It seems dealers are looking for a magic wand they can wave to have a perfect reconditioning department. Unfortunately, that’s not the way it works.
There are a number of things necessary for a proper reconditioning department; things that are easy to identify, but difficult it seems for the auto dealer to grasp.
What is needed for a proper reconditioning department is the implementation of what we call the “Principles of Production” for an automotive service department.
These principles are easily recognized, but seemingly difficult for the dealer to implement. They are as follows:
- Management
- Personnel
- Facilities
- Equipment
- Materials
Since it is impossible to write extensively on each one of the Principles, what we will do is briefly discuss four of the Principles and focus the article on personnel and their training.
Management
Probably the biggest downfall for dealers with the reconditioning department is in the area of management, which in any business or department is the key factor in success. The problem in dealerships is attitude. Everyone in the dealership from the top down has the attitude that the detail department is that of the “red-headed” stepchild that no one wants to acknowledge. Some call it the “Cinderella of the Dealership”, and it looks and operates that way because of poor management. Let me explain.
The dealer principal or general manager usually gives responsibility for the department either to the fixed operations manager, service manager, body shop manager, or in some cases, the used-car manager. This tends to be a mistake. Why? Because, in most cases, those managers have their hands already full running their respective departments, and detailing becomes a burden to them.
Further, very few of these managers even know what to manage in a reconditioning department in order to insure that it operates efficiently and profitably. Most have no idea of what equipment, chemicals and supplies are needed to properly operate the department. They also do not know what procedures the detailers should be following to properly detail a vehicle. Need I say more?
The next mistake that is made in dealerships is to appoint the “best detailer” or the “detailer with the longest tenure” as the manager. The problem with this is that the person is a “detailer”, not a manager.
His or her skill is in detailing cars not managing. This person does not know how to manage or what to manage, and as a result, little management is done. The shop manager is detailing cars rather than managing.
Personnel
This portion of the article will deal with hiring the right people and the necessity for training them. That is, if you expect them to perform as most dealers would want them to perform.
You must know how to hire, and once hired, you must have a training program that will result in the performance you are looking for and this takes a commitment on the part of management. That is the fixed operations manager, or service manager, or whomever the dealership has in charge of the department. In addition, having a shop manager who knows how to manage is key, which involves training and monitoring the personnel.
To insure employee training for a dealership reconditioning department is effective you need to selectively hire employees. You cannot hire the untrainable and expect them to be receptive to training that requires them to change. Most experienced detailers are not trainable. You also need a good manager, not a detailer, a manager who is committed to an efficiently operated department (as mentioned before).
Auto detailing is a labor-intensive business, and with the primitive technology used in most dealership reconditioning departments, you have to focus on efficiency. Even with the equipment and organizational advances that are available, few dealerships have them, and even those that do still have to insure they are used.
Facilities
In many dealerships, the reconditioning department is put where there is extra space in the building. Little attention is paid to what is needed for lighting and proper flow. If you have this kind of facility, it will be hard to gain the efficiency that is desired. That said, we do find that today many new dealerships and those being built are dedicating good space to the detail department.
The number of bays in the reconditioning department should relate the number of vehicles to process, on average, per day.
For example, if the reconditioning department is to process 10 or more cars per day, then there should be at least four detail bays and one wash bay for engines, wheels and body wash. This is true even if there is an automatic car wash, because the engine and wheels have to be hand cleaned, and this should not be done at the entrance to the car wash, which will hold up flow to the wash, and put grease and grime into the car wash reclaim system.
If there is no automatic car wash and the dealer is washing every service customer’s car, then you will need at least two or more wash bays to handle both the reconditioning preps, new car “make ready’s”, new-car deliveries and the service customer’s washes.
As you can see, a great deal of thought needs to go into the amount of space being dedicated to the reconditioning department.
A final word, do not, I emphasize, do not wash cars in the same area as you are cleaning the interiors and buffing and polishing the paint.
Equipment
In the past, and unfortunately, still today in many dealerships’ reconditioning departments, the equipment used is, to say the least, primitive. In fact, it’s not much better than what was used in the 1950s. A shop vacuum; 10-pound electric buffer; a few brushes, rags, and chemicals diluted by hand and placed in plastic spray bottles and plastic ketchup bottles. Some more advanced reconditioning departments might have a heated soil extractor for shampooing carpets and fabric upholstery. Unfortunately, most detailers use these extractors incorrectly, or not at all.
