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?

Five Strategies for Social Media ROI Social media is relatively new and critics often state it does not produce concrete measurable results and thus is not worth your time.  This is false.  Here are five concrete, value-boosting strategies that your store can use to benefit from social media. Social CRM Your dealership should already have a storewide Customer Relation Management system to help you track and transact with your customers.  Social CRM has a parallel goal to your CRM system, to maintain and strengthen ongoing relations with your customers.  However, Social CRM is much less focused on creating transactions, and much more focused on creating strengthening relationships.  These relationships are built and maintained through efficient conversations on social media sites. High quality content that engages customers and creates ongoing dialogue is the key to social CRM.  When your customer has a question about a 60k mile service, the answer should be found on your blog.   When you sponsor your customer's little league team you should be posting pictures, articles and stats about the team.  When your local bank is raising money for a charity you should use your social assets to support them.  If your OEM has a recall, you need to transparently blog about it as soon as it happens.  Anytime someone comments on any of your posts, you should answer them.  Likewise the dealership social manager should be an active participant on other community forums.  Don't just participate on your site, that is not being a good online citizen. You should reach out to your customers in the communities where they already participate such as Facebook, Twitter and Youtube.  You will sometimes bring these users back to your blog through links. Branding: Your branding goal is to solidify your name in the market as synonymous with the brand values you stand for.  When someone hears, "Your Dealership Name" they should think, "Best price with no haggle" or whatever your brand stands for.  Social media is an excellent medium to build your brand because you do not have any constraints of the 15-second TV spots, 30-second radio remotes or the price of the airtime.  Tell your story in conversational ways.  Use video, blog posts and tweets to share content that stands for your brand.  The content should NOT all be created by you, share other people's content too. Remember, your content will consume and shared in direct proportion to its quality.  Your view on what is quality content and your customers view are most likely very different things.  In this case your opinion does not count!  The customer is in control; give them the quality content they want. Reputation Management Another important part of social media is defending your brand through reputation management.  Use a "listening tool" to follow the dealer rating sites, blogs and social networks.  Track keywords such as your name, OEM name, competitor's names and other names of interest to your brand.  Have a plan for leveraging good comments about you, and engage the negative comments to solve problems. You need to be nimble, transparent and calm in responding to user reviews.   If there is a problem at your store fix it, and let the customers know of the resolution.  You will be rewarded not because you are perfect in execution, but perfect in effort. Traffic generation Since the future of marketing is about content, and the better your content the better advantage you will have at building traffic.  There will be a natural boost of traffic from your participation in other communities as users follow quality links that you leave.  Think of links as paths back to your website.  The more legitimate links you have, the more traffic you will garner.  The better your content, the more reason people will have to share your links.  Become a destination site by sharing good content and measure the traffic gains and leads from your Google analytics. Inbound marketing is important, be a magnet for consumers by being the best place for them to get information. SEO Value Links around the web not only create multiple paths back to your site for human visitors, but they also act as "votes" for your website when Google determines your site's authority.  The more quality inbound links you have that say, "Honda Accord Boston" helps Google rank your site higher for the search term "Honda Accord Boston."  Now, there are lots of other factors in determining your site's ranking, and poor link building can actually hurt you in Google's eyes, but correct social media participation can be an excellent source of link juice. In addition to the value of the links you will notice that pages that you create on social sites can often rank quite easily themselves for long-tail keywords.  For example perhaps you create a presentation about "getting the most for your trade in" and share the presentation on a site like slideshare.net.  That page on slideshare could rank for the term, "getting the most for your trade in."  Google visitors that are searching for help with trade in valuations will find this slideshare page and if your content is good they will come from there to your site. In this example you will get positive branding, link value from the post, another page that ranks in the SERPS and additional referral traffic.  All these benefits can come from one correctly done, high quality post on a social site. Its not rocket science. Don't be afraid because of the "Nay-Sayers." Look, social media is the Wild West right now and there are lots of people causing dealers to fear this medium.  These critics do not do not understand social media themselves. Social media is not rocket science and there are substantial benefits to being involved.  Don't be shy.  Get involved.  Invest some time and try things out. I hope these five strategies help your store gain a better perspective and direction.  Please share your successes and failures with social media...

