Ziegler blames the ongoing theft of your customers’ personal, private information by nefarious marketers in part on factory co-op programs, which limit dealer choice and vendor competition. 
 - Photo Topp_Yimgrimm via Getty Images

Ziegler blames the ongoing theft of your customers’ personal, private information by nefarious marketers in part on factory co-op programs, which limit dealer choice and vendor competition.

Photo Topp_Yimgrimm via Getty Images

Let me begin by pointing out the fact that I was writing and speaking about the corruption in the factory executive ranks long before it came to light. Let me also point out that literally no one else was piping up about it, and I was attacked for doing so. But, as it has many times in the past, history bore me out as new information came to light. I was totally vindicated and the accuracy of what I wrote was verified.

I begin with that because it is most certainly going to happen again. This time, it’s an “Emperor’s New Clothes” type of situation: Everybody can see the dude, and we all know he isn’t wearing a stitch, but nobody’s got the balls to say it.

I am talking about the manufacturers’ co-op marketing programs and their relationships with the companies that administer them.

When Factories Don’t Co-operate

At best, this is a story about weak management, manufacturer executive incompetence at the highest levels, and incredibly stupid decisions. Factories are pounding dealers with an iron fist to control which vendors they use and cover the associated costs. I might be wrong. But I seriously doubt it.

Shift Digital is a company that, for reasons unclear to me, controls most of the manufacturers’ co-op programs and preferred vendor selections. Informed estimates tell me they are cashing in on annual gross revenues north of $500 million, and even that number might be low. Some of the company’s detractors have not-so-lovingly referred to them as “Shifty Digital.”

And they’re not alone in the co-op space. Internet Brands, for example, recently earned FCA’s business with some of Shift’s former employees in tow.

Are these administrators and their partners the best in the business? Anything is possible. But from what I’m hearing, the vast majority of you would prefer to choose your own vendors.

I have long suspected some manufacturers could be persuaded by payoffs, bribes, and kickbacks. I experienced it firsthand, back in the day, when a factory exec told me I’d have to pay to get their business. I am not saying that’s happening here. But I wouldn’t be surprised to learn those practices have survived and evolved.

Now, I know there are some really great manufacturer-approved vendors. But there are plenty who have delivered some of the crappiest service imaginable. And yet, if you don’t use them, you lose your co-op as well as any earned incentive money.

So let’s say you get stuck with an OEM-approved vendor — just speculation, mind you — and let’s say these people are the absolute worst at what they do. They take half your ad spend and give you the same exact cookie-cutter template they hand every other dealer.

Now let’s say your site underperforms or crashes and the service sucks. You can’t wait to tell your manufacturer how bad your experience was, because you know they would never continue to mandate the use of any vendor that didn’t deliver documented results — certainly not with so many great competitors in the market. How can a company with a bad reputation manage your reputation?

Sadly, when these decisions are left to the factory, it is possible and even likely that such a company could become a preferred vendor on any manufacturer’s list.

Counting Sheep

Whenever I hear a dealer say, “Yeah, I know, that vendor sucks. But the factory recommends them, and they do get co-op,” it sends a chill up my spine. I personally do not view any partner the dealer didn’t choose on their own as a friend.

You might wonder where the national and state dealer associations stand in all of this drama. Aren’t they the dealer watchdogs?

Unfortunately — and this is just my opinion, based on the fact I have an IQ higher than an earthworm —your associations are mired in a financial conflict of interest. They need to and may want to stand up for their members. But they don’t want to risk offending the manufacturers and the large conglomerate sponsors who pay handsomely for big booth spaces at their conventions.

A Fiat Chrysler rep once told me that more than 90% of his dealers use the same website provider. Now, I’m not saying that provider is bad. Then again, I’m not saying they’re not bad. But I have to ask: What gives the manufacturer or their program administrator the right to decide on the dealer’s behalf?

A Hyundai dealer recently told me he had to double his spend to meet the minimum required for reimbursement. And the factory program’s “set price” with those vendors was already higher than he had previously negotiated with the same vendors.

Almost everyone is using the same formula: Approve a vendor, let them charge what they will, then pressure the dealers to use them.

More proof, you say? Did you see the recent letter sent to Lexus dealers announcing the launch of their program?

In the FAQ section, the letter states, in part:

IS THE NEW PROGRAM REQUIRED? Yes, All dealers are required to enroll in the website program. The certified tolls do not have a mandatory enrollment, but enrollment in tools outside the program will be prohibited.