Today, there is greatly improved technology available to increase the speed of the reconditioning, in the quality and in making it easier for the employee to do the job, with less fatigue. Unfortunately, the person in charge of the department, knowing little about the industry, is not aware of this new technology, depending in some cases on the detailer to tell them what is needed. However, most of the experienced detailers have no knowledge either.
Most have been doing the same thing they have done for years, and that is using 1950s technology. Ask them if they are aware of vapor steamers, dual action polishers, clay towels or gloves, automatic chemical dilution and dispensing systems and detail work stations, to name a few. Most will answer in the negative. In fact, ask them how they use an extractor to clean carpets/fabric upholstery and most will tell you a very incorrect procedure.
Finally, reconditioning department’s management, not having knowledge of what is needed and why, have far too little equipment available. If you have four or five detailers in the department you are going to need more than one vacuum, more than one heated soil extractor and more than one or two buffers, etc.
When you are short on equipment, what you end up with are employees standing around waiting to use the one extractor or the one vacuum or one buffer. To keep people busy and get cars out quickly you need to have sufficient equipment to keep everyone working at the same time. Logical?
But if a manager does not know what is needed and why, how can they know how much equipment is needed?
Supplies & Chemicals (Materials)
This may seem incidental to the overall operation of the reconditioning department, but like equipment, you must know what is needed in terms of supplies and chemicals to get the job done quickly and correctly.
Again, if there is no real knowledge on the part of the manager in charge of the department or the detailers themselves, then any given shop will suffer.
That is the purpose of this article, to let you know the problems you face and how you might resolve them. Anyone reading this article is welcome to contact me for any guidance at buda@detailplus.com.
Several dealers have asked me recently about the value of measuring the “Profit Per Day” of their used vehicles.
As I understand it, the metric is determined by dividing a unit’s front-end gross profit by its days in inventory (e.g., a retail unit that generates $1,500 in profit after 30 days would translate to $50 in profit per day).
The metric appears to help dealers see how some units generate a higher per-day profit than others, particularly if they sell quickly. Likewise, the metric would also help dealers recognize that inventory turns are important. (For example, if the same vehicle noted above sold in 60 days and generated a $1,500 front-end gross, the per-day profit would be $25.)
But I don’t think the metric is really the “game-changer” for maximizing inventory turns and profitability that its proponents claim. I say this for three reasons:
1. The metric doesn’t pass the “So what?” test. I might be missing something, but the metric seems to affirm what any market-astute dealer already knows—some cars do better than others and, generally speaking, you make your best front-end gross on any car while it’s fresh. To be sure, the metric offers some potential value to help dealers spot problem cars. But I would submit most dealers, if they’re honest with themselves, are already aware of the winners and losers on their lots.
2. The metric’s built on a faulty premise. The metric seems to be built on the traditional belief that you “make your gross” when you sell a used vehicle. In my day as a dealer, this was largely true—the customer didn’t know how much we might/should have paid for the vehicle, and it wasn’t easy for buyers to compare cars and prices, which gave us a lot of latitude with our cost-up mark-ups and margins. Today, however, it’s different. Customers are more circumspect and smart about retail prices and, as a result, there’s unprecedented pressure on front-end margins. In this more transparent environment, dealers effectively establish the front-end gross profit margin potential on any car when they acquire it. If they pay too much, the front-end gross profit will suffer, irrespective how of quickly the vehicle sells. In this instance, the Profit Per Day metric wouldn’t reveal that a dealer may have a problem acquiring cars “on the money.”
3. The metric raises more questions than it answers. The beauty of the Profit Per Day metric, its simplicity, is also its curse. Beyond buying the “right” car for the “right” money, there are a host of other factors that affect a vehicle’s gross profit potential—paying too much or taking too long in reconditioning, a car-specific pricing strategy that balances gross and turn, proper merchandising, discounts at the sales desk. If, for example, the Profit Per Day metric showed a less-than-favorable result for a vehicle, I’d have to ask various questions and see a lot of other data to understand the root causes and learn a lesson.
