Dealers: It is possible to get extraordinary results from ordinary people with motivation.
The unfortunate attitude that some dealers may have about their detail employees is “that they’re not very
good!”
This attitude is usually held by dealer-principals and/or their managers that are saddled with detail employees who:
• Don't come to work
• Show up late
• Aren’t well groomed
• Are unstable
• Have difficulty staying focused on the work to be done
What is worse is when dealers and their managers accept this behavior as the "norm," and it results in less than average levels of detail work on in-house vehicles, and even more problematic, on customer details.
The reasoning seems to be that the pool of detail workers is just not good enough for the dealers to expect more.
Nothing could be further from the truth. There are potential detail employees out there dying to work for your dealership who are capable of outstanding job performance. You just have to take some time to find them; rather than continuing to hire the same old people you have always hired, and getting the same results.
It really comes down to understanding some simple, but often universally overlooked psychological "buttons" that all employees share.
The first "button" is the employee's motivation. Are your detail employees motivated to do a good job? Or are they simply shuffling through the day, watching the clock, waiting to go home? If you have “shufflers,” you have probably said, "They just aren't motivated."
Yes, they are motivated, but not to do the things that are important to you. It is written that there is no such thing as an "unmotivated" person. Everybody is motivated to do something. The only reason anybody ever does anything is because they are motivated to do so.
Having a motivated detail employee who will do the things that benefit your dealership and your customers, including themselves, is your goal. Sometimes, such a person might walk through your door looking for a job. This employee is one who “makes things happen." The phrase used to describe this type of employee is a "self-starter."
The reality is that buttons that seem to coincide with your business’ needs motivate these “self-starters”.
When you find one of these employees, count yourself lucky! Far more frequently, you find yourselves with detail employees who do not share your goals.
Money is not the answer
Before discussing employees' motivational "hot buttons," let me point out one thing that is not a motivator, even though you might think it is – MONEY!
That is right; I believe that money is not the primary motivating factor in any employee's decision to do a good job. Most management personnel assume that the paycheck is the ultimate motivating factor for the detail employee. The fact is that money offers absolutely no "emotional satisfaction."
Money is simply a means to an end. It will pay the employee’s rent, put gas in the cars, and allow the employee to take the spouse or loved one out on Friday night, etc.
Follow this logic: Most detail employees get the same paycheck, or almost the same paycheck, every week regardless of their job performance, as long as that performance is “good enough.”
Therefore, if the only motivation you give the detail employee is his or her paycheck, there is nothing to make the employee do an exemplary job — for the results of the work will be the same regardless: the paycheck.
I find that the thinking, most of the time on a subconscious level, is "Why do extra work and get the same pay? Since my pay will not change significantly no matter how well or poorly I do my job, I may as well do the least amount of work possible to get by."
Honestly, isn’t that the attitude you see with most of your detail employees?
As frustrating as this might be, it is a logical thought process. The employee using this logic is actually practicing great efficiency and economy: Get the most return (pay) for the least amount of investment (effort). Isn't that what you try to do in operating your dealership business, getting the most you can while keeping your expenses low?
While some employees might tell you that they would do a better job if they were paid more, the effects of a pay raise can be short-lived, if there is any noticeable improvement at all.
How many times have you given out raises to your detail employees in the misguided attempt to make a poor performer a "decent" one? The results are usually a top-heavy payroll for mediocre employee performance.
Reach out and touch …
To get the best performance from your detail employees, you have to find, and utilize these employees' emotional "hot buttons."
Recognizing that money is not a particularly effective motivator, what then is a good motivator? Without question, the No. 1 motivating factor in most employees is the feeling of a "job well done.” Or, in another word, “respect.” This stems from the human need to feel accepted and appreciated for our accomplishments.
This is where effective employee training comes in. Training is more than simply telling someone how to do something, and then leaving them to do it, hoping for the best. This will set the employee up for emotional distress, because they believe a satisfactory outcome for the new task will not be achieved and the fear of resulting negative feedback for their effort. If no constructive feedback is given near the beginning of training, the assumption by the employee is that they are doing the job well, or at least adequately.
Then, later, they are reprimanded for some specific aspect of the job they have been doing the same way all along; they don't see why they should be motivated to do a better job.
Coaching your people on a day-by-day and car-by-car basis also shows them that you are interested in everything they do not just the mistakes they may make.
You and your managers need to motivate your detail employees by demonstrating to them that the things they like come to them when they do a better job. Things like a complimentary pat on the back, or a friendly "Hey! Good job today! I'll see ya' tomorrow!"
By using the emotional "buttons" that an employee reacts to most effectively, the employee then feels that their better efforts at doing an exemplary job will result in a more favorable outcome for themselves. You have then, given them another form of motivation. Most importantly, this "hot button" is easily and repeatedly useful to you in developing the motivation with your detail employees to want to do the best job they can.
