Most Successful Dealers Share Best Practices to Overcome Challenges

By Joe Overby, Staff Writer
December 18, 2009

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ATLANTA — During the past year as the auto downturn hit full tilt, dealers — like most other parties in the industry — were faced with unprecedented challenges.

However, the strategies that have allowed the most successful dealers to "dictate their own destiny" during this stormy period include investing in advertising, personnel and customer benefits, just to name a few areas, according to a study from EasyCare.

Basically, EasyCare's "Learning from Dealers Who Grew Through 2009" research was designed to examine what the dealers that have thrived in this environment have done to tackle today's challenges compared to dealers who have struggled.

The company conducted an online survey of EasyCare Chairman's Conference trip attendees, who represent what EasyCare called some of its "most successful partners." Overall, EasyCare gathered information from 126 dealers — a strong number of whom are from large dealer groups — from Oct. 12 through Nov. 5.

"While all dealers surveyed were successful relative to the market during this challenging year, those that managed to grow during this time gave us a clear message: ‘Participation in the recession is optional. Further, this market is full of opportunity, compliments of dealers who have chosen to participate in the recession,'" officials noted.

EasyCare said that dealers whose operations have blossomed focused on three messages:

—Seize this opportunity to grow your business.

—Get back to the basics of good business.

—Mine the value in your current customer base.

"We're excited to report that our research suggests that participation in this recession is optional, and is significantly dependent upon dealer decisions," states Larry Dorfman, chairman and chief executive officer of APCO. "This is empowering information for dealers who have endured, and even thrived, over a year of doom and gloom predictions about our industry."

Survey Results

Continuing on, EasyCare broke down the results to its survey in more detail, beginning with how these dealers fared in terms of revenue.

According to the data, almost a third (32 percent) said their revenue climbed, while 11 percent indicated their revenue was rather static.

And although 57 percent said their revenues fell, most of these dealers had declines of less than 10 percent, according to EasyCare.

When asked what their biggest challenge to vehicle sales, more than three-fifths of dealers (62 percent) cited "not enough buyers" in their top two reasons. Meanwhile, almost half (45 percent) listed "not enough shoppers" in their top two.

Thirty-four percent said the same of "inability to obtain financing for would-be buyers," and 38 percent cited "insufficient stock: new vehicles" as a top-two challenge. A quarter mentioned "insufficient stock: used vehicle" as one of the two biggest challenges.

"When asked for additional feedback on challenges with regards to vehicle sales, dealers overwhelmingly mentioned concerns about ‘defeatist' or ‘destined-to-fail' attitudes of salespeople, and the need for well-trained, positive personnel," EasyCare explained. "This was followed by concern about consumer perceptions of an industry ‘fire sale.'"

In fact, officials said there were mentions of "customers who think we should we lose substantial money on every deal ... the discounts just aren't enough in their minds."

As far as hurdles related to service, dealers indicated that they have been challenged the most by customers putting off service needs. This was followed by customers turning to lower-priced options and customers delaying routine maintenance.

Moving on to discuss expense reductions, although 72 percent of respondents said they cut personal expenses and over two-thirds (67 percent) cut back on print advertising spending, interestingly enough, 37 percent actually increased spending on "additional benefits to customers."

"These included additional benefits like dent or key coverage, as well as rewards points, discounts, and other forms of loyalty programs. One dealer noted, ‘You should never decrease benefits to your customers,'" executives highlighted.

"Most dealers mentioned some reduction in personnel, or a small loss due to not replacing employees who left voluntarily, but this was clearly not a primary area for cutting costs," they continued. "Nor was charity/community support, although a few dealers said that ‘unfortunately cuts had to be made.' One added: ‘Our community support is keeping 130 employees working.'"

Dealer Comparisons

Next, EasyCare said it realized its "most significant findings" in its comparisons between dealers showing increased revenues against dealers with static or decreased revenues.

"Simply put, the dealers whose revenues had grown or stayed the same were significantly more likely (up to 56 percent more likely) to have maintained or increased their marketing investment, and 71 more likely to have maintained or grown their personal expenses," officials noted.

"This could of course bring up a ‘chicken vs. egg' argument, but that was resolved by reviewing dealer comments about their deliberate choices to defy the market by maintaining or growing their marketing investment," they continued.

Similarly, dealers that saw growth or stability were 46 percent more likely to have had steady or boosted TV/radio advertising spending and 42 percent to have increased charity/community support or kept it stable.

Moreover, the same group was 23 percent more likely to have increased personnel or kept it at the same level, and they were 5 percent more likely to increase/kept steady "additional benefits to consumers."

EasyCare noted that "only area in which dealers whose revenues had decreased were more likely to have increased spend was in direct mail/couponing. Couponing is always a defensive move that, by definition, negatively impacts profits and revenues per transaction."

Additionally, the survey indicated that dealers who saw dips in the revenues were more likely to have slowed expenses. Meanwhile, there was a greater likelihood that stores showing increases or stability in revenues either boosted support expenses or kept them the same.

Dealers Give Advice

Finally, EasyCare offered a few points of advice from dealers who showed growth this past year and broke these down into three areas.

For starters, successful dealers have said to "seize this opportunity to grow your business."

"We increased our inventory, hired four more salespeople and stayed consistent with our advertising," one dealer said. "Our sales are up over 20 percent and net up well above that."

Another urged his peers to "increase investment in advertising, advertising value instead of price," and one other dealer "stayed the course, marketing while others stopped, taking even better care of the customer."

Second, dealers emphasized the need to "get back to the basics of good business."

One point of advice was the following: "A lot of defensive measures in managing expense better. Also, tightening up processes for the sales dept for measurable results — clear expectations with clear accountability."

Also, a respondent talked about "focusing more on the internal processes, helping people get better and give more."

Another dealer was "much more efficient with our expenses and better rallying cry for the corporate goal with all employees."

And third, one way dealers can be successful is to "mine the value in your current customer base."

This includes one store that has "launched very aggressive e-mail campaigns to drive service and sales traffic to all of our locations and concentrating on what works with our active and non-active customer base is critical because we already do a current or previous relationship," and another that "stayed focused on the big picture and on our own customer base is most important in these times."

In its concluding point, EasyCare offered some commentary from someone it called one of its successful dealers.

"I find that the 'basics' are what people want to abandon first and the strange thing is that these 'basics' are usually free or at little cost to the company. I'm speaking of simple things like follow up, professional demonstrations, new owner clinics, sales contest, keeping the display clean and perfect, building/lawn maintenance, employee recognition, etcetera," the dealer said.

"Yes, I'm talking basics. Why companies get away from these simple things is a mystery. At (the dealership), we have tried very hard to stick with the basics over the last 50 years," the dealer continued. "This business really has not changed that much over the years; people simply want good value for their money from a company that they have a good relationship with, one that will provide a fantastic buying and ownership experience. How has that changed?"