NCM Associates Blog

Great Players Rarely Make Great Coaches.

One of the things that I think became readily apparent when the economy hit the skids in 2008 was the fact that a lot of the people that we call managers really aren't. When the economy is humming along and customers are pouring into showrooms, a lot of our deficiencies as an industry are masked.

As a manager, as long as we've got plenty of customers on the showroom floor, everyone's happy. Unfortunately that’s not a reality in today’s environment. What sales managers are doing when they don't have customers in the showroom is every bit as important to the success of the dealership as what they do when they have a showroom full of customers.

If I walk into a dealership and I see four salespeople that have been standing around for two hours waiting for one customer, that showroom is not being effectively managed at that time. That didn't make any sense when the economy was at its best and it certainly doesn't make sense today. So why does this happen in showrooms across the nation?

The problem is this. We tend to promote people to management that were our best salespeople not realizing that the skill set required to be a good manager is completely different from that required to be a good salesperson.

Look at the NFL. The best coaches in NFL history weren't the best players, but the guys who knew what to do and when. But dealerships consistently take great players and make them coaches. They’re given very little, if any, real training. And then we’re disappointed when they fail.

Today's manager must be able to manage activity to drive traffic, putting an emphasis on “how many appointments have we set up today” versus the old “how many appointments do we have coming in today?” Today is too late to focus on today. Today should've been taken care of yesterday and the day before. This person must also be able to really train. So much of what is done at dealerships in the name of training is educational at best. REAL training involves role-playing and simulation.

Managers today must be very process driven. So many "systems" that are implemented at dealerships tend to be short-lived because processes aren't implemented to ensure long-term success. Without processes in place, it's nothing but talk!

If you would like more information on how we can help equip your managers or prospective managers with the tools necessary to succeed in this or any business environment, click here.

Are Retail Auto Dealers Ready for a New Chinese Automobile?

This month, representatives from Versus Motors visited NCM Associates to showcase its new vehicle line up that brings together Italian design and U.S. safety engineering with Chinese assembly.  New entrant, Versus Motors, launched with a cross-country durability drive to road test their entry products, while showcasing the products to dealers along the route.  Their mid-way stop in Kansas City is the home of NCM Associates where we delivered a contingency of dealership representatives to listen to their story, review their marketing plan, including distribution and dealer channel strategy, and to test drive and give feedback on the vehicles. The group was joined by leadership from JAC Motors, Versus Motors’ manufacturing partner and a top ten OEM from China.

Two Versus Motors model variants were included in the road test:  a sedan and a crossover.  To achieve market competitiveness, Versus Motors and JAC used the road test to review for engineering adjustments that might be required for the myriad driving conditions in the U.S., and they were eager to have the dealers, GMs, GSMs and Service Directors in the audience participate in the ride-and-drive exercise to validate those observations and get that critical dealer perspective.

Versus Motors Founder and CEO Julie Brown and COO Marianne McInerney laid out the high-level marketing plan to their audience, which generated plenty of questions around the dealers’ investment in the franchise, expected return on that investment, the distribution and inventory models, and whether the plan was to use established import dealers to the exclusion of the domestic franchises. 

Not backing down from any of the questions, their answers were as detailed as possible in this early phase, but always framed in the context of their expectation to partner with their dealers to work out the best business model to make the dealers money while helping Versus Motors gain 2% U.S. market share, ideally via 70-120 dealership operators representing 330 exclusive market territories.    Brown stressed the importance of the selected dealers having strong market roots and entrepreneurial vision irrespective of their retail experience in domestics or international makes.   

JAC Motors is currently selling passenger vehicles in 8 countries.  The U.S. product line will launch in 2013 with the sedan and crossover, with additional models rolling out every 6-8 months.  With a quality product, a price point 15% below Hyundai and Kia, a competitive factory warranty, a new $200 million production facility dedicated to U.S. vehicles, and the allure of new profit opportunities for dealers with strong entrepreneurial inclinations, they are convinced their plan will stand up to the challenge. 