This eliminates the need to continually try to use money, or the hope and promise of a big raise to try for some extra motivation in your detail crew. Besides, how long can you dangle that carrot before they get wise to you and go back to their mediocre performance?
Positive reinforcement is necessary when it comes to properly motivating your detail staff, but it is not the only tool in the box, nor will it work all alone. Just as a nail is useless without a hammer, positive reinforcement alone is useless unless tempered with a realistic yet fair and respectful measure of good old-fashioned discipline to help your crew members achieve their highest levels of accomplishment.
The correct methods for disciplining any detail employee are much the same as for doling out praise. It must be applied based on the employee's performance, never on their ability. Focus any disciplinary action upon the fact that an employee will not do something – not that he cannot do something.
Discipline must also be utilized based on behavior only, not attitude. You can easily effect a change in someone's behavior, but it is nearly impossible to demand a positive change in someone's attitude. By motivating a detail employee to want to change their behavior, their attitude will naturally change along with it.
To do this is really far easier to master than you might believe. When you discover the real benefits to be derived from this type of management, you will decrease the stress associated with the problems you have with the detail department.
Be fair, be open and be honest with your employees about what you expect from them. Your reward? Success! How is that for motivation?
If I can help you with motivating your detail employees, contact me buda@detailplus.com.
The most important thing a dealer should know today is that it is “not business as usual” when it comes to operating an efficient detail department.
Without question, in talking with auto dealers across the USA and Canada, they ALL want to operate a detail department that is organized, efficient, turns out quality work and makes a profit. Unfortunately, most do not.
Why? It has to do with the attitude the dealer and people in the entire dealership have towards detailing — the Cinderella of the dealership.
The change of attitude I speak of sounds simple enough, but unfortunately, few dealers are able or willing to do this. As a result, they continue to have the type of detail operation in their dealership that they do not like or want.
The changes aren’t difficult
Considering the costs to establish or upgrade a modern body shop of $250,000 to $1 million or $2 million or equip a service department, the cost to establish or upgrade a detail/recon department are minimal.
Even the equipment you need to have a first class detail department is not expensive.
Say you were going to equip the department with the modern central chemical distribution systems and central pressure washing systems. The cost would be less than $50,000.
The problem, however, is that most dealers don't feel that the detailing department deserves more than a few thousand dollars of investment. After all, “we've always been able to operate the department with little equipment and low-paying, entry-level people.”
But that is the problem, isn't it? Old technology and unskilled, unreliable personnel. As I said, changes are not difficult or expensive; a dealer just has to be willing, as Nike says, to, "Just Do It."
An investment is necessary
There is not really any way around it. If a dealer wants to stay in business today they have to make investments in their business and facilities. The detail department is no different. After all, if used vehicles offer more profit potential for a dealer than the sale of a new car, doesn't it seem logical that they would want to do all they could to modernize and streamline this part of their business?
Because detailing has always been sort of a “back-alley, cottage business,” there really isn't much help for the dealer who wants to establish or upgrade a detail department. The prime movers in the detail business have been, for years, the chemical companies. And today, they are making more money in the histories of their companies than they ever have. Say to them things need to change, and they will look at you as though you are crazy. “Change, why would we want to change? These are the best times we've ever had!”
Bottom line: do not expect much help from your detail chemical supplier. They are doing what they have been doing for the past 50 to 60 years: selling chemicals. A dealer needs more help than information on detailing chemicals.
It almost does not need to be said, but I will say it anyway. If you are considering or going to make a commitment to establish a new detail department or upgrade your existing operation the decisions have to be well-planned and accurate, if investments are to provide a proper return.
The question is, however, "How does a dealer make such decisions? Where does he get the required information?"
If you think the answer is, “By hiring an experienced detailer. He certainly will know what is needed,” you are incorrect.
“The ‘E’ Myth”
In his book, "The 'E' Myth,” author Michael E. Gerber describes the fatal assumption made by many business people that: “… if you understand the technical work of a business, you understand a business that does that technical work.”
The reason that this way of thinking is fatal is that it is just not true.
Almost everyone in the detail business today, chemical suppliers, their distributors and the detailers themselves are somewhat informed on most technical aspects of the trade. All of them have been doing things the same way for years. If a dealer wants to change things, these people are certainly not whom you would talk to for information on “how to change things.”
But there is still this mindset among dealers who want have a better body shop or detail shop to feel that all you need to know is the technical aspects of the trade. This mindset is always lurking in the wings.
When the dealer himself/herself — or someone they give the responsibility to investigate upgrading the detail shop — begins research, it is typically from a technical point of view. What equipment do we need? What is out there to do a better job?
Little time or attention is given to things like projected vehicle volume through the detail department; do we want to sell to the public; facilities, do we have enough space to process the expected volume; can we expand; how should the facility be laid out. What kind of equipment will make us more efficient?
