Executive Summary of recent published and widely acclaimed, Adapt or Die - How The Internet Is Destroying Dealer Profits And What To Do About It. Books can be ordered at lulu.com. Thanks for your support!
Adapt or Die:
How The Internet Is Destroying Dealer Profits
And What To Do About It
THE SUMMARY IN BRIEF
In Adapt Or Die, industry insider Kurt Baumberger outlines the current state of auto-
motive retailing and the demise of the ―Brick and Mortar‖ Dealership. The Internet is by Kurt Baumberger
destroying Dealer profits and one look at a Dealership's financial statements shows Deal-
ers must change how they "go to market."
Just like computer, book, and electronic retailers over the last few years, automotive
retailers are being forced to quickly transition to online shopping. Customers want a con- Customer Demands
venient, low pressure way to shop and buy a car online coupled with a follow-up online
service relationship. Dealers need a way to meet these Customer demands by utilizing
Behavior Tracking to intelligently guide customers down the sales funnel. Failure To Adapt
Consumer-centric, insightful, implementation savvy, the author has worked with
Amazon, Dell, Best Buy, and others to build their e-commerce businesses. Now, in this
straightforward and insightful book, Baumberger shares his online retailing wisdom with Success Strategies
the automotive industry. Page 4
You'll see why traditional Dealership retail approaches won't work - and what simple,
proven, profitable strategies exist today to get a jump on online solutions that will profita-
bly drive sales in the next decade. Page 5
BT: The “Silver Bullet”
IN THIS SUMMARY, YOU WILL LEARN:
Why ―Brick and Mortar‖ Dealerships must transform into Virtual Dealerships.
What To Expect
How to select a viable ―go to market‖ virtual strategy.
How to build internal support to sustain implementation of your virtual strategy.
Why Behavior Tracking is the ―silver bullet‖ for implementing your virtual strategy. Getting Started
How to increase profitability through customer demand marketing metrics. Page 8
Summary: ADAPT OR DIE
by Kurt Baumberger
Failure To Adapt But the reason Dealerships are not different from other
retailers is because they serve the same customers. And cus-
Over the last two decades, there has been a radical change tomers follow the path of least resistance to acquire what they
in retailing. First, Big Box chain retailers demolished the small want at the lowest possible price with the least hassle.
independent retailers. Then, Internet retailers destroyed the To prove the point, look no further than how Dealership
Big Box players. The retail industry transformed from inde- showroom walk-in traffic compares to Internet Lead traffic
pendents to chains to online players in the blink of an eye. over time. Customers are clearly following the path of least
Look at the list of retailers that no longer exist or are fac- resistance and choosing to ―let their fingers do the walking.‖
ing bankruptcy: Circuit City, Linens and Things, Borders, Ritz 800
Camera, Big 10 Tire, Crabtree and Evelyn, Bi-Lo, K-Mart,
Blockbuster. The Internet forced them to lower prices to
compete, but they couldn’t (or wouldn’t) adapt their business 600
model to adapt. Showroom
There were plenty of warning signs. In the late 1990’s,
Dell introduced a new Sales Model that revolutionized the
computer retail experience and virtually wiped out all the inde- 300 Leads/Month
pendent and even some chain retailers like CompUSA. Dell’s 200
innovation was to automate the entire sales process: Make Se-
lection, Determine Price, Add Accessories and Finance Pur-
1995 2000 2005 2010
Sound familiar? These are the same basic steps in automo-
tive retailing. Dell commercialized this process and created a In the pre-Internet days, the name of the game was main-
multi-media experience of pop-up explanations, start to finish taining sales control and avoiding customer ―Be Backs.‖ To-
workflow, and real-time shopping cart pricing calculations. day, Dealerships don’t even know who is shopping online or
Now, customers are comfortable configuring a $1,000 com- what they want or how to meet their needs. Everything is hap-
puter or $70,000 server system. Dell made it straight forward, pening in an Internet ―black hole.‖
automated, and user friendly.
