By Gregory Arroyo
I was fooled, at least during my days covering the F&I trade for an industry publication. And I was reminded of that on Jan. 27. That’s when Automotive News published an article on Dale Pollak’s “new truth of used-car profitability.”
My excuse is I covered F&I, which meant I was limited to “drive-by” reporting when it came to the inventory-management space. What I needed was a connection, and, well, the credit crisis that preceded the Great Recession of 2009 and its impact on inventory-management strategies provided just that. That led to this December 2009 article: Stock Up/Stock Down.
The piece quotes the two leading voices in the inventory space at the time: Pollak and the team at Inventory+. Both were leading the charge in turning inventory-management solutions into pricing tools. Inventory+, according to my sources, was the choice of many of the industry’s big dealer groups, while Pollak was the newcomer. And, yes, he was making a lot of noise at the time.
I remember the blog he wrote in May 2008 (The Core is Rotten), where he bashed Inventory+ and the Ideal Inventory Model that serves as its foundation. So you can imagine my reaction when I saw the video Dale posted in late 2018, the one in which he semi-admits that maybe he was wrong. And you can imagine my reaction when he doubled-downed in that recent Automotive News article, blaming dealers for not paying to get his fix for a problem his software created.
What troubles me is my brethren on the media side have decided to let Mr. Pollak off the hook, allowing him to pin margin compression on some “dramatic turn” in the spring of 2016.
Interestingly, Dale rolled out Stockwave in March 2016, but, as you guessed it, his press release and Automotive News failed to mention that. Instead, Dale uses both platforms to tell dealers to adopt his new software “if they want to be profitable.”
Well, Dale, I’m not sure your customers ever fully embraced your now-debunked theory. “I’d never use [vAuto] the way Dale Pollak … recommends you use it,” wrote Jim Ziegler in a July 2015 column in F&I and Showroom magazine. “I suggest using it as a buying and selling guide, but not a pricing guide. I just believe every used car should have a chance to make a decent profit.”
Now, Pollak has gone from managing inventory like trading stocks to managing it like trading precious metals. And according to his team’s analysis, dealers wrongly managed their best investments, their platinum cars, like their worst investments, and vice-versa. So, the trick is to hold onto those profit drivers and rid your lots of those bronze cars.
In other words, find your core inventory.
So, how will you determine your bronze and platinum vehicles? Well, Dale and his team have gone and developed a new secret algorithm that weighs three main factors — cost of goods being one of them. I singled out that factor because Dale never mentioned cost of goods before, but the Inventory+ rep I spoke to for my 2009 article did: “Simply turning vehicles and selling them quickly is not the answer, because it’s a balance between cost of goods, profitability, and how quickly you can sell it.”
He then added this: “The internet is an incredibly powerful and wonderful thing, but it can also be a wasteland of information.”
See, like Pollak’s software, Inventory+ does show users how competitively priced the market is on a specific vehicle based on how other dealers are advertising that vehicle or a similar vehicle online. But we take it a step further by displaying a market’s actual transactional data. That means the dealer doesn’t have to wonder if the price advertised online is outdated because the vehicle was sent to auction.
What really separates Inventory+ is our algorithm (yes, we have one, too) analyzes a dealer’s transactional history — about 90 days’ worth — to determine the dealership’s core inventory, or vehicles that deliver above-average grosses in below-average turn times.
So, we base our recommendations on your dealership’s unique DNA. The reason that’s important is relying on market data alone — like Pollak’s solution does — means other dealers in the same region are getting the same recommendations, which increases wholesale costs for the same vehicle (I’m sure Cox loves that). That leads to those profit-squeezing, race-to-the-bottom pricing wars. Sound familiar?
And by analyzing your historical transactional data, Inventory+ tells you what your customers are buying — not what your competitors’ customers are buying 25 miles down the road. And if you do well on a particular vehicle, there’s no reason to get down in the gutter with every other dealership engaged in a pricing war. You simply need to differentiate your profit driver with the photos you take and the description you write.
See, Dale, it’s always been “profit time” at DealerSocket.