What are your thoughts?  Is there room and appetite for a new Chinese brand here in the U.S.?

Use of Social Media by Auto Dealers Works! Think Integration.

The discussion taking place regarding social media for retail automotive dealers is fascinating.  It’s a very predictable conversation as businesses jump into this new exciting media channel. 

It goes something like this.

“WE HAVE TO GET INTO SOCIAL MEDIA!”

“I agree we can’t be left behind and it might be a silver bullet!”

“HOW DO WE DO IT?”

“I have a friend who’s into social media or we can use our internet guy... he’s a wizard on Facebook.  Let’s get one of them to set it up and run it.”

“HAVE WE SOLD ANYTHING?”

“No not yet.  I’ve been posting deals of the week and nothing sold.  But, I haven’t looked at it in a few days.”

“HOW COME WE ONLY HAVE A FEW LIKES?”

“I don’t know.  I told you this was a waste of time!”

This scenario has taken place thousands of times.   All you have to do is look and you’ll see Facebook skeletons littering the internet.  All the sights look the same, very few likes and no post for months.

Here’s the problem:  Narrow thinking and a lack of social media knowledge.  It’s not the media!  It’s the driver.  It’s a new media AND very few people understand how to make it work.

HERE ARE SOME TIPS

Review your social media platform.

• You must have a blog but it shouldn’t appear to be a sales site.
• It needs to have key search words in the title, text and photo’s.  Match the key terms you ‘re using for Google Adwords.  (If you’re not using Google Adwords call me right away!)  You need to post 3 blogs per week. 

Integrate your blog into digital and traditional media!

• The blog gives you great content every month for an e-newsletter.  Put 4 blogs into the newsletter and send it out.  Add fixed ops offers and encourage them to engage your social pages.
• Each blog you publish enhances your Organic search rankings.  You’re becoming more relevant!
• The blog gives you editorial content to run in local newsletters for churches and other local organizations, community newspapers, and internet sites. Everyone needs free content!

Integrate Social Media into your sponsorships!

• Don’t sponsor one more event or organization without creating a social media event out of it.
• For the first time you can actually get value out of every donation you make.  In fact  you’ll see returns you never thought  possible.  When one of these opportunities goes viral, look out.   The added exposure of TV, radio or newspaper exposure can be significant.

Integrate Social Media into your media negotiations.

Social Media should be a part of every media negotiation you do in the future.  Look for opportunities to tap into the media’s social networks.  Ask how do we create a dynamic social program with this promotion.  If you really want some added value out of your next media buy include social media.

OK… Social Media WORKS!  The problem is the discussion is usually centered around the wrong topics. 

You shouldn’t be asking is it working.  You should be asking…..

 ”How do I Integrate Social Media into everything we do?”

Last thought>>>  Stop thinking of Social Media as a stand-alone media.  It’s a critical communication channel for your customers.  Make it a big part of yours.  Integrate!

Ron Wheeler is president of Wheeler Advertising.  Want to learn more about marketing integration?  View Ron's video, "Marketing is Getting Really Hard," by clicking the button link, below.

Auto Dealer Compensation Planning Tips

To be effective, a compensation plan will:

• Primarily focus on those areas for which the manager or sales employee is accountable

• Provide motivation for the employee to continually achieve higher levels of individual or departmental productivity and profitability  

• Be fair to both the employee and the dealership, under varying levels of operating performance 

The following is a process that may help you develop sound, results-oriented compensation programs for your management and sales personnel just in time for your 2012 planning.

1. Assess your current compensation methods.  Review your compensation plans and your employees' earnings histories.  How do the various compensation categories relate to the dealership gross profit and expense structure? 

