“So, Did You Buy the Car, Dad?” A Look at How Tech Spend Really Does Matter (Part 2)

- January 3, 2014 2:36 PM
Categories: Guest Post, Innovation, Spend Management, Technology | Tags:

This is Part 2 of a two-part post by David C. Wyld, Professor of Management at Southeastern Louisiana University, on process reinvention and car buying. Click here to read Part 1. 

After my wife and I decided which car to buy, the finance manager I was speaking to agreed that technology hasn’t really cut down on the buying process. According to industry statistics, the average time that it takes for a customer to complete the car buying process – from test drive to negotiation to financing – is four hours, regardless of car make. He said that while dealers and manufacturers have been making the behind-the-scenes flow of information work faster, they still lose customers at every stage of the process.

Thus, time is a major concern for every car brand and their individual dealers, and there is indeed some managerial frustration that despite how they continue to make substantial investments to give customers more information on the car shopping experience, the actual, mechanical process of buying a car takes too long.

Today, buying a car today ranks only behind buying a home in the high-dollar, high-risk category of personal decisions. And, selling cars is much akin to selling homes. Just like the real estate agent’s compensation is based on getting a customer, in the classic line from Glengarry Glen Ross, “to sign on the line, which is dotted,” the same is mostly true for car salespeople.

So, this author is not saying that we should find a way to buy a car in less time that it takes to have a pizza delivered from Domino’s. The size and scope of the decision does merit a time investment. However, with every passing minute, the risk that the customer will have a reason to walk away grows, meaning no sale and no income for anyone involved. And a lost customer can mean more than a single lost sale, with the average car buyer making 10-12 vehicle purchases over a lifetime. For salespeople, the sales interaction is indeed a “zero-sum” game, either succeeding and receiving a commission on that sale (and perhaps engendering referrals and repeat business) or failing, resulting in a total loss of that time invested with the customer, failing an incredible sales recovery effort to get them back in the door.

So what is the lesson to be derived from the way car sales are still being conducted today? As a management professor and consultant focused on procurement and supply chain issues, I think this story illustrates why spend should indeed matter for the major carmakers and their dealers, as well as for your organization. Think about the billions that have been spent on IT in the auto industry aimed at the customer. Likewise, there have also been billions spent by automakers and dealers specifically, along with a network of third parties (financial firms, auto warranty companies, and even the companies that provide those mysterious interior and exterior coatings) to facilitate the transaction.

From my perspective, while we have great websites today that inform customers and arm them with far more information on vehicles than ever before, when it comes to actually buying the car, those monies spent on tech might as well have never been spent. Whether it is not spending on the right type of technology and/or not having management that can effectively implement and leverage that technology to make people’s jobs easier and ultimately bring about more sales, CEOs have to ask more questions about the ROI on a whole host of tech spending. Too often, CIOs and CTOs can get wrapped up in functionalities, capacities, and capabilities, without asking how we make the job of our people on the front lines – and the “work” of our customers interacting with them – easier.

I think of all the metrics we use to measure work today, everywhere from call centers to retail to manufacturing. Tech spending would be far more effective if we think about how to use the technology better in face-to-face interactions with customers. To be a viable player in 2014, yes, you need to have a great web presence and, as car dealers actually do today, offer a way to buy your product online. However, think about the increase in productivity and sales that auto dealers and car manufacturers would see if they could reduce the average four-hour sales process to three, two, or even one hour. What would that mean for their salespeople? How would it revolutionize things for customers? And as a note of caution, we middle-aged customers may accept the way business is done based on our past experiences, but car dealers should be concerned about the 20-somethings.

This writer will give you the example of his teenage sons, who sat in the comfortable back seat of the family truckster when we first stopped at the dealer where we ultimately bought the car. Armed with their phones, they soon lost track of how long we had been inside, making first contact with our salesman, looking at a few models on the showroom floor, and picking-up brochures. We had been inside the dealership for about 45 minutes, and when we returned to our soon to be replaced family car, my 18-year-old asked (and really expected a yes), “So, did you buy the car, Dad?”

Think about that. In an era where tech has made information readily available, where we expect not only pizzas, but a whole slew of items of various price ranges, to be available in 30 minutes or less, your customers will expect your tech to be able to deliver a customer experience equal to or surpassing their already high – and rising – time and quality expectations. Keep this in mind with every tech investment you make. You will be surprised at how much more effective that spend will be at producing real metrics at the most important point: the bottom line!

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