The future can be a frightening place, especially for those not able — or willing — to adapt to changing realities and market conditions. While the auto sales industry has enjoyed several years of growth, change is on the horizon. Those dealerships locked into past models and old methods of thinking might not find that future to be a hospitable — or survivable — space.

Brian Benstock, vice president and general manager of Paragon Honda and Paragon Acura of New York City, has spent time and effort trying to determine what that future has to offer, and one word sums up his findings: disruption.

The ways of the past

“The current dealer model is not a dying breed,” Benstock said. “It’s dead. It’s absolutely dead.”

The reason for his startling prediction is due in part to changing customer expectations of not only automotive shopping but the very act of shopping itself. Benstock believes that the convenience, growing acceptance, and ultimate expectation of online transactions — along with the transparency those transactions demand — run counter to the classic dealership model.

“The most successful businesses are the ones that best meet the needs of the customer,” Benstock said. “For years, the dealers have relied on antiquated business models — the franchised dealer agreements — to protect themselves. The second the customers are given an opportunity to go away from the standard business model of automobile dealers, they will. More and more, we’re seeing that they’re being given many different options by some of the largest retailers in the world.”

Several of the companies responsible for this disruption of the automotive industry are not even in automotive sales. “We’ve got companies like Amazon and Apple that are approaching a trillion dollars in valuation,” Benstock said. “They have incredible resources to take over and change any industry that they so choose.”

Current realities and potential opportunities

The reality of Benstock’s Paragon dealerships is one of the reasons he’s made it a point to anticipate future market conditions. Located in Queens, just outside of Manhattan, the Paragon dealerships are the No. 1 new and used car dealerships in the country. Because of their location, however, the dealerships have always had to think differently about the way they do business. “Real estate is at a premium,” he said. “Compared to some other dealers in other markets that have acres of land, we have a patchwork of properties. Customer parking and customer display can be one of the challenges, but that also leads to some great opportunities.”

One of those opportunities is the ability to continually re-think how they do business. “Does it make sense anymore to bring the customers to the dealership?” Benstock asked. One of the answers to that question was the creation of Paragon Direct, a new online platform where customers can do everything from arrange a test drive to purchase a vehicle. Benstock refers to this method of doing business as a “frictionless consumer experience,” which is something consumers are increasingly demanding. “We’re in the New York market competing against some of the best Honda and Acura dealers in the country, and we’ve proven we can hold our own. We’ve taken a look at some of the disruptors and business models that are coming in, though, and those are causing customers to take a different look at things.”

To meet this challenge head-on and serve consumers how they want to be served, Benstock and his team have taken a step back to see what sales methods would best meet their needs. “The customers basically want three things,” he said. “They want us to know them better, serve them faster, and ‘wow’ them everywhere. This is not special anymore. This is an expectation of today’s consumer.”

Marketing to today’s drivers

Part of meeting those needs is presenting a marketing message that connects the dealership with customers in a meaningful way. To do this, Paragon Honda and Paragon Acura have partnered with Team Velocity to present their marketing and direct mail, including using Apollo, a data-mining solution, to provide the right message to the right contact at the right time.

“[In addition] we’ve been utilizing a vehicle exchange program for several years and targeting customers with the highest likelihood of doing business with us now and in the future,” Benstock said. “That’s worked out for us.”

The availability of consumer data has never been higher, and that ability gives dealerships, like Paragon, tools to connect with consumers directly. “We’re taking a closer look at our CRM and data that’s available from our customers and making sure that, when we speak to our customers, we’re speaking from the knowledge that we should and do have about that customer,” Benstock said.

From an industry-wide perspective, Benstock knows this data has not been utilized to the same full potential other businesses have been successful with. “Why is it that many other retailers in other industries seem to be able to better target their customers than an automobile dealer when we’ve got incredible data on our customers? We know their buying patterns. We know their product selections and desire. We know their budgeting information. I don’t think we do a great job as an industry in effectively communicating with our customer in a personalized manner.”

