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The pros and cons of outsourcing for car dealers

Do you buy in services or grow your own?

Today’s car retailer needs to be a jack of all trades and master of as many as possible. Outsourcing components of the business – from digital marketing and enquiry management to valeting and vehicle transport – is the answer for many dealers. However, there’s obviously a cost, leading others to believe keeping things in-house works best. So what are the pros and cons of each approach?

 

Enquiry management

Outsourced: Moneypenny answers nine million telephone calls annually for more than 7,000 UK businesses. Jo McKeown, automotive business development manager, said dealers recognise the high cost of a missed call, for new business and aftersales.

“Engaging with a telephone answering service can improve dealer profitability while lifting the customer experience. Too many calls are either going unanswered or diverting to an unwelcome answering machine, both during opening times and out of hours. Outsourced overflow support takes the pressure off the reception desk when the receptionist is busy with a customer.”

It is fruitless for dealers to spend money on advertising if they are not converting the leads because they’re missing calls, she said.

Lansdown Mazda uses Moneypenny and managing director Danny Sacco said: “As far as callers are concerned, our receptionist is sitting at our

reception desk as one of our team. We know we are capturing every opportunity and impressing our customers by delivering the first-rate service they expect.”

 

In-house: Essex Auto Group has its own marketing and call centre within its Lakeside dealership, staffed by 11 operatives and a supervisor. It takes all incoming sales and service enquiries across nine brands and five sites. Service and MOT calls make up the bulk of the bookings, while sales enquiries are routed to the appropriate site and added to the enquiry management system.

Matt Brown, group marketing director, said: “It has been this way for 10 years and allows us to centrally manage leads. They’re going in at the top of the funnel and we can ensure there’s no spillage. It means I can see a true measurement of what we’re doing on marketing, because the two go together, and gives me a holistic view of our effort and conversion.”

Brown believes outsourcing wouldn’t work because of the loss of control and instant responsiveness. “How could you do it any other way?” he said.

 

Digital Marketing

Outsourced: With something as specific and complex as digital marketing, if you want a professional job, employ a professional to do it, said Tim Smith, group strategy director at GForces. The goals are three-fold; wide reach, efficiency with low cost per lead and high conversion rates. The company helps hundreds of clients on search engine optimisation (SEO) and pay-per-click (PPC) advertising. Smith said: “We can work very closely with the dealer through our dedicated marketing department, to ensure we’re meeting their goals and getting best value for money from their budget. While they might not have the capacity to look at trends or opportunities and react to them immediately, we do. It allows them to get on with the job of selling cars.”

Dale Richardson, Nissan franchise director at Wessex Garages, is a fan: “Working closely with GForces we formulated a campaign across our website, social media and YouTube. Sales have totalled over 600, so clearly it worked very well.”

 

In-house: Outsourcing costs money, so the primary motivation for Lookers to bring its digital marketing in-house last year was to cut that cost. But managing director Nigel McMinn said he soon realised the bigger efficiency was in how well directed the marketing spend could be.

“Running an in-house team saved us hundreds of thousands of pounds over a year, but we’re talking about a digital marketing spend that runs into the multi-millions,” he said. “If I can bring 10% efficiency by that money working harder, or cutting out wasted spend, then it starts to dwarf the saving.”

McMinn said he has seen “disproportionate growth” in online enquiries.

“Part of the change was bringing web content creation in-house and having two people writing original news stories about the group. Google’s love of original content means organic ratings have been boosted.”

 

Transport

Outsourced: Movex is a vehicle logistics platform that allows dealers to put details of a job online and have it go to a network of more than 500 transport companies.

“Many dealers, including Lookers and Sytner, use us for transfers, inbound and outbound, and delivery to customers,” said CEO Daren Jones. The advantage is ease of use, cost savings and potentially very quick lead times. “We’ve had cars picked up 20 minutes after they have been put on the system because it’s come through to a driver nearby on his iPad. You could never do that with a conventional contracted transport firm.”

Jones said dealers start to use the company because their own driver isn’t available, then don’t stop. He believes it’s because it works out cheaper and dealers don’t have to worry about insurance or drivers’ expenses.

