With so much hupla over potential for a government bailout pundits and politicians are quick to point an ignorant finger at the many wrong reasons that placed us in this mess to begin with. Few if any, are discussing the historic facts at the core of the domestic automakers current crisis.  The industry was set up right, but has been locked in and unable, not just unwilling, to change their now antiquated business model & structure.

The domestic automakers were born in the very early 1900’s, they weren’t started IN the industrial age, the WERE the industrial age.  These companies grew rapidly into becoming the economic engine that fueled America’s great growth.  To serve the population dealerships were needed in every community for sales and service.  This industry revolutionized the economic world as well as the social world.  Cars made travel affordable and efficient, keeping people connected and making the world a smaller place much like social networks of today.

In the 50’s and 60’s the interstate highway system was built out, to the pleasing of the auto industry lobbyists.  With easer means of travel the need for cars increased, but so did competition, which severely eroded dealership margins.

Honda and Toyota didn’t enter the US market until this time, and really didn’t gain significant traction until the 1980’s.  Because their infrastructure was built out decades later and in a completely different economic era, their businesses structures are very different than the domestic’s.  Most notably they have far fewer dealers, especially when looked at the ratio of dealers to car sales.  Also, they are also not weighed down by the UAW, which was formed in 1936 (however smaller unions date back to the late 1800’s.)  Global competition has caught up to the American factory worker and these corporations can no longer afford to pay the benefits afforded through the past century given global competition.

Letting these plants move over seas should be out of the question, despite the potential short-term benefit.  Out-sourcing the domestic’ manufacturing would be a national security disaster.  During the past Word Wars the auto plants we converted to building tanks, planes and other vehicles for the military. Could you imagine if WWIII ever happened and we had to outsource our military vehicles to china?  YEA RIGHT!

There is no doubt the industry has some pains ahead of it as it goes through a much needed correction but there is a silver lining to this gray cloud.  Restructuring (even with a Chapter 11 reorganization of some sort) could provide some HUGE long-term benefits to the US auto industry.  Even though the industry is changing and that is painful, it must look at it as an opportunity. New business models could sprout creating a wide array of benefits for those inside the industry and those that consume our products and services.  There is lots of uncertainty in the market right now.  However, one thing is certain, as long as American ingenuity and entrepreneurship is alive and well the domestic industry will survive and reinvent itself into the world wide powerhouse that it was and deserves to be.
 

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.
 

Handling internet leads successfully usually requires moving the lead from the web, to the phone, to the store.  Phone skills are very important since that is how you build raport and a relationship to bring the customer to the dealership.

I heard this simple question from a rep of mine a while back and it  works GREAT to open up the conversation to set an appointment. Adapt this to your personality and it will engage your guest in a trial close and let you know where you stand.  Remember, the road to any successful sale is to build value, build a relationship and overcome any objections.

Wording:

After responding to the vehicle inquiry, get the guest on the phone confirm that you have the correct vehicle.  Then simply ask them, “Are you the type of customer that would like to test drive the vehicle before making a selection or will you just handle everything over the web?”

The vast majority of customers will answer that they would like to “test drive the vehicle.” This is your perfect lead in to schedule the appointment.  Respond, "Great, when would be a good time to meet up? Is tomorrow afternoon good or..."

Every once in a while some will answer “everything over the web” and if that is the case you can begin the credit application etc process according to your dealership policy.  "No problem, we are one of the few dealerships who have a process to handle everything over the web for customers like yourself.  To get started lets..."

It is a simple yet effective trial close.  There are plenty others, let me know what works for you...
 

Recently General Motors announced it’s running dangerously low on cash and could run out in the next couple months with out the governments help.  They need 11-14 billion in cash reserves to run the daily operations of their giant company and are expected to end this year with 12.5 billion available.  This is a thin margin to be running a company on of this size; especially this is a difficult market to be forecasting in.  

What is the 11-14 billion for?  It’s the cash needed to run the company on a daily basis, akin to the working capital a dealer needs to made debt payments, pay off trades as they come in, discount for rebates and wait 30-60 days for the OEMs to reimburse them and to make payroll while waiting for car deals to be funded.  If this money runs out, there will not be enough to make their payments to their creditors, including potentially employees.  They will be forced to seek bankruptcy protection so they can try and renegotiate their obligations with others.  
In a good market General Motors would borrow funds, but in today’s climate, and with their declining capacity to pay against their current obligations its has made that reality a near impossibility.  In other words General Motors is just like the customer who comes to your dealership to trade in their car to lower their payment.  Unfortunately they are so far upside down, it would be extremely difficult to lower the payment to begin with, and if you could find a car cheap enough, the value of the collateral isn’t enough for a bank to cover the negative equity of the trade.  In other words their DTI is too high and they can’t get the advance.

So what are they left to do?  Like the buried customer who goes to mom and dad to borrow money for the down payment, General Motors (and the others) are petitioning the federal government for some help.  This is where politics get involved, (this isn’t meant to be a political post so ill just generalize here.)  The right (republican side) favors little government, and little intervention.  The company reaps what it sows, good or bad and the market remains more “pure.”  The left (or democratic side) generally pushes for the government to get involved and support the workers.  Both sides have good and bad implications, especially in this scenario (generally picking a side is based on what “goods” you feel are stronger and what “bads” you feel are worse.)