As I tell dealers, there’s no single metric that will change their destiny in used vehicles. Rather, it’s the consistent, ongoing use of several metrics, in tandem with each other, that help dealers maximize their used vehicle inventory turns and profitability in the most efficient, sustainable fashion.
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
The reason we market is to generate leads and sales. If that’s not true for you, then please stop reading this, and go do something else productive. If you want to use Facebook to close more sales and earn more profit, you’ve come to the right place, my friend.
I got in the car business somewhat unceremoniously. My grandfather was a dealer in the ’50s in Downtown Los Angeles, but he passed on before I was old enough to work. I was hired by a car dealer when I worked at a bank during college. I took the job because it was more money with less stress. I’m the only person in my family who’s carried on the “car business credo” (if one could put it that way), and that’s because I’ve always enjoyed selling to and servicing the cars of awesome people. I loved the business because it allowed me to apply what I knew, adapt it for growth, make a decision today and see the effects of my decision tomorrow.
Today, as a social media marketer and consultant, I talk to lots of clients and prospects, some who don’t really know for sure why they have to use social media, only that they do. They’ve heard it’s where they need to be but aren’t willing to allocate a budget to make it work correctly. Some dealers (and other businesses too!) appoint a “social media director” and have no clear process to know if what he/she is doing is correct or successful.
There are cases where the boss doesn’t fully understand the power of Facebook, and they make a snap judgment installing a rookie in the starting lineup. These “social media directors” limp along trying to do what they can with the assets given to them, which in many cases are just their own ideas and sweat equity. All so that a few months later, the boss says, “What the hell does this guy/gal do?” and they pull the plug.
If you’ve come across this scenario either as the boss or as the appointed social media guru, listen up. As the boss, you already know that nothing is free in this world. That’s definitely so with Facebook and other social media marketing, especially in the last 18 months. If you’re willing to adapt and make the decision to do it right, Facebook will give you the results you’re looking for.
If you’re the social media director (or some variation thereof) and you’re struggling to be successful, there are a few things you have to do in order to get the boss’ attention. First, you have to summon the courage to ask for a budget. Come in confident; tell the boss what’s up, and show them how your plan will work with the right spending. You’re talking social media ROI and when you talk results, you talk their language.
What are the results you’re going to talk about? Leads and sales. How will you get there? Here’s how. This is a method I use daily, and many clients are seeing more traffic from Facebook than from third-party lead providers. One client enjoys a 3:1 ratio of traffic from Facebook compared to another well-known “traditional” source.
Here’s my 3-step process using Facebook to generate leads and sales:
1. Publish Awesome Content
By now you’ve probably heard that you need useful, relevant content to attract buyers. While many of you agree that you need it, very few are actually producing and publishing it. In order to get to awesome, you must first discover a few things about yourself and your business:
- You must know what makes your business different than your competitors’ businesses. Why do people buy from you? What core values and beliefs make up your business ‘brand’?
- You must be able to describe in detail who your ideal customers are. In the new age of Google Panda 4.0 the more you know your customer, the better you’ll be able to reach them.
- You must know what your goals are and write them down regularly. In today’s example, I’ve done just that with items two and three.
2. Grow Your Likes and Increase Engagement
Grow your community on Facebook to mirror that of the real life community around your business. In the salad days of Facebook, people would like your page and then they’d see all the content you posted. That’s simply not the case anymore. The good news is that Facebook ads deliver great results (when done correctly) for not a lot of budget. Use Facebook ads these two ways:
- Ads to Grow Page Likes. Target those ideal customers you described in detail earlier with delightful reasons to like your page.
- Page Post Engagement Ads. Promote certain posts that are getting better organic results. If your audience likes something (and you can judge this by looking at your Insights) then there’s a good chance more will like it if you serve it to them by paying to promote it.
Keep in mind that a large amount of Likes does not mean that your page is succeeding! You must have high engagement to match it. If not, it won’t matter how many people like your page because NOONE will see your posts. In the next step, we’ll cover the strategy to generate leads. If your strategy is only about growing likes and not about driving users to your website, you’re doing it wrong. You can’t stop at growing Likes. You can promote a well done value added post that drives actions on your own website OR you can promote “likes” on your Facebook page where people are likely to never see or hear from you again. One boosts profits, and the other boosts ego.
3. Get Leads
Now that you’re building a nice size audience of prospects, it’s time to go for the gold. Use your Facebook page as the welcome mat for the sales process; a path to close the sale.
