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Are you serious? Does anyone think this is good Dealership Management?

Sunday, January 24th, 2010

WOW! The video below is a sad but somewhat familiar occurrence in the auto industry.  It’s video of a real sales meeting where the manager is insulting his people into motivation.  He tells his people they suck, failure is their fault and that he, the manager, refuses to be part of the problem.

Unknown to the manager, one of the sales people whips out his phone and records the incident, then posts it to YouTube for all to see. No doubt we will write about the social media implications to the dealership’s brand, but for now I want to talk about the huge gap in management skills that are demonstrated in the video.

What do you expect?
We have all been in meetings similar to this.  Most of us promised that when we became managers we would do a better job.  Sadly, without being taught the skills of proper management many in the industry become a product of the environment and poor management perpetuates itself.

I will be the first to say a manager’s job is to hold his/her team accountable.  However, there is a right and a wrong way to do it. By chewing the team in such a fashion without offering any solutions the manager becomes a problem creator, not a problem solver.  This is simply bad form that produces bad results.  Would you work harder for your managers if they treated you like this?

Understanding Managements Power:
There are three types of power a manager can have: (adapted from Steven R Covey)

Coercive Power- This power comes as a result of fear in the subordinate. Because the employee has fear of a consequence, he or she will acts in a certain way to avoid the punishment.  Managers often fall back to Coercive power because it is easy to exercise and requires no skill.  All one needs to exercise Coercive Power is authority from a title.  Sadly, this management style often reveals character flaws in the leader, causing the team to lose more respect, starting a downward spiral.  Think of some of the great dictators in history and you will find extreme examples of coercive power.

Greatness is never achieved through Coercive Power because the subordinates never strive to do great things; they simply try to stay out of trouble. Coercive power is not the way to build a lasting team of greatness.

Utility Power- This power stems from the exchange of goods. The followers have what the leaders want, like a sales person’s time and talent. The leader has something the follower wants, like commissions. A deal is reached and the parties exchange goods in defined roles.  “You sell cars for me, follow my rules, and Ill give you commissions” as an example.  The relationship is mechanical but usually fair.  Regardless, it lacks heart.

Motivation based on utility power is better than coercive power because at least both parties are willing to participate.  However, Utility Power is still not the optimal form of motivation.

Legitimate Power-this comes when the follower believes in the cause of the leader and trusts the leader can take the follower in the right direction.  Legitimate power will not come from a title, but is earned through service and performance by a leader who honors his or her team, works to serve the greater good and produces results.  When your team believes in your cause, and your managers have legitimate power, your team will be transformed to a whole new level.

Sadly the manager in the video displayed no vision, had no connection with his team and only relied only on coercive power to try and destroy his team into motivation.  I sincerely hope he is a better manager than the video showed.  There was no building of greatness in this sales meeting, only destruction of the team.

What could this manager have done different?
1.     First, he should have separated out those who did perform from those who didn’t.  There is no need to rip your best performers for something they are not a part of.

2.     This was nothing more than an emotional rant.  Managers need to stay composed and in control so to avoid mistakes, especially during serious discussions around poor performance.  If you can’t control your emotions don’t try and lead your team when you are angry, you are likely to do more damage than good.

3.     The manager 100% separated himself from his team, blaming them for everything while washing his hands of any wrongdoing.  He showed no loyalty to the team and they have no reason to return any loyalty.  This manager should have diagnosed the problems, said we’ve got our work to do and together we are going to get items A, B &C done!  You are more likely to dig yourself out of a ditch if you are working together.

4.     He offered no evidence of his claims.  When you are trying to win the team over always offer evidence, especially when you are being negative people are going to be slow to take what you say at face value.

5.     He should have acknowledged management’s failures and outlined the solutions to fix them.  If the team sucks, they didn’t get the training they needed.  If the sales people are not capable of success they should have been let them go.  Ultimately managers need to manage, there was no management taking place in the meeting.

6.     The biggest task in being a successful manager is to be a problem solver.  The manager offered only complaints, no corrective direction or advice.  This manager should have had solutions prepared to offer the team a path to success and to lead them out of trouble.

What else can we learn from this post?  What would you have done differently?