Market research shows not only that the buying experience
By standardizing the buying process, Dell helped to shift is radically different today, it also shows customers are willing
power permanently away from the retailer to the customer. to buy from Dealerships at a ―fair and reasonable‖ price.
With the click of a mouse, customers can find what they want,
where they want it, at the price they are willing to pay, and can
select the delivery method they prefer. Now that customers Customer Online Behaviors
control the purchasing process, no retailer is ever going to get it
1. 90+% of car buyers use the Internet as their primary infor-
back, including automotive retailers.
Why Walk-In When You Can Click-In? 2. Three-fourths of car buyers make their initial Dealership
For some strange reason, Dealerships (like many other contact through email
businesses) always assume their business is ―different.‖ Deal- 3. 60+% of car buyers said that if they received a competitive
ers often claim customers want a ―relationship‖ or need to price and compelling reason to buy from a Dealership that
―look you in the eye.‖ But Dealerships ignore the fact that they would stop shopping elsewhere
there is 200+% turnover in the industry. After all, people have
4. 28% of car buyers said that if they received a competitive
relationships with people, not things.
price and compelling reason to buy from a Dealership that
Think about it. The Dealer is out of the showroom. The
they would merely compare price with one other source to
GM is at the desk. The Sales Manager is always busy. So who
exactly is the customer supposed to have a relationship with?
ensure it was “fair and reasonable”
3 Strategyview Executive Book Summaries®
Summary: ADAPT OR DIE
by Kurt Baumberger
Part Two: Sell More To More For More Customer-intimate Dealerships don’t advertise or price
promote and don’t try to pursue transactions; they cultivate
Strategy Is Everything relationships. They seek to build ―transferable trust‖ from the
initial transaction to the service department to word of mouth
Most Dealerships have never had to discuss or consider referrals.
their ―go to market‖ strategy. Their focus was always on peo- Customer-intimate Dealerships sell ―high-line‖ vehicles,
ple and process because they always assumed there would be such as Acura, Bentley, BMW, Cadillac, Jaguar, Lamborghini,
showroom traffic. But what happens when there is no show- Lexus, Mercedes Benz and Porche.
room traffic? What happens when the bulk of the customer
Successful customer-intimate Dealerships are those that
buying process shifts to the Internet ―black hole.‖
have become expert at understanding their customers’ needs
Fortunately for Dealerships, they don’t have to develop and at creating solutions. Customer-intimate Dealerships take
their ―go to market‖ strategy. Customers have already made the long view. They recognize that the onus is on them to con-
the strategic choice for you. Remember, customers are in con- vert a transaction to a steady client – a lasting asset.
trol. Dealerships lost their leverage when customers gained
So what can a Dealership do to create real customer inti-
―perfect information‖ and ―price transparency‖ online. So
macy? Concierge Services.
Dealerships just have to focus their efforts on executing that
strategy with distinction. Requirements:
The three basic ―go to market‖ strategies are: Make long-term commitment of at least three (3) years
Product Differentiation Create one-on-one problem/solution messages
Customer Intimacy Deliver messages from women, not men
Operational Excellence Focus on personal assistance
Product Differentiation Operational Excellence
A Dealership pursuing a Product Differentiation strategy
Operationally Excellent Dealerships deliver a combination
needs an inventory of products that push the envelope. Their
of quality, price, and ease of purchase. They are not innova-
manufacturers must concentrate on offering vehicles that ex-
tors, nor do they cultivate one-to-one relationships with their
pand performance boundaries or can reasonably claim to be
customers. They execute extraordinarily well and their value
uniquely designed for unusual experiences.
proposition to customers is low price and hassle-free transac-
There are only a few vehicle brands that can credibly exe- tions.
cute a Product Differentiation strategy, including Jeep, Land
Consequently, these Dealerships are characterized with
Rover, Subaru and Volkswagen.
processes for end-to-end sales and service transactions that are
So what can a Dealership do to create real product differ- optimized to minimize cost and hassle. Operations are stan-
entiation? Authentic experiences. dardized, simplified, and tightly controlled, focusing on inte-
Requirements: grated, reliable, high-speed transactions that result in high in-
Make long-term commitment of three (3+) years ventory turnover.