Why your Internet Sales Process matters more now than it ever has, and the 7 Process Points you must execute to be successful: Advanced marketing tactics like SEO and Social Media Marketing are a big focus in the industry right now. These marketing tools are very successful at moving the bar forward and YES your dealership needs to be involved.  However, if you are growing your arsenal of marketing tools you are also being more wasteful if your process is not nailed down.  Your store should not be investing more marketing dollars unless your customer funnel is proven to convert the customers into deals.  As the economy rebounds and you look to grow your marketing it's a perfect time to do a dealership process check up.  How does your store stack up? The Correct Internet Sales Process A successful Internet sales process is not rocket science.  There are 7 things every process should accomplish.  By executing these seven points consistently and with your dealerships brand, you will maximize your close rates.  Use this as a checklist to grade your dealerships process: 1. Quick Response time Yes, this concept has been beat into the industry but in this age of immediacy it continues to be one of the largest separators of success.  An hour to respond to an email is NOT acceptable.  Your response needs to be within minutes, if you cannot do this consistently restructure your department or use technology that can respond with YOUR price quote immediately. Do not measure, average response time, it's a bogus measurement.  Instead measure what % of the time you responded within 15 minutes.  Face it, if you don't respond quickly the chances of closing the deal drops dramatically. 2. Transparency in price, availability and trade Customers can get whatever information they want.  If they don't get it from you they will get it elsewhere.  Don't let that happen.  If they ask for a price give them a price.  If they want to know what their trade is worth talk to them about it.  Don't ever avoid a question.  Be transparent, be engaging, be a place they want to do business, answer their questions and give them a reason to come see you. 3. Provide multiple options When customers go online the regularly add features or submit requests on vehicles out of their price range.  They are curious, they are hopeful and they are human... trying for something better than current reality is just what we do.  Once you realize they are unlikely to buy the vehicle they submitted a lead on you realize the importance in providing options to them.  This helps engage the customer with you as they explore their options and come to reality of what the best car for them really is. 4. Sell the advantages of your product Again, customers regularly DO NOT buy the product they submitted a lead on.  Many even switch brands or bounce from new to used and vice versa.  Clearly the MYTH that Internet customers know exactly what they want is FALSE.  You need to "sell" your product. How do you do this?  Provide links.  Send them to your product landing pages, micro sites and the pages that tell your brand proposition.  If you don't have these pages built and optimized put that on your list of things to do.  Use OEM sites, outside news stories, social media profiles and your dealership ratings and reviews to boost your brand proposition. Do be cautious sending customers to sites you down own, you have less control but added 3^rd party credibility.  Balance the pros/cons appropriately. Track these links.  Your CRM should be able to tell you who is clicking on what, replace the links that get no action and keep the content fresh. 5. Phone call to request appointment If the customer provided a phone number you have permission to use it.  Call them.  Confirm they got your email, start a conversation to get to know them.  The one piece of your product another store cannot is your relationship with the customer, be sure that relationship is strong.  Use a phone script, set an appointment and track your shows. 6. Long term follow up Most 3^rd party leads close AFTER 30 days.  If you are a dealership that does a great job at following its customers for 3 weeks, congratulation!  You could double your closing rate if you could extend that follow up/engagement process follows for an additional 60 days.   Long term follow up should be more than automated emails or a dealership newsletter.  Include regular phone calls into the mix.  You are most likely better at building and maintaining relationships on the phone than you are at email.  Use this to your advantage. 7. Differentiated "customer friendly" sales process After you have done all this work to get the Internet Customer to the dealership, don't blow it with a bad "in person" sales process.  Continue to be transparent, answer questions, be a resource and over come objections.   You should close an exceptionally high number of your Internet appointments that show up.  It's ok to sell and be a closer, just maintain your customer relationship through the process and you will be fine. Dealership Internet Sales Success If there is one thing I would I would emphasis is consistency.  We are in the business of doing the little things a lot of times.  Measure every step of your process and report with your management team in weekly meetings.  Reward the process by keeping spiffs and awards focused on execution.  You cannot manage results but you can manage the activities that get the results.  The 7 activities listed above will get you results but most stores struggle in the execution of their process.  Hitting all 7 points consistently is an uphill climb.   Where does your store excel and where does it fall short?  What is the biggest tip you could offer your fellow dealers about executing your process correctly?  Please share...

