Wednesday, September 19, 2012 | Edited by Daniel Moores
||The 'Wild West' of Online Vehicle Transactions
Old Marketing Regs Keep Dealers at Risk
States are struggling with rules for selling and advertising cars online.
For example, one state law puts an auto dealer at risk when somebody else takes his dealership's ad, alters the information then posts it on a different Web site. The process is known as scraping.
As one dealer puts it, retail auto marketing online is still "the Wild West." State regulators are meeting this week and will discuss scraping and other online marketing issues such as:
For an example of the confusion, consider what happened to Virginia dealer Mike Duman. A year ago Duman received a certified letter saying he was violating state advertising regulations. The Virginia Motor Vehicle Dealer Board's complaint? Internet listings for two vehicles failed to disclose the amount of the document processing fees.
- Fees paid to lead generators
- Cross-border shipments
- Content of advertising
Duman says that the ads he authorized showed the fee. But when he checked the listings in question, he was taken aback. They didn't list the fee. And they were on Web sites that he didn't even know existed -- an example, he says, of the way listings mushroom out across the Internet.
These days, the listings spread from major car-sales sites, with which a dealer has a contract, to secondary sites linked to those major sites. After that, the listings may be grabbed by "scraper" sites that pull listings from other sites to bulk up their own offerings. And sometimes those sites trim details from the original ad to fit their formats, Duman says.
"A dealer in a lot of instances does not have any knowledge of what's getting posted to other sites," says Duman, who adds he forwarded printouts of 34 similar online listings from Virginia dealers to the state.
"I printed off all 34 of those, and I faxed them to the motor vehicle board," Duman recalls. "I said, 'Two wrongs don't make a right, but obviously there's a problem here.'
"They were legitimate dealers, and they didn't even know this was going on."
The state declined to take action against Duman, a state official said.
Recycled vehicle listings are just part of a broad array of issues that can land dealers in trouble as they negotiate the rapidly changing world of online marketing.
Some in the industry question whether traditional concepts such as brokering, bird-dogging, curbstoning and state advertising restrictions are outdated in the digital world. But they're still on the books and may trip up dealers using new marketing techniques.
Dealers held responsible
The discussion has prompted the National Association of Motor Vehicle Boards and Commissions to include a panel on the impact of Internet marketing at its meeting this week in Alexandria, Va.
Greg Kirkpatrick, president of the association, says dealers "are just getting inundated with vendors offering the latest sales boost via the Internet."
But Kirkpatrick, executive director of the Arkansas Motor Vehicle Commission, says state officials hold dealers responsible for their online marketing.
"It's on you," he says. "You've got a responsibility that what you're doing with a third party is compliant."
Kirkpatrick says many regulators feel current statutes are flexible enough to deal with online marketing. He adds that any changes will be on a state-by-state basis. This creates a patchwork of laws, Kirkpatrick concedes.
"I feel that there will be less uniformity than there should be, maybe, for this issue," he says, adding that a national policy would make sense.
That's a sore point for third-party vendors. Scott Painter, CEO of TrueCar Inc., says the Santa Monica, Calif., company has "worked really hard to comply" with laws in every state. TrueCar was hit by several states saying that, among other issues, its business model of charging dealers a $299 fee per vehicle sold amounted to bird-dogging. Traditionally, bird-dogging is the practice of dealers paying individuals to steer buyers to their stores.
Painter says TrueCar has worked out state-by-state business models to avoid causing legal problems for dealers. He says the cost and complexity of the effort makes it a piece of proprietary intellectual property. In describing it, Painter only will say, "There are a number of different flavors of how we bill."
50 sets of laws
Painter takes pains to say TrueCar is focused on complying with state laws, not trying to change them. But he notes that working with 50 different sets of laws is tough.
"The complexity of this is that none of them are really federal regulations," Painter says. "There are 50 different states with 50 different legislated outcomes."
Similarly, Donna Sechrist, senior vice president for dealer initiatives at Edmunds.com, says the online shopping site painstakingly picked its way through state laws when developing a "premiere dealer" feature in 2010. Dealers pay a subscription fee to be featured on vehicle search pages.
"We haven't had to change our business model since we launched that," Sechrist said. "There's a lot to look at because it varies from state to state."
But many industry players argue that Internet commerce is not significantly different from brick-and-mortar commerce. Mike Jackson, CEO of AutoNation, the largest U.S. dealership group, says Internet companies should follow the same rules that his stores have to.
