Friction doesn’t just play a critical role in physics. Removing friction from the automotive shopper’s journey is the key to automotive dealerships prospering in an industry fraught with the challenge of running a modern dealership.
Twenty years ago, an automotive retailer needed to be proficient with one-to-three traditional media outlets to promote its value while investing the majority of its time on hiring, training, developing people and honing and executing on processes to win with the consumer. Digital introduced some interesting wrinkles – on the one hand delivering more informed and purchase-ready consumers but also complicating the dealership’s life. The challenge of managing a myriad of digital advertising platforms and software alone actually began to compete with a dealership’s ability to develop its people. As a result, while the consumer is more empowered than ever, the dealership team members have struggled to master the very tools designed to empower dealerships.
It’s time for third-party marketplaces — dealerships’ vital digital advertising partners — to step up and simplify the dealership’s job in the most important way we know how: removing friction from the shopping journey. Making the journey faster and less complicated will help dealerships balance supply and demand more effectively, whether the dealership is creating a sense of urgency around used-car pricing or guiding the shopper more intelligently through new vehicles.
But not all marketplaces remove friction the same way, and some are better than others. So, I propose a friction test to help dealerships better understand who really removes friction and thus connects more high-value shoppers to the lot faster.
The Amazon Example
First, some context: removing friction from shopping is the foundation of success for marketplaces such as Amazon that are shaping entire industries. Amazon enables consumers unfettered access to products, price details, consumer-generated reviews, information on similar products, and ease of transaction. For example, the Amazon Dash button provides an easy way for consumers to replenish staple goods such as detergent with a simple button. Amazon GO, the emerging brick-and-mortar grocery store, makes it possible for shoppers to literally take what they want from the store shelves and walk out the door without seeing a cashier or even a self-service kiosk. As Fortune magazine put it, Jeff Bezos is waging a war with friction, and he’s winning. No wonder Amazon is on track to become the first $1 trillion company by 2022.
Third-party automotive marketplaces may not have the scale and reach of Amazon, but they’re connecting in-market shoppers to dealerships similar to how Amazon connects shoppers with merchants. Marketplaces all remove friction differently, though. Dealerships can better distinguish these differences by applying a basic “friction test” in three different categories as follows.
Friction test: Review how your car inventory is contextualized on the marketplace you use.
The key question dealerships should ask is this: does your digital marketplace contextualize car prices to reduce friction between the auto retailer and the consumer?
It’s not enough for a marketplace to provide a standard price rating. A marketplace needs to provide the “why” behind a price, calling out a vehicle’s attributes that may be affecting the price and weighing additional factors such as the vagaries of supply and demand. Doing so enables dealers to be more transparent with their customers, show value beyond price and, ultimately, close the deal quickly and efficiently.
It is important to challenge your automotive marketplace on factors that contribute to the “price badge.” If the marketplace is only using price without incorporating considerations such as supply and demand and the availability of sub-trim levels like options and packages then they are greatly adding friction by neglecting to tell the complete “why” story behind the price.
Additionally, does your marketplace treat its price ratings dynamically – or does your marketplace apply a one-size-fits-all formula to distribute vehicles into different pricing categories (e.g. “Good Price” or “Great Price”)? For example, when a shopper compares prices on a group of Ram 1500s — some limited edition and some not – the marketplace should not apply the same rules for assigning different price badges as when a consumer compares a group of base trim Toyota Camrys. The number of vehicles that fall into Great or Good ratings should be influenced by dynamic metrics that respond to each unique consumer browsing scenario. If your marketplace is simply bucketing a set percentage of inventory into the “Good” price rating and set percentage into the “Great” price rating for every browsing scenario, then the marketplace is adding friction.
At Cars.com, we provide price badges to remove friction in the car buying process. Our badging uses machine learning to assess the closest comparable vehicle and considers features that are either in high demand for a region or those that affect the price beyond year, make, model, and trim. If there are 25 2013 BMW M3s in a certain area and all are either “Great” or “Good” deals based on the data, then we take pride in conveying to the consumer this data and do not force a subset of these vehicles differently.
Friction test: how well does your marketplace connect dealerships with customers 24/7?