2. Determine and Forecast Key Results Areas.   Identify and quantify each element for which the management or sales employee is totally accountable, and also those for which he/she is only partially accountable.  Develop a planning model depicting various performance scenarios. To determine individual and overall compensation philosophies and budgets, consider what the position should cost: as a percent of gross;  per Retail Unit;  in annual dollars.  Consider, too, what this specific person expects, needs or deserves based on past performance; based on past and current earning levels; based on the competitive local labor market.

3. Plan Development and Testing.  Design a compensation plan that attempts to match your objectives at the Planned Performance Level. Then test the plan at numerous variances from the PPL. Once you have developed the initial plan, you may want to test it and even "negotiate" the plan with the involved employee.

4. Use an Automated Plan Calculation and Presentation Tool.  A Plan Calculation and Presentation software application will: (1) automatically calculate and present current and prior performance and earnings (by line item) for a 12 month period; (2) project annualized earnings, assuming current month performance represents the monthly average; and (3) project annualized earnings pace based on actual year-to-date earnings.

5. Implementation and Documentation.  Communicate and validate departmental objectives and individual compensation plans.  Create a compensation plan document that explains the plan and the accountability philosophy in detail. It is strongly recommended that plan documentation be signed by the employee and the manager, then filed for future reference. 

6. Follow-up and Fine-Tuning – Even the best-designed compensation plans may need adjusting once they are exposed to the dynamics of the real world retail automotive business.  If the basic parameters are sound, they will remain sound, but it is possible that the detail of the plan may need to altered to accommodate unforeseen and uncontrollable circumstances.

Effective compensation planning is a key element in NCM Institute management training programs.  Get the direction you need from the experts at NCMi.  Call 866.756.2620 about upcoming classes for all your managers or go online to check out the training schedule.

 

Use "Next" Practices to Become a Dealer of Excellence

Being in automotive dealerships every week, your staff of NCM® Retail Operations consultants are always asked by car dealers and dealership managers, “What are the good dealers doing in their dealerships today that is really working?”  This isn’t always easy to answer because in attacking the challenges of business today, most automotive dealership “best ideas” or “best practices” are simply aggressive, timely adjustments to fundamentally sound business practices that you already know need to be in place.  At times you just need to have someone trip that switch in your head because your dealership, at that point in time, needs some new focus in that area.

So you take the idea, implement it and move on, and you feel pretty smart in doing so.  And you are!  So in my mind, the dealer who keeps challenging himself or herself to vigorously discuss the common issues facing the business is going to get this constant exposure to best ideas and best practices.  Dealers like this are the smart dealers, because if a fellow dealer has an issue and addresses it with a solution and verifies the result, why not take it and implement it and feel smart in doing just that? Frankly, that’s somewhere on your job description as a good dealer.  NCM, the originator of the automotive industry 20 Group discipline, figured this out in 1947 and has been successfully implementing this best practice ever since.

That said, what I feel the really excellent dealers do—because they are the authors of all the best ideas and best practices—is something that I came across recently that truly provoked some serious reflective thought on my part around the concept of best practices:

“Organizations become winners by spotting big opportunities and inventing ‘next practices’.”   (Source: Harvard Business Review, April 2010)

Think about this.  The truly great ideas are developed by those individuals in an organization who, every day, enthusiastically and aggressively look inward—they look inside their business and discover how it can be better. The best ideas and best practices that smart dealers recognize and implement are the result of this process.  Next Practices are the result of a wonderful business culture in your dealership that encourages and stimulates true innovation and positive adjustment to your operational challenges, and more importantly, your operational opportunities.

Now think about this one more time. If you embrace another’s best idea or best practice, you are smart—but are you ahead of or behind the dealer organization that created the next practice that turned into the best idea or best practice that you just adopted?  I think you get where I am going.

Want to move from being simply smart to really excellent?  Encourage yourself and your management team to develop Next Practices and be the first beneficiary of a great new best idea or best practice—because you originated it!

