Driving digital 2017 presentation

Line Up
Nathan Coe
Scott Sinclair
Neil Addley
Eddie Hawthorne
Nick King
Mark Squires

NATHAN COE
COO
AutoTrader
Observations on Top Quartile Dealers

New Car growth is plateauing and may decline slightly
* 12 month rolling
-10%
-5%
0%
5%
10%
15%
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2,200,000
2,400,000
2,600,000
2,800,000
New Car Sales
Rolling 12 month New Car Sales Rolling quarterly YoY

7
However Used cars still have a strong tailwind

8
And despite increasing supply, prices are holding up well

9
Even when adjusting for vehicle age

47%0 to 3 year old vehicles within franchise network
10
Creating an opportunity for Franchise Dealers to grow
6%3 to 5 year old vehicles within franchise network

12
• Data is from Auto Trader’s market place
• Approx. 45 million visits and 250 million vehicle views each month, over 70% of all minutes spent
• ~4,000 franchise dealers and 200,000 cars removing individual forecourt and brand anomalies
• Pricing is based off observed prices, which on the whole is fine but may overstate the margin
achieved by dealers that over price
• There are 10,000+ price changes on Auto Trader every day and 300,000 a month
• Primary metric for quartiles is stock turn
The data

13
Top 25% of dealers days to turn is almost half bottom 25%
Top 25% Bottom 25%2nd quartile 3rd quartile

14
Which is consistent in premium brands (eg)

15
and volume brands (eg)

16
There average price position is “at-market”

… by pricing to the real market using tools like iControl
17
Which they do from beginning to end!

18
The result of this on sales is dramatic over a year
* Based on the average Used Car GP% from publicly listed UK groups
… even when normalised for stock levels

19
But what about margin?
Below we have taken the average gross margin for listed retailers and
adjusted it up or down for the final price position achieved (conservative?)

20
1. Largely fixed operating costs will mean a bigger impact on operating profit
2. Top quartile dealers use less working capital to sell the same number of vehicles
3. Vehicles held longer will absorb more operational effort and cost
4. Less inventory devaluation risk and more flexibility
Four reasons why this benefit may be understated

So what are they doing differently

1. Driving fast stock turn at margins that deliver a better profit outcome
Through a digital-led selling and data based stock and price decisions
2. “Bought in” managers in key roles with the right tools
Where buying, pricing, re-pricing and disposal decisions are made
3. And then reinforce consistency from top to bottom
Every day, every car, every person …
22

23
The prize …

Which combined with excellent online advertising (imagery, descriptions, trust
etc) generates more ad views for the same cars
24
They focus on selling online where car buyers are

… for example using tools like iControl that capture the market real-time
25
By ensuring most of their stock is price to market

26
And confidently staying at market from start to finish

27
Staying in line with market requires regular re-pricing
10,000+ price changes a day on Auto Trader or 300,000+ a month!!

28
Monitoring and adjusting across all vehicles all the time

… through retailing and avoiding knee jerk discounting and trade outs
29
This results in top quartile dealers having a lot less overage

Summary of the observations of the Top 25% of franchise dealers, on average …
1. They focus on selling the car online first and foremost
2. They turn cars in 37 days (on AT)
3. They price to market from day 1 and stay there
4. They re-price every 15 days
5. 84% of their stock re-priced every 30 days
6. Only 15% of their stock is 60 days+
30
Fast stock turn delivering a better profit outcome

31
Delivering the potential margins we saw earlier …
This understates the benefit to the bottom line profit due to fixed costs and
greater operating costs on vehicles held longer

32
But … its difficult to make happen without

33

1. Centralised functions vs. dealership level
2. Dedicated teams vs. the universal soldier (with 15 other things to do)
3. What do you measure and how do you review? Measuring inputs not just P&L
• % inventory priced to market
• Stock sold under 30 days (US: 45% is “good”, 60% excellent)
• % F&I penetration (gross profit)
• % Overage vehicles and price position
• % retailed stock that goes to wholesale (US <10%)
• Stock online – marketplaces and website
34
How top dealers think about leadership and consistency

35

leaving only two questions:
why not start tomorrow?
what are the implications of not changing?

SCOTT SINCLAIR
Industry Manager
Google
The Consumer Journey & Winning MicroMoments

We don’t go online. We live online.