Movex also has a ‘backload’ system, where if a transport company has an empty vehicle returning from somewhere, they can look to see if there’s anything they can pick up on the way home.

 

In-house: Pentagon Group will top 14,000 car sales this year, which means a lot of vehicles going out to customers and others, from leasing companies, coming back. The business has its own transport division, though fleet general manager Keith West acknowledged some jobs are also contracted out.

“One of the main reasons for doing it ourselves is that by having our own people involved, we can ensure there’s a professional handover to the customer,” he said, adding that staff were all trained, uniformed, badged and able to explain the vehicle’s features. “They’re often more mature in years, with the disposition and customer service ethic that buyers appreciate.”

West said because the group is scored on its performance as part of its service level agreements, it’s vital the job is done right. “We’re in control with our own people. What we’re not in control of, if it’s an outsourced company, is what happens with the customer. We’re in their hands, and we try to make sure it’s done professionally, but it doesn’t always happen. It colours people’s opinion of Pentagon.”

 

Finance and Insurance

Outsourced: Adroit Automotive provides business managers to dealers on short-and long-term contracts.

Managing director Adrian Foster said if you’re a PLC or company with turnover enough to justify a BM, and the resource to manage that person, then it’s the way to go. “However, there are hundreds of smaller dealers with one or two sites, who don’t have the expertise in F&I. With the FCA making life more complicated every day, it’s a scary thing to tackle; it’s very vague in its demands and very draconian in its punishments.”

Foster said with dealer margins being constantly eroded, adding extra services such as F&I is important to create new revenue streams.

“There are lots out there who would like a BM, but don’t know how to go about it. If you’ve got 10 sites, you can lose the cost of a BM, but with one or two sites you probably can’t and also won’t have someone who can manage them. Paying a little extra to have a contracted BM, and me for two or three days a month looking after them, is a cost-effective way of doing it.”

 

In-house: John Clark Motor Group has business managers (BMs) in all but one of its dealerships. They are specialists, SAF-approved, and F&I director John Sampson believes that’s the right approach for today’s market. “You must be able to present and explain F&I products to customers in a professional and compliant manner, which does require bespoke skills. I believe that, providing the dealership sells enough cars to warrant the role, the BM provides the best level of customer service and creates the best outcome for everyone.”

He accepts that other dealerships prefer to combine the BM role with parts of the sales manager’s function, to create sales controllers or transaction managers. “These roles become responsible for the total profit in the deal, which may dilute both pots and not provide the same levels of customer care, unless carefully managed.”

The role of the BM has changed in recent years to ensure FCA compliance. Sampson said: “We are committed to the traditional role as a secondary incremental profit centre generated from professional presentation and sales of F&I products.”

 

IT and dealership management systems

Outsourced: “The benefit of a third party is you’re using an expert. Dealers are great at selling cars, often not so much at developing, maintaining and supporting IT systems,” said Neil Packham, UK vice-president for supplier CDK Global.

He believes today’s dealership management system (DMS) has become an ERP tool – that’s enterprise resource planning – and is a single, holistic solution for everything done in the dealership. A DIY approach will present challenges, with different systems not talking to each other. “With something like Autoline Drive, customers are paying a monthly fee. That helps cashflow, but also means, because it’s enhanced with monthly releases, all our customers are on the latest version of our software.”

Packham said benefits come from a variety of places. For example, around mobile, CDK has created the ability for its systems to be device-agnostic.

“We communicate that to our customers and they have to decide to switch on the functionality. That’s what you get with using a specialist.”

 

“The benefit of a third party is you’re using an expert”

Neil Packham, CDK Global

In-house: James Hamilton is marketing director of Scottish dealer group Macrae & Dick, but also an enthusiastic self-taught software programmer. Two years ago, he designed and created an app that runs alongside his DMS to improve the quality of data.

“The problem I was trying to solve was that, while we have a big database, whenever we came to extract from it, the wrong information was in the wrong fields.”

The app looks at records edited or created in the past 30 days and individually goes through each field, giving it a score based on how accurate the data is. It means Hamilton can see who is putting what into the database, and crucially who is getting it right and wrong.

