August 2009, Auto Dealer Today - WebXclusive
Outsourcing Business Development
There are two ways to improve cash flow—reduce spending or increase income. Today, many dealers have been forced to reduce spending – whether through ad budget cuts, layoffs, contract renegotiations with vendors or other means. One department that has been cut in many stores is the business development center (BDC). “When dealers are cutting overhead left and right, they can’t afford the luxury of an in-house BDC,” said Matthew Dennis, president of Dealer Apps, Inc.
By tweaking business development strategy so that some or all of the work is outsourced, many dealers could significantly reduce business development spending. While an in-house BDC allows a dealer to maintain control, it can also be a hefty expense. “Look at an average BDC. It probably needs four people and a manager … you’re going to have $12,000 a month in employee cost,” said Hugh Hathcock, owner of eLEAD CRM. He added that when you include technology and a location for the BDC, both of which vary in expense, a dealer easily can spend up to $20,000 a month for an in-house BDC.
Whether dealers choose to employ an outsourced BDC to supplement in-house business development efforts or to replace an in-house BDC, they need to consider three things:
1. What business development functions do you want to outsource?
2. How in-depth do you want the outsourcing to be?
3. What departments do you want to develop business for?
Functions to Outsource
The main functions of a BDC include making outbound calls, answering incoming calls, drafting/sending e-mails and responding to e-mail inquiries. Many outsource business development options available today can perform all these functions.
Outbound calling, referred to as the “heavy lifting” by Hathcock, is a vital function of many business development centers. He said, “[Outsourcing business development] can be as simple as saying, ‘OK, I want keep my BDC. I just want you to do the heavy lifting,’ which means, ‘We’re going to give you the outbound calls.’” He added that outbound is “really what [eLEAD CRM is] the best at.”
When left in the hands of the sales staff, long-term follow-up can wane over time if processes aren’t in place or if the staff isn’t held accountable for outbound calls. “Internet leads aren’t typically followed up with after five days,” said Hathcock. By using an outsource solution, dealers can ascertain their follow-up calls are being completed. He said, “Not only are they being made, they’re getting six to eight attempts, and the calls are recorded.”
A dealership’s incoming calls, which are what Dealer Apps mostly handles, can give a caller/customer a bad first impression of the dealership when handled poorly. Dennis said, “In a dream world, the best way … is for that call to go straight through to a salesman who answers on the first ring and has time to sit there on the phone and work the customer immediately, and for that salesperson to follow-up with that customer continuously until that lead is gone. That’s the ideal world. To do that, the cost there is manpower, employee hours, and that’s a dealer’s overhead.”
He said oftentimes, customers are put on hold, transferred between departments, directed to voicemail or transferred to a salesperson who picks up the phone but is busy at the moment and has to call the customer back. Sound familiar? “We handle that initial response and make sure every opportunity is captured for that dealer so that they don’t miss a sales opportunity because the call came to their store and nobody answered.” The leads are then delivered to the dealership, whether by inputting them into Dealer Apps online lead system, e-mailing them to the dealership or being fed into the dealership’s CRM program.
Nowadays, many dealers rely on e-mail as a main form of communication with customers (especially Internet customers). The buying cycle for internet customers spans about 90 days, according to Pam Randow, president of Automobile BDC, which can lead to a large amount of follow-up quickly. She broke down the numbers to illustrate how much follow-up can be built. If a dealership receives 15 e-mail inquiries a day, that’s 450 leads per month, which adds up to 1,350 leads to follow-up with over 90 days. She added, “Most dealerships are not prepared for that.”
Depth of Outsourcing
Many outsource providers are flexible, offering different levels of outsourcing. Some examples of the different levels of outsourcing – from least in-depth to most in-depth – include:
• initial greeting on inbound calls (to be followed up on by dealership employees)
• inbound appointment-setting (calls or e-mail)
• outbound CSI (calls or e-mail)
• long-term follow-up (calls or e-mail)
• data mining campaigns (calls, e-mail or direct mail)
For example, Dealer Apps can take the initial call and collect contact information. From there – depending on what the dealer wants – the company will 1) submit the lead to the dealership to work, 2) attempt to get a completed credit application, and/or 3) attempt to set an appointment.