Moments
7:05am Text Jim
7:45am Check time
8:12am Read text from Jim
9:03am Send work email
1:23pm Post vacation photos
3:29pm Text Karen
5:38pm Take picture of traffic
5:40pm Post picture of traffic

7:15am Find brunch place
7:53am Watch how-to fix boiler
video
8:59am Research holiday
destinations
10:07am Read about best running
shoes
1:23pm Watch mountain biking
videos
5:38pm Look up mortgage rates
Micro-moments

Google is the largest omnichannel
measurement provider in the world

Proprietary + Confidential
Which-Car-Is-
Best
Moments
Where-Should-
I-Buy
Moments
Am-I-Getting-A-
Deal
Moments
Can-I-Afford-It
Moments
Is-It-Right-For-
Me
Moments

finding better answers
to your marketing challenges

Proprietary + ConfidentialProprietary + Confidential
WHICH-CAR-IS-BEST
MOMENTS

Buyers often change their mind
during the research process
Key decisions have not
been made at the start
Showing up gets your brand in the game not
just to be seen
half of buyers will
end up buying a
new make to their
previously owned
vehicle
are not fully decided
about what make or
model to buy at the
start of their research
journey.
buyers did not purchase the
car they originally had in
mind at the beginning of their
research journey.72%
1 in 2 50%
Changing loyalty to brands
they currently own

There has never been such little differentiation in
cars as there is today.

Explosion in growth of the SUV market has meant increased
competition. How well are you associated with these
searches? Are you present in the moment?
Benchmark your moments
Nissan Qashqai
SUV
Ford Kuga
VW Tiguan
Audi Q3

IS-IT-RIGHT-FOR-ME
MOMENTS

of car shoppers say that search
provides the most useful online
source when helping through their
research journey
of buyers say that online video
sites are most helpful sources
when helping through their
research journey
Multiple touch points in the auto consumer’s
journey provide many useful moments
62%
59%
of consumers say that regularly
getting useful information from an
advertiser is the most important
attribute when selecting a brand

Win the is-it-right-for-me moments
Source: https://youtu.be/fJl72jUSY7I. https://youtu.be/OEJYD6PS9q0.
Be There
Promote your video content on YouTube
and Google search results.
Be Useful
Create your own auto review, walk
around video content and get it seen.
Be Quick
Make auto reviews and educational
content easy to find on your mobile site
and YouTube channel.
Carwow Arnold Clark
Lookers VW
Reviews

WHERE-SHOULD-I-BUY-IT
MOMENTS

of smartphone users have bought
from a brand other than their
intended one because the
information provided was useful
of smartphone users say they're
more likely to buy from companies
who customize mobile information to
their location
Without utility in the moment, not only will
consumers move on, they actually might not ever
come back
51%
of dealer visits, phone calls with sales
persons and test drives informed
their final vehicle purchase
76%

Where-should-I-buy-it Moments
2008 2015
search term: dealership location
dealerships near me

Use location signals to highlight
relevant locations, driving directions
and call contact
73%
of conversions are
not counted under
traditional ‘online’
conversions
Buyers don’t tell you they are going to visit the
dealership - they just ‘turn up’

Visit
s
store
Store Visits
Device
location
data
Signed and
opted in
Ongoing data
validation surveys
Physical
world data
Extrapolated, aggregated
and anonymized
Click
User behavior
Backend
data
Store
Visits

Win the auto shopping moments that matter
Source:
Be There
Put yourself in the car shopper’s shoes
and walk through each moment. Are you
there at every step?
Be Useful
Build relevant marketing that helps
customers in the moment.
Be Quick
Eliminate steps, anticipate needs and
load like lightening. How long does it
take shoppers to complete their key
action on your mobile site?
Be There Be Useful Be Quick

CAN-I-AFFORD-IT
MOMENTS

+8% +296% +126%
Computer Smartphone Tablet
Source: Google internal. UK Car Finance searches by device Q3 2014 vs Q3 2016 (overall searches increased 14%)
Car finance searches are becoming increasingly
mobile

Source: Lorem ipsum dolor sit amet, consectetur adipiscing elit. Duis non erat sem
71%
of car buyers would like to
begin the finance process
online
Source: MakeMyDeal survey 2015 US

