February 2010, Auto Dealer Today - WebXclusive
Sonic Automotive Discovers Untapped Potential
The name Sonic Automotive is well-known to anyone in the industry, and with good reason. It is the third-largest automotive group in the country with 153 dealerships and more than 30 collision centers and a Fortune 300 company. Carrying more than 30 different vehicle brands, its reach stretches literally across the country, from California to the Carolinas.
Sonic Automotive began as a mere handful of dealerships and was incorporated in 1997 by O. Bruton Smith, chairman and CEO of Speedway Motorsports, Inc., a company well-known for owning and operating several NASCAR racetracks around the country. With long-term performance in mind, Sonic began to expand its reach, acquiring dozens upon dozens of dealerships and multiple franchises. “Over the years, we have had to focus both on purchasing those brands that we feel would perform the best over time and on getting good locations,” said Rachel Richards, Sonic’s vice president of retail strategy. “We have a very strong brand strategy; we are 80 percent luxury and Asian import.”
Running an operation the size of Sonic is, of course, a formidable task. Ensuring a consistent customer experience and tracking performance is much more difficult when dealing with over 150 stores and multiple manufacturers. To establish a measure of consistency, the corporate management team at Sonic has determined the best practices for each of a dealership’s profit centers – new vehicle sales, used vehicle sales, F&I and fixed operations – and has taken steps to make sure those practices are implemented in each of their stores. Richards stated, “The consistency of those best practices across all the dealerships is probably the most challenging for us.”
However, consistency and uniform processes do not necessarily translate into homogenization. “We do believe that there is a level of entrepreneurialship that is needed in our dealerships,” said Richards. Creativity and initiative are still important at the individual dealership level; each store has its own unique identity. There are also considerations to be taken for the many brands they carry. “Every manufacturer has specific brand requirements that they ask their retailers to comply with, and we do partner with them and comply with the specific brand requirements,” she stated. “However, we have developed commonized processes in what we call ‘playbooks’ that our stores should follow to execute the key processes in each of the areas of the dealership that we believe are critical to helping sell cars, trucks and services and also satisfy our customers.”
However, uniform best practices are only part of the formula. After all, even the most efficient procedures are of little use without customers to serve. Taking a closer look at what was being done to drive traffic into the dealerships was imperative. One area of particular focus over the last year or better was fixed operations. Of course, as with the other dealership profit centers, a best practices playbook was implemented covering everything “from parts to how the customer should be greeted when they drive into our service lane to walk-a-rounds for vehicles inspections, product offerings, and how we market and merchandise in our service lanes.” With this in place, Sonic’s management turned their attention to more aggressively marketing their dealerships’ service operations.
“We actually were doing a review of our overall … sales and service marketing organization,” said Richards. What they discovered was untapped potential for greater profit and stronger customer relationships through fixed operations. “There is a fair amount of customers who visit a dealership to buy a vehicle but do not return to the dealership to have their vehicle serviced,” she stated. “They should come back to a dealership for their servicing needs, not just warranty [work].”
She pointed out that when it comes to fixed ops, oftentimes franchise dealerships will focus on their warranty business and overlook the opportunity to market a valuable commodity— specialization in the service and maintenance of a particular vehicle make. “Retail dealerships have trained technicians that know those products in and out … in many cases sometimes better than the independent service facilities,” she observed. “There’s a big opportunity for retail automotive dealerships to increase their service business.”
There are, of course, benefits to be gained from the fact that over the last year or so, many vehicle owners chose to keep their existing vehicle longer rather than purchase a new one; however, Richards said that was not the primary motivation behind the decision to focus on service marketing. Rather, as with much of what Sonic Automotive does, they were looking at a strategy for the long-term. “At the end of the day, a dealership business is not just your sales operations,” she stated. “Once the customer leaves your showroom, you want to develop a long-term, loyal relationship with them.” So, the company began looking for a better way to go about marketing its dealerships’ service departments.
Of course, when there are over 150 stores involved, things have the potential to get complicated. “We had probably about 40 to 50 different service marketing companies working with our dealerships … they were doing different things and we weren’t measuring any of the results,” she said. While individual stores may have been tracking their service marketing ROI, there was no way to ascertain performance over the whole group. “One store may have been performing one way and another store may have been performing a different way, and there wasn’t a consolidated view from a corporate look.” Ideally, they needed to find a solution that would work for all of the group’s stores.
After some research, corporate management reached out to a company they were already familiar with, Automobile Protection Corporation (APCO); specifically, they were looking at EasyCare, one of APCO’s brands. EasyCare’s Special Owner Services (SOS) program looked like it could be a good fit. Richards stated, “They have fairly sophisticated analytical tools that enable us to mine our database for customers that come into our dealerships on a regular basis, those that don’t … [and] what they purchased.” A dealership’s service manager can log into the system and choose from any number of various marketing campaigns—anything from simple maintenance reminders to targeted mailers with special offers for service customers who have not returned to the dealership in a specified time frame.
The program was launched on a trial basis at a handful of stores in the group. The key metrics under scrutiny were the total amount of revenue generated using the program, the number of sold customers who returned to the service department, and overall return on investment. The program was so successful in those test stores that other dealerships within the group began inquiring about using it in their stores as well.
Sonic is now using EasyCare’s SOS in about 100 of its stores, with plans to roll it out to all but a few of its dealerships. Because of manufacturer requirements, a handful of stores will continue with their current service marketing organization, one that has been specified by the manufacturer. The rest, however, will be using the SOS program.
While the program also enables a dealership to run marketing campaigns to prospect outside the store’s database for new service business, Richards did not believe any Sonic stores would be doing that in the immediate future. “Our dealerships do have the flexibility to make those decisions,” she said. “However, from a corporate perspective, there is so much opportunity in just our current database and what we sell, so we most likely would not in the near future go out and attempt to prospect service customers outside of our own database.”
Of course, the dealerships’ service departments are not the only one that can benefit from this type of marketing. With more than 30 collision centers, there’s even more potential to increase business. While Richards acknowledged that they will indeed focus on marketing the collision centers in the near future, there are other steps needed before this can move forward. “We have just recently hired a national director of our collision centers, and we’re putting a lot more focus on developing playbooks for them,” Richards said. The SOS program will likely be rolled out to Sonic’s collision centers once playbooks have been established and implemented. “Once we have a whole plan to build that business and run it better, they will be pulled into the service marketing arena.”
Richards would not go into detail with the specific numbers resulting from the new service marketing program, but she was willing to comment, “The results have been positive for us … we will continue to use them based on the good performance results we’ve had.” Overall, Sonic’s service operations are performing well. Richards reported, “We’re actually up year-over-year.”
Vol. 6, Issue 12