September 2012, Auto Dealer Today - WebXclusive
When I was a dealer working in the retail world, I had this strange notion that increasing sales was a good thing. We trained employees in all departments how to become better salespeople, how to provide our customers a higher level of service through effective communication, and of course how to increase gross profits. As a dealer or department manager, how do you expect to increase net profits and earn a reasonable return on the dealer’s multi-million-dollar investment if you don’t increase sales? So again I ask my question: Since when is selling a bad thing? Allow me to explain my point by sharing with you some real-life examples of what I’m talking about.
I have personally spoken with, preached to and worked with thousands of dealers across the U.S., Canada, the United Kingdom, and most recently, Poland. I have found that far too many dealers and managers have a great divide within their dealerships. I like to call this divide the demarcation line. It divides the variable operations (new, used, F&I, special finance) from the fixed operations (service, parts, collision center). When some of these dealers cross over the demarcation line from the variable operations to fixed operations, the word “selling” takes on a whole new meaning.
For example, when I ask a dealer what he/she would do with a salesperson who only sells five cars a month, the most common response is, “Get rid of them and replace them with someone who can sell.” Conversely, when I ask that same dealer what he/she would do with a service advisor only selling 1.0 hour per repair order (HPRO), far too often, the response is, “He’s a good guy. Everybody likes him, and I don’t want him to oversell our customers.”
By this logic, this dealer would fire a salesperson for underselling and fire a service advisor for overselling?
Let’s take this one step further. Using this example, you would fire a sales manager who could only close 10 percent of the sales opportunities coming in the door because he is underselling and losing you thousands of dollars in gross profit each month, and you would fire a service director who is closing 50 percent of the service menu presentations in the service drive because he is overselling and making you thousands of dollars in additional gross profit each month? Really?
Dealers tell me they don’t want to oversell their service customers, yet they cross the demarcation line to the variable side and tell me they expect their sales team to maximize F&I revenue per retail unit (PRU) with 100 percent turnover from the salespeople, 100 percent F&I menu presentations with 100 percent finance presentations. They expect a strong closing ratio of 25 to 30 percent on the sales floor with above-average gross profits PRU, 100 percent turnover to a sales manager by the salesperson, minimal wholesale losses from used cars and a 45-day turn on inventory. The managers responsible for achieving these sales benchmarks are usually supported to the max with healthy advertising budgets, professional training programs, and full accountability for their end results.
These same dealers cross over the line to the back end of their dealerships and tolerate far too many underachievers who are losing thousands of dollars in additional gross profits with
• zero walk-around presentations by advisors,
• zero service menu presentations by advisors,
• zero turnover of declined repairs to a manager,
• a 10 percent closing ratio by advisors,
• 60 percent one-item ROs (oil change),
• below 70 percent gross on retail labor sales and below 35 percent on retail parts sales,
• $50,000 in obsolete parts inventory supported by a minimal advertising budget,
no professional training programs for advisors or managers,
• and minimal accountability for performance.
And they’re worried about overselling the customer?
Why would any dealer tolerate this scenario? Why would any dealer think performance-based pay plans are a good policy for the variable operations but a bad one for fixed operations? If having 100-percent menu presentations is the right process for the F&I department, then why is it not the right process for the service department?
In my 12 years of working in the field with dealers of all sizes, I have yet to find a single dealer who is overselling their service, parts and collision center customers. Of course we should never sell a customer any product, service, part or repair that their vehicle does not need. That, however, is not what I’m talking about here.
I’m talking about the advisor not selling the customer what their vehicle does need. I’m talking about selling the safety and reliability service and repairs. I’m talking about selling the customer on the benefits of preventative maintenance and following the manufacturers’ basic requirements and recommendations.
Recently, here at DealerPro Training, we did a study based on a dealer averaging 500 customer pay ROs per month and the advisors made a menu presentation to 70 percent of the customers coming in the door. Here are the results:
• Menu penetration at 70 percent
• Manufacturer minimum services sold at 30 percent
• Additional service sold at 0 percent
• Increase in HPRO at 0.2 hours
• Monthly gross profit increase at $12,268
• Annual gross profit increase at $147,227
Obviously, the closing ratios above are nowhere near a good job of selling but an increase of 0.2 HPRO produces a lot of gross profit, resulting in increased net profits, which provides the dealer with a higher ROI and gives the employee added job security. So again I ask: Since when is selling a bad thing?
Vol. 9, Issue 7