…And why the Internet is the worst thing that’s ever happened to car dealers.
THESE ARE THE BASE NOTES FROM JIM ZIEGLER’S KEYNOTE SPEECH AT INTERNET SALES 20-GROUP IN DALLAS LAST WEEK…
Performed by Jim Ziegler, CSP, HSG at Renaissance Hotel, Dallas, Texas, 3/19/2013
First of all let’s look at some of the lessons I’ve learned from 37 years kicking around in the car business…
Manufacturers do not know how to sell cars, and they’re never going to learn but they will continue to interfere and meddle in the retail process. About the time they finally realize that their theories don’t work, they retire and here comes the next batch trying the same old tired crap that didn’t work for the guys that just retired.
According to the most recent census and government statistics, there are approximately 208,000,000 licensed drivers in the United States.
As an aggregate number, reputable forecasters that predict our sales are saying we will sell 15.5 million new units sales in calendar year 2013.
At the same time these industry experts are predicting approximately 43,000,000 pre-owned (used vehicle sales).
There are 208,000,000 licensed drivers in the USA accounting for 88% of adults within eligible age guidelines. That is up from 193,000,000 a decade ago.
AND, get this! The number of young licensed drivers is decreasing percentage-wise. In 1983 more than a third of all licensed drivers were under 30 years of age. Today that number has decreased to less than 22% with a down arrow. Qualified adults in 1983 under the age of 40 accounted for more than 50% of all drivers while today that number has diminished to less than 40%.
There are 234,467,679 cars and light trucks registered to US Citizens. In other words we own 1.27 cars or light trucks per licensed driver already.
In other words, if we are going to continue to sell 58.5 million units annually; and, that number is expected to grow, we will have to sell a new or newer car to every licensed driver every 3.5 years.
That is in direct conflict with the fact that the average car on US Roads today is 10.8 years old. Compare that with 6.9 years in 1973. It appears that everyone that wants one has one or two or more already, and they’re hanging onto them and maintaining them better.
Collectively all of manufacturers selling product in the US Market have forecast their production in excess of 35,000,000 units. Of course we all know “That ain’t gonna happen”. So, somewhere around mid-year they will make dramatic revisions scaling their production plans back and the year-end incentive wars are on.
The Numbers Don’t Lie. At some point we’re going to reach market saturation… again.
In 2007 we sold 17,000,000 new units and 43,000,000 used units which is the all-time record U.S. automobile sales. If that is to happen again, most experts agree it won’t happen until perhaps 2015.
We had been traveling at numbers rivaling that pace for nearly five years leading up to it. Remember, we were cramming nearly 61,000,000 units a year into a potential customer base (licensed drivers) of 200,000,000. At the time I was writing in every article and saying in very speech that we were rapidly reaching market saturation… and… even if the entire economy had not collapsed in 2008, car sales were poised to tank under the weight of dramatically reduced demand.
The Internet is the worst thing that ever happened to Car Dealers.
Remember, although most people know me as a speaker and industry trainer; I have an unrivaled record for accuracy in industry predictions I have made over the last 25 years as an industry forecaster.
Here’s the bottom line. The Internet has not created the sale of one additional unit that we wouldn’t have sold anyway.
All the Internet has achieved in our industry is that it has inserted vendors between us and the retail customers who are taking a huge slice of the profits while, at the same time, many of them are reducing our profits.
AutoTrader.com alone has annual revenues of more than $1,037,000,000. Let me spell that out for you… that is One Billion and Thirty Seven Million Dollars annually. The majority of that billion dollars was paid to AutoTrader.com by dealers out of what was otherwise your profits. Did you get your value out of it? Or, like most dealerships are you wasting the opportunities?
Now, exponentially add up all of money paid to all of the vendors who are grabbing some piece of your pie to deliver sales to us that would have happened anyway. No vendor has ever said credibly they created additional customers or brought new buyers into the marketplace.
Okay, now that we’ve said all of that… Let me make another statement… pay attention, this is extremely important.
“All the Internet has accomplished is redistributing which dealers get the business.”
In other words, it doesn’t matter if we like it, love it, or hate it. It’s here and it’s not going away. You have two choices, ‘Grow or Die’. With the market barreling toward saturation again, the dealers with the best Internet sales and marketing processes and training are going to dominate and take the business away from their weaker competitors. They already are.
If your dealership, is underperforming while a competitor across town is over-performing, there’s a strong possibility they are taking that business from you with superior technology-enabled sales and marketing.
Traditional advertising is no longer cost effective, and frankly, most of your messages are lost in the buzz. It’s just so much noise you tune out in the background of your life. It doesn’t engage you, grab you, or cause you to pay attention and participate. If it’s passive messaging and not interactive advertising, it’s not effective.