- Create a marketing campaign to attract eyeballs.
- Share that content on Facebook and promote it using Facebook ads.
- Drive those who click to a landing page on your website.
- Collect their contact information and follow up.
- Track the traffic from Facebook to your landing page using the tracking pixel (provided by Facebook in your ads manager).
It’s time to reboot the way you think about Facebook and other social media. Every marketing effort’s goal is to ultimately generate leads and every business’ goal is to make more profit. Improve your process using Facebook to generate leads and sales.
This article appeared first on www.krusecontrolinc.com.
I’ve been struck by a couple trends emanating from dealer F&I offices:
1. Loans are longer. A recent Automotive News report noted that the average length of a car loan runs 66 months, the highest on record for Experian, which tracks the data. In addition, the report calls 72-month loans the “new normal,” and loans ranging from 73 to 84 months saw a sharp rise this year, accounting for nearly 25 percent of all new-car loans.
2. Customers are carrying more car-related debt. A recent TransUnion report shows a steady climb in the average amount of debt customers carry in their vehicle loans for the past three years. The increase appears to owe to factors like customers buying “more car” and carrying over unpaid balances from other vehicle loans. For the moment, customers are able to absorb this additional debt by stretching loan terms to make monthly payments more affordable.
3. Dealers are making lots of F&I money. The Automotive News report shows double-digit gains in F&I/car revenues for top dealer groups, with the top 10 groups averaging nearly $1700 or more per vehicle. The increases aren’t surprising, given the increased emphasis dealers place on F&I income as front-end margins face continued pressure.
4. Everybody’s buoyant. The reports quote dealers, financial company analysts and executives offering an optimistic view of current conditions. Risk factors like delinquencies, factory production levels and portfolio oversight are currently in balance. “There is good discipline across the industry,” one executive says in the Automotive News report.
Taken together, the trends make everyone a winner, which leaves me wondering how long the ride can or will last—and what specific market volatility might make the good times go away.
My biggest concern goes for dealers who have come to over-rely on F&I income for their storewide profitability. Typically, these dealers haven’t focused fully on increasing efficiencies—and margin performance—in their new and used vehicle departments. For them, making more in F&I has been the path of least resistance to increase profitability.
The problem, of course, is that this F&I-dominated strategy seems to rest on a shaky, phantom-like foundation; if any one of the aforementioned risk factors falls out of balance, or a new risk emerges (e.g., rising oil prices), the F&I-reliant dealers will likely find themselves in a tough spot.
First, they’ll see their principal source of profitability diminish due to factors beyond their control and, second, the weight of the untended inefficiencies in other dealership departments will hamper their ability to make up the difference.
Of course, I’m not worried at all about Velocity dealers. Their efficiency-driven and department-diversified profit streams will continue to yield positive results, even if times aren’t as flush in F&I.
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
Though a simple oil change might not seem like a big deal, 73 percent of shoppers who had a good experience on routine maintenance will return for larger services in the future.
That’s according to Paul Potratz’ latest “Think Tank Tuesday” video.
The chief operating officer of Potratz Advertising says the majority of service shoppers are willing to pay more for better quality.
“Surprisingly, most dealers are not capitalizing on this fact, and are missing out on the opportunity to increase profits in service,” Potratz said.
And repeat service customers could also spell trade-ins for your used lot down the road.
On this episode of Think Tank Tuesday, Potratz explains how you can attract shoppers to your service bay, and create top of mind awareness for your brand.
“Isn’t it time to start winning and keeping service customers?” Potratz asked.
He cited a recent Google Study that focuses on opportunities for service – and the opportunities are huge.
According to the study, there are 700 million searches every 30 days having to do with service in North America.
Potratz says it helps to try and picture yourself as the consumer. What goes through your mind before making a purchase?
Justification, says Potratz.
In this sense, dealers need to focus on making their service packages worth it for consumers, as well as making them stand out from competition online.
“Drive more people into service; you are going to sell more cars,” says Portratz.
To see the latest “Think Tank Tuesday” video, click here.
I’ve been getting more inquiries lately from dealers asking about the merits of a one-price sales environment at their dealerships.
The dealers have seen reports in automotive trade press about groups like Sonic Automotive adopting this non-traditional approach to provide a more efficient, cost-effective and customer-friendly process for selling new and used vehicles.