Many companies specialize in outbound calls, whether CSI or long-term follow-up, and lately, in-depth business development campaigns have become more popular. Hathcock said data mining among dealers is “huge right now,” adding, “Selling cars out of the database in today’s market is one of the [key aspects] in this business.” In fact, many of the dealer inquiries he’s been getting over the last two months are about data mining. He thinks more dealers are trying to develop business through data mining because it’s not coming through the doors naturally.
Departments to Benefit
Of course, the dealership stands to sell more vehicles by ramping up business development efforts, but so do F&I, service, parts, body shop, detail, Internet, rental car, etc. Any department that generates sales income can benefit from business development efforts.
Randow said Automobile BDC specializes in Internet and Service BDC functions. The service BDC handles incoming calls and makes outbound calls to schedule service appointments. One recent, successful campaign brought several new service customers to a Chevrolet dealership. When the Saturn dealership closed in the area, the Chevrolet dealer received approval to do repair and warranty work on Saturns, so the service BDC called area Saturn owners to inform them that the Chevrolet store was authorized to repair their vehicles.
Dealers can work with an outsource provider on similar campaigns to drive traffic to all departments. For example, to generate F&I revenue, the outsource provider working with the dealership could put together a list of customers whose warranties are about to expire. The provider could call, e-mail or direct mail these customers to offer them a service contract.
Other Outsourcing Advantages
In addition to saving thousands of dollars each month, outsourcing business development provides other benefits. Typically, in-house BDCs have limited hours of operation, while most outsourced operations stay open much later (some 24 hours). Hathcock said, “Most people are at work during the day, so from 6 o’clock to 9 o’clock [at night] is the best time to call, and that’s typically when the dealership has the most traffic for sales … You’re most productive time to reach a customer is when your BDC is least staffed.”
Dennis added that many dealers are running late-night direct-response TV ads because the spots are cheaper, which can be counterproductive. “[Dealers are] calling on that person to react [to the ad] right then, but if that person tries to call, the dealership is closed.” He said, having an outsource provider answer those calls is “where outsourcing pays off” because it allows dealers to capture leads when the customers are most excited.
Many outsource providers have access to expensive technology that dealers don’t typically have, which allows their call center representatives to be more efficient. For example, Hathcock’s 600-operator call center has a multi-million-dollar predictive dialer that keeps his operators busy and productive. “It’s dialing thousands and thousands of names every minute and hooking up to an operator that doesn’t have any down time … that piece of hardware is really what makes my call center the effective tool it is.”
Another advantage of outsourcing is it eliminates the need to hire BDC employees. In and of itself, hiring can be a huge chore, and according to Hathcock, finding and keeping a quality business development manager is even tougher. Also, outsourcing curtails overall training expenses, and according to Randow, BDC training can get pricey. She said since most dealerships don’t have someone on staff to train BDC employees, dealers either “send them out or hire a really expensive [consultant] to come in and show them how it’s done.”
As with an in-house BDC, an outsource provider can help track advertising campaigns and hold employees accountable. Dennis gave the example of running a targeted subprime direct mail piece. If a dealership sends out 5,000 mailers that instruct customers to call the special finance manager, but that SF manager lacks set processes to log and follow-up with leads, that mailer is likely to fail and the dealer has no method to determine why the campaign was unsuccessful.
Instead, the dealer must rely on the SF manager’s opinion of the campaign. Even though the mailer bombs because of process, if the SF manager said the mailer received a low response rate, the dealer wouldn’t know any different. On the other hand, if the dealer routed the calls through an outsourced BDC, the dealer could view very specific details about the mailer’s response rate. This gives the dealer an unbiased view of the success (or failure) of the campaign regardless of whether his SF manager was following up with customers properly.
While outsourcing business development costs money, sometimes in order to make money, it’s necessary to spend it. In comparison to an in-house BDC, an outsource provider can provide the same or similar functions for a fraction of the cost. In the end, business development efforts can pay big dividends.
Vol. 6 Issue 6