Win the can-I-afford-it-moments
Source: https://youtu.be/fJl72jUSY7I. https://youtu.be/OEJYD6PS9q0.
Be There
Geo modify search results to dealer
location.
Be Useful
Create your own auto finance and
aftersales content to reaffirm product
proposition.
Be Quick
Make video content easy to find on your
mobile site and YouTube channel.
Audi UK
Financing
Volkswagen
Geo Modify
Bids for
Finance Terms

Be There - Anticipate moment for the open minded car shopper
Be Useful - Create relevancy to inform and connect
Be Quick - Frictionless experiences to act swiftly
Connect the Dots - Reframe how you align with the car buyer
Succeeding in a micro-moment world

WIN THE AUTO MOMENTS THAT
MATTER

NEIL ADDLEY
MD
NFDA Trusted Dealers
The Trusted Consumer

The Trusted Consumer
• Introduction
• The Trusted Consumer
• Performance

NFDA Trusted Dealers
• Dealer backed classified
• Controlled by the NFDA (National Franchised Dealers Associaton)
• 10 Points of Difference
• NFDA Used Car Standards
• ADR (Alternative Dispute Resolution) service
• Generate leads
• Campaign to promote franchised dealer benefits
• “where not just what”
• Stock management and marketing partnership with AutoTrader

Who is “The Trusted Consumer”
• Who is “The Trusted Consumer”
• Why are they important?
• How do we target them?
• What are they looking for?
• How do we measure effectiveness?

Why is “The Trusted Consumer” Important?

Why is “The Trusted Consumer” Important?
Post Brexit “vote”
Millennials
Squeezed by raising interest rates (car loans, mortgages, rent)
New car finance subvention wiggle room reduced by exchange rate
Trusted Consumers
Fixed incomes, pension access
Equity release
Savers benefit from interest rate rises

How do we target the “Trusted Consumer”?
• Proposition
• Search Marketing Demographics
• Social media advertising and content
• AutoTrader
• Public relations

Demographics: Targeting
• Higher PPC bids for older car buyers
• Messages target value and
proposition over price
• Goal: no clicks wasted
• Bespoke Scottish activity

Entertainment: Social Media
• Facebook page more active than even leading classifieds

Marketing
• Branded “tick mark” against stock
on AutoTrader
• Monthly email campaigns
• Consumer awareness
promoting franchised
dealers

Exposure: PR
• Twin
strategy
• Consumer
& trade
audiences
• Next:
Energy
Saving Trust

What are they looking for?
• Information
• Peace of mind
• Consumer validation (reviews)
• New cars(!)

Consumer has to click
on “New Cars” to start
journey

Shoppers part exchange vehicle

Submit
Shoppers submits new car
enquiry with PX details and
appraisal to get “Cost of
Change” proposals from dealers

How do we measure success?
• “Hard Leads” v Engagement

According to Comscore*
Trusted Dealers is second
only to Auto Trader in
terms of views per visit in
the used car classifieds
sector
*September 2016
Engagement
Market Position: Views per Visit

• Improved management of tracking
numbers
• Lowered call costs
• Increased quality of calls through main
marketing channels
• 82% of traffic driven are genuine used
car leads
Enquiries: Call Quality
Call Quality
Used Car Enquiry New Car Enquiry Service Booking Parts
Dealer Engaged Unanswered Call Other

• All on site actions logged against a postcode
• All email enquiries logged with postcode
• Matching against sales data
• Proving unique sales matches or touchpoint in
customer journey
Enquiries: Postcode Matching
neil@trusteddealers.co.uk

• Only 18% customers will use tracked media
(79% are internet generated walk ins)
• 22% of members customers visit Trusted Dealers
Enquiries: Postcode Matching

• Who is “The Trusted Consumer”
• Why are they important?
• How do we target them?
• What are they looking for?
• How do we measure effectiveness?
• Record January – tracked leads @ £13
• Now’s the time to put us to the test!

EDDIE HAWTHORNE
Group Managing Director
Arnold Clark

NICK KING
Insight Director
AutoTrader

How dealers adapt to service consumers in a changing digital environment

2001 2007
Design changes before our eyes…

Things from a
few years ago
seem antique

Not only didn’t test but didn’t evolve….

I fear not the man
who has practiced
10,000 kicks but the
one who has
practiced 1 kick,
10,000 times…
Bruce lee

Small changes to routine – BIG DIFFERENCE

If you break down a big goal into small parts and
then improve on each of them,
you will deliver a huge increase when you put
them all together

Search engines carry out 12000 Random
Control Tests per year!