Recently I received a layout for a proposed detail shop that a dealership in Florida was planning. The drawing had been done by an architectural firm who had designed dealership service departments, and with little or no knowledge of what is done in a detail department, they laid out a 12,000-square-foot building.
After reviewing the layout and discussing with the dealer what they wanted to achieve, we were able to give them sufficient used-car detail bays, new car POI bays, wash bays and space for an automatic conveyor-like carwash — all in 5,000 square feet.
So, what to do?
Now that you realize that your technical instincts are not the proper criteria to use when planning to establish a new or upgrade an existing detail department, we can turn to the other resources necessary to address this issue.
Assuming that a dealer wants to upgrade their detail operation to increase efficiency and production, we find there are several resources to consider: facilities resources, equipment resources, materials resources, manpower resources and management resources.
Facilities resources
This is the physical building(s) where the production will take place. As critical as this is to an efficiently operating detail department, very few dealers, or even anyone in the detail business, gives it the consideration that is required.
You must allocate sufficient space to the detailing department to allow for an efficient layout and design to insure maximum production.
Equipment location, traffic flow patterns and careful attention to things like space organization, lighting, air quality, heat, air conditioning and noise are just some of the important layout and design considerations.
Nevertheless, facilities, resources and the expectations of the layout and design are often overrated. There exists a belief that facilities and equipment, for that matter, hold the key to efficient production. Many dealers, even after spending HUGE sums of money on facilities and equipment, eventually realize that emphasis on these resources aren't the only answer. But that is what the “technician mentality within” wants to hear.
Equipment resources
Looking at a detail shop in any dealership, or anywhere for that matter, one can see the need for better equipment and tools. You may not know what, but it is clear that there has to “be a better way.”
In any technical trade, the right equipment and tools to do the job is critical. And today, with increasing wages it is even more critical than any other time in history.
However, the existing mentality in the detail business among detailers themselves, shop owners, and among dealers is that we do not need much more than a few plastic squeeze and spray bottles, a 10-pound electric buffer a shop vacuum, and a few rags to get the job done.
Some others are looking for a new-fangled gizmo that will cure all the ills of the detailing department. For example, portable soil extractors for cleaning carpets and fabric upholstery have been on the detail scene for years, yet “experienced detailers” do not understand how this machine will replace the primitive hand scrub brush and bucket of carpet shampoo. The extractor is part of the solution, but not all of the solution to carpet and upholstery cleaning.
Yet many dealers will invest $2,000 or $3,000 in one machine for a department that has five detail bays, believing that this is the answer to all their problems. So, five bays and a minimum of five detailers and one machine — not very efficient.
You will have 4 detailers standing around waiting for the one extractor.
For the dealer and even the detail shop owner this is just the age-old art of throwing money at the problem. The fault here is to think that this piece of equipment will solve more of the problems we have than it was ever designed to fix, or is capable of fixing.
Materials resources
It is generally accepted that you cannot detail vehicles without the right chemicals to do the job.
There is no argument about the correlation between having the right materials and efficient production. Once again, there is a tendency here for the technical aspects to overwhelm the decision-making process.
But the answer for most dealers will be found closer to the base of the production pyramid, the resources of personnel and management.
Manpower resources
The manpower resources are the employees used in the production process. Nothing happens without qualified employees. Even recognizing the importance of people, most dealers go about the solution in the wrong way.
First and foremost we go after “experienced detailers.” If you do not like what you now have, why would you hire the same type of personnel? Here it is again, “doing what you have always done, getting what you always have.”
What you are trying to do is change the way your detailing department has functioned in the past. You can improve facilities, install the latest equipment and technology and utilize the finest chemicals, but if you hire the same type of people as you have had before they will soon have this monument to efficiency, operating at the same level as you had before.
You must hire personnel, not with good skills, but people with good values and potential and teach them the skills.
While detailing does require some skill training, it is not rocket science, and the skills can be taught in a matter of a few days. I have personally trained people in foreign countries who could not speak English, and who had no prior knowledge of detailing how to detail in three days, including high speed buffing.
Another mistake that is made that is an extension of this thinking is to believe that if you offer a higher pay scale you will attract a better grade of detailer. While I might agree that you could get a better detailer, the bottom line is that you still have a detailer whose experience is only good if you allow them to do what they have always done. See the point?
Management resources
These make up the foundation of the production pyramid, because without a clear understanding of this resource, the time, attention, and money that were spent on all the other resources will be for naught — absolutely worthless.
Management resources relate to the level of organization, administration, discipline, and control applied to the business of reconditioning vehicles.
As much as a dealer knows about the importance of good management in the operation of their dealership, they seem to deny their importance when it comes to the detailing department.
Whether they directly, or someone in the dealership directly manages the operation of the detail department, there is a tendency to hang onto the “technical aspects” and as a result, the tendency is that if we have good “detail technicians” we don't need to manage them.
Consequently, the detail department is soon back to where it always was.
