In today’s full-speed, take no prisoners online reputation landscape, where one misstep can spell disaster for a car dealership’s reputation, it’s crucial to stay vigilant. Imagine losing a sale overnight because of an easily-remedied customer complaint. The stakes are high, and the consequences of neglecting this vital aspect of daily operations can be devastating.
But sometimes knowing the consequences isn’t enough to inspire action. We’ve all had situations where we don’t think it will happen to us. Taking another view – such as what a 5-star online reputation is worth in dollars and cents – can be persuasive.
Customer satisfaction, online ratings and reality
I’ve been in this car dealership online reputation world since 2009, when I realized that there wasn’t a standard internal process in daily operations to manage the outcomes of customers sharing their experiences in real time. Word of mouth became digitized and the risks of ignoring it seemed like something I needed to shout about. And I did for a long time. But the introduction of new concepts and opportunities in retailing cars tends to bring about a lot of noise, followed by an onslaught of vendors offering to mitigate the “pain” dealers felt around change.
Instead of dealers implementing long-term strategies, such as cultural shifts and workforce upskilling, these vendors proposed “easier,” alternative, often substandard solutions and soon, the online ratings sites were controlling the narrative. Some dealers were held hostage by customers who threatened to leave negative reviews and sadly, the opportunity to substantially improve the public’s assumptions of dealerships largely faded into the distance.
Call it idealistic, but because I come from family-owned dealerships that were pillars in their local community, I thought we’d see faster adoption of online reputation management. For sure there are some stellar dealers who’s online reputation reflects the great experience they deliver, and they are the true pioneers that still lead the industry today.
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Today’s complex world of online reputation management
I was asked to speak at the NIADA (National Independent Auto Dealers Association) Conference next month. Independent dealers are non-franchise used car dealers and they are who’s lots you see often in your neighborhood or city center. They can be large operations and small mom ‘n pops on the corner. Unlike new car franchise dealers, they don’t have the constraints of adhering to manufacturer guidance, but no guidance comes with its challenges, too.
I’ve always felt a kinship with this segment of automotive retail and had many conversations about how independent dealers are underserved, especially when it comes to either CFO-type advisory or digital marketing, which includes online reputation management.
Independent dealers don’t have the budget and manufacturer support that new car franchise dealers have to manage the ever growing complexity of online reputation. So, I’m going to give as much helpful info as I can to the attendees at the conference. (If you’re going to be there, come say hi!).
As I was preparing my session, I wanted to convey the compelling reasons to treat online reputation as a company asset. We tend to not consider it as such, mainly because it’s digital and not sitting on the showroom floor. But the fact remains, it is a component of the business’ value and creating processes to build, enhance and nurture an online reputation increases profitability.
I also want to share some of the common mistakes I am seeing today. Whether you’re in the automotive industry or not, there are valuable lessons to be learned from others’ mistakes and maybe one day soon, you’ll have an opportunity to share this with someone who needs the help.
But first, let’s talk about online reputation value.
What is the monetary value of a dealership’s 5-star online reputation?
A strong online reputation can enhance the dealership’s overall value and even if the dealership isn’t looking to sell, it’s encouraging to see evidence that your efforts to achieve a 5-star customer experience are paying off in tangible ways.
I’ve been involved in several dealership buy/sells and you can bet that while it takes work, assigning a monetary value to a car dealership’s 5-star online reputation is worth the effort and should always be part of the valuation appraisal process.
Online reviews significantly impact the value of a car dealership by influencing customer trust, loyalty, and ultimately, sales volume. However, this impact goes both ways: positive reviews boost…and negative reviews drain.
I would consider several key factors to determine the monetary value of a 5-star online reputation for a potential sale. The value can vary widely, but a conservative estimate would be 5%-10% over a dealership’s baseline valuation. So if the value of the dealership is say, $10m, that equates to $500K – $1m in additional value. That’s a pretty nice return on hard work.
Here’s how I would justify this assessment:
Impact on Sales
A 5-star reputation attracts more customers, leading to higher sales. I would analyze the dealership’s historical sales data to understand how much of its revenue is attributable to its strong online reputation. This can be supported by comparing sales trends before and after the dealership achieved its 5-star rating, as well as benchmarking against similar dealerships with lower ratings.
Customer Lifetime Value (CLV)
A positive online reputation increases customer loyalty and repeat business, enhancing the dealership’s CLV. I would assess the dealership’s customer retention rates and average spend to estimate the increased value attributable to a strong reputation.
Competitive Advantage
A 5-star reputation provides a competitive advantage, attracting new customers and creating a barrier for competitors. This advantage can justify a premium in the valuation, especially in competitive markets. I would analyze the dealership’s market share and its position relative to competitors with lower ratings to quantify this advantage.
