For every dealer that has adopted web-based marketing strategies with enthusiasm, there are probably 10 more who feel such efforts are a distraction from the business of selling cars and finance. Can F&I prosper without new technology, or is it time the industry switched on to the digital channel?
This month, Motor Finance, in collaboration with Frontline Solutions, invited 12 car finance professionals to attend a round table discussion on the subject, hosted at the Cardiff headquarters of independent finance house MotoNovo. The following pages highlight the afternoon’s debate, which focused on the use of social media for marketing and CRM, direct online sales, and the ways in which finance companies work with dealers on the web to generate more business.
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Fred Crawley: Debbie, could we start with MotoNovo’s take on how technology fits into the big picture for the motor finance market in the years to come?
Debbie Mackay: It’s fair to say that the crisis is still with us – we talk about the eurozone issue, GDP, housing, unemployment, inflation, interest rates, and it’s all probably bad news from a UK point of view.
The impact it’s having on our consumers is low levels of buying confidence, falling living standards, growing focus on value for money and longer working hours, not to mention talk of a lost generation in our economy.
The car market has been depressed, at best flat, and increases in sales are only coming through increases in market share.
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By GlobalDataCar buyers are changing their vehicles less and keeping them for longer. The top 100 dealers are talking about stocking cars that are much older than usual, as more customers are looking for older vehicles.
In terms of the finance industry, the captives have been behind most of the growth in the market, while the independents have been a little behind but have been gathering pace in the past six months.
As independents, we are getting back to the same focus on return on assets that we should have had previously. The previous approach to ROA was probably unsustainable, hence we saw a lot of exits in our market.
At the moment, point of sale finance companies only ever deal with one part of the consumer buying process, which is basically at ownership stage, and we need to be looking at penetrating further into the car buying journey using technology – how we build customer contact, deliver products and services via the web, develop a showroom presence that has personality, and use the web to understand the behaviour of our customers.
So we know that the showroom is a small part of the buying process now, and that a lot of customers are doing a lot of research online. From our perspective, we want to look at how we can add more value to the shrinking showroom in the future and keep customers buying from us even though the internet is forcing a change in consumer behaviour.
Currently 12% of all retail sales are completed online, and 90% of car purchases at some point are researched online.
There’s also the growing importance of social media – I had never used Twitter before the London riots, but now it’s often the first point of information for me.
Information is at hand for our consumers, and the industry is lagging behind by not being able to provide it to them.
In conclusion, we very much support a new model that places the consumer and the dealer together, and helps the lender know what our consumers want, when they are going to buy, how they buy, and why they might buy from us.
In reaction to that, I’d like to get some opinions from the retailers. What strikes most true to you and where are you in terms of using the online channel?
Jamie Caple: I think people are more mindful of price now. We research the market extensively and try to make our car the best price – when historically a customer may have just gone to a dealer, now they spend more time looking, and if our car is £1,000 cheaper than the dealer’s car, the phone rings. If you’re on page 3 or 4 of Auto Trader, you’ll never get seen. So we price ourselves very aggressively, and we turn over our cars very quickly.
Karl Werner: What are the customers like? Are they confident or is every sale harder at the moment?
Nick Donald: That’s up to us to decide – we’ve got to give them the experience they’d like to have, regardless of whether they’re buying a higher-mileage, older car than they would have done five years ago, I think they still need treating exactly the same as if they’re buying a new prestige car.
Karl Werner: So are they more difficult?
Jamie Caple: You do get the odd customer that says, "you need to do the deal, because it’s a tough climate and you’re desperate for business". At which point we’ll sometimes sit them down, pull up the Auto Trader, and show them that our cars are very well priced. And then say "why do we need to discount it". We use that as a tool.
That said, most of the people that come to our site have researched the market, so they will know that our cars are a good price.
So is it universal that people are using what they see online to govern where the negotiation starts when they enter the showroom?
Rick Wilson: It’s partly a generational thing. I grew up before the internet. I’ve had to struggle to get to terms with it. It’s great when you do though, it’s fantastic. There are still people who don’t use it, but they’re increasingly a minority.
Jamie Caple: I had an elderly gentleman come in the other day, and he said he went on Auto Trader, and it made me smile. Everybody uses and everybody embraces it.
