Dealership Innovation Guide - Q3 2012

Dealership

INNOVATION

GUIDE

A DrivingSales Publication

Quar terly Ranking of Dealership Vendors and Best Practices 3rd Quarter • 2012

Making Sales on the Service Drive

By Jeremy Rhudy - Page 16

DATA: The New Currency

By Russell Grant - Page 24

The 5 Core Internet Structures For Dealerships

By Jared Hamilton - Page 40

What You Need To Know About 401k Fees

Can You Compare AutoTrader.com vs Cars.com Metrics Accurately?

By Lindsey Auguste & Dennis Galbraith - Page 26

By J.T. Greenwood - Page 44

Christine Knowles

Director of eMarketing Christine Knowles Shares Her Secrets to Success - Page 30

Modern Consumer Journey

By Steve Hanson - Page 14

2nd Quarter Vendor Rating Results - Page 6 Visit DrivingSales.com to view more than 5,000 verified dealer ratings of over 800 vendors in 27 categories.

2 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide

Dealership

INNOVATION

GUIDE

A DrivingSales Publication

Quar terly Ranking of Dealership Vendors and Best Prac tices

Dealership Executives, The pace of change is speeding up within our industry, continuing to move at a speed we never thought possible. Google is rolling out changes almost weekly. The social web continues to evolve. Online Reviews are increasing in their importance to your dealership. You are collecting data – actionable data – on your customers and prospects at an unheard of pace. Keeping up is becoming almost impossible, which is why, as the industry’s leader in unbiased information, we’re sharing the industry knowledge with you.

The hot button in the industry these days is data. Data is everywhere in your dealership. What are you doing to collect it, analyze it, and then act on it? Your dealership’s data are like gold bricks, but they’re only as good as what you do with them. Billy Beane, the General Manager of Major League Baseball’s Oakland A’s, changed the game of baseball by using a data-centric mindset. Automobile Dealers have the same opportunity to change the way they look at and conduct business.

Dealers can learn from experts like Billy Beane and others in a variety of industries to learn what they can capitalize on in the auto industry, and how to avoid pitfalls.

For those dealers who are progressive in the industry and are looking to take their digital business to the next level, we invite you to the DrivingSales Executive Summit on October 21-23 at the Bellagio Las Vegas. The fourth annual event will bring together the most progressive dealers in the country, along with world-renowned speakers such as Billy Beane, from “Moneyball” fame; CEO of SEOmoz, Rand Fishkin; mobile experience extraordinaire, Luke Wroblewski; and for the first time ever, we’re teaming up with JD Power to provide you a power packed keynote linking the two events. The event is focused on pushing the auto industry’s ‘innovation boundaries’ and translating the latest trends and business realities into solid 2013 action plans for every dealership department. As always, the exclusive dealerdriven event has a vendor-neutral policy, meaning there is no vendor influence on presentation selection and we adhere to a strict dealer-to-vendor ratio.

Register quickly at www.DSES.com with the code DIG to receive $100 off registration. Last year’s summit was standing room only, and although DSES 2012 will allow for an expanded number of registrants, it is expected to sell out quickly.

Training and education have become paramount to your organization’s success.

Take every opportunity to learn, grow, and better those around you. Your operations depend on it.

We hope to see you in October at the DrivingSales Executive Summit, and until then, enjoy this 3rd quarter publication of the Dealership Innovation Guide.

Sincerely,

Jared Hamilton Founder, DrivingSales Inc.

Dealership Innovation Guide

Jared Hamilton, Founder of

DrivingSales Inc, is a third-generation car dealer and technology geek. His passion for this industry and for tech has inspired him to help dealers gain access to better information, faster.

This guide is meant to be used within dealerships to keep dealers informed about emerging trends in vendor products and world-wide best practices. Find this content online at dealershipinnovationguide.com.

Meet the Dealership Innovation Guide Team Jared Hamilton Founder, DrivingSales Inc. @drivingsales Lindsey Auguste Editorial Director lindsey@drivingsales.com @lindseyauguste Jeff Pease Art Director jeff@drivingsales.com @jeffpease Larry Schlagheck Director of Advertising larry@drivingsales.com @ larryschlagheck Bart Wilson Business Development bart.wilson@drivingsales.com @bartrwilson Paul Hamilton Production Manager paul@drivingsales.com @ pbhamilton Tommy Bay Director of Marketing tommybay@drivingsales.com @tommybay DrivingSales • 3rd Quarter - 2012 • 3

››› Insights into your dealership no one else can provide.

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MAGAZINE CREDITS About This Guide Dealership Innovation Guide is published quarterly by DrivingSales.com. To subscribe, visit DealershipInnovationGuide. com. Printed in the United States of America. Copyright © DrivingSales.com 2012. All rights reserved. No part of this publication may be reprinted or otherwise reproduced without publisher’s written permission. Dealership Innovation Guide and DrivingSales.com assumes no responsibility for unsolicited manuscripts or photographs.

4 • 3rd Quarter - 2012 • DrivingSales

Letters To The Editor Dealership Innovation Guide and DrivingSales.com welcome letters to the Editor. If you have questions about the guide, or would like to make a comment, or voice an opinion about the guide, DrivingSales.com, or the industry in general, please feel free to write us.

Please send letters to lindsey@drivingsales.com. Include a telephone number and address (preferably email address).

Letters may be edited for clarity or space. Because of the high volume of mail we receive, we cannot respond to all letters.

Dealership Innovation Guide

Contents 3rd Quarter - 2012

FEATURES 1 4 Modern Consumer Journey

By Steve Hanson

1 6 Is Your Next Sale Sitting On Your Service Drive?

By Jeremy Rhudy

2 0 Why Should I Car About Young Folks?

By Justin Sprague

2 4 Data: The New Currency

COVER STORY 30

Marketing 101 Christine Knowles

2 6 Comparing Listings

Publications Like AutoTrader.com and Cars.com

By Lindsey Auguste and

06

Dennis Galbraith

On DrivingSales.com, dealers can rate their vendors. All reviews are verified to be legit and posted, for you to learn who the best vendors are directly from your peers. A summary of the ratings is published in this quarterly guide.

42

By Russell Grant

Android App Users [infographic]

3 6 Its Time Franchise Dealers Start Operating Like Independents

By Bill Berry

3 8 Fixing Three

Common Used Vehicle Profitability Problems

By Dale Pollak

4 0 Structure For Scalability:

The 5 Core Internet Structures For Dealerships

By Jared Hamilton

4 4 401k Fees: Your 401k Fees Are Now

Disclosed Via 408(b)(2) Disclocure Rule Changes. Are You Sitting Down?

By J.T. Greenwood

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 5

Over 10,500 unbiased vendor ratings submitted by verified dealers.

CATEGORIES 8

Call Management Chat CRM Fixed Operations

9

CRM Sales Department Dealership Management Systems (DMS)

10

Internet Lead Management (ILM) Inventory Pricing Internet Trainers

11

Mobile Sites New Car Leads

12

Owner Marketing Reputation Management

13

Search Engine Optimization (SEO) SEM - PPC Used Car Advertising Websites

View detailed vendor reviews written by verified dealers at DrivingSales.com/Ratings

6 • 3rd 3rdQuarter Quarter--2012 2012 •• DrivingSales DrivingSales

Dealership Innovation Guide

How Vendor Ratings Work The DrivingSales Vendor Ratings site is the first formal mechanism for dealers to rate and review their vendors in a comprehensive, real-time vendor directory. It empowers dealers by allowing them to learn about all the solutions available and to view actual customer feedback, both good and bad, about how each solution actually performs.

Rules • •

•

•

Only dealership employees can post ratings and reviews. Reviewers are verified to ensure they are valid and eligible to leave reviews.

Dealership employees can only rate and review the products they have experience using. The ratings are a chance to hear from actual customers with live experience using the solutions in their stores.

Each reviewer must answer three questions to complete their rating: 1. How many stars does the solution deserve?

2. Would you recommend the solution to a friend?

3. Why would or wouldn’t you recommend the solution?

All three components of the review, along with the job title of the reviewer, are posted live to DrivingSales.com for all to reference when selecting new vendors.

Safeguards •

•

DrivingSales.com protects the anonymity of each dealer employee who leaves a rating and review. However, DrivingSales requires valid name and contact information for each reviewer so that each reviewer can be validated.

Each review is passed through a variety of technological checkpoints to ensure vendors are not gaming the system. Furthermore, DrivingSales staff calls to verify a large percentage of the reviews.

Vendor Ranking In each product category the vendor solutions are ranked in real-time as each new dealer rating is submitted. The vendor products are ranked based on a weighted Bayesian Algorithm. This is a standard mathematical calculation that looks at the number of stars the reviewer gave as well as the statistically valid sample size needed, relative to the competitive set, to create a ranking based on the statistical accuracy of the results. Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews.

We encourage all dealers to rate and review their vendors by visiting DrivingSales.com/Ratings

Dealer Satisfaction Awards The DrivingSales Dealer Satisfaction Awards recognize those solutions with the highest vendor ratings. For each category within the vendor ratings there are three award winners, the “Highest Rated” vendor and two “Top Rated” vendors. These awards reflect products and providers with a proven record of success and excellence in serving their dealer clients. The Dealer Satisfaction Award trophies are presented annually.

Rankings Only dealership employees are allowed to rate their vendors on DrivingSales.com and all submitted ratings are verified. The vendors are then scored and ranked using a weighted Bayesian Algorithm (shown below).

Sometimes a company with 3 stars will rate above a company with 4 stars if mathematically the first company has a higher probability of success based on the submitted reviews.

w = (m*v 2 )*r+(v 2 *m)*c

The Vendor Ratings in this issue are based on the aggregate of all dealer ratings submitted from July 1, 2011 to June 30, 2012. *Category scores are computed per category and are not comparable across the board.

