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Measured Expectations

August 2010, F&I and Showroom - Feature

by Mark Rodgers

What if more door swings didn’t lead to more sales? What if commissions didn’t really drive performance? What if following up with customers makes them like you less? What if, for all these years, the largest impediment to your success was your inability to discover what actually produces results?

Instead of using conventional wisdom and flawed models (e.g., “that’s how the other stores do it”) that lead you into a pricing war with your competitors (where the customer ultimately hates the dealership experience), what if we changed course? What if we looked honestly at what works, what doesn’t and what’s best for our business?

If we can dispassionately look at issues, such as whether managers “desking” deals actually decreased front-end profitability, might we just find aspects we can improve? We can’t change the nature of the car business overnight, but what if we could increase the number of “fun” deals and eliminate or change the nature of some of our toughest transactions?

Testing the Obvious

Take, for example, a dealership in the mid-Atlantic region. The owners have spent untold — and uncounted — amounts of dollars and effort for years producing direct mail campaigns to support its open house efforts. On the surface, it looked as if it paid off. With a packed showroom, who wouldn’t think these efforts were worth the effort? Apparently, the analytics-driven dealer principal didn’t once he decided to evaluate the promotion.

What this dealer discovered was that on the days of the events, the dealership actually sold less. Sales of major units were down, high-dollar accessory sales were off and, to top it all off, they had to pay for food, entertainment and other event expenditures. Could the event have stimulated residual sales? Might customers have come back later as a result of their positive interaction at the promotional event and spent money? Well, anything is possible, but, you have to ask yourself, is that a compelling reason to continue spending the time, money and effort to run these types of events?

It’s time to smash conventional dealership business wisdom by testing our assumptions. The path to this new way of doing business is through the coordinated use of business intelligence, customer intelligence and evidence-based management. Let’s review each component:

■ Business Intelligence (units sold, profit dollars, forecasts): The gathering, analysis and derived knowledge of your real-time business data. The key here, of course, is the immediacy and utility of the information. That includes everything from your transaction information, like unit sales and F&I measures, to income statement reporting.

Customer Intelligence (demographics, purchase info): Information about customers and their purchases not only helps you understand and guide consumer behavior, but it also increases your interaction and loyalty to your dealership. When collecting this information, remember the five “Ws”: 1) Who bought? 2) What products did they buy? 3) When did they buy? 4) Where did they buy? 5) Why did they buy? 6) How did they buy?

Just remember that when it comes to customer intelligence, there are “important and obvious” insights, as well as “important and not-so-obvious” insights. Below are some examples.

Important and Obvious Info:

- If service labor dollars are down, target customers in a particular mileage band for scheduled service.

- If they purchased a pet barrier, did they also get a cargo liner?

- If they purchased mud guards, did they purchase bug deflectors?

- If they bought floor mats, did they get dash mats?

Not-So-Obvious Info:

- Do people of a certain age have buying tendencies?

- Do people of a certain ZIP code have buying tendencies?

- Do people of a certain age and ZIP code have buying tendencies?

■ Evidence-Based Management (a different approach): Employing facts to the fullest extent so leaders can do their job better. Based on the belief that facing hard facts about what works and what doesn’t will help businesses perform better now and in the future.

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