driving digital 2017 presentation

DRIVING

DIGITAL

Welcome to

SUE ROBINSONDirector

NFDA

Line Up

Nathan Coe

Scott Sinclair

Neil Addley

Eddie Hawthorne

Nick King

Mark Squires

NATHAN COECOO

AutoTrader

Observations on Top Quartile Dealers

New Car growth is plateauing and may decline slightly

* 12 month rolling

-10%

-5%

0%

5%

10%

15%

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

2,600,000

2,800,000

New Car Sales

Rolling 12 month New Car Sales Rolling quarterly YoY

7

However Used cars still have a strong tailwind

8

And despite increasing supply, prices are holding up well

9

Even when adjusting for vehicle age

47%0 to 3 year old vehicles within franchise network

10

Creating an opportunity for Franchise Dealers to grow

6%3 to 5 year old vehicles within franchise network

The best vs. the rest?

12

• Data is from Auto Trader’s market place

• Approx. 45 million visits and 250 million vehicle views each month, over 70% of all minutes spent

• ~4,000 franchise dealers and 200,000 cars removing individual forecourt and brand anomalies

• Pricing is based off observed prices, which on the whole is fine but may overstate the margin achieved by dealers that over price

• There are 10,000+ price changes on Auto Trader every day and 300,000 a month

• Primary metric for quartiles is stock turn

The data

13

Top 25% of dealers days to turn is almost half bottom 25%

Top 25% Bottom 25%2nd quartile 3rd quartile

14

Which is consistent in premium brands (eg)


15

and volume brands (eg)


16

There average price position is “at-market”


… by pricing to the real market using tools like iControl

17

Which they do from beginning to end!


18

The result of this on sales is dramatic over a year

* Based on the average Used Car GP% from publicly listed UK groups

… even when normalised for stock levels

19

But what about margin?

Below we have taken the average gross margin for listed retailers and adjusted it up or down for the final price position achieved (conservative?)


20

1. Largely fixed operating costs will mean a bigger impact on operating profit

2. Top quartile dealers use less working capital to sell the same number of vehicles

3. Vehicles held longer will absorb more operational effort and cost

4. Less inventory devaluation risk and more flexibility

Four reasons why this benefit may be understated

So what are they doing differently

1. Driving fast stock turn at margins that deliver a better profit outcome

Through a digital-led selling and data based stock and price decisions

2. “Bought in” managers in key roles with the right tools

Where buying, pricing, re-pricing and disposal decisions are made

3. And then reinforce consistency from top to bottom

Every day, every car, every person …

22

23

The prize …


Which combined with excellent online advertising (imagery, descriptions, trust etc) generates more ad views for the same cars

24

They focus on selling online where car buyers are


… for example using tools like iControl that capture the market real-time

25

By ensuring most of their stock is price to market


26

And confidently staying at market from start to finish


27

Staying in line with market requires regular re-pricing


10,000+ price changes a day on Auto Trader or 300,000+ a month!!

28

Monitoring and adjusting across all vehicles all the time


… through retailing and avoiding knee jerk discounting and trade outs

29

This results in top quartile dealers having a lot less overage


Summary of the observations of the Top 25% of franchise dealers, on average …

1. They focus on selling the car online first and foremost

2. They turn cars in 37 days (on AT)

3. They price to market from day 1 and stay there

4. They re-price every 15 days

5. 84% of their stock re-priced every 30 days

6. Only 15% of their stock is 60 days+

30

Fast stock turn delivering a better profit outcome

31

Delivering the potential margins we saw earlier …

This understates the benefit to the bottom line profit due to fixed costs and greater operating costs on vehicles held longer


32

But … its difficult to make happen without







33

1. Centralised functions vs. dealership level

2. Dedicated teams vs. the universal soldier (with 15 other things to do)

3. What do you measure and how do you review? Measuring inputs not just P&L

• % inventory priced to market

• Stock sold under 30 days (US: 45% is “good”, 60% excellent)

• % F&I penetration (gross profit)

• % Overage vehicles and price position

• % retailed stock that goes to wholesale (US <10%)

• Stock online – marketplaces and website

34

How top dealers think about leadership and consistency







35

leaving only two questions:

why not start tomorrow?

what are the implications of not changing?

thank you

SCOTT SINCLAIRIndustry Manager

Google

The Consumer Journey & Winning MicroMoments

We don’t go online. We live online.