Some of the areas where management resources must be effectively utilized are:
- Cost analysis and a clear understanding of what is required to detail a car and how much this costs in labor and materials
- Ongoing performance standards and measurement
- Clearly defined goals and objectives for the department
- Clearly defined management philosophy
- Systems and procedures that are applied to the administrative and production management process
- The hiring, motivating, and retraining of employees
- Delegation of responsibilities
- Well defined accountabilities
What do you want to know?
At the base of the production pyramid is what most dealers do not want to know about operating a successful detailing department.
As important as these 8 points are, it is rare to find a dealer, service manager, body shop manager, or whoever in the dealership is responsible for the detailing department, that spends any time and energy on the management resources related to the detailing department.
Summary
An electric buffer, plastic squeeze and spray bottles, a shop vac, an extractor, and a few chemicals plus detailing skills, will not make it anymore. Many dealerships have detail departments, but they are not really doing a neither a professional, nor a profitable job of detailing the vehicle.
Why? Because the dealer has not allocated an equal amount of time, effort, and money into all the production resources.
If you want to discuss how you can apply all the Production Resources to your dealership's detailing department contact me. 1-800-284-0123 or buda@detailplus.com
I have bad news to share about the upcoming year.
It’s not that 2016 won’t be good for dealers. Most signs suggest we’ll have another robust year of new- and used-vehicle sales.
But here’s the problem: Dealers won’t necessarily be making more money in 2016, even if they’re able to sell more new and used vehicles than they did in 2015.
I make this prediction based on three factors that will shape dealer destinies in the coming year:
- Margin compression. The past five years have seen front-end margins decline by double-digit percentages in new and used vehicles—a trend that will no doubt continue in 2016. This ongoing margin compression owes to ever-increasing levels of competition, operational costs and price transparency in the auto retail market.
- Supply/demand imbalances. As we’ve closed out 2015, we’ve seen rumblings that factories are purchasing demand for new vehicles by increasing incentives. On the used vehicle side, everyone’s aware that wholesale supplies are growing, a rise that’s expected to continue in 2016. Both trends will make it difficult for dealers to maintain, if not surpass, the level of new/used vehicle performance and profitability they achieved in 2015.
- Market volatility. Dealers who over-rely on F&I income will face increased profit pressure as captive finance companies, lenders and regulators reduce dealer discretion in loan mark-ups. It’s also likely that dealers will face difficulties if interest rates rise, or the economy takes a hit from as-yet unforeseen circumstances in the coming year.
In light of this outlook, I’ve been encouraging dealers to take an honest, no-holds-barred review of their dealership operations. The goal is to identify, and then work to eliminate, operational inefficiencies that currently impede dealership performance and profitability—and will only get worse if left unaddressed.
Here are three areas that often pose efficiency challenges for many dealers:
- Inventory age. Aging units remain a persistent problem in both new and used vehicles for many dealers. As the market becomes more challenging, dealers will need to become even more age-aggressive. In new vehicles, this mandate means striving to retail at least 50 percent of your inventory in 60 days or less—a bigger challenge (and opportunity) for dealers who traditionally haven’t regarded aging new vehicles as a problem.
In used vehicles, I advocate that dealers maintain at least 50 percent of their inventory under 30 days. The best-performing dealers actually retail half of their used vehicles in this timeframe.
As dealers become faster, more efficient new/used vehicle retailers, they typically find that speed minimizes the risks from inventory supply/demand imbalances and maximizes total dealership profitability.
- Transaction times. I would encourage dealers to aim for average new/used vehicle transaction times of 90 minutes or less. At traditional, negotiation-based dealerships, this benchmark may seem completely out of reach. If so, strive to reduce your average transaction time by 25 percent. Dealers who reduce transaction times see two key benefits. First, they provide a more satisfying experience for customers, who have long wanted an easier, more convenient way to purchase cars. Second, they enable their sales associates to sell more cars in less time, which increases their production and profitability. Dealers achieve transaction efficiencies by re-thinking the stages/steps in their sales processes, and shifting a greater portion of each transaction online.
- Employee turnover. It’s not uncommon for dealers to see at least 50 percent turnover in their sales teams—a statistic that suggests dealers would sell more cars and make more money if they weren’t always trying to fill empty seats. I would submit the industry’s persistent turnover problem results from a mismatch between candidates, job responsibilities and the in-store culture that greets them on their first day of work. Dealers who address this problem have reinvented their hiring process, invested in management and mentoring programs, and implemented clear-cut career paths that pave the way for longevity and loyalty.
I should note that these areas of inefficiency are not the only ones that merit attention and scrutiny. Each one, however, represents an opportunity for dealers to improve their performance and profitability as retailers, and to capitalize on the challenges and opportunities in the months ahead.
Here’s hoping that everyone has a great holiday season and an even better New Year!
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
Let’s start with this: There is a reason why we go see a dentist when we need a root canal. Similarly, there is a reason why we have commercial airplane pilots in the cockpits of the planes we fly in.
