Over the last three months I’ve noticed that that more and more companies are succumbing to cyber threats and attacks. I hear about big companies like Yahoo in the news, and I have received notifications firsthand from three other relatively big ones, who have all informed me that their systems have been compromised and that I should update and change my passwords www.adobe.com, www.linkedin.com and www.payasugym.com (which I use when I’m on the road). These aren’t small companies, two are tech giants and given that LinkedIn is owned by Microsoft, it doesn’t bode well for the future if Adobe and Microsoft can’t protect my data and their data effectively!
It feels to me like its ramping up, getting worse before it gets better. Yesterday I received a notification from www.Logmein.com another service that I use, that there had been an attempted login from France. I live in the US it was flagged up for that reason. It’s great to know that it was only an attempt , however no doubt someday soon there will likely be a break-in. So what should a small business like mine do to protect itself?
What I did was write an email to my friend Si Thomson! https://www.linkedin.com/in/simonthomson Si has been my IT guru for the last 17 years and asked him for his sage advice. Which he has given me and I think it’s so good that I’m sharing it with you. It’s not been edited so hopefully you will forgive some of his more flamboyant language!
Oh good god. This is becoming a nightmare. I’m sure you follow the rules of passwords – but I’m going to offload some of my advice and what I do personally because I hate friends and clients having these issues.
If I was to be honest – the most important element of keeping your details and info safe – is point 4 – VPN.
I hope something in this quick brain dump helps you in some form Brian.
Cheers for now
Thank you Si, your a top bloke. The information is so useful and I owe you one.If you need Si to help you his contact details are on his LinkedIn profile https://www.linkedin.com/in/simonthomson
The final bit of information Si gave me was this infographic
I wrote a blog post back in March 2010, I revisited today as an update to a wonderful story that’s still unfolding. The blog was called:
A rather ridiculous thing, running and sales and was an introduction to my monthly newsletter at the time, because I had a rather ridiculous story to tell.
In May 2009 I received an email from Ian Kinsella pictured above, the content of which I’m going to reprint for you. It’s inspirational and its genuine. After you have read it there’s a YouTube link to a presentation that Ian has just delivered that I recommend that you share as a reminder of just how much your chosen attitude can influence your life.
An inspirational email
I want to give you a little background to the email. It’s from a salesman that I have worked with for a number of years. He’s in his mid-20’s and he lives and works in Dublin. He’s been one the best delegates that I have trained (and is to this day), he’s enthusiastic about training, he likes to learn and he’s not afraid to try.
This is his email exactly as he wrote it:
How the hell are you? I had to email you as I did something that is rather ridiculous in the current economic climate and if anyone would appreciate it, it’s you.
As you know, I’ve had a difficult year; in fact, about a month and a half ago I lost my Grandmother too which was like rubbing salt in the wound after losing my mother. Basically I hit an all-time low and didn’t think I could pick myself up again, I had no interest in selling cars because it all seemed so insignificant……………..so I made a decision, to try beat the sales record in the middle of this recession, I thought that setting such a crazy goal would keep me focused and make me get back into selling again, I also knew that I can do anything if I put my mind to it.
So I gave up drink, I worked every day and every hour I could, I answered every phone first, got to every customer first and I started to get back in the groove very quickly and before I knew it I had delivered 60 retail cars in 26 days; breaking my old record of 58 set back in January 2007.
Maybe in these depressing times when your training around the world this story could be worth telling other sales people who are struggling and think that you can’t make money in this recession.
From the 9th of April until the 7th of May: 61 Hours a week, 244 hours in the month, 2.3 sales a day over 26 days – Record broken by 2 units.
Hope your well,
This landed in my LinkedIn feed this morning. Please take some time to watch it.
Its Ian’s story in his own words 7 years on , its 15 minutes long and one of the best presentations I have seen delivered in a long time. Its professional, its motivational, it’s real and its meaningful. It’s worth sharing with your sales people, it’s worth sharing with your friends and with your family. It’s truly inspirational and for me was a great way to start my day. It should be a TED talk on a much bigger stage.
When I wrote the blog I was concerned that people would think that the story was an imaginary tale! Well I think you can see it’s clearly not and if you are a salesperson or manager then you need to take on board Ian’s message.