“It’s about responsibility, because it gives staff nowhere to hide. We understand the importance of good data and it’s put the focus on that, but also pointed out which parts of the business have challenges in data collection. The app isn’t at a commercial level, but it does the job for us.”

 

Valeting

Outsourced: Steve McBrierty, managing director of Motorclean, doesn’t accept that using an outside contractor has to be more expensive.

“Having a company like us do the dealer’s valeting allows them to focus on their core skills. They’re adding the most value to their business when selling and servicing vehicles, not cleaning them,” he said.

The seasonality of the motor trade can also make dealing with the peaks and troughs tricky, said McBrierty. That issue doesn’t arise with an outsourced service.

“There’s a broad spectrum of how well a car is valeted and having people experienced in quality-checking means you have a higher level of product coming out of the process when a contractor is doing it,” he added.

He also believes there’s the benefit of best practice: “Two or three employees at a garage who see nothing else are by definition restricted in how they can improve what they’re doing.

“We’re in more than 600 dealerships and continually challenging ourselves to do better.”

 

“We can see the benefits of outsourcing – but we feel the costs will be higher too”

Russell Day, Day’s Motor Group

In-house: Day’s Motor Group does its valeting work in-house and doesn’t use an agency such as Motorclean or Autoclenz – though it is debating whether it should.

“We’re very lucky that at one branch we have good and loyal staff,” said sales director Russell Day. “They valet new and used cars, cover each other’s holidays, work well as a team and are not looking for their next job.” It’s a different story at another site, where the team is younger, and less inclined to stick around, creating issues around recruitment and training.

Day said the advantage of the current set-up is that costs are under control and as long as someone keeps an eye on the team and makes sure the rules are followed, it works.

“We can see the benefits of outsourcing – productivity monitoring, if someone is sick the company has to supply someone else, if they’re not very good you can ask for them to be replaced.

“Productivity would probably be higher, but we feel the costs will be higher too and that’s what is putting us off.”



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Comments

  • Ray Bedford - 24/08/2015 12:02

    Your Outsourcing "article" was somewhat disappointing in terms of content and quantitative assessment. Hearsay is not a business process, but outsourcing is. We as a Purchasing Consultancy specialise in both car dealerships and outsourcing. Our outsourcing experience embraces many of the functions listed in your article, however, we have been very much involved for many years in outsourcing large organisations' direct labour, involving E&M maintenance, distribution engineering, stores and logistics, transport and distribution etc. From our experience of car dealerships, many of them talk about the cost of outsourcing which is obviously central to the debate. An outsourced Proposal document from an outsourcing supplier is very quantitative, specification lead and fully priced (usually against a schedule of rates). Again from our experience of car dealerships, very few have conducted adequate scoping to determine what the true cost of an in-house operation really is. Essentially a well-balanced outsourced contract provides a logical pricing regime, supported by a robust Service Level Agreement. Importantly, it takes the client away from "best endeavours" associated with an in house direct labour team to a measured contract which would provide meaningful management information on the actual work outputs. Outsourced contracts are very effective and quite sophisticated in their format if the client can take the time to understand the business processes involved. Of course, many outsourced contracts do fail but the research into why, over the last 10 years, very often lies is a weakness in the client's own organisation. This can lead to a lack of specification (4 years ago we asked a hundred car dealerships in a group business for their cleaning specification... not a single one had such a document. One must ask, if contracts are put together on this basis, are they destined to fail? Again, the answer is yes. We as a Consultancy work in partnership with clients to scope fully the client's current operation and then provide a Proposal to formulate an outsource relationship. This process is not based on guesstimates and subjective conclusions but quantitative benefits supported by a Contract that protects both parties. Very few of our clients fully understand the right or wrong way to outsource... They really must learn to trust organisations like our Consultancy with an outsourcing pedigree. We provide senior government bodies in African countries with 2/3 day seminars on the outsourcing process which enables them to analyse the benefits to outsource (or not to) in their own member states. Ray Bedford Director The Purchasing Agency

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