CBT News sat down with Pete MacInnis, Founder, and CEO of eLEND Solutions to discuss how using basic payment estimator or calculator tools can have an unintended negative impact on your customer experience and your reputation in regards to digital retailing.
Digital retailing can be extremely helpful to dealerships who are looking to improve their customer experience, but some of these payment tools may be causing more harm to your dealership than good. These tools are unable to take into account the customer’s credit profile, specific vehicle, or any of the dealership’s lender programs; thus establishing an unrealistic payment expectation for the customer. This can then lead to an unavoidable conflict at the dealership if the customer is given a price that is very different or much higher than what was originally calculated with the payment tool. For dealers striving to deliver a frictionless and transparent buying experience these digital finance tools actually deter customers when it comes to the buying experience rather than enhance it.
VIDEO TRANSCRIPTION:
Jim Fitzpatrick: Hi everyone. I’m Jim Fitzpatrick. Thanks so much for joining us on another edition of CBT News. Today I’m excited to have in the studio, Mr. Pete MacInnis who is with Elan Solutions. I know that you know that company’s name and this gentleman is sitting right here next to me. So, welcome to the show, Pete.
Pete MacInnis: Thanks for having me, Jim.
Jim Fitzpatrick: Yeah. Whenever you’re on, we get a lot of great feedback from our subscribers and our viewers and so, I want to drill down into and talk a little bit about digital retailing. With so much hype around digital retailing and consumers wanting to do more of the process online, as you know. Payments seem to be as important to them. I want to talk a little bit, if we can about how digital retailing addresses this issue because I know it can be a real angst between the consumer getting one bit of information online and then them coming into the dealership and it’s a different story, right? In a dealer survey, Elon conducted recently, over 50 percent of dealers stated that they offer payment estimators and calculators on their websites. Are these tools time savers?
Pete MacInnis: Well, actually no, but I’ll talk about that in a second. When you think about the payment aspect, when you talk about payments being as important as price, right? Particularly with this millennial generation and moving forward, it’s all instant demand. It’s what can I afford today? They don’t think back like we used to do back in the days about what’s my resale value? That’s not even relevant to them. It’s what’s my total cost? Can I afford to pay for this today? So, more and more as we’re moving forward, that becomes much more relevant. So, a lot of the digital retailing tools are now offering hey, self-help, payment estimator, self desking type deal.
Pete MacInnis: Put in your estimated credit score or put in your own APR and stuff like that. It’s like, well, you’re going to have a customer choose their own APR and it has to be their own credit score. They’re not going to downgrade themselves.
Jim Fitzpatrick: I’m going to be 800 credit score. So, I want $200 a month for my $25,000 car.
Pete MacInnis: Absolutely. So, it’s either an inaccurate or unrealistic expectations. So, it’s being set up upfront, right? In that regard and so, that’s really somewhat problematic with that. So, 87 percent in the same survey, 87 percent of the dealers stated that was a problem most of the time, those inaccurate payments and that was really causing more disruption than anything else.
Jim Fitzpatrick: I could imagine.
Pete MacInnis: I mean, 87 percent of them said it was an issue of inaccurate or unrealistic payment expectations in the process.
Jim Fitzpatrick: Of course and then it causes a real problem with that consumer moving forward, chances are you’re hurting yourself in winning that customer over, right? To sell a car to if already right out of the box by the time they get there or when they arrive at your dealership, it’s not the case. You can’t deliver a car at that wishlist. Right?
Pete MacInnis: Well, what it’s doing, it’s just further perpetuating that trust gap with the dealership. Right? It’s reinforcing why they don’t trust the dealer, right? And I think those tools are really set up from a lead generation standpoint. They’re not really getting the dealer into a real process. So, I think they’re looking at it from a lead generation. Can I get the customer in and engaged? But it turns out you’re going to pay for it later because now you’re going to have that disconnect with the customer.
Jim Fitzpatrick: Yeah. It’s really a false sense of security, isn’t it? So, at the end of the day, the payments that they’re delivering sometimes $25 higher than the reality, aren’t they having a negative impact? I mean, I know we just touched on that, but that’s got to play a big role.
Pete MacInnis: Well, yeah. The dealers are trying to evolve and they want to give the customers more of what they want up front. The customers want to do more self help stuff and things. So, they’re trying to give it to them, but the reality is that that’s creating as much friction as it is removing it. So, when you talk about the question is, is it saving time? It’s not saving time, it’s causing problems. It’s setting up assault, a false sense of time saving, right?
Pete MacInnis: Oh, we’re going save, we’re going to do this up front, but then it turns out they have to unwind it and redo that and the numbers are staggering how much time and what happens with those tools.
Jim Fitzpatrick: Is that one of the reasons why some dealers are not using digital retailing tools?