Keep content refreshed; at least weekly updates To be sure, price remains the focus of Operationally Excel-
Involve customers in contributing content lent Dealerships. But they have also come to terms with the
Focus on affiliation; do not sell products or services critically important fact that they must strip out cost (people)
from the historically labor-intensive sales process.
Customer Intimacy The Dealerships best suited to an Operational Excellence
A Dealership delivering value via Customer Intimacy strategy include Chevrolet, Ford, Honda, Hyundai, Mazda,
builds bonds with customers like those between good Nissan, Toyota, Volvo.
neighbors. Customer-intimate Dealerships make a business to So how does a Dealership create Operational Excellence?
know the people it sells to and the services they need. Operational Excellence requires fundamental restructuring of
people and processes which is the focus of the rest of the book.
4 Strategyview Executive Book Summaries®
Summary: ADAPT OR DIE
by Kurt Baumberger
Part Three: Get It Done The Tiger Team should rate each competitive Dealership
from +5 to -5 against these core value dimensions. The team
should draw on its collective knowledge where your Dealership
has lost business and why the business was lost. This will re-
The implementation of a ―go to market‖ strategy requires sult in an accurate, fact-based assessment.
the leadership of your organization, a Tiger Team. The ideal Next, your team will rate your Dealership on the same core
Tiger Team should include a coalition of Dealership personnel value dimensions. The process may reveal things that you do
and vendor partners with specific roles. not want to face. Painful as it may be, this exercise must take
The Dealership personnel should include the GM, Internet place before your Dealership can be strategically repositioned
Manager, Finance Manager, and Fixed Operations Manager. to compete and win.
The vendor partners should include the Dealership’s Website
Provider, CRM Provider, DMS Provider, and a Professional Round 2: How Do We Need To Change?
Services Integrator. You are making a fundamental investment
In Round 2, the Tiger Team shifts from agreeing on what
in your future – time to adapt or die. So you must invest the
the Dealership is today to agreeing on how the Dealership
time and effort to have this transition led by your best and
needs to change to achieve its business objectives.
To get started, the Tiger Team should explore the follow-
The Tiger Team needs to spend time coming to grips with
ing questions for each value dimension discovered in Round 1:
the reality of the situation. Do not let them make simple as-
sumptions or take short cuts. The goal in this stage of develop- How does each dimension of value affect the Dealership’s
ment for the Tiger Team is to establish a common understand- customer expectations?
ing about the current health of the Dealership. How do your closest competitive Dealerships achieve
It is crucial that the Tiger Team conduct three rounds of
How is the operating model of these Dealerships designed
to attain these levels of performance?
Round 1: Where Are We Today?
Round 2: How Do We Need To Change?
Round 3: What Needs To Get Done?
Round 3: What Needs To Get Done?
In Round 3, the Tiger Team should list all of your ―touch
Round 1: Where Are We Today? points‖ – places where your Dealership interacts with your
In Round 1, the Tiger Team must come to an understand- customers. You’ll be amazed at how many there are and how
ing of where your Dealership currently stands and evaluate its each one either adds or subtracts to what you want to be in cus-
performance honestly. It is important to tap into the customer tomer’s minds.
experiences of ―front line‖ Dealership personnel to answer: The Tiger Team should report back with thoughtful an-
What are the value dimensions customers care most about? swers to the following questions:
For each dimension of value, what percentage of custom- What are all of the customer ―touch points‖?
ers focus on it as their primary or sole decision criterion? How does the new strategy change each touch point?