Moments

7:05am Text Jim

7:45am Check time

8:12am Read text from Jim

9:03am Send work email

1:23pm Post vacation photos

3:29pm Text Karen

5:38pm Take picture of traffic

5:40pm Post picture of traffic

7:15am Find brunch place

7:53am Watch how-to fix boiler

video

8:59am Research holiday

destinations

10:07am Read about best running

shoes

1:23pm Watch mountain biking

videos

5:38pm Look up mortgage rates

Micro-moments

Google is the largest omnichannel

measurement provider in the world

Proprietary + Confidential

Which-Car-Is-

Best

Moments

Where-Should-

I-Buy

Moments

Am-I-Getting-A-

Deal

Moments

Can-I-Afford-It

Moments

Is-It-Right-For-

Me

Moments

finding better answers

to your marketing challenges

Proprietary + ConfidentialProprietary + Confidential


WHICH-CAR-IS-BEST

MOMENTS

Buyers often change their mind

during the research process

Key decisions have not

been made at the start

Showing up gets your brand in the game not

just to be seen

half of buyers will

end up buying a

new make to their

previously owned

vehicle

are not fully decided

about what make or

model to buy at the

start of their research

journey.

buyers did not purchase the

car they originally had in

mind at the beginning of their

research journey.72%

1 in 2 50%

Changing loyalty to brands

they currently own

There has never been such little differentiation in

cars as there is today.

Explosion in growth of the SUV market has meant increased

competition. How well are you associated with these

searches? Are you present in the moment?

Benchmark your moments

Nissan Qashqai

SUV

Ford Kuga

VW Tiguan

Audi Q3



IS-IT-RIGHT-FOR-ME

MOMENTS

of car shoppers say that search

provides the most useful online

source when helping through their

research journey

of buyers say that online video

sites are most helpful sources

when helping through their

research journey

Multiple touch points in the auto consumer’s

journey provide many useful moments

62% 59%

of consumers say that regularly

getting useful information from an

advertiser is the most important

attribute when selecting a brand


Win the is-it-right-for-me moments

Source: https://youtu.be/fJl72jUSY7I. https://youtu.be/OEJYD6PS9q0.

Be There

Promote your video content on YouTube

and Google search results.

Be Useful

Create your own auto review, walk

around video content and get it seen.

Be Quick

Make auto reviews and educational

content easy to find on your mobile site

and YouTube channel.

Carwow Arnold ClarkLookers VW

Reviews



WHERE-SHOULD-I-BUY-IT

MOMENTS

of smartphone users have bought

from a brand other than their

intended one because the

information provided was useful

of smartphone users say they're

more likely to buy from companies

who customize mobile information to

their location

Without utility in the moment, not only will

consumers move on, they actually might not ever

come back

51%

of dealer visits, phone calls with sales

persons and test drives informed

their final vehicle purchase

76%

Where-should-I-buy-it Moments

2008 2015

search term: dealership location

dealerships near me

Use location signals to highlight

relevant locations, driving directions

and call contact

73%of conversions are

not counted under

traditional ‘online’

conversions

Buyers don’t tell you they are going to visit the

dealership - they just ‘turn up’

Visits store

Store Visits

Device location data

Signed and opted in

Ongoing data validation surveys

Physical world data

Extrapolated, aggregated and anonymized

Click

User behavior

Backend data

Store Visits

http://youtube.com/v/Xl8_qgaNl_E


Win the auto shopping moments that matter

Source:

Be There

Put yourself in the car shopper’s shoes

and walk through each moment. Are you

there at every step?

Be Useful

Build relevant marketing that helps

customers in the moment.

Be Quick

Eliminate steps, anticipate needs and

load like lightening. How long does it

take shoppers to complete their key

action on your mobile site?

Be There Be Useful Be Quick



CAN-I-AFFORD-IT

MOMENTS


+8% +296% +126%

Computer Smartphone Tablet

Source: Google internal. UK Car Finance searches by device Q3 2014 vs Q3 2016 (overall searches increased 14%)

Car finance searches are becoming increasingly

mobile

Source: Lorem ipsum dolor sit amet, consectetur adipiscing elit. Duis non erat sem


71%of car buyers would like to

begin the finance process

online

Source: MakeMyDeal survey 2015 US


Win the can-I-afford-it-moments

Source: https://youtu.be/fJl72jUSY7I. https://youtu.be/OEJYD6PS9q0.

Be There

Geo modify search results to dealer

location.