Contact Paul Stowe, Director of NCM Retail Operations Consulting, at pstowe@ncm20.com.

What's in Store for Your Buy Here, Pay Here Store

I recently had the honor and privilege of hosting a webinar titled, "Understanding the Buy Here, Pay Here Business Model." I use honor because there were over 400 registered attendees. I use privilege because there are few things I enjoy more than talking BHPH. It’s an industry that has given me so much. 

Attendees were current Buy Here, Pay Here dealers, those looking to get into the BHPH business and service providers to the industry. We gave a current state of the union and some critical decisions that need to made before entering into the industry. Although we didn’t have time to get to everyone’s questions, the ones we were able to answer were well thought out and relevant.

Earlier this year, I wrote an article about what the BHPH operator should expect in 2011.  It might be a helpful review for those who weren't able to make the webinar and who have some questions about today's opportunities in BHPH. Enjoy!

It should be another good year to be in the BHPH industry, although 2011 will not be without its challenges.  In fact, there are certain areas of the BHPH industry that could be more challenging than ever.

To get an idea of what to look forward to in 2011, we first need to review how 2010 treated the BHPH operator.  

From a profitability standpoint, the dealers that I have the distinct privilege of working with enjoyed a 22% increase in profitability in 2010 versus 2009.  This sizable increase was due mostly to the rightsizing of overall operations.  Dealers focused on their entire BHPH operations from top to bottom to “cut the fat” and run their operations based on the cash they where generating, instead of relying on lines of credit.

I expect this same focus to continue in 2011.  Although funding sources have become more readily available, overall I think most dealers will be focusing again on generating the capital necessary to run their businesses from their businesses. As always, there will be those dealers looking to grow aggressively through borrowing and rates will continue to make this a very viable option.  I don’t see rates rising drastically in the coming year, so it will still be a good time to borrow. Having said that, I still see it being more difficult to secure new lines of credit in 2011.  It’s going to take some patience and the willingness to educate some institutions on our industry.

With our dealer clients, we saw sales volume increase by almost 3% in 2010 over 2009. Not a record-setting year by any means, but this was driven more by cash management.  Dealers seemed to want to sell what their cash flow dictated rather than sell as much as possible.  We all know that we can sell as many as we want, or have the financial resources to, in this industry.  There doesn’t seem to be a lack of customers needing or wanting what we have to offer.

Same will pretty much hold true for 2011.  We should have the customers in the market to sell as much as we would want. The biggest question will be inventory availability. Now I’m normally a glass half full kind of guy, but when it comes to this, I think the glass may be half empty. Even though the prices had somewhat leveled off the last half of last year, the numbers where dwindling even more than usual.

2010 portfolio performance saw some stabilization from a dollar loss standpoint. But from a number loss standpoint, we saw a slight increase or worsening in 2010. This I believe was driven by a couple of factors, the first being the need for inventory.  I think some dealers accelerated their repo times when a desirable unit was involved.  This also helped stabilize the dollar losses, as the vehicles were repossessed earlier and in better condition and thus garnered higher recovery amounts.  The other factor was renewed focus on underwriting and the overall collection process.  Dealers remained more disciplined in both areas, seeking quality over quantity.

2011 will see more of the same.  Dealers have seen the error of their past ways and are enjoying the spoils of their more disciplined labor.  I expect to see the average charge off to remain essentially the same, the number as a percent of sold to remain higher than in past years, but expect collections dollars to improve as well as overall collection effectiveness.

Biggest thing to affect our industry in 2011 will no doubt come from the compliance front. The Consumer Finance Protection Act was signed in July of last year and with it the establishment of the Consumer Finance Protection Bureau. The “rules” of the Act, per the Act, have to be drafted by August of this year, so we will know what kind of field we will be playing on.  In the interim, I have already heard from a few BHPH dealers who have received a letter from the FTC (The Bureau’s governing body) informing them of pending audits.

