The Difficult Truth We Ignore

After spending 22 years in auto retail and coming up on a decade as a vendor to the automotive community, I’ve learned that there is a glaring misconception about success in automotive that must be addressed. Our community operates under the false presumption that “selling a lot of cars” (arbitrarily) equals success. As you read this, I’m sure right now you know that there is a certain number of cars, both new and used, that your dealership wants to sell this month. It might be based on how many you sold last month or last year or the incentives provided by the manufacturer. But rarely (if ever) is efficiency part of the equation. Sure, there are stair-steps and trunk money and CSI and many other ways dealers forecast profitability, but this process leads to a constant chase where “HOPE” is the fundamental basis for goal setting and achievement. There is a sweet spot for selling the most amount of cars for the least amount of expense and many dealers are falsely operating under the presumption that this is happening. This needs to change.

We often discuss that a car is the biggest single purchase a person will ever make (after a home). For car dealers, the biggest single expense most dealers face is their marketing (after personnel). Why then, with so many industry experts talking about data and metrics; creating new acronyms all the time, has our ability to forecast and make solid decisions on where to invest (or cut) spend not evolved further than it has? 

The Truth About Data

There are no shortage of articles written by industry experts about data. Sales attribution (multi-funnel vs last click, etc) is the hot topic of the moment. But what if the problem isn’t your vendor? How do we even know where to begin to make an assessment of what is or isn’t working? Think about how many metrics we “experts” have told you that you need to understand over the years? SRP’s, VDPs, sessions, visits, bounce rates, conversion rates, time on site, behavior flow, assisted conversions - and lets not forget you need to be Google Analytics certified just to understand where to find it all and understand what it means. Its information overload. And even once you understand it, there are no landmarks. There’s an automatic understanding that a huge amount of time will need to be dedicated to truly understanding it. 

Whats worse, is that there is a lack of standards between vendors in even collecting your data in the first place. Improper installations and use of Google Tag Manager, event tracking, mismanaged UTM parameters, etc can make your data virtually meaningless. Understand, this is not an occasional problem. MOST dealers that are using OEM recommended website providers are likely to have glaring issues with the quality of their data largely due to the incompetence of those providers and/or your 3rd party providers due to multiple tags firing, improperly installed GTM or 3rd party incompetence modifying your website with their containers. This is particularly troubling as this compromise of your data integrity creates a lasting problem both in assessing your historical performance as well as properly assessing future performance of new vendors. 

A Truth You Can Rely On

In 2004 I posited a theory that there was a direct correlation between the number of visits a website received and the total number of cars a dealership would sell in a given month. There’s a good chance one of your vendors may have recited some version of this metric but things have changed and there is more information can be derived from this correlation.

1%-2% of your total website sessions should represent the total number of cars sold (Sessions to Sales - STS). This is important because it doesn’t matter if your store is more focused on new volume or used volume. It doesn’t matter if you focus on subprime or not, buy-here-pay-here or not. The only outliers to this correlation are exotics and ultra highlines — lifestyle vehicles. Don’t worry, your Lexus, Range Rover and BMW dealer will fall in this range too.

Why a range? The range IS your landmark: 

The closer you are to 1% the more you need to look at the following: BDC performance, closing ratios, website conversion

The closer you are to 2% the more you need to look at your marketing spend and consider increasing that spend to sell more cars or… the more you need to evaluate wether that marketing spend is generating enough traffic relative to that spend.

The Irony of the Truth

What I have found most often is that dealers that don’t know this information tend to act contrary to their best interest. Dealers who are close to 1% tend to think they are over spending their marketing and are averse to looking internally at hiring and training the personnel they need to properly close the amount of consumer interest they are getting. Generally, their marketing spend will indicate a high cost per sale, but their cost of personnel relative to their volume will likely be low or that personnel will be low performing. 

Dealers close to the 2% number tend to think they are rock stars because their people are “over performing.” Generally, their marketing budget will indicate a very low cost per sale, but the cost of personnel will be higher than industry average. In reality, there is a substantial opportunity for growth. 

Even the stores you may look to for inspiration are often missing out on existing opportunities. Just this past July, I saw a very good Chevy dealer that sold 812 vehicles in July. Their GM boasted about the 85,000 sessions and 812 cars sold (2:1 Used to New). Now understand this is a great organization. They do many, many things right. And yet, I would bet the farm that they left about 300 cars on the table. And this is the irony of the problem. A top 20 Chevy dealer that sells nearly 300 new cars and over 500 used cars - by far the leader in their market - would never know to even look for this missed opportunity. 

Who’s Job Is it?

Many marketing companies focus on “their analytics.” Since marketing can only provide you with the opportunity to do more business and cannot complete the transaction for you this tends to be where reporting ends. But how often have you taken a meeting with a marketing company to find that their numbers show everything should be great but you’re not sure you even sold one more car as a result of the spend?

It has always been my philosophy that it's our job as vendors to provide the value; to not just do what is easy, but get in to the dirt and do the hard work. I believe it is the vendor’s responsibility to figure out the problem especially when my reporting shows success and the client’s sales do not reflect that success.

That said, empowerment is a great equalizer. Dealer’s should have personnel that routinely examine their own data: leads, website conversion, BDC performance. You should know how to spot BDC associates that are marking leads unresolved to move them outside of a process to inflate their ratios for the benefit of their pay plans. You should know how to normalize lead sourcing. Where to look for things like website changes when lead sourcing changes in your CRM. How to build a pivot table to understand your data. 

Walk the Talk

Bear in mind this is a very brief summary of the opportunity that exists. If you find that when you compare total monthly sales in your store that that number is 1% or lower or 2% or higher, I would welcome a call. No agenda or sales pitch. I’d be happy to walk you through the data and find what is missing. It's time to walk the talk. Success at the end of the month should be more than an arbitrary number based on the past. It's time to win and know it.