Ever lose a customer to a competitor in the middle of a sale? How do you think they got their number? Duplicitous vendors could be reselling the data they pull from your systems. 
 - Photo by Kritchanut via Getty Images

Ever lose a customer to a competitor in the middle of a sale? How do you think they got their number? Duplicitous vendors could be reselling the data they pull from your systems.

Photo by Kritchanut via Getty Images

It Gets Worse

Is it all wine and roses for factory-approved vendors? Nope. To be accepted into one of these programs, those vendors have to drop their drawers and give away everything — net zero or close to it. It is absurd that you have to lose money or break even just to be considered to be an approved vendor on a program where the administrator is taking a huge chunk … and for what?

“Well, wait a minute, here, Ziegler,” you say. “If they’re not making money on it, why would vendors want to be approved?”

The majority of vendors — not all of them — are making huge revenues by reselling their customers’ data to other companies to repurpose, repackage, and resell.

Data brokering is a huge business, and it’s your private customer data that they’re stealing and reselling.

Did you ever have one of your customers approached by a competing dealer while you were still working a deal with them? The customer didn’t contact them and sure didn’t try to buy a car from them. So how did they know? Who told them?

Well, the truth is one of your trusted vendors lifted that data from your website traffic — or from your CRM, or your DMS — and sold it to a data brokerage. The brokerage then resold that lead to your competitors. And since it was an “in-market” buyer, they paid a premium.

Recently one of the prominent SEO advertising agencies was caught red-handed reselling dealers’ data to hostile third parties. The CEO of that company had to go on social media boards, admit the truth, and apologize.

It used to be that a customer shopping on your website was anonymous until they disclosed who they were. Well, not anymore, Buttercup. A customer fills out a form on your website. Their information is attached to their IP address, and wherever they go online from there, they’re tracked.

And in many or even most cases, it’s perfectly legal. You do read the end user license agreement clause at the end of every contract you sign, right? That’s the one that lets vendors take ownership of your customer data. And if your vendor is under a bigger company’s umbrella, that end user license agreement you skimmed past might apply to the entire group.

Of course, all they’ll find out is your customer’s name and contact information, financial profile, the last vehicle they chose, and when they bought it. And you’re their customer, so they could be using all this data to your advantage, couldn’t they? It could be a good thing. … Right?

Pixels and Tags and Cookies! Oh, My!

Yesterday, I pulled up 20 dealer websites built by preferred vendors on factory programs. I used a simple privacy extension called Ghostery. It tells you exactly what your website provider has programmed into your website to export your customer data, and it shows you who they sent it to. It even gives you a complete readout of what the company they sent it to does with it.

The 20 sites I analyzed were sending data to an average of 38 different companies. Yes, some of it was legitimately in the dealer’s best interest. Most of it was not. Armed with a strong geofencing program and the aid of tags and pixels, your competition is getting your customer information in real time.

By the way, I also saw “DoubleClick,” “Google Tag Manager,” and “Amazon Associates,” which I am told facilitates Alexa. Hmmm.

Remember this: Federal privacy laws and the privacy statement you share with your customers clearly forbid you to share this data with any third parties. Nor may you allow any vendor to steal, redistribute, and resell it.

In fact, I think there are a number of possible federal crimes happening in our industry that probably should be investigated. The FTC needs to shine the light of day on some of these companies. Ideally, executive prosecutions and prison time will follow.

But my guess is this is bigger than that agency is competently able to handle. You are more likely to see the FTC going after small fish. I am not sure they even have the expertise to understand the issues at play.

It’s up to the dealers to speak up. And everyone will benefit if you do, including the vendors who actually deserve your business but are priced out of the factory programs.

But that still leaves one major question unanswered: Why?

Why do these programs even exist? Why are manufacturers so eager to interfere in retail when they’ve proven so many times that they’re really bad at it? Is any of this even legal?

I don’t know the answers to these questions. But I hear them all the time in conversations with dealers.

Nobody is advocating for a boycott or anything like that. Instead, I believe we — and I mean everyone in the automotive industry — needs to get active on these issues. If every franchised dealer in America were to step up and write a confidential complaint to the FTC about these abuses and possible violations of federal law, the truth would be revealed.

Say it with me: “The emperor has no clothes!”

Author

Jim Ziegler
Jim Ziegler

President and CEO of Ziegler SuperSystems

Jim Ziegler ranks among the industry's most recognized and honored trainers, consultants, authors, speakers, and forecasters.

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Jim Ziegler ranks among the industry's most recognized and honored trainers, consultants, authors, speakers, and forecasters.

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