Are you looking to beef up your employee training program, or are you wondering how to help a struggling salesperson? Customer Success Manager Erik Post returns with a tip on how to use the unsold pipeline in DealerSocket CRM’s Daily Checkout Report to identify opportunities for training and improving your employee one-on-ones.
By Gregory Arroyo
Increasing CRM engagement is challenging. Hey, sales talent and technology don’t always mix. Still, the one thing I noticed over a decade covering this industry is talent that produces month after month and year after year typically adheres to a strict process — one that is often driven by technology.
With that in mind, I’d like to share a couple of process tips that have helped some pretty successful operations increase CRM engagement while preventing opportunities from falling through the cracks.
Adam Nobles is the internet manager at J. Pauley Toyota in Fort Smith, Ark., and he’s a big fan of DealerSocket CRM. “You guys have done a phenomenal job,” he says. “To me, the biggest thing is I can customize it.”
He points to the ability to customize reminder labels as an example. DealerSocket CRM does offer a list of generic reminders, but users can customize them after clicking on “Add New Reminder.” In J. Pauley’s case, Nobles created three key reminders: “One Week Follow-Up,” “Day 3 Follow-up,” and “5 PM Call.”
Nobles says the latter is designed to tell a salesperson that an unsuccessful attempt to reach a customer was made that morning. “They were probably at work,” Nobles says. So when that “5 PM Call” reminder pops up at, yes, 5 p.m., the salesperson knows to make another attempt at reaching the customer.
The same goes for the dealership’s “One Week Follow-Up” and “Day 3 Follow-Up,” which immediately tell a salesperson or internet staffer what task to perform.
Ryan Huang is the sales manager at Great Lakes Honda in Akron, Ohio. He also is a big believer in CRM. “Whether it’s DealerSocket or one of the other popular ones, you have to use the CRM to its full potential,” he says. He and other sales managers made CRM and process training a key focus in 2019. They also made a few process tweaks to encourage engagement.
The three-day and 10-day follow-up tasks the management team created for themselves are a great example, and they’re Huang’s favorite. Not only are they designed to ensure proper follow-up, they force the dealership’s sales and BDC teams to enter notes into the CRM. More importantly, it ensures sales managers never miss a customer.
The process works like this: If a fresh “up” enters the showroom but doesn’t buy, the salesperson who engaged the prospect has three days to follow up. “Seventy-two hours after the customer leaves our dealership, the CRM sends me a reminder to review the opportunity to make sure proper notes were taken on that customer, and that the salesperson is completing proper follow-up,” Huang says. “If they aren’t completing proper follow-up, I have the opportunity to go straight to that salesperson and say, ‘Why haven’t we called this customer’ or ‘Why haven’t we emailed them.’ And if there aren’t any notes, God forbid I catch it.”
If there aren’t notes or a follow-up was missed, Huang will type in a few notes of his own: “One of my favorite things to do on the third day is, if there aren’t any notes in there or the salesperson hasn’t followed up, I’ll type a note for the salesperson to see,” he says. “And I’ll write, ‘Why didn’t you write any notes on this customer? What’s going on with them? How can I help?'” Seven days later, Huang receives the “10-day follow-up” task, which allows him to see if the salesperson replied.
“I can see if they took action after I wrote those notes,” he says. “And if they didn’t take any action and it’s seven days later, whoa.
“So those two tasks for fresh-ups have truly helped us, and it ensures that no customer slips through the cracks,” he adds, noting that the dealership will soon implement a similar approach to RevenueRadar leads. “Another way it’s useful is, let’s say the salesperson went on vacation. I get the three-day call task and I get the 10-day, allowing me to follow up with that customer because I can see the salesperson is on vacation or not at the dealership for whatever reason.”
Gregory Arroyo is the former editor of F&I and Showroom and Auto Dealer Today magazines. He now serves as manager of strategic content for DealerSocket. Email him at email@example.com.
