Consumers Moving Closer to Buying Cars Online

Auto retailing is moving closer to the day when many customers will completely, or almost completely, purchase cars online, predicts Mark O'Neil, CEO of DealerTrack, an automotive software provider.

“The online car purchase will become main stream, but it won't happen overnight,” he says during a CEO panel discussion at the conference.

“Two years from now, 75 million Generation Y shoppers will be in the automotive market,” O'Neil says. Because of their affinity to the Internet, “much of what now happens in the store will happen online. Clearly, it's evolving in that direction.”

Other impending trends he foresees include:

The finance and insurance and sales departments will grow closer together, because the customer wants a more efficient, faster process.

Dealers will rely more on richer, real-time data for inventory and pricing decisions. “In the morning, you will look at data showing where the market is today,” he says. “It will upend the way dealers sell cars and auto makers make them.”

Joining O'Neil on the executive panel are Chip Perry of AutoTrader.com, Mark Bonfigli of Dealer.com, Mitch Golub of Cars.com, and John Holt of ADP/Cobalt.

Perry predicts a “smoothing of the process” from customers shopping and researching cars online, then heading to the dealership for the off-line transaction. “We are not there yet, though.”

Important business involving a car purchase takes place at the dealership, but some of that activity has shifted online and will continue to do so, he says, citing Web applications that estimate trade-in values and calculate monthly payments based on credit scores and down payments.

“Those online activities will get the customer closer to the transaction at the store,” Perry says.

Many consumers want to spend as little time as possible at a dealership, notes Dealer.com's Bonfigli. The vehicle test drive is the main reason people go to a dealership, he says. “A lot of customers don't want to deal with the dealer. They want the product; that's why they come to see it. But the dealership experience matters.”

High employee turnover can hurt the efforts of a dealership offering satisfying purchase experience, Bonfigli says, referring to a problem affecting many car stores. “The turnover is insane in our industry.”

Dealers should heed the social-media phenomenon, he says, noting close to 800 million people are on Facebook worldwide. “It is not emerging. This is your marketplace. People on Facebook are saying things that are great, or not great, about you. Adopt as a mantra, ‘How can I be friendly to these people?’”

Bonfigli offers advice: “Key advocates” who praise a dealership online deserve special treatment in return, such as service specials and deals. “Invest in those loyal customers who come in for service,” he says. “Invest $5,000 a month in those people to keep them loyal and jazzed.”

Cars.com's website this year began offering dealership reviews, which have helped dealers sell cars, Golub says. “Leads are four times more likely to convert to sales when the dealer has reviews on a website.”

About 90% of reviews are valid and pass Cars.com's screening, Golub says. Some phony ones have been scratched, including “a couple from dealers.” Most are positive.

The average dealer rating is 4.4 out of 5.0. Two dealers, miffed about getting some bad reviews, pulled out of Cars.com's opt-in program.

“But one came back five days later and the other seven days later,” Golub says. “They told us that after they got over their anger, they found their stores did have problems that warranted the bad reviews. And they fixed the problems.”

Although some dealers fear getting rapped online, “reviews are one of the greatest things that have happened to dealers,” he says.

Holt, who heads the Cobalt digital marketing unit of ADP Dealer Services, says online car shoppers encounter “a lot of noise, and we need to break through that with one message around one process.”

Doing that will lead to loyal, delighted customers, he says. “The Internet has not reduced customer loyalty but it has changed the way it takes place.”

He cites a successful launch of the Chevrolet Cruze as an example of bringing together key product and marketing elements. Since its introduction in late 2009, the Cruze has become the best-selling compact car in the U.S.

“It's not random that the Cruze became a best-seller,” Holt says. “Chevrolet has a capable dealer network, and General Motors brought a good car to market.”

Also playing a role was an “aligned” digital-marketing campaign that was “incredibly linked” and offered a consistent message across national, regional and local advertising, he says.