Jd Power Online Automotive Review Fixed Op Web Marketing Apr2007

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Jd Power Online Automotive Review Fixed Op Web Marketing Apr2007

  1. 1. Online Automotive Review—Dealer Edition April 2007 Moving Accessories from the Back End to the Internet By Bill Williams As OEMs continue to improve product quality and extend useful parts life, the nature and timing of service engagements is changing to fewer visits and lower parts sales. At the same time, vehicles are becoming more technologically sophisticated, so owners are increasingly reliant on dealers to perform a number of specialized repair and maintenance operations. Additionally, many customers are interested in customizing or personalizing their vehicles. With all of these forces impacting fixed operations, some dealers are successfully changing their perspective on parts and accessories and discovering the Internet as a means for moving their businesses well beyond the boundaries of the bricks-and-mortar store—and well beyond their local market. Redefining the Role of Accessories At one time the Parts Department served as handmaiden to the Service Department. The key was to ensure parts inventory was in line with service throughout to keep a lid on unsold inventory. The focus was internal: serving the Service Department and the needs of ambient in-store parts customers made up largely of DIY owners. Viewed from this perspective, the primary competitor was the local Auto Zone or PEP Boys facility and they, frankly, did a better job of stocking, displaying, pricing, and marketing parts than the average dealer. The traditional defense against the local competition was the often-used notion that customers should insist on genuine OEM parts—the veiled threat being that aftermarket parts bought elsewhere put the vehicle, and the owner, at risk. Whether true or not, vehicle owners were faced with a choice between that veiled threat and having to go to a dealer, likely having to order and wait for a part, and in most cases having to pay more. And that’s just for necessary parts. When it came to accessories, the alternative of going to a dealer was rarely even considered. Dealer accessory inventory was rarely displayed, hard to find, limited in range, not in stock, and, again, more expensive. The difference between accessories and options was really only a matter of when the items were installed and by whom. Accessory marketing, like other dealer operations, was servant to the front end and to service—useful when it could add some margin to a vehicle or close a deal. But typically it was not seen as a stand-alone profit center with significant revenue and profit contribution. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. 1
  2. 2. Online Automotive Review—Dealer Edition April 2007 Moving Accessories (continued) Today, that view is changing. Small, medium, and large dealer groups have recognized that accessory marketing is a whole new ball game. Consumers’ attitudes toward their vehicles are changing. OEMs are offering vehicles that embrace customer personalization (such as Scion and Chevrolet SSR); and the range of appearance, performance, comfort, and convenience accessories has exploded as their quality and affordability have improved. Small, medium, and large dealer groups have recognized that accessory marketing is a whole new ball game. Moreover, dealers are now able to use the Internet to fashion a separate business that creates virtually boundless sales opportunities and uses the best practices of other Internet-based marketers to reach prospects who might never shop the store when considering a new vehicle. Dealers Have to Pay to Play The new accessories ball game means dealers have to get their marketing game on because online accessory sales brings with it a new set of marketing disciplines. It’s not enough to decide to sell accessories online; successful online marketing means getting the store vision and the organization in place to support it. A good example of this can be found in the way three stores are approaching online accessory marketing. One is Longo Toyota in El Monte, California. As do most dealerships, Longo Toyota includes Parts in the overall store menu, along with a special Parts icon (Figure 1). Figure 1: Bottom Portion of Longo Toyota Figure 2: Longo Toyota Parts Online home page (www.longotoyota.com) (www.longoparts.com) home page Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. 2
  3. 3. Online Automotive Review—Dealer Edition April 2007 Moving Accessories (continued) However, Longo also has a separate URL for parts, so automotive Internet shoppers looking for Toyota or Scion parts and accessories—separate from new- or used-vehicle shopping—can search exclusively for accessories at www.longoparts.com (Figure 2). The Longo Parts section has 23 different categories, including make and specific product types. Also included are Best Sellers, Specials, What’s New, Product Reviews, and a Quick Find search function that operates on broad product descriptions. Make-level Toyota accessories include exterior and interior convenience accessories, while accessories for Scion—which is fundamentally designed for higher levels of customization—include a supercharger, lowering springs, sound system, and exterior applications. Two other examples of stores focusing on accessory sales are Gary Rome Hyundai Accessory Store (Holyoke, MA), www.hyundaiaccessorystore.com (Figure 3) and Courtesy Nissan (Richardson, TX), www.courtesyparts.com (Figure 4). Figure 3: Gary Rome Hyundai Accessory Store home page (www.hyundaiaccessorystore.com) Figure 4: Courtesy Nissan’s Parts home page (www.courtesyparts.com) Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  4. 