The start of a new year gives us a chance to introduce a new customer-focused mindset.

As 2023 moves to the rear-view, the automotive industry in Canada remains an unpredictable landscape. New car pricing and interest rates remain the top industry discussion topics across all segments and the four factors that affect pricing (vehicle supply, manufacturer incentives, dealer discounts and trade in values) have all seen major disruptions since the COVID-19 pandemic.

As reported recently by Cox Automotive, non-luxury vehicle prices have remained steady since January whereas luxury vehicle prices dropped by four per cent and EV by 19 per cent.

Notably, higher prices have caused consumers to consider more options when buying a vehicle and this is a crucial factor to bear in mind as we step into a New Year. So, what is in store for 2024?

Vehicle supply

Vehicle supply is improving, particularly for domestic brands such as Jeep, Dodge, Ram, and Chrysler with more than 100 days’ supply on the ground as of August.

These manufacturers have added excess inventory in anticipation of the Union Auto Workers Strike which began in September and negotiations rumbled on as I was writing this.

Imports are still struggling to reach pre-pandemic levels with Honda, Kia, Toyota, Lexus, and Subaru ranging from 28 – 44 days’ supply. However, the national average is 58 days which is close to the historical norm of 60.

New vehicle pricing

Elevated inventory levels should mean a drop in prices but with interest rates remaining undesirably high and a pent-up demand from lack of availability, many foresee new car prices to remain high throughout 2024. Increased supply has led manufacturers to re-introduce some incentives, making the market more competitive than we have seen in recent years. With so many uncontrollable factors impacting the industry, dealers can only be certain of one thing: continued uncertainty.

So as a dealer, how can you confidently compete? My advice is to focus on what you can control — your customer experience.

Shifting mindset

The effects of the pandemic undoubtedly made the automotive industry a seller’s market. Dealers became accustomed to selling vehicles at full price, even over MSRP in some cases.

They knew that if a deal was not made with one customer, another would come along and snap it up. Unfortunately, in many cases this meant that any quality sales process and customer experience went out of the window.

As vehicle supply continues to increase, manufacturer incentives make a comeback, and demand remains strong, dealers can no longer afford to circumvent the sales process. The power is back in the hands of the customer and providing an exceptional experience is one of the only tools dealers have to successfully compete.

This means shifting the mindset among your team and revisiting your sales process. Your sales team must work to build value for customers and work to earn their business.

They must assume that customers are shopping around and have options on which vehicle to purchase. For those newer to the business, remember that they have never encountered this landscape before.

Therefore, dealers must support their team in transitioning to a more competitive market and invest in training to ensure they have a good understanding of what makes an exceptional customer experience.

The power of exceptional experience

While a vehicle purchase for many is a practical decision regarding specific needs and budget, it is equally a very emotional decision. Customers need to feel connected to their dealership and feel valued by them. In recent years I’ve heard countless stories from friends and acquaintances about their experiences at dealers and few have been positive. If they did make a deal, it was due to the product rather than the experience and many have expressed that they would be hesitant to do business with the same dealer again.

As the industry becomes more competitive, we need to shift to a longer-term outlook and focus on providing an experience that will generate loyalty and retention.

The dealers that will succeed are the ones that focus on the customer over everything else, and truly understand what they want as individuals. They communicate with transparency, they build value, and they give the customer a sense of belonging at the dealership.

Doing so will enable them to build long-term relationships with their customers and keep their businesses thriving for years to come.

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What’s it like being a customer at your dealership?

Typically, the first experience a new customer has with your dealership is with the sales department.

This experience sets the tone for the relationship throughout their ownership of the vehicle and significantly impacts the longevity of that relationship and the overall health of your business. Therefore, it is crucial to provide an exceptional experience to every single customer.

So how do we navigate the sales process in a way that allows us to achieve our dealership objectives, and provide an exceptional customer experience?

User Experience

In today’s technological era, and post COVID, it’s no surprise that the vast majority of customers begin the buying process online. Providing a great user experience is key, in fact CDK Global reported earlier this year that 89 per cent of users will shop with a competitor after a poor user experience.

Review your online presence through the eyes of your customer. Is your website easy to navigate both on desktop and mobile? Are convenient features available such as up to date inventory listings and payment calculators? Are these accurate? One of the biggest customer frustrations is calculating a payment online only to find that it increases when they visit the dealership.

While the online trend continues to increase, affecting the amount of walk-in traffic at the dealer, most customers still want to complete the transaction in the dealership even if they begin the process online — 91 per cent in fact (CDK Global Friction Points Study 2023). Therefore, the showroom experience must line up with the online user experience.

Showroom Experience

The traditional showroom sales process is built around the dealership objectives and simply no longer aligns with the expectations of the modern customer. By the time the average customer sets foot into your store they are well-researched and informed regarding what they would like to purchase and their trade value and are looking for a great experience. To meet these expectations, we must be willing to tailor our approach to the individual.

The Friction Points study also reveals that the top focus for dealers in 2023 is to elevate their customer experience, in fact the response was overwhelming at 5x higher than the next: managing inventory to maximise profits. To elevate your showroom experience, consider the following:

Transparent Communication: for sales departments to shake the stereotypical customer perceptions and build trust, we must focus on transparent communication throughout the whole process.