Benstock believes that the auto industry has lagged behind this curve due to one glaring reason – if a consumer wanted to buy a new car, they had to go to a franchised car dealership. As a result, the auto sales industry has been slow to react to changes. That luxury, Benstock believes, is quickly coming to an end as the consumer’s very relationship to vehicles is evolving. “Take Uber, for example,” he said. “They are offering fractional ownership opportunities or fractional ride-share opportunities. When I say fractional, I don’t mean monthly. I can pay per ride. I can have the car I want, the size I need, delivered when I want, where I want. Many customers are finding this more efficient than owning their own automobile. Then add into that, the autonomous car that is going to be a part of our future. The driver is the biggest expense of Uber. So, Uber will then become even more of value as there will no longer be a need for a driver. That’s just one disruption.”

“Then you’ve got Elon Musk and the Tesla group, going outside of the traditional franchised dealer system saying, ‘We think we can do it better,’” Benstock said. “They’re offering different products in a different manner. It’s interesting to see the initial success they’re having. They’re doing quite well in the high-end luxury market and seem to have taken over a pretty good amount of the market share.”

Consumer behavior has also disrupted the marketing landscape. “We’re certainly looking at how easy is it for our customers to do business with us online,” Benstock said. “The Internet, for most of us, has gone from informational 10 or 15 years ago to transactional today. Fully transactional. I think auto retailers have not been quick to embrace that. More and more, we’re realizing as a group that we need to do a better job there.

New customers, new sales methods

This innovative insight into the sales process was the catalyst for Paragon Direct. “We’ve built it for speed,” Benstock said. “Not that our customers would need to conduct a transaction in under a minute, but pretty much they can get to a negotiated price by themselves in under a minute. If they have a trade involved, or there’s financing involved, it will take slightly longer, but customers can navigate on their cell phone or however they access the Internet [with ease].”

Before this new transaction model can be fully adopted, however, some psychological barriers need to be overcome — both on the customer’s and the dealership’s side. “From the consumer standpoint, there’s a natural distrust of automobile dealers,” Benstock said. “So, when you’re offering to do this transaction completely online, and you’re offering transparency, it’s not something that they’re used to getting from dealers. Also, they’re not 100 percent comfortable doing such a transaction online yet. They will be, but initially, we are finding many of our customers are getting 70 or 80 percent through and then electing to conclude the transaction in the dealership. The good thing is they save a lot of time by doing most of the transaction online.”

From the dealership’s side, while transparency might be a scary prospect, it’s one Benstock believes must be implemented. “Our philosophy is that transparency can and should improve revenue by making it easier for customers to have access to the information they want online,” he said. “Imagine if you wanted to buy an iPhone online and they told you, ‘Come on in, and we’ll give you the price.’ It’s preposterous, and yet in dealerships around the country, that’s exactly what happens.”

Holistic dealerships

In addition to changing the way dealerships interact with their customers, Benstock believes the way internal departments interact with each other needs to change as well. “Each department used to have to stand on its own independently,” he said. “Now, we need an interdependence of the departments. We have to look holistically at the profit centers at the dealership. For instance, you get the new car manager who doesn’t want to take a short deal when there’s a trade in. By not taking that deal, however, they’ve deprived the used car manager of a car and deprived the service department of a service RO. They didn’t look at that deal holistically. What gives any one manager the right to cut out those other departments? The managers of today need to have an excellent understanding of the complete business.”

The future

“I think the current state of customer satisfaction with the buying process makes our market ripe for disruption,” Benstock said. In addition, he believes that even the model of automobile ownership will soon change. “I think dealerships are going to see consumers paying a monthly payment and being able to drive [or] shift out of cars without long-term commitments,” he said, “very much like what we’re doing with cell phones today. Let’s call it ‘flexible drive ownership.’ It will be the ability to pay a fixed monthly payment and drive an SUV when you need an SUV, to drive a coupe when you need a coupe and a sports car when you want to drive a sports car.”

Benstock sees these changes as revolutionary for the auto sales business but believes dealers and GMs who consistently react instead of proactively meet this future will suffer. “I think you’re going to continue to see more decompression,” he said. “I think you’re going to see a reduction in the number of dealerships and a reduction in the number of people employed at dealerships. I think dealerships are going to be distributions points, and dealerships are going to have to be moving at the speed of the customer wherever the customer wants to be.”

Where some see a crisis, Benstock considers an opportunity for those willing to embrace it. “Change is going to come whether we like it or not,” he said. “The saying is ‘change or be changed.’ What our dads did, or our mentors did, our predecessors did, some of those basic business philosophies certainly hold true. Others need to be completely revisited. We have to adapt. We have to adapt and be very, very flexible in our beliefs.”

