The body of evidence undeniably shows that auto dealerships that do not sell auto detailing to service customers are missing out on profits.
If there was ever a Cinderella in an auto dealership, it is the detail shop.
It seems that dealer principals and/or general managers pay so little attention to detailing that they cannot conceive that it could ever be considered a profit center. To most, it is a problem center.
But, as the price of automobiles has increased, so have the franchising terms and the length of ownership. What this means is that the motorist has a need to maintain the cosmetic appearance of the vehicle, as well as its mechanical condition.
Certainly, the dealer should know the value of cosmetic maintenance. Hasn't it been the dealer, who for years, has detailed used cars before resale to increase their value? Why then shouldn't the motorist, who pays an average price of over $20,000 for a new car, not want to keep its value by maintaining its cosmetic appearance?
And with today's high-tech paint finishes and leather interiors, the motorist feels ill-equipped to handle this maintenance. Besides, they really do not want to spend a weekend “detailing” their vehicle, even if they had the correct equipment and knew how to do it.
Are you guilty?
With the motorist having the need for the service, all evidence points to the dealer as the most likely to take advantage of this opportunity:
Adequate facilities
Customer confidence and respect
— Experience and knowledge
— Existing sales staff
Existing technical staff
Those who do not take advantage are guilty of not cashing in on a pre-paid investment already being made in facilities, staff and expertise.
What about competition?
Most of the existing independent detail shops primarily do work for the auto dealer. Most are ill-prepared for the commitments needed to sell to the retail customer.
Besides most are “12 and Out Shops.” They start in business, fail to make a go of it, and shut their doors within 12 months or less.
Certainly, a great deal of the failures is due in part to the fundamental lack of knowledge about how to run a business. But most have insufficient capital when starting; have little or no equipment to properly detail cars; and the demand to comply with EPA and OSHA requirements make it nearly impossible to be in business. Add to this the need for competent and skilled personnel; the typical detail shop owner just cannot handle it.
Your prepaid investment
At the risk of repeating myself, let's look again at the prepaid investment that you already have made that gives you a head start over anyone else who wants to be in the detail business.
- Customer confidence that you know what the vehicle needs, whether it is mechanical or cosmetic maintenance
- Facilities that can accommodate a professional detailing department
- Capital with which to purchase modern detailing equipment
- Financial ability to hire and pay for top quality technicians
- An in-house need for the detail service
Despite these advantages, the number of dealers with professional detailing departments, or who even market detailing to their service customers, is dismally low.
It just does not make sense for the auto dealer to not have a professional detailing department. They have an in-house need for new-car get-ready, used-car detailing and a huge customer base who want to purchase detailing services from someone.
Many consumers would prefer to take their vehicles to the dealer for detailing services because they have the confidence the dealer will know exactly what is needed and how to do it properly.
Dealers who do not take advantage of this built in preference are simply throwing money away.
One-stop services
Studies indicate that a dealer who offers mechanical repair, body repair, painting
and detailing is able to gain market dominance because that dealership becomes the place for one-stop automotive needs from a new-car purchase through mechanical repair, collision repair, detailing, and finally, trade-in for a new car.
In a study done by Christopher Chung of the Department of Industrial Engineering at the University of Pittsburgh on body shops in dealerships, he developed a model called “the Simultaneous Service System.”
This system is intended to emphasize concurrent efforts, minimize customer inconvenience and maximize customer satisfaction.
If any part of the system is missing, the whole process is disrupted and less efficient. To function effectively all departments in the dealership have to be working together for a common goal, more profit for the dealership.
For example, when a customer brings a car in for service or warranty work, the service writer should have a keen eye to see if the vehicle has any need for body or paint work, or at the least, a polish and wax or interior shampoo.
The customer could be encouraged to have the repair or detail done while the vehicle is in the shop. This is simultaneous service that does not inconvenience the customer.
In most dealerships that have a detailing department there is very little attention paid to the department. It is located in the back of the lot “out of sight” and usually “out of mind.”
But, as the detailing service continues to grow in popularity with the motoring public it should occupy a more prominent position in the dealership.
It is one department that can attract customers outside the dealership’s normal customer base. As such, it can be an excellent marketing tool for selling the dealership to new-car customers.
For example, suppose you advertise a “Selling Your Car Special Detail” to motorists selling their vehicles. Emphasizing that detailing will increase the resale value.
Once in for a “special” detail you have a hot prospect for a new car.
Remember, a well-operated and promoted detailing department can be a window to a world of new customers you could not otherwise reach.
Beyond any reasonable doubt, the evidence is clear; a professional detailing department in a dealership means big profits.
If you have questions on how to make this happen in your dealership, you can contact Bud Abraham at buda@detailplus.com.
Low hiring standards are the major reason for dealership problems.