Newspaper is wheezing its last wheezy gasps of breath as it eats the last brown shriveled leaves off of the trees as it is being sucked down into the tar-pits.
I have more than 450 channels on my cable television. No one station has a significant share of the audience, it’s too diluted.
Direct mail, radio, the inflatable gorilla on the roof and the wavy-armed guy on the driveway; what used to work has greatly reduced effectiveness… or none at all. Contrary to popular belief, balloons are not state-of-the-art marketing.
If you are a dealer or a key decision-maker in your dealership, the survivors who make it into the millennium… ultimately the winners… are going to be those dealerships that made the commitment to the personnel, tools and processes that will put your company on top.
As a dealer, if you are going to achieve excellence and maximum profitability over the next decade; these are the commitments you’re going to be required to make.
Resistance to Measurement
In most dealerships today there is an element of people within the organization who are resistant to measurement. Internet excellence in sales and marketing requires constant monitoring and adjustment. Me, personally, this is not a part of my personality. So the answer is to hire trusted employees with the expertise to report and monitor and advise changes in a rapid-fire evolving environment.
Like Henry Ford, it is not necessary to understand how to do everyone’s job; it is more important to hire competent people who know.
Customer Relationship Management
“Your part customers are your best and cheapest source of new business.”
CRM is not a technology application, but rather using technology to amplify productivity.
There are two things every dealership must commit to in the larger picture of managing the customer relationship… ultimately protecting your reputation.
First of all: You must have a CRM technology that not only measures and tracks ongoing business, but; a system that manages the relationship with past and current customers throughout their ownership experience.
Secondly: You, as the dealer, must legislate compliance. What I mean by that is that once you have a CRM Process in place, there is no tolerance for deviation.
I can tell you from experience that every time I have worked with a dealership and we required that every manager and employee used everything the CRM did, the numbers went up dramatically. Unit sales, closing ration and profitability: You must require that everyone uses the system you selected without exception, zero deviation. There is no part of the CRM program that is optional for anyone, regardless of their position or production. I have increased dealerships by millions of dollars annually with that simple adjustment.
Daily Save-a-Deal Meetings
Regardless of the size or staffing in a dealership, in my world management meets daily to discuss ongoing business and strategize sales.
Within any sales organization there are several cultures at war with each other, defending their turf, and; justifying their position.
There is no room for clashing cultures within an organization… and there is a valid reason for the meeting of the minds.
The ‘Old School-New School’ wars are tearing many dealerships up. The truth be known there is a need for all of the traditional sales tools the techies are so adamantly rejecting, and the traditionalists need to accept that technology enables sales and marketing is the new reality.
Merging the cultures into a smooth and flowing process of cooperation is in everyone’s best interest.
Every morning before the beginning of business, before the sales meeting or any other necessary duties; the managers meet with a dedicated agenda.
There is no postponing this meeting or canceling it, or opting out before you had something else you need to handle. The save-a-deal meeting happens every day and no one is excluded that is scheduled to be there, not for any reason.
The elements of the meeting are the sales management, the F&I management, and the BDC managers. These meetings work best when the dealer, general manager or general sales managers are present and conducting the flow.
If you, as the dealer, GM or GSM never attend these meetings, you will not be personally aware or on top of your business.
Save-a-deal meetings begin with the F&I report on deals in progress, in transit, conditions for approval… what’s working and what’s dead… what we need to put these together.
The BDC manager discusses appointments and deals in the pipeline at all levels of the funnel. What advertising is working and what vendors are performing… which ones are not.
The sales management is the recipient of the information from the two supporting departments and together an action plan for the day comes out of the meeting. It’s all about what’s working, what’s not working, and what we need to change and what we need to change it to.
The most successful dealerships in the business meet with management every day.
The Bottom Line is The Bottom Line
Over the years I’ve developed a reputation as a consultant for turning dealerships into the big numbers quickly. We’ve seen dealerships that never sold 200 units a month in history, delivering 600 units a month in less than a year. Dealerships selling 500 units a month grow to 1000 units a month in a year and one-half.
Without exception every time these dealerships have exploded into the big numbers overnight. Not one time ever did we gradually grow into it.
The secret to growing a dealership to the big numbers is to assess the potential and then act like you’re already doing it.
The areas of concern are
- Processes and training
- Internet and Customer Communications department
- Community involvement
- Reputation Management
Once a dealership has all of those areas operating at their best levels, the numbers will grow to the dealership’s maximum potential sales and profits.
The Final Factor
… is dealer commitment.
You want the numbers? You want to survive and prosper in this increasingly competitive environment. The only way to increase your business… or even stay where you are now… is to take that business from a competitor that already has it. The Internet is the combination to the vault and you need to get serious or get out of the game.