For questions about Vendor Ratings, please contact bart@drivingsales.com Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 7

Call Management Solutions that track inbound calls through designated tracking phone numbers so that you can manage your marketing spend and increase ROI.

Company

Product

Score Rating Rec

Callbright

Inbound Lead Tracker

157.10

Century Interactive

Call Tracking

CallSource CallTracking Who’sCalling

Who’sCalling

Dealer.com CallTracking CAR-Research XRM

Call Tracking/Ad Sourcing Solution

eLead

eLead Call Center

CallRevu, LLC

Wilson Technologies

CallRevu, LLC Teletracker

661.20

100%

27.71

67%

7.91

75%

3.83

100%

26.12 6.92 3.83 3.83

100% 100% 100% 100% 100%

Chat Products These solutions allow you to meet, greet and converse with customers who visit your website, as well as set appointments, generate leads and provide better customer service.

Company

Product

Score Rating Rec

Activengage

Activengage Chat

184.45

ContactAtOnce! LLC Dealer e Process

ContactAtOnce! Auto Dealer Chat Dealer e Process Live Chat

Client~ConneXion Chat~ConneXion CarChat24

CarChat24 - 24/7 Fully Staffed Chat

700.44

98%

23.16

100%

2.16 1.67

99% 100% 100%

CRM / Fixed Ops CRM - Fixed Ops: Customer Relationship Management systems for the Fixed Operations.

Company

Product

Score Rating Rec

CIMA Systems

CIMA CarView

173.67

CIMA Systems

Dealer e Process DealerSocket

CIMA Car Care Service Menus Virtual Service Consultant DealerSocket Service

eLead AutoPilot VinSolutions

MotoSnap™ Service CRM

ADP Dealer Services

ADP CRM

DME Automotive

The Customer Journey

731.15

100%

173.67

100%

12.35

100% 100%

8.33 100% 8.27

50%

1.71

100%

7.55

100%

Add your own vendor ratings at DrivingSales.com/Ratings *Category scores are computed per category and are not comparable across the board.

For questions about Vendor Ratings, please contact bart@drivingsales.com 8 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide

CRM / Sales Dept Variable Ops: these are CRM systems that track all your walk-in, phone and Internet customers through the complete sales funnel and owner life-cycle. They allow for advanced customer segmentation and marketing and track your sales activities by employee to make your team more effective at attracting customers and managing relationships.

Company

Dominion Dealer Solutions DealerSocket

CAR-Research VinSolutions eLead

ProMax Unlimited

Product

Score Rating Rec

DealerSocket CRM

35.74

Dominion CRM

CAR-Research XRM

VinSolutions MotoSnap CRM eLead CRM

ProMax Unlimited

218.49

96%

14.93

100%

92%

2.61

73%

.274

85%

.369

80%

Dealership Management Systems (DMS) Dealership Management Systems connect all your dealership departments with accounting and maintain your dealership data in one central place. These ratings are for the DMS systems themselves, NOT the solutions that plug into the DMS systems such as a Desking or CRM solution.

Company

Product

Score Rating Rec

Reynolds and Reynolds

Reynolds ERA DMS

284.89

ADP Dealer Services DealerTrack

Auto/Mate Dealership Sys Reynolds and Reynolds AutoSoft Inc.

Dealership Innovation Guide

ADP Drive DMS

DealerTrack DMS AMPS

ERA-IGNITE

AutoSoft DMS

418.44

58%

74.01

62%

23.58 12.78 11.13

61%

86%

100%

40%

DrivingSales • 3rd Quarter - 2012 • 9

Internet Lead Management (ILM) These Internet Lead Management solutions are built exclusively to handle incoming Internet leads and manage your Internet sales process. Many full-service CRM systems include Internet Lead Management features, but the ILM systems listed below are stand alone utilities built exclusively for managing Internet Leads.

Company

Product

Score Rating Rec

VinSolutions

VinSolutions MotoSnap™ ILM

10.47

3.52

88%

Dominion Dealer Solutions DealerSocket Dealer.com eLead

Cobalt

iMagicLab

Dominion ILM

DealerSocket ILM

Dealer.com Lead Machine eLead ILM

Lead Manager

Internet Lead Management Tool

274.06 4.48 1.15 .643 .633

99%

80%

89% 100%

50%

100%

Internet Trainers Consultants and trainers who focus on bringing online success to dealerships. General Dealership Consultants, Sales Trainers, and Fixed Operations Consultants belong in their own categories.

Company

Product

Score Rating Rec

KPA

KPA Webinars: DealerWebinars.com

192.52

PCG Digital Marketing Phone Ninjas

PCG Digital Marketing

DealerKnows Consulting POTRATZ

KainAutomotive.com eXtéresAuto

Brian Pasch

Phone & Internet Training Glenn Pasch Joe Webb

Digital and Social Media Trainer David Kain

eXtéresAuto - Dealer Training

218.47

57.86

100%

22.02

98%

100%

100%

19.60

100%

4.28

100%

5.45 0.90

100%

100%

Inventory Pricing With market volatility and transparency increasing online, knowing how to price your inventory is a science critical to increasing your store’s profitability. These “Inventory Pricing” tools collect various forms of market data to help define the optimum pricing for your inventory to maximize both Gross and Turn.

Company

Product

Score Rating Rec

VinSolutions

MotoSnap Market Pricing

4.43

67%

2.02

vAuto

DealerTrack eCarList FirstLook

Black Book

vAuto Pricing, Appraising Tools TrueTarget & eCarList HD

FirstLook - 360º Market Pricing

Black Book Used Car Guides...

256.49 3.34 .467

100%

86%

100%

67%

Did you know DrivingSales has over 10,500 verified vendor ratings?

Visit DrivingSales.com/Ratings for more information. *Category scores are computed per category and are not comparable across the board.

For questions about Vendor Ratings, please contact bart@drivingsales.com 10 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide

T:7.625”

“SINCE WE WENT WITH TRADE-IN MARKETPLACE,% WE’VE TAKEN OUR APPOINTMENTS UP ABOUT 33. ” Tim Mitchell Owner–Kernersville Chrysler Dodge Jeep Kernersville, NC

Elizabeth Gavlik Business Development Executive AutoTrader.com

To hear Tim’s unbelievable story, just visit WeWorkForYou.com/Tim. ©2012 AutoTrader.com, Inc. All Rights Reserved. “AutoTrader.com” is a registered trademark of TPI Holdings, Inc. used under exclusive license.

Mobile Sites

AT2-590 (Driving Sales Innovation Guide)

82881_AT_AT2-590.indd 1

6/13/12 5:09 PM

These websites are built specifically for mobile browsers to cater to customers surfing the web from mobile devices.

Company

Product

Score Rating Rec

Cobalt

Cobalt Mobile Websites

214.53

Dealer e Process

Dealer e Process Mobile Websites

Dealer.com MobileSites VinSolutions

82881_AT_AT2-590.indd

DealerFire

Saved at: 6-13-2012 5:06 PM

WorldDealer, Inc

MotoSnap™ Mobile Websites DealerFire Mobile Websites

From: swilde-mpt-09115

WD2GO Mobile Websites

by

287.44

91%

149.96

75%

31.02 25.86 13.45

Company Dealix

Product Dealix New Car Leads

Cars.com NewLeadsPlus AutoTrader

New Car Advertising

Autobytel Inc.

Autobytel New Car Leads

ZAG

Black Book Online Division Dealership Innovation Guide

Zag Sales Strategy Activator Complete

100% 100%

Printed At

Job info Approvals Fonts AUTOTRADER.COM Client Fonts: Print Producer Hodge, Brent 21-02050-085 Job # News Gothic BT (Condensed, Bold Extra Account Mgr DiCicco, Jaclyn 82881 Prefix Condensed), Adobe Garamond (Regular, Bold), Art Director Cooke, Mark 7.625” x 4.875” Trim Helvetica (Medium) Copywriter Hutson, Bryan 7.625” x 4.875” Bleed Traffic Peters, Danielle 7.625” x 4.875” Live Link Name: Art Producer Frey, Karen Line Screen 300 dpi AT_12_014_RM_4CSWOP.tif (CMYK; 1348 ppi; Scale None These providers collect and aggregate leads from their web properties and from partner Product Code 006 - TRADE ADVERTISING 22.25%), AT_08_WWFY_pos_4C.eps (11.49%), Proof # 2 leads and vehicle leads. (22.29%), Unit to dealers.

Magazine Currently this category is for both finance AT_09_Ult_com_Orange_4C.eps Caption Since we went...

SignOff_out_K.eps (76%)

New Car Leads

100%

Prepared by: Southfield, MI • 248.354.9700

Jeff Mansk / Heather Yuhas

70%

100%

Used Swatches: Cyan, Magenta,

Yellow,

Black

sites, then distribute these hot

Score Rating Rec 165.60

87%

5.51

58%

9.20

63%

3.56

50%

.414

67%

2.14

71%

DrivingSales • 3rd Quarter - 2012 • 11

Owner Marketing These targeted solutions help you mine and segment your customer database, and then market to them successfully.

These solutions can market to your customers through email/direct mail/phone and other means.

Company

Product

Score Rating Rec

CIMA Systems

Complete Virtual BDC

161.74

J&L Marketing, Inc. J&L Marketing, Inc. J&L Marketing, Inc.

Dominion Dealer Solutions

Sales Events

Customer Pay Clinics bLinked

Dominion Marketing Services

275.31

100%

75.70

100%

38.91 33.90

100% 100% 100%

Reputation Management These products and services help a dealership manage its online reputation. They may assist with review collection, monitoring, resolution and promotion of online reviews.