Rick Wilson: An older lady and gentleman bought a car yesterday and she turned up with an Amazon voucher. You can’t stereotype people at all.
Do you think it’s going to carry on being just research that happens online, though? We just heard the statistic that said 12% of retail purchases are done online. I imagine that percentage is a lot smaller for auto retail. Does anyone see that percentage rising?
Jamie Caple: I think people will buy cars online by pressing a button. That’s what we want. You want to come in, in the morning, and see three deposits have been taken on cars without us doing anything.
Philip Skinner: I always think with used cars, people will want to feel and touch them. They do all their research online and decide yes, we want to buy that car. And they may hand over a £50 or £100 retainer deposit but they’re not actually going to physically buy and pay for that car.
Jamie Caple: I think that’s right. Predominantly they will leave a reserve. You would never consolidate a deal blind, not with a used car. But just getting that commitment in the first place, half the battle’s won.
Rick Wilson: Can I disagree with that because I’ve had first hand experience with that not being true. When I was at Carshop, and they first spoke to me about reserve and collect, and home delivery, I just didn’t believe it.
Same as you, Phil – it’s not my world. But when Autoquake disappeared and we bought the platform from them, after one or two months it really snowballed. That said, I think it’s going to take a while for people to gain confidence with buying used cars online.
Philip Skinner: Were they paying for the car in full?
Rick Wilson: Yes. Paying in full, delivered to their home.
Jamie Caple: They had about 50 photos, which helped. You could see everything.
Karl Werner:Autoquake did about 40% in home delivery. They used to call them ‘never-meets’. Never met the customer, the customer never met the car. It’s backed up with that leap of faith that came with the 14-day no-quibble return. It turns up in your driveway and if for any reason you didn’t like anything about it – the smell, even – you can send it straight back on the transporter and it would cost you nothing.
Philip Skinner: They weren’t frightened to show all of them?
Jamie Caple: No, but I think they prepped them thoroughly. They minted them before they photographed them.
When recovery does come, is that going to change the mechanics of the used car buying process and the number of people willing to commit online?
Philip Skinner: I think as the economy gets stronger, more people will be prepared to pay a deposit online. I don’t really agree with what Rick said about the amount of people that will pay fully for a car but, alright, if it’s backed up with a 14-day return, maybe.
Rick Wilson: Whether it will work for every dealer is another question. But there are people who will buy online.
John Harman: It’s critical the way that the buying process works now. Looking 10 years ahead, and at kids who are 14 now, everything is done on Facebook, BlackBerrys and iPhones, so they’re naturally going to move into that arena–if they buy everything else online, why not buy cars too?
Another thing you’ve got to look at is the buying process, a lot of younger people are doing this from 10 o’clock at night to midnight or one in the morning. You’re going to see young people buying cars at twelve o’clock at night and you’ve got to facilitate the fact that they will be doing this.
Jamie Caple: We’ll get leads coming through at 1 or 2 in the morning. You get a text message, sometimes, asking if a car is still available.
Debbie Mckay: We had an interesting couple of days with our consultant Stafford Masie, who was the CEO of Google in South Africa, and he talked about being a digital native. If any of us have owned an LP or a CD, we’re not going to get this market – you would stream now, you don’t necessarily have to own a physical copy.
Karl Werner: I’ve been thinking about age a lot because I’m 40 this month, and there’s a lot of stuff I just don’t get. Like why kids tweet or why they’ve got so many Facebook friends. It’s good to be able to recognise the emotional or intellectual distance, from a group of people getting older, that will affect our business in the years to come.
Craig Judd: Can I throw a hand grenade in? If you believe that if you’re not the cheapest and you haven’t got the best website, you’re going to lose out, you’re not taking into account human nature, certainly for men if you’re anything like me. Three shops and that’s it. Three calls and that’s it – that’s all I’m going to do. It doesn’t matter how many websites there are out there and how much choice there is, it’s still three calls – that’s all it’s going to be.
Jamie Caple: The personal factor comes into it as well, certainly. Don’t get me wrong, we’re not the cheapest on everything, and we do back up a cheap car with 20 great photos, a very well written advert, and when the enquiry comes in, it gets handled properly.