Nearly every dealer I consult with says the same thing about their detail employee problems: “It just isn’t realistic for us to have hiring standards for detail shop employees; we need someone with experience, and most of these are ‘warm bodies.’ We have to take whoever walks in the door.”
As I have stated many times, dealers have for too long followed these same hiring practices.
But, if you keep following these same hiring methods you will continue to shoot yourself in the foot, and end up with a permanent limp.
The Great Depression
When the Great Depression hit this country with a tornado-force in the 1930s, many major companies slashed their advertising budgets. Some even stopped advertising altogether. On the surface, this seemed the most logical business decision considering the state of the economy.
There were two notable exceptions to this common practice. They were the Campbell Soup Company and Procter & Gamble. They continued advertising and were even the sponsors of the first radio programs.
This is when Campbell’s famous “Mmm Mmm Good” jingle was born. And when Procter and Gamble promoted Oxydol soap on the famous radio serial “Ma Perkins” (who even remembers), among the factors giving birth to the famous term “soap opera.”
So what does all this history have to do with hiring detail employees?
Today, these companies are household words, two of the largest advertisers in the U.S., and extremely successful. Why? Because they raised the bar in spite of tough times.
The point is, neither company lowered the bar, so to speak. Sure, they made adjustments, but they maintained a high level of performance.
And that is what I want to tell you. Do not accept the conclusion that there are not good people out there to hire in your detail department, or that you have to take what there is.
This reactionary mindset does, and will continue to, undermine any positive progress you want to make in the operation of your detailing department.
Good employees produce profits
We all have heard this cliche so many times it almost becomes meaningless. Nevertheless, let me put it another way: would you purchase second-rate or out-of-date equipment for your service department or body shop?
When you build a new dealership facility, is it designed to look no better than the competition’s, or even not as good?
If you say no, then why is it ok to hire second-rate people for your detail department? And, on top of that, employees who have little or no management or operational standards?
If you settle for second best, you get second best. And I must tell you — that is what almost every dealership I have visited has in their detail department: second best.
If you want something better from your detail department, you must first expect more. People who expect more get more.
What is it you expect out of, or are looking for, in the operation of your detail department?
We’re as good as anyone
OK, you might say to me that, “Our detail staff is just as good as any other dealership.” That is fine if you want to get by as you always have. But is that really what you want?
Wouldn’t you like to have a clean, organized detail department, manned by reliable and dependable employees, who turn out quality work, quickly and profitably? Of course you would!
But, you must have a vision and some simple standards for your dealership, especially for this problem child, the detail department.
How to be better than the others
One of the best ways I know to have a detail shop that is better than other dealers is to do a better job of hiring and managing than they do, as well as having better equipment that saves time and reduces labor.
The single best predictor of a company’s overall excellence is its ability to attract, motivate and retain the best people.
More objections
If I had a dollar for all the objections I get from dealers about hiring better employees in their detail departments, I could retire.
A common objection (excuse) is that, “I let my GM run the dealership, and I can’t convince them it’s worth it.”
Or, “I just don’t have anyone willing to manage the detail department. The service manager doesn’t want it, and the body shop manager has his hands full.” Or, better yet, “The department could not justify the salary a good shop manager would require.”
As the dealer, you have to realize when someone will not do what you would like them to, it is because they don’t understand what is in it for them.
Yes, you are the owner and you can command them, but you and I both know that no one does anything they do not want to. They will pretend to cooperate, but as is usually the case in most dealerships, they do a sloppy job of it. Just look at your detail department.
What this illustrates is two things:
1. This type of behavior is typical, and
2. If you want someone to do something new, you had better take the time to explain what they have to gain.
It is no longer acceptable to say, “Because I said so.” It is futile, and in the end, the “inmates end up running the institution.”
If you run your dealership with the command and control management style, you will have high turnover and poorly operating departments.
Conclusion
Therefore, if you want better employees in your detail department you need to get the managers in your dealership to buy into the philosophy I have been expounding. If they do not see that better employees will be better for them, their department and the dealership, nothing will change.
Detail shops are not profitable because of employee turnover, and it erodes morale. There is also a strong correlation between employee retention and customer retention. Think about it; what will happen if you keep hiring second-best people in your detail department?
The greatest cause of employee turnover is not low unemployment or downsizing; it is, plain and simple, hiring mistakes. And how many hiring mistakes have been made in your detail department?
If you would like to discuss this or anything related to detailing call me at (1800) 284-0123 ext. 4 or email buda@detailplus.com.
I’m seeing far too many 2014, even 2013, model-year new vehicles in dealers’ current inventories.
Yes, those cars. The ones nobody wants to talk about. The ones that mean tens, if not hundreds, of thousands of dollars in unproductive capital for many dealers.