On the subject of digital marketing, one question I frequently encounter is “Should/could I hire someone to do this internally?”
The truth is, there’s no one answer that will correctly address the needs for every situation or every company. Having spent my career split between insourcing (working within large dealer groups) and outsourcing (running a digital marketing agency for car dealers), I feel like I have a unique perspective to offer on these two approaches. Experience and working with hundreds of dealerships over the years has proven that there are many different ways to skin this cat, and what might work for some might not work for all. What you will find, however, is that appropriate analysis and weighing the pros and cons will earn you and your company the balance and results that you’re after.
Not unlike the realities that existed before it, the realm of websites and digital marketing are only becoming more complex and faster moving as they become more accessible and readily available. In many ways we are experiencing, at a global scale, a gold rush that will only become more competitive and offer greater rewards for those who are willing and capable of keeping their focus and evolving with each step. It is because of this that the argument to partner up with others for support in external capacities is a stronger claim than ever before.
However, there are some unique scenarios where bringing everything in-house is the best choice companies of any size can make. Below I’ve listed some of the things to consider before making the decision on what is right for your store.
What are the risks of insourcing?
■ Trusting your website, advertising and brand to someone who is not qualified
■ No one person can excel at website development, graphic design, SEO, SEM, content writing, strategy, automotive industry knowledge, etc.
■ The best tools and resources are expensive.
■ Holding your in-house person accountable can be challenging, when no one truly understands what they do, or how to measure their success.
■ If your person leaves, you’re in for a whole lot of time and frustration trying to pick up where they left off, and find someone else to fill their shoes.
When does insourcing make sense?
The way I see it, the only time it makes sense to insource a digital marketing strategy is for large auto groups. If you have the infrastructure to support a team of digital marketing experts, then a case could be made that this is a strategy that might just work for you. The reality, however, is that a group would generally need to have 15+ stores to justify being able to hire a 4+ person team with the skills needed to craft an optimal online presence.
What are the benefits of outsourcing?
■ Generally speaking, you will be tapping into a team of individuals who already possess a diverse set of skills and experiences which you will benefit from.
■ Most agencies worth their weight will be up to date on the latest strategies, techniques, search engine algorithm updates, etc. to help get you to the top of your market.
■ You can fire them easily! If the company you are working with isn’t living up to your standards, you’re generally only a 30 or 60 day notice away from ending the relationship.
■ Despite what many think, outsourcing is often more cost effective than insourcing. The cost savings on the salary and time resources that are allocated on hiring internal staffallow you to invest more money externally, often enabling you to get more for your dollar.
Another question that often surfaces is, “can I insource some things and outsource others?” The answer to this question is a resounding: “Yes!” In many, if not most dealership/group environments the ideal scenario will consist of having a person working inside the dealership who works directly with a digital marketing agency on the outside. This person doesn’t have to be exclusively focused on digital marketing, but they will serve as the point of contact for the agency you team up with it.
Why are the benefits of an insourcing/ outsourcing split?
■ Streamlined communication with a designated point of contact
■ These two individuals will ‘speak the same language’.
■ Some things can’t be seen or effectively done from outside dealership walls
In conclusion
Some things in life are incredibly complex and difficult, and it just makes sense to rely on a professional for help, rather than trying to figure it out on your own. Website development, Search Engine Optimization and Search Engine Marketing very much fall into the same category. While virtually anyone with a pulse and good clicking finger could attempt these things, the final outcome is going to be very different from that and what a team of seasoned professionals will produce.
Whether you ultimately decide to insource or outsource, the most important aspect is choosing the right person or company to rely on. Your digital marketing strategy and website are two of the most important parts of your business. Make sure they get the due care and attention they deserve.
Kevin Gordon is a co-founder of Convertus, a fast growing automotive digital marketing agency based out of Vancouver. Contact Kevin at kgordon@convertus.com or call 888-354-6441 to learn how Convertus can help you craft a winning digital marketing presence for your store.
I thought it’d be useful to share my email exchange with a dealer who got stuck interpreting the market days supply for a used vehicle.
The dealer: “I am sitting here pondering a question with vAuto and need help to solve this in my mind. How can you have a high volume (high demand) vehicle (Chevrolet Impala) but that vehicle can have a high market days supply (190 days)?”
Me: “Thanks for the question. Market days supply (MDS) is derived by a calculation that divides current available supply by the average daily retail sales rate over the past 45 days. The answer to your question is that in spite of high volume (i.e. your denominator), there is also extraordinarily high supply (numerator), which derives a high MDS. Given this condition on your Impala, it is likely to sell fast, assuming it is priced very aggressively from the onset. Therefore, it becomes especially imperative to own the vehicle for the proper amount of money to make a respectable investment return. I hope this helps.”
The dealer: “Dale, thanks so much for solving this!”
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
We’ve had an amazing year in new vehicles.
