“It's the golden age of automotive retailing,” says Lloyd “Buzz” Waterhouse, who as CEO of information technology giant Reynolds and Reynolds Co., sees three “mega trends” affecting dealership operations.

They are:

  • The empowered consumer who, largely because of the Internet, enters the dealership informed, serious about buying and knowing the invoice price.
  • A move from a standard four-walled dealership towards “a true multi-channel store” making the most of showrooms, phones, information e-kiosks on the floor, an active Internet presence and targeted mailing.
  • The “tethered” customer whose car is equipped with a mobile computer that does online diagnosis, sends service alerts (70% of auto malfunctions are predictable with such a system) and can be used to schedule service appointments. “This is a whole new thought process for retailing, and it can be made into a loyalty tool,” says Waterhouse.

It's a different way to sell, service and stay connected with customers.

Waterhouse says to capture, control and convert business opportunities emanating from those trends, dealers need to:

  • Spend less on broad-based marketing (“in auto retailing, TV has the worst ROI than any other media,” says Waterhouse) and more on establishing narrow-band relationships with customers using information technology data.
  • Move from a disconnected “bump-and-grind” selling system to an integrated and disciplined process that stays connected to consumers as shoppers, buyers and owners.
  • Leverage information assets. Think of them less as an expense and more as “a strategic weapon,” says Waterhouse.

Auto dealers spend about 0.50% on information technology compared with 2% for the retail industry in general, according to Waterhouse, a 26-year IBM veteran before joining Reynolds in 1999.

He says dealers and car companies spent $18 billion on local market advertising last year. Moving 5%-10% of that to IT products that leverage and target customer data bases would provide “a huge return,” he says.

“Don't misunderstand me. Ads are extremely important. But moving some of that money for leads and closings would be tremendous,” says Waterhouse.

But it can be a hard sell to dealers.

Says Waterhouse, “There's one group of dealers that's very receptive and thinking about relationship building. Then there's a group with a different model of looking for high traffic, blasting out from there and hoping to get as much as you can out of it.”

He says the keys to success for any dealership using customer retention management systems are a commitment by the dealer principal, staff training, then the technology itself.

“I always mention technology third,” says Waterhouse. “It's not the holy grail. If you don't have leadership and training, it's easy to fail.”