Why Car Dealers Compete With Dealers of Their Own Brand

Two Toyota dealers 20 minutes apart buy the same car from Toyota at the same price, and then they compete with each other for your business. Todd Katcher, CPO of Zoney Digital Signage, says car dealers are the only franchise he knows of that competes against the same brand in the same market. That makes the experience inside the store what sets one dealer apart, and that includes the TV in the waiting room.

In this episode, I talked with Todd Katcher, CPO of Zoney Digital Signage. Zoney's sister company, Digital Dealership System, has been putting digital signs and sales leaderboards in car dealerships for about 15 years. It now works with more than 1,000 dealerships across the country. Some have one screen and some have 50. The software they used to run all that was built on plugins, and keeping every piece updated got cumbersome. They couldn't find a tool that fit, so about five years ago they started building Zoney for themselves. Then they decided to make it available to everyone.

I didn't know much about how dealerships make money, and Todd's explanation was eye-opening. Franchise laws require every dealer to buy the car at the same price. What changes is the back end. Dealers earn incentives from the manufacturer for sales volume and for keeping their facility up to the latest standards, which is part of why five Ford stores can look so different. There's also allocation, where the more cars you sold, the more you get to sell next year. A store that earns more on the back end may sell the same car for less up front. Compare that to McDonald's. The McDonald's on Second Street doesn't compete with the one on Main Street. Two Ford stores 5 miles apart do.

Customer satisfaction counts too. A third party surveys buyers about their sales and service experience, and dealers get bonuses tied to that score, called CSI. Todd said a store with a low score that sells a lot of cars can make less than a store with a higher score that sells fewer. Then there's floor plan financing. Dealers normally don't pay for a car until it's been on the lot for 90 days, and after that they pay financing to keep it there. If holding a car costs $500 a month, Todd said a dealer would rather sell it to you for $500 less. A few years ago I helped a relative shop for a car and couldn't figure out why two stores of the same brand had different prices. This explained a lot.

Here's where the waiting room comes in. Todd said about 90% of dealerships play regular live TV in their lounge. Picture paying $400 a tire while an ad on that TV says buy two tires, get two free. Or you're waiting on financing for a Honda Accord, and another Honda store nearby advertises a payment that's $100 a month lower. You may not qualify for it, but now you're doubting the deal, and the sale slows down. Digital Dealership System replaces that with commercial-free, family-friendly content that promotes the dealer's own products and services, for $99 a month. I saw this done well at a Tesla collision center recently. The big TV played a long loop of Full Self-Driving clips, and while I drank my coffee, I learned about things it could do that I hadn't heard of.

Zoney works outside car dealerships too. A group with five stores can push corporate content to every location while each store adds its own, like an employee of the month. Content can also change by region and language. I told Todd about a Chick-fil-A in El Paso where one screen had a bad Spanish translation, and he explained that whether a mistake like that is local or corporate depends on how the franchise sets up access. Zoney can also connect to a point of sale system, so when a restaurant changes a price, the signs update with it.

We also talked about building software with AI. Todd thinks the project manager role matters more now, since that's the person who understands the business case and can check whether the result works for real users. He said AI is good at code but weak at design. Ask it for 20 different products and they'll all look like the same person made them. He breaks big features into smaller waves. On a document management tool he's building, one feature took three passes of 40 minutes to an hour each, and he still logged in and tested it himself afterward. I work the same way. I have the AI log every task in GitHub issues so nothing gets lost when the conversation gets long.

My takeaway is to look at how you talk to customers once they walk in the door. If you're still using printed pamphlets or sheets of paper taped to the wall, Todd suggests starting small. Most TVs can play a slideshow from a USB stick, and that's already a step up. The next step is software that updates every screen remotely, so you aren't climbing a ladder to change 10 TVs. You can find Todd's work at zoney.com and digitaldealershipsystem.com.