Ian had focused on what he could do, he had set himself a goal and he had worked hard to achieve it. He had focused on his activity and he had taken every customer inquiry seriously. Perhaps that’s why he and his team are still breaking sales records in his new career.
I love the line that he soon got back into the groove, because that’s exactly what we all need to do. Back in 2009 Ireland was rocked by the recession it faced, and it really is only coming out of it now in 2016. Stay focused. Lift yourself up, challenge yourself, rev your motivation and point yourself in the right direction, that’s what Ian did and look what he achieved.
Running and sales targets
If you know me well you know that I get off on running. I completed my first half marathon in 2009 coming in at 2.00.52 on the clock (Ian’s marathon times put me to shame but then again he is 25 years younger than me :-). I’ve done many half marathons since but not a full one and I think Ian’s gentle reminder to me today was just what I need to get me back on a full marathon track.
So what’s running got to do with sales? Well targets for most things in life fall into the categories of quality, quantity, cost, profit and time. Running is said to be simple to measure; you have a distance and then complete the distance in a time (the 100 meters for example). It’s not that simple though; what if the distance is all uphill, what impact will that have on the time? What if the temperature is going to be high or the humidity high?
The conditions will have an influence over the result and you will have to work harder in tougher conditions (and smarter) to achieve similar results to the race before. It will have an impact on your time as well unless you train differently for the different conditions (and as Ian points out you have to have the right gear and training to truly compete.
Well that’s the same in sales in my mind, if the market conditions are tougher so we need to work harder and train differently. If there are fewer prospects around so we really need push the boat out with every customer, give them the best presentation we can, present the offer in the most enthusiastic way, communicate all of the positives and really do our best for every customer. The market today needs us to treat every customer like they are gold (because they really are) and treat them to the very best of our ability.
I truly believe that we all need to train harder for these changing economic conditions. I train 5 days a week for the reward that it gives me. I train to make sure I’m prepared. I do it because I love it not because I’m forced to do it. I make time for it because if I didn’t then I might either injury myself or fail to meet my goal. Now there are people around me that say I’m mad (which is probably true), why bother, what’s the point. The point is that I’m doing it for me, the point is that enjoy it and the point is that it is rewarding for me.
And that’s exactly the sale in sales, if your salespeople don’t enjoy it, don’t find it rewarding, if they don’t want to work harder in a tougher environment and they are not prepared to train (or for you to train them) then don’t be surprised if things don’t improve.
I think that Ian’s email and his presentation says it so much better than I do. Nobody forced him to work so hard, he did it because he wanted to, to challenge himself and to see what he could really achieve. He achieved his goal and I know that he got his reward as well.
I hope that Ian’s story has touched you, it did me. I can’t wait for the next chapter!
P.S. His Berlin time was under 2 hours 46, 8 minutes under his personal best. Way to go Ian!
Most sales managers tend to approach budgeting simply by looking at the unit and bottom line figures. Here, Brian looks at a different approach – one which he implemented at a dealership towards the end of last year.
I started my projections by looking at how many units were sold in each month of the previous year, and then converted each monthly total into a percentage of the total (alternatively, you could take the average monthly sales over the past three years, to iron out the effects of any special promotions or market anomalies). I was working on the basis that those monthly percentages were unlikely to be significantly different in the year ahead (although the number of sales might be).
Next, I took the 2015 sales targets (2300 new and used retail units) and broke that down into 12 monthly targets, based on the previous year’s percentages. From that I was able to work out how many prospects the dealership would need to talk to (based on a 20% closing ratio, which I believe is the industry average – in the Digital sales age your sales team may well be closing 25%-30% of the prospects they talk to to achieve the required level of sales each month as customers are better informed than ever before.
From this you can calculate how many salespeople you actually need to do the job, and whether you currently have enough or too many. In this example, the dealership currently has 8 salespeople. They will require an extra two to meet the January target, two more in February, and a further one in March. By the time April comes around you might think the sales department will be over-staffed, but of course you have to remember that, one, there will be a degree of staff turnover and, two, you also have to cover holiday and sickness as well. The projections are based on each salesperson delivering 180 units per year.