Craig Judd: I describe what we do as Lidl or Aldi – people buy us on price but we still try and offer a good service where we can to differentiate ourselves in the low-price arena. Last year 20% of our business was from repeat and referrals. So we must be doing something right.
Do you think it’s tougher to differentiate yourselves on service online than it is in the showroom?
Nick Donald: It depends on what you use. If you’ve got Facebook – and we have a 5,000-strong following on Facebook – it gives you some options. For example, we had a very dry man, interested in a Merc, who was not much crack over the phone. We pointed him to our Facebook page. Ten minutes later when we rang him back he was happy to leave the deposit the next morning.
A completely different personality. He’s seen some real people enjoy their experience, and because he can see it online and these are real people with real cars, he knows nobody’s lying.
Craig Judd: With these sales how many people are just walking into a dealership to do some prep or research?
What if people are coming to see you because they want to see what a Peugeot 308 looks like against something else – then they’ll go online and buy from someone else. Your challenge is surely still to make the sale, there and then.
Rick Wilson: Philip, just going back to a conversation we had years ago, your business was always very strong on customer retention.
Philip Skinner: Yes, it’s a huge part of our business.
Rick Wilson: Maybe it’s a bit of a leap of faith, but if you embraced Facebook, surely you could easily grow a social network off your own customers?
Jamie Caple: We’re a new business, you see, so Facebook has helped us to give people confidence to buy off us, because no one knew about us. It’s something we’ve pushed massively, because there is no trust because we don’t have a big customer base. One of the reasons we’ve priced aggressively to start with is to build up a large customer base, and Facebook is another strand of that.
Ian Dewsnap: In a sense what you have done is use that medium to give you a fast track to building your reputation, which traditionally would have taken over 5 or 10 years, selling vehicles to families and so on.
Philip Skinner: Being a little bit negative about it, we don’t really need it because we’ve got that many people on our books already.
Ian Dewsnap: But a lot of what we’re talking about is how things will evolve from today. The current generation of 11-31 year-olds, who in 10 years’ time will be much more in a position of economic influence, might change things.
The shift to online has in some ways taken a long time. Go back 15 years and people were spending millions – they all had to be online. Cars were going to be bought this way in five years’ time – and it didn’t happen. As we’ve already established, if you make any significant purchase, you do your research on the product over the internet. But you still want to go and negotiate your deal, quite a lot. This will change eventually though, because coming through is this generation to whom ownership isn’t what it was to our generation.
Look what BMW is doing at with Sixt at the moment in Germany – it’s like a car usage scheme and you don’t go to a rental site anymore; you’ve got an app on your iPhone, and you enrol on the scheme for something like €29. The app will tell you where a car is parked and you’re given a chip. You sit in the car, put your chip in, press the button and you’re away. You pay by the minute, maximum €14 an hour or something, and then when you’ve finished you park up and the next person comes along with their chip and iPhone and finds it.
That kind of thing, if it works, is going to change the way the game’s played. It will educate people no longer to buy cars but just to consider them as useful transport. There will still be people who want to own the car, however – specialist cars, high
performance cars – those kinds of things.
But I think with this generation coming through we’ll see this market shift. The issue becomes three parts. First, how do you communicate with people? – how do you best use these digital media? How do you get to your customers. How do you use Facebook and so on? Secondly, what do you communicate? Because I think your product offer is going to have to change in the future. I don’t know what it evolves to – if we knew that we’d all be millionaires, but it will evolve. And then thirdly, how frequently do you communicate with people? Because we need the CRM piece of it to get the repeat business.
It started in a very raw way 20-odd years ago when companies sent customers birthday cards. Do that these days, and it’s a bit of an insult. How do you modify that into how you communicate with your customers on a regular basis? It’s particularly challenging for someone in the indirect business like financing. Perhaps it’s a little easier in the vehicle market because you have a tangible product to offer, but an intangible product like finance that has to go through a distribution channel is much more tricky.
If CRM is going to be achieved largely through social media, how will the types of customer interaction change from the current model?
Nick Donald: This is something we’ve discussed a fair bit. We do a little bit of local advertising as well, still paper-based, because we’re local lads. But on Facebook, we’ve got 5,000 people following us. They’re not 5,000 customers, don’t get me wrong. They’re people that have picked up because it’s entertaining.
We put content on there all day, every day, so people watch it not because they want to buy a car but because it’s quite a good page.