4. Online Automotive Review—Dealer Edition April 2007 Moving Accessories (continued) What makes these sites interesting is their positioning of the online accessory categories as related to, but independent from, the main store. Each bears the obvious brand linkage to the dealership, but each uniquely addresses the interests and shopping behaviors of accessory buyers: ■ Multiple close-up photos of accessories ■ Easy navigation—two clicks—to a detailed photo, description, and price ■ Fun, exciting, motivating text—not just a part number ■ E-mail registration for online offers and savings ■ Shopping carts ■ Prominent online pricing with “today only” pricing ■ Last-minute impulse items (like those found at a bricks-and-mortar checkout register) ■ A Wish List section so others can buy gifts for a vehicle owner ■ A reassurance of quality and confidence by tying into OEM information, material or support These are examples of the kind of merchandising dealers need to engage in to compete in the online accessory marketing space, where shoppers need to be enthused and excited about products. Featured items range from pure appearance to drivetrain and suspension. Particular attention is paid to giving shoppers clear visual depictions, including close-up photos where required. Some sites offer the ability to share photos and descriptions with a friend. Some of these sites allow the shopper to calculate item costs before checkout, so that taxes and shipping can be computed; others require registration and log-in prior to calculating costs. There is a benefit to the latter in being able to collect online shopper information even if an online engagement is aborted. That being said, it’s likely more appealing to customers to be able to shop and compute total costs prior to divulging contact information. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  5. 5. Online Automotive Review—Dealer Edition April 2007 Moving Accessories (continued) Importantly, each of these examples addresses other vital aspects in developing an online accessory program. Marketing online means retailers have to confront key considerations affecting both sellers and buyers: ■ Order handling: Make clear how long before the item will be shipped ■ Shipping: Provide details on how will the item be shipped, the expected delivery time, and make clear up front who pays the shipping ■ Returns: Include a clear policy on items that cannot be returned, any costs for returned items, and time limits on returns ■ Refunds: Clearly state restrictions, if any, on what can be returned Handling, shipping, and returns are both a policy and a marketing tool, as other online marketers have demonstrated. E-marketers can use shipping as a purchase inducement by offering it free as either a standard policy or attached to certain sale or time period conditions (e.g., Free shipping for orders over $200 or Free shipping on items purchased before June 1). Marketers of large items often assess a return or restocking charge against refunds on items returned. Longo has a 10% handling charge on all returned parts; Gary Rome charges a 20% restocking fee; and Courtesy applies a 25% charge on all returned parts. There is typically a time limit on returns, ranging from 10 to 30 days, and some items are identified as non-returnable. These kinds of restrictions are crucial to the dealership in order to protect it. And, they are common practice among Internet marketers and online shoppers who are accustomed to these kinds of restrictions. However, to avoid any surprises and minimize post-purchase problems, it is important to make absolutely certain the restrictions are easily found, clearly articulated, and repeated at various stages in the purchase process. What’s important is to note the different dynamics that accompany online business. Most dealerships bend over backwards to ensure in-store transactions lean to the customer’s benefit. But in online shopping, pricing transparency (including related costs of tax and shipping), delivery speed and dependability, as well as detailed product descriptions, are crucial—and attention has to be paid to the delivery process, including e-mail alerts to advise purchasers of ship dates. Management needs to make a commitment to maintaining access to accessory supplies: online customers won’t tolerate excessive wait times for their purchases. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  6. 6. Online Automotive Review—Dealer Edition April 2007 Moving Accessories (continued) A Separate Marketing Unit The upside of all of this is that any store can decide to be an aggressive player in the online accessories (“personalization”) business. A dealer could decide to be the truck or performance car specialist in an area, or more generally focus on capturing more accessory business for their make and model lineup. Once a dealership has organized internal operations around an Internet accessory business—particularly in lining up product and delivery operations—a marketing specialist can focus on issues such as pricing, merchandising, and communication. Key to all of this is a new way of thinking about the business. Key to all of this is a new way of thinking about the business. While the bricks- and-mortar dealership has fixed hours, often includes price negotiation, is based on protracted consumer shopping, includes face to face relationships, and measures performance in terms of geographic penetration, online marketing runs full time all the time, and often involves long-distance relationships that might never include a face-to- face component. Bricks-and-mortar sales require considerable front-end representation, while online is more backend. Traditional marketing involves fewer and larger transactions, whereas online there more likely will be multiple, smaller-level purchases. And, while vehicle marketing often means taking a share of existing demand, online accessory marketing offers the dealership an opportunity to create demand. Consider, for example, holiday-related accessory marketing (Father’s Day, holiday gifting); avocational marketing (golf, ski, fishing); or community-related marketing (car clubs, enthusiasts, youths). Each of these offers accessory marketers a venue for creating and packaging accessories and marketing them online. It’s also important for customers to be able to find the accessory site. As with bricks- and-mortar stores, accessory sites need promotional support. Dealers can create unique URLs that describe the site and link it to the primary store (www.longoparts.com), and separately promote it in offline and online media. The advantage of an online accessory store is that it can be merchandised in highly targeted media: specialized magazines or special print or broadcast environments and online with links and banner ads. Media selection should be driven by the overall positioning of the store: for example, a focus on enthusiasts would lead to media that reach that target (car clubs, DIY media, youths). Again, an online store can be created, designed, and promoted—and even repositioned—very quickly, so long as the key back-end operations (pricing, availability, shipping, returns, etc.) are very carefully considered. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  7. 