Having determined that the sales team needs to speak to 1,200 prospects in January, it follows that they will need to give 600 of them a test drive. Again, that is based on standard industry figures – for every ten prospects you demonstrate to, you should sell four cars. So, for example, in January 600 demonstrations should lead to 240 sales.
Similarly, with customer follow-up, experience suggests that each prospect who leaves the showroom without buying a car needs to be contacted three times to maximize your chances of converting them into a sale. The first follow-up is usually to thank them for visiting the dealership, and to establish if there are any other ways in which we can help them. That contact, whether it is by phone (preferably), a handwritten note, an email or a text, should be made within 24 hours of their visit to the dealership, unless they have visited on a Saturday in which case Monday is the best time to re-contact them – Sunday is a bit too intrusive in my mind. The second might be some additional information and an offer of a second demonstration to help the prospect make a decision. The third should be to establish the next course of action.
If you are doing three follow-up contacts per prospect, then you are working pretty hard. If 360 follow-ups are required per salesperson during January – that’s around 15 for every working day of the month. 15 call-backs per day is basically two hours work on the phone, which is probably as much as a salesperson can productively manage, bearing in mind that most of them are probably doing a delivery a day as well. So, any more than that and you are probably going to have to give your sales team some extra support
That is the trouble with most budgets – we tend to budget for results when what we should also be budgeting for is the salesperson’s activity levels.If you want your salespeople to be effective, then you simply have to budget for their time to follow-up prospects. If you don’t, you will probably find that your team is not big enough and inevitably they will reduce the number of follow-up calls they make. This in turn will reduce their effectiveness and your sales.
Does it stack up?
The next stage is checking to see if this all stacks up as a budget. This year, in our example, we required 24 unit sales per salesperson per month on average. Last year it was 22. So the question is, can we expect to get an 8% increase out of our sales team? In this particular case the answer was most certainly yes, since we were working with a more experienced sales team now.
Also as a cross-check, last year the average per salesperson was 19 units and we managed to raise that to 22.
On a 50% finance penetration in January, the dealership would sell 120 cars on finance and get $174,000 in finance commission. But if they could just raise that penetration to 60% they would sell 144 cars on finance and bring in $208,800. If an extra 10% penetration means an extra $420,000 profit over the course of the year, you have to ask if it would not be worth considering investing some of that money in an additional business manager to ensure we get that extra revenue? Or, it might mean looking again at the way in which we sell finance to try and maximize the potential.
Use actual results
My first attempt at the budget, was done using only the dealership averages. My cross check was done on actual results, which means I am now developing a budget that is based on each of the salespeople’s real activities in previous years. It’s a much more accurate way of looking at whether or not we can achieve our budget.
First we look at what the individual salespeople should be able to contribute during the new year in terms of units, and at what activity levels are required. Here we are working on the basis that for every two demos you do you will sell one car.
When we come to look at F&I, we see that if they continue this year as they did last year then they should be able to bring in $2.4m of F&I commission, which is in line with our projection. It means we are going to have to do something with finance if we want to raise it $1.4m.
So this now becomes a very good check against the original activity-based budget. If that came in at $1.9m, for example, we’d have to do something radical with finance. But as we are in the ball park in this example then we can be confident that there is definitely an extra $0.5m up for grabs.
Excel (email us for the attachment)
The beauty of developing your budget on an Excel spreadsheet is that you can interrogate it to ask ‘what if?’ for example, our example spreadsheet shows 1,000 new and used units. Replace that with, say, 550 and all the other figures will change accordingly.
Looking across the top of spreadsheet, sales turnover is based on average selling price. If you changed the average selling price from $20,500 to $25,500 the figures would change again.
You can use this to get a feel for the volume of sales you think you are going to do, which will be important to you in terms of identifying cash flow and for making your cash flow projections. Say you have 50% finance penetration, 60% trade-ins and you sell a car for $25,500. For three days you will have outstanding, say, $18,000 worth of finance and you might also have a trade-in that is tying up your cash.
Most dealerships will only do a result based budget (which is much better than doing no budget at all). They don’t tend to think through what their salespeople are going to have to do to get there. And there’s no cross-checking. Dealerships need to look at carefully at what they have done this year before they start budgeting for that % increase next year.