"The states are holding us to one set of regulations. You can't exempt the digital world," Jackson says. "If I have to meet those regulations, they should have to meet them. It should be one rule book.
"Now, the digital people like to be exempt from all regulation because they're new-age. But, I'm sorry: At a certain point, everybody has to play by the same rule book."
James Moors, director of franchising and state law at the National Automobile Dealers Association, agrees. Digital commerce itself may be new, he says, but practices such as bird-dogging and advertising invoice price -- banned in many states -- have the same effects as in the past.
"One of the things that people need to focus on is there's a reason for the regulations," Moors says. "A motor vehicle is a fairly significant purchase, and the dealers are regulated. A lot of the recent issues that have come up seem to be new, but they're not."
Dealers and regulators focus on licensing requirements for dealers and, in some states, salespeople. Bruce Gould, executive director of the Virginia Motor Vehicle Dealer Board, says there needs to be a clear line between licensed dealers and online vendors that want to set up deals.
More state regulation
Regulators have taken pains to professionalize auto retailing, Gould says. In Virginia, for instance, a new-car salesperson is subject to background checks and must pass a test. Having another party negotiate price or other terms of a deal evades those requirements, he says.
The upshot, Gould and other regulators say, is that sale and delivery of a new vehicle must take place in a state-licensed dealership -- a requirement in all states. David Wilson, owner of Wilson Automotive Group in Orange, Calif., says that's one of the earliest lessons he learned when he started selling cars.
"The first thing they taught me is you can't sell a car on the phone," Wilson says. "If you get a guy on the phone, you've got to get him into the dealership. You can't sell a car on the Internet."
Wilson adds that he has encountered situations similar to Duman's with vehicle listings popping up in unexpected places online: "They're selling leads to each other. It's scurrilous, it's unregulated. It's the Wild West out there."
Others see a need to at least review existing laws. Tim Jackson, president of the Colorado Automobile Dealers Association, says dealers remain at risk of unintentionally stepping outside the rules. Although the TrueCar controversy brought the problem to light, other third-party online sites' practices jeopardize dealers, Jackson says.
"These laws need to be reviewed and probably to be renewed in light of the Internet," he says.
Meanwhile, state regulators will pursue violations, Jackson adds. And customers will get angry about paying a document processing fee that wasn't part of the price they saw online. In either case, the problem lands on the dealer.
"They're having a lot of stuff thrown at them, there's no doubt about it," Jackson says. "It's put the dealers in the cross-hairs of all this."
(Source: Automotive News, 09/17/12)
||Drivers Want -- And Will Pay -- For More Efficient Cars
A growing number of Americans are demanding not only more fuel-efficient cars, but those that run on cleaner alternatives to gasoline -- and they're willing to pay, according to a pair of new studies.
That could be good news for manufacturers fretting about the cost of meeting the government's strict new Corporate Average Fuel Economy, or CAFE, mandates requiring an average 34.5 mpg by 2016 and 54.5 mpg by 2025.
"Cost is a key issue," especially with more radical alternatives such as electric propulsion, said Phil Murtaugh, the head of California-based Coda, a start-up in the emerging market for electric vehicles.
A study conducted for Ford Motor Co. by Penn Schoen Berland found that seven in 10 drivers are taking steps to reduce gas consumption, most reporting they are driving less and nearly half saying they've slowed down on the highway. Others have adopted somewhat more extreme steps, such as drafting behind larger vehicles.
Meanwhile, 21% said they have purchased a newer vehicle that is more fuel efficient.
And 25% told researchers that if they had an extra $1,000 available at the time they made their next vehicle purchase they would opt for a hybrid rather than a conventionally powered vehicle. That could signify a notable shift in consumer sentiment. Conventional wisdom has suggested motorists want greener, more fuel-efficient products but weren't willing to pay for the necessary features to get there.
Ford is one of a growing number of manufacturers offering steadily more hybrid technology options, such as the gas-electric version of the 2013 Fusion sedan and the hybrid and plug-in versions of the new C-Max model. Toyota has promised to introduce hybrid versions of virtually every model in its lineup over the next few years and its Lexus luxury brand hints that it could have several more dedicated hybrid models coming.
A separate study by Phoenix Marketing International finds that a solid majority of American motorists are now willing to consider some form of alternative propulsion, whether hybrid, pure battery-electric or something even more radical. In fact, the vast majority of buyers under 40 see that as a real-world choice to consider, the study indicates.