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ISM Pay Plans

Monday, June 8th, 2009

Today, the Internet Sales Manager is one of the most important and emerging positions in your dealership.  Here is some direction to creating a pay plan that will fairly compensate an ISM and insure the success of your dealership’s web efforts.


1. The pay plan should focus the ISM on their responsibilities:

The objective of your pay plan is to align your employees’ job with your dealership objectives, so the employee is compensated for achieving what the store needs in way that generates fair pay in your market.  Thus, the very first step to creating your pay plan is to review your written job description to see the expectations you are asking the ISM to meet.  If you, like most people, do not have a written job description then your fist step is to create one.  Here are the most popular “Roles” ISMs have in dealerships. 


Various ISM roles:

Sales ISM: This ISM is directly responsible to take customers through your process and deliver units.  They are similar to a floor sales person, but rather than take ups they work with Internet leads.

Manager ISM: Similar to sales ISM except in this scenario the store has grown beyond a one man Internet department and has added a team of “Sales ISMs.”  The Manager ISM is given the responsibility to lead the crew.  This person may also desk deals for their team.

Director ISM: In this position the ISM branches out to manage multi rooftops in a dealer group or to oversee multiple dealership departments, such as the web efforts for parts and service.

BDC ISM:  Business Development Centers typically handles the leads, make the calls and sets appointments for the sales team.  The BDC typically does not walk the customer through the sales process and close the deal, but is usually responsible to achieve specific metrics for lead response, appointment setting and revenue generated from their appointments.

Marketing ISM: This type of ISM manages the website, the lead purchasing, the SEM and SEO efforts, email marketing, data base segmentation, publishes the online vehicle data, does the social media marketing and handles the vendor relations.


2. Use various pay structures to align with your ISMs Role:

Not all methods of compensation were created equal.  Every employee deserves to know how their success will be measured and the range of unacceptable, acceptable and outstanding metrics they will be judged by.  This improves the leaders ability to manage and provides your employee with a roadmap to success.  Different compensation methods will better align with the most important metrics that you will use to measure success.  Such as:

Commissions – the most standard pay method can be based off of gross or volume generated. Commissions should be a part of the pay plan for all ISMs responsible to deliver units and revenue.  Be carful though, an ISM pay plan should rarely be 100% commission based.

Activity pay - For those ISMs who dont focus on selling cars themselves, but rather are responsible for the activities that lead to the sales process, should be paid on those activities. The most common “activity pay” in the market is paying for appointments showed or leads generated.  Activity pay is usually best suited for Marketing and BDC type ISMs that control specific metrics that lead to the sale, but in the end pass the customer off to a sales team.

Salary or Base pay, since the ISM’s job, particularly when they are a director, marketing or BDC type role, is very fluid and changing daily, a base pay of some sort is good to cover all the little things these roles do that do not directly result in a measured activity or a sale.  Often times the base is simply a base guarantee, or a minimum monthly total guaranteed to the employee.


3. Putting it all together and finding balance in “Role” and “Pay.”

Look at your written job description and decide realistically how much time and focus should be given towards each objective, back this into the value your market places on this role.  For example, if your role is 100% to sell cars to Internet leads, than a 100% commission structure should be fine. 

However, most ISM roles are a hybrid of roles.  For example, 20% lead generation, 20% site management/vendor relations and 60% sales.  In this situation your ISM role should receive 20% of their pay in SALARY to cover their misc management, 20% of their check in ACTIVITY PAY for the leads they generate and 60% of their pay in COMMISSIONS from to the deals they close.  All totaled, with average results, they should earn average pay for your market.  If they under perform the commissions will naturally lower their pay and when they over perform the compensation will likely naturally rise.  This same theory can match any pay plan to any ISM job description.  Just simply outline what percent of their job should be focused on what activities and match the pay plan accordingly.


4. A couple tips:

Increase performance through EOM reporting.
At the end of each month you do not want to just hand your ISM a check, especially if their pay comes from multiple roles.  Rather, break out the performance of each pay type and let them see how much was salary, how much was commissions and how much was “Activity Pay”.  To go the extra mile, off to the right of their totals, display what the pay would have been had they hit their goals.  If they over achieved, they will know it and receive the proper recognition.  If they underperformed they will have a clear depiction of where, and can see exactly what to focus on next month to improve their performance and thus their pay.

