Study: NADA Tackles Factory Image Programs with First-Ever Cost Analysis

McLEAN, Va. (Aug. 29, 2011) – The National Automobile Dealers Association (NADA) has commissioned an independent study to take an in-depth look at the cost effectiveness of factory image programs that require new-car dealers to invest billions of dollars each year.

NADA Chairman Stephen Wade, who’s traveled across the country over the past several months, speaking to dealers says one resounding concern he’s hearing over and over, regardless of dealership size or brand, is the frustration dealers have with their manufacturer’s facility image programs.

“These investments have a significant impact on dealer balance sheets, in many cases severely straining them and in some cases even persuading a dealer to leave the business rather than commit to such a large investment,” said Wade, a multi-franchise dealer in Utah and California.

NADA has undertaken this fact-based, objective study to uncover both the both positive and negative factors that drive return on investment so that dealers are in a better position to make informed, rational and fact-driven decisions on facility investments.

“The perception today is that the decisions made by dealers on facility investments are often based on opinions, pressure and personalities, which is no way to guide significant spending,” Wade said. “We want to find out the truth so these important decisions can be based on facts, not perceptions.”

Surprisingly, little evidence on return on investments to either manufacturers or dealers exists. Factory programs are typically justified on qualitative grounds such as, “the store image must support the brand” or “customers expect all our stores to offer a similar look and feel,” he said. Solid economic arguments such as, “updated stores sell X more cars for every $1 million invested” or “CSI scores soar when a facility is upgraded,” are generally absent.

“By moving the facilities debate away from opinion and assertion and more towards facts and data, we expect the findings of the study to be extremely valuable to dealers and manufacturers alike,” Wade added.

The study, conducted by industry consultant Glenn Mercer, is expected to be completed by late November with a detailed White Paper to follow by the end of the year. Mercer is a former partner with McKinsey & Company’s automotive practice.

About NADA

NADA, founded in 1917, represents nearly 16,000 new-car and -truck dealerships operating about 32,500 franchises, both domestic and international. For more information, visit www.nada.org.

One thought on “Study: NADA Tackles Factory Image Programs with First-Ever Cost Analysis

  1. What will the NADA study include in it’s upcoming independent study dealer factory image programs? With new technology affecting when and where payments are accepted, it will be interesting to see to what extent this may be included in the study.

    I don’t know much about factory programs, but our teams listen to customers express their problems and help them solve them. Here’s an excerpt from a sales meeting with an auto executive: “We send every service advisor to school to learn how to respond to customers, some who are yelling. We teach them how to turn an unhappy customer into a happy face. Everything that serviceperson does is to make them happy. And when everything is done and the customer is happy, they then go over to the cashier. There may be 2 or 3 other customers in front of them. Invariably, there are times when someone starts asking questions about their bill. And if they are unhappy, everyone in line knows it. Then every customer starts thinking they should ask questions about their bill. The customer doesn’t leave with the same happy face they had when they left the service advisor.” As with many dealerships, the cashier has big power in the customer relationship, and also in what the dealer pays to accept electronic payments.

    There are multiple solutions depending on the dealer space available, to empower the service advisors to accept payments. In this case the dealer group tested using mobile devices with our payment processing technology platform to their service advisors. Instead of going to the cashier, the service advisor takes all electronic payments right at the car. Customers sign their receipt on the mobile device (iPad or Droid) and the receipt is sent to a nearby network printer or emailed.

    The service advisor now has total control over customer satisfaction. Additionally, while there were initially internal fears that “they’ll mess up the transaction”, the exact opposite occurs. Due to the hosted, smart terminal technology, the merchant actually lowers risk of electronic payment acceptance and removes control of payment processing fees from the user.

    Here’s a summary of benefits:
    – Customer was checked out quicker.
    – Payment processing fees managed by technology to optimize and least cost route the transaction, removing employees from impacting EBITDA.
    – Customer thinks it’s cool. Maybe they’ll tell their friends and the experience will go viral.
    – The entire customer was in the power of the trained advisor; the customer leaves happy.
    – The advisor is happy because he has a cool new device and he has more control over his performance ratings.
    – The dealer can collect extra information such as email or zip code to datamine or market to.
    – The signed receipt is electronically stored with the internal invoice number and customer name, with instant retrieval availability for up to 7 years.

    A second more common scenario for using our technology has been service operations that have installed signature capture terminals with each service advisor. These units also increase pin-debit to averages over 75%.

    In summary, these are new solutions to fix real dealer problems. With mobile payments being especially new, will these operations be included in the study? And to what extent will they have an impact?

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