Company

Product

Score Rating Rec

DealerRater.com

DealerRater Certified Dealer Program

25.78

92%

1.27

100%

eXtéresAuto

PCG Digital Marketing

Dominion Dealer Solutions Naked Lime Marketing

12 • 3rd Quarter - 2012 • DrivingSales

Online Reputation Management

Reputation Management Services Dominion Prime

Digital Reputation Management

110.70 2.49 .440

98% 100% 100%

Dealership Innovation Guide

Search Engine Optimization (SEO) These companies will help get your website optimized so that it shows up higher in the search engine rankings. These services generally include both on-page and off-page optimization.

Company

Product

Score Rating Rec

PCG Digital Marketing

SEO & Strategic Internet Marketing

342.05

eXtéresAuto

Dealer eProcess

eXtéresAUTO - SEO

Power PageRank SEO

Dealer.com ManagedSEO Autofusion, Inc. KPA

Search Engine Optimization TK Carsites PowerSEO

644.89

100% 93%

101.96

100%

38.60

90%

26.49

100%

27.12

100%

SEM - PPC These solutions help you determine how to invest in and execute a Pay-Per-Click campaign on the major search engines for greatest ROI.

Company

Product

Score Rating Rec

POTRATZ

Search and Behavioral for Web

91.82

Dealer eProcess

Local Search Group

PCG Digital Marketing Dealer.com

Dealer eProcess Digital Marketing Edge Inventory PPC

PPC Management Service TotalControl Dominator

115.19

100%

36.35

100%

100%

33.21

100%

17.33

100%

Used Car Advertising These consumer facing websites allow you to display your inventory to in-market consumers. They make huge media buys to attract customers to your inventory, and to increase your walk-in, phone and web leads.

Company

Product

Score Rating Rec

Cars.com

Cars.com Online Advertising

152.78

AutoTrader.com

Used Car Advertising

158.34

75%

91%

Dealix UsedCars.com 93.44 94% Digital Compass Marketing

Automotive Advertising Network (AAN)

DealerMall.com Cargigi

13.39

5.20

100%

75%

Websites These full service websites are built to be the main hub of your dealership’s online presence and are central to your dealership’s marketing, branding and customer service.

Note: Micro Sites and Mobile Sites are rated in their own categories on DrivingSales.com.

Company

Product

Score Rating Rec

DealerFire

DealerFire Custom Websites

492.83

Dealer eProcess DealerOn

Dominion Dealer Solutions Dealer.com

Dealership Innovation Guide

Dealer eProcess Dealer Website Flex Sites

Dominion Websites

Digital Website Suite

899.78

99%

196.14

98%

93.73 44.02

99% 97% 88% DrivingSales • 3rd Quarter - 2012 • 13

Modern Consumer

JOURNEY Don’t forget the Eighth Element in the Modern Consumer Journey 14 • 3rd Quarter - 2012 • DrivingSales

W

hen I read The Zero Moment of Truth (ZMOT) I think back to my early sales days – with more hair and less weight! - standing in the showroom next to a brand spanking new Dodge Aries. From that vantage point, I’d see consumers who would drive from dealership to dealership, gathering information and brochures while adding or removing cars from their consideration list. In-store sales processes back then were constructed around stopping the shopping, and if

we failed to do so, our manager’s idea of constructive criticism and coaching was to call us “weak.” Yikes! What a memorable First Moment of Truth (FMOT) that must have been for the consumer!

We know from ZMOT that seven of the top eight automotive buying influences are online. The “eighth element” is your in-store processes. Sadly though, as I’ve witnessed in too many dealerships, a winning ZMOT strategy combined with antiquated in-store processes equals a recipe for disaster. Digital processes

Dealership Innovation Guide

are improving, but what about the 89% of consumers whose First Moment of Truth takes place over the phone or by walk-in? For many dealerships, the eighth element, phone and in-store processes, is as antiquated as a K-car.

Tips and Tricks for Creating a Modern In-Store Process Manager Meet and Greet The Manager T.O. worked great when cars still had retractable seat belts and cassette players, but now consumers don’t want to be turned over to a manager after they have made a decision to leave…or introduced to some mysterious person when a deal can’t be agreed upon. Dealership managers should get out from behind their desks and walk the showroom meeting and greeting customers at the beginning of the sales process, not at the end. This simple change in your sales process creates a friendlier environment for the consumer and injects a feeling of transparency into the sales process.

If this is not a standard practice in your dealership today…it should be!

Customer Qualifying Let’s start with some good news: if they are physically in your dealership, you’ve already won the Zero Moment of Truth!

But you still need to win the First Moment of Truth, and expanding your qualifying process can easily help you deliver a victory for your dealership. Embrace the fact that your consumers will likely have received some serious education by the time they set foot in your showroom. Let your customer know that if they have questions or need access to additional information while they are shopping, that you have a computer or iPad available where they can privately get online. This simple statement provides transparency in the shopping process and helps you remain in control of the sales process.

It’s better for the consumer to do additional research in your dealership than leaving to do it at home.

dealership buying a car. As Sales Managers, you control the deal flow. So when it comes to negotiating price, don’t implement a sales process that requires your salespeople to run back and forth negotiating numbers with the desk. Your dealership sales process should allow the sales manager’s first pencil to be directly with the consumer. Remember, your consumers are educated and have the same information in front of them as do you. So get out from behind the desk and go in and close the deal! If your sales process includes the Manager Meet and Greet as mentioned above, you’ll be well on your way to delivering a positive First Moment of Truth.

Do we still want to “stop the shopping?”

Of course! But today, by the time the consumer has entered the dealership, they have stopped shopping. They have narrowed their consideration list to a small handful of vehicles and dealerships. With seven of the top eight buying influences occurring online, it’s up to dealers to deliver that critical eighth element that is going to take shoppers from the floor to over-the-curb.

About The Author:

Steve Hanson is Cobalt’s Sr. Manager, Performance Improvement Consulting, with over 22 years of dealership operations and consulting experience.

Steve’s dealership experience spans from Sales Consultant to VP & Partner. His background helps him deliver digital marketing strategies and processes to top-performing dealers across the country.

You may reach Steve at steve.hanson@adp.com or 404.668.5115.

Negotiating Consumers want transparency as well as an expedited sales process. They don’t want to spend five hours in your Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 15

Is Your Next

SALE SITTING In Your

SERVICE DRIVE?

16 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide

WATCH NOW!

A

s I stand over my daughter’s shoulder and she is “texting” away on her state of the art iPhone typing A.M.A. (another meaningless acronym), I found myself feeling older than I am. In a constantly changing market of social media and digital technology, you may find yourself lost. I strongly suggest that if you can’t beat them – join them! If you are not quite there but looking for optimization of your staff, sales, and marketing budget, then I would recommend looking as close as your own service drive. Are you currently marketing to the customers that come through your dealership’s service department? Do you cross sell between your sales and service department? If you don’t, then you are missing out on one of the greatest marketing secrets: the opportunity for additional new and used car sales and the chance to increase your service department’s profit. It is a win - win..

A recent demonstrated that 80% of all new car buyers researched not only the automobile, but the service department’s ratings and customer reviews prior to purchasing a new vehicle. Again, we are on the information highway where your perspective customer can pull up comments and reviews of your dealership and your service department.

The customer wants to know that, once the car is delivered and you have sold them the fully loaded extended warranty package, your service team can take care of them. If my daughter’s phone breaks because of too many “LOLs” and “BFFs” then I will have to take her phone to the Apple store to be repaired. You know what I am talking about: When I get to the register, the sales member will ask if I want to upgrade to the newer model or if I would be interested in the iPad. I Dealership Innovation Guide

may just walk out of there with a happy daughter and a new toy for myself. This should be the same philosophy for your sales team and your service department.

Do the research to find out how many customers come through the service drive on a daily basis. Depending on your location, it may be an average of 100 customers per day. Here is the best part...it is 100 FREE customers that chose to come to you! You may be thinking that not every customer is ready to purchase a vehicle at this time, perhaps they just purchased two months prior. But if you continue to ensure that your service team is providing exceptional customer service and your sales staff has an on-going relationship with the customer that does not stop after the car is delivered, you have guaranteed a future sale. As I ponder over this idea at the same time I am writing this article, I look up to see an Internet lead pop-up. The customer posted: “I just wanted to drop you a note and tell you that I really appreciate your service department. Every time I have come to you dealership, everyone has been very professional. Because of the way they treat me will ensure that I will buy a vehicle from you when I’m ready to make that move.”

There are many ways to cross-sell to the customer from sales to service and service to sales: •

Are your sales associates taking the time at delivery to introduce your customers to the Service Advisors and Service Director? If not, this would be a great place to start.

The Sales Associate could ask the

Exclusive & Entertaining Automotive Coverage DrivingSalesTV combines two powerful media platforms – video and social media – with powerful profit-building information. With DSTV, dealers can easily keep tabs on their industry, see best practices in action, and have a more personal view into peer success stories, in a format that is lively, interesting, interactive – even, at times, provocative – but always with a focus on business innovation and improvement.

DrivingSales • 3rd Quarter - 2012 • 17

Service Advisor to go ahead and set up a reminder call for the customer’s first oil change. Let’s take it one step further; even if the customer does not purchase a vehicle at this time, most likely they have a current vehicle that may need service.

The Sales Associate can introduce the customer to the service team and add continued value to both the service department and the relationship with the customer.

By this time, your customer has a vested interest in your dealership.

•

•

Is your service department trained to ask if they are interested in seeing or purchasing a newer model? (Remember the new iPhone I had to buy for my daughter?)

•

Another way to cross sell to your customer would be to have the service advisor contact your sales team instead of the local rental car provider. Put your customer in a newer model of the vehicle they currently own or offer to drive them home in the new model.

I used the word free earlier and yes, you did not have to pay for those leads, but nothing is totally free. There is no magic diet pill, or get rich quick program; it all boils down to how much effort, time, and dedication that you and your teams are willing to invest. You will need to set up the policies and procedures, and ensure that there is accountability to them. With all of this said, this is a great marketing opportunity that will not only increase sales, but build customers for life.

