By Brad Korner, General Manager of Cox Automotive Rates & Incentives
As automotive professionals, when was the last time you admitted that pricing wins deals?
Leading with value to deliver a unique buying experience is the goal of all retailers. On the other end of the transaction is a shopper determining whether they can afford the price or payment of a vehicle. They’re also trying to figure out how the deal you’re offering compares with deals from your competitors.
Having accurate incentives for each consumer purchase option is table stakes for dealer service providers (DSPs) and their dealers. This may sound simple. However, there are many moving parts that can affect whether this “first pencil” price is an accurate offer to the customer, such as net price (after applicable rebates, interest rates, trade-in value, dealer cash/dealer discount, etc.). Some data providers claim “penny perfect” payments, but this is not achievable if you are applying incorrect incentives.
Incentives for pricing and payments through multiple vendors create inconsistencies across the consumer experience, causing abandon and drop off rates to rise. With dealers paying an average of $.50 to $20 + per VDP visit according to Generations Digital, choosing the correct data partner leads to multiple areas of savings, conversion increases, and profitability.
Research conducted by Cox Automotive Rates & Incentives (CAR&I) analyzed the accuracy of data used for calculating pricing and payment information presented through DSP tools. In the study, CAR&I compared APRs, cash and conditional incentives through these various tools for seven new vehicles in the East Coast and West Coast markets. The analysis looked at data from three competitive incentive providers, including CAR&I.
The study found significant variations across the three providers, ranging from $0 to $6,750 in pricing for the same vehicle, resulting in monthly payment fluctuations of up to $122 per month for 60 months. The analysis also showed that both unnamed vendors incorrectly applied incentives for two vehicles, resulting in $500 to $750 in overstated incentives applied, costing dealers valuable margin.
These disparities have wide-ranging consequences for dealers, including loss of credibility in pricing and loss of profits on transactions. It’s not just that consumers might walk away from one purchase; it can affect repeat purchases and referrals too. Pricing information must be accurate for digital retailing to do what it is intended to do – build trust and transparency while improving the customer experience. This also means making accurate pricing available online as well as in-store.
This study of the shopper experience supports the biggest paradigm shift for the industry – integration of the entire consumer online workflow from pricing and payment configurations to credit approval and aftermarket offers leading to in-store completion. By offering consumers digital access to these tools, the industry will meet the expectations of 83 percent of consumers who want to complete one or more steps of the purchase process online, according to the Cox Automotive Future of Digital Retail Study.
By engaging with the consumer online, shoppers feel more comfortable sharing personal information in exchange for accurate pricing and payment details (i.e., asking for a credit application in return for finance rates as part of the payment calculation). This “trade-off” boosts customer adoption and can add an incremental front-end gross profit increase of approximately $200 per transaction through F&I product and aftermarket purchases, equating to a 23 percent gain in overall finance penetration compared to non-digital retailing deals, according to Dealertrack findings.
Moving your shoppers through the online workflow process with accurate incentive data will increase the consumer close rates at higher profitability, as well as increase the CSI of these buyers, according to Maritz Research.* This can add an additional $100K annually to dealer CSI score payments.
Dealers can maximize CSI scores, eliminate customer wait times and improve sales efficiency by offering customers these shopping tools online with access to all guaranteed and conditional offers during the buying process. This can help complete the final transaction at the dealership, creating a faster and more enjoyable experience for the customer and sales staff.
As DSPs and dealers continue the adoption of these tools, choosing a data supplier that can integrate this information consistently and accurately across all steps of the shopping process is critical. This includes digital advertising, website/portal listings, digital retailing, dealer desking and equity calculation offers.
Using this comprehensive approach will enable you to achieve greater sales efficiency and meet your customers at every step of the car shopping and buying journey, helping you fight margin compression, meet profitability goals and improve the return on OEM incentive investments.
*According to a 2012 study by Maritz Marketing, the average dealership would be able to generate an additional $106,315 in gross profit by improving the customer experience.