In my time as a dealer, it was pretty rare to carry last year’s cars. With Cadillac, we could count on fall incentives to help us clean out our inventories. We generally considered it a failure if we hadn’t eliminated all prior-year vehicles by Jan. 1.
It’s unfortunate those days appear to be long gone.
Dealers offer several reasons for keeping these cars — their factory partner sent a dud, they got it wrong when they ordered or they simply can’t find a buyer.
There are other factors that contribute to aging new vehicles. Factories introduce new-year models at different times during the year, not just in the fall. In addition, factories use incentives throughout the year to achieve their market share objectives, not necessarily a dealer’s need to clear out prior-year units.
The end result: the responsibility to mind and manage older-age new vehicle inventory increasingly fall’s on the dealer’s shoulders.
Interestingly, however, dealers don’t seem concerned that the presence of older-age new vehicles is hurting their performance and profitability. Some believe that, unlike used vehicles, new cars do not depreciate. If you follow this thinking, a 300-day-old new vehicle is as appealing and fresh as the same vehicle that just came off the hauler.
When I take a closer look at these older units, I often find they are priced the same as newer units — a sign that the dealer is banking on finding a buyer willing to pay up to own the older car. But I have to ask: In this day and age of ever-greater pricing and product transparency, does anyone really believe such buyers exist?
Some dealers recognize that older-age new vehicles poses the same problem as old-age used vehicle inventory. As time goes on, these vehicles become less and less appealing to buyers, and their ability to deliver a sufficient return on investment diminishes at the same or greater rate.
When I mention this dynamic to dealers, some disagree. “Dale, you’re wrong,” they’ll say. “New cars don’t spoil like used cars.”
On some level, these dealers are correct. In today’s market, the prime retail window for used vehicles is 45 days or less. One could make a case that the shelf life for new vehicles is twice as long.
But even by this standard, you really can’t argue that a 2014 unit has little luster as a new vehicle to today’s buyers — and it’s unquestionably counter-productive from the dealer’s investment perspective.
My advice: Stop hoping for the buyers who probably won’t come. Price your 2014 and older vehicles to retail right away. Take the loss today, if necessary, and accept it as a lesson learned to shape a more profitable tomorrow.
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
That is a deceptively simple question. Having a firm understanding of the elements that go into the concept of efficiency within a used-car department is vitally important. The better you understand the elements involved in efficiency, the better positioned you will be to correct inefficiencies – and to be more profitable! Here is a list of areas that need to be running at maximum efficiency in order to maximize your profit:
- Trade appraisal
- Acquisition
- Reconditioning
- Marketing and advertising
- Sales process
- Traffic measurement – floor, email and phone
- Showroom – sales, follow up and delivery
- Finance and insurance department
- Training – initial and continuing
- E-commerce
- Inventory management
So, how efficient is your used-car department in those eight categories? If you are like most dealerships, several of the above categories represent opportunities to become more efficient. Acting on those opportunities requires a lot of work – a well thought out plan, quality people and very good processes. This takes time, resources, discipline and support. I can also say it is well worth the effort – not only from the used-car department perspective, but from the perspective of the dealership as a whole. The used-car department is the fuel that drives a new-car franchise store.
Although all the eight categories I mentioned above are important, for the rest of this article I want to dive deeper into one category that I believe is a key factor in creating more gross profit in your used-car department, and also reducing your expenses. The category is advertising and marketing.
I’m sure that everyone would agree that the internet has changed our business, and that it will continue to change and evolve our business. To illustrate the evolving nature of used-car sales, try to remember back when we first started to advertise vehicles online. For the majority of vehicles being advertised online, under the price column, what did it say? “Call for pricing”.
I know it seems strange to think about that now, but we all know it was the way things were done (heck, there are still dealers today advertising “call for pricing”). So, why did that evolution happen? Did dealers randomly decide to become more customer friendly? Or did the market reward those who chose to post prices online with more business than their competitors? The answer is obvious. I am a firm believer that the market will always push for the creation of an efficient environment.
So, great – you start advertising the selling price of your vehicles online – does that make you efficient in the marketing and advertising category? If only it were that easy. Remember, the market continues to evolve. There is more work to be done.
I am going to make a bold statement here: the goal of your advertising and marketing plan should not be to create leads. Let me repeat that – the goal of your advertising and marketing plan should not be to create leads. Creating apparent leads is the goal of third-party advertisers and website providers.
That is, of course, how they justify the monthly bill they send you. The favorite line of third-party advertisers and website providers goes something like this: “our job is to get you the leads; it’s your job to close them.” Sound familiar? Getting leads is easy. What the goal for your sales and marketing plan should be is to create more sales through qualified leads. What’s the difference? Efficiency. You pay an enormous amount of money for your advertising and marketing plan. Why not create maximum value for your money?
