Before they got serious about their organizations’ digital marketing efforts, Matt Buchanan and Joe Castle were like most dealers: They’d spend big money on newspaper, direct mail and cable TV ads, complete with crazy stunts, to set the stage for big weekend sales.
“I was blanking on a Saturday, selling two or three cars with a full newspaper ad,” said Castle, CEO of Chicago-based Castle Auto Group.
Buchanan, the fresh-faced 27-year-old who serves as dealer principal for Sarasota (Fla.) Ford, says he looked to the Internet as a way to level the playing field with the mega dealer groups in his area. “It gives us an opportunity to compete against them,” he says. “If I didn’t go digital, I would be losing market share every year to my competition.”
Castle and Buchanan don’t call themselves “digital dealers” — at least, not yet. Instead, they consider themselves students of the digital marketing game. But several key components of their in-store sales and F&I processes have migrated online, and they’re working hard to strike the right balance between the showroom and digital experience.
“We have to be careful about being driven completely by surveys that claim to show what customers think they want,” said Cory Mosley, F&I and Showroom’s Sales Driver columnist and principal of Mosley Automotive Training. “The smarter thing to do is to try to create a simplified process and abandon old ideas and processes like the 13-step sales process. I think that’s key.”
Sarasota Ford is the flagship store for the Buchanan Auto Group, which was founded by Matt’s father, Vern Buchanan, in 1990. A Stanford graduate, Matt joined the family business in 2009 after spending a few years at investment firm Merrill Lynch. After starting at the group’s Honda dealership in Cocoa, Fla., he was transferred to Sarasota Ford two years ago and was named dealer principal in May 2011.
Buchanan didn’t steer the dealership down its digital path right away. He first had to strike the right chord with the people manning his store. As he puts it, being a Gen Y’er has its pros and cons when it comes to managing a dealership.
“I think being young is a positive, but I also think being older is a positive,” he says. “Being a little bit younger means you’re tied into this digital stuff, but I’m young and humble enough to say that I don’t know everything.”
The first thing Buchanan did was seek out an ad agency that was focused on both traditional and digital marketing, as he believed his dealership was missing opportunities by relying solely on TV and print ads. His search led him to Schenectady, N.Y.-based Potratz Automotive Advertising, which he hired last June. By July, Potratz had begun implementing its Internet marketing strategies, which included the purchase of Google key words, such as “used cars,” to drive traffic to the dealership’s Website.
Buchanan also took advantage of e-mail marketing, which he limits to once or twice a month, and pay-per-click campaigns. His store also creates YouTube videos of vehicle walkarounds. And under the guidance of his new advertising firm, the dealership invested in a live chat feature for the store’s website. The investment paid off: Live chats alone deliver about 100 leads per month.
In total, Buchanan estimates he spends about $250 to $350 on advertising per vehicle sold. That amounts to an estimated $50,000 to $60,000 per month for his 200-vehicle-a-month store, which is actually less than what he spent before his digital drive. He adds that his budget would be a lot smaller if he could go completely digital.
“Our district is older than most in terms of population, so we’re not in as digital an area as other places,” Buchanan says. “I still think digital is growing and you need a balance of both types [of advertising].”
John Giamalvo, Edmunds.com’s director of dealer strategy, said the balance Sarasota Ford attempts to strike is a challenge dealers across the country are wrestling with.
“The more conservative stores are directing about 12 to 15 percent of their advertising budget online, while the more forward-looking stores are directing as much as 70 percent of their advertising budget online,” he says. “Edmunds.com is seeing that dealerships are getting more and more comfortable in the space, understanding its value to them and jumping in with both feet to take full advantage of the opportunity to be where car shoppers are.”
Paving the Way for F&I
Today, 55 to 70 percent of Sarasota Ford’s sales originate online, with Buchanan estimating the store handles about 750 leads per month. The goal, he adds, is to get to 1,000-plus leads per month.
As for the process, each lead is entered into the dealership’s CRM before the Internet manager hands it off to one of six full-time Internet salespeople. Their main job is to sell appointments and get customers into the dealership, a process that has resulted in a closing ratio of between 12 and 14 percent, Buchanan estimates.
“Once the customer is ready to make the purchase and feels comfortable with the price, we introduce them to the F&I team,” he says. “We try to do early introductions, because our closing ratio seems to be higher when we do.”
Buchanan hasn’t made a concerted effort to sell F&I products online, but he has equipped the store’s website with features designed to get customers thinking early and often about how they’ll finance their vehicle.
For instance, under the “Finance Center” tab on the store’s home page, visitors can submit a credit app and peruse any finance specials. The tab also features a payment calculator that factors in trade-in values and credit scores. He can’t quantify the impact of those features, but Buchanan believes they have helped move more products and services.
Buchanan has yet to arm his salespeople with iPads, but every sales consultant has a smartphone so they can keep pushing vehicle listings online and stay connected with customers. Another sign of his digital push is the “aftermarket room” he built in February.
