CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
Dealers are enjoying a significant comeback in retail automotive sales. However, experienced dealers know that rising interest rates, changes in lending rules, or a downturn in the economy could put sales and profits back in the painful free-fall of 2009. That’s why forward-thinking dealers are investing in transforming their business model to exceed the expectations of today’s online shoppers, increase market share, and tighten processes to weather the next storm. What’s one of the biggest transformations out there? Moving from an open sales floor process (OSFP) to a managed retail sales process (MRSP).
The move to a MRSP is often triggered when dealers make the decision to define and measure the Key Performance Indicators (KPI) of their sales process. Often, they quickly realize they don’t have the ability to measure and inspect the actual numbers needed to make decisions. This is a significant problem – you can’t improve the customer experience and increase profits if you don’t know where your weaknesses lie.
And masking weaknesses is a hallmark of an OSFP. After all, this type of “free for all” process where salespeople are pitted against each other for the next walk-in or “up,” is the enemy of accountability. It practically encourages sales associates to look for the easy sale, and then quickly cut ties to pounce on the next visitor when they determine the first is not a serious buyer. This type of process makes it virtually impossible to track what salespeople are doing, how long they are spending with customers, and what steps they are taking to ensure a sale. Since there is no accountability, it’s also difficult to monitor CRM tasks. Often, customers judged to be “just looking” are never even entered into the system. This skews the numbers and makes marketing to these potential buyers impossible. In addition, this type of interaction negates the 61% of customers who initiate contact by walking into the dealership with no prior communication.
An MRSP is the complete opposite of this approach. What you get instead is a round-robin system where leads are handed out in turn, and backed up by real-time management tools for an accurate view of the entire floor operation. If a salesperson does not log a customer interaction in the CRM, he or she cannot get back in the virtual queue for customers. An MRSP also encourages salespeople to slow down and truly spend time with a customer because every opportunity counts. They can’t quickly jettison what they deem an unpromising lead. As a result, salespeople are held accountable, every consumer is engaged, and managers have increased visibility for every showroom visit.
More information about showroom visits is critical for franchise dealers facing lower margins, increased competition, and a market where more than 70% of consumers visit only one or two dealerships before making a buying decision. In this environment, dealers who have a strong CRM-centric culture will see the obvious benefits of having more customer records to work with each month. This assertion is backed up by a recent independent study from PCG Research of more than 100 automotive professionals using a MRSP. The report found that 85% of respondents sold more cars; 60% saw between a 20%-85% lift in logged showroom visits (some dealerships interviewed saw a 100% lift); and 70% of sales representatives said they had more time to complete their CRM tasks.
One notable story in the report came from Mercedes Benz of Hoffman Estates, located in a northwestern suburb of Chicago. Before moving to a MRSP system, the dealership logged 400 showroom visits a month. After implementing a MRSP it logged 560 a month, for a 40% increase. The store is now selling 186 units per month at a higher CSI.
In addition, the dealers in the study realized that their current sales processes were rewarding bad behavior and creating high employee turn-over. With a MSRP, they could clearly see their best performing sales associates for the first time, as well as their lowest performers. This visibility into the sales process enabled them to make changes where needed to boost the KPI and bottom line. Crucially, the dealers also know that all consumers who visit the showroom will now be a part of follow-up marketing activities.
Changing a sales process which has been in a dealership for 30 years in some cases is not without its own challenges. It’s natural to have reservations about leaving the OSFP. However, that fear of change pales in comparison to what a MRSP can offer. Updated retail processes are a necessity to remain relevant and profitable in today’s environment of internet shoppers, unpredictable economic changes, and fierce competition.
Mark Stringfellow is the Vice President of Sales at The Next Up and can be reached at Mstringfellow@thenextup.com.