The first step is to create the equivalent of an online salesperson or gatekeeper. It’s not as difficult as it sounds. It’s as simple as providing up front answers to the majority of questions that a potential customer may have. For example, customers viewing vehicles online will often send in a lead asking if a specific vehicle has had an accident. It is quite an inefficient process to send that individual potential customer the history, let alone the time that’s likely then invested to attempt to convert that weak lead into a sale. If the information was instantly available online, you would be saved the time and energy it takes to respond to the individual potential customer and to chase a weak lead.
Think back to when we didn’t advertise the price of the vehicle online – how many leads inquired as to the selling price? What was the conversion rate? How many more rejections did your front line staff face back then? I’m pretty sure once you started advertising a price, your leads went down, but your sales went up (or at the very least remained the same). You were more efficient.
Full disclosure of important facts online makes the dealership more efficient and, by default, more profitable. That disclosure also has the added benefit of being a more transparent and professional way of doing business – and giving customers an all-around better buying experience.
If you create an informative, emotionally attractive and professional vehicle detail page, the market will reward you for being an early adopter. When you are efficient in the category of marketing and advertising, the overwhelming majority of your phone and Internet leads will come in with the line “is the vehicle still available?” Just by the type of question being asked, you know this is a better lead than “what’s the selling price?” or “has this vehicle been in an accident?”
Overhauling the way you deal with online information disclosure for each vehicle will definitely take some extra upfront effort. However, it increases the efficiency of your dealership’s used-car department and produces higher quality leads, and more satisfied customers. And, that’s what efficiency is all about – smoother processes, happy customers and more profit!
Remember, it all starts with you!
Richard Macdonald is the founder of RPM Solutions. Richard provides consulting, training and coaching services to new-car franchise stores to help them maximize their used-car department profits. For more information, contact Richard at (416) 894-1475 or richard@rpmsolutions.ca.
Have you ever come in contact with a third-party lead generator for fast food?
No. Why? Because even though they have products of questionable nutrition, with confusing menus and confused employees, fast food companies do what they do, for the most part, pretty well. They offer fast service on value priced food options with a customer experience that focuses on getting your order right and moving you out of the restaurant or drive-thru in a timely fashion in order to make room for the next customer. Period.
So why do so many car dealers rely on third-party tools, sites, systems and products designed to attract new leads and generate business? Simply because, as a community, we as car dealers do not always do what we do very well at all.
Every time I attend a conference or read an industry publication, I notice the ads of companies who promise “more customers in your service drive” or “more car buyers in your showroom.” These companies are often well versed in tools and techniques to communicate with prospects about the services offered by their dealer customers. They employ smart and well trained front-line staff who get to know their customers and uncover their true needs. Then they focus on using the systems and processes they have been given to work with to do what they have promised. They help their dealers make more money, and they get paid very well to do that.
These third-party lead generating companies perform a valuable and necessary service given the way many dealerships operate today. The question I have is: why? Why do car dealers need someone to reach out to people who need to buy a vehicle, who live near their dealership, and who, in some, cases, have done business with them in the past or who know a member of their staff via their personal life? The answer I have come up with is not complex. It has very few contributing factors, and it is pretty easy to fix. If we as dealers made it easier for our customers to do business with us, more customers would do business with us.
Here are a few top-of-mind ideas to help you meet your customers’ needs:
- Answer the phone in four rings or less, whenever you are open. Make sure callers are transferred to the person or department they are looking for. Establish guidelines for the amount of time allowed between someone leaving a message and your employees calling back.
- The phone goes both ways; use the phone, the easiest communication method in your store, to keep customers updated on the status of their vehicle search, repair order or parts request. Don’t make them keep calling you to find out what’s going on.
- Make your showroom a 100 percent customer-facing environment. That means no intimidating huddle around the reception desk, no discussion of what’s for lunch or who is dating who. Lead by example, and treat every customer who walks in the door as a guest in your home, so your staff can learn to do the same.
- Do what you say you will do. This means delivering cars on time, and having service vehicles ready when you promise for pick up. If something gets in the way of following through on timelines, it should be the highest priority of that department and escalated through levels of management until it gets resolved.
- Manage through your managers, and stop letting the tail wag the dog. Your dealership exists to sell and service cars. It does that through the team of humans you have hired and placed in a structure with implied accountability to ensure the job gets done. The first line in every person’s job description should be about supporting their key function or outcome. A general manager has to be focused on making sure the department managers have what they need and are getting their jobs done. A sales manager must be present and engaged with the employees trying to facilitate sales all the time. Ensuring that managers have the latitude and attitude to be proactive and keep employees on task eliminates the desperate front line employee who feels that kinking your system is the only way to get his job done.