5% of our audience
on our test site …all
the time

Research from KPMG confirm the growing importance of the dealership…

So how do retailers adapt with all this tech
and heightened consumer expectation?

Average vehicle desirability
Stock over 60 days
Average days to price change
Ad view performance vs similar ads
Average days to turn

The world’s changed and is set to keep changing
From To
Finance not key to success
Power shifted to the consumer
High Tech World
UK Wide
Much slimmer marginsDecent profit margins
Local area Influence
Low Tech World
Power sits with the retailer
Finance penetrations grows
Car sales As a career Car Knowledge less necessary
n: 60 automotive retailers 2017 Acacia avenue

Dealer mind-set Retailer mind-set

Retailer mindset are much more open to change
159
• More open minded
• Data is an opportunity (as is everything)
• Customers are more empowered
• Don’t have to spend time haggling, relationship is
less adversarial
• Margin is eroded but they spend less time selling
each car
• Meet customer on own terms, adapting retail
model and retail space
Vicious circleVirtuous circle
• Were good when they started (and good
at sales)
• But don’t adapt
• New things seen as a threat
• Margin is eroded
• Less able to drive traffic
• Resent customer empowerment

Successful dealers see themselves as good at
marketing and stock management rather than selling
160
0
10
20
30
40
50
60
70
80
Customer service
Marketing
Stock
management
Sales teamFinancing services
Forecourt
strategy
Servicing
Successful
Less Successful
Perceived Strengths
SU1. What would you say are your real strengths which make you good at what you do in today’s environment?

The less successful are more reliant on passing trade,
the majority agrees is declining
161
23
34
32
7
0
27
47
27
0 10 20 30 40 50
0%
1-5%
6-20%
21%+
Less Successful
Successful
Proportion of Passing Trade Change in Passing Trade
F2. Roughly what proportion of your business comes from passing trade? / F3. And is this much less than before, or about the same?
0
10
20
30
40
50
60
70
80
Customer service
Marketing
Stock management
Sales teamFinancing services
Forecourt strategy
Servicing
Successful
Less Successful

Successful dealers are over twice as likely to embrace digital
(41% vs 20%)
162n: 60 automotive retailers 2017 Acacia avenue

…Ensure a seamless customer experience
• “Make sure that you make the sales experience as seamless as
possible.”
• “We don’t see ourselves as a car business we see ourselves as a
people business – if you have great people delivering a great
customer experience, then you make some money.”
• “Customers want a retail environment that they recognise.”
163

• Chatbots on Facebook messenger
can now take payments via PayPal.
• Useful for existing customers….
• Already an essential part of doing
business in China with Wechat

Summary
• We continually evolve and consumers expectations will only
increase
• Technology will evolve, so your business needs to too.
• Fuse instinct and experience with data
• Trust and Transparency becomes ever more relevant
• Create a seamless customer journey
• Talk to customers in their language
• Retailer mind-set, that embraces the future
• …with a Positive Mental Attitude

MARK SQUIRES
Chairman
NFDA
What to concern ourselves with in The Way Ahead

Manufacturers’ online sales channels
Fiat /
Amazon
BMW
Volvo
Hyundai
Peugeot

The quickest to adapt,
survive

CHANGING THE PUBLIC’S
PERCEPTIONS OF THE
FRANCHISED DEALER
 Consumers
 Influencers and Opinion Formers
 Government and Statutory Bodies
 The Media
 The Industry

Overview
• Twice yearly survey of consumers
• Assess attitude to franchised dealers
• Currently focuses on aftersales only
• Wave 1 :Dec 2015 Wave 2: Jun 2016 Wave 3: Dec 2016
• 15 minute phone interview
• 1000 interviewees

Purpose
• EXTERNAL – Fighting our Corner
• Explain the Value we offer
• Differentiate ourselves from the competition
• Shift the battleground in aftersales from Price to Quality
• Shift negative perceptions
• INTERNAL – Consumer Insight
• Align ourselves with consumers’ interests
• Fresh insights into consumer’s real wants & needs
• Encourage best practices to deliver a stronger customer
proposition

Alternative strategies for the future
Plan A Plan B

Driving digital 2017 presentation

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