Surprisingly, perhaps, the study found those in the luxury market more open to alternative propulsion, by a margin of three-to-one. In more mainstream product segments it's still two-to-one willing to consider alternatives.
The younger the motorist the more open they are, with only 10% of those under 40 not open to cleaner or more fuel-efficient powertrain technology, reports Phoenix, which polled in July 1,800 consumers who were either just in the market or were still looking for a new vehicle.
"For automotive marketers that means there is immense opportunity for developing and delivering alternative fuel messaging around their brand," said Phoenix Senior Research Analyst Kevin Severance, especially in marketing aimed at younger buyers. "As alternative fuel vehicles continue gaining popularity, cultivating and communicating an alternative fuel image will be critical. Honing related messaging will be step one in persuading consumers who are unsure about the technology to consider their products."
Among non-luxury brands, Toyota had the most buyers inclined to consider alternative fuel vehicles, the survey revealed, followed by Ford, Honda and Chevrolet. Among luxury brands, BMW led the way, followed by Lexus, Mercedes-Benz and Audi.
The biggest challenge for the auto industry is to translate purchase interest into an actual purchase. Recent studies have repeatedly shown that shoppers will at least look at hybrids and alternatives but when it comes time to buy they largely return to conventional alternatives.
But while hybrids and other battery-based vehicles currently account for barely 3% of total new vehicle sales, the total number of those vehicles registered during the first half of the year rose by roughly two-thirds compared to a year earlier, according to another new study by Experian Automotive.
And those who market diesels, another fuel-efficient alternative, are also reporting strong results. Volkswagen has seen demand for the diesel-powered version of its Passat sedan climb to 26% and now believes it will nudge beyond 30% once it expands capacity.
As for battery-electric vehicles, Murtaugh told TheDetroitBureau.com he expects that as consumers become more comfortable with cost and range issues he expects demand to rise, although it could take years before that technology moves into the mainstream, he acknowledged.
(Source: The Detroit Bureau, 09/13/12)
||Let the Pickup Wars Begin
General Motors has been cranking out pickups to stockpile them ahead of factory downtime this summer and fall, as it retools for the next-generation trucks due out by summer.
Now it's crunch time. The company wants to whittle its four-month supply to less than three months by year end. The plan: GM is extending its semiannual truck month promotion, traditionally run in October, over two months and is throwing in big cash for both dealers and buyers.
But GM faces tough competition from rivals Ford, Ram and Toyota, which are clearing out their own 2012 pickups and aren't in any mood to cede market share.
GM kicked off the promotion right after Labor Day and plans to run it through October. Dealers are trumpeting as much as $3,500 in customer cash -- $4,500 for buyers who are trading in vehicles -- on most 2012 Chevrolet Silverado and GMC Sierra models. And GM is dangling as much as $1,500 per pickup to dealers who can blow past their sales target for both 2012 and 2013 pickups under a GM stair-step program.
The sales push is one step in a complex marketing maneuver. GM's next-generation pickups, on an all-new platform, are slated for release by late spring as 2014s.
GM had to overbuild its inventory of both 2012 and 2013 models ahead of lost production time at three truck plants -- in Flint, Mich.; Fort Wayne, Ind.; and Silao, Mexico. The retooling work has been done intermittently since early this year. Several more down weeks are scheduled for this fall. That left GM with a 122-day supply of Silverados and a 131-day supply of Sierras, or a combined 243,400 units, on Sept. 1. In September 2011, that number was 203,900.
Now it's trying to chew through the excess.
"They've pulled forward truck month, so we get both September and October, and they're putting a lot of cash on the hoods," says Chris Haydocy, a Buick-GMC dealer in Columbus, Ohio, whose usual 90-day Sierra supply has crept over 100. "With a little participation from the client, I think we'll be fine."
Meanwhile, Ford Motor Co. is hitting the market with its annual F-series promotion in September and October. Chrysler Group is putting cash on the hood of the 2012 Ram ahead of next month's arrival of the re-engineered 2013 Ram, and Toyota has comparable deals on the Tundra, last redesigned in early 2007.
GM's rivals are well aware of GM's lofty pickup inventory. And the threat of their counterattack has added urgency to GM's sell-down.
"When I heard that Ford had announced their truck month (in September), I definitely felt it was the right thing to have also had (the same timing) in our plan," says Alan Batey. The no-nonsense Brit and former Chevy sales boss made the call to start the sale in September in his current role as GM's U.S. vice president of sales and service.