It’s not rocket science, but it is harder than it sounds. Our dealerships are ecosystems with a delicate balance unique to each one. We can’t, however, lose sight of what it is we are here to do. Working to meet our customers’ needs is the straightest line to the end of having customers who want to do business with us. There is an old expression that says, “I know that half of my marketing dollars are working for me, trouble is I just don’t know which half.” I once worked in an environment where the overarching belief was that “Money follows good customer service”, and this is true in any business. Maybe those big food chains are on to something when they ask us every single time, “Would you like fries with that?”
Cathie Clark has over 20 years of automotive industry experience, and is currently a dealer principal and president of Automotive Insider Consulting. Equal parts competitive car dealer and compassionate dealer educator, Cathie offers insight into digital and traditional marketing, F&I and sales processes as well as proactive compliance to improve customer experience. Reach Cathie on Twitter @autoinsidercat or at Cathie@AutomotiveInsider.ca
The landscape of our industry has changed drastically in the last five years. Independent dealerships and small auto groups are being eaten up by larger groups left, right and center.
But, why is this happening?
How is it going to affect me?
What should I do?
Continue on concerned reader, and all will be revealed …
1) Our industry has changed
The reach of the Internet and the way in which it has changed consumer behavior is a big part of this consolidation.
The Internet is a complicated and ever evolving challenge, and one that has really shaken the status quo up. Many dealers would rather sell out to a big dealer group than try to adapt to a shifting market that they no longer understand.
2) The economy has struggled, and oil has skyrocketed
It’s said that in tough times the rich get richer, and the poor get poorer.
When the economy struggles and car sales dip, some dealers get shaky knees and want to pull the ejection cord. This offers a great opportunity to the big groups out there that have the staying power and confidence to get through the tough times.
They know that the market will rebound, so they buy stores in times of desperation (i.e. when our oil prices recently went through the roof) and reap the rewards the market corrects itself in the months and years to come.
3) The first generation dealers are moving on
The dealership model is still relatively new in the grand scheme of things, and 90 percent of the dealerships out there were started in the last 40 years.
That initial wave of founders are now in their 70's and beyond. Their priorities are different, and often the appeal of cashing out and providing their families with lifelong financial security is just too great to resist.
4) Increasingly competitive
There are more dealers than ever before, and dealership advertising budgets are at an all-time high. The glory days have come — and gone.
As little as 10 years ago, having a strong franchise and a reasonable PMA was essentially a license to print money. A dealership would essentially have to try to fail, but this is no longer the case.
With the increase in competition from the big groups and better operators, the old-school independent dealers who have been on cruise control for the last 10-40 years are now being forced to reassess the way they run their business.
5) Higher operating costs
This one is pretty self explanatory. The cost of real estate alone has nearly doubled in most places of Canada over the last 10 years.
Everything from the office furniture we use, the software we rely on, to the gas we fill up cars with have escalated in price. Similar to the increase in competition, these higher operating costs force antiquated dealerships to either run a tighter ship or risk slowly sinking into obscurity.
6) Economies of scale
Medium to large auto groups generally receive a discount in the range of 10-20 percent from most of the vendors in the industry (note: if you are part of an auto group and you are not currently negotiating as a group and leveraging that power, you are doing it wrong). When most dealers have 10's of thousands of dollars in monthly costs, a 10-20 percent discount can provide a significant advantage.
Final Thoughts
In a sense, what we're seeing with the automotive industry is just Darwin's famous theory playing out. The strong are eating the weak, growing stronger and evolving faster.
Most dealerships that are being purchased by auto groups are underperformers, often with aging and complacent ownership. The big groups then bring in fresh blood, better processes and modern tools. It's not uncommon to see an underperforming store completely turn around and double its numbers months after being acquired by a larger group/better operator.
Manufacturers award more new dealership locations to medium-large auto groups than to independent and small groups, largely because they believe that the store will do better under the larger umbrella.
If you are an independent dealer or small auto group, it's time to take a good look at your business for ways you can improve your operation. With the bar being continually raised in our industry, your choices are simple — evolve or fold.
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 see how Convertus can help you craft a winning digital marketing presence for your store.
I’ve been talking new cars with dealers lately, helping them create and navigate strategies for proper pricing in today’s market.
Naturally, customer incentives and rebates are a key part of the discussion—particularly as some manufacturers rely on them more than ever to drive market share and sales.
From these conversations, I think it’s fair to group dealers in three buckets:
Bucket 1: These dealers resist applying any incentives or rebates as they price new vehicles. The chief reason: The dealers prefer to limit incentive/rebate discussion to the showroom floor, where they can be absolutely certain they’ve matched specific customers with the correct price discounts.
Bucket 2: These dealers believe it’s appropriate to include incentives/rebates in their new vehicle pricing, provided a) most buyers would qualify for them, and b) each vehicle listing properly discloses the conditional nature of the rebates/incentives, and shows how a dealer uses them to calculate each asking price. The dealers have adopted this practice to meet buyer desires for a greater level of pricing transparency.