Which competitive Dealerships provide the best value in What resources are needed to implement the change?
each of these value dimensions? How will these changes increase revenue and profitability?
Where does your Dealership stand relative to its competi- What critical factors will make this solution successful?
tors along these dimensions?
How will the Dealership make the transition to this new
Where and why does your Dealership fall short? strategy over the next 30, 60, 90 days?
For example, Dealerships implementing a Operational Ex-
This is where a Professional Services Integrator really
cellence ―go to market‖ strategy may discover that the dimen-
makes a difference. They can provide a set of store operating
sions of value are hassle-free transactions, wide product avail-
processes that are easy to implement and sustain.
ability, and fair price.
5 Strategyview Executive Book Summaries®
Summary: ADAPT OR DIE
by Kurt Baumberger
The Silver Bullet: Behavior Tracking Virtual Showroom Critical Components
Now that you have identified your customer touch points, There are three critical components to all retail virtual
it is time to deliver them through your primary sales channel, stores. First, content is king. Second, process is critical. Third,
the Internet. You’ll recall that over 90% of customers use the the buying process must be automated.
Internet before they interact with a Dealership. Now, you need Content: Let’s start with content. Your website needs to
to create a 24/7 sales solution that automates and micro- do more than list your inventory. It needs to be surrounded
manages that last golden mile using a “Virtual Showroom” with information about each piece of inventory much the same
that gives customers the access and freedom they want. way that Amazon provides pictures, video, specifications,
Fortunately for the automotive industry, ―Brick and Mor- manufacturer editorial, and 3rd party editorial reviews.
tar‖ retailers have already created a clear blueprint of what is Process: While any website can be loaded full of content,
necessary to build a Virtual Showroom designed to meet the without a clear buying process, these websites are nothing
needs of the Internet customer. Even better, instead of trying to more than ―brochure-ware.‖ These types of websites employ a
build your own Virtual Showroom, you can easily add a web- ―Search and Destroy‖ approach that forces customers to shop
based SaaS (Software as a Service) system to your current in a random process.
CRM and DMS to provide a comprehensive solution. These
The key to success is the ease of use and natural naviga-
SaaS solutions provide a flexible, low cost way to get into the
tion that the website provides for the customer. Customers are
accustomed to an online shopping process that flows in a step-
But the most important advantage to Dealerships creating wise fashion, yet is flexible enough to allow customers to
their Virtual Showrooms today is the recent development of change their minds, skip ahead, or start over. Virtual Show-
Behavior Tracking. Behavior Tracking is the process of iden- rooms must have a built-in navigation process:
tifying individual customers on the Internet and tracking their
1. Vehicle Availability - Do you have the car I want?
behaviors so you can understand their specific ―needs and
2. Vehicle Specifications - Does it have the features I want?
wants‖ based on their online activity. Behavior Tracking trans-
3. Vehicle Price - What’s your best price?
forms the Internet from a ―black hole‖ to a sales process where
4. Vehicle Accessories - What can I add and for what cost?
customers move themselves down the sales funnel without the
5. F&I -What about warranties or other options?
Dealership lifting a finger.
6. Trade-In - How much is my old car worth?
7. Financing - Can I get approved for a loan?
Behavior Tracking Sales Alerts 8. Appointment - When can I come in?
1. Alerts tell your Dealership that a specific customer (name,
Yet, most Dealership websites today simply declare,
phone number, email) is looking a vehicle online (year,
―Here’s what we’ve got. Good luck.‖ There is no navigation
make, model) in real-time.
process to guide customers where you want them to go.
2. Alerts summarize all behavior for a given customer regard- Automation: The final piece of the puzzle is to automate
less of when they began their buying process. each step in the buying process. What you are doing through
3. Alerts can suggest how to follow up based on an individual this automation is allowing customers to move themselves
down the sales funnel.