In some cases, the dealers are simply curious; in others, the dealers are looking to differentiate their dealerships from the competition, and they wonder if a “haggle-free” environment might be better than the traditional negotiation-based sales process they currently employ.
I’m quick to tell these dealers that while I believe one-price sales environments will become the industry norm over time, I will not encourage them not to rush to adopt this more efficient, customer-friendly way of selling vehicles.
My reasoning: It takes an absolute commitment from management, 100 percent buy-in from sales teams, and a complete change of culture and compensation to make the one-price process really work. The first exception, whether it occurs with the price of a vehicle or trade-in offer, always leads to the failure of the entire system. For many dealers, the learning curve is too steep and the risks too great for me to recommending they implement a one-price model.
But I will strongly recommend that dealers explore limiting negotiations to lay the foundation for the day when a one-price sales environment will become a necessary way of doing business. I outline three steps that many dealers have already undertaken:
Step 1: Market-based pricing. In most markets, dealers have come to understand that consumers can easily spot, and ignore, used vehicles that are priced “out of the market.” As a result, many dealers now apply more market-rational pricing decisions as a matter of necessity. These dealers may still negotiate when customers come to the dealership, but their used vehicle asking prices are a lot more transaction-realistic than they used to be.
This same dynamic is more nascent in new vehicles, but it’s a growing trend as dealers embrace technology and tools that allow them to view competing pricing data and combine incentives into their pricing and promotion strategies.
Step 2: Documentation as negotiation. This step often closely follows the adoption of market-based pricing in used vehicles. The idea: Sales associates explain the dealership’s market-based pricing strategy with each customer, and then offer comparative prices of competing cars to validate why the asking price represents a fair price for a vehicle. In addition, the discussion highlights how the dealership uses the vehicle’s unique attributes—color, condition, equipment, mileage and ownership history—to determine its asking price.
Step 3: Tracking discounts. Sonic’s effort to adopt a group-wide, one-price sales process follows the launch of its True Price model last year. Under the model, Sonic dealers would determine the lowest acceptable transaction price for each new and used vehicle, and set an asking price with $300 of “wiggle room” to negotiate with customers. This approach is similar to efforts by other dealers who track the variance between the asking and transaction prices of used vehicles in an effort to minimize discounts and “hold gross.” The thinking: With market-based pricing, there’s even less margin available on a vehicle so why give it away if you don’t have to?
When dealers employ this level of accountability, their average discount will drop from $400 to $500 to $250 or less. (Note: These dealers also incorporate the discount data into the volume-based pay plans they offer sales associates, providing greater rewards for those who give up the least amount of gross margin.)
As I explain these steps to dealers, some begin to understand that the decision by Sonic and other dealers to fully adopt a one-price model and eliminate negotiations altogether represents the next logical step to give customers the level of transaction transparency that they’ve always wanted. A smaller number of dealers will start doing the math and recognize the bottom-line benefits a one-price model can create through lower variable expenses and fewer “closers” on the showroom floor.
Most dealers, however, aren’t quite ready to embrace the trend toward limiting or eliminating negotiations on the price of a vehicle. It’s an understandable reaction given the level of investment and past success they’ve achieved with traditional negotiation-based sales models.
But I believe the handwriting’s on the wall when it comes to one-price selling.
In the not-too-distant future, customers will increasingly expect dealers to deliver the kind of experience they can get from other retailers—where the price you see is the price you pay, and you don’t have to spend an entire afternoon in a dealership to purchase the vehicle you want.
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
Last week on Potratz Advertising’s “Think Tank Tuesday” video, we heard from Don Boyle, general manager of Hendrick Honda of Charleston, on what processes his store has implemented to increase profits in service, parts and sales.
This week, in the second installment of the two-part series, Boyle is back to share more on how his store has achieved 137 percent fixed coverage.
Boyle first points out that dealers need to change the way they look at simple service procedures, such as oil changes. He says they should be viewed as “customer acquisition.”
“When you give an oil change for $9.95 or $12.95, you are obviously losing a little money on what it costs you, but you are getting an introduction to the customer," Boyle said.
Potratz Advertising chief operating officer Paul Potratz brought up the topic of coupons, as well.