It started with Rockar
and the trend continues with Aston Martin opening their Mayfair boutique
and continues with Seat opening a store in Lakeside,
What’s interesting with this news story is that it is Group 1 Automotive Group1 are one of the largest automotive groups in the world. Although mainly located in North America this exercise is worth keeping an eye on. If successful they will most likely bring it to the US where it will be fought, as it would fundamentally change the dealership model here.
And it continues with Porsche set to tap into the premium retail environment of Leeds’s Victoria Gate shopping mall with a new pop-up brand experience center with “no overt sales process in place”
Time and changes in automotive retailing march on!
Flying back from London to Chicago yesterday afternoon I experienced a new level of customer care from British Airways that I want to share.
On boarding the plane and whilst getting settled into my seat I was passed this card from Jo of the cabin crew.
Handwritten, personal and welcoming. It was a great start to a really improved service.
BA had made one other small change that I didn’t really notice until the end of the flight. Normally the meal service food is served from the cart however today it wasn’t. The food was served on a tray and carried to the seat by the cabin crew (as were snacks during the flight), simply it was a much more personal service.
Two very simple changes that made a world of difference and made the overall flight experience so much more pleasurable.
Thank you British Airways, the little things really do matter!
When work in the office I listen to NPR (National Public Radio) and I heard an interesting interview with a surgeon this morning as I was doing some bench-marking that I think is worth relaying.
This senior Harvard surgeon has implemented simple check lists into his operating theaters. He is responsible for 8 hospitals and every surgeon that works for him has to use the checklist before they operate to help them diagnose and then deal with the patient properly (and to ensure that mistakes don’t happen). The checklist takes 2 minutes to complete.
His surgeons hated them when they were introduced. They said that they didn’t need them, they already did everything right and that it was important to follow their instincts; the lists wouldn’t help or add any value.
The surgeon that first implemented the checklist went on in the interview to tell a story about a patient who attended casualty with a small stab wound.
His blood pressure was normal and the wound was not visibly bleeding much. 10 minutes later the patient collapsed and when they opened him up they found that an internal organ had been severely damaged. The width of the wound was small; the depth was 10 inches which they had overlooked completely. The checklist would have helped the surgeon diagnose more effectively because it asks the question about the instrument that caused the stab wound (in the event of penetrating wounds). The patient survived but only after a very dangerous operation, intensive care that cost a small fortune and a longer recovery than needed (had he been diagnosed properly in the first place).
6 months down the line the fatalities in the 8 operating theaters that use the checklist have dropped 35%, 80% of the surgeons say that the lists have helped and most interestingly 94% say that if they were to have an operation themselves that they would want it in a hospital that uses the checklist!
HERO’S AND LISTS
“Sully” Sullenberger is called a hero for saving 155 lives when he successfully ditched a plane into the water in New York City. Airline pilots use lists as a crucial component for normal job tasks and also critical parts such as emergencies. Sully says he wasn’t a hero, he simply put the landing down to great team work and adherence by the team to the protocols that they followed (the checklists).
A LESSON FOR YOUR SALES PEOPLE?
If your Sales people are missing opportunities, or not following your sales process, or taking shortcuts, because their experience and their instinct is better ,then maybe there is a lesson to be learned from surgeons and from pilots.
Sales is not life critical, and maybe the comparison is not valid, however checklists can become important support tools in business that when used help to get the job done properly.
Dealerships understand that a successful test drive demonstration increases the chances of a sale by bringing a vehicle to life in a more direct way than any online brochure, YouTube video or Virtual Reality experience will do.
In 2015 17.4 million new vehicles were sold in the USA through 18,011 dealerships with the average US dealership selling 970 new vehicles and a similar number of used. With 80% of those sales having had a test drive before purchase it means that there are more than 700,000 new and used vehicle test drives completed each week throughout the country on sold vehicles alone.
Factor in those demonstrations that didn’t result in a sale and the total number is way over a million test drives conducted through dealerships every week. This represents an investment of millions of dollars in man-hours, fuel costs and vehicle expenses, which emphasizes the importance of achieving a return on the investment from the activity, easy to measure but hard to cost.
