the website and it can be distracting for them as well. So first and foremost, they need to be fast and they need to be able to answer the consumer’s questions about the vehicle.

Mike Cavanaugh: Next was the trade in. What we found is that when a consumer was looking to get a trade in value for their vehicle, oftentimes they would say, “Well, you have to come in to speak to somebody at the dealership.” Right?

Jim Fitzpatrick: Right.

Mike Cavanaugh: Or they would refer them to a tool on the website. Rather than answer it quickly and easily themselves, they’d say, “Well, we have this tool on the website. Why don’t you fill that out?” Well really what the consumer was trying to end up at was the question of about what am I going to have to pay for this vehicle? Because most customers don’t buy a car for cash. They don’t pull out $50,000, $60,000. They finance it.

Jim Fitzpatrick: That’s right.

Mike Cavanaugh: So they wanted to know, is my trade in worth 5000, 10,000, 15,000? And then once we know that, how much more do I need to put down, what could my payment be? So it was information about the vehicle quickly, the trade in, and an estimate of what they think their payment would be on that car. Those were the top three things that this was designed to help dealership personnel do.

Jim Fitzpatrick: And it makes sense. I mean, your experience tells you that that makes sense. I’m a former dealer myself and that seems to be… those top three things, this was the same case 30 years ago, right? They call, what’s my payment, what’s my trade worth, what’s it going to cost me? And then of course, then they get into how long is the process, is the vehicle in stock, and things of that nature, right?

Mike Cavanaugh: Yeah. It hasn’t changed since I was a kid.

Jim Fitzpatrick: Yeah, it really hasn’t. So how is the role of the BDC different than a salesperson? You know, you’ll hear so many different takes on that, but what is it from your perspective?

Mike Cavanaugh: So when you think about a BDC, and I talked to this a little bit earlier, but that BDC person is so critical because they are the first impression that a consumer often has with your dealership. So if their first impression is an email from a person that actually wrote it versus an autoresponder that can change their perception of your customer service.

Jim Fitzpatrick: Huge.

Mike Cavanaugh: Their first perception when they call in or they get a phone call of somebody that’s really educated and they’re a product expert and they can answer all the questions, that’s their first impression.

Jim Fitzpatrick: That’s right.

Mike Cavanaugh: And that can really set you apart, especially if this is in the upper funnel where a lot of this interaction happens is during the consumer’s research phase, right? If that impression is good, you set yourself apart from the competition. Even if they shop you around through other dealerships as well, now you’re the gold standard. So I think the BDC difference is you are really the first impression. Sales can be the first impression if that’s how your dealership is set up, but oftentimes they come lower down the funnel, lower through the process.

Jim Fitzpatrick: That’s right. And does every dealership in your opinion need a BDC?

Mike Cavanaugh: You know, I’ve seen some wildly successful dealerships across the country, and I’ve probably been to over a thousand dealerships in my career, and I’ve seen some wildly successful dealerships with a BDC, and I’ve seen some wildly successful dealerships without a BDC.

Mike Cavanaugh: But I will say those dealerships without a BDC, they truly have an internet culture where everybody is trained very well.

Jim Fitzpatrick: It’s one large BDC really.

Mike Cavanaugh: It really is. I’ve seen them where even most of the salespeople aren’t on the sales floor unless there’s customers there. They’re in the back, they’re making phone calls, sending emails or doing all that.

Jim Fitzpatrick: Sure. It used to be that it was a penalty to say, “Hey, get back there in the BDC and make some phone calls for the next three or four hours and then you can come back on the showroom floor.” Now it’s kind of reversed isn’t it?

Mike Cavanaugh: You’re right.

Jim Fitzpatrick: Now people want to be in the BDC and they look at the showroom floor as well, what do I want to be out there for? All the activity is happening online and on the phone. Right?

Mike Cavanaugh: You’re right.

Jim Fitzpatrick: Yeah, for sure. So the industry is going through so many changes and for the dealerships that are out there right now, thinking should I do a BDC? Should I not do a BDC? What do you recommend as their first step, to give you guys a call and say, “Hey, come in and kind of do an assessment of my dealership?”

Mike Cavanaugh: So what we do oftentimes, and whether a dealership asks us to do it, we do hundreds of mystery shops every quarter.

Jim Fitzpatrick: That’s great. That’s huge.