Bucket 3: These dealers include nearly all available incentives/rebates in their new vehicle pricing, even those that may only apply to a small percentage of potential buyers. The dealers rationalize this “kitchen sink” approach by noting that they provide the proper disclosures, and they hear few complaints from customers who might feel misled.
I can understand why dealers in Bucket 1 are where they are. It’s only been of late that dealers have the technology and tools to accurately apply/stack incentives and rebates in their pricing strategies.
I typically applaud dealers in Bucket 2. They’re keeping it real and realistic as they include incentives/rebates and offer more transparent asking prices.
With Bucket 3 dealers, I offer a word of caution. Just as you get more proficient at applying incentives/rebates as they price new vehicles, customers and industry regulators get better evaluating them. The “kitchen sink” approach may be working for now, but I have to question the strategy’s risks and viability moving forward.
It wasn’t all that long ago that every dealer was essentially a Bucket 1 dealer. Incentives/rebates were too complex, and online pricing technology too limited, to confidently and efficiently include them in a new vehicle pricing strategy.
Times are different now, of course. The technology is now available and, more importantly, dealers recognize that it’s increasingly important to provide consumers incentive/rebate information right away, while they shop new vehicles online.
Looking ahead, I believe incentive/rebate-based new vehicle pricing will become the norm, and we’ll see the vast majority of dealers in Bucket 2.
As this transition continues, dealers would be wise to remember what our customers will be thinking when they evaluate new car prices—“if it seems too good to be true, it probably is.”
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
Talk to any dealer and he or she will tell you that reconditioning (detailing) is vital to their dealership, yet the role of the detailer is often perceived negatively.
And for the detailer, there is a lot more at stake than negative stereotypes.
Detailers are exposed to a great many chemicals, which can cause occupational asthma. There is also a host of other dangers that could come from mixing the wrong chemicals, and the increased likelihood of slip-and-fall injuries, not to mention the potential impact on used-car sales and profits.
Despite all of these risks, detailers play a huge role in the profitability of the dealerships. Then why the bad reputation, and why are they and the department treated so badly?
There are a number of reasons for this situation — there are no education requirements or necessary certifications for detailers anywhere in the United States. Then, there is the problem of low pay; most detailers are paid by the car or just above minimum wage.
It is all theory regarding why the detail industry has not advanced in the United States. Nevertheless, the prevailing thought is that most dealers or detail business owners want to keep the wage rates low. However, once you start attaching certifications to any profession, it raises the amount you have to pay people. Detailers work hard, they do a dirty and repetitive job, they work late at night and there are many things that can go wrong.
They deserve to be paid fairly and treated as an integral part of the dealership.
Training means retention
Turnover is a constant problem in detailing, with rates cited anywhere between 50 and 400 percent by dealers and detail business owners. That means dealerships could be replacing their entire workforce between once every two years and four times per year.
Training programs are an underutilized way to help tackle this problem. Not only does regular, in-depth training provide the opportunity to raise pay, but it also shows workers that the dealership cares about them, enhances skills and job performance, and helps with turnover.
The key, of course, is, you must have people who are capable of being trained. You cannot improve the detail employee by continuing to hire the same type of people repeatedly. You will just keep getting what you always have.
With the people we have trained, we have seen that the programs that have led to higher pay also lead to better retention. One of our customers had an incentive program so that detail staff would make more money as they advanced through the stages of training.
After two years, most of these employees are still there. They do not use training to weed people out, but people weeded themselves out.
The budget often has the final say in training decisions. Many dealers do not see the value in training when they look at it on paper. They see an upfront cost, the potential of having to pay more for certified and trained detailers, and the loss of man-hours that are spent training as negative impacts on the bottom line.
Some dealers do not want to train people because they are afraid they will go somewhere else, but on the other side, what happens if you do not train them and they stay? Training will work if you hire the right people; you will get a positive return on your investment.
Promoting higher worker value
Our approach to training is simple — get knowledge into the detailer’s head — knowledge about chemicals, technology and the supplies available to detail vehicles properly. Additionally, knowledge about the vehicles: paint finishes, wheels, leather, carpets, glass, etc. Most detailers we find have no real knowledge of the vehicle and are using techniques for detailing from the ‘50s.
The hands-on training breaks the detail jobs into these categories:
- Engine clean
- Wheels
- Body wash
- Tar removal
- Trunk clean
- Complete interior clean and shampoo
- Exterior buff, polish and wax
- Final detail
For each of these jobs there is a step-by-step process so every detailer does the same thing, the same way. This gives management control over the entire detail process, instead of every detailer doing it “their way.”
Professional organizations, such as the International Detailing Association, have training that results in a certification, but it is a lengthy program that involves several on-line tests, and then hands-on training at an IDA recognized location. This is probably too long and too expensive for dealers.