Cash on the hood
Ford is offering customers between $1,500 and $3,000 on the 2012 F-series pickup, depending on engine and trim level, according to AIS Rebates, an Ann Arbor, Mich., company that tracks industry incentives. Chrysler is offering up to $3,500 cash on many 2012 Rams. Through Oct. 1, Toyota is offering up to $3,500 cash back on certain 2012 Tundras.
GM has said it expects its pickup inventory to fall to 80 to 85 days by year end. The company expects pickup sales to get the usual seasonal lift through the fall, aided further by promising economic signs, particularly in the critical housing sector. Lost production time will whittle stocks further.
But GM is handicapped by having the oldest full-sized pickup on the market, introduced in late 2006, which could force it to dig deeper on incentives than its rivals.
"If you're undecided in the truck market, the Silverado has a disadvantage because it's gotten a bit stale," says TrueCar.com analyst Jesse Toprak. "That means the only way to convince people is to sell the deal."
Still, GM's customer cash is not outsized compared with past promotions. Last September and October, GM's consumer incentives were higher for its outgoing pickup models than they are now, AIS Rebates data show.
A GM retail planning calendar recently sent to dealers shows its truck month running through October, but Batey says it's too early to say whether GM will run the promotion for a second month.
"It's always competitive in trucks," Batey says. "Truck months are something the public understands and they expect to see, so I think it will be competitive."
For months, Chevy and GMC dealers have been strategizing as GM pumps the pickups into the system. Some ordered a larger number of trucks than usual, worried that they would run thin when production was crimped from the plant downtime, which began early this year but kicked in especially this summer and fall.
Others ordered more cautiously, worried that they would have to pay extra floorplan interest on a glut now -- and that they could be stuck with leftovers when the redesigned trucks arrive.
A Chevy dealer in a Western mountain state says he lost a gamble this spring and summer when he loaded up on trucks that now are piling up on his lots. He welcomes the extended promotional period to help move the excess.
On the other hand, Lynn Thompson, a Springfield, Mo., Buick-GMC dealer, says he was "a little worried" about his 2012 Sierra stocks but says sales improved enough in August to quell his concerns.
Thompson also believes he can hit the objective GM set for his Sierra sales under the dealer incentive that runs from Aug. 28 through Oct. 1.
Dealers who surpass their factory-set baseline target by up to 10 percent earn $100 per truck on a portion of those sales. Dealers who beat their sales targets by 10 to 20 percent get $750 per truck on a portion of the sales. Those who sell 20 to 50 percent more than their target get $1,500 on about half of their total pickup sales.
Thompson said his bogey is "very fair" compared with past target programs.
"We still have to get on our horse and ride," he says. "But I think we can get there."
(Source: Automotive News, 09/17/12)
Daily Sales Tip: The Pre-Call Strategy Session
One of the most important components of the sales call that will help you close more business is the pre-call strategy session.
The pre-call strategy session consists of the following four steps:
1. Know what questions you will ask and anticipate responses. Your questions must be designed to get the prospect to verbalize their compelling reasons for meeting with you relative to their problem or, as we call it, severe mental anguish (SMA). Additionally, you must ask all of the pertinent questions about their current provider (your competitor), the capacity for change in the organization (time, money and resources) and the decision-making process. Those questions and their related answers will enable you to disqualify the prospect early in the process and eliminate stalls and objections at the closing.
2. Anticipate what questions the prospect will ask and practice your responses. Your responses should often be clarifying questions that will help you understand completely what is underneath the prospect's question.
3. Anticipate "curve balls" that the prospect may throw you. For example, you may find out, at the final presentation that the decision-maker is not going to be present. What will you do? You must anticipate and prepare.
4. Role-play the call. Decide, as a general practice, that any sales opportunity exceeding a certain dollar amount will be subject to intense role play and strategy development prior to it. Role-play with a peer or your manager.
If you are a new salesperson, you may not have a problem with implementing this pre-call process. However, if you are an experienced salesperson, it is easy to feel like you are beyond this rehearsal process because you've been selling for so long that you "know what will happen." I challenge you to think about all professional athletes or musicians who practice for hours each day and rehearse for each and every competition or performance. I hope you will adopt the mantra "Perfect practice makes perfect performance" and become a true professional salesperson.
Source: Tony Cole, president/CEO of Anthony Cole Training Group