By Gregory Arroyo
The thing that’s so mind-blowing about the California Consumer Privacy Act (CCPA) is its timing. It arrives just as technologies like artificial intelligence and machine learning are about to usher in a major transformation in how dealers stay connected to their customers.
The state of California estimates the CCPA will protect over $12 billion worth of personal information that’s used for advertising in California each year. And as Brian Maas, president of the California New Car Dealers Association (CNCDA), put it, there is “no federacy privacy law with the scope and breadth of this landmark piece of legislation.”
“The biggest challenge is knowing where to start, because the law is so extensive and overwhelming,” Maas says, noting that the association recently published the second edition of its “CCPA Handbook” and is expected to host a series of seminars later this month addressing CCPA compliance.
For California dealers, Jan. 1 — the statute’s effective date — marked 182 days to get into compliance before state Attorney General Xavier Becerra begins enforcing the toughest privacy rule in the United States. State estimates put the cost of compliance at $75,000 in the first year, $2,500 annually.
By the way, fines for each intentional violation is $7,500.
Truth is, this blog entry isn’t directed at California dealers; it’s directed at dealers in Connecticut, Colorado, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Rhode Island, Texas, and Washington State. Because what happens in California tends to spread, and the states I listed are considering taking similar steps to protect consumer privacy.
The California statute grants consumers the right to know what categories and specific pieces of their information are used, shared and/or sold. It also gives them the right to opt-out of the sale of their data. They can also request that you delete their information.
Honoring those rights means California dealers must determine “the categories” of consumer data they collect, then map out the flow so you know where it’s going. You then need to take steps to ensure the data is protected. Wait, there’s more.
The CCPA also requires that you have a consistent method of tracking where each piece of consumer information goes and how it’s used. And if a customer asks for his or her info to be deleted — and, yes, your website must offer this capability — you must ensure you and all your vendors comply.
All those activities mean coordination with your software vendors is essential. If your planning to make the trip to Las Vegas next month for the 2020 NADA Show, make sure to click here to schedule an appointment with our CRM and DealerFire digital teams. We’ll be in the Las Vegas Convention Center’s Central Hall (Booth No. 3915C), where we also plan to host discussions with compliance experts on the CCPA and its spread to other states.
Now, setting up those consumer rights is a privacy notice California dealers need to hand to their customers “at or before data collection,” the statute says. Compliance guru Randy Henrick with Auto Dealer Compliance says it differs from the model FTC form in that it requires that dealers address the “categories of information described in the CCPA.” It must also inform consumers of their right to learn who their information was shared with during the prior 12 months. The notice must also inform them of their right to opt-out of certain sharing or request that certain pieces of their information be deleted.
Henrick used the word “certain” because the statute does allow businesses to retain consumer data if there is a legal basis. Think of the Equal Credit Opportunity Act, which requires that dealers retain credit applications and any written record used to evaluate the application for 25 months. Governor Gavin Newsom also signed into law a CNCDA-sponsored bill that clarifies that dealers and manufacturers can share information about consumers related to recall and warranty repairs without running afoul of the CCPA. There are questions, however, about whether other federal requirements will take precedence.
“I suspect it will be months, if not years, before we learn if that is the case,” Maas says, noting that he suspects there will be several attempts made to modify the CCPA before its July 1 enforcement deadline.
Attorney General Becerra published the CCPA’s draft regulations in October, which kicked off a public comment period that ended in December. Barring any revisions to the proposed regulations, which will require an additional 15-day comment period, the regulator is now expected to submit final text to the Office of Administrative Law. The OAL will then have 30 working days to review and approve the regulations. If approved, the rules go into effect.
“I don’t believe there will be any delay in the attorney general beginning enforcement of the law on or after July 1,” Maas warned. “We are urging our dealers to comply now.”
Since DealerSocket was founded nearly 19 years ago by co-founders Jonathan Ord and Brad Perry in Brad’s garage in California, their vision was to offer auto dealers innovative software with a deep focus on customer service. They began by creating the industry’s first-ever hosted CRM solution for dealerships. After partnering with Vista Equity Partners, they acquired four companies to expand their offering, and by the end of 2015, DealerSocket was nearly able to offer the market a full platform solution, but was still missing a key piece, a franchise DMS solution.