What do I think will happen?  Well right about now I’m not so sure the politicians can come to an agreement in time as to what is best for our nation.  One side says bail them out, the others counter that will raise taxes.  One side says if you don’t bail them out the pain will be greater on the public than the raise in taxes would… and the politics go round and round.  At this stage I think most on each side are in agreement the industry needs help, it’s the details they are fighting over. If the fighting isn’t resolved, the support may come but too late for bankruptcy. GM will file, and begin to restructure, similar to united airlines over the last few years.  GM will stay around, and go through some very radical changes, but they will survive.   To me the biggest variable will be how the public reacts.  If the media blows this thing way out of proportion it may taint the buyers opinion of buying with concerns about “will my warranty be valid?” “Will there be parts when its time for a service?”  The answer is yes they will be here, (bet GM reemerges, but as a very different company) the biggest challenge the dealership will be up against is customer perception.  The perception will be based on the media, and your sales people.

Perception is reality, I don’t write this article to be doomsy or circulate the negative info.  In fact I hesitate to publish this at all, but I think its important that the people on the front lines who are focused where they should be, “on making deals” understand what is happening so they can respond to customers in a non political, understanding way.  Your customers have some wild ideas running around in their heads right now and the sales people must be trained to handle the questions and over-come the objections they are facing.

I often train that objections are the keys to the car deal.  Build value, a relationship and seek out and solve your customer’s objection; that is how you sell.  I hope this summary helps someone out there in “reader land” better explain what is happening to the market the next time a customer asks.  If you cant answer your customers questions, or respond with, “I don’t follow that stuff much” you will not be breeding confidence with your customer.  

Sales people need to understand the industry is going through some painful corrections and may morph and evolved, but its not going anywhere.  The auto industry is changing and in this environment knowledge is power.  Keep your team current on the facts, and motivated to win. It’s a tall order, but we didn’t become the backbone to our nations economy for nothing.

Split deals can be a headache for Management and a downer for the department.  They affect more than the two or three sales people involved, because the team tends to pick sides with their friends and the “ill-will” spreads like a contagious cancer around the showroom floor.

The saying, ‘the best offence starts off with a solid defense” definitely applies here.  Set ground-rules and insure everyone, including management, plays by them; your team will be much better off.

Your CRM tool is one of, if not THE most important piece of technology since it holds the keys to your success, your customers.  Regarding split deals, your CRM tool can take on added value as the end all answer to many of your stores in house disputes.
I feel strongly that “process” is key to one’s success.  Mediocre sales people perform above average if they execute a process well and good sales people will be unstoppable.  As a manager define and ALWAYS reward your process.  Build your sales process into your CRM system and use it in moderating questions over who a customer belongs to.

For example, if your CRM recodes inbound and outbound calls these can be used to decide split deal disputes.  If your process is follow up with a customer weekly then protect the sales person if the CRM system shows they followed the customer weekly as directed.  If they missed their call, or didn’t record it in the system, they loose protection.  If a sales person claims he worked with a guest a few days prior, and has their name and number on a business card to prove it but they are not logged into the system… sorry no protection.  Customer activities must be properly recorded in the CRM to warrant protection. You must always go back to your stores process, and make sure your CRM system is aligned with what you want to happen and you will kill two birds with one stone.

1.Disputes over split deals will happen less and less, keeping your sales team happy and focused on the task at hand, selling    cars.

2.By using the CRM system as the deciding factor in protecting a sales person from a split deal, you will build a culture that your process matters.  This alone will increase your business by getting all the team on the same page.

Disputes over split deals are a waste of time.  Take a few minutes to outline your process in your CRM and define your rules for split deals.  The benefits will pay off 100 fold over time as you build a team that executes your vision.
 

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!
 

A description of the typical gen Y buyer today.  (no this isnt really me, im older than 26... just wrote this to illustrate a point.)

I am an “Internet Buyer.” I am not a super mooch of a customer just looking for the lowest price.  I am not an anal-retentive computer science nerd using mosaic to buy my car because that’s what the elite of the web do.  No, those days and shoppers are long gone.

I’m no longer a 14-year-old boy playing around on his dad’s laptop, who decided to send a lead to see what happens. That was me 12 years ago when the web was just starting to take traction in the auto industry.  Today I am a normal 26-year-old college grad buying my second car. I don’t look at the Internet as a fad or me as part of a specialty market.  No, the Internet isn’t even a “way of life,” it’s just part of me and there is very little separation between my life and the web.

I was writing emails, surfing the web and created my first website before most sales people started complaining about invoices being published online. I went to school online, I work online, shop online and communicate online.  My friends and I keep in touch on facebook and through text messaging. I’ve got friends in other countries and we don’t talk long distance thanks to skype; even email seems a bit archaic these days.

I’m not alone, if fact my whole generation is like me.  Not to mention my parents now bank online, have their own blogs and even my grandmother visits our family photo albums on Picasa.  The astonishing thing is not my grandmother, but my 4-year-old niece.  She plays Disney online, is learning to read online and uses the digital camera to film her princess dolls and asks for my help to post them on youtube.

Yea, its not 1999 anymore and the Internet isn’t a novelty. It’s life.
 

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.
 

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.

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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