On-site training is best for a dealership — training the entire staff at your location, using your tools and chemicals. You do not have to buy into a complicated training program to find in-depth, high-quality training for your detail workers. There are several good trainers who will come to your dealership.
Of course, a dealer can go to their chemical supplier and ask for hands-on product and procedure training, but there is a question about the caliber of training they are going to receive. Most chemical companies only train to understand and use their chemicals, so your detailers are not really trained at all.
Rather, find a training program that moves beyond how to hold a buffer and delves into the chemistry behind cleaning.
One way to identify a high-quality training program is to ask how often the staff should be trained. That is a good question to define what the supplier really thinks training is. It is like going to the gym. If you go once or twice a year it is not going to make a difference. Training is the same way. If it is repetitive and constant, you are definitely going to get more buy-in from the staff.
There is no magic training program that is going to transform your detailers into technicians if they are the wrong individuals, and the training is just a one-time thing. It is a continuous process with periodic refresher courses.
The impact of recognition and praise
There is a famous story about President John F. Kennedy’s encounter with a janitor who was cleaning a bathroom at NASA. Kennedy asked the man what he was doing, to which the custodian replied, “Mr. President, I’m helping to put a man on the moon.”
That is the kind of pride that exemplifies the true role of a person’s work. By telling inspiring stories of detailing staff taking a proactive, engaged and proud stake in their role, the detail industry can help push the detail narrative forward — and move beyond negative perceptions.
Detailers have the capacity to improve the meaning and identity of their work by being proactive, engaging with others and seeing their value in the larger context of the organization. But it is up to the dealer to create this atmosphere. If the detailers are not engaged, nothing will change.
I have interviewed groups of detailers in dealerships that fell into two groups: one group did not like detailing and did not value their skills or role as a detailer. The second, happier group took great pride in their work.
I noted the happier detailers understood the value of their work at the dealership and altered the relational nature of their job to form bonds with everyone in the dealership. These detailers enjoyed the work and felt they were highly skilled. They engaged in tasks that made the jobs and lives of sales people easier.
Another observation of the happier, more proactive detailers was their ability to see their work in a larger context. These detailers were able to look at how what they did was so important to the dealership. Rather than focus on a detailing task, the happier detailers could see beyond that and how what they do has a major impact on the entire dealership and its customers.
How do dealers promote this proactive, heightened sense of value in their detail staff and their entire dealership? Training helps. But praise and recognition are critical. The detailers have to see themselves as part of the whole, and the entire dealership must reflect this respect towards the detail staff.
Service managers, fixed operations managers and the new- and used-car managers can make a huge impact free of charge by reminding the detail staff of the importance of what they do. When it comes to detailing, people usually do not notice the job until something is not done right or when there is an unhappy customer.
Taking the time to notice when the job is being done well will pay huge dividends in lifting detail employee morale and keeping them around longer.
Invite in a training company to provide training for the detail staff. Then try something as simple as giving detail staff a certificate and a pat on the back, and telling them that training was important because what they do has a major impact on the dealership. Do this and do it well, and you will see less tardiness, less sleeping on the job and an overall upgrade in the work.
Finally, a pat on the back by the dealer principal cannot be underestimated. When you are talking to a group of detail employees, you do see them stand a little straighter when you tell them nobody else in the dealership has a more direct effect on the profitability of the dealership than they do. Unfortunately, it is a message that dealers do not deliver enough.
If you are interested in learning more about training, contact me at buda@detailplus.com.
It’s probably not the best time to talk about problems in the new car business.
After all, dealers have been enjoying what may go down in history as unprecedented success in new vehicles. Sales have been on steady uphill climb since 2008, and everyone expects the current year to end on the same, if not better, note than last year.
But the buoyancy around the industry’s performance tends to mask three underlying fundamentals that I find disturbing:
Margin compression: While dealers have been selling more vehicles, they’ve effectively been making less money on a per-car basis. Stats from the National Automobile Dealers Association (NADA) show that gross profits as a percentage of sales prices have declined 31 percent since 2009 (from 3.6 percent that year to 2.5 percent in 2014).
Part of this decline owes to rising transaction price transparency. It’s easier than ever for today’s buyers to learn how much they should pay for a vehicle online. The decline also owes to factory pricing decisions. This spring, Fiat Chrysler became the latest to shave a percentage from the margin between the dealer invoice and the manufacturer’s suggested retail price (MSRP).
The cyclical nature of car sales: Dealers should know better than anyone else that ours is a cyclical business. We’ve enjoyed a really good run the past several years as new vehicle sales have satisfied demand that effectively disappeared during the economic downturn.
But this market demand simply can’t last forever, particularly when the past few years of sales have been marked by ever-longer finance terms. Analysts may disagree on the timing, but most concur that sales volumes will eventually level off, if not decline, from current levels.
