The Future of Dealer Technology: CEO Perspective, Part 1

While the DMS – dealer management system – has been a common component of car dealership technology for many years, its current role within the dealer tech ecosystem is evolving, making it one of the top strategic technology investments that today’s dealers are making – whether they realize this or not. Let’s consider several key trends impacting the retail automotive industry that reflect the importance of effectively harnessing the power of data and optimizing the customer experience. Then we’ll take a look at the DMS, and I’ll share how DealerBuilt envisions the evolution of the DMS’s traditional role within the dealer tech ecosystem. As a leader responsible for driving and shaping the future of dealer tech, my hope is that this article gets you thinking about where the industry is heading, and its potential to become a healthier ecosystem for the benefit of all of its members – end consumers, dealers, dealer tech providers, and OEMs.

Rapid Proliferation of Data

The IDC predicts that the total amount of digital data created worldwide will grow to 163 zettabytes by 2025, accelerating rapidly with the growing number of devices and sensors employed across all facets of life (Forbes). In the retail automotive space alone, vast amounts of data are generated by the DMS, CRM, and other complementary point solutions (i.e., applications that “plug in” to the DMS) used by specific departments at dealerships, website and mobile interactions by customers, OEMs, and connected cars, which are expected to make up 73% of passenger vehicles sold by 2022 (IHS).

All of this data has the power to create new efficiencies, lower costs, inform product decisions, enable tailored product and service offerings, and remove friction from customer interactions. In the dealership world this means better employing data to deliver a personalized, customer-centric, and timely vehicle purchase and ownership experience. It also offers the potential to better align your people resources (e.g., lead follow-up, intelligent dispatching) and drive operational efficiencies (e.g., inventory management, protection of vehicle assets, faster vehicle diagnostics).

The Imperative of a Closed-Loop Customer Journey

80% of customers say the experience a company provides is as important as its products and services and 64% of customers say providing an excellent customer experience strengthens their loyalty (Salesforce State of the Connected Customer Report). Given margin compression in the retail automotive space, creating a customer experience that drives a closed-loop customer journey – meaning those who purchase vehicles at your dealership become service customers who will eventually purchase their next vehicle from you – has never been more important. Dealers must strive to capture more of the higher margin fixed ops business from vehicle purchasers, and then use the ownership experience to continue cultivating loyalty and trust that results in a future vehicle sale – one that comes without the added cost of acquiring a new customer.

According to a Cox Automotive survey, the top reasons customers returned to the dealer of purchase for service are trust and a good purchase experience. On the flip side, 74% of car buyers who had their vehicle serviced by the dealership of purchase said they were likely to return there to purchase their next vehicle, while only 35% of those who did not have their vehicle serviced at the dealer said the same. To drive profitability, dealers must offer a seamless, frictionless, digitized experience throughout the entire vehicle purchase and ownership life cycle that creates stickiness and connects customers to your dealership.

Removal of Barriers to Innovation and Data Access

The final trend of note relates to data access and the hefty fees that some DMS providers have been charging for years, simply to allow dealers to push or pull their own data to/from their DMS system into other point solutions used by the dealership. As was noted by the author of NADA’s The Dealership of Tomorrow 2.0 report, this approach has amounted to “economic rent” that has “raised costs for vendors, their dealer customers and ultimately consumers, while depressing innovation in the third-party software space.”

That said, this approach to using third-party integrations as a profit center for the DMS has been rejected by more forward-looking DMS providers, which champion that dealers should have their choice of the best and most innovative technologies available when building out their dealership’s technology ecosystem. This viewpoint is certainly core to our mission at DealerBuilt and how we partner with our clients, and we count ourselves among the DMS providers working to remove barriers to innovation and data access in our industry. It’s also notable that more and more dealers are moving to alternative DMS providers, like DealerBuilt, in an effort to mitigate the cost burden of third-party integration fees, while also enjoying more technology choice when it comes to improving the customer experience and cultivating a closed-loop customer journey.

With all this in mind, let’s shift gears and discuss how these trends will influence the future dealer tech ecosystem and how the traditional role of the DMS will need to evolve.

The Hub of the Ecosystem

You may have noted that all of the trends mentioned above drive towards the need for technology that enables fluid, timely sharing of data to shape the customer experience. As the central nervous system of a dealership’s technology ecosystem, the DMS platform of the future must serve as its hub, connecting all members of the ecosystem – dealers, end consumers, OEMs, the wide variety of point solutions that make up a typical dealer tech stack, and even connected cars.

In its role as keeper of the customer “master view” within this ecosystem, the DMS is best positioned to make sense of the relationships between the vast amounts of data related to each customer and freely enable its use to cultivate the desired closed-loop customer journey of vehicle purchases and ownership.

The DMS as the keeper of the customer master view.

Graduating Beyond the System of Record

In its role as the data hub, the DMS of the future is not just the traditional system of record that collects and calculates data, but also a system of:

  • Fulfillment – The DMS will empower dealers, dealer point solutions, OEMs, and connected cars to serve up content that unites critical data points from multiple ecosystem members, allowing the presentation of unique content at the right time in ways that personalize and optimize the consumer’s purchase and ownership journey and create more stickiness. For example, bringing together data from various systems to enable the dealership to display the details and pricing of a customized service package to the customer within their connected car, based on the vehicle’s service history and telematics.
  • Insight – The DMS will connect all members of the ecosystem to data and insights that inform decision making on the part of consumers, dealers, OEMs, and dealer point solution providers. For example, during a customer’s tablet-based write-up in the service lane, providing the advisor with insights into the customer’s equity position, their vehicle’s trade-in value, as well as recent service history and spend, arming them with information to discuss whether it’s time for the customer to consider an upgrade to a different vehicle. For ecosystem members like OEMs, these insights will help them to continuously improve the product itself and better support the end consumer’s vehicle purchase and ownership experience.
  • Engagement – The DMS will enable consumers to interact with the dealership on their terms, in ways that minimize friction and enable seamless transitions between the digital and dealership experience. For example, its core features will include mobile tools that allow a client to schedule a service appointment, check in upon arrival at the dealership, text about the status of the vehicle, and pay via smartphone.

Setting a Course for Success

So what does this future view of the DMS mean for you as a dealer today? As you consider technology investments now that will set your dealership on a course for long-term success, it’s critical to assess an existing or potential new DMS through the lens of its future role as a system of fulfillment, insight, and engagement. Even if you’re not currently in a DMS evaluation cycle, there’s a high likelihood this will be on your agenda in the not-too-distant future. Be on the lookout for Part 2 of my “Future of Dealer Technology” article later this month. In it, I’ll share three important areas that dealers should consider as you evaluate a DMS provider’s ability to successfully serve as your dealership’s DMS platform of the future.

Learn more about DealerBuilt’s ceDMS (customer experience DMS) platform or schedule a custom product demonstration.