With three flat-screen TVs mounted on the wall and three tables equipped with a wireless mouse and keyboard, the room is set up to allow customers to configure their own vehicle, from the model and trim level to paint color, wheels and more.
“I think most people are visual buyers, and, so far, we’ve seen an increase in aftermarket sales,” Buchanan says.
A Better Impression
Six years ago, Castle implemented his own digital and social media strategy. The first step was to install business development centers to help turn around his two zero-grossing stores. Today, sales are up 200 percent for his $5.2 million-a-year operations.
“The structural change came about because I was at a store and saw our inefficiencies in handling Internet customers,” he says, adding that the changes he made were critical to his operation’s survival through the Great Recession. “The old-school, traditional process wasn’t working.”
Castle says his BDCs now handle 99 percent of all leads. Their main goal is to sell appointments, while his salespeople, which he refers to as customer care representatives, take care of each customer from the moment they arrive at the dealership.
“The BDC people are your new sales consultants, and the sales consultants are now your product specialists who [handle the delivery],” Castle explains. “The BDC handles all inbound calls and sets the appointments, while the CCRs take care of customers, show them the vehicle, and finalize numbers.”
The group’s new structure calls for one BDC rep for every salesperson, and Castle says his BDC people have the same authority as a traditional general sales manager — a position eliminated under his digital strategy. That means BDC reps are responsible for helping customers select a vehicle before they ever set foot inside the dealership, which Castle says helps set customer expectations and reduces in-store negotiations.
“In this new digital marketplace, the communication stream becomes more fluid. When a customer comes through the door, everybody knows what the BDC told that customer, so there’s no disruption in the communication stream,” he says. “If you don’t have it structured like that, there will be a huge communication gap, and you’ll have F&I and sales working customers like it’s their first time at the dealership.”
Castle estimates that the entire sales process, from the time customers make contact to the moment they take delivery, can take about seven days. The beauty of that process is that customers are more receptive to what his F&I offices have to offer. So far, the process has worked for his F&I producers, which average $1,200 per copy and claim acceptance rates of 50 percent for both GAP and service contracts.
“You still need to give F&I the time it needs to build relationships; there shouldn’t be any shortcutting of that process,” Castle notes. “And customers are so happy with the experience that they want to buy F&I products.”
Castle’s digital drive has had a positive effect on his advertising budget as well, which he says is down to about $97 per car sold. Eliminating print and TV ads from his marketing budget and focusing on merchandising inventory online and building his operation’s social-media footprint is a major reason for that decline.
Today, 60 percent of Castle’s sales process has gone digital. There are the iPad apps his stores make available on the lot so customers can access vehicle information. His F&I departments also have joined the movement, making credit apps available on Facebook and other social media sites. The group also will run keyword searches to find customers looking for vehicle financing. Castle is even testing out digital F&I menus on his out-of-state customers. If things go well, he may even try them out on his Internet shoppers.
“The key with the Internet is making sure that everything runs through that BDC layer,” Castle says. “But you also want to make sure the BDC isn’t boxing out F&I.”
Mosley has helped countless dealers go digital. The ones that were successful, he says, knew exactly what they were trying to accomplish. “You need to know what you want to get out of it beyond selling more cars. That’s the key ingredient,” he says. “Stores fail because they hire an outside company that just brings in a box of stuff. You have to create best practices and create a new culture for the store. And you have to be clear as to what you’re prepared to do and what you’re not prepared to do.”
And that’s the approach Castle took when he installed his new digital process six years ago. “The first thing you need to do is get everyone in the organization to understand the vision,” he says. “I held a company meeting at a hotel conference room, and everyone down to the porters and office staff attended. I needed everyone to understand what their role was and how it fit together in this organizational structure I created.”
Buchanan made the same commitment, although he admits he was motivated for different reasons. “The larger dealer groups are getting better at the game,” he says. “That’s because they have e-commerce guys telling them what’s good and what’s bad. Dealers like me don’t have that luxury, which means doing a lot of homework and research and attending as many seminars as I can.”
Edmunds’s Giamalvo would agree. “In an age when factories are building for demand, managing inventory is paramount, and social media is incredibly powerful, it is critical for dealers to understand that inventory searches and dealer reviews are still the fastest growing types of research,” he says. “And consumers go to a dealership website to find the car they already built and researched elsewhere. The dealerships that make that process easier will win the foot traffic.”
Name: Matt Buchanan
Position: Operating Partner/Principal
Dealership: Sarasota Ford
Location: Sarasota, Fla.
Number of Employees: 91
F&I Product Acceptance Rates:
Service Contract: 12%
Road Hazard: 15%
F&I: UCS, IntegraLink (a division of Cobalt), DealerTrack, RouteOne
Inventory Management: vAuto
Social Media: Facebook, Twitter, LinkedIn, YouTube and blogs
Name: Joe Castle
Dealerships: Castle Chevy and Castle Buick GMC
Number of Employees: 178
F&I Product Acceptance Rates:
Inventory Management: HomeNet Automotive, vAuto
Social Media: Facebook, Twitter, YouTube