Increased reliance on “below the line” monies: I recently spoke to a Chrysler dealer who has all but given up on front-end gross profit in new vehicles. The reason: The dealer’s determined that it’s in his best financial interests to essentially give up front-end gross profit in favor of retailing more cars to meet factory stair-step incentive targets.
This dealer’s decision is increasingly common. In the face of an ever-smaller pool of front-end gross, who can blame a dealer for chasing the bigger pot of gold? The problem, of course, is that the “below the line” money carries conditions, some of which erode the entrepreneurial nature of being a car dealer.
Likewise, the “below the line” money isn’t guaranteed. While factories are pretty flush right now, it’s not irrational to consider that bonus program rewards will diminish as sales volumes decline.
Taken together, the underlying new vehicle market fundamentals suggest a darker horizon for dealers. The next question becomes: What can dealers do today to prepare for conditions that may create a perfect storm of problems in the not-so-distant future?
The answer, at least to me, rests in increased efficiencies. Dealers will simply have to retail a greater volume of new vehicles at a lower cost per unit, and in less time, than they’ve been accustomed to in the past.
Some dealers have already embraced this efficiency-focused operational standard. Their emphasis on efficiencies typically manifests in three ways:
- Stocking the right new vehicles. The dealers use new technology and tools to consistently align their inventory mix to current market demand. The strategy builds volume while reducing time in inventory and related carrying costs. The dealers essentially create an advantage over other dealers who are less adept at mining market data to make inventory decisions.
- Pricing to meet customer expectations. Just as we’ve seen in used vehicles, more and more dealers are adopting a “near one-price”-type approach to pricing their new vehicles. That is, their asking prices include incentives and other discounts to advertise prices that fit the range of transaction prices today’s buyers can easily find online. These dealerships also adopt pay plans that reward sales associates for selling more cars and minimizing discounts.
- Reducing transaction times. Progressive dealers are embracing a goal of a one-hour-or-less average transaction time for new vehicle customers. To achieve the goal, the dealers employ e-commerce-type tools to effectively complete a deal before customers arrive at the showroom for a test drive. The ultimate goal: A faster, more satisfying in-dealership experience that seeds repeat/referral business.
I realize some dealers likely won’t appreciate my frank assessment of the future new car market. But, as my Dad has always said, “the worst days aren’t quite as bad if you see them coming.”
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
Following is an email from a friend and customer about increasing his inventory as we enter the summer slowdown.
Good afternoon Dale. Hope all is well with you. Last month was a down month for my used car department. Sold 62 at $1200 per copy. I had around 15 percent of my used inventory as trades and the rest were “p” cars that I know I’m paying up for. Anyway the turned dropped from 18 to 10. I’ve identified some changes I need to make and will spare you the details. My pay plan is maximized at 80 used so my thoughts are taking the inventory up from 88 used in stock to 120. So even at a 10 times turn I still end up at 85. I’m simply adjusting my math. I killed it March and April, breaking store records selling around 85 cars at $1700 front end per copy. But I also had trades coming in. It’s tough when you have to pay up at auction but necessary to generate an opportunity.
So my questions are what are your thoughts going into the second half of June and the rest of the summer? It seems there are less “right” cars on Smart Auction and people are less willing to deal on them. I’ve been the used car manager here since mid-February so I’m still trying to dial in the right inventory. They previously carried 110 cars and sold 48 on average. It also seems the used car business is slow in this area. What are your thoughts on the overall used car market now? Thanks in advance for your time.
Here is my reply:
WARNING, WARNING, WARNING. DO NOT INCREASE YOUR INVENTORY
You’re about to make one of the most common mistakes in the used car business. Specifically, you do not ever increase inventory for the purpose of selling more cars. The only proper justification for increasing units is to slow your turn. Once your retail turn reaches 15-16 turns, you have the right to either raise your prices slightly and generate more gross or add a few more units to your inventory. Either approach under such conditions is prudent so long as you do not fall below 12 retail turns per year.
This advice is especially critical at this particular moment of time. This is because the values in the wholesale market have already peaked and will only be declining for the balance of the year. Your approach is also ill-advised because of the large quantity of late-model expensive off-lease cars that are due to be returned to the market in the coming months. If you go out and buy a whole bunch of used cars now you will surely have an excess amount of over-valued inventory in the coming weeks and months.
Think about the analogy of operating a fish market. If your current sales were below your expectation, would you go out and buy more fish with the belief that it would generate additional sales? The answer is obviously no. Sell what you have in stock as it already represents more units than you should have.
In other words, what you have on your hands right now is a sales problem, not an inventory problem, and therefore, you should address it as such.
Dale Pollak is the founder of vAuto. These entries and Pollak’s entire blog can be found at www.dalepollak.com.