Be Useful

Create your own auto finance and

aftersales content to reaffirm product

proposition.

Be Quick

Make video content easy to find on your

mobile site and YouTube channel.

Audi UK

FinancingVolkswagen

Geo Modify

Bids for

Finance Terms

Be There - Anticipate moment for the open minded car shopper

Be Useful - Create relevancy to inform and connect

Be Quick - Frictionless experiences to act swiftly

Connect the Dots - Reframe how you align with the car buyer

Succeeding in a micro-moment world

WIN THE AUTO MOMENTS THAT

MATTER

NEIL ADDLEYMD

NFDA Trusted Dealers

The Trusted Consumer

The Trusted Consumer

• Introduction

• The Trusted Consumer

• Performance

NFDA Trusted Dealers

• Dealer backed classified

• Controlled by the NFDA (National Franchised Dealers Associaton)• 10 Points of Difference

• NFDA Used Car Standards

• ADR (Alternative Dispute Resolution) service

• Generate leads

• Campaign to promote franchised dealer benefits• “where not just what”

• Stock management and marketing partnership with AutoTrader

Who is “The Trusted Consumer”

• Who is “The Trusted Consumer”

• Why are they important?

• How do we target them?

• What are they looking for?

• How do we measure effectiveness?

Why is “The Trusted Consumer” Important?

Why is “The Trusted Consumer” Important?

Post Brexit “vote”

Millennials

Squeezed by raising interest rates (car loans, mortgages, rent)

New car finance subvention wiggle room reduced by exchange rate

Trusted Consumers

Fixed incomes, pension access

Equity release

Savers benefit from interest rate rises

How do we target the “Trusted Consumer”?

• Proposition

• Search Marketing Demographics

• Social media advertising and content

• AutoTrader

• Public relations

Demographics: Targeting

• Higher PPC bids for older car buyers

• Messages target value and proposition over price

• Goal: no clicks wasted

• Bespoke Scottish activity

Entertainment: Social Media

• Facebook page more active than even leading classifieds

Marketing

• Branded “tick mark” against stock on AutoTrader

• Monthly email campaigns

• Consumer awarenesspromoting franchiseddealers

Exposure: PR

• Twin strategy

• Consumer & trade audiences

• Next:Energy Saving Trust

What are they looking for?

• Information

• Peace of mind

• Consumer validation (reviews)

• New cars(!)

Consumer has to click on “New Cars” to start

journey

Shopper contact details

Shopper new car request

Shoppers part exchange vehicle

Submit

Shoppers submits new car enquiry with PX details and

appraisal to get “Cost of Change” proposals from dealers

How do we measure success?

• “Hard Leads” v Engagement

According to Comscore* Trusted Dealers is second only to Auto Trader in terms of views per visit in the used car classifieds sector

*September 2016

EngagementMarket Position: Views per Visit

• Improved management of tracking numbers

• Lowered call costs

• Increased quality of calls through main marketing channels

• 82% of traffic driven are genuine used car leads

Enquiries: Call QualityCall Quality

Used Car Enquiry New Car Enquiry Service Booking Parts

Dealer Engaged Unanswered Call Other

• All on site actions logged against a postcode

• All email enquiries logged with postcode

• Matching against sales data

• Proving unique sales matches or touchpoint in customer journey

Enquiries: Postcode Matching

[email protected]

• Only 18% customers will use tracked media(79% are internet generated walk ins)

• 22% of members customers visit Trusted Dealers

Enquiries: Postcode Matching







• Record January – tracked leads @ £13

• Now’s the time to put us to the test!

COFFEE

EDDIE HAWTHORNEGroup Managing Director

Arnold Clark

NICK KINGInsight Director

AutoTrader

How dealers adapt to service consumers in a changing digital environment

123

Our behaviour is changing

2001 2007

Design changes before our eyes…

2010 2017

Things from a few years ago seem antique

14 years ago

10 years ago

5 years ago

Not only didn’t test but didn’t evolve….

1993 2017

I fear not the man who has practiced 10,000 kicks but the one who has practiced 1 kick, 10,000 times…

Bruce lee

50,000 practice kicks

500,000 kicks

Small changes to routine – BIG DIFFERENCE

If you break down a big goal into small parts and then improve on each of them,

you will deliver a huge increase when you put them all together

Search engines carry out 12000 Random Control Tests per year!