The demonstration test drive plays a number of critical roles at a dealership:
Probably the most important sales factor is that for every two quality demonstrations given there is a proven closing ratio of 50%. The significance of the test drive to each dealership then is a critical success factor, because the conversion rate almost doubles when a customer has a successful test drive demonstration than those customers that don’t.
So given the importance of the test drive you would expect Sales Managers to reinforce the message daily through their training and coaching. However in reality most Sales Managers have never even accompanied their sales people on a test drive, or asked a sales person to role play an actual test drive with them. For those that have done they rarely revisit and retest. This means that for those sales people that have fallen into bad habits on their test drives remain ignorant to the fact.
What this means is that for most dealerships, a key step in the sales process,RTS process steps 2016 is not looked at to see whether it can be improved. In the worst case the test drives given could be awful, doing more damage than good with both sales people and their managers completely unaware as to the damage done; which is unforgivable given a dealerships investment in them.
SELLING SMART PHONES
If you were to upgrade your smart phone for a new one without anyone showing you how it functions most people would be able to switch it, make a call, send a text message and access Google etc. However they wouldn’t necessarily know that the smart phones applications could control your heating and lighting at home, could check you into a hotel room, get an accurate weather forecast, use it to measure your heart rate and hold a boarding pass for your flight to name just a few functions of a smart phone today, unless they had knowledge and experience of the applications.
Without knowing how to use a smart phone you would most likely view the capability of the upgraded phone, on the previous experiences you have already had with previous smart phones in the past, which wouldn’t always a fully educated view given the speed that technology moves Like comparing an IPhone 2 with an IPhone 6S, they are worlds apart .
So, if you don’t take the time to demonstrate a product, you reduce the chance of it being purchased, as you are expecting your prospect to find out everything for themselves, which is fraught with pitfalls.
At the very least, with the connected car being so complicated today, with a poor demonstration you are losing the opportunity to let the vehicle highlight its key benefits at arguably the most crucial time in the buying process.
And if Sales Managers don’t know the expertise of their team at demonstrating their products then they are missing a trick; blind to mistakes and blind to opportunities to improve performance that increase sales.
A CAREFULLY PLANNED TEST DRIVE = MORE SALES
When *surveyed some 60% of unsold prospects (new vehicle customers) had taken a test drive as part of their shopping experience.
*SP 14 is an internet only sales person, resulting in a high close and low demonstration rate.
Delving into a dealerships CRM to look at the other side of the coin, sales person activity results report demonstration ratios higher than 80%. Clearly something is amiss as the numbers show a variance of 20%. What it is clear from the statistics though is that more demonstrations result in increased sales.
The reason the numbers don’t stack up? What is most likely happening in this situation is that only hot prospects are being recorded into CRM, resultant in a high close and higher demonstration rate than is actually being achieved (sales people 3, 6, 18,19 have high closes against demonstrations).
Among used vehicle buyers, overall test drive rates are higher, mainly because customers will be purchasing the specific vehicle they are looking at. Therefore a used vehicle sales process that is underpinned by robust quality test drives is a more successful model.
The timing of the demonstration and the length of the demonstration are equally important. Test drives earlier in the sales process allow more time for a relationship between the sales person and the customer to be developed.
Test drives later in the sale tend to be more a formality as pricing has been agreed to. The car still needs to prove itself, however the price negotiation has already been concluded.
The average time for a demonstration is around 30 minutes, with an hour being about the maximum.
Investing more time with customers has increased in importance over the past few years, as most will already have moved towards the final purchasing stages through the digital research completed before they even set foot in the dealership.
As a result, dealers may only get one chance to win over customers or risk losing them to another dealership, putting even more emphasis on the quality of the demonstration. *Further research has found that most people take a test drive during the critical period when they have narrowed down their selection to a few vehicles (56%) or are certain of what they want (38%).
On average, customers in 2016 revealed that they test drive just two vehicles and nearly two-thirds of buyers (61%) said a test drive can change their mind on the vehicle they are planning to purchase.
With so much at stake dealers risk losing the deal if they don’t get the test drive right. Test drives don’t just help a dealer to sell a vehicle; they help sell the client the right vehicle with customer satisfaction prior to the sale helping improve the ownership experience.
