Four IT Lessons Learned

After years of trying to help dealers utilize IT for improved profits and smoother and more efficient operations, I started to wonder if those of us on this side of the business actually had very little new to offer to our clients.

I was starting to feel a certain stagnation gripping the business as a whole.

But several recent developments re-energized my commitment to the role of IT in auto retailing and to the power of rapid, positive change to redefine even the oldest and most sacred of our business paradigms.

The Electronic Parts Cataloguing (EPC) business serving the retail segment of the auto industry had remained virtually unchanged since its migration from microfiche to computer-based solutions in the late 1980's. The go-to-market models for EPC were fixed, in several ways.

Dealers typically paid several hundred dollars upfront to acquire the license to the software from their vendor of choice. In addition, they had to pony up at least several hundred dollars per month for each user of the catalogue. And, the EPC often had to be run on proprietary and expensive hardware.

Sales were typically made during face-to-face encounters between EPC provider representatives and dealership parts personnel. Included in the pitch process was a costly and time-consuming onsite demonstration. This led to the sale of the EPC package to the dealer for typically a minimum of five years and significantly more in the case of one of the providers.

The situation was anachronistic and more than a little restrictive. Everyone on both sides knew it.

Then — almost overnight it seemed — an EPC product called Microcat appeared. It offered essentially the same product, but with a radically different sales and contractual model.

Microcat didn't require upfront fees. Cost per user was significantly lower. No long-term contract was required, as the service was purchased on a month-to-month basis. The need for proprietary hardware was gone, as Microcat would run on any virtually any current model PC.

Moreover, almost all sales of this product atypically were completed during short phone conversations.

We asked ourselves, “What company in its right mind would risk taking such an alternative, game-changing version of an established product to market and expect to be successful?”

The answer is that it was a company very much in its right mind. It researched the EPC market, listened to clients and prospects and then delivered the requested product.

For years dealers have been saying that they disliked the long-term contracts and high dollars associated with many of their IT solutions. Dealers kept asking, “Why do commodity-like products never seem to get less expensive?”

The answer — or lack of one — has much to do with the fear on the part of the providing companies to change. Yet, in this case, the change that revolutionized the EPC business wasn't based on advanced functionality or a dramatic new technology.

The change was subtle, but elegant in its simplicity. It has forever changed the way car dealers look at EPC offerings. Four lessons (and there are probably more) we can take from this are as follows:

Then we should use those answers to change accordingly.

Matt Parsons is vice president of sales for the Automotive Retail Group of ADP Dealer Services.