This is something that has existing dealers debating whether to remain in the industry, and causing some who are looking at getting into the industry to delay their entry until the rules are set.  What this Act and Bureau are going to do is separate the men from the boys, so to speak. The dealers who are trying to the best of their ability to do the right things will survive and those dealers who like to operate in the gray areas will fall by the wayside.  Sorry to say that the waysiders are going to cause the cost of doing business to increase for everyone else.

So here is the best advice I can give to existing dealers as well as those wanting to get into the business in the coming year: don’t wait. Don’t wait to get compliant.  Don’t wait to spend a little money to do so. Don’t wait to review all processes and procedures.  Don’t wait to review all expenses.  Don’t wait to review all your employees.  Don’t wait to train.  And definitely don’t wait to sell cars, collect money and make profits!

NCM and NAMAD 2011 Member Conference

Recently I had the pleasure of attending the National Association of Minority Automobile Dealers (NAMAD) 2011 Membership Meeting in Las Vegas.  It was a very interesting conference attended by many of the top minority dealers in the U.S., as well as by representatives from the OEM Minority Associations such as Ford, GM, Chrysler, Honda and Toyota.  Much of the discussion at the conference was centered around the disproportionate fallout and decline in the number of minority dealers vs. the industry as an average.  For the remaining players, positive and proactive steps are being taken to prevent a repeat of this scenario in the case that another industry crisis is experienced. 

The dealers appreciated the opportunity to come together and discuss these challenges and related necessary measures, all the while being exposed to experts in the business who conducted a series of workshops on their behalf, one of which was our own Dennis Gregg who presented the importance and profit opportunity of pre-paid service maintenance agreements.  In essence, it was like a 20 Group with guest speakers!

The event was capped off by a riveting speech from Edward James Olmos, an active minority philanthropist best known for his role as Lieutenant Martin Castillo in the 80’s hit show Miami Vice, who challenged the attendees to remove the notion that the word “race” is divisional and instead concentrate on it being inclusive.  In a tongue and cheek manner, he also warned the brass at NAMAD to prepare for a name change in the future, as the “minority” of today will be the “majority” of tomorrow! 

Our own Brandiss Warren, the NCM® Institute program specialist, even had the chance to get her picture with Mr. Olmos!

Got Partners? Consider a Buy-Sell Agreement

Guest blogger David Perkins of The Business Owner gives sound business succession planning advice to automotive dealers and their business partners in this week's post.  Read on and then link through to the full article.

If you have partners, you need to consider what will occur when a partner wants to retire or suffers death or disability. One way to minimize chaos and control the order of events is to design and execute a buy-sell agreement. Desirables include:

1. Preserve control by restricting transfers or sales of company stock to persons outside the company or owner’s immediate family.

2. Protect business assets and ongoing operations.

3. Provide cash or other assets (e.g., life insurance proceeds or promissory notes) to the retiring or disabled owner or family of the deceased.

4. Establish a method for determining the value of the business for estate tax purposes and transfer or sale of company stock.

5. Assure sufficient liquid assets are available to fund a buyout, pay federal and state estate taxes, and meet financial needs of surviving family members.

6. Reduce some of the risks inherent in grants of incentive stock awards to key employees.

Structuring a Buy-Sell Agreement

A buy-sell agreement can protect business value, reduce the likelihood and severity of shareholder disputes, and provide for continuation of the business beyond its current ownership. A buy-sell agreement can also be designed to provide income to the retiring or disabled partner or to the family of a deceased partner. Initial questions that need to be considered are:

For the complete the article and to view a buy-sell agreement check-list and valuation methods to use in Buy-Sell Agreements, visit The Business Owner online.

Is Groupon Good for Car Dealers?

I read recently in an article by Carla Dewing that Groupon is causing some small businesses big headaches.  Especially where profit margins are slim already and then you have to give Groupon a big chunk of your selling price, to boot.  Add to that the impact of crowding out loyal customers for one-off discount shoppers, it could be the complete undoing of some businesses looking to jump-start some extra business via the “Daily Deal” bandwagon. 