THE HUMAN TOUCH
The human touch is still at the heart of the sales process, despite the growing influence of the digital world (perhaps the word digital should be dropped as it really is the new normal way of shopping for a car for the majority of customers).
Although 75% of dealerships offer online booking of test drives, the vast majority say customers prefer to book by telephone or in person at the dealership, a solid reason for having a Business Development Center BDC. This reflects a survey of customers which found that most prefer to contact the dealer direct, while 30% prefer to request a test drive online. Either way a BDC can help to pave the way.
In truth, adopting both approaches maximizes the chance of offering a solution that fits individual customer requirements.
However, unless strict processes and controls are in place, any test drive promotion could risk losing sales leads rather than generating them. As an example an *international survey of 2,500 online test drive requests from a manufacturer found that 46% of requester’s received no contact after 14 days.
In another assessment, a quarter of test drive requests made online with dealers received no response at all!
So what do accompanied demonstrations do? In its most basic form a demonstration:
VIRTUAL TEST DRIVES
Manufacturers recognize that demonstrations influence however they have little control how they are delivered. This is why most are going down the road of first generation virtual test drives, virtual reality experiences that mirror physical ones albeit they have a way to go it really won’t be long before your customer will be able to sit at home and have a virtual reality test drive without touching the dealership.
Virtual reality VR cameras can range from $400 such as the Ricoh Theta through to Nokia OZO at $60,000. VR footage is much more immersive than flat video and to some degree bridges the gap between a video test drive and a real one.
DEMONSTRATION TEST DRIVE – POINTS TO CONSIDER
A predetermined demonstration route is recommended. You should have a route that incorporates the conditions and distance that will enable the customer to really experience the vehicle. It should be approximately 2-3 miles in length, have light traffic and be as uncomplicated as possible.
The sales person is more knowledgeable about the vehicle, that’s why the manufacturers give salespeople product knowledge training and insist that they have demonstrators available for the salespeople to drive.
The implementation of product “Geniuses” in Apple stores was designed to enhance the buying experience without any hard sell, allowing the “Geniuses” to answer questions and demonstrate products. Widely copied in retail by Microsoft, ATT, Samsung and even BMW, right at the core of the Geniuses’ role is their ability to demonstrate the product. That’s why it works so well in retail.
If the demonstration is unaccompanied then the salesperson isn’t able to communicate that knowledge and positively influence the customer. Neither can they answer any questions the customer might have as the test drive progresses.
One unanswered question can lead to an objection, one that you will be unaware of if you do not accompany the customer.
COMMON SENSE RISK PREVENTION (always accompany)
It is important not to allow the customer to drive dangerously or to break any traffic laws while in your vehicle, how can you do that if the test drive is unaccompanied?
Always get a copy of the driver’s license before you test drive a vehicle (card readers can read license and put the data straight into your DMS saving you and the customer time, which will help you).
The salesperson should drive the car to the turnaround point of the test drive course and continue featuring the vehicle in the process. If the demonstration is unaccompanied how do you accomplish this?
The salesperson should then ensure that the customer is set up to drive the car properly. Make sure that the customer is set up in the driver’s seat; show the customer how to adjust the seat, mirror, tilt wheel, outside mirror, and the seat-belt. This is safety related and often overlooked. It also DEMONSTRATES that you care.
Let the customer drive the car and at this point don’t enter into unnecessary conversation. Allow the prospect to concentrate on the new vehicle and simply answer any questions that they have.
THE DEMONSTRATION -BUYING SIGNALS
It is generally at this stage of the Sales Process that your customers are likely to start giving buying signals. They come in many shapes and forms, and you need to raise your awareness of them.
If you are not in the vehicle you won’t see the buying signals
And finally at the end of an accompanied test drive ascertain the customer’s opinion on the car and ask a simple question such as:
All are trial, or pre-closes. A pre-close can’t be done if you are were not in the car to see the buying signs!
The key ratio for success on accompanied demonstration is:
Or in simple terms speak to 10 prospective customers; give 8 demonstrations, give 8 quotes and that activity will result in 4 sales.