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If they have a quick service need, like an oil change, it would be a great time for the “no obligation” test drive or an escorted stroll through the showroom floor.

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Are you purging your daily service log for potential pre-owned merchandise? For example, the customer that just left your dealership was looking for a 2009 model but you did not have one on your pre-owned lot to show, but you do have one sitting in your service drive. The owner of that 2009 might just upgrade as long as there is no additional monthly cost. The ideas are endless if you think about all the ways you can market and cross sell to your service drive.

About The Author:

Jeremy Rhudy has been in automotive sales and sales management for over 6 years. He is currently the Director of Business Development for Allen Samuels Alliance. He is dedicated to the process of sell and strives for customer loyalty.

Last but not least he is a loving husband and father of five.

Dealership Innovation Guide

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 19

I Why you should

CARE ABOUT

young folks 20 • 3rd Quarter - 2012 • DrivingSales

n an ADP survey conducted last year, nearly 30% of our over 2,800 dealer respondents said that increasing Parts and Service revenue was their number one goal and priority. (See Figure 1)

This shouldn’t be surprising to anyone.

What could be surprising is how the latest crop of consumers, the “millenials” as they’re called, behave. We all know them – they’re our daughters, neighbors and babysitters. And beyond being glued to their smart phones, they have some very different shopping behaviors that you need to address in your store.

The Pew Internet Research group recently found some interesting traits on millenials. There are so very different than their parents. They’re multi-taskers. They are used to having choices. They want instant gratification.

They are FAR less likely to be loyal to brands and switch more often.

Dealership Innovation Guide

Granted, they don’t make up the majority of car sales, but they’ll take these behaviors with them throughout their lifetime. When dealers ask me what I think they need to do in service to cater to this group, the answer is really the same for every consumer; the millenials are just more fickle and therefore what you do has a bigger affect on them: give them a better consumer experience.

We asked 22-year-old college graduates their views on service.

They perceive a dealership’s service department as more expensive. Their parents may have bought them their car, but they are not loyal to the parent’s dealership. One bad experience and they bolt. They’re not interesting in getting mail or filing paper work. They want everything available to them online.

They grew up on Amazon.com where you can buy everything in 3 clicks. They don’t feel their service experience should be any different.

Dealers ask me to take a look at their current service technology and process and recommend what needs to change to get more customer-pay business, especially since warranty work is down.

When I walk through dealership’s service processes, I see again and again that they’re thinking about it in the wrong way.

They think of each step as a standalone

Figure 1

transaction. Schedule service. Write up the ticket. Do the inspection.

But the key is that it all has to be in one workflow. I see dealerships every day waste valuable time with their customers because they have separate systems for inspection, write-up, and scheduling. Systems don’t talk to each other. The screen – and the data – that the customer saw when she booked her appointment isn’t the same when she drives her car into service.

The ideal service workflow is this: after she buys the car, you set the appointment before she leaves the dealership. Don’t let her walk away before she does this – data has shown time and again that customers are way more likely to come back again and again if you start them off right. Or, if she’s scheduling service on your website, make it like the Amazon.com experience.

Show her recommended maintenance, either as a menu or a la carte. Show her past and denied work. And when she is in your drive, remind her of all of this right then and there. She is far more likely to buy more if you do this, coupled with a walkaround using a mobile tablet.

Print and sign the repair order right there. This is what those millenials are looking for. Fast. Easy. Done at home on their laptop. All of the information accessible in one place. Do business the way they want to do business.

And if you had a tight service workflow, all of the pieces would talk to each other, you wouldn’t spend time rekeying or hunting for data because it would all be there right in front of you. And that saves your service advisor time – time to sell more. Spend more time with a customer.

It can all be done and leads to a much more satisfying experience that makes you more money and hours per repair order. This is what large Dealer groups are starting to see through their use of mobile tablets in service.

And it doesn’t stop there. ADP recently conducted a study of the dealership’s workflow and found that the Service Advisor is the hub of the Service dealership process. Communication tools like texting and IP Telephony are essential. You need seamless communication to the technician too, with an automated inspection process, that again, sees everything from the past customer interactions and gives you the opportunity to upsell.

Otherwise you’re leaving money on the table and not building trust.

So our millenials told us they want an Amazon or Apple-like experience with their cars. They grew up spoiled – all the information they want at the fingertips, instant gratification, all done seamlessly and transparently on their computers or smart phones.

With a seamless workflow process in which all the pieces talk to each other and rely on mobile technology, you can give them just that.

About The Author:

Justin Sprague is currently a Sr Director of Product Marketing. In his role, he is responsible for the product strategy/ direction and project management of ADP’s Drive core portfolio. His career history includes contributing as Director of Sale Support and Business Development and Director of Sales Enablement.

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 21

October 21st - 23rd, 2012 Bellagio - Las Vegas, NV

Welcome to the DrivingSales Executive Summit

Once per year at the start of the fourth quarter, the most progressive dealers in the country gather to collaborate on the most innovative trends and formulate their business plans for the following year.

Each year the attendees are invigorated with profit building strategies and leave prepared to increase their successes.

Seating is limited, and as in years past, the event will sell out.

Reserve your spot quickly to ensure your participation.

You don’t want to miss DSES 2012!

How DSES is Different Created Specifically for Dealer Execs Dealers, GMs and high level decision makers.

Focus on Advanced Dealership Strategies This is not a beginner event.

Fresh Content Not the same agenda you see everywhere.

DSES is known for world renowned leaders and groundbreaking research.

Dealer Designed Vendors don’t dictate the agenda, dealers do.

Outside Industry Experts Many challenges inside our industry have been solved outside it. We bring those solutions in.

DrivingSales Annual

BEST IDEA CONTEST Enter your dealership strategy in our $10,000 Best Idea Contest. Visit DSES.com for more info.

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Featured Speakers at DSES 2012!

Billy Beane GM of Oakland A’s, Featured in the movie, “Moneyball” As portrayed in “Moneyball”, Billy Beane re-invented baseball by finding hidden value in underutilized metrics. Billy’s practices have since been applied across the sports and business worlds helping organizations beat their competition with a fraction of their budgets. Don’t miss Billy explain how “moneyball” thinking can help your dealership succeed!

Scott Stratten Best-selling Author, President of Un-Marketing Scott Stratten is an expert in viral, social, and authentic marketing, which is all about positioning yourself as a trusted expert in front of your target market. When they have the need, they choose you.

Stratten’s book, ‘UnMarketing: Stop Marketing. Start Engaging.’, became a national best-seller before it was released. His second book is set for release in the fall of 2012.

Facebook & Google The Future of Search & Social Marketing Facebook and Google will each be presenting keynote addresses about the future of social media marketing, search marketing and how dealers can benefit from upcoming changes in each. At the conclusion, Dean Evans, the CMO of Subaru, will join Facebook and Google on stage for a candid discussion and Q&A. Florian Zettelmeyer Professor of Marketing, Kellogg School of Management Professor Zettelmeyer, who got his Ph.D in Marketing from MIT, specializes in evaluating the effects of information technology on the product market behavior of firms. He has led numerous research projects on the effect of the Internet on the auto industry. Zettelmeyer teaches the MBA class “Information and Technology-based Marketing” at Kellogg School of Management, one of the highest rated marketing programs in the world.

Rand Fishkin World leader in SEO, Founder of SEOmoz Rand Fishkin, the founder and CEO of SEOmoz, is considered one of the world’s most respected SEO experts. He has been invited to present around the globe from Beijing to Milan to groups like the United Nations and Stanford University. Fishkin has even been invited to speak to the search engineers at Google and Microsoft. He recently co-authored the book, ‘The art of SEO’.

Visit www.DSES.com for a full list of speakers

Dealership Innovation Guide

October 21st - 23rd, 2012 Bellagio - Las Vegas, NV

Summary of Agenda Sunday

Time

Event

Time

Event

10:00am - 5:00pm 10:00am - 3:00pm 3:00pm - 5:00pm 5:00pm - 7:00pm

Monday

8:00am - 5:00pm 8:00am - 9:00am 9:00am - 12:00pm 12:00pm - 1:00pm 1:00pm - 3:00pm 3:15pm - 6:00pm 6:00pm - 8:00pm

Tuesday

Time

8:00am - 12:00pm 8:00am - 9:00am 9:00am - 12:00pm 12:00pm 12:30pm - 1:30pm 1:30pm - 3:00pm 3:00pm - 5:00pm 5:00 pm - 7:00pm 7:00pm - 9:00pm

Registration Private Group Meetings General Session Opening Reception

Registration Breakfast General Sessions and Contest Lunch Breakout Sessions General Sessions and Contest Reception

Event

Registration Breakfast General Sessions and Panels Lunch Awards Ceremony General Sessions and Panels Private Group Meetings and Workshops Joint Keynote Presentations with JD Power Automotive Marketing Roundtable Joint DSES / JD Power Reception

Register Today!

The DrivingSales Executive Summit is committed to creating an exclusive, collaborative environment for the nation’s most innovative dealers. To protect exclusivity and provide the highest quality experience for the participants, we regulate the number of attendees.

Seating is limited and the event will sell out, so register early to guarantee yourself a seat.

Visit www.DSES.com/registration to register now!

Scan this code with your smartphone to register.

Exclusive Discount For DrivingSales Innovation Guide Readers!

Bellagio Room Info

The Bellagio Hotel is one of the world’s most iconic resorts. We feel that the Bellagio’s dedication to excellence is not only an appropriate place to hold our annual DrivingSales Executive Summit meetings, but also an ideal place for our attendees to stay while they’re in Las Vegas. Last year, the DSES room block sold out months before the event so we urge you to book your rooms as soon as possible.

