With evidence mounting that telematics could help auto dealers sell cars and retain customers, what kind of value proposition will inspire them to get on board? Susan Kuchinskas reports.
As telematics gains in prominence, and the offering of connected services continues to widen, OEMs are pushing car dealers to become de facto salespeople and tech support staff for the new technology.
It’s for their own good, the OEMs argue. With telematics, dealers stand to sell more cars, increase revenue from both scheduled and unscheduled maintenance, and strengthen the loyalty of existing customers.
The problem is many dealers are not buying these arguments.
"I think telematics is selling cars for us, but we haven't figured out the revenue model,” said Wes Lutz, owner of Extreme Chrysler, Dodge, Jeep in Jackson, Mich., during the first-ever dealer panel discussion at Telematics Detroit in June. “In its present form, I don't know if I'm interested in spending extra time with the customer to explain it."
(A recording of the Telematics Detroit panel discussion – The missing link in the telematics value chain: The dealer – is available on demand through TUWebcast.)
This attitude is far from uncommon – and for good reasons.
Even if telematics adds to a dealer's bottom line, selling telematics services can be labor-intensive, distracting or just plain hard. In many cases, dealers are having to sell connectivity packages to consumers who have never heard of telematics but are used to all-you-can-eat data and free apps. Connected-car services have been created for consumers by OEMs, mostly without the dealers being involved. And it's often extremely difficult for dealers to extract, consume and exploit telematics data such services provide.
Terry Burns, president of the Michigan Auto Dealers Association, who was also on the panel at Telematics Detroit, said that charging for what is still a fledgling technology is bound to fail consumer expectations, expectations they have developed while using their mobile phones.
According to Burns, consumers may be willing to accept the buggy apps they get free of charge on their phones, but once they pay the dealer for a connected car, they'll expect the same level of knowledge and support they get in the service bay when an engine light comes on.
As a result, Burns doesn't think that the current telematics offerings support a paid model. "Don't charge for [telematics], because if you do, expectations change dramatically," he said.
Another problem is that dealers are pressed to explain these services during an increasingly narrow window of opportunity during a showroom visit.
A 2012 J.D. Power and Associates study found that 79% of new-vehicle buyers use the Internet to research their vehicle purchase at home; in-store shopping and test drives have become quick stops to validate the choice.
A 2013 study by AutoTrader found that half of car shoppers think they need 30 minutes or less to evaluate and test-drive a vehicle. It could take that long just to explain a connected-car services package to a consumer who's never heard of it.
Keeping it simple
After initial denial, OEMs are starting to feel the dealers’ pain. And they have been coming up with ways to alleviate it.
BMW has, for example, decided to ask dealers to only sell the head unit and a basic connectivity package, and then let consumers handle the actual app purchase and set-up via BMW's app store.
Reinhard Jurk, head of business development at BMW, says his company wants to let dealers focus on selling the upgrades they're familiar with – wheels, leather seats – and not have to explain the complications of apps.
"So, basically, the customer should go out of the showroom, he has bought everything that’s necessary for using apps later, but he is given the opportunity to select those apps later on,” he says. “That’s basically shifted the sales process in time for additional functionality."
The holistic view
Providing training support to dealer sales staff is also gaining in importance.
BMW is, for example, hard at work on a holistic training program to help sales advisors and after-sales advisors sell and support BMW ConnectedDrive, according to David Colon, ConnectedDrive manager for BMW Mexico.
The program will include both face-to-face and web-based training for as much as five full days, with possibly a certificate to identify reps within dealerships as experts on the product.
There will also be additional info for drivers. "We will have a customer portal for BMW that will have hints, guidelines, and overall information on third-party services that will be global with local market adaptations," Colon says.
Volvo also plans to provide specialized training for salespeople in dealerships. And there is a thing or two Volvo expects to learn back. According to Linda Gangeri, manager of marketing platforms and technologies at Volvo Cars of North America, Volvo is also keen to use the training to understand the challenges faced by early adopters.
"The biggest challenge that all OEMs face is education," Gangeri says. "We need to learn from our dealers. They are at the forefront of the customer interaction, and we need to understand what's gone on and how we can improve."
Still, Lutz of Extreme Chrysler, Dodge, Jeep remains skeptical that training will do the trick, pointing to the fact that the sales department turnover in an average dealership is 70% per year. "We would have to train a person every six months," he said.
Not created with dealers in mind
While service and repairs revenue is the key to profitability for auto dealerships and routing auto diagnostics info generated by connected telematics directly to dealers seems like a no-brainer, this ability has not been, for the most part, baked into most OEMs' offerings, according to Lutz.
This is not only due to lack of initiative on the part of OEMs; it's also a technical challenge.
Most auto dealers use proprietary, legacy software systems to manage their businesses and customers. Not only were these systems developed without the APIs that support data exchanges among different entities, their business models also involve charging for access to the data.
There are also major privacy issues to be worked out if data will flow between the dealership, the OEM and third-party data and application vendors.
Stand-alone customer relationship management (CRM) systems like AutoLoop’s suite of software-as-a-service applications, designed to let dealers manage their customer interactions, might act as in important stopgap.
AutoLoop's service began by automating activities most important to dealers, and now it's trying to work its way up and become that central data hub that will let dealers access and respond to diagnostics information.
However, to do that, it would need to work directly with OEMs, something it is now trying to address, according to Matt Rodeghero, AutoLoop’s chief product officer.
Adoption of telematics services for dealers is also complicated by the fact that auto dealerships are typically independent from automakers, at least in the United States. As a result, OEMs can't mandate that dealers use a particular system, so they often provide incentives or designate an approved product that dealers should use for "best results.”
But some dealers are reluctant to toss out their investments in back-end systems and sign onto OEM-backed products because they're afraid their OEMs will later try to push something different.
At the end of the day, it may still be up to the OEMs to close the loop. But it will only happen if both OEMs and dealers are willing to give up a little: dealers a little control of the customer, OEMs a little bit of their brand experience.
Susan Kuchinskas is a regular contributor to TU.
For all the latest telematics trends, check out Telematics Brazil & LATAM 2013 on Sept. 11-12 in Sao Paulo, Brazil, Telematics Japan/China 2013 on Oct. 8-10 in Tokyo, Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, and Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco.
For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.