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?
- 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.
Putting Ideas Into Practice
So, how does one gather business intelligence? Well, you’ll be surprised at the opportunities the daily grind presents. Take, for instance, a Harley-Davidson dealer with whom I worked.
See, this dealer had a ton of calibration downloads in cartridge format. Unfortunately for him, they only worked with specific motorcycles, and Harley-Davidson had already discontinued the use of the format for computer downloads.
Rather than throwing the cartridges away or allowing them to collect dust on the shelf, the dealer queried his customer database for a listing of all members who owned motorcycles that were compatible with his cartridge inventory. He then created a promotional offer that gave those customers a free download with the purchase of a new set of Screamin’ Eagle slip-on mufflers and a new Screamin’ Eagle air cleaner.
Most of the names filling out this dealer’s list were customers who had five-year-old bikes. His staff, as you might imagine, wasn’t too enthused about the idea, as most thought these customers already had the equipment required to qualify for the download. The dealer didn’t disagree that the customers on his list owned those parts, but he figured that those components were worn out, scratched or discolored.
In the end, not only did the promotion clear out all the cartridges, but the dealership sold a pile of mufflers and air cleaners. After the campaign was over, the dealer took the promotion one step further by personally calling 35 of the buyers to find out what their motivation was for taking advantage of the promotion. Some customers were under the impression that the new mufflers would sound better or give them more power. Most customers, however, simply thought their older mufflers looked worn out.
The true value of that promotion was that customers had a new download to match the new mufflers, so it was a true $150 savings. More importantly, the dealer now had data to guide future promotions.
The business intelligence here was the identification of the older, over-inventory position of the calibration cartridges. The performance insight was that the dealer could either:
a) throw out the cartridges and write off the inventory (write-ons are always better than write-offs), or b) try to take action to recoup some sort of return, which is what this dealer did.
As for consumer intelligence (i.e., their customer database), the dealer was able to identify customers for whom these cartridges could help. Then he was able to use his marketing insight to come up with a logical promotional offer.
The dealer then practiced evidence-based management and took a very reasonable risk (as long as the marketing campaign was cheap, what did he have to lose?) and measured the results. In addition to the quantitative findings, he also used qualitative research (called 35 customers to ask them about their purchase motivation) to test if his marketing insight was on the target or if something else was driving the purchases.
This example begs the question: How many high-dollar parts and accessories are sitting on your shelves gathering dust and tying up precious capital? How many sedans are growing older by the moment? What apparel do you have tying up needed space and resources?
What if you could intentionally replicate this practice of data marketing over and over again in your business? Well, the potential, quite frankly, is limitless, and it’s easier than you think. Just let your market intelligence be your guide.
Mark Rodgers is an award-winning author, trainer and founder of Peak Dealership Performance. He can be reached at [email protected]
Sidebar: Smashing Conventional Wisdom
If you aren’t using evidence-based management, don’t feel bad. There are several major corporations that have been victimized for not heeding the power of data-driven decisions. 7-Eleven was one of them. In 1987, its parent company, Southland Corp., spent millions of dollars and untold effort on a customer service initiative that rewarded store managers for simply offering a greeting, a smile, eye contact and a heartfelt “Thanks!” to every customer.
The company even hired popular game show host Monty Hall for a $1 million drawing for 17 managers whose stores won regional courtesy contests the company initiated. Unfortunately, what the company found was that sales were actually lower at less courteous stores. What they failed to realize is that convenience store customers don’t care about perfunctory greetings; they just want to get in and out fast.
Before you make the same mistake, why not test this evidence-based theory by trying these three experiments at your store:
1. Expectation-Setting Sales Statement: The obvious benefit of such statements is that they create a social contract between the salesperson and the customer, or does it? Why not test to see if making these types of statements early in the sales process has any impact on closing ratios and referral acquisition? Here’s a typical statement you can use to test this out:
“We’re excited that you’re considering buying your car from us. What we want you to know is that we are committed to making you so deliriously happy that you’ll want to refer your friends and family. Fair enough?”
2. Use Test Drive Evaluation Forms: Test drives are pretty much the norm in the auto industry. But instead of staging a carnival-like event where customers are lined up for a test drive, why not make it a more personal experience that might even help you close the customer? To do that, create a test drive evaluation form that asks drivers about their impressions of the vehicle. Heck, the experience might culminate with you using a trial close. Just make sure to study the impact this concept has on closing percentages.
3. F&I Pen Reciprocity: At some point in your career, I’m sure you’ve heard of the rule of reciprocity — where you feel compelled to return a favor to someone who’s done something for you. So, what if you gave your customer a gift, such as a high-quality pen with your dealership’s name on it, right before you presented your F&I menu? Would that have a positive or a negative impact on your F&I transaction? Here’s a word-track you can use when testing this out:
“Welcome back. What we want to do now is review some of those cool things you are entitled to now that you are officially a member of the dealership family. But first, we’d like to give you this (open the box revealing the gorgeous new pen) dealership pen. We give this to you for two reasons: One, we want you to remember the day you joined our family and, two, because you’re about to sign a lot of documents!”
The key here is to examine the various outcomes. For instance, does the gift have any impact on the dollars of the deal? Are “pen” customers more satisfied with their dealership experience? Would these customers be more likely to provide a testimonial of the dealership?
Evidence-based dealership management could give us insight as to whether this would influence your business. And although this small technique isn’t going to result in millions of dollars, it may add something. The question is, what if this technique could work in other customer exchanges?