At about 5:30 am yesterday morning I was woken up by a twitter text from Jeff Kershner at DealerRefresh.  He told me about a contest he was running to help get dealers involved in using social media and asked if DrivingSales would participate. Naturally we are game to support anything that helps the dealers get involved in social media.  (Plus I was half asleep and would have said yes to just about anything.  Looking back, buying two flip cams is a commitment I can handle!).   So here it is, DrivingSales is donating a couple extra flip cams to the cause so your chances of winning just doubled! If you want one of the sickest ISM tools on the market, the Flip Cam MinoHD, here is what you have to do: 1.     Sign up on twitter and follow @dealerrefresh (jeff) and @drivingsales (me) 2.     At four random times during the digital dealer event we will Tweet our location. 3.     First person to come to us from the tweet gets the Flip Cam.

*fine print at the bottom of the page.

Personally I think this is a really cool idea and give props to Kershner for thinking it up.  Social Media is amazingly effective and efficient way to communicate, (especially when waking someone up at 5am) and while this contest represents industry insiders communicating with each other... it's how we should be comfortable communicating with our clients. Social media is more widely used than email and if you are not using Facebook, Twitter and the likes to stay in touch, then you are out of touch, simple as that!  For those of you wondering how to engage on social media from your dealership level, be sure to come hear me speak. Ill be covering that very topic in my Digital Dealer presentation. FINE PRINT: NONE!  Get involved and enjoy! For those of you who have been on the fence about setting up a twitter account, commenting on blogs or otherwise participating, its now time to jump in!

DrivingSales has been re engineered from the ground up to be faster, offer more features and help you easily find the profit building information you need to maximize your success.  I wanted to offer a quick tour of the new features so you can get the most from your experience in the community.  If you are not a member yet, join us by creating a profile here. Filters: We have added filters (in the left column) so you can organize the steady flow of content by dealership department and action.  For example, you can view best practices relating to "Growing Sales" in the "Used Car" department, "Cutting Costs" in "Fixed Operations" or an unlimited number of options.  Simply click the departments and actions you wish to view. Content Creation: Creating and sharing content is the foundation to social media and communities like DrivingSales.  We have added a "Create Some Buzz" box in the top right corner of every page to allow for one click content sharing.  Ask a question in the discussion forum, share a link to a good article you have read, upload a video and more, all from one location!  We've made it easy for everyone to create content and make a name for themselves. Profiles: The new profiles are MUCH more dynamic and similar to what you see inside other social networks like Facebook.  Your new profile allows you to update "what you are doing" in real time, have a custom "Activity" feed of content based on your "friends" best practice activity.  In addition we have added:

• Info Tab: to keep your public resume information up to date. Only those you are connected with can view your contact info.
• Friends Tab: to see what best practices your friends are engaging in and to communicate directly with them.
• Endorsement Tab: for you to write and receive letters of recommendation from professional colleagues.

Just like sharing content, connecting with or "friending" associates, is at the foundation of your social network experience.  Be sure to connect with those you know and invite others who have yet to join the community. Vendor Ratings: We have added new categories and made the process to rate and review your vendors much easier.  The products listed are WIKI, so if you find a company or product missing, simply add its description and be the first to rate it.  Remember, this feature is open for all edit the wiki pages, but only Dealership employees can rate and review vendors to keep the ratings fair and accurate for all vendors. Thank you! The is lots of growth ahead, but we have come a long way! While we just built this new platform from the ground up specifically to meet the needs of the auto industry community, don't think we are stopping here; this is just the tip of the ice burg.  Development is already in the works for new features and to push what you see to the next level.  Most of our current features were direct requests from members and going forward we will continue to seek your guidance to make sure we are delivering the best collaborative solution for the industry. It's wild to see the community grow and evolve.  I started DrivingSales back in 2003, long before social networking was a popular buzzword; and we just passed the 1 year mark since we opened up what was a private community to the entire auto industry.  I would like to give a special "thank you" to all the loyal users who have contributed time, feedback and knowledge to make DrivingSales the resource that it is.  We currently deliver best practices to tens of thousands of professionals in 6 countries around the world... not bad for a project that started as a class project at Dealer Academy! We are looking for all the feedback we can get.  Contact me directly, respond on the discussion board or just leave a comment here regarding your thoughts of the new release... talk to you all soon!

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.

The Chrysler Bankruptcy is pushing private creditors into a head on collision with the government and the government backed companies. What plays out in New York's bankruptcy court will largly determine the direction General Motors, and our industry heads.  Will the government keep the playing field level and let the markets rebuild themselves naturally from here, or force their hand to achieve some predefined objective?