September’s sales were very strong, spurring some analysts to raise predictions that we’ll close 2015 with more than 17 million new vehicles on the road.
As the good times roll, I like to poke around behind the curtain—to see if dealers are doing as well as they could while the sales juggernaut continues.
In recent conversations, I’ve asked dealers three questions:
1. Do your sales associates sell more cars on an individual basis than they used to? The question’s intended to determine if dealers are leading their sales teams to achieve higher levels of efficiencies and productivity. Interestingly, the answers I get reflect a roughly 60/40 split.
For 60 percent of dealers, the monthly unit-sold average for sales associates is about the same as it’s always been, roughly 10-12 retail deals a month. Meanwhile, 40 percent of dealers have raised the individual sales associate performance benchmark to 15-18 deals.
2. What percentage of your new vehicles are online at any given time with a competitive price and proper complement of custom descriptions, photos? This question follows industry stats that suggest only 25 percent of dealers consistently price/market all of their new vehicles online, all of the time.
The stat reflects findings from my conversations. A Colorado dealer estimates roughly half his inventory isn’t priced or marketed properly at any given time. “It’s too time-consuming,” he says. “We do need a better process to be more competitive and consistent.”
3. What percentage of your new vehicle inventory is over 90 days old? Some dealers don’t track inventory age in new vehicles. Among dealers who do pay attention to new vehicle inventory age, I found that roughly 40 percent of dealers’ new car inventories hit 90 days or more. Dealers cited a combination of factors for the aged units—cars that either they or the factory didn’t get right, or a lack of attention, given faster-selling models in their inventories.
While my findings are not scientific, they do reflect areas of operational inefficiency that, if addressed, would help dealers do even better in today’s record-setting new vehicle market. I asked dealers who have addressed these inefficiencies for tips to help other dealers improve:
Emphasize volume, not gross, in sales compensation plans. “We made the switch about two years ago and haven’t looked back,” says a Midwest dealer who now requires a minimum of 15 sales/month from associates. The dealer says the change followed a realization that market factors—increased pricing transparency, better-educated buyers and stiffer competition—have a greater effect on gross profit levels than sales associates. The dealer also credits a more market-competitive pricing strategy, and “no discount” bonuses for elevating his sales team’s productivity and maximizing front-end gross. The dealer’s next goal: Reduce transaction times to 90 minutes or less.
Use technology/tools to improve new vehicle pricing/marketing consistency, efficiency. The new vehicle manager for a Florida Ford dealership says he used to spend nearly two full days pricing the store’s 600 new vehicles at the beginning of each month. Today, he uses a pricing system that helps him tie incentives to his asking prices and price every vehicle in minutes. The manager also says the technology allows him time to keep up with pricing new vehicles as they arrive from the factory, and stay on top of competitors’ price changes. “I used to spend an hour or two a day checking Autotrader and competing dealer sites,” he says. “Now, I see where I stand on a single screen and make adjustments on the fly.”
Make inventory age reduction a higher priority. Traditionally, dealers don’t believe age matters in new vehicles. But when dealers make inventory age a priority, and focus on retailing units based on time-in-inventory parameters, two things happen. First, they eliminate the shell game of using floorplan credits earned for fast-selling vehicles to offset the expense of slower-moving vehicles. Second, they have an opportunity to redeploy the investment toward better-performing units. “It’s a mental shift,” a Southwest GM dealer says. “Now, my new cars don’t just sell when they sell. They sell when I want or need them to.”
Some dealers may dismiss the need to address these inefficiencies today, when times are good in new vehicles. But here’s a key question: How much more will these inefficiencies cost you when sales slow and times aren’t so good?
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
I caught a snippet of last week’s debate on C-SPAN around the U.S. House of Representatives bill H.R. 1737. The bill seeks two goals—to roll back the Consumer Financial Protection Bureau’s (CFPB) efforts to limit dealer reserves on finance deals, and require greater public participation as CFPB issues guidance to dealers and lenders.
In the C-SPAN coverage, I was struck by the passion of Rep. Mike Kelly, a Pennsylvania Republican and third generation dealer, who spoke in support of the bill, which passed the House by a 332-96 vote:
“We are a third-generation automobile dealer. I can tell you that it is a people business, not a white person business, not a black person business, not a brown person business, not a red person business, or a yellow person business. It is a business that is done face-to-face. I have sat across the desk from many people, lower income people, who cannot afford to get a car because they don’t have the ability to negotiate the auto loan.
It is our business, and I am stunned by people who have never done what we have done who have somehow decided that we are racist and that we are overcharging people. We are doing exactly the opposite … Three generations of Kellys have sold over 150,000 cars. You don’t do that by cheating people. You don’t do that by being a racist. You don’t do that by discriminating against people. You do that by working with people … The ability to get these people transportation–private transportation–falls on the shoulders of those who are the dealers. We negotiate in their best interest.