Once implemented correctly, your Virtual Showroom
4. Alerts can be aggregated overnight to deliver daily “follow transforms a nameless ―Unique Visitor‖ on your Dealership
up” tasks for every salesperson or Manager. website to a known Internet Lead. And with Behavior Track-
5. Alerts can show which sales lead sources deliver “hot” Inter- ing your Dealership will be completely armed with information
net Leads based on how leads behave. about an individual customer’s ―needs and wants‖ to drive ap-
pointments and close deals.
6. Alerts allow Managers to oversee how Internet Leads move
Implementing these critical components will immediately
through your Virtual Showroom just like they monitor your
reduce operating expenses while improving sales effectiveness.
“Brick and Mortar” Showroom from the desk.
6 Strategyview Executive Book Summaries®
Summary: ADAPT OR DIE
by Kurt Baumberger
Virtual Fixed Operations Am I suggesting firing all your new vehicle salespeople?
Well, before you reject this idea as shear lunacy, let me tell you
After you’ve built a process driven Virtual Showroom, the about a couple of Dealerships that have done just that.
Dealership should turn to milk the ―cash cow‖ of the business,
Fixed Operations. Once more, Behavior Tracking is the silver They started by putting in place a Business Development
bullet when building a Virtual Service Department and here’s Center (BDC) that hired only women between 40-50 years old
where the power of Social Media can help. and paid them $15/hour without the traditional bonus for ―Set
Appointments.‖ These women were trained on the different
Social Media is designed to be highly accessible and scal-
products sold at the Dealership.
able. It’s a way for you to transform your Fixed Operations
service message monologue (one to many) into a viral social Then, young women between 21-29 were hired as Dealer-
message that can be shared among friends and family (many to ship “Ambassadors.” These Ambassadors greet customers as
many). they walk into the Dealership where customers are surrounded
Imagine opening up a new communication channel with by signs that say, ―Putting FUN back into buying a car!‖ The
your customer base on their mobile phone. Now imagine your signs explain that no one is on commission and promises to
service department promotions going ―viral.‖ That’s the power make your visit the best experience you’ve ever had.
of Social Media—let customers do the work for you. The Ambassador takes the customer through a checklist of
Unfortunately, there is a lot of ―noise‖ about creating a activities. Once completed, the Ambassador asks if the cus-
Facebook page or a Twitter connection. But these forms of tomer would like to purchase the vehicle. If the answer is yes
Social Media don’t advance customers down the sales funnel. or maybe, then the customer is escorted to a Finance Manager
However, a smart phone Service Department application com- with a guarantee that the deal will be done within 30 minutes.
bines a specific offer with a way to immediately respond.
What’s Been Gained?
Do You Have The Right People? The Dealerships smart enough to ―fire all of their salespeo-
Over the last four years the economics of every Dealership ple‖ have gained a tremendous amount even during difficult
has drastically changed. New car profits have plunged into economic times. Here’s a partial list of what they’ve gained in
negative territory and new car sales are now a loss leader. a short period of time:
Increase sales 5% vs. industry decline 20-40%
Dealership Net Profit Contribution
Average $1,500-2,500 gross profit on new vehicle sales
Reduce operating expenses 30%
Reduce advertising expenses 30%
Reallocate 50% of advertising expenses to online
Limit turnover to 15% for full-time employees
There are a host of gains that are more difficult to quantify.
These Dealerships report a much higher level of enthusiasm
and teamwork. The GM’s uniformly report a palpable sense of
pride of ownership within the Dealership and more affection
between customers and the Dealership.
