The car business is in the beginning stages of a technology-fueled evolution in terms of the connection dealers forge with their customers. What we see today is going to be so much better, so much more precise and so much more ingrained in processes in the next three to five years that it will be transformative for dealerships and the industry at large.
The best part is this transformative moment will allow dealers to take advantage of their greatest asset — their data — to solve their greatest pain points, which we identified in a study commissioned earlier this year on the future of automotive.
According to results, nearly 50% of the 500 dealers polled listed “Identifying the best places to invest marketing spend” as their No. 1 pain point. Listed at No. 2 was “Sourcing and pricing vehicles to maximize profits.” Solutions to both challenges lie buried in dealers’ data. The problem is wading through that sea of data, extracting what’s salient, overlaying it with local market conditions, and then using it to make both informed and strategic decisions.
That’s why I believe artificial intelligence and machine learning will usher in this significant transformation in our industry. The reason is AI and ML can combine large amounts of data sets with fast, iterative processing, and intelligent algorithms to learn from patterns in the data. It’s through these patterns that dealers will be able to predict things like buying propensity, stocking levels, price points, and how and where to invest marketing spend.
And I’m not alone in seeing the potential, as more than two-thirds of dealers polled in that same study said AI and ML would be the most critical industry development in the next five years. Sitting at No. 2 and 3 were “Digital Retailing” and “Intelligent & Personalized Marketing,” two areas I believe AI and ML will drive.
Let’s start with the latter, because that’s what I and everyone in the CRM space have been after for nearly two decades. The early forms of AI and ML were mostly static algorithms that said, “If this, then that.” With ML-powered predictive algorithms, today’s solutions can learn daily with each new transaction, each change in interest rates, each increase in vehicle prices and each visit to a dealer’s website.
All of a sudden we’re stitching together a story that tells us the likelihood a customer is in the market for a new car. Then, based on the customer’s patterns, we can predict the kinds of vehicles he or she would want to buy. That helps dealers then personalize and customize that shopping experience in a much different way than they have in the past.
See, true AI and ML create a dynamic and personalized set of interactions that continuously change to meet the specific needs of every customer. What this translates to is knowing what’s needed today to prepare for tomorrow. That’s one reason I believe dealers are excited about the promise of AI and ML. Another reason is the opportunity to lower one of the highest costs in their business: labor.
Think about the number of customers who touch a dealership, whether it’s digitally through the website or physically in the store. We can use AI to automate follow-up and communicate with customers with the right message at the right time, then help them find the right car with the right financing in an automated and simple way. So, not only can we use AI to improve the overall experience for customers, we can nurture and lead them much closer to the transaction process before the dealer’s sales staff ever engages them. The result is more transactions at a much smaller cost, thus improving dealer profitability.
Eventually, AI will bring about a fully interactive and completely digital buying experience for customers who want that experience. That’s why it’s important your website and digital retailing platform are 100% connected to your CRM. That allows everything customers do online — all the cars they looked at and the payments they calculated — to be the same when they reach the dealership. A significant technology gap has been closed. Now dealers need use the technology, so the process is the right experience for the customer.
Our industry is rapidly evolving into this digitally connected, consumer-centric experience. Data powered by AI and ML will be a key ingredient, as will the dealers who lead the charge in terms of adoption and process development. It’s an evolution that will require patience and persistence.