 

Where do I bill the ISM on my statement?
Another pitfall is many dealers feel their percentages of pay on their financial statement will not support a properly paid ISM.  However, usually they are lumping the entire pay into one account and then complain that the account is over the “20 group” guideline and needs to be cut back.

Depending on the ISM role, it is usually best to split their pay up into multiple accounts to keep things accurate.  For an ISM that is 30% sales, 30% management and 30% marketing, I recommend splitting their pay up into those three accounts to accurately reflect your stores spending.  Accurate decision making starts with accurate data.  Your ISM plays multiple roles across multiple accounts and often against multiple departments, be sure to account for the job properly.

 

Keep it simple.
The work should be in creating the pay plan, not in calulating it each month.  If your employee needs an oracle database and a super computer to calculate their pay, i guarantee you have an ineffective pay plan when it comes to employee motivation.  Simple and trackable is best.


The ISM has a role that is different from your other sales people and from your other department managers; their pay should be structured differently too.  It is not best practice to pay the ISM like someone they are not.  The best practice is to start with a blank slate, clearly define their responsibilities, the metrics they will be graded on and then to construct a pay plan that meets the dealerships needs while paying a fair wage for your market.  Don’t be afraid to break the mold and have active communication with your ISM, in the end everyone will benefit.

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Preparing your store for a Chrysler or GM Bankruptcy

Monday, April 27th, 2009

Preparing for a Chrysler or GM bankruptcy is an ugly thought that nobody wants to discuss.  However, if you are prepared for such an incident you could save your store hundreds of thousands of dollars.

If your manufacturer does file BK, your dealership will be hit in two main ways.  First, consumer confidence will fall, making the bankrupt franchise’s products harder to sell and sending ripples through the retail and wholesale markets.  Second, your dealership’s cash flow will be significantly altered in the form of holdback, incentive, warranty and other payments that are owed your store.

Here are some tips I recommend to shield your dealership form the worst.

Manage your cash position daily

Typically a weekly cash meeting is sufficient, but today as a GM you must be looking at the appropriate schedules daily to insure the dealership has as much cash in the system as possible.

A cash meeting is a time when the department heads get together with the GM or Principle to review all the receivable schedules for each department and make sure the cash is being collected.  You should look at your holdback, incentive, finance, and other receivables due the variable ops.  Also discuss your open RO’s, SOP, Warranty receivables and any outstanding commercial accounts in your Parts and Service Departments.  The objective of the meeting is to turn these receivables to cash and to remove any obstacle in the way of collecting your money.

In the event of a Manufacturer BK you will need all the cash you can get to weather the short-term crisis. Free up as much cash as possible now, before the storm hits.

Wholesale inventory

The most likely market effect once a manufacturer files BK is that their vehicles will experience a step drop in value.  If you are a ford dealer that typically stocks a few Chevy’s, it may be time to rethink that strategy for the short run.  If you are holding the vehicles when the BK happens you stand to lose a significant amount of money.  On the other hand, buying that inventory after a BK does present other risks, however it will insure you are buying after the price drops, putting you in a much more favorable position.

Submit Warranty claims daily

After filing BK the manufacturer may delay, reduce or stop all together (for a time period) its payment on warranty claims.  Dont let warranty repairs sit idle in your shop, get the work complete while the OEM is still paying. Once the work is complete, process your warranty claims daily.  The faster you get these claims approved and in the system to get paid, the less risk you will have. 

Process incentive receivables daily

Like warranty receivables, the faster you can process car deals and get your rebate, dealer cash and other incentive claims in the system and paid, the less risk you will have in an OEM default situation.  If there are reasons for the OEMs to deny rebate claims, they will.  Insure the sales team collects any documentation needed at the time of sale to process all student, business and other speciality rebate claims.

Pitch interest rates, not rebates

The manufacturers usually offer the choice of a special interest rate or a rebate for the consumer to choose from.  Often, the difference in payments to the customer is minimal.  When possible steer the consumer to the financing option, not the rebate.  The reason is that the dealership floats the rebate to the customer and waits for the manufacturer to reimburse them. By selecting the financing option, you avoid the risk of another incentive the manufacturer may not pay.  It puts the store in a much better cash position when the consumer takes the special financing.