Our founders’ vision from several years ago of an all-in-one platform is today almost a reality. Earlier this month, I shared with you that DealerSocket signed an agreement to acquire Auto/Mate, a DMS that serves more than 1,500 franchise dealerships. Auto/Mate has in recent years become a leading franchise DMS provider, winning more than 82% of their customers from the industry’s two largest DMS competitors, and enjoying more than 98% retention year after year.
Since early 2018, when I first spent time with Auto/Mate’s leaders, I realized that our companies share similar core values, and we both have a dedicated team who care deeply about our dealership customers, many of whom come from families of dealers and have spent years of their career working in dealerships. I truly believe the combination of our two great companies offers dealers a much-needed alternative, a new choice for a full platform solution in our industry, dedicated to serving car people by car people.
Challenges you may have heard about or seen in the media about this transaction are disagreements regarding the valuation and economic terms of this transaction among our founders and other board members. There is no disagreement across our board about the strategic benefits the transaction will have for DealerSocket, Auto/Mate, and our dealers.
We have been working on the acquisition of Auto/Mate for quite some time. Throughout this period, we held very comprehensive and deliberate discussions with our board, including several board meetings and volumes of emails and calls discussing and iterating on financials and the decision to execute on this transaction. The entire process has been handled with integrity, openness, and thoroughness. We discussed and agreed on the strategic value of our combined companies, and we reviewed detailed financials, which were shared amongst all of our board members in connection with this deal. Ultimately, our board agrees on the strategic value of combining DealerSocket with Auto/Mate, and all of our board members, including myself, unanimously voted to approve the deal, except our two founders, due to economic terms related to it.
I am disappointed that these legal filings are causing a delay in completing this acquisition and ultimately delaying our ability to offer our dealers the strategic benefits of a combined offering. I look forward to completing the next steps and welcoming the Auto/Mate family to DealerSocket soon. I believe we will look back many years from now and realize that the combination of DealerSocket and Auto/Mate was one of the most impactful, game-changing decisions for our dealers and the automotive software industry.
I look forward to sharing great news of a completed acquisition with you soon.
Sejal PietrzakPresident & CEO
I am excited to share a great announcement with you as we kick off the new year! DealerSocket has signed a definitive agreement to acquire Auto/Mate, one of the leading DMS providers for automotive dealerships.
By bringing together Auto/Mate’s comprehensive DMS technology with DealerSocket’s software suite, once the acquisition closes, we will offer our dealers a unique and intelligent platform where innovative software is combined with best-in-class service.
As you may know, DealerSocket has an independent-focused DMS product, but we do not currently have a DMS product for franchise dealers. Upon the close of the deal, with the acquisition of Auto/Mate’s DMS, we will be able to offer franchise dealers a complete and comprehensive one-stop-shop solution with great technology and best-in-class service that is much-needed in the market.
We believe the combination of our two companies will be a game changer for our customers, our industry, and our two companies. Upon close, the combined company will support more than 9,000 dealerships and well over 300,000 active users.
We decided to acquire Auto/Mate to offer dealers a new alternative and a better choice for a fully integrated platform solution. After we close, we will invest significantly in a deeper integration between our products. We will continue to innovate to create intelligent applications that make your job easier and help drive increased profitability for you. For our customers who utilize another DMS provider, please know that we will continue to offer you seamless and real-time integrations between DealerSocket products and all DMS technology providers, just as we do today.
DealerSocket and Auto/Mate will continue to operate separately until an official close has been announced. For both of our companies, it will be ‘business as usual’ as we complete the steps to close, and you should continue to reach out to your normal point of contact at DealerSocket as needed. We look forward to sharing additional updates after the deal closes.
I hope you have had a wonderful holiday season with family and friends, and I wish you all the best in this new year. Thank you for your business. We value you and appreciate your continued loyalty and trust in DealerSocket.
Sejal PietrzakPresident & CEO