President Obama delivered a great speech when he announced that Chrysler would seek Chapter 11 protection.  Despite announcing some really bad news, he kept things very positive and encouraged the public to buy American.  The largest problem facing Chrysler has been, and still is, a steep decline in consumer confidence. The president should be commended for attacking that head on.  However, he ripped a small group of Chrysler creditors for not settling their debt according to the government’s recommendation and thus laying balme on them for forcing Chrysler into Bankruptcy. The media has picked up on that and kept the public beating going, claiming these groups were actng selfishly and even in an "unamerican" way.  Is their condemnation justified?

The creditors being slammed were part of a group of secured creditors owed 6.9 billion, meaning in the event of a BK they are legally to be paid out first.  The government offered them about 30 cents on the dollar to walk away.  Yet the UAW, an unsecured creditor owed 10.6 billion, was given a 55% ownership stake in the new Chrysler and a payout over time of almost half their debt.  People are crying foul; saying that the government is favoring the UAW, a huge supporter of the administration, by illegally moving them to the front of the line and giving them more than their fair share.  Is the UAW being given special treatment?  Perhaps the bigger question is how can we expect the government be a fair moderator and do what is best for our industry when they have converging political and economic interests based on the outcome of the negotiation? 

To further complicate matters, these condemned creditors are also arguing they have been kept out of the government discussion because they are the only party that isn’t tied to the government.  The situation is not as simple as the creditors vs. the UAW fighting for Chryslers assets with the government in he middle.  Sure, the government is playing moderator in the middle, but are they really in the middle? In addition to playing moderator the government is also a direct creditor, Chrysler shareholder, they have political interests to protect the UAW, and have substantial funds (90 billion to be exact) invested in the other banks that have outstanding debt to Chrysler.  Given their broad involvement in the situation, which of their many conflicting motivations will prevail and again, what is best for our industry?

Here are a couple other messy situations:

With the UAW becoming the largest shareholder in Chrysler and selecting one or two of its board members, will they do what is in the best interest for their workers or for the company as a whole?  Sometimes it is in the best interest of the company to cut workforce, use outsourcing or leverage technology to make the company more scalable, all things the union hates.  How will a Union who has proven their sole motive is to benefit its workers even at the cost of the company, help run Chrysler any better?  Who will the union blame now when they have a problem? Themselves?  Would Chrysler be better off without the unions like the imports?

With GM under government control, the fate of Saturn's employees and dealers are resting in their hands. Will the government be willing to save the jobs by letting a foreign competitor like Renault take over the Saturn brand even if it means creating a GM competitor in the process? On one hand they want to preserve American jobs, but on the other hand they want to protect their newly acquired company.  Cliff Banks of Wards Auto wrote a great article on this conundrum.

It appears as though the free fall in our economy has stopped, and the government has played a big role in that.  However, is the current situation set up to create the most innovative and robust industry going forward?  I'm not sure it is.  

Could you imagine being an NFL quarterback playing in the Super Bowl against a government backed team, with a government referee and with some of your own teammates on government payroll?  The competitive spirit is dampened when it feels like the outcome is decided ahead of time; and unfortunately it’s the competitive spirit that produces the real MVPs.

 

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.

This past week I took a couple days off the hustle of office life and traveled back to sunny Florida to attend ward’s Spring Training event in Tampa.  For all those who didn’t attend, I figure Id share a few words and let you know what you missed.

First, I’m a firm believer in industry events.  One problem quite prevalent in the car business is that we tend to have a fairly insular view of our positions within the industry.  As a whole, we do not look outside our companies, let alone our industry, near enough for inspiration and solutions to our issues.   I view Professional events as one way to remedy this problem (participating in a network like DrivingSales is another).  The events allow us to take a step away from the grind, re-evaluate our position, strategy and be inspired for the return.  However, too often these events become such a busy hub for business dev that they turn into a blur of a few days where your feet throb with pain and the messages delivered were hardly retained.  This was not the case with Spring Training.  While I came back to a pile of work on my desk, the event was a refreshing break where I was able to “sharpen the saw” as Steven Covey would say.