Making such a radical change is probably not something
Seemingly overnight, the two profit levers of the business most Dealerships feel comfortable embracing. But there is a
became Pre-Owned vehicle sales and Fixed Operations. We’ve middle ground.
already discussed the necessity to build a ―Virtual Showroom‖ Pre-owned vehicle sales remain a key lever of the Dealership
and ―Virtual Service Department‖ to meet the demands of to- business model. Specifically, there is more profit to be made
day’s customers and strip out costs along the way. So now the on pre-owned vehicles so there is more room for sales commis-
question is whether you have the right people to affordably sell sions to be paid. And selling pre-owned vehicles requires more
new vehicles where you make little or no profit? sales skills since there is inherently even less trust between
7 Strategyview Executive Book Summaries®
Summary: ADAPT OR DIE
by Kurt Baumberger
buyer and seller. Customers want to know about the vehicle’s Demand Metric Industry Best In Class
history, what’s been done to improve its performance, what’s Benchmark Dealerships
covered under the manufacturer’s warranty, what’s covered Website Unique Visitors 3,000 5,000
under the Dealership’s warranty, and more. While many of
% Unique Visitor Converted 3-4% 8-12%
these processes can be automated online, pre-owned customers
to Internet Lead
are more willing to work with a salesperson to address their # Website Internet Leads 90-120 400-600
issues and specific concerns.
% Internet Lead 30% 75%
Part Four: Measure, Refine, Repeat Appointments
# of Internet Lead 27-36 300-450
Key Business Indicators Appointments
% Internet Lead 50-67% 75%
Dealerships measure all kinds of things. A lot of Dealer- Appointment Shows
ship measurements are great – number of appointments, num- # Internet Lead 14-24 225-337
ber of appointment shows, and number of units sold. And
% Internet Lead Appt. 50-67% 75%
some Dealerships drill down further and measure traffic, deals
Shows Sales Conversion
lost to bad credit, and the number of ―Be Backs.‖ These efforts
# Internet Leads Sold 7-16 168-253
are absolutely critical because all that matters at the end of the
day is driving profitable sales. % Internet Lead Sales 8-13% 42%
And that’s where the conundrum lies. When I visit Deal- Conversion Rate
erships, they can tell me how many units they’ve sold and how # Internet Leads Blown Thru 83-104 232-347
much money they are losing or making. But they can’t tell me
how they got customers to show up and buy. % Internet Lead Blow Thru 92-87% 58%
Measure Customer Demand
So how does a Dealership measure customer demand? Do
The writing is clearly written on the wall for the traditional
you know how many unique visitors visit your website each
―Brick and Mortar‖ Dealership. You need to take the plunge
month? Do you know your conversion rate from your website
and build a strategically sound Internet infrastructure sooner
to Internet lead? Do you know your Internet Lead conversion
rather than later. It is time to Adapt Or Die.
rate to sales for the leads originating from your website?
Don’t let your Dealership’s epitaph be listed as:
All of these questions are measurements of demand for
your Dealership and your products. All of your marketing ef- We should have tried something different.
forts should be specifically designed and executed to drive de- We should have asked for help.
mand. And you spend tens of thousands of dollars every We lost our courage to change.
month. Do you know what you get for that investment?
Ask for help from Professional Service Integrators who are
And do you know how many customers visit your website ―cars guys‖ and know the business inside and out. After all,
for Fixed Operations? Do you know your conversion rate from failure is not an option.
your website to Service Appointments? Do you know your
gross profit on Service Appointments originating from your Integrator Contact Info Experience
website? Kurt MarketSquare Solutions Apple, Amazon, Coca-Cola,
And if you don’t know these things, then how can you Baumberger firstname.lastname@example.org Dell, Ford, GM, Honda
make intelligent business decisions about where to allocate Tom Fee Verity Partners Booz & Co. Consulting
resources? How do you know where to increase automation to email@example.com Retail & .Com Consultant
strip out costs? How do you determine if your people (your Steve Kain-Stauning Reynolds and Reynolds
highest variable cost) are focusing on the activities that will Stauning firstname.lastname@example.org Asbury E-Commerce
maximize your Return On Investment (R.O.I.)? David Kain Kain-Stauning Dealer Principal
email@example.com Founder, Ford Direct.com
8 Strategyview Executive Book Summaries®