Create your contingency plan now

How will your company strategy evolve and change in this tragic, but possible event?  Will you switch your focus to being a used vehicle dealer?  What niches/car lines will you focus in?  How will you position your marketing?

By thinking about the tough issues now you can more successfully navigate the stormy waters when they come.  Every good business strategist has multiple plans. You should to.  Committ these plans to writing so you have them fresh on paper in the event they are needed.

Meet with your flooring source

Your floor plan company has a very vested interest in the viability of your dealership since they have millions of dollars loaned to.  If they see on the morning news that your manufacturer has filed for bankruptcy, they will immediately question ability to honor your flooring agreement.  They will call a meeting with you and want to know what is happening in your business.  Many stores are already dealing with audits at an increased frequency.  The last thing you need is your flooring line to be called.

Be proactive.  You should have a contingency plan as to how you will navigate the difficult waters.  Put this plan in writing and take your banker to lunch.  Talk it over with them, let them know you are a good client and will continue to be even in the event of an OEM BK.  By letting them know you are prepared ahead of time, you will avoid additional headaches at a time when you need to focus on leading your store.

Our industry is changing.  Sometimes it is difficult to look up form the day to day grind of running a business to look into the future and strategize on theory’s that may never come to pass.  Most actions needed to prepare for a manufacturer BK are things you should be doing anyways and in the event of a market disruption 5 hours of preparation will save you 30 hours of headache.  Nobody can tell the future to know if something like this will happen and how the market will react.  Sometimes "being prepared" for probable options is the best thing we can do.

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What is IN and What is OUT!

Tuesday, January 6th, 2009

This is not 1996 anymore. It’s 2009 and we have some exciting trends taking place in our industry; its time to come out of the cave and participate in these exciting opportunities!  

 

What’s Out: Internet Departments

What’s In: Teaching your entire staff, desk included, how to handle Internet shoppers

The Internet is NOT a niche market anymore.  Since over 80% of your customers are using the web to purchase cars, shouldn’t at least that much of your staff be prepared to handle the demand? 

 

What’s Out: CRM as a technology

What’s In: CRM as a management tool for your entire dealership

In today’s market follow up is imperative, especially with Internet marketing.  We reach consumers much earlier in the buying cycle, requiring much more robust follow up. 
(Check out CRM vendor ratings right here.)

 

What’s Out: Traditional marketing to drive customers to your store

What’s In: Traditional marketing to drive customers to customized landing pages/microsites

IF you are still sold on traditional media (this is opening a whole other can) at least send them to a special micro site or landing page to track and capture what is left of your traditional marketing effectiveness. 

 

What’s Out: Walled gardens of information

What’s In: Leveraging the collective knowledge of peers to think smarter and faster

Individual trial and error wastes time and money; that’s why it said that “two heads are better than one.”  Someone, somewhere has solved the issue you’re facing.  The most progressive professionals in the industry are blogging, commenting, discussing and leaning on their peers nationwide for guidance and ideas to improve upon and implement at their stores. Thousands of successful industry pros have flocked to dealer communities like DrivingSales.com, where they can ask questions, discuss tactics and get creative ideas to be more successful.  Mass collaboration networks have revolutionized the way peers in other industry’s innovate; it’s about time it hit the car business! 


What’s Out: Websites that were made to be beautiful.

What’s in: Websites that were made attract traffic and Convert.

Dealers have figured out that a good looking, whiz bang website is not the objective.  Websites that are open to the Search Engines and index well bring in potential customers.  You site must also take visitors and convert them into leads so that your dealership can sell IS the objective.  Stop judging a website by how cool the functionality is, and judge it by the simple equation of  “leads captured”/Site visitors.  That is how a website should be judged.

 

What’s out: Unprofessional, ALL CAPS LOCKS, misspelled and misaligned emails.

What’s in: Professionally branded l messaging. 

Emails should be short and to the point.  Include a proper signatures and links to more information including video and custom landing pages. Lastly, DON”T YOU KNOW ALL CAPS IS YELLING IN WEB LANGUAGE?  All caps was acceptable in 1996, lots has changed and it is now (12 years later) offensive so its time you caught up with the times.

Lastly a few other things that are IN:

Dealership Chat:  Chat is proving itself at stores across the country to dramatically increase the number of leads a site provides.  Leads = Car Deals and Car Deals = ROI.

