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You can achieve long-term profit

Dealerships looking to increase profits in their sales department have traditionally focused on two key areas: increasing the prospect conversion rate and increasing gross profit per sale.

That is what the vast majority of sales training programmes today are dedicated to – but there is only so far you can go.

There is undoubtedly some potential to improve the prospect conversion ratio in most dealerships. The true industry average is no more than 10%. Many dealerships believe their figure to be higher, but they often fail to take account of selective logging in the showroom.

The top performers are achieving approximately 20%. But even with a tightly-controlled sales process in place, it is hard to get beyond that level. This is partly due to the quality of people employed in the industry, and the prevailing salary/commission structures.

Increasing the profit per sale is even tougher. In a mature, competitive market, raising your prices is often not an option. Raising your gross profit by a significant amount without raising prices is extremely hard work, even before you take into account the increasing costs of holding a franchise in the post-Block Exemption environment. You don’t just have to sell better, you have to buy better as well.

One alternative is to sell more accessories. Finance and insurance has long been seen as a way to increase profits, but that too is under increasing pressure, not least from the legislative authorities.

If you look at the trends in the USA, with the controls they now have coming in such as the disclosure of finance commission, that pressure seems certain to increase. Personal contract plans

During the past decade the industry has focused more on increasing the customers’ repurchasing frequency as a way of increasing profits. Ford set the ball rolling when it launched the Options Personal Contract Plan (PCP). It was designed to increase the frequency with which customers change their cars, and to make sure they return to the dealership they bought them from initially.

When they saw how successful it was, the rest of the industry soon followed. But because PCPs are linked to residual values there is a risk involved, as the industry found to its cost on both sides of the Atlantic.

Now that residual values appear to have stabilized, the PCP is regaining popularity. However, there’s a clear need for the industry to develop new products that lock customers in and drive them back to the dealership that are not tied to residual value risks.

Some of those products are being developed in the USA today in the form of tyres-for-life and engines-for-life programmes. Dealers who have embraced them are achieving some success in terms of getting customers to come back to the dealership.

The tyres-for-life guarantee is not sold as an add-on product, it is built into the selling price of the car and customers have to come back to the dealership every three months or 3,000 miles for a quick tyre inspection. The engine-for-life package requires customers to keep coming back to the dealership in line with the manufacturer’s service intervals.

Encourage returns

With tyres for life, the warranty company that funds the programme can buy the tyres in bulk, which keeps the cost down and makes the programme viable. It’s based on the fact that the average customer changes car every 27 months, which typically equates to one set of tyres.

It also helps the used car department, because every used car sold has a new set of tyres on it. Customers who keep their cars for longer than that are more likely to come back to the dealership when their tyres need replacing. Where else can they get them for free? And that gives the dealership an opportunity to sell other products and services if it is handled in the right way by the service advisor. If not, it may be perceived as a rip-off. The customer may feel you are simply loading as much as you can onto the invoice.

Increasingly, US dealerships are putting more of their marketing budget into activities such as these, and reducing the amount they spend on newspaper adverts.

Expand your ideas

The motor trade is less good than some other industries at marketing additional products to their customer base.

Companies such as Dell, EasyJet and Ryanair excel at this technique. On a regular basis, the online computer and travel firms will come back to you offering additional products and services. If you buy a computer from Dell, for example, the company will continue to offer you consumables, or a new laptop, 12 months after you’ve bought one, or an upgrade to your home system.

Easyjet and Ryanair sell travel insurance, hotel bookings and car hire, plus, of course, their in-flight services.

For the motor trade, satellite navigation systems are an equivalent example. A dealership database is perfect for marketing these too. Who’s to say that of the 5,000 or so customers you have on your database, 200–300 aren’t going to be interested in a SatNav system right now? It is good CRM.

But the next generation of CRM strategies will encompass products that lock customers into the dealership. If you have your customers locked in, once you start to tweak their repurchase frequency through your marketing activities, you start to see serious growth in your profits.

  • For more information, see the Saleslynx website at www.saleslynx.co.uk

    Prospect and be proactive

    Many salespeople spend too much time waiting for a deal ‘to walk through the door’ or get side-tracked into non-selling activities. That’s according to Sewells’ Best Practice Guide To Prospecting, which outlines the way successful salespeople organise their day to make sure they manage their relationships with customers effectively.

    In broad terms, salespeople should spend about a quarter of their day searching for new customers. Finding people to become personal customers of theirs and customers of the dealership – by personal calling, by telephone, by letter, advertising in the newspaper and so on.

    The whole object of prospecting is to get face-to-face with a customer to demonstrate and strike a deal to buy a car. Although the motor industry is changing rapidly, one thing will not change – cars will always require a degree of face-to-face selling. Something like a further 25% of a salesperson’s day should be spent meeting customers.

    Administration and follow-up is crucial – following up customers, making sure they are happy, looking for more business, looking for referrals, sending out personal mailshots, keeping customer records up-to-date and all the administration a salesperson has to do in buying and selling cars. This will account for about another 25% of a salesperson’s time.

    A salesperson is responsible for making sure each new and used car they deliver is absolutely ‘spot on’ before handover to the customer. They must ensure that it is a hugely enjoyable experience – one their customer will delighted be with. One that will keep them as customers and encourage them to tell others about their buying experience and help generate referrals for even more customers.

    This will take up about 10% of their time.

    They must also set aside time for sales meetings, coaching, training and planning. Customers you’ve already got will leave the area, retire, die or go to buy elsewhere even if only for a change. If salespeople don’t allow about 10% of their time for planning they’re heading for failure. And, finally everyone needs time to relax – but no more than 5%.

    The most successful salespeople start each day with a ‘skeleton’ work plan. Planning builds confidence, helps direct efforts into areas that produce the best results and makes sure they don’t forget to do things.

    Is CRM The Holy Grail?

    Paul Cleverly of family business Mon Motors decided that CRM was imperative for growth. He spent months viewing what was on the market before deciding to build his own system, CloseIt! He now runs Complete Automotive Solutions, which has Capitol Skoda as one of its clients.

    “CRM is leading the new customer-led sales environment. It’s probably the most dramatic change you can make that will have an effect almost instantly on the quality of service and your ability to earn money,” says Cleverly. “Imagine a customer who phoned your dealership two months ago and enquired on a model not yet available. Then you call him and ask about his holiday in Italy and whether his wife enjoyed going back to where they were married.

    “You know all this as you spoke about it two months ago and have just listened to that call two minutes before phoning him. What does the customer think? Probably astounded by your apparent interest in his life, and you’ve just outdone every other dealer he has spoken to.”

    Capitol Skoda in Newport, the largest solus site in the UK, opened to the public in January 2005. CRM is key to the Capitol’s success, and helped sell 125 units in the first four months of operation.

    “Through CRM we recognize customers immediately; whether they have bought, are considering buying, or have just made initial contact,” says Jason Lewis, Capitol sales manager. “It doesn’t matter who answers the phone, every client feels valued by all members of staff. Customers have commented: ‘It’s nice to see everyone knows me’.”

    CRM doesn’t end with sales of new and used cars. “By implementing the correct process you will increase F&I, GAP, Paint Protection even sell more accessories,” says Paul Cleverly. “You will never ever look back.”

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