We put this ridiculous thing on there this morning – what was the question, Jamie?
Jamie Caple: Write the name of your favourite muffin on the page to win a deck of cards. Ridiculous, but within three minutes there were 15 comments, 12 people who liked it. That’s 27 people within three minutes of posting something on a page.
Nick Donald: You know that 49 minutes ago, 25 people liked it and we had 53 comments. Admittedly, that’s of no financial benefit to anyone.
Ian Dewsnap: No, and interestingly it has no connection to our industry at all. Maybe that’s one of the keys to the communication question. Essentially, talk about things that are not your business, because you’re not trying to sell me something, you’re trying to build a relationship. When you’ve got something to offer me, slide that in, and because I now trust you because I’ve built a relationship with you, I’ll listen to you talk about cars or finance.
Does anyone else do anything online which isn’t directly to do with selling cars or finance?
Craig Judd: Yes. We’re doing the same sort of thing. We started off putting messages out – saying we have a cheap this, and a cheap that.
But I knew that from my own experience that when I got this type of message from other businesses I just turned them off and said I didn’t want any more messages from that company.
So now we do exactly what you do – we put jokes out and things like that, just to keep the brand in people’s heads.
Jamie Caple: You can’t say, all day every day: "We’ve got cars, we’ve got cars, and they’re really cheap."
Andy – your business sells a lot to small businesses I’m assuming. Does that change the way you’re using social media? What we’ve been talking about so far is very consumer focused.
Andy Ismail: Yes. Facebook isn’t fantastic for business users. Most offices don’t want to use it. We don’t find it benefits us massively, but it’s a medium we keep up because of the younger buyers.
What about LinkedIn? That’s always called the business Facebook.
Andy Ismail: I’m not convinced. I think it’s just a way for people to network through your network. I think people use it as a marketing tool, frankly.
How will the dealer/funder relationship change as technology advances?
Karl Werner: You can talk and investigate and research about what you need to do to change your business, and hire consultants and experts, but fundamentally the customers will decide the shape of motor finance in the future or the shape of car retailing, because they are totally in charge.
And direct loan rates are going down at the moment as well.
Karl Werner: I don’t buy that people have gone to direct lenders because they’re the cheapest, any more than they’re buying the cars from the cheapest place to buy a car.
Andy Ismail: They did go to direct lenders because they were the cheapest a few years ago, but it was easy then.
Karl Werner: It was easy, you’re right. But even now when they get a phone call back to say the rate’s not 7.9%, it’s 10.9%, many customers just go with it anyway.
Jamie Caple: Direct lenders aggressively advertise on Auto Trader. I spend a lot of time on Auto Trader and I think a lot of people use it rather than using motor finance.
Andy Ismail: Just from our point of view, the customer doesn’t come into us and say I’d like to go with MotoNovo Finance or whoever. They’re not bothered about the provider..
Karl Werner: There’s a certain, for me, couple of Holy Grails that motor finance companies haven’t figured out yet – nobody in our industry has the answer. Number one is how the customer is feeling and making the offer personal to the customer.
The second thing is how can a customer complete this entire thing without the tiresome noise of having his or her driving licence, coming in to sign documents, waiting for a fax to come across to pay out. But I think motor finance companies will work out how to do that; so the dealers feel the income and the customers feel the convenience, and those motor finance companies should do very well. That’s the journey that we’ve got to try. We’re getting there. But it’s not quite done yet.
How does a finance company market itself online in a way that generates leads but prevents quibbling over who owns the customer?
Nick Donald: It’d be great if the finance company said: "There are some leads", and that’s what Car Loan 4 U does, for example. To be fair, you get phone calls saying: "We’ve got a customer, we’ve approved the money, there’s a car on your site they are interested in. We’ll get them to give you a call."
Jamie Caple: They’re great. They have a call centre and make loads of finance commission, no overheads.
Debbie Mckay: Are they Car Loan 4 U customers or are they your customers? This is where we have the debate. We don’t want to say these customers are ours and not yours. The route we definitely want to take is these are our customers. Can I give you your own customers back and be used as a portal to get you more?