Boyle said people are online typing in “lowest price oil change,” and you have to be very competitive with your prices if you are trying to reel these customers in.
We’re saying don’t lose money on your loyal customers, but ramp up deals on simple service procedures to create more potential buyers, said Potratz.
To watch the latest “Think Tank Tuesday” video for more tips for the service department, click here.
In his latest “Think Tank Tuesday” video, Potratz Advertising’s Paul Potratz chats with a top Honda dealer on how his store achieved 137 percent fixed coverage.
Don Boyle, general manager of Hendrick Honda of Charleston, explained that his store has ramped up its service department so much it could be negative 65 cars at the end of the month and still be profitable.
Boyle said that when the store implemented its new program, the dealership wanted to focus on service, and pushed their average of 60 percent to 65 percent fixed coverage up to 137 percent.
“For service, the No. 1 thing is to make sure you are very competitive in your market, because the perception is prices are higher as a franchised dealer than the independents, so you have to know your market,” said Boyle.
He also explained that making sure you are communicating to your customers about all services and dealers, from tire rotations to free oil changes.
One of the first things Boyle did when ramping up his store’s service department is to send out customer surveys in an effort to create the optimal service department for his market.
In regards to high gross from the service department, Boyle had this to say: “You are no longer concerned about profitability in car sales; you are more interested in gauging market share and getting people to come back to the service drive.
“It is a big advantage because you don’t have the pressure of making money on the front end,” he concluded.
To view the latest “Think Tank Tuesday” video from Potratz Advertising, see here.
I love it when I have the honor of talking shop with Brian Benstock, general manager and vice president at Paragon Honda and Paragon Acura in New York.
As an early adopter of the Velocity Method of Management, Benstock comes as close as anyone to perfecting the art and science of retailing used vehicles successfully in today’s ever-changing market. He and his team definitely deserve a “Velocity Black Belt,” earning seven consecutive years as the No. 1 certified pre-owned dealer (CPO) for the Honda and Acura brands.
The other day, Benstock shared stats that show his stores are well on their way to achieving the CPO honors for the eighth consecutive year. I took the opportunity to catch up and talk about the business.
“Our results in certified are pretty special, but the real story is that we’re selling 500-plus vehicles a month without adding a single space on the lot,” Benstock says. “We’ve had year after year after year of record growth. We’ve done it by getting more velocity and efficiencies into our used vehicle operations. And what I think makes this a real eyebrow-raiser is that the competition is definitely getting better in our market and outside our market.
“We’re now a very mature certified used car machine and the growth rate is measured in the 5 percent to 7 percent range,” he adds. “For us to continue to have any level of growth has been a quite an accomplishment for the team.”
The Paragon team consistently sells 500-plus used vehicles a month from an inventory of less than 300 units. That performance translates to 18 to 20 annualized inventory turns, and an exceedingly sharp focus on speed in the dealership.
“If we want to continue to dominate, we can’t be weak in any area of our game,” he says. “We’re in acquisition mode seven days a week, 365 days a year. We’ve got to know the time from acquisition to front-line ready and reduce it. We’ve got to make sure we’re adjusting the pricing as necessary every day, it’s no longer every two or three days. It’s got to be an everyday discipline.”
Benstock also shared how, over time, the emphasis on increased speed has spurred changes to the way they segment their inventory. A few years ago the store’s initial inventory “age bucket” ran from 0-30 days; now, it’s 0-seven days.
“Your maximum turn and gross profit opportunities now happen in the first bucket,” he says. “It’s no longer acceptable that it takes three to four days to get a car out of the shop—that’s 50 percent of your first bucket. In fact, it may be time for us to go to a zero to three-day bucket. We’re going to have to keep raising the bar.”
I asked Benstock if he worries about the competition—especially those who might also adopt Velocity principles and give his stores a run for their money.
“There’s no margin for error for us as other people adapt to the new reality of doing business,” he says. “But so much of what has to change in the dealership has nothing to do with technology or tools. It has everything to do with the culture. You can install a tool overnight. The culture takes a little longer to change. We’ve developed a level of expertise that’s going to take other guys a while to get. It’s not going to take seven years like it did for us, but it’s not going to happen overnight.”
As we wrapped up the conversation, I asked Benstock what he viewed as incoming future challenges for his dealerships and the industry.
