People get excited about AI. Some love it, some fear it and some feel it is overhyped and under-delivering. Across the internet, the impassioned debate rages on: how many of today’s AI technologies are actually delivering value?
Before we start talking about whether or not these technologies have anything to offer the automotive industry, allow me to set the stage.
Lead follow-up can have a drastic impact on your ability to convert prospects into customers.
That probably goes without saying. The great news is that the automotive industry is better at lead follow-up than any other industry.
Each year, our company produces a sales effectiveness report on lead follow-up across a number of different industries to determine how effectively companies are following up on incoming leads using four key metrics: promptness, persistence, personalization and performance. For 2017, 866 different companies were contacted with direct, specific inquiries — 124 of which were in the automotive industry.
The report found that only 7 percent of auto sales departments failed to follow up on incoming sales leads, and the 93 percent that did were much more effective compared to sales departments in other industries.
Unfortunately, service departments are a weak link. Only 6 percent of service departments scored strongly across all points of assessment, and a full 20 percent of direct, specific incoming service inquiries were neglected entirely.
Why is this so important?
With an average 72 percent gross revenue margin, auto service is the most profitable department of most dealerships. What’s more, the vast majority — about 80 percent — of car buyers who receive service at a dealership will buy their next car from that dealership.
Car buyers are extremely valuable. As Carl Sewell notes in Customers for Life, an average auto customer is worth $517,000 over their lifetime.
This is where AI can help. Extensive research demonstrates that promptness is the most important factor in follow up — the faster the lead response, the higher the likelihood of converting a lead into a customer.
The conversion rate increases by 391 percent when dealerships make a call attempt within a minute of receiving a lead; the odds of qualifying a lead contacted within five minutes are 21 times higher compared to 30 minutes, and contacting a lead within the first hour increases the likelihood of qualifying the lead by 60 times in comparison to 24 hours or longer.
Replying to leads within the first hour of inquiry — or even better, within five minutes — keeps the potential customer interested. It is usually impossible for sales reps to personally respond to every single lead within the five-minute time window. But AI software can.
It can also identify “hand-raisers” — people who are actually interested in making a purchase — and handle the mundane but critical task of verifying contact information and preferred time to call. This is a huge time savings for sales staff members, who don’t have to waste time gathering contact details or guessing which leads are most likely to convert.
AI software also ensures sales teams do not “undertouch” crucial leads and eliminates the bias that comes from salespeople cherry-picking leads.
AI can also help busy sales teams to be appropriately persistent. One or two attempts to follow up with a sales lead is almost never enough to be effective.
Best-practice research proves that an increased number of attempts yields significantly increased conversions: companies with the fastest-growing revenues are most likely to attempt contact with a lead five to eight times, and even just attempting contact three times instead of once will double response rates.
Asking a human to follow up with each lead five to eight times is not only inefficient; it’s unrealistic. Which is why it so rarely happens.
Even in the high-scoring auto sales industry, just 43 percent of sales departments made at least eight attempts to follow up with an incoming lead and, among service departments, that number dropped to 10 percent. Indeed, more than two-thirds of service departments gave up after one or two attempts.
Here, again, AI can help. Automated assistants can engage leads in natural, two-way conversations. They don’t get frustrated. They are always polite. They never take vacations or forget to follow up. Eight follow-ups are no more difficult for them than one or two.
But this technology doesn’t exist yet, right? Wrong. This technology exists — and it works. We have more than 1,200 virtual assistants working
in dealerships around the world. They engage with new car buyers to make their first service appointment and consecutive appointments, re-engage customers who have defected or abandoned service, remind customers of services previously recommended but not performed, alert customers to the need to have a state inspection performed, and follow up to gauge customer satisfaction after a service visit — and at a rate up to 10 times greater than that of what most dealerships normally do.
This is what led PCG Research’s Brian Pasch to say that “when AI and machine learning are put into the context of the auto industry, they are bursting with exponential opportunity for dealers.”
Other applications of AI may still be years away, but when it comes to the automotive industry, dealerships that are not investing in AI to boost sales and service are leaving money on
the table.
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