For unaccompanied demonstration the numbers tend to be lower at around just 35% of the unaccompanied demonstrations closed with a 20%-25% close.
A sales team’s demonstration and sales numbers over 12 months; SP 9 is working smart and getting the best result from fewer prospects. How are they doing it? By spending more time with each prospect, and by giving more quality demonstrations that result in more sales.
Demonstrations are hard work! As with all things in life – the more effort you put in, the more you get out – or in the words of Gary Player, the Golfer:
“THE MORE I PRACTICE, THE LUCKIER I GET!”
*Research data with thanks to AM-Online 2016
What benefit is there to a car market to register in excess of 50% of its monthly registrations in the last 10 days of the month? I have been trying to figure this out all year and it doesn’t make any sense to me for the motor industry in Ireland to continue to do this. June 2012 saw 4178 units registered in the last 10 days, a massive 65% of the month’s units! Our year to date report is at this link INSIGHT JULY 2012
With the seasonally adjusted sales rate (SAR) at just 77,000 units for the year the market is suffering from a savage beating at the moment. Retail sales are falling, and with the availability of credit tightening the prospect of more sales through finance doesn’t look good. Nor does the prospect of another scrappage scheme look likely even though some manufacturers are calling for them across Europe Crisis in Europe.
In fact things could get much worse before there is any sign of them getting better. The government have called for a review of VRT in Ireland and whilst this shouldn’t bode badly for the industry it needs to be very carefully managed.
When it was last reviewed in 2008 the timing couldn’t have been worse with the new scheme coming in on the 1st July that year. Effectively it killed sales in the first 6 months and the industry welcomed in the recession way before it should have done. This can’t be allowed to happen again.Click here for the VRT detail
IS THE DEALER’S VOICE BEING HEARD?
The reality is that the government needs to generate more revenue from the industry as their tax receipts are back 72% on 2007 from €1.4 billion to under €400 million last year. It’s highly likely that they will change the rates around the CO2 emission band and the rumour is that this will be in place for the budget. I don’t want to tread on any toes with this as I know that the livelihoods of a lot of people depend on the manufacturers, the industry bodies and the government getting it right this time.
However I do have concerns, concerns about the government not listening as well as it could do to what is happening at the coalface. To do that they need to listen to another voice, not as loud or as well represented as it could be for a myriad of reasons. That body is the dealerships, the people that own the dealerships, that run them and that work in them. They are seeing first-hand what is happening.
WHAT IS THE GOVERNMENT HEARING?
The most immediate issue and the most pressing is the one that I have started the article with, the pre-registrations that are happening at the end of the month. With the exception of cash rich dealerships (a declining species), which can avail of manufacturer incentives and buy pre-registrations at reduced prices, there is absolutely no benefit to these dealers to self-register. The pre-registered cars will be sold, however they will push down the price on used cars, cars in stock that the dealers are having to absorb (this reality is happening now).
|4 year comparison|
At the very same time the government must be hearing a very different message, a message that is confusing unless you have the full picture. This message is one that says we are getting our revenue at the end of each month as the new cars get registered so everything must be OK. Sure they would like new car sales to increase and therefore earn increased review from the tax. But they are not absorbing any pain, they are not absorbing direct losses for these cars and therefore these losses have no direct consequence to them.
Pain is a funny thing. I broke my rib just 3 weeks ago and I have to say it’s really uncomfortable. For the first week it was awful pain and I couldn’t sleep, the second week a little less and this week a little less again. But the pain is still there and I’m taking pain killers daily. Everybody around me has forgotten I’m in pain of course; the reality is they don’t care and I get that, however it’s hurting me and I’m having to make a lot of changes to how I do things because of it.
It’s the same for the government but they just don’t know it. The dealers out there are really hurting and they are in a lot of pain, but its a pain that the government aren’t feeling which they need to. 34,493 cars have been registered in the last 10 days of six months to June this year so far, 50% of the total cars registered year to date. If I conservatively suggested that 33% of these cars were self-registrations then the government has taken around €45million in revenue this year over and above what they really should have done. THAT WOULD BE A PAINFUL HOLE IN REVENUE TO PLUG.
