It would be safe to say that everyone in the retail automotive space lost some weight following 2008, figuratively speaking. It would be surprising to find a dealer who didn’t tighten-up his or her business operations during the Great Recession, both in terms of people and in demanding greater ROI in money spent.
Dealers began to take a more laser-focused approach to personnel, keeping only those who were necessary, and who could perform to hit certain standards. Dealers began to leverage more as a less expensive means to drive traffic and branding, and a more sophisticated means of measuring and tracking business operations. In essence, dealers came out of the Great Recession as lean and analytical business athletes with the ability to run a marathon.
Fast forward to today. Life is good coming off two years of record sales numbers, with 15.6 million new units sold in 2013 and 16.5 sold in 2014. And, the industry expects this year’s sales numbers to be on par or better than 2014. Unemployment and consumer confidence continues to improve, and fuel prices reached record lows in the first quarter of this year. In general, the economy is looking up. So, let’s live a little! But remember, the key is to live a little – don’t hit the all you can eat buffet.
While the Great Recession was incredibly painful for all aspects of the industry, it did help correct significant operational issues that long needed to be addressed in the retail automotive space. And, it did so in a condensed period of time.
The new operating model requires a different level of analytics; diligence in compliance; proactive management and efforts to capture online car shoppers. In addition, individualized training programs for personnel with key staff retention strategies are needed. In short, this means much closer and empirical daily management. Let’s call it daily cardio for the business.
Now that things are rolling, dealers are tempted to skip their proverbial workout. You may not be hearing as much about how every deal counts. You may see less emphasis on training in exchange for more people on the floor. There may be less career path planning and higher turnover, as well as less urgency around online customer reviews. And the pounds start showing up around the waist and on the hips of the business. Sound familiar?
Your role as an agent is to be your dealer’s personal trainer to ensure they stay fit and healthy as a business. You also have to resist the urge to splurge, and your counsel to your clients has to go beyond F&I revenue, PRU and penetration rates.
Consider a comprehensive performance evaluation that an objective party would use to gauge your contribution to your client’s overall business health. How do you think you would rate if we were in a down economy?
- Are you as engaged with your dealer clients as you were in 2009?
- Are you as concerned with providing your clients support above and beyond what they could get elsewhere?
The fact that we’re in an up economy should mean that we also ramp up engagement. It’s the perfect time to identify areas where dealers can improve operations to fortify them for the next time the economy shifts. There are immediate things you can do to improve their health for the long-haul.
With the CFPB looking for ways to extend their influence into the F&I space, more lenders considering flat fee models, and the growing importance of compliance in the dealer space, now is the perfect time to help your dealer clients insulate their business. Help them evaluate where they stand with their compliance processes, methodologies and certifications, and, determine a go-forward plan to tighten compliance procedures.
With product sales increasing in importance in a potentially expanding flat-fee lending environment, consistent pricing is key during this time of heavy scrutiny. Take a look at how much your dealer clients typically make on each product and help them create a reasonable, predictable and consistent range in which their F&I managers can the markup the product.
Along with pricing, it’s equally important for dealers to have a formal process to address complaints. As we’ve seen in previous years, institutions like the CFPB and FTC direct their focus based on consumer complaints. So, it’s important that they are effectively managed before calling the attention of the government. Beyond that, studies continuously show that customers are more likely to remain loyal to a brand that successfully remediates complaints. And, we all know it’s a lot easier and less expensive to keep a customer than it is to get a new one. So, help your dealer clients put in place a formal complaint process that will enable them to act quickly, demonstrate that the customer’s voice is heard, empowers employees to make quick decisions, and provides documentable data for the dealer to review.
2. Product Mix and Performance
Take a deeper look at your dealer client’s PRU and penetration numbers to help determine what’s working and what’s not. This could signal the need for additional training, or a product mix revamp. Conduct a market analysis, reviewing consumer income levels, unemployment, housing stats, etc. to ensure that the F&I products the dealer is selling match the needs of their target consumer group.
Review your dealer clients pay plans and incentives, and compare them to their turnover numbers. Remind them that a main reason why good sales managers and F&I producers are recruited out of a dealership is because their pay plan was changed, resulting in less take-home pay. Help your dealer clients refine their job descriptions and determine a pay plan for each position based on the percentages they are willing to pay. Then remind them to stick to those plans when their people succeed. If an F&I producer is taking home a fat check, that means the dealership is making that much more.
3. eLead Engagement and Competitive Edge
Mystery shop their store and their competitors. Review their website. Submit an online inquiry and evaluate their follow-up practices. Look at their online reviews. Determine the strength of their online presence in comparison to the competition. When you call, use your research and ideas to have something interesting to say. The dealership personnel will be more intrigued to see what you have to offer and how you can make them more successful.
One area where many dealerships are struggling is how to successfully service customers online, especially on platforms beyond their control on social media and review sites. More and more consumers today actively research both car reviews and dealership reviews, and they trust these more than any advertising tactic.
Help your dealership clients leverage this trend. Remind them that consumers often choose who they want to work with before they even enter the store by looking at reviews. In fact, according to Equifax, consumers are now visiting 1.2 showrooms before buying. Therefore, more reviews correlates with increased opportunity for sales for the team members and the dealership. Have your dealership clients coach their team to ask for reviews. Or, even have your clients run an incentive-based contest among the sales and service teams to drive reviews. Sales professionals are trained to ask for the sale. It’s time to motivate them to ask for the review.
Help your dealership clients stay focused and healthy by setting them up for future success. Develop mechanisms to elevate your relationship with your dealer clients by evaluating their operations and creating solutions for potential problems they didn’t know they had. Remember, the healthier dealers are, the healthier the agent – and, the less likely the dealer will be to look for other resources.