Mike Cavanaugh: Of dealerships across the country. So we can do it for you, provide you with a report, or if you don’t want to have us do it, it’s just inspect what you expect. We’ve heard that saying before. Call your own store, see how they handle questions about the trade, about the vehicle. See how if somebody questions the price on their car, can you justify why it’s priced the way that it is? All of these questions that you know you’d want these employees to answer the right way.

Jim Fitzpatrick: That’s right.

Mike Cavanaugh: It’s alarming when we do these mystery shops, how long it takes to respond to a lead, how people respond to these questions, so inspect what you expect. We’d gladly do it for any dealer free of charge and provide them with a report. It’s very eyeopening.

Jim Fitzpatrick: Dealers that are listening, call Mike right after you hear this conversation, because what he just put on the table free of charge is priceless to your dealership. As all of you know, you’ll call the dealership and sometimes ask to speak to one of the managers. Maybe you’re a dealer is on vacation or late coming into the dealership and you call ahead and you want to talk to somebody and you’re put on hold forever, maybe disconnected. Maybe it’s a new operator that isn’t familiar with the phone system or isn’t familiar with who’s on the roster that day.

Jim Fitzpatrick: I, like you, have been around the industry and have spoken to a number of dealers and they’ll say, “Yeah, I have a BDC but I don’t have the right training, I don’t have the right software, I don’t know what’s going on in there. I’m not really sure if it’s working or not.” That’s not a reason to give up on a BDC, is it?

Mike Cavanaugh: No, it’s not at all. I mean, you have to really think about how important this is to your business, and every good dealer operator out there knows their financial statement, they know how much they spend on marketing, they know how much every cost per lead is with their different providers.

Jim Fitzpatrick: That’s right.

Mike Cavanaugh: And when you see how much you spend to get that phone to ring, to get that email or that lead to come through, if you don’t handle that properly, if you abuse that lead or neglect that lead, it’s like burning money.

Jim Fitzpatrick: It really is.

Mike Cavanaugh: It really is just horrible neglect, and I think it’s whatever you pay attention to as the owner of a dealership, the GM of a dealership, your people are going to pay attention to.

Jim Fitzpatrick: That’s right.

Mike Cavanaugh: And I think because the BDC isn’t right in front on the showroom floor, it gets neglected in many cases and oftentimes get staffed with the most entry level people. But when you just say it in plain English that this is the first impression department of your dealership.

Jim Fitzpatrick: It’s the lifeblood of the dealership.

Mike Cavanaugh: It really is. It’s insane to not really put the right amount of attention on this.

Jim Fitzpatrick: MAX Digital. Tell us a little bit about the company MAX Digital. You guys have been around for awhile.

Mike Cavanaugh: We’re a Chicago based company. We’ve got our development office in Austin, Texas as well. We’ve got an intense focus this year really on what the industry refers to as digital retailing, omni-channel, and this is the first really big step into helping dealerships be successful today in where they need to be successful.

Jim Fitzpatrick: I want to have you back on the show because you touched on those two words, digital retailing. That’s a very hot topic, as you know. Some dealers are prepared for it, some dealers I think are going to get blindsided by not being prepared for it. It sounds to me like you guys are gearing up for that to help dealers with that transition, one that’s very important because Carvana and Vroom has shown us that people are open to purchasing a car via the internet without a test drive, maybe a very liberal return policy if the car is not exactly what they anticipated. But nevertheless, digital retailing is coming isn’t it pretty quick?

Mike Cavanaugh: That’s very true. No, it’s definitely coming right now. I think what we’re focused on today is helping where the majority of the consumers are. What we’ll be releasing later this year will help with where consumers are going even more. So I think our approach this year is more about how can we help dealers sell more cars and make more money. That’s the thing that we hear so often in the car business. That’s where the focus is today. We want to help dealers with that today and we’ll be releasing some more digital retailing tools later this year, which helps with that full omni-channel process. So excited to talk about that again.

Jim Fitzpatrick: Fantastic. And I know we’re going to catch up with you guys at NADA as well. So for those of you that want more information, either give Mike a call, we’ll show his information on the screen now, or stop by the MAX Digital booth out at NADA and come by to the CBT booth and say hello. You might see Mike and I in conversation there. So thanks again, Mike, for joining us and thanks to all of you for tuning in.

Mike Cavanaugh: Thanks Jim.

Jim Fitzpatrick: Thank you.

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