For example, frustration is often caused when customers are not informed about optional products prior to the business office turnover, or when expectations on lead time for new vehicle orders are not managed proactively.

The modern Sales Associate must be trained and empowered to execute a consultative approach. They must be well versed in the options available to the customer and be confident in making recommendations throughout the process, prior to the turnover.

With the supply constraints of recent years, it is common for a customer to pre-order a vehicle and they must be updated regularly and consistently. Not only does this keep them informed with the progress of their new car build, but it also allows the Sales Associate to maintain the level of excitement about their purchase, and satisfaction with the overall experience.

Consider having assigned “update days” and set the expectation with the customer that they will receive updates weekly in whichever way they prefer to be communicated with.

Time Investment: Studies show that dealerships and customers want the same thing: an efficient process and less time at the dealership. To optimize the customer experience, we must offer a comprehensive, yet concise sales process. We can achieve this by communicating the process to the customer, and asking questions to ensure that we meet their expectations of time spent together.

CDK Global also reports that 65 per cent of shoppers in 2022 waited 15-45 minutes for the F&I Manager. If every customer was informed about the turnover process and options available prior to meeting the F&I Manager, time in the business office will be reduced and we can avoid these bottlenecks that negatively impact the customer experience.

By the time the average customer sets foot into your store they are well researched and informed regarding what they would like to purchase and their trade value and are looking for a great experience.

Leverage data: To identify top opportunities for improvement, listen to what your customers are saying. Analyze your CSI surveys and online reviews and look for common themes. Speak to your customers about their experience, take their feedback on board and proactively look at ways you can tweak your processes to improve.

Delivering an exceptional customer experience is the foundation for increasing loyalty, retention and quality referrals. We must have an unshakeable focus on not just meeting customer expectations, but exceeding them.

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The new battleground for success is providing an unrivalled customer experience. But what does that really mean?

The terms “customer service” and “customer experience” are commonly used interchangeably. There are, however, key differences between the two, and offering great customer service is not enough to achieve long term customer loyalty.

Customer service is defined as: “the assistance and advice provided by a company to those people who buy or use its products or services.”

It is essentially what the company does. It is an event that is transactional, quantifiable, and reactive in nature. Customer service is merely a part of the overall customer experience.

Customer experience, on the other hand, encompasses the whole customer journey and is less tangible. It is subjective, experiential, and proactive in nature. As opposed to being a particular event, it is the feeling of the customer based on their own perception and expectations.

So, if customer experience hinges on the feelings, perceptions, and expectations of the customer, how do we manage and optimize it?

Communicating with transparency: According to Google research in 2019, 51 per cent of customers reported that they were frustrated at a dealership. A quick review of negative reviews for various dealerships shows a common theme: poor communication and transparency.

To optimize customer experience, dealers must be dedicated to effectively communicating processes and reasoning to the customer throughout, while proactively confirming understanding from the perspective of the customer.

The moment that the customer feels a lack of transparency, trust is lost and extremely difficult to regain.

Customers don’t care, nor should they, about internal politics between departments. In their view, every employee represents the dealership as a whole and they expect a consistent experience.

Interdepartmental collaboration:

In other research from Google Gearshift 2022, a top reason for customer frustration was what they perceived to be “attempts to sell unwanted services” — with 39 per cent reporting that they experienced this.

In the sales department, this is likely due to poor explanations of available services throughout the sales process, and poor teamwork between the salesperson and the financial services manager. Internal processes should be reviewed to minimize conflict in the goals of each department and amended so that each department can effectively support the other, while achieving the primary goal of delivering a great customer experience — every single time.

One size fits one: Standard operating procedures are certainly important to achieve consistency in customer service. To optimize the overall experience, however, dealers need to be nimble and open to variations of their procedures to suit individual customers. To do this effectively, time and attention needs to be taken to get to know the customers’ communication preferences and their expectations of the experience. With this information, team members can tailor the process to the customer, make accurate recommendations, and enhance the overall experience.      

Authenticity: Authenticity is an important factor in developing trust and loyalty among your customer base. Customers need to feel that the dealership truly cares about their experience and satisfaction.

A stand-out in the industry is Lexus. A cornerstone of the Lexus experience is “omotenashi,” a Japanese word that roughly translates to ”warm hospitality.” In fact, the Lexus Covenant states: “Lexus will treat every customer as we would a guest in our home.”

This means being proactive in ensuring customers are comfortable, relaxed, and enjoying their experience. It means showing a genuine interest in each customer, how they perceive the interaction, and taking steps to ensure that expectations are exceeded.

Leadership and culture: While the customer experience is delivered by the front-line employees, the overall responsibility is on the shoulders of leadership. To effectively deliver on the points mentioned above, leaders need to intentionally create and nurture a culture where staff are supported, encouraged to share ideas, and empowered to go above and beyond for their customer.

Internal processes should be reviewed and critiqued by management with the customer experience at the forefront. Leaders should apply the same factors to their teams: communicate with transparency, look for opportunities to bring departments together with common goals, and adapt leadership styles to effectively coach, develop, and empower their team members.

In summary, transitioning from customer service to customer experience does not necessarily require significant financial investment. At a foundational level, it is about creating a customer first mindset across all departments, being proactive, and working as a team to build an authentic and trusting relationship with each customer.

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