7. Online Automotive Review—Dealer Edition April 2007 Moving Accessories (continued) The opportunity is limited neither by geography nor dealer size. Indeed, the biggest obstacle isn’t what must be done to create a successful online accessory store—it’s overcoming traditional thinking about how parts and accessories fit in the overall dealership operation, and how consumers shop and buy accessories. The opportunity is limited neither by geography nor dealer size. Think Dell, think Amazon, think eBay—just don’t think like the dealer down the street. Dealer Action Notebook 1. Parts are one thing: accessory marketing is a whole new ball game. Parts make a vehicle operate, accessories make a vehicle “mine.” 2. Dealers must plan, think, and operate like a merchandiser: make accessory shopping fun, easy to find, and safe to buy. 3. Cover make-level accessories, but also include general and impulse items. Put some thought into captivating interest (e.g., Last Minute Buys, Gift Ideas, Internet Only, OOPs Department [overstock or return specials]). 4. The audience is diverse: some visitors are gear heads, some are pure appearance buyers—give visitors a chance to choose how much detail they want. Obviously, the larger, more complex accessories require additional detail, so make sure you show it. 5. Ensure policies for shipping, returns, etc., are very clear and repeated for clarity. 6. Make sure pricing, delivery times, the ability to track shipments, and communications during the delivery process are all clearly relayed to customers. 7. Some shoppers just want to shop: be wary of asking them to log in/register too early in the process. Consider offering price information (including tax and shipping) without requiring registration. 8. Don’t overlook the opportunity to use OEM-provided information on your Web site. 9. Your online accessory store can and should have its own personality—not every online shopper will have visited your dealership and many never will. Your online store can create its own unique “personality.” 10. Always meet online promises: word travels extremely quickly when a consumer is disappointed in delivery, pricing, etc. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  8. 8. Online Automotive Review—Dealer Edition April 2007 Fixed Operations Marketing: Dealer’s Perspective By Bill Williams Fixed operations face many of the same changes and challenges as front-end operations. Some of the challenges facing the industry today include: ■ Changes in product design, quality and technology ■ Demographic shifts ■ Advances in communication ■ Finding and keeping qualified technicians ■ Managing parts inventory ■ Vehicle personalization Successful dealers are finding and creating ways to take advantage of these changes and challenges in the back-end operations. Online Automotive Review—Dealer Edition asked two Group 1 Automotive experts for their views on how they see these changes impacting the business and how they are dealing with them. Wade Hubbard, Vice President of Fixed Operations and Steve Richardson, Parts Manager at Courtesy Nissan, Richardson (TX), share their opinions on how Group 1 views the market today. OAR: What are the major changes you see that have impacted Parts and Accessories during the past few years? Wade Hubbard: In the last several years, there have been some significant changes that appear to have shaped our dealership parts and service business. For starters, it seems that cars and trucks are “cool” again. Custom and performance parts and accessories are everywhere. High-tech electronics are no longer exclusive to high-line vehicles and styled wheels rule. We have seen so much of this migrate from the aftermarket to the new-vehicle portfolios—it’s pervasive across our business. Hot rod and custom shows on television, car clubs, Web sites, and showrooms have been instrumental in this surge. For instance, have you noticed the attention that the OEMs are now paying to the annual SEMA show in Las Vegas? Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  9. 9. Online Automotive Review—Dealer Edition April 2007 Fixed Operations Marketing (continued) A second development is that vehicles of all brands have enhanced their level of quality and sophistication. Not only is the technical architecture of all vehicles increasingly more complex, but better build quality and design for durability have extended service intervals and reduced the number of conventional contacts we have with our customers These strides mean the nature of work that dealerships are performing in their service departments is polarizing towards more maintenance on one end and technical diagnostics on the other. The Internet enables us on both accounts. E-mail helps us to keep in touch with our customers, and intranet access to manufacturer technical information aids us with complex diagnostic matters. Steve Richardson: One of the changes we have seen over the last few years would be the quality of the systems and the parts used to assemble new vehicles. What may have been cable- or vacuum-controlled in the past now has been replaced with complex electronic systems that tend to perform flawlessly. These systems have replaced mechanical parts that would eventually lead to replacement within the life of the vehicle. At the same time, we now see new vehicles coming out with 100,000-mile parts like spark plugs and timing belts. Even fuel filters are rarely ever replaced now—at least with many of the newer vehicles. The result is few visits to our service department and less parts sales when they do visit. Most of our customers find it too difficult to repair their own vehicles or do not have access to the tools needed to diagnose their problem. They end up at our store when it must be fixed right. OAR: How has improved technology affected the business? “Now we have the ability to communicate better with the factory, each other and most importantly, the customer.” Steve Richardson: Another big change over the last decade has to do with the power of computers. Five years ago our work stations in the Parts Department were centered on a computer with proprietary hardware and software. These units were limited to researching parts and accounting functions. Now we have the ability to communicate better with the factory, each other, and, most importantly, the customer. The maturation of the Internet over the last few years allows us the opportunity to communicate the features and benefits of our store and its products with potential customers 24/7. This new medium for communicating with customers has changed the way we do business. Our customers now shop and buy around the clock from around the world. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.