Pete MacInnis: Oh, absolutely. Of the dealers in that same survey of the dealers that weren’t, and we ask, “Why are you not?” And they felt that, 50 percent of those dealers said that the reason they aren’t is because it’s really having an adverse negative effect on their FNI income and it was a real, big uncertainty for them and it’s a big part of their profits and if it’s a big black hole and it’s going to cause friction when a customer comes in and the first thing they have to do is say, “Oh, your payment’s not this.” So, one of the examples, I’ll give you a perfect example what we say about these payment [inaudible 00:04:48], so they get to that, right? And most of the stuff you see, it’s whether the customer is self-helping and say, “I’m going to give myself a 800 credit score and I’m going to choose 1.9 percent financing,” or they’re going to go off that advertised promotional things that these digital retailings do a good job with. It’s the same thing as radio and TV. Now it’s moving to the website, “Hey, here’s the vehicle, here’s the deal, here’s the special incentives. Here’s 199 a month, 199 down, 60 months on tier one approved credit,” right? So, everybody has that expectation, but that’s it, right? And there is not a lender that has less than six credit tiers and there’s a reason for that, right?
Pete MacInnis: So, it’s let’s put everybody one size fits all for everybody and set that expectation. It’s, “Okay, but we’re going to get the lead and we’ll deal with it later.” So, it’s really taking some of those things that the consumer disliked in the dealership and let’s move it online, like that’s going to make it better. Right?
Jim Fitzpatrick: And it’s supposed to be a more transparent process, right? For the consumer. Are dealers willing to embrace digital finance and provide more transparency if improvements are made?
Pete MacInnis: Oh, absolutely. The dealers expect and want digital retailing to remove inefficiencies in the process, they’re willing to help, but right now some of them actually create inefficiencies and that’s why the dealers going, “No.” Until you can provide proof and evidence and data that shows that this is working, I’m not going to case, but once that’s proven and digital retailing and all these payment quotes gets beyond what we’re just talking about and they prove that it’s working, they’re going to break, they’re going to jump all over because that’s the goal., They want to create those efficiencies.
Jim Fitzpatrick: Sure. So, what can dealers do in the meantime?
Pete MacInnis: Well, dealers have a little bit of a different objective of digital retailing then what a lot of people think that is or what they’re talking about. So-
Jim Fitzpatrick: There seems to be a number of different versions-
Pete MacInnis: I mean, people are all over the map about the definition of that-
Jim Fitzpatrick: No question.
Pete MacInnis: I think the general hype about it is moving everything online where really digital retailing for a dealer should be about leveraging technology that’s going to remove bottlenecks, disconnects, profit leaks and the transactions. Let the customer move at their own pace. Right? And the end results going to be it’s going to help them sell more cars faster with increased profitability. That’s what the dealers are looking and wanting in digital retailing. So, there’s really a what is being presented and versus what they really need and want. So, when we can get to that point where you can take and bridge the gap between those things and start building true trust and engagement with the customer. So, what you stay online and what you actually do ends up being the same, then the dealer’s going to see value in that.
Jim Fitzpatrick: Yeah. They say that it’s right now it’s less than 5 percent of the actual deals that are done in the scope of what we think as a true digital retail experience, which is from start to finish all online where they literally deliver the vehicle to your front door and say, “Here are the keys. We’re going to take your trade, take it back to the dealership.” You never stepped foot in the dealership. That’s probably less than 5 percent currently taking place in dealerships. Although it’s growing. What we also see is the fact that you’ve got different groups that like digital retailing better than others, right? Where you might get maybe seniors that still want to go into the dealership the way they’ve purchased cars for the last 50 years of their life. Right? While you’ve got millennials that maybe just want to turn to their iPhone and say, “How do I get that new car in the quickest way that we can?” Do you see that to be the case?
Pete MacInnis: Oh, absolutely, but going back to this specific topic we’re talking about with the whole payment calculators and self desking things, which is ridiculous, right? You could think about how difficult it is for a desk manager to desk a deal without that expertise. It’s hard, right? You’re going to let a customer do it themselves?
Jim Fitzpatrick: Forget it. It’s like giving a loaded gun to a baby.
Pete MacInnis: It’s just not there yet. So, to answer your question, what should dealers do? I think really the first thing we say, turn the spotlight back on yourself. Look at yourself, put yourself in the customer’s position and is that the experience that you would like? Is that what you would want to go through, right? So, it’s just that very basic stuff in that regard and that doesn’t matter whether it’s online or in store, right? Just put yourself in that seat and I think that’ll do a lot. So, when it comes to these online calculators and tools and self-help stuff, really do your homework, right? Which ones are dumb ones? Which ones are smart ones? And be clear on understanding the difference between those two and what you’re getting.
Jim Fitzpatrick: Yeah because dealers don’t want to be giving out erroneous information. Right? They want to get as close as they can to that payment to help that customer when they come in to go, “Look, this is the real deal.” I mean, people, they want it right down to the penny nowadays, don’t they?
Pete MacInnis: Yes, they do.
Jim Fitzpatrick: Yeah, they really do and I know that we’re going to talk about that in the next part here because I see this as a two-part series. This is great content. I want to have you back in so we can touch on some of those things and other things. So, thanks very much for joining us in the studio today. This has been great.
Pete MacInnis: Thank you.
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