The Wards Spring Training event was small, but it had the right people in attendance, so I would count the size as its strength.  It was a tight group of vendor executives, dealer principles and group executives.  The schedule nice, but not overbearing; most of the speakers presented twice, so you could get to all the good stuff you needed to.  Some favorites were Larry Bruce and Shaun Kniffin presenting on 21st century marketing. Essentially thier messaged boiling down to database segmentation and permission based marketing; something ever dealer should be actively involved in, but few do well.  Jeff Kershner and Matt Belk also did a great job talking about branding yourself online; another timely topic given the ubiquitous nature of user generated content that will shape your brand for you if you don’t get involved.  The event topics didn’t drift into too much into next generation strategies, but rather focused on core concepts and how to move them to the next level.  If you went to learn the next big thing that is going to hit the industry I think you would have been disappointed. However, if you had attended to sharpen skills in areas proven to deliver ROI for your store regardless of the economic slump, then this event was a home run.  (Pardon the pun)   I think the approach in topics was appropriate given the state of the economy.

I must admit, I had meetings to attend to and thus missed the Yankees preseason game and accompanying dinner.  This was a big disappointment for me, but in all the event was a good couple days to recharge and refocus through good conversation with some great people in the industry.  I had had a fun time, learned  important stuff, strengthened some relationships and my feet didn’t hurt!  I assume Wards plans on doing the event again, and if so, Ill be back.

I welcome comments or your opinion on the event.

Welcome friends and family of the deceased.

We are gathered here today to honor the life and mourn the passing of the infamous “4-square.”  The 4-square was born at the dawn of the auto industry when vehicle margins were thick, consumers were uneducated and invoice data was guarded with upmost secrecy.  In recent years, with transparency increasing, the four square has been on life support plagued with “old-schooler’s disease, but the time has come to bid farewell. Our beloved 4-square is survived by market based pricing, transparent information exchanges and multi choice menu styled write-ups.  Unless you want to die of old school-ers disease too, I suggest you move on and find a new way of negotiating.

 

How do you negotiate?

Like many of you, my first sales manager was a master negotiator who indoctrinated me on “4-Square” negotiating.  He would role-play tactics to avoid price and “hit, hit, commit” then move to the next square.  After the customer had autographed the write-up I would head to the tower only to return with the  “atomic” pencil, (numbers so extremely high to “adjust the guests thinking” and raise the expectation so could come in lower and make the deal.)  The 4-square WAS the ultimate negotiation game.  However, the days where 4-square negotiation was the best mode of operations are officially behind us.  Today, “games” don’t get you car deals!

 

Market Based Pricing:

Successful negotiating should get off on the right foot with market based pricing.  This means your inventory is priced according to real market value for all to see and advertised online.  Your prices should be aggressive enough to put you in the top consideration of the customer.  If you have thousands and thousands to drop from the price at the first pencil, its highly unlikely you are using market based pricing.  Poor pricing will dramatically reduce your phone, email and lot traffic.

 

Transparency:

Then you must offer you customers a transparent transaction.  If they ask for a price, give it to them.  If they ask for payments, give it to them.  Your customers CAN get the answers they are looking for; the question is will they get them answered from you or your competitors? By avoiding their questions and side stepping the information they want will only push them away.  Yes, this breaks the rules of old negotiation; but being the best never was easy.  If you want to be the best you may need to learn new ways of handling objections.

 

Menu Presentations:

If you resurrect the “ol’ 4-square” and slap it on the desk in front of the guest you will immediately invoke old school buying emotions in them and they will start shutting you out.  If you want to keep the process moving towards happy customers, you need a write up that is customer friendly yet still leaves them an element of control while helping them come to a decision.  I recommend a menu of various choices, easily presented with 2-4 options that is an excellent closing tool.  It makes life easy when you can present options 1,2 & 3 and say “which one works best?”  If they don’t come back with quick close, you can, in a consultative yet influential way, walk them through the pros and cons of each option.  Menus display information in a quick to read format and facilitate a customer centric negotiation process.

 

Time to move on:

Yes, the glory days of the 4-square have passed and its time to move on.  Chances are if you still use a 4-square you disagree with what I have written and will argue that it still works well.  My response is that there are simply better ways.  I am not convinced there is only one way to perform a write up. However, I firmly believe the most successful practices will involve market based pricing, exchanging transparent information and giving choices to the customer in some form of a menu format.  What works for you? If you agree back me up with examples from your experiences.  If you disagree, I'd love to hear why.