Reduced Marketing Costs
A strong online reputation serves as organic advertising (ie: not paid), word of mouth, reducing the need for the additional marketing and advertising expense that a competitor with a 2-3 star rating would need to spend to make up for the public’s negative assumptions about the store. I would evaluate the dealership’s marketing/advertising expenses before and after achieving a 5-star rating, estimating potential savings that contribute to the overall valuation.
Goodwill and Brand Equity
A 5-star reputation enhances the dealership’s goodwill and brand equity, which are significant intangible assets. I would assess the dealership’s brand recognition, customer perception, and overall reputation to determine the added value. This can be cross-checked using industry standards for goodwill valuation, based on a percentage of annual revenue.
Now, let’s cover some of the common mistakes I observe in online reputation management for car dealerships.
The journey to a 5-star reputation is strewn with the casualties of numerous fallen warriors.
Online reputation management is crucial for dealerships – and really any retail business – because it directly impacts customer trust, sales, and overall business growth. It’s a cautionary tale because potential car buyers heavily rely on online reviews and feedback when making purchase decisions.
Sometimes it can feel like everything you’re doing is not enough. I once facilitated a manufacturer’s national online reputation training program where a dealer exclaimed, “Social media is a scourge!” He was exasperated from all the moving parts, many of which felt like they were beyond his control. He was doing everything he could to effectively manage the store’s online reputation but he knew it wasn’t enough.
The key factor for him during the half-day training was uncovering the pitfalls to avoid when managing online ratings. Specifically, it was designing an alternative way to respond to reviews. Together, we came up with a plan that worked for him: He would write out his response on a word doc, then send it to his wife for review. The simple action of writing out his honest response alleviated some frustration and getting a “second opinion” before it was published provided an insurance policy for him “saying the wrong thing” without realizing it, which was causing him a lot of anxiety.
Here are some common mistakes I witness that can help dealers discover how to better protect their organization in the unforgiving world of online reviews and social media.
6 common mistakes in online reputation management for car dealerships
1. Ignoring Customer Reviews
Example: Failing to respond to reviews on platforms like Google, Yelp, or Facebook.
Impact: This can give the impression that the dealership doesn’t value customer feedback or isn’t interested in resolving issues, potentially deterring prospective customers.
Best practice: Respond to every review in a conversational tone without repeating a “canned” response over and over. When appropriate, offer to take certain sensitive discussions offline to build rapport and trust.
2. Negative Customer Experience
Example: Poor customer service, both online and offline, often leads to negative reviews which harm the dealership’s reputation and profitability.
Impact: Customers who’ve had a negative experience are often motivated to share their experience with family, friends and co-workers, which diminishes trust in the dealership’s reliability and professionalism…and can often compel buyers to choose a competitor.
Best practice: I used to say, “If you suck in real life, you’ll suck harder on social media.” There’s no way to fake it. The best way to improve customer experience is to improve customer experience. Training programs or dealership consulting to instill a customer-centric culture are available and in my experience, when introduced thoughtfully, customer feedback turns positive, employee morale improves, along with profitability.
3. Poor Handling of Negative Feedback
Example: Responding to criticism defensively or aggressively, or simply not addressing the root causes of complaints.
Impact: This response tactic always exacerbates the situation and leads to further public dissatisfaction and damage to the dealership’s reputation.
Best practice: Always listen and never make the customer wrong (no matter how wrong you think they are). Offer the GM’s or dealer’s cell phone to discuss the issue offline.
4. Lack of Proactive Engagement
Example: Only interacting with customers when negative issues arise instead of maintaining regular, positive communication.
Impact: Misses the opportunity to build strong relationships and loyalty, which are crucial for reputation resilience.
Best practice: Online ratings sites offer a unique way to connect with customers and people feel special when a store takes the time to respond to them. Engage as if the customer was sitting in front of you. Even just a few thank you’s or short appreciations go a long way.
5. Neglecting Employee Training
Example: Staff members who are unprepared to manage online interactions or escalate issues appropriately.
Impact: This can easily turn into a crisis when an employee unknowingly says the wrong thing, up to and including promises that can’t be kept.
Best practice: Always utilize a written employee social media policy, which is typically included with the employee handbook. Through training programs, equip your team with the specific skills required to engage online customers, whether it’s on review sites or any other digital communication platforms (email, social media, texting).
6. Failing to Leverage Positive Reviews
Example: Not promoting or sharing positive testimonials to counterbalance negative feedback.
Impact: Reduces the visibility of positive customer experiences that tell the story through current customer’s feedback.
Best practice: Work with your marketing manager to devise a strategy promoting positive reviews you’ve earned. This can be simply displaying them on your website or more advanced tactics like sharing on social media and your email marketing.
By understanding and addressing these common mistakes, dealerships can significantly enhance their online reputation management process, enhance their systems for managing reviews and turn challenges into potential opportunities for growth and customer engagement.
Don’t forget your FREE DEALER SELF-ASSESSMENT. It will reveal how you measure up against manufacturer-specific benchmarks. Get it today!