Craigslist, and other free online services to list inventory.  Many established companies (Google) and new startups are getting into the space with innovative business models to publish inventory for free and capitalize on upgraded services.  Dealers are taking advantage of these services for gains in incremental traffic and deals to their store.

Creative: (not the verb, the noun)  Beautiful design can dramatically send a visual statement to your customers about your brand.  First impressions set the stage and tone of the relationship. Poor creative is like wearing plad pants, white leather shooes and a fur coat on the used car lot, it doesnt strike positive emotions in your customers.  Get your creative done right.
 



 

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I hated spoon deals.

Wednesday, November 26th, 2008

I hated spoon deals.

Spoon deals can do some great… and really crappy things inside a sales department.  Sales people rightfully love to be handed a done deal; it basically means free money!  There is a downside to these deals though, they can promote laziness, unnecessarily increase expenses and can start bad feelings inside the department as managers tend to pick favorites because of friendships and then unfairly distribute the free deals.

Here is one way we found to keep the positive and rid ourselves of the negative effects of spoon deals.
Get all your managers to together and determine qualifications that they feel a sales person must have before they turn a family member to them.  This may include things like being knowledgeable with the product, be good with people etc.  Find ways to make these qualifications measurable such as pass off the product tests, have a minimum CSI score of X etc.

With a complete list of measurable qualifiers we went to the sales team and let them know what they had to achieve to “qualify” for spoon deals.  This insured that there was a push for certification and CSI.  Then each month you would rank your sales team on other measurable goals (based on your stores culture.)  The ranking could be determined by sales volume in the prior month, the winner of the walk around contest or the amount of perfect scores received on the prior months CSI surveys.  Once the sales people are ranked place them in order on a white board.  Managers have spoons to pass out; they always choose the top sales person on the list who is present at the store.   This allows the managers to pass family and friends off to be helped by qualified sales people.  By creating a “spoon board” we found we distributed the deals fairly and created some friendly competition for the matrix we were trying to reward.  (in our case we ranked sales people based on highest CSI for the prior month.) 

Whatever matrix the dealership decides to reward, you will find your team engaged and happier because they are no longer focused on why its unfair that Johnny always got the spoons and they never do.  They will be happier and motivated, which always sells more!
 

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No email for Obama

Monday, November 17th, 2008

Life would be very tough without my blackberry.  Of the hundred or so legitimate emails I get a day, being connected and capable of a quick response at all times has dramatically improved my effectiveness.  Its no wonder that smart phones have become a necessity for all walks of executives.

Is it strange then, that the President of the United States, perhaps the most powerful executive of all, cannot use his blackberry to keep up?  Through the campaign trail, I was embarrassed for McCain’s lack of commitment to technology.  He at times seemed proud that he didn’t read emails and often pronounced his lack of tech usage having aids print emails fro him to read.  (Remember the Sales Mangers that continued print leads and only use the paper printouts despite having great CRM/ILM tools available.?  Yikes.) Obama’s campaign, on the other hand, greatly increased his advantage by aggressively pursuing a successful online strategy.

Well, the new Chief Executive of the United States, Barack Obama may be forced to turn in his blackberry.  Obama is apparently a heavy blackberry user, and leans on the device to keep him efficient.  No suprise since smart phones have proven to make millions of executives more efficient.  However, due to the Presidential Records act the fears of his correspondence becoming public and potential security issues, there has not been a US President who has personally used email.  Some may call it a perk, others a curse, but they have staffers to handle that for them.   Even George W. Bush sent an email as he entered The White House, using his personal AOL account, to friends and family saying that while he appreciated their communication, he was needed to power down until he was out of office.

Obama seems to know no bounds and is accomplishing many firsts.  It will be interesting to see if he is the first “Ultimate Executive” holding office of President of the United States to use the “Ultimate Executive” tool, a smart phone.  I couldn’t do with out mine; I can only imagine the withdrawals the President will go through.
 

 

 

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Split Deals and Separation anxiety

Monday, November 10th, 2008

Does this sound familiar? As an ISM have you work a lead, set an appointment and then it appears the guest didn’t show as promised… then hours later you see their name on the deal board next to another sales persons name?  You approach the sales person and get the response, “They didn’t ask for you, how am I suppose to know they were an Internet customer?  I’m not giving you half a deal now since I’ve done all the work, all you did was send them an email.”