You can visit www.DSES.com/hotel for more information. You can also scan this code with your smartphone to go directly to our website!

Contact

We understand that you might have questions about this unique and innovative event, and we are happy to answer those questions.

Lindsey Auguste

Email: lindsey@drivingsales.com Mobile: (866) 943-8371, ext. 4 Twitter: @drivingsales Facebook: Facebook.com/drivingsales

Use code DIG to receive $100 off your registration fee.

Don’t delay! This event has almost sold out!

Dealership Innovation Guide

www.DrivingSalesExecutiveSummit.com

DrivingSales • 3rd Quarter - 2012 • 23

DATA The New Currency

E

very day I talk to dealers and tell them the same thing, data is like money in the bank. But you’ve got to treat it that way. You need to respect it, you need to invest in it and you need to protect it. It’s your number one resource for connecting to your number one asset—your customers.

Keeping Your Customers If you consider that 85% of consumers start the car buying process online, that means your dealership is fighting to keep its customers before they even walk in the door. In fact, if a customer likes what they find on a competitor’s site, you may never get the opportunity to hold on to them. To combat this, you need to wrestle back control of the car buying experience and connect with customers before they go online, before they even think about purchasing a vehicle. How can you know which customers to target and when to target them? You can’t. Not unless you’ve got good data and a smart strategy.

Simple Segmentation Isn’t Enough Most dealerships already practice simple segmentation for their marketing communications, targeting customers who share one or more characteristics: model of vehicle, lease expiration date, age of vehicle, etc. Or they target types of customers: new, used, active, inactive, lease or conquest. This type of segmentation enables you to focus on a specific message or offer and narrow your list by targeting certain customers.

However, it won’t maximize your sales or

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profit potential. To accomplish that, you must incorporate advanced analytics.

The Value of Advanced Analytics To really drive sales, your direct marketing efforts must employ advanced analytics and predictive modeling to forecast customer behavior, which is then used to select targets for communications. For example, let’s say you want to regain customers who have defected to your competition.

Mailing to your entire inactive customer segment would be very costly. Not only that, there’s a reason these people defected, which means the majority would ignore your offer. A strong analytic team, however, would identify your inactive customers, analyze the data and create complex algorithms to predict or project which of these customers have the highest propensity to respond to your offer. This information would save you a sizeable amount of money on your marketing— and produce a much better ROI.

Using Data to Detect Risk After creating the algorithms and target list for inactive customers, this same team could analyze the data to identify patterns and behaviors of these customers when they were still active— and how those patterns and behaviors started to change before they defected.

The team can then create analytic algorithms to identify customers who are “at risk” of leaving you in the near future.

This gives you the chance to reclaim “lost” customers before they defect.

The Cost of Communication It’s easy to get caught in “the more I send, the more customers spend” trap. While volume can reduce the cost per communication, the campaign can still end up costing you more.

And the real question is, what is the price per lead? More importantly, what is the price per sale?

The real danger, however, is overcommunicating to customers. That’s where advanced analytics comes in, because you only want customers to receive relevant information at a time that is appropriate to them. If you over-market to customers, they become callous to all your messages regardless of the offer. Then you’ve lost them forever.

Data: Accuracy and Consistency Data can’t be analyzed until it is in the proper format and for that to occur, it must be accurate, consistent and complete. My company works with thousands of dealerships that use a variety of DMS, but there are a number of issues we encounter across the board. These issues can cost dealers time, money and sales. The two most important things to remember are: Be careful and enter information uniformly—make sure everyone responsible for entering data understands the importance of this. Keep in mind that typos or abbreviations may be okay internally, but they can cause issues when your data is sent to vendors or transferred to another system.

Be consistent about which fields you enter and what information the fields contain. There should not be different fields for different customers; and if payment information is in field 19, every customer’s payment information should be in field 19.

DMS Best Practices By partnering with dealers across the country, we’ve learned firsthand about some of the mistakes they’ve made with their DMS. In addition, we’ve discovered how these dealers can work more efficiently with vendors Dealership Innovation Guide

to maximize their direct marketing efforts. These lessons may be beneficial to your dealership as well.

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Keep all historical customer data.

Never delete data regardless of its age. Without it, you cannot determine patterns and forecast future behavior.

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Make sure that, when a customer trades in a car, there’s a way to mark the original sale as traded in. Otherwise you may end up marketing to someone about a car they’ve already traded in for another vehicle.

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Provide complete information for financing and leases. Even though there’s a lot of data entry necessary—especially for leases—this information is essential now and in the future.

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When considering a new DMS, ensure that all prior data will transfer completely before switching systems, otherwise you might lose access to that information forever.

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Confirm that your data isn’t being archived without your knowledge. At some point, data almost always gets archived. Find out when and what is being archived, because once it’s archived, it’s a challenge to “put it back”. And it usually involves a fee.

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Back up your data—don’t lose your most important asset.

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Enter your customers’ email addresses. Email is a critical— and cost-effective—marketing and communication tool. Update them every time you have contact with customers, as some customers change their email addresses frequently.

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Protect your data—consider the dealership in Georgia accused by the Federal Trade Commission of compromising consumer data by failing to adopt reasonable security measures.

Dealership Innovation Guide

You’ve worked hard to earn your customers and they are, without a doubt, your number one asset. But in today’s market, I believe dealerships should think of every customer as a conquest, because dealers have to win their customers’ business every single time. And to do that, you need to get to your customers before they get to the Internet and before your competition gets to them. But not too soon and with just the right message. In other words, you’re going to need some data.

About The Author:

A 20-year veteran of the automotive industry, Russell Grant is the VP of Sales at J&L Marketing, Inc., where he previously served as a Business Growth Strategist and Strategic Consultant. Prior to that, Grant was the National Sales Manager at eXteres Auto, a company specializing in SEO and Online Reputation Management. He has been a regular speaker for 20 Groups, Driving Sales Executive Summits and Digital Dealer.

DrivingSales • 3rd Quarter - 2012 • 25

Comparing Listings

Publications

Like AutoTrader.com and Cars.com

O

ur conclusion to the years old AutoTrader.com and Cars.com comparison debate boils down to one simple word, “don’t.”

We’ve seen and heard lots of these debates over the year. What follows is our take on why the most commonly used comparisons just don’t hold up and our recommended approach to dealers.

Relative Number of Site Visitors When you buy AutoTrader.com or Cars. com you are not buying access to the audience on those websites. You are buying access to the vast audience across those networks of websites. For many years, these companies have been posting the millions of vehicles listed on their websites on other sites as well. Some of these sites are regional, so this added benefit is not evenly distributed geographically. Of course, the popularity of the core sites varies geographically as well. If you are selling vehicles nationally or across a huge region, like Finish Line Ford or Suzuki of Wichita, then total audience size matters.

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For most dealers, what matters is the relative audience in the dealer’s market.

Getting good metrics on visitations that are consistently defined for both services across your market is difficult to impossible. Some markets are relatively strong for one service vs. another.

Cars.com is very strong in Boston and Chicago, but that is not the case in San Antonio. Does that mean Cars.com is worth half as much as AutoTrader.com in San Antonio? One-third? One-fourth?

We don’t think it is possible to gauge the comparative value based on audience alone. Smaller audiences tend to attract a smaller number of competing dealers.

vary greatly from store to store based on product, price, and merchandising.

AutoTrader.com was always better than Cars.com at attracting Pickup Truck buyers, so Cars.com bought Pickuptrucks.com and put their truck inventory on that site as well. Has that closed the gap? Is Cars.com as good for Dodge dealers in your market as it is for Lexus dealers? Are Cars.com and AutoTrader.com impacted equally in your market by adoption of a velocity pricing strategy? I doubt your trainer, or anyone else, can answer these questions.

Experience of Trainers and Other Vendors

Dennis was once a leading advocate for Cost per VDP as the strongest comparative metric. It remains the supreme metric for comparing one Cars.com package to another or one AutoTrader.com package to another.

VDPs are very useful in comparing packages within a company, but they cannot be compared across companies.

DrivingSalesData.com is a site that allows dealers to anonymously input their data and see where they stand relative to competing dealers, at no cost. Within that

We’ve heard trainers and vendors try to weigh in on this discussion, because they can bring larger sample sizes to the debate than most dealers can. However, the degree to which those samples of dealership results on Cars.com and AutoTrader.com are representative of your brand in your market is almost nil.

Even if a vendor had results from 100 stores in the same market, the results

Cost per VDP

Dealership Innovation Guide

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 27

is cost effective or you don’t buy that service. These services compete over consumers, and they compete over additional places to put their dealer’s inventory and provide exposure for their dealers. But they don’t need to compete for dealers. Consequently, you don’t need to decide which is best. You have two distinct decisions to make: Should I use Cars.com? Should I use AutoTrader. com? Keep them separate and you’ll find them quicker and easier decisions to make. When you find yourself dissatisfied with the results of either, look at the market demand for what you are stocking, your price to market, and your merchandising. Then ask yourself, “Is the product not working sufficiently to justify its price, or am I not working the product?” We have seen both cases, but the only thing that matters to your decision making is your situation.

Whether or not this same thinking applies universally across all listings Publisher is something we are still collecting data on. site, we have gathered enough trending data from enough dealers using both services to be extremely confident in saying this vital metric is not comparable across companies as currently reported.

It has long been understood that Search Results Pages on Cars.com and Autotrader.com are Apples and Oranges.

What is now clear it that either the way the sites function, the way the metrics or captured, or both cause the conversion rates to behave much differently as well. On average, the overall conversion from SRPs to Tracked Contacts (phone calls, emails, and chats) is roughly the same on both sites. However Cars.com shows a significantly higher conversion from SRP to VDP and AutoTrader. com shows a correspondingly higher conversion from VDP to tracked contact.