How stunning to think that somehow we are these predators who are just taking advantage of these poor people who don’t have any financial literacy. That, my friends, ultimately, is the biggest insult you could give people of color or people of gender. It is absolutely incredible to me that we would bring it to this issue.”
The House’s overwhelming support of H.R. 1737 owes in no small part to the work of the National Automobile Dealers Association (NADA). The group has been opposed to CFPB’s efforts to limit dealer reserves since the agency’s initial guidance in 2013.
As H.R. 1737 moves to the Senate, the bill faces an uphill battle to garner enough support to overcome the threat of a veto from President Obama.
I would encourage every dealer and industry stakeholder to do what I’ll do—call your Senators and ask them to support the bill to protect the future of our industry.
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
Let’s imagine that you’re sitting front and center, as your favorite band takes the stage.
You bought tickets a few weeks ago. You cleared your schedule. You’re pretty excited as the band cranks up the opening tune. The singer steps up to the microphone.
But the first note falls flat, followed by another clunker. You wince, and think: “WTF? I didn’t come all the way here for this!”
I share the anecdote because it’s similar to how today’s vehicle buyers feel when they find a vehicle they like online, and contact the dealership by chat, phone or email.
In most cases, the buyers engage the dealership to learn two things—whether the car they like is available, and what it will cost to purchase. In other words, they want to start working the deal without coming into the showroom.
But how do most dealers respond? Too often, it’s some variation of “Come on in!” The effect is exactly like the singer’s sour notes. It greatly reduces the buyer’s confidence in the dealer, and his/her interest in completing the deal.
My colleague, Mike Burgiss of Cox Automotive’s MakeMyDeal, says his team sees this dynamic every day. He shared a recent example from a Southeast Kia dealer:
A husband sent a chat message to ask about pricing for a Kia Soul, which his wife had recently checked out at the dealership. The sales associate’s first response: “Let’s sit down with my GM and talk numbers. He’s done crazy things when he’s with a customer.”
The buyer politely declined, and the sales associate sent another message that offered a price range, details about Kia’s powertrain warranty and a second invitation to come to the dealership. The buyer’s final response: “I understand. I will keep looking. Thanks for your time.”
Burgiss says the exchange would have gone better if the sales associate answered the inquiry with deal terms personalized for the buyer. “The example highlights a prevailing belief among dealers that customers must be in the showroom to negotiate a vehicle’s price or other terms,” he says. “Unfortunately, that’s out of step with today’s buyers. They’d prefer to work out deals from their home or office, just as they do with other retailers.”
I asked Burgiss for recommendations to help dealers better today’s vehicle buyer preferences. He shared three:
Recognize the “shopper” vs. “buyer” distinction. When customers find a vehicle they like, and take the time to view a VDP, they have shifted from simply shopping to an active stage of buying, Burgiss says. “The question for dealers is whether the information they present online facilitates the transaction right then and there,” he says. “If it doesn’t, potential buyers won’t see the signs of an easy, efficient purchase they’re looking for.”
Allow buyers to work deal terms online. Burgiss says new technologies give buyers the ability to configure a vehicle deal on a VDP and make an offer—without requiring them to provide personal information, send an e-mail or contact a sales associate. Even though buyers work deals under dealer-set parameters, the process and technology gives them a greater sense of control and self-direction.
“Dealers who adopt this process see higher levels of buyer engagement and improved closing ratios,” he says. “These improvements come because the dealers made the leap to serve buyers in the manner they prefer.”
Be authentic. When buyers take the opportunity to configure deals online, they send a signal that they expect an easy, efficient transaction, just as they would from other retailers. “If you play coy on price with these buyers, you’ll end up like the Kia dealer and lose them to a dealer who isn’t playing the traditional deal-making game,” Burgiss says.
I like this thinking on multiple levels.
By working deals online, dealers could achieve greater efficiency and satisfaction in showrooms. Customers could essentially show up, test drive a vehicle and, if they like it, take delivery. Less time equals increased customer satisfaction—and more time for sales associates to sell more cars.
Finally, this e-enabled approach to retailing vehicles creates another benefit for dealers. You’ll have less risk of hitting a bad note when it’s your turn to step up to the microphone.
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
I recently read a great book, The Boys In The Boat, about an unlikely crew team from Seattle that captivated the world when it earned a gold medal in the 1936 Olympics.
The book discusses the art, science, tenacity and will required to create synchronicity, or “swing,” among eight rowers on the water:
“There is a thing that sometimes happens in rowing that is hard to achieve and hard to define. Many crews, even winning crews, never really find it. Others find it but can’t sustain it. It’s called ‘swing.’ It only happens when all eight oarsmen are rowing in such perfect unison that no single action by any one is out of synch with those of all the others. It’s not just that the oars enter and leave the water at precisely the same instant. Sixteen arms must begin to pull, sixteen knees must begin to fold and unfold, eight bodies must being to slide forward and backward, eight backs must bend and straighten all at once. Each minute action—each subtle turning of wrists—must be mirrored exactly by each oarsman, from one end of the boat to the other. Only then will the boat continue to run, unchecked, fluidly and gracefully between pulls of the oars. Only then will it feel as if the boat is part of each of them, moving as if on its own. Only then does pain entirely give way to exultation. Rowing then becomes a kind of perfect language. Poetry, that’s what a good swing feels like.”
