Ask almost anyone concerned with the business side of automotive retail and they will recognize the term DMS or Dealer Management System. The DMS model can trace its ancestry back to the earliest car dealerships, long before software based systems arrived.
As the name implies, a DMS was designed to help dealers manage their dealerships. The first systems were focused on managing the basic aspects of a dealership: accounting, inventory and possibly service. This allowed the dealer to manage their business, and handle basic accounting and reporting. In the U.S., the DMS software landscape was quickly dominated by a couple of large players and many OEMs focused their integration efforts on these systems. Initially, few could argue that this made sense from a business and technology standpoint. Several trends have now come into play that have many within the industry questioning if this focus is still necessary or even desirable.
Trend #1: Blurring Of the Lines
In response to demand from the dealers for more sophisticated software to increase profits and improve customer experience, hundreds of new software systems have been developed in the past 15 years and there appears to be no end in sight.
These interfaces allow advanced capabilities such as:
Digital, On Demand, Employee Training
Service Scheduling and Management
All of these systems either directly impact the consumer experience, or contain some information about the consumer. The initial versions of these systems were often stand alone interfaces, but it is increasingly common to see entire DMS systems coupled with advanced features. So, if a DMS includes business analytics, CRM and marketing capabilities, is it just a DMS anymore? Pentana Solutions, Dealertrack and many more are good examples of this model. Conversely, if a former standalone DMS is now tightly integrated with another vendor’s customer loyalty and digital employee training programs, what do we call that? From an OEM perspective, just where should you draw the line when it comes to integration opportunities?
Trend #2: Improving Customer Experience
As the demographics, needs, lifestyles, attitudes and values of the car buying market change, expectations are also changing. Younger, more tech savvy buyers, have raised the bar regarding the automotive buying experience. They expect a paperless buying experience, software that speeds them through the sales process, and many consumers now prefer to interact with only one person throughout the entire vehicle buying process.This can only be accomplished by “holistically integrated software”.
A great example of the benefits of integrated software solutions is the smartphone. How many of us would buy a smartphone with a limited number of available apps? Limited apps mean decreased functionality which translates into poor user experience. Google (Android) and Apple quickly figured this out and made a determined effort to make the integration of other software (apps) a priority.
Created marketplaces for consumers to browse and purchase applications
Provided developers with tools to facilitate development and integration.
The result is that Apple and Android have combined to offer over 3 million apps and these 2 companies now dominate the smartphone market (over 95% of the combined global market share). All of this was achieved by offering an “open” software ecosystem that directly improved customer experience.
Compare and contrast this to the automotive retail model where even in 2015 we have limitations imposed by OEMs and a mish mash of different business strategies when it comes to integrating dealer systems.
How can integrated software improve customer experience and contribute to a manufacturer’s bottom line? One example is transaction speed. Connected software systems could dramatically speed up the buying process, which would have a direct impact on customer satisfaction (customer satisfaction declines after 90 minutes in a dealership). Many people would actually visit dealerships more often if the sales process was less onerous. A recent study provides data that substantiates that claim. Improved customer experience would translate into a sales increase of up to 24%, due to a greater frequency of vehicle purchases. For the top 5 OEMs, this would translate into a staggering 9-12 million more passenger vehicles per year! 1 The takeaway is that increased sales don’t require lower prices or bigger rebates, just a better customer experience which demands flexible, integrated software.
Trend #3: Big Data And Business Analytics
The vast majority of any manufacturer’s revenue is generated at the retail (dealer) location. This revenue is produced either directly via the sale of vehicles and parts, or indirectly through F&I. Because of this focus, most DMS software was built around these few components of the sales process. Introducing a layer of information about customer behavior, promotion responsiveness and customer/employee interaction changes the equation dramatically. Without seamless integration, huge amounts of critical data about the buying process can be lost.
OEMs are relying upon increased leveraging of “big data” to improve business decision making and profitability. With a nod to the axiom “garbage in, garbage out”, we can see that the quality of business analytics and decision making is completely dependent on the ability to access quality data from the dealers and integrate it into the OEM systems.
Trend #4: Integration Is No Longer A Hurdle
Let’s get back to the reasons that OEMs initially chose to work with a limited amount of software systems. Historically, integration has been hampered by 2 factors:
Lack of integration standards
No fast, easy and cost effective integration programs
STAR has created data standards specifically for automotive retail to allow for easier integration between diverse systems. Many large OEMs are part of STAR and these data standards have proven very useful in many integration projects around the world.
Past integration programs have relied on I.T. software development practices that often involved contracting with I.T. companies or using internal I.T. resources to develop one-off integrations. These were plagued by lengthy rollouts, high costs and didn’t scale. New solutions that feature a structured program orientation combined with a flexible software platform are now available and dramatically lower I.T. costs. These integration programs are dealer system agnostic, opening up the retail environment to software interfaces that can combine features beyond the traditional DMS.
In the end, the loss of the traditional rigid DMS definitions will boost customer experience, reduce OEMs I.T. expenses and ramp up sales. The technology is now available and the benefits are waiting to be reaped. All that is required is a new way of viewing the DMS and the definition of a dealer system.
1“WORLD MOTOR VEHICLE PRODUCTION” International Organization of Motor Vehicle Manufacturers,2014