For his stores, Benstock says their desire to continue their growth will require an even greater emphasis on used vehicles, beyond the success they’ve seen so far with their CPO efforts. “We’re shifting now. We think the advantage will be in the non-certified business as more dealers concentrate on certified,” he says.
For the industry, Benstock sees an emerging challenge as technology plays a larger role in helping dealers manage their businesses, giving less market-astute dealers the ability to compete more favorably with dealers who are already market-smart operators.
“The trend gives me some cause for concern but I think there’s always going to be a way for dealers who are on the edge to see the opportunities and get ahead of the market,” he says. “You’ve just got to be willing to change.”
Brian Benstock, general manager and vice president at Paragon Honda and Paragon Acura in New York, was also featured as Auto Remarketing's 2010 CPO Dealer of the Year.
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
In the past several years, many dealers have come to understand that speed matters in their dealerships.
This emphasis on speed has been most profound in used vehicles, where dealers have been aggressively working to sell a greater number of vehicles in less time. In market after market, there are dealers who have doubled their used vehicle sales volumes as they’ve made “time is money” a mantra for management and employees alike.
The “time is money” mantra has helped dealers and their teams zero in on problem areas that often slow the velocity of their sales, and crimp their profitability potential. For example, these dealers now get vehicles through reconditioning and detailing in 48 hours or less, and many price their vehicles on a near-daily basis. Both of these “time is money” initiatives go a long way to helping the dealers retail “fresh” cars faster to maximize gross profit.
But now some “time is money” dealers are starting to apply the mantra to another aspect of dealership operations that remains a costly source of inefficiency — their sales processes.
“We realized that customers don’t like the four-hour process we required to buy a new or used vehicle from us,” says a California dealer. “They liked our cars, our people, and our prices, but they didn’t like our process. Now, we try to close deals in two hours or less, and everybody’s happier. Customers like spending less time in the dealership, and our sales associates appreciate the opportunity to sell three or four vehicles a day, versus one or two.”
The California dealer’s experience mirrors that of other “time is money” dealers who have taken steps to shave the time they ask of customers to purchase vehicles. The following are three recommendations these dealers share to achieve what I believe will become a standard of excellence among dealers in the near future—offering customers the ability to buy cars in less than half the time it takes today:
1. Consider what your asking prices say about your sales process. This may seem like a no-brainer, but it’s not uncommon, especially in new vehicles, for dealers to post asking prices that effectively tell potential buyers, “Gear up. You’ll need to negotiate hard when you get here.” By contrast, the “time is money” dealers are going a different direction. Their asking prices do two things—they reflect the market and the process buyers will undergo at the dealership.
“We basically price our cars in line with what used to be our first pencil on deals,” says an Arizona dealer. “We also tell the customer that we price our vehicles competitively to save them time when they do business with us.”
2. Limit discounts and negotiations — or nix them altogether. The “time is money” dealers who have eliminated the most time from their sales processes have adopted a “near one-price”-type strategy. That is, they may still negotiate, but it’s a one-time pass, and the amount in play is often $500 or less.
“Our prices are very competitive and customers know it,” the California dealer says. “A few might insist on negotiating deeper discounts than we’re prepared to give, but we can successfully counter their offers by showing them the market data that validates we’re offering a fair deal.”
If you plan to negotiate, dealers say it’s important to track any discounts made by individual sales associates and managers. The purpose: Determine whose habits of discounting vehicle prices are hardest to break to minimize give-aways of your front-end gross profit.
3. Combine sales and F&I functions. This is a bigger step than many dealers are currently willing to make, given their reliance on F&I income for dealership profitability. However, the “time is money” dealers who combine sales and F&I functions (either with a sales associate or sales manager) say they won’t go back. “It’s a huge time-saver for customers, and we’ve seen positive gains in F&I income,” the California dealer says. “But it takes a blend of coaching, as well as the right type of person, to make it work. Consumers like dealing with a single person and, once you establish trust, it’s much easier to get past price and focus the sale on the value of our products and process.”
The efforts the “time is money” dealers have invested in speeding up their sales processes are a facet of the “race to the customer” reality in automotive retailing today. And, like any race, those who cross the finish line first reap the biggest reward.
Dale Pollak is the founder of vAuto. This entry and Pollak’s entire blog can be found at www.dalepollak.com