 Jones Honda blows past new and used averages in their market. Sales up 22% YOY with increased market presence.

Jones Honda, part of the Jones Family of Dealerships in Lancaster, Pennsylvania, has a great reputation for retaining customers and providing outstanding sales and service experiences. What the dealership lacked, however, were the tools and marketing strategies needed to get those customer onto the lot in the first place.

“Once customers come and see our facility and meet our people, we have a high conversion rate,” said Kris Jones, General Manager of Jones Honda. “Typically, if they’re coming, we’ll close them. Just this past weekend, we had a customer from Maryland who came in because they love our store. They’ve bought three cars from us over the last 10 years. They literally passed two major Honda stores to get here. We have a loyal customer base, even by Honda’s standards, and they measure everything.”

With a loyal active customer base and excellent retention, the question became; “How do we grow and get new customers walking through our doors who have never heard of Jones Honda?” With all economic indicators pointing towards a slowing market, this was a question Jones knew he needed to answer.

HONDA PIONEERS

One of the oldest Honda dealerships in the country, Jones Honda truly knows their customers and what their customers want. “We started off in 1960 as a standalone Pontiac dealer,” Jones said. “We were a Pontiac dealer until 1971. My grandfather, Jim Jones, had an opportunity to expand and add a new franchise, and the two that were available were Subaru and Honda.”

Deciding which franchise to pursue was a major decision, but Jim Jones found his answer from an unlikely source: dirt bikes. “My father, Steve Jones, always had Honda dirt bikes, and they didn’t require any maintenance,” Jones said. “You just rode them into the ground and they always started and ran well. My grandfather said, ‘Geez. If they build a car half as well as they do a motorcycle, we’re going to be in good shape with Honda.’ That’s what pushed my grandfather to select the Honda franchise over Subaru.”

In hindsight, the decision was the right one for the company. At the time, however, the future was cloudy when the products weren’t meeting the dealership’s immediate expectations. “If you remember, in ‘71, Honda’s quality was not anywhere near where it is today, so there was a bit of a struggle for a few years,” Jones said. “My grandfather believed in the product, though, and Honda quickly started producing great, reliable vehicles, and it’s been a wonderful franchise to have.”

From there, the dealership expanded, opening a GMC franchise in 1984, Acura in 1990 and Buick in 1999.

TOOLS AND TRAINING

Lancaster County isn’t a large metropolitan area, but there is still stiff competition when it comes to where customers decide to buy a car. Besides the many other franchises around Jones Honda, there are three other large Honda stores within a 40-minute drive, and still more competition in nearby Maryland and Delaware. To hold their own against their rivals, Jones Honda has recently remodeled its store into a state-of-the-art facility. Jones knows, however, that the true value of a dealership is with its staff. Because of this, the company focuses on training and providing a culture that supports staff longevity to enhance customer service and satisfaction.

Part of a winning customer service strategy is treating customers as people, and not simply as sales opportunities. “We’re not a super pushy store,” Jones said. “We’re not going to send five closers out there to try to close the deal today. A lot of stores have that, ‘You’ve got to buy it now’ kind of mentality. We talk to the consumer, and we get their agenda. We see what they’re looking to accomplish today, and then we tailor our process around that. It works well for us. Do we want to close a car deal? Of course. We’ll push — but only so far. People appreciate that and we have a lot of customers who come from all over to buy a car from us.”

That philosophy is also followed in the dealership’s online and follow-up processes. “Each store in our group has its own Internet team that responds to leads,” Jones said. “Our method isn’t to shoot somebody the best price and hope they come in. It’s a consistent follow-up program that gives the customers what they’re looking for.”

Training is also a key factor in Jones Honda’s processes. The dealership has contracted with David Lewis and Associates to provide new hires in their group with a five-day sales process training. “It takes our new employees from start to finish, so it starts on a Monday and by Friday, they’re done,” Jones said. “Saturday, they can come in and take a prospect through the processes up until the negotiation part. In the first week, they don’t spend lot of time going over our negotiation strategy only because each store does it a little different. Once they get through the initial training, there are various courses covering closing, objection handling and more. It’s nice because the training facility is only an hour away for us.” Advanced classes and refresher courses are also provided for experienced staff members to keep the sales team sharp and motivated.