My belief is that the real retail market is sitting at around 60,000 units this year and as such the likely revenue from VRT should be around €240 million and not the €310 million that they will likely get paid. If that revenue was €240 million perhaps they would sit up and take notice, €70 million that’s a big hole in revenue to fill. Its a truer picture of what’s really happening in the market on which to gauge their decisions on the VRT review. AND IT DOESN’T INCLUDE ANY OF THE VAT REVENUE THAT WILL BE GENERATED.
Getting back to the dealerships pain though; 5 dealers have closed their doors within the last 3 weeks and it is rumoured that there are manufacturers who are actively shoring up others. The reality is that there are still too many dealers for the size of the current market and more will go. What can be done to avert this?
There are therefore only two things that can be done, either somehow the market has to see a lift in volumes or more dealers have to close their doors. Anything the government can do to lift sales will be a welcome boost for the dealers as with this option there is a chance for the government to earn more revenue in VRT, VAT, PRSI and Corporation Tax. The second option guarantees a drop in taxation revenue and will result in more dealers closing their doors. The dealers need this message to be heard loud and clear.
My belief is that this argument, that any increase in taxation will hurt the other side of the revenue coin is not being discussed as much as it could be. Whilst the government picks up VRT revenue from decisions made to pre-register cars not required, the true story will not be told.
My genuine concern is that unless it is discussed in more depth with dealers it will lead to a decision on VRT that, like a broken rib, will be really painful and will take much longer to heal that is avoidable.
If the government increases VRT in whatever way, in a depressed market, it will have major adverse consequences for car dealers, jobs and tax revenues. The industry needs to avoid a repeat of what happened in 2008 by getting this debate on the table now and getting their voice heard loud and clear.
Dealerships looking to increase their profits in their sales department have traditionally focused on two key areas – increasing the prospect conversion rate, and increasing gross profit per sale. But there is only so far you can go with that.
There is undoubtedly some potential to improve the prospect conversion ratio in most dealerships. The true industry average is probably no more than 10% or so. 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 probably achieving 20%. But even with a tightly-controlled sales process in place it is hard to get beyond the 20% level – not least because of 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. And 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, or more finance. F&I has long been seen as a way to increase profits, but that too is under increasing pressure, not least from the legislative authorities. And 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.
During the past ten years or so the industry has focused more on increasing the customer’s repurchasing frequency as a way of increasing profits. Ford set the ball rolling when it brought out the Options PCP. It was designed to increase the frequency with which customers change their cars, and to make sure they came back to the dealership they bought them from in the first place. 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 stabilised, the PCP is regaining popularity. But there’s a clear need for the industry to develop new products that lock customers in and drive them back to the dealership, which are not tied to residual value risks.
We’re seeing some of those products being developed in the USA today, in the form of tyres-for-life and engines-for-life programs. Dealers who have embraced them are achieving some success in terms of getting customers to come back to the dealership more often – or even at all!
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.
With tyres for life, the warranty company that funds the program can buy the tyres in bulk, which keeps the cost down and makes the programs viable. It is 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 that goes out 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 like these, and reducing the amount they spend on traditional advertising. That represents something of a sea-change.
The motor trade is less good than some other industries – companies like Apple, Dell, EasyJet and Ryanair spring to mind – at marketing additional products to their customer base. On a regular basis these companies will come back to you offering additional products and services. If you buy a computer from Dell, for example, they will continue to offer you consumables, or a new laptop 12 months after you’ve bought one, or an upgrade to your home system 12 months after you’ve bought one. Easyjet and Ryanair sell travel insurance, hotel bookings and car hire, plus of course their in-flight services.
For the motor trade your used car stock offers you a considerable opportunity. A dealership database is perfect for marketing to. Who’s to say that of the 5,000 or so customers you have on your database, 200 aren’t going to be interested in a new used car right now? It is good CRM.
The key of course is a clean, up to date database. If you have that in place you can market additional service products, you can market to lapsed service customers, you can market to lost sales prospects….. the list goes on.
But the next generation of CRM strategies will encompass products that lock customers in to the dealership – because if you have got your customers locked in, once you start to tweak their repurchase frequency through your marketing activities you can start to see serious growth in your profits.