Lets face it, this happens. A lot.

The tensions between Internet departments and retail floors are real.  ISMs feel skated by their retail counterparts and the retail sales person doesn’t believe that an ISM deserves part of the deal “for just sending an email.”

With over 80% of the population using the web to help their purchase experience, these disagreements are not going away.  What ends up happening is you dampen employee moral with the bickering.  Managers get involved and an employee is left feeling like their manager doesn’t support them.  It’s a downward spiral.  The consensus I get in talking with ISMs around the country is that the number one complaint is their managers don’t support what they are doing.  If arguments over split deals are prevalent in your store you run a high risk of losing your ISM, especially if they are good.

My question is, why are the Internet and retail floor separated?  Generally a dealership has 10 retail sales people to 1 ISM. Doesn’t it seem backwards to have 90% of your store is focused on retail deals yet 80% of your customers are focused on Internet transactions?   Better yet, if over 80% of your customers are focused on the Internet, why not just do away with the separation of the floors all together and train everyone to work with the “Internet Buyer?”

The excuse I hear the most is that dealers are afraid of losing gross.  However, the facts are you are more likely to lose the customer by not treating them right, especially if they are armed with information (as 80% plus of them are.)   When more than 80% of your customers are on the web and using it to direct their purchase experience, it does not make sense to dedicate any less than 100% of your staff to serving the this once “niche market.”  Its not 1998 anymore when people were questioning if the internet was a fad… its for real and ALL your staff better be involved.
 

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Are we making our problems worse?

Tuesday, November 4th, 2008

I just had a conversation with a friend of mine who works the desk at a Ford store.  He was telling me how you could buy a F150 Lariat in the $24k range thanks to over $10k in factory rebates.  It’s a killer deal and the public is all over it.  He said truck sales rebounded a bit for them last month and they moved a bunch of these units, especially due to the fact that you could un-bury someone with a bunch of negative equity thanks to the rebate.

I’m stoked they were able to have a better month of sales.  We all know the industry needs it, but aren’t we just digging ourselves deeper into a hole?  What is that Lariat really worth: the $34k sticker price or the $24k selling price?  Obviously it’s worth what the buyers are willing to pay, and that certainly isn’t $34k in today’s market.

Lest look at this realistic scenario: if the buyer had 9k in negative equity (very realistic considering how soft trades are) they just financed 33k, plus taxes and fees. As they left the lot they were approximately $14,000+ plus taxes and fees upside down.  OUCH! Then you figure they took out a 72 month loan with a mid interest rate (we all know FMCC doesn’t provide the most aggressive rates) and their principle balance will not be paid down near the rate of depreciation.  What’s all this equate to?  One less buyer on the road for another 4-5 years because they will be so tanked in their new truck they have no hope of trading out without a significant down payment!

How many times did this happen across the country last month? Last year?  How many buyers are out of the trade cycle because they are SOO far upside down that they are completely un-financeable?  How long will this last before banks adjust lending guidelines and dealers are really hurt?

Can you blame the dealer?  If they had sold the truck to the customer, someone else would have. Any sales manager worth his paycheck would gladly answer, "Roll it!" Their job is to put together deals, not police the nationwide market.  However this doesn’t stop the fact that we are only hurting ourselves in the long run by reducing the number of financeable buyers in the market place.

So what’s the answer?

a) Continue… knowing that just like home mortgages the piper will come calling and once the banks get tougher we will deal with it then. (That will be a tough day)

b) Switch to leasing, since there is such strong support for leasing at the moment. (Ha-ha yea right, strong support for leasing?)

c) Play financial advisor for our customers and recommend shorter terms and larger downs risking that our competitor down the street will beat us by a mile on payment.

d) Not worry about it, at least they bought GAP?

Our options aren’t too good, but seriously this is a real problem.

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Are your pay plans correct?

Friday, October 24th, 2008

Times are tough but there are some great opportunities to be had right now.  The traditional media advertising channels are dead and most dealers are feeling the drive to the web.  The web is at a stage where skills, not sheer dollars, are winning.  Meaning the big dealer up the road with a seemingly unlimited budget can spend all he wants, but if they don’t have the skill to execute online they wont get anywhere.  The web has leveled the playing field!