In a business that depends on one person selling a car to another, marketplaces should connect a dealership with customers on the consumers’ terms. Doing so delivers more qualified, ready-to-buy shoppers on the dealership’s lot.
For example, at Cars.com, we offer a tool known as Salesperson Connect, which helps shoppers identify a dealership’s salespeople ahead of time and build a relationship with them before the shopper walks on the lot. Salesperson Connect integrates into a VDP the top-rated salespeople based on their reviews (published on a review platform operated by DealerRater, a Cars.com brand) and thus gives shoppers one easy place to review details about the vehicle and the person selling it. Doing so removes friction by streamlining the process for consumers and connecting them to the right dealership and right salesperson to meet their needs. The dealership benefits by having its salespeople connected with a stronger lead.
Salesperson Connect meets a fundamental shopper need: according to our own research, 97 percent of auto shoppers would like to select their salesperson ahead of time.[i] In addition, according to a recent survey of DealerRater Certified salespeople, more than 80 percent of DealerRater Certified salespeople said their employee profile helps them sell more cars, drive more showroom visits per month, and speed up the sales process resulting in a higher close rate.[ii]
Making salesperson profiles available to shoppers also humanizes a dealership’s brand. And humanizing a brand builds trust, which leads to a buyer becoming more confident and ready on the lot.
Predictive Selling Indicators
Friction test: review how you and your marketplace uses predictive selling indicators to create a sense of urgency.
Predictive selling indicators are common in digital marketplaces. Consumers demand real-time and predictive insights on how quickly an item may move, whether they’re shopping on a real-estate marketplace, an airline site, or Amazon. The retail housing marketplaces do a solid job of predicting when a house will sell, which removes friction between the buyer and seller because now both buyer and seller use the same data in deciding price.
Automotive marketplaces should provide predictive selling, too, and Cars.com does exactly that. By analyzing vehicle supply, demand, and pricing data in a specific market, Cars.com now offers consumers the insight needed and dealers the third-party validation to ensure both parties win in an era of information parity. For example, our “Hot Car” technology helps car buyers determine when and how to act on a purchase — and assists in accelerating sales for both new and used cars.
The new technology leverages a proprietary machine learning algorithm from Cars.com to identify which vehicles are most likely to sell quickly, based on car make and model, geographic demand, time on lot, pricing and consumer shopping behaviors. Importantly, Hot Cars discerns between differences in purchasing windows for both new and used cars. For instance, a Hot Car badge is featured on used vehicle listings that have a 70 percent chance of being sold within seven days from the day it was added or modified on Cars.com. New vehicles earn a Hot Car badge when they have a 70 percent chance of being sold within 20 days from the day it was added or modified on the site.
This innovation creates a sense of urgency for consumers, which also benefits local retailers by increasing turn rate and speeding the time to complete the transaction.
Removing friction improves trust and speed to sale while engendering the most powerful sentiment in sales where both the buyers and sellers feel that they have won.
Improving the On-the-Lot Experience
Friction test: how well does your marketplace facilitate the purchase process on the lot?
Lot traffic still defines a retailers’ success. The typical car shopper visits fewer than two auto dealerships before making a purchase versus five visits in the early 2000s.[iii] And while they are on the lot, consumers are showrooming, or using their mobile phones to compare dealerships and their inventory.
Dealerships should demand from their providers information on what consumers are shopping for and how they are cross-shopping while on the lot. For example, Cars.com provides a monthly report that provides dealerships insight into cross-shopping behaviors of mobile shoppers while they are on the lot. In addition, to remove friction, marketplaces should help shoppers make better decisions while they are on the dealership’s lot.
We are on a journey as we strive to remove friction and connect in-market shoppers with sellers. Removing friction saves retailers’ and consumers’ time and money and importantly, improves the quality of the transaction. How we remove friction will change (and often) as we use technologies such as artificial intelligence and machine learning to make our site adapt to shoppers based on their evolving preferences. Expect Cars.com to provide a more personalized experience that will result in more confident buyers coming to the lot. Stay tuned. Our friction free journey is just beginning.
[i] DealerRater Introduces Customer Connect, April 27, 2016.
[ii] Survey of 233 salespeople of DealerRater customers, June 2016.
[iii] CNBC, Americans Rethinking How They Buy Cars, February 26, 2014.