Philip Skinner: We’ve just had a situation which confuses the whole thing we’re talking about. A guy bought a car from us in 2009. We did the documents; the lender did the follow up call for PPI. The customer’s back on the phone screaming at us saying "I didn’t want PPI. I want my money back." We didn’t sell it, but he signed the documents with us. It’s a real grey area.
Debbie Mckay: That’s the finance company’s responsibility to cover.
Philip Skinner: The customer doesn’t appreciate we’re working together.
Rick Wilson: The big barrier to what we’re talking about is hire purchase, as opposed to personal loan. If you get personal loan funding, the loan is there, the customers got his credit rating. He’s got an amount he’s approved for and he buys a car. We try to make the car sale more profitable, but if you’ve got people coming in with direct lender funding, you’ve lost that income.
If we introduced a customer to yourselves who wants to buy a £7,000 car but he’s probably good for £20,000, that’s the way to expand your relationship. To then open a credit line, you’ve not just sold him finance on a car. You’ve said if he wants to buy a caravan, or a boat, we can probably help him to achieve that.
Then we have him as a customer, because he’ll remember we’ve influenced his lifestyle. Maybe in the light of responsible lending that’s not the thing to do.
So long as you’re not pushing the sale, it’s not something that comes into it.
Debbie Mckay: I think it’s a bit more than that. If we’ve got a quarter-million customers that we have information on and we do nothing with that from a dealer perspective, it’s the same as having a Facebook page with 5,000 followers that you don’t give any information to.
If we started to give info, what should we give and would it keep our dealers happy? Are dealers also happy if a finance company jointly markets customers?
When we review with the dealer in two years’ time, we want to be able to say we’ve made you £100,000 in commission and our website link to MyCarLocator has sold you 67 vehicles. Our dream is to help you sell more finance and more cars.
Nick Donald: It’s equally foolish. If we send a customer for £10,000 and he is approved for £7,000, we know we’ll always get £7,000. We’ll never know if he has been lent £15,000. There is an opportunity. That’s the point.
Jamie Caple: I’ve had customers who have said they are going with a particular company on finance because they offer great rates. As a finance company, do stay in touch with customers and tell them to come back for future motoring needs. I’ve spoken to customers who have liked that. It’s made them feel special and important.
Ian Dewsnap: It’s difficult to do. There is a split between what happens in new and used cars, and customer behaviours.
From a finance company perspective, for pre-underwriting as marketing offer, there isn’t really a business case. It’s expensive and brings back a very small amount of repeat business. You’re back to having to communicate and get the timing right. The industry has wrestled for years to define "repeat".
A paid-off customer comes back two months later – is that a repeat? If he changed his car six months earlier and the dealers sold him yours, is that repeat? The new car arena behaves one way and the used car arena, another.
By the fact you’re all here today, you’re probably more proactive when it comes to repeat business and CRM. This is not always the case for many dealers. For a finance company, it’s a matter of selecting your partner carefully, saying: "This is the new idea", a partner that you can leverage this with and invest a moderate amount to get a decent return.
Andy Ismail: They don’t speak to the customer, they’re worried something will go wrong and it’s going to cost them money.
Nick Donald: A lot of dealers will do nothing with that information as well, to be honest. They’re just not particularly switched on.
Debbie Mckay: If someone’s enquiring, looking, or at these trigger points, we’ll keep sending them change requests. With social media, we’re not capturing information. We don’t have a Facebook presence with some of our customers. If we did and they talked to their friends about their next car purchase, you’ve got live info.
Andy Ismail: The ability or the cost of contacting customers can be negligible if you use electronic media. There’s no significant cost and you’ve got 250,000 customers on the database; you talk to most of them at some point.
Why not save that information at the point where you’ve had application for finance? You’ve got a contact system which doesn’t cost you anything to use.
Debbie Mckay: You know at the moment if you want to logon to anything really, you can log on with your Facebook account? There doesn’t seem to be any high street banks at the moment that are allowing you to log on via your Facebook account. They can be encrypted from the research that we’ve done.
If you can get people to logon to their MotoNovo account to get a settlement figure, look at information, go on discount shopping and at the same time log on with their Facebook profile, you’ve got access to a lot of info.
Andy Ismail: You need to do more as a lender, to drive customers to look at that information. The majority of customers will go back to the dealer they bought a car from three years ago and ask how much they owe on it. You need to drive your customers to your website to seek the information.