With the slow economy all dealers are being forced to the web 2 main reasons: 1st its completely traceable, no more guess work in computing ROI on an ad. 2nd most Internet advertising options are scalable, meaning they are pay for performance.  Take PPC for example, you don’t pay unless you get a click; 3rd party leads, you only pay if you get a lead.  The newspaper on the other hand, will take all your money up front regardless of results.  IE: you pay for your ad and pray for results… more on that later.

The point I want to bring up today is that if you are trying to focus your team on web marketing, but haven’t adjusted your pay plans you most likely wont get great results. Typically GMs or GSMs are paid to manage the traditional media spend.  Who is paid to manage the results of your web campaign?  Most ISMs are paid a variation of a sales person pay plan… that might be a mistake for your store.  If your ISM is paid a per deal, or commission only pay plan, they may stay focused on closing the lack of traffic that is out there rather than generating leads.  The market is shifting so much today you have to have someone actively managing the "virtual lot."  If the ISMs are paid on deals how motivated are they, for example to keep fresh content via specials on the site?  Static content is the death of a website.  Your content needs to be updated daily, as do your SEM campaigns, your site links, pictures, pricing etc.

Now, in theory, if you pay them on deals you would think they would focus on all the indicators along the path to a deal right? Wrong.  This is the real world and I’m sorry, it hardly ever works out like that. (How many commission only sales people manage their walkin/demo/write up and closing rates?  Few.)  Motivate your team to stay focused on the activities that drive results to keep them focused on the positive wins along the road to a sale.  If you would spiff a sales person for Demo, spiff your ISM for fresh content, a higher placement in the SERP or an increase in conversion on your site.  If you are wondering if your store might need some additional focus in these areas simply Google your name, calculate your conversion rate or simply look and see the last time someone updated the specials page on your site.  If you are less than happy with the performance on any of those indicators, ask yourself who is in charge and are they compensated so their goals align with yours?

The market is tough; lets not make it tougher than it needs to be.  Keep your team focused on the activities that lead to results and celebrate the little wins along the way!  There is so much business up for grabs right now!  Seriously, I know it sounds out of touch but I’m telling you, most stores could gain so much business because their competitors are asleep at the Internet wheel.  If your team is talented, and focused on the right things you have a great opportunity right now despite the horrible market.

…more on this later.

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Cost Cutting and Employees

Tuesday, September 23rd, 2008

Cutting costs and expense management can be a painful, but necessary part of business.  In today’s economic climate, with times being tough 90% of the dealers are cutting costs and this process is painful for everyone.  So where as an operator do you start and how and an employee do you react?

The discussion surfaced earlier today, and a dealer responded, you always start with the non-personnel expenses.  I’d add that fixed costs represent the most risk, and that risk is amplified in a soft market when volume is down.  Controllable expenses tend to be inventory and marketing, look to cut there first:

-  When cutting inventory remember you are dealing with a depreciating asset and your first loss is your best loss; sick to your inventory turn policy and move the old stuff off the lot.  Also, you generally need less inventory than you think.  Some of the most successful used car dealers in the country run with a 30-day turn.

-Marketing costs should be judged on a track able Cost Per Deal.  If you cant track it QUESTION IT!  There are enough marketing options that are completely track able; there is no reason to not to use them up first before you gamble on other options.  Then, grab your reports and figure out how much an avg. cost per sale is with each marketing mechanism.  Every marketing channel or mechanism will have diminishing returns at a certain point; this will vary for every store but maximize each one and trim the fat off your marketing budget.

After going through all fixed and variable NON-personnel costs, if need be some dealers are still forced to make personnel cuts.  A dealer in our NADA class today mentioned how he approached this tough decision.  He brought all three sales managers in and leveled with them.  They had already seen the other cost cuts and knew his efforts to protect them were sincere.  He gave them the option of him cutting someone, or of them staying as a team and each shaving a little off their pay to achieve the same savings.  The team chose to stay together.

Cutting personnel is one of the ugliest jobs any business owner has to do and unfortunately, it is something that most, at least one time in their career, have to do.  I applaud how this one dealer handled it, and Id like to get some thought from other dealers on the topic and also from employees.  How can a dealer help make that ugly situation better for both sides?  We would like your opinion in the open discussion about it here.

 

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