Clearly there is more of a difference than simply the fact that the two sites have very different search pages.

Further complicating the matter is that there is virtually no correlation between the SRP-to-VDP conversion metric and the corresponding VDP-to-Tracked Contact metric. More data is needed to confirm this lack of correlation, and DrivingSales will have that data before DrivingSales Executive Summit in 28 • 3rd Quarter - 2012 • DrivingSales

October. With what we know now, there is every reason to think VDPs are no more comparable across these two sites than SRPs are, apples and oranges.

Cost Per Sale Cost per Sale relies on your ability to track all five forms of contact generated by these sites: phone, email, chat, visit to your dealership site, and walking in.

Of these, walk-in traffic is largely thought to be the one generating the largest numbers and the one that is most difficult to track. Does your sourcing program include attribution to the entire network of sites or just the core site? Secondly, not all sales have the same value. Does the site do a good job of selling the portion of your inventory that is most difficult to sell, the portion that offers the best margins, or the portion that you were going to sell quickly anyway? Cost per Sale is a useful metric, but not a sufficient metric for comparing one vendor to another.

You Don’t Need to Decide We hate to see dealers waste time on a decision they don’t need to make. You don’t need to know which service sells more vehicles. You don’t even need to know which one is most cost effective.

You just need to know that each service

The Seesaws Between Merchandising and Exposing Inventory The better a dealership merchandises its inventory online, the more cost effective it becomes to add exposure through product upsells or the addition of other listings publications. The more exposure the store obtains for its inventory, the more cost effective it becomes to invest in additional online merchandising. Focusing only on better merchandising without reexamining the cost effectiveness of additional inventory exposure would be a mistake.

That additional exposure could come from driving traffic to the dealer’s site or investing in additional listings publications. Similarly, investing in additional services without taking the time to consider how merchandising could be improved to enhance results across all sites exposing the dealer’s listings would be a mistake.

Knowing the Breakeven Point Much of the effectiveness of online vehicle merchandising comes from the investment of human capital, rather than a direct cash investment. A manager’s Dealership Innovation Guide

bragging rights should not come from the average cost per VDP on any of these products but how high that store can afford to pay per VDP on the margin. A store with vehicle merchandising, lead handling, and appointment closing so good that it can turn a profit on a cost per VDP of 2.00 can outbid a store with a breakeven point of $1.50.

In the example below, the dealer cannot profit sufficiently to justify the upsell product from Service A.

By better managing the resources available, the breakeven line shifts up. This happens because more traffic is being driven to the store from the same investment. Not only is the area of profitability greatly expanded, the upsell option is now not only affordable but profitable. In cases where the upsell is exclusive to the region, this means the dealership may now be in a position to outbid their competition for this opportunity.

About The Authors:

Lindsey Auguste is the Editorial Director for DrivingSales, ensuring that the community is getting the content and experience they need to improve their dealerships. Lindsey comes from a background in psychology and sociology at Chapman University and worked as a research assistant at Stanford University where she executed the research design and collection process. She applies this specialty at DrivingSales by providing research across the industry and by helping to bring relevant content to her DrivingSales peers.

Dennis Galbraith leads Research and Business Intelligence for Dealers at DrivingSales and is the author of Sales Integration. Dennis ran the automotive internet division of J.D. Power and Associates and was Vice President of Advertising Products and Training for Cars.com. He has owned several successful companies, Dennis Galbraith Marketing Services and Revenue Guru. He earned an MBA from University of Southern California and taught marketing for Embry-Riddle Aeronautical University and NADA Academy.

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 29

- we sell Honda, Toyota, Scion, BMW, MINI, Hyundai, VW, Jaguar, Porsche and Audi, and we operate a used car super store called Driver’s World.

Needless to say, it is a big job. I have a talented team of six sales animals (a.k.a. Customer Care Representatives a.k.a. Internet Concierges).

Marketing 101 Christine Knowles Shares How Her Dealership is Crossing the Finish Line at Checkered Flag

I

f anyone still believes that today’s successful dealership eCommerce Director needs to be a lifelong industry veteran, a technophile, and a car “guy” – you couldn’t be more wrong. Christine Knowles proves these stereotypes wrong while continuously pushing the needle for excellence and improvements, both personally and professionally.

down. Her ability to keep the momentum going with regards to all the change she’s endured, the shifting environment, and the size of her operations serve as an inspiration to dealers. Here’s how she describes what she’s doing, where she’s going, and everything in between.

In just six years, Christine has moved up through the ranks of Checkered Flag and the retail industry by demonstrating the core values needed within a dealership.

And she isn’t showing signs of slowing

At Checkered Flag we have a centralized Customer Care Center (a.k.a. the CCC, a.k.a. the BDC, or BDT), which handles all inbound sales calls and Internet inquiries for all Checkered Flag locations

30 • 3rd Quarter - 2012 • DrivingSales

Centralized Operation Philosophy

It takes a uniquely skilled individual to man these positions. They must possess the ability to speak intelligently about 10 new auto brands as if he sells each brand exclusively, as well as ALL the pre-owned makes and models we carry. This is not a receptionist or admin job. This is a job for real, strong sales people, super sales people, or as I like to call them “sales animals.” I stole the term, and a lot of our team’s philosophy from the book Rhinoceros Success by Scott Alexander. It’s a Dr. Suess-ian motivational book with big text and pictures. Perfect for shortattention-span-afflicted car people. I require everyone on my team to read it. We have a Rhino mascot, Rhino pictures on the wall, and we play Rhinothemed team-building and motivational games (trivia, Rhino bingo, etc.).

Change Is Everywhere – What’s On The Horizon?

The major change has been the tidal wave of social media sites. Only a few years ago, Alex Snyder looked at me and said, “We need a Facebook page for the dealership.” I replied, “Isn’t that that website where college kids check their course schedule or something?”

Flash forward and we’ve got vendors knocking our doors down to manage our Facebook, Twitter, Linked In, Foursquare, Pinterest, Flickr, Reddit, Yelp... you name it! Whether dealers handle this ginormous task in-house or hire a partner to do the heavy lifting, it cannot be ignored. You must be in the mix of social: write a blog, get on the sites, get some fans/friends/followers, and post videos. This is not an option.

Going forward I see mobile everything. iPads in place of desktops. Sales Agents, Service Writers, F&I Managers untethered, free to roam the dealership and conduct business, start-to-finish, via their iPad or other tablet device. Start the paperwork during the test drive, sign one Dealership Innovation Guide

time. It’s going to be a marvelous place – also, I fully expect that hover board from Back to the Future II to be available soon.

It’s About Connections: Blog, Video & More!

Mistake Are Learning Opportunities

Losing Key People

I’m proud of our extensive web video library. Since (again) Alex said, “We need to make some web videos,” we set a goal of five new web videos per month. We’ve covered every model sold, About Us, Service, How-To, Events, Customer Testimonials (although there is a lot more to be done with this), and tons of other relatable topics for consumers such as “What is a Processing Fee?” and “What Happens in the F&I Office?” We’ve understood for a while now the importance of giving the shopper what they want, and giving Google what they need to find us.

The first major disappointment in my career as an eMarketer was when I established our very first Facebook page.

I didn’t know the difference between a “friend” page and a “business” or “fan” page. I built Checkered Flag Auto Group as a personal page, not knowing any better, and friend requested EVERYONE. Seriously, I was obnoxious.

I spent countless hours searching out people I knew, local people, strangers, fans of other automotive pages and anybody I could find to send a friend request. I had over a thousand friends and was feeling quite the social guru when Facebook caught up with me.

They shut me down. Killed the page.

I’m pretty sure I cried a little. I learned the difference, and now strictly follow guidelines on all our social media sites.

Everyone was sad to see Alex leave when he made the move to Dealer.com, no one more than me, even though we were all thrilled for him and his exciting new opportunity. Alex hired and trained me, and he informed me that Facebook was indeed NOT a website where college students check their course schedule, amongst other lessons. Although it was intimidating attempting to fill the shoes of such a talented eCommerce Director, I had an ace up my sleeve. Although Alex was now 700 miles away, he took up residence with a partner company of whom we are a client. This meant that in a roundabout way, I became Alex’s client! In a move taking customer service to a whole new level, Alex made himself available to me via email, phone, AIM, Bat Signal - from day one of our transition. To this day I don’t hesitate to reach out to him for suggestions when I need a trusted opinion. Everyone is impressed, but not surprised, at the accomplishments Alex has achieved in the short time since he joined the team at Dealer.com. Plus, his family is here, so he comes for a visit every once in a while.

Dealership Innovation Guide

Our blog is another source of pride for me primarily because it’s nothing like other dealerships’ blogs. We talk about anything and everything. I want every single person in my community to consider my website a source for current events, news, entertainment, and yes, of course, automotive stories. If you cater your blog to auto-enthusiasts, they’re the only people who will read it. Guess what? A lot of people who are not autoenthusiasts buy cars! Welcome them to your world before they are ready to buy, and they’ll remember you when they are ready. The blog alone doesn’t get the message out, that’s why we link to the articles from Twitter and Facebook.

It’s a Team Effort!

When I started the social effort, I was a one-man-show. I wrote every blog article, Facebook post, Tweet, and personally responded to all comments and posts.

As my role with Checkered Flag has evolved, I’ve had to loosen my grip and allow others to assist me with blogging.

I no longer write the articles, but have two amazing writers who “get me” and keep entertaining articles flowing. We’ve also taken steps to broaden our reach on Facebook and Twitter. In the beginning, each social site was simply a groupbranded page, Checkered Flag Auto Group. Now with the help of our partners at Digital Air Strike, we have a page for each individual dealership, Checkered Flag Toyota, Checkered Flag Honda, etc. The team at DAS publishes content to these pages on our behalf, and I’ll admit, I’ve struggled with not having complete control over every little thing that’s broadcast. I’m a bit of a control freak when it comes to the representation of our company (and everything else in life - but that’s a different article). The DAS team has done a wonderful job, and I’m excited to see our social circles increase over time with their help.