MAKING MARKETING MATTER

While his store had great people and processes in place, Jones wasn’t liking what he was seeing from a marketing perspective. To get to the next level, he realized he needed to make some changes — a step Jones Honda didn’t take lightly. “We were with our last advertising company for around 15 years, and were with the one before that for about 20 years,” Jones said. “We’re not typically a ‘let’s try the latest, greatest thing and shoot from the hip’ kind of dealership.”

Change, however, was necessary. “We had hit a wall with our last agency,” Jones said. “They were a national firm located states away, and we would see them once a year, or maybe twice, if we were lucky. There was a big disconnect between what we were trying to accomplish and what they were trying to accomplish. We were never on the same page.”

Jones knew he wanted a marketing company much more responsive to his dealership’s needs, a company that his dealership could stick with for the long term who truly understood the car business. After searching for a company that would meet his needs, Jones and his team selected Team Velocity Marketing as the right agency for the job. “We were looking for a long-term solution that could move the needle,” he said. “We got away from our last ad company and went 100 percent with Team Velocity. They handle every aspect of our marketing and advertising. From SEO and SEM, to direct mail and equity mining with email. They even produce all our traditional TV and radio spots — everything. And we’ve seen a tremendous uptick. It’s been worth the investment.

Jones Honda of Lancaster County uses Team Velocity Marketing’s Apollo Technology Planform® to manage integrated marketing campaigns for sales, service and equity mining. Apollo automatically generates and deploys campaigns across mail, email and digital advertising, offering consistent messaging and branding, and provides a web-based dashboard to track results in real-time.

Because they now have monthly meetings and weekly reports, Jones Honda can adjust much quicker to market forces and consumer behavior. “With Team Velocity Marketing, we know what’s working and what’s not working. If we see that a mail piece or email blast is killing it, we can tweak that for the next month and run it again. If something is underperforming, we can take another look and see if it can be made better or if we need to try something else. It’s a much more rapid process, and they’re much quicker to react and move forward.”

REALIZING RESULTS

A major benefit of having a single marketing agency dedicated to the store is the ability to execute a centralized, all-encompassing marketing plan from start to finish. Why? Because it helps communication within the store, giving customers a better experience. “Before, with our previous advertising company, we would advertise, say, a Civic or Accord lease special,” Jones said. “Customers would come in asking about that special and nobody here — management or sales staff — knew what it was. The agency just made up an offer and never got our team on the same page”

Jones knew that had to change. “The way it works now, with Team Velocity, is that everybody knows what our message is,” Jones said. “Sales, Service, F&I — the whole store knows what we’re trying to accomplish. Now, when an ad brings a customer in, we know what the ad offered, what the payments were, and we can jump right into it with them. It’s that kind of across-the-board communication between all our departments that’s made a huge difference.”

Jones said his service department has seen the greatest results from the new strategies. “Obviously, sales has been doing well, but our service department has grown a ton with Team Velocity’s mail pieces,” he said. “We have a three-tiered approach. We have our active customers, our lost customers and our conquests. Team Velocity has a unique way to go after each of those groups and the results are incredible.”

The new marketing company also helped Jones Honda learn about their market — and turned up some surprising facts. “We have more than 22,000 thousand Honda customers who are in our direct market,” Jones said. “We had no idea that number was so high. I would’ve guessed it to be half that.”

Once the market was better defined, marketing strategies were put into place to take advantage of the information. “Team Velocity’s approach is to send out highly personalized mail pieces to bring those customers in,” Jones said. “We’re seeing great success with these customers who have never been to our store. We’ve also been having a lot of success with customers who live in our market who bought from another dealer — we’ve been able to bring them in and get them to use our service department.”

The increase in visibility and staff coordination has directly increased Jones Honda’s sales figures and the dealership’s bottom line.

“Year over year, from 2016 to 2017, we’re up 22.5 percent in sales, and 115 percent in certified pre-owned,” Jones said. “To give you some perspective, in our district, Honda is up only 12 percent in new car sales and 17 percent in certified pre-owned for that same period. Team Velocity Marketing’s program is a winner and has had a huge impact on our overall growth.”

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