How do you help an industry that won’t change?

Late in 2006 I developed software to help car dealers automate the request-for-quote process on their websites. The simple interface allows website visitors to search inventory, select a car and instantly receive an actual price, not MSRP and not invoice, but a bona fide purchase price. Up to now, the only way to shop for a car on the internet is to visit a website, fill out a contact form and wait for a salesperson to call or email. It took some time, but by late 2007 I was ready to start peddling my idea. I went to dealers in New Jersey and New York showing them how they could satisfy and get contact information from more of their online visitors, build a database of email addresses for marketing purposes, and gain an edge over their competition.

I had spoken with literally hundreds of consumers and I asked them; if they were in the market for a car and knew of a website where they could search inventory in real-time, select a car, and receive an immediate purchase price, would they use it? The response was a resounding, yes, they would use it. Armed with this feedback and having ‘mystery shopped’ hundreds of dealers who failed to deliver a “Quick Quote” I figured my product would be an overnight success. I overestimated the willingness of my market to change. Wrongly assuming that car dealers would embrace the opportunity to actually reap the benefits of the ‘net, and provide a satisfying customer experience, I pushed on finding the odd dealer ready to change.

My company is called RedNumbat, the ‘Numbat is a little unassuming icon added to a dealer’s homepage that proclaims “Click me and I’ll get your price in seconds!” Customers began to click and get their prices. I spoke with them, and they were surprised and delighted to actually get an instant price without having to talk or email with the salesperson. Although many thought it was just a ‘come on’ from the dealer, they gave it a try anyway. Were the dealers right? Did customers actually prefer going to the showroom and dickering over price?

Dealers fear that they won’t make any profit if they have to post prices on the internet. They would rather do business the old way, where a guy wanders into the showroom and then worn out after negotiations, he “takes it home today”. Those days and those guys are running out. By most accounts 90% of car shoppers will access the internet prior to making a purchase. Customers are routinely better informed than the salespeople they do business with. Gone are the days when a car buyer walks in knowing little about the car, the financing, the warranty, the accessories or the trade-in value. In fact, profits are going down on the sale of a new car, and they have been for years. However, customers truly don’t expect a dealer to lose money selling a car, indeed if a dealer treats them with respect and is “in the ballpark” on price, the customer will buy. Surveys have shown that car buyers identify price as the third most important criteria in their decision to buy from a particular dealer.

So, should a dealer fear reduced profits by giving out prices over the internet? No more than they should by advertising a price in the newspaper or on the radio. When I sold cars back in the 80’s, we had a policy of not giving out prices over the phone. The customer had to come in if they wanted a price. This strategy never made for a warm first meeting, but we got some of them to come in. Today, if a dealer stalls, or fails to provide a quick quote when asked, the customer will move on. Contrary to dealer belief, the customer isn’t left thinking that you are concealing ‘the lowest’ price. The opposite is true however, and the customer believes that the reason for not giving a price is because it’s the highest. So, the dealer who doesn’t give out a price doesn’t even make the customer’s ‘short-list’.

Car dealers spend a tremendous amount of time and money driving people to their websites. They talk the talk at the factory meetings. They say it’s time to leverage the internet to increase sales. But deep down they long for the old days. But they can’t have it both ways. That is, the dealer wants to turn the website shopper into a walk-in shopper who can be manipulated, bullied and ‘stuffed’ into a car. They cannot, the best they can hope for is to convert the website shopper into a walk-in buyer. And the way to do it runs counter to decades of dealership culture. Instead of stonewalling and wearing the customer down, today’s dealers need to address questions promptly and recognize that customers don’t always want to build a relationship with them. Relationships will follow, but the time to ask for an exclusive relationship is not at the point of sale. You earn a relationship, you don’t ask for one on the first date.

I hope that dealers begin to take this seriously. The current internet car shopping model is broken, badly. Just try it. Whether you wind up a so-called content site, a manufacturer site, or a dealer site the exercise is the same. You click the button that says “Free Quote” and you fill out a long form. You hit ‘submit’. You wait for a reply. And 30% of the time, a reply never comes. Can you imagine BestBuy.com not giving you a price on a new camcorder? Or Amazon.com making you wait for a call to get the price of a book? It sounds absurd I know. But this is how it is in the retail car business, and very few dealers within this business are ready to change.

If car sales were going well, I could understand a bit of resistance to change. But this year automobile sales are dismal. There will no doubt be fewer dealers next year than there are this year. Domestic vehicles are worst hit. Interestingly, the domestic dealers are the most reluctant to change. I have spoken with hundreds of dealers over the years. And right now, morale is at an all time low. Competition is fierce. Profits and sales are down. And many of these dealers will ride this wave to insolvency, rather than try to change. Perhaps it’s a certain pride, or maybe there’s a code among dealers that providing transparency in pricing is the kiss of death? But I don’t think it’s either.

We’re now up to almost 50 dealers in the NY metro region and things are starting to turn. A marketing campaign aimed at the car buying public is raising awareness of the ‘Numbat and the service we offer. And now a consumer can actually visit our web portal and get up to three quotes from one or more dealers with just one-click. To the lay person, it seems so normal, but to the vast majority of car dealers it seems so strange.