DrivingSales • 3rd Quarter - 2012 • 31

32 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide

Tame The Tech Beast

The Balanced Life

Technology is an unstoppable freight train. I didn’t have a computer growing up, had no interest in technology, went to sell cars, and now I’m the Director of eCommerce. The technology sucked me in, now I spend my life staring at double monitors (and three more on the wall above me.) I freak out when I forget my cell phone and feel like I’m missing something if I don’t check Facebook periodically, and I’m not (terribly) abnormal. This just is the way it is now. We have sales agents who had never used a keyboard now “liking” the dealership on Facebook, and checking in on Foursquare when they come to work in the morning. Eighty-year-old customers are asking us to text them the info. We’re constantly trying to keep up, we now text through the CRM, and are launching iPads at our BMW MINI dealership for easier customer interactions.

Whatever is next, we’ll do that too!

What’s this personal life you speak of?

Kidding. I am fortunate that the majority of my duties can be performed from the office, or from home, so I am not chained to my desk. I have a difficult time taking vacations primarily because I feel like someone will need me. It’s a wonderful and terrifying feeling being the only person in the organization who can access certain pieces of our digital marketing. If a change needs to be made on the fly, and I’m out of the office, I have to get myself to a computer quick and take care of it. I’ve recently deputized one of my team members and am slowly showing him the ropes.

Yet another important lesson learned

Christine’s Vision – What’s Next?

1. People want quick, easy, in-andout service; the faster the better. If they could do business with your company and never speak to a human or step foot in your front door, that’s the way they would prefer to do it. Six hours to sell a car simply won’t cut it. Two hours for an oil change with a mandatory check-in and check-out structure won’t work anymore. Get slick, use technology to trim down the time required for all customer interactions.

If you don’t your competition will.

2. We must advertise the real, best, lowest price online. Shoppers are used to buying online, they’re comfortable with it, and they don’t expect a different price online versus in the store. They don’t go to Bestbuy.com and see a TV set for sale, take the price into the store and negotiate down. What you see is what you get with online shopping.

Cars shouldn’t be the exception.

Price aggressively, post it online, and honor the price at the store.

Transparency will win, every time.

Dealership Innovation Guide

from Alex is to have a “what if I get hit by a bus?” plan in place. The show must go on even when I’m in Jamaica, or *gulp* flattened on the pavement.

Online social connections are a tricky business. My face and name are on the Checkered Flag Auto Group Facebook Page, and other social sites. I post and comment as “Christine from Checkered Flag Auto Group” -- because let’s face it, a building or logo can’t have an opinion, carry on a conversation, or crack a joke.

It needs to be personal, social is all about relationships with real people. It gets sticky when a “fan” of our business page solicits a connection with my

personal page. Do I friend them? Do I ignore it? Will it insult them if I ignore it?

When I started out I accepted all friend requests, over time I’ve paired it back to only people I know and/or wish to interact with. As a result of all the previous connections I made I’ve gotten down right brutal with the un-friend button. One post that rubs me the wrong way and BOOM! They’re gone. The business page is the appropriate place for business interactions. However, I am mindful of the fact that I represent Checkered Flag at all times, in real life and online.

Christine Recommends 1. Think in terms of what you want as a customer. What sort of marketing, sales process, environment, personality, interactions encourage YOU to choose a retail location? Create a culture that mimics what you would respond well to. It’s easy, think about where you shop for clothes, food, technology, music – everything.

What is it about the website or store that makes you comfortable spending time and money there?

Low prices? The welcome, friendly staff? Cool ambiance?

2. Follow through on your processes.

If you have a top-of-the-line CRM tool and no one uses it - you fail. If you have a set process for greeting guests on the phone, online, and in the showroom but employees aren’t held accountable for following it- you fail. Setup regular training sessions, repetition is the key to learning. Hold everyone accountable for their part in the process, GMs to janitors.

3. Work on your relationship skills.

Read How to “Win Friends and Influence People,” “The 7 Habits of Highly Effective People” and my personal favorite, “Rhinoceros Success.” Then seek out industry leaders who have already accomplished the type of success you are seeking and read what they have to say. Follow automotive industry blogs so you’ll always know what’s happening, and more importantly, what’s about to happen to within our industry. A couple of good ones: Dealer Refresh, DrivingSales • 3rd Quarter - 2012 • 33

The most authoritative source for selecting dealership vendors

DrivingSales.com/Ratings

34 • 3rd Quarter - 2012 • DrivingSales

DrivingSales, Autoblog and Autoblog Green, Consumer Reports, Jalopnik, Polk, the list goes on and on. Find a couple you enjoy and subscribe.

Also, don’t forget to network. Online networking is easy; we’re a chatty group! Face-to-face interactions still work too. Call the eCommerce Director at the dealership down the street and ask him/her out to lunch. Chat with your vendor reps.

That nice smiley blond who pitches AutoTrader is a powerhouse and an excellent source of information.

My Cars.com rep has shared some helpful insights ideas and best practices that I hadn’t considered.

Use the resources available to you.

Be friendly with everyone, all the time, even when you’re having a rough day. Back when all I did was drive around from store-to-store taking pictures of our used cars I met and interacted with General Managers, Sales Managers, Receptionists, Sales People, and yes, even the janitors. I always smiled, I always said “Hello”; I always asked people how their day is going. I am fully aware of the importance of these relationships as I now depend on cooperation from these people for many aspects of my job. I need their help - and they are willing and happy to help me, because I was nice to themall the time. Never underestimate the power of a positive attitude and a mega-watt smile!

Checkered Flag’s brand name is more than fitting. They’re crossing the finish line first while firing on all cylinders and it’s apparent within all of their initiatives.

Christine’s attention to detail is a true indicator of the leadership needed for today’s successful dealership and today’s successful eCommerce Director.

Congratulations on your successes, Christine, and to everything that lies ahead for you and Checkered Flag!

About Christine Knowles:

Christine Knowles is the Director of eMarketing for Checkered Flag Auto Group and Driver’s World in Virginia Beach.

With ten years of experience in the car business, Christine has worked in a wide variety of dealership positions including: Sales Agent, Customer Relations Manager, Dealer Trade Manager, Inventory Manager, Internet Sales Associate, Internet Manager, Blog Author, Video Producer, Company Spokesperson, Social Media/TV/Web Video Personality, and others. Her current role as Director of eMarketing is a hybrid position encompassing all aspects of Digital Marketing, Social Media and Reputation Management, as well as managing a Customer Care Center (or BDT) of six talented sales agents who handle all inbound sales phone calls and internet inquiries for Checkered Flag’s ten new auto brands, as well as Driver’s World’s pre-owned sales business.

Dealership Innovation Guide

It’s Time

Franchise Dealers

W

Start Operating Like Independents

hen independent dealers look at franchise stores, many imagine what they would do with a massive inventory and huge marketing budgets. But the fact of the matter is that franchise dealerships would do better if they thought like an independent.

Independents run lean and mean, and make every dollar count. Because they’re selling the same type of used vehicles as their franchise competition - but at a fraction of the operating budget - independent dealerships 36 • 3rd Quarter - 2012 • DrivingSales

are always looking for new ways to get the best ROI. They adapt quickly and aren’t overburdened with multiple levels of management. As a result, they have more freedom to question the way things are being done and to not repeat old decisions month after month simply because “that’s how it’s always been done.”

Here’s what it really boils down to, every dealership should be reviewing every vendor they use every six months, if not quarterly. Sure, you get what you pay for, but just because you have money doesn’t

mean you have to spend it. I wish I had a nickel for every time I have been on a call and the dealership had 2 or 3 systems that do almost the exact same thing. It’s mind-blowing how many GM’s are paying for the sins of prior GM’s with long term contracts and redundant software.

A wise independent dealer once said to me, “People either won’t do it or can’t do it. When you think about it, those really are the only two options.” I personally believe that many dealers won’t take the time to question their results simply because it’s much easier Dealership Innovation Guide

to throw money at a problem and hope it fixes itself. That school of thought has to change. You can treat high blood pressure with medication, but until you hit the gym and lose the weight, the root of the problem is not being addressed. That’s where the vast majority of dealerships find themselves today, on medication. Don’t wait for the next software vendor to tell you how much easier they are going to make your job.

Don’t let yet another salesperson tell you, “If you move just one more car, then the software pays for itself.”

Coming from the software point of view, I would say that most franchise dealers are really utilizing a very small percentage of what each system does.

They are using bits and pieces here and there but never fully understanding how or why things are the way they are.

The auto industry is changing! It is time for franchise and independent dealers to hold vendors accountable for ROI. As a software vendor and a consultant in automotive Internet marketing, I have a unique perspective. I love engaged dealers that hold me and my company responsible. I wish more dealers asked the “right” questions, but the fact is most don’t know what they don’t know. I want to challenge dealers that are reading this article to change their thinking. Business as usual should no longer be an option.

I want dealers to embrace the following 5 action items.

1. Accounts Payable – This is step one. Review all the vendors that you are paying on a monthly, quarterly, or yearly basis. Many times there are vendors being paid on a credit card every month and the software isn’t even being used.

2. Vendors – Review the vendors you are using and make sure you fully understand what they offer.

Vendors often push out new product and features that may benefit your dealership. Additionally, I strongly suggest going through a retrain on the software every 6 months so you’re getting the most out of your platform.

3. Data Flow – Review the flow of your vehicles from DMS to appraisal to lots services to website to classifieds to CRM. 4. Employee’s – Do you have the right people in the right positions?

You are only going to be as successful as the people you hire.

and stick with it, but of course adjust it when the market or the dealership conditions change.