This passage makes me think of the “swing” some dealers achieve in their used vehicle departments—that point of harmony that occurs when buyers, managers, service technicians and sales associates align every decision and task toward the common goal of efficiently maximizing opportunity in every vehicle.
As the book excerpt indicates, even winning used vehicle teams may never find their collective “swing.”
But I’d submit it’s a worthy goal to aspire to, and one that pays rich dividends every time it arrives.
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
Average dealerships have wishes and hopes. Confident, successful stores have goals and a plan to maximize CPO.
I was speaking to a large group of dealers and marketers recently on ways to get traffic, leads and sales with social media. Before we started, I asked everyone to categorize his or her social media marketing skill level — beginner, intermediate or advanced — and that day, I had a mix of all three.
Then I asked, “Who has a solid, written marketing plan?” Sadly, no one raised their hand.
What benefits do I actually get from social media?
A recent study from Crowdtap reported that the vast majority of car-buyers research a vehicle on social media before buying. Respondents also said digital car advertising is the least trusted source of information.
Some of the most up-to-date data from the study include:
• Sixty-eight percent of those who purchased a car found the vehicle on social media.
• Eighty-seven percent say they research cars via social media.
• Eighty percent say they're “more likely to turn” to social networks than sales people.
• Ninety-five percent say they “would talk about” car models they like on social media.
• Fifty-four percent say they use “User Generated Content” to inform their purchase decision.
Dealerships and CPO managers who are able to steer the power of peer endorsements, engaging target customers and social sharing will find success in social marketing’s people-powered future. But, only you can make the decision that’s right for your store.
Do I even need a marketing plan?
Honestly, the answer is … it depends.
While that answer may not thrill you, it is the most accurate. Here's why:
Every business has its own DNA, its own culture and its own ecosystem. Some respond favorably to developing a plan that brings discipline and focus to all marketing activities.
Others may spend time, energy and budget to develop a marketing plan, then lose interest and resort to tactical maneuvers, which quickly veer off the prescribed path into parts unknown (and unmeasured).
Still, others may not have a plan at all and somehow manage to hit their numbers.
So you can see why I say, "It depends."
To get a better feel for whether a written marketing plan would make sense for your organization, answer the following questions:
1. Do you have defined social media and content marketing goals or strategic objectives that you want to reach?
2. What's your company-wide comfort level on publishing informative content about your company, employees and customers?
3. If you have specific goals and objectives, do your marketing efforts significantly and consistently contribute to achieving them?
4. Do you struggle with determining what the best performance metrics are?
5. Do you find that you're constantly seeking better marketing results but you remain unsure of how to best get those results?
6. Is your management team — sales, service, operations, marketing, admin — on the same page as to what marketing success looks like?
7. Would a written plan keep everyone more accountable for results?
If you're fearless in your answers to these questions, you may find that it makes sense to have a marketing plan. Going through that inquiry and decision-making process is crucial, and the insights you’ll earn may surprise you.
One of the challenges in developing a marketing plan is realistically aligning it with the culture of your organization. Your plan has to fit your culture and organizational structure. It must fit the flow of how “things get done.”
Making the commitment to do the ONE thing that will maximize your CPO is not easy, but I guarantee that once you’ve taken the steps, your business will be better for it, and you’ll have a clear idea of where you need to go.
Ask yourself if what you're doing today is getting you closer to where you want to be tomorrow.
If you choose to move forward with your marketing plan, take note that it’s a living, breathing marketing GPS that will shift and change many times over as your goals and objectives are revisited, evaluated and redefined.
I’m going to speak more about making the right decisions on your marketing plan at Used Car Week’s CPO Forum on Nov.16.
We’ll cover some of the components of how to get more leads and sales from social media.
Setting goals is the first step to turning the invisible into the visible.
Many dealers and managers reach out to me with thoughtful questions about social media. It seems to be at the top of their “To-Do” list, but many are stuck not knowing if they’re on the right path.
There are those naysayers who are unfamiliar with social media’s benefits and how SEO, content marketing, online reputation and authority, even advertising, are all intertwined with social media.
There’s a lot of uncertainty and misinformation, and if you’re able to make it to my session at the CPO conference, I promise to do everything I can to help you and your team figure out what’s best for your store’s success.
The ONE thing you need to maximize CPO with social media is to decide where you want to go and how you’ll get there. A marketing plan will ease your travel by providing more efficiency with less expense.
Take action today, and turn your invisible desires into visible leads and sales.