  10. 10. Online Automotive Review—Dealer Edition April 2007 Fixed Operations Marketing (continued) Wade Hubbard: It is widely understood that consumers have access to more information and are more accessible than ever before. Internet enablement is a wonderful thing, but breaking through to the multi-tasking consumer—not to mention [through] the spam filter—with a time-relevant and compelling message is challenging. Turning your electronic communications into commerce requires that you are on top of your marketing game. It is amazing how much you can expand your market reach, extend your company personality, and broaden customer accessibility. However, in the end, it still comes down to people and customer service to deliver on the product or service promise. We recognize this! OAR: How have these changes affected the role of the parts/service department inside the dealership, if at all? Steve Richardson: Actually, it’s been a blessing and a curse. On the one hand, we can no longer count on the annual filter-and-spark-plug-changes of the past, but we can now offer a bigger mix of products to a larger base of potential customers. OAR: Are parts and accessories seen as a new business operation, or as a customer retention operation? That is, are accessories a closing tool, a service satisfaction tool, or a marketing tool? Steve Richardson: It can be all of the above. We see accessories as a new business tool. It is up to us to show the customer what is possible on their vehicle, knowing it is their choice whether to personalize it or not. We accessorize some vehicles on the lot to give customers an idea of what is available to them and how it will look. They have an opportunity to see the quality of the genuine Nissan product before they purchase. We also have displays in the showroom and the parts department showing accessories and performance parts that we offer. The customer will drive away without accessories unless we can show them how they can personalize their vehicle. If we miss them while they’re here, they can find us online later when they are ready, where they can see every accessory we offer for their vehicle. OAR: How has the Internet impacted fixed ops in general and accessory sales specifically? Steve Richardson: In our case, the impact has improved all facets of our business. Our Internet-related sales make up a significant portion of our parts department sales monthly and we have customers arriving for service from all over the region because they know about us from our Internet presence. Because of the reputation we have developed from our parts Web site, some of our customers choose to buy their vehicles from us as well. As a result of our user-friendly Web site, our accessory sales have led the nation for the last 10 years, according to Nissan North America’s figures. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. 0
  11. 11. Online Automotive Review—Dealer Edition April 2007 Fixed Operations Marketing (continued) OAR: Are there opportunities to specialize or segment in accessory sales (e.g., performance, trucks, commercial, women or youth)? Steve Richardson: Absolutely! The opportunities are boundless to create and structure your Web site to appeal to almost any market niche. OAR: What can be done to drive traffic to aftermarket accessory sales online? Steve Richardson: Most ideas that work in a typical bricks–and-mortar environment should work on the Internet. OAR: What’s worked in terms of online/Internet accessory or parts marketing? Steve Richardson: We believe the customer wants to see just what is available for their vehicle. Many of our competitors’ Web sites throw everything out there and you have to pick through. We’ve made ours easy to navigate by grouping all items by vehicle model, cutting down on clicking and keep focused on what means the most to [the customer]. OAR: Can accessory marketing be used as a lead generator for new/used-vehicle sales? “From our experience, it is best not to mix parts... with new-car sales on our Web site.” Steve Richardson: From our experience, it is best not to mix parts and accessories sales with new-car sales on our Web site. There are too many variables that might interfere with the relationship we try to establish with our customers. Our one attempt to merge the two departments online created mixed results. We accepted pre-orders for the new 2003 350Z many months before release and accumulated orders from all over the country. In the end, we sold more vehicles than we were allocated, resulting in cancelled orders. OAR: Do you envision a situation where a dealer could be marketing accessories regionally or nationally (or at least well outside their trade area) using the Internet? Steve Richardson: It’s more than a possibility; it is exactly what we do. Copyright © 2007 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved. 1

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