I've returned from the NADA Convention with a new level of enthusiasm. Why? Because the tone was one of determination.
During the past few conventions, with the exception of the year in which dot-coms were supposedly going to replace auto retailers, dealer attitudes have been positive. Why not, since sales and profits have been at or near record levels?
Ford Motor Co. CEO William Clay Ford Jr., told convention attendees that “relatively high” incentives would continue, and there is no indication interest rates will increase during the first two quarters of the year.
So, what's different this year? In my opinion, the dealers. I had numerous conversations with dealers who used terms such as “getting back to work” and “getting back to the basics.” That's music to my ears.
Manufacturers share a common goal: increasing or winning back market share. Ford, GM and Chrysler are in a dogfight for share while others quietly take bigger bites. Additional ad dollars targeting specific markets will, along with incentives, continue to drive showroom traffic, but what does this do to our gross profit margins?
Obviously, if we want to participate in the give-away game, our gross and net profits will suffer. How can we prevent that? We know gross profit margins are higher on referrals and repeat customers. But we continue to spend 80% of our efforts, money and time on snaring new customers. We should spend 20% there and that 80% working our existing owner bases.
One of the most successful dealers I know (a domestic) does a limited amount of advertising, yet month after month his store is the volume leader in his region and often near the top nationally.
Sure, he has a good location, but that's not all. He also has a plan to work his owner base and referrals. His average sales person has been with him 16 years and he has a waiting list of personnel wanting to join his team.
What would happen to your net profit if you could reduce your ad spending and invest in your owner base? What would happen to our retail volumes if we could retain sales personnel and turn those green peas into seasoned well-paid professionals?
We can make excuses for our high turnover or we can look in the mirror and have a conversation with the person there about changing our methods. Remember, what do we get when we continue to do the same thing the same way unsuccessfully?
It doesn't matter how much traffic we have, if we aren't prepared to handle it professionally, we only have ups to count.
How do we improve our execution or closing ratio? By working with our sales staffs. Hire the right people, then train and train. Sales managers and personnel must train and execute as a team.
I once worked with a successful high-volume dealer group. Initially, we had high turnover and we couldn't understand why since we had a very qualified group-training director.
Eventually, someone mentioned that we were training the sales personnel, but not the managers in the same sales processes. The sales personnel were spending two weeks in a training class and the very day they reported to the individual dealerships ready to conquer the automotive world, everything changed except our turnover ratio. When we strarted training managers, too, our success multiplied.
It's important to get a handle on turnover. That will, in turn, allow us to get back to the basics in the sales process. It guarantees improving not only volume, but also gross and ultimately net profit.
Tony Noland ([email protected]) is the president and CEO of NCM Associates, Inc.