Yesterday, I saw an automotive dealership offering a Groupon and it made me wonder if 51% off on a package of four oil changes that expires in two years is really that compelling a deal and will the dealer find the Groupon promotion to be a successful campaign?  At the time of this writing and with 9 hours to go, only 2 folks had purchased the deal, so I think the answer to the first question is “not so much.”  The answer to the second remains to be seen.

For those who don’t know, Groupons are online, geolocation-based coupons.  Groupon requires a participating business to offer an exceptionally deep discount with the promise of driving traffic to your shop.  For many businesses, Groupon deals are loss leaders.  They are designed to drive traffic and increase sales volume.  The business has some control over the terms of use, but the Groupons also tend to have an extended shelf life, as promotions go.  Hopefully, the Groupon customer will spend more or become a repeat customer once they’ve redeemed their Groupon.  However, some businesses have found the Groupon shopper to be more interested in the discount than the service provider; loyalty may not be the Groupon shopper’s strong suit.    

Don’t get me wrong…as a consumer I love Groupons.  In fact, I used two when dining with my family on Father’s Day.  While we all walked away with smiles and full tummies, we were also wondering how the restaurant could sustain itself on parties like ours.  To their credit, they did get three new loyalty program takers!   But I also fear for the business owner who isn’t completely clear on the potential impacts and implications of a Groupon campaign.  In fact, in that same article, I read about a small bakery with a strong loyal customer base that used Groupon and essentially displaced those loyal, full-price-paying customers by filling the shop for 3 months with a steady stream of first-and-only-timers paying not even enough to cover her expenses. 

So here’s my take on whether Groupons make sense for car dealers:  if the dealership can up-sell the customer at the first visit or convert them to a repeat customer with ongoing reasons to do business at the dealership, then the strategy makes sense; however, for those who don’t anticipate the ramifications of a sudden increase in low-profit sales volume over an extended time period, it’s likely to wreak havoc on your operations as well as your margins.  

If the offer is controllable, your response to it well planned and likely to generate that coveted up-sell or repeat customer, then perhaps it’s worth sticking a toe in water to see what bites, but before you take off your sock, read  Carla’s tips and be an informed Grouponer!   With a plan and a process, Groupon could be the shot in the arm your quick lube or service drive needs.

 

Got your own Groupon story to tell?  Let us know how are Groupons working for your car dealership. 

Manage Your Automotive Dealership's Opportunities to do Business

I clearly recall the first of numerous automotive dealer-clients to say, “I need your help to increase my Up-Count.”  My follow-up question was, “Do you know how many Opportunities To Do Business (OTDBs) you currently have by control category and by salesper­son?”  The blank look I received led me to explain that until you are able to accurately measure your true OTDB count by category, there is no basis to gauge improvement.  You may already have a sufficient num­ber of OTDBs to achieve your sales objec­tives, so why would you consider changing your marketing strategy if the real issue is that you’re not doing an acceptable job with the OTDBs you currently enjoy?

Like most auto dealers, the client had no idea there are actually eight distinct OTDB control categories, four each for New and Used Vehicle Sales.  Why eight categories?  Because there are eight different sets of metrics and each set must be addressed separately.  An Opportunity Analysis Worksheet, which details both the Control and Metric categories, is a tool I routinely recommend to my clients for tracking and measuring the automotive dealership’s OTDBs.

Most auto dealers understand the rationale for why New and Used Vehicle Sales must be separated, because of the “unique” pre-owned vehicle versus the “generic” new vehicle.  Most also understand Control Categories 2 (Inbound Phone OTDBs) and 3 (Internet OTDBs).  But Category 1, Salesperson-Proactive OTDBs, and Category 4, First Time Walk-In OTDBs, typically require a bit of explanation.