5% of our audience on our test site …all the time

14 years ago

10 years ago

5 years ago

Research from KPMG confirm the growing importance of the dealership…

So how do retailers adapt with all this tech and heightened consumer expectation?

Average vehicle desirability Stock over 60 days Average days to price changeAd view performance vs similar adsAverage days to turn

The world’s changed and is set to keep changing

From To

Finance not key to success

Power shifted to the consumer

High Tech World

UK Wide

Much slimmer marginsDecent profit margins

Local area Influence

Low Tech World

Power sits with the retailer

Finance penetrations grows

Car sales As a career Car Knowledge less necessary

n: 60 automotive retailers 2017 Acacia avenue

Dealer mind-set Retailer mind-set


Retailer mindset are much more open to change

159

• More open minded

• Data is an opportunity (as is everything)

• Customers are more empowered

• Don’t have to spend time haggling, relationship is

less adversarial

• Margin is eroded but they spend less time selling

each car

• Meet customer on own terms, adapting retail

model and retail space

Vicious circleVirtuous circle

• Were good when they started (and good

at sales)

• But don’t adapt

• New things seen as a threat

• Margin is eroded

• Less able to drive traffic

• Resent customer empowerment


Successful dealers see themselves as good at marketing and stock management rather than selling

160

0

10

20

30

40

50

60

70

80

Customer service

Marketing

Stockmanagement

Sales teamFinancing services

Forecourtstrategy

Servicing

SuccessfulLess Successful

Perceived Strengths

SU1. What would you say are your real strengths which make you good at what you do in today’s environment?

The less successful are more reliant on passing trade, the majority agrees is declining

161

23

34

32

7

0

27

47

27

0 10 20 30 40 50

0%

1-5%

6-20%

21%+

Less Successful

Successful

Proportion of Passing Trade Change in Passing Trade

F2. Roughly what proportion of your business comes from passing trade? / F3. And is this much less than before, or about the same?

0

10

20

30

40

50

60

70

80

Customer service

Marketing

Stock management

Sales teamFinancing services

Forecourt strategy

Servicing

Successful

Less Successful

Successful dealers are over twice as likely to embrace digital

(41% vs 20%)

162n: 60 automotive retailers 2017 Acacia avenue

…Ensure a seamless customer experience

• “Make sure that you make the sales experience as seamless as possible.”

• “We don’t see ourselves as a car business we see ourselves as a people business – if you have great people delivering a great customer experience, then you make some money.”

• “Customers want a retail environment that they recognise.”

163

Futurology…..

Voice Activation

• Chatbots on Facebook messenger can now take payments via PayPal.

• Useful for existing customers….

• Already an essential part of doing business in China with Wechat

Live video

Summary

• We continually evolve and consumers expectations will only increase

• Technology will evolve, so your business needs to too.

• Fuse instinct and experience with data

• Trust and Transparency becomes ever more relevant

• Create a seamless customer journey

• Talk to customers in their language

• Retailer mind-set, that embraces the future

• …with a Positive Mental Attitude

Thank you

MARK SQUIRESChairman

NFDAWhat to concern ourselves with in The Way Ahead

“A change is gonna come”

Autonomous cars

Digital disruption

Manufacturers’ online sales channelsFiat /

AmazonBMW

Volvo

Hyundai

Peugeot

Carvana vending machine

China

ICDP July 2015

The quickest to adapt,

survive

CHANGING THE PUBLIC’S PERCEPTIONS OF THE FRANCHISED DEALER

Consumers

Influencers and Opinion Formers

Government and Statutory Bodies

The Media

The Industry

CONSUMER ATTITUDE SURVEY

Overview

• Twice yearly survey of consumers

• Assess attitude to franchised dealers

• Currently focuses on aftersales only

• Wave 1 :Dec 2015 Wave 2: Jun 2016 Wave 3: Dec 2016

• 15 minute phone interview

• 1000 interviewees

Purpose

• EXTERNAL – Fighting our Corner

• Explain the Value we offer

• Differentiate ourselves from the competition

• Shift the battleground in aftersales from Price to Quality

• Shift negative perceptions

• INTERNAL – Consumer Insight

• Align ourselves with consumers’ interests

• Fresh insights into consumer’s real wants & needs

• Encourage best practices to deliver a stronger customer

proposition

Alternative strategies for the future

Plan A Plan B

QUESTIONS…

THANK YOU

SAFE JOURNEY

driving digital 2017 presentation

Automotive