Dealers have many vendor options available in today’s marketplace. Keep in mind that there are no silver bullets – no matter what that sales rep tells you.

Take control of your vendors and think about the best way to streamline your process, reduce your costs, cut your time to market, and improve your turn rate.

Bottom line: Question Everything.

About The Authors:

Bill Berry, VP of Sales, has been with AutoRevo for six years and in the

auto industry over ten.

He’s a published feature article writer and is committed to helping dealers understand automotive internet marketing. Bill is also responsible for managing AutoRevo’s sales department, developing customer and dealer group acquisitions, expanding partner relationships, and speaking at industry events.

5. Goals – Dealers not only need to hold their vendors accountable, you need to hold yourselves accountable. Have a plan

866.943.8371

Online training available 24/7/365

WE TEACH INTERNET PROCESS, STRUCTURE AND MARKETING

Webinars

Transform Your Dealership Through Education At DrivingSales University!

DSU@DrivingSales.com

Dealership Innovation Guide

DrivingSalesUniversity.com

DrivingSales • 3rd Quarter - 2012 • 37

Fixing Three Common

Used Vehicle Profitability Problems

A growing number of dealers say they’re having a hard time turning a profit in their used vehicle departments.

The problem isn’t that these dealers aren’t selling enough vehicles. In most cases, these dealers have increased their used vehicle sales volumes.

They’ve adopted inventory management technology and tools to help them acquire the “right” cars and price them competitively to attract today’s online used vehicle shoppers. Even so, the dealers say they’re closing more deals, but “we’re not making anything when we sell the car.”

As I’ve worked with these dealers to diagnose their profitability problems, I’ll typically find three trouble spots that undermine their used vehicle profit potential. These are revealed by examining key inventory metrics to discern the precise points in a 38 • 3rd Quarter - 2012 • DrivingSales

used vehicle’s lifecycle where profit erosion occurs. Once identified, dealers can directly craft and control a more profit-positive outcome.

You paid too much for the car Every dealer knows the theory—you make your money when you buy a used car. The problem is applying this theory consistently when a) there’s

increased pressure to feed cars to a used vehicle department that’s selling more units and b) the wholesale market’s more volatile than it has been for much of the past two years.

I’ve long advocated that dealers take a more retail market-focused approach as they appraise and purchase vehicles from auctions and trade-ins. That is, they should determine the maximum they’re willing to pay for a unit based on the amount they’ll likely get for the car when they sell it at retail. This is the way grocery, hardware, clothing and other retail store owners determine what to pay for the products they put on their shelves. They do not determine their acquisition costs based on what they might get if/when they offload slow-moving stock to resellers.

Velocity dealers use the cost-to-market metric to identify the “right” amount Dealership Innovation Guide

to pay to acquire a used vehicle.

The metric measures the “spread” between the acquisition cost for a car and its prevailing retail price points.

A benchmark: The most successful velocity dealers acquire cars at an average 80 percent cost to market, which means they have a 20 percent “spread” to absorb reconditioning/other costs and generate front-end gross profits as they retail the unit. If they step up and acquire a vehicle with an acquisition cost-to-market higher than 80 percent, these dealers recognize they need to more carefully manage the “spread” to achieve their front-end gross profit expectations on the unit.

You spend too much on reconditioning

willing to wholesale vehicles that, upon closer inspection by technicians, will require significantly more money to stand tall as a retail unit. Why? Because they recognize the unexpected costs will erode the vehicle’s “spread” and their expectations for frontend gross. As one dealer recently noted, “we’re done putting lipstick on cars that end up as profit pigs.”

You give away too much at the sales desk I recently worked with a Wisconsin dealer group that did a stellar job acquiring vehicles for the “right” money.

They were also extremely careful about preserving and protecting each vehicle’s “spread” as it moved through reconditioning. Even so, their front-end gross profits fell below expectations. As we took a closer look, we spotted the problem: The sales department routinely discounted vehicles by $500 or more as they negotiated with customers.

vehicle customers. Now, salespeople share market reports with every customer to demonstrate why the dealer’s asking price represents a competitive and fair deal. Further, they underscore how the asking price is likely the reason the customer landed on the car in the first place.

These efforts have effectively eliminated the practice of discounting prices at the dealer group’s sales desks.

“We’ve seen a $350 improvement in our front-end gross profit average,” the dealer says. “We don’t run away from our prices like we used to.”

About The Authors:

Dale Pollak is the founder of vAuto, Inc., a company that provides automotive dealerships technology and tools to improve used vehicle department sales and profitability. A former dealer, Dale is a recognized expert in used vehicle operations and author of two books on the Velocity Method of Inventory Management.

To address this, the dealer group has adopted what I call “documentation as the new negotiation” with their used

Five years ago, it wasn’t uncommon for dealers to spend a minimum of $1,000 to recondition used vehicles.

Many dealers wouldn’t even think twice about these costs as they believed “that’s what it takes” to get a car ready for their front lines. In today’s more margin-compressed marketplace, dealers are rethinking these reflexive decisions. They’re finding ways to lower reconditioning costs without sacrificing the quality and reliability of the vehicles they decide to retail. On a day to day basis, this means they’re using non-OEM parts when appropriate, replacing tires and brakes only when necessary and reviewing the necessity of body/interior work more carefully.

Velocity dealers say their average reconditioning costs run $500 to $700 per vehicle, and they’re far more Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 39

T

he three main pillars to dealership success are marketing, process, and structure. I’d like to spend some time focusing on structure, as it is the number one killer of Internet Departments throughout dealerships today.

Structure’s main goal is to put scalability to your process. Today, there are 5 core structures that dealership are using. There seems to be an evolution within these structures, so it’s entirely possible that a store might be utilizing one core system now, which is different from one they’ve had before. But let’s think about where we’re headed. If your store quadrupled the number of Internet leads tomorrow, could you handle it? As structure dictates scalability, it’s the number one factor in determining if your store is positioned to handle more business.

Single Internet Sales Manager

Structure for

Scalability The 5 Core Internet

Structures for Dealerships 40 • 3rd Quarter - 2012 • DrivingSales

This is where most of us started in the industry. We realized there was business to be had online and that there were Internet leads coming in from our manufacturers and 3rd party sources.

Most of us grabbed the person in the store we thought was the best on the computer and put them on the Internet.

Unfortunately, one of the drawbacks of this model is that we tended to grab the person who didn’t do so well in sales.

But, of course, not being good in sales shouldn’t be your first requisite for an Internet Sales Manager. This person needs to be incredibly dynamic and a wonderful sales person. This position is particularly difficult to hire for because the individual needs to be both right brained and left brained. They must be great with people and great with process. They have to be great on the phone and great on the computer.

Another drawback of this model is that it’s not scalable. It won’t take long before you realize that you have more Internet business than one Internet Sales Manager can handle. This leads us to the next core structure involving multiple people.

Dealership Innovation Guide

Multi-Team Internet Sales Department This might include 2, 3, 5, or maybe even 10 people all housed in one department.

These people take and work the leads, set and show appointments, help the customers, close the deal, get the customer to finance, and do the long term follow up. This structure tends to results in a showroom sales team separate from an Internet sales team.

The drawback here is that there is a division between your retail floor and your retail floor, and we’ve all seen the ramifications of this on Saturday morning when your top Internet guy is having Kangaroo Court with your top sales guy because they’re fighting over a split deal. The fact is, you can’t tell an Internet customer from any other type of customer, so managing this division becomes complicated and a primary reason why we need to have a more integrated approach.

BDCs Some dealers have seen the Internet Department model and decided that even if they have a growing sales team in this department, there is a lot of follow up to be made and a lot of phone skills to nail. Instead, they create a phone center, or BCD, where they filter all of their leads into the BDC where the people with great phone skills can answer the calls and email leads, and set appointments.

When those appointments come in, they pass them onto their best sales people.

The BDC model thrives on the philosophy that some people are better tasked to phone and email while others have strengths in selling and closing, and those strengths are mutually exclusive.

Reverse BDCs Some people argue that a BDC isn’t the most appropriate model because they worry about putting their most valuable asset, the customer, in the hands of a call center person who gets paid $12 an hour. In this case, they’d rather have their sales people, who are trained to handle leads, set appointments, and

Dealership Innovation Guide

close the deals, to be at the forefront.

A Reverse BDC works on the premise that the sales people get the sales up front and have a specified amount of time to set an appointment or sell the car. If those goals aren’t met in the said timeframe, the salesperson is assisted by the BDC who helps with follow up and appointment setting, and once the appointment is set, the BDC passes it back to the sales person.

Internet Stores There are some stores that understand that 90% of their customers are online and only 10% of their staff is trained to handle them. The solution? Train everyone in the dealership to handle Internet leads. Internet is simply a communication preference, and if a sales person can meet and greet, and overcome objections with a phone customer and a walk-in customer, why can’t they do the same for an Internet customer? It’s just a communication preference, then train all of your sales people to handle Internet leads.

As you move forward, solve the problem of scalability by looking at your processes (particularly, your lead process), and decide how to execute it over and over with great results by having a scalable structure.

About The Author:

Jared Hamilton, founder and CEO of DrivingSales, is often described as one part dealer operator and one part tech geek. He has over 10 years of dealership management experience in addition to his award winning entrepreneurial record.

Jared is a highly acclaimed international speaker educating audiences across the globe about capitalizing on the Internet’s opportunities and how to invest and implement technology solutions inside businesses.

We are heading to a place where all dealerships will be Internet Stores one day. Many people think that’s radical or even wrong. Let me be clear: I’m not insisting that every store needs to be like that now, nor am I saying that we need to do away with call centers in dealerships.

I simply believe that the division between Internet and retail is going away. We don’t have newspaper departments; we don’t have TV departments; so, why do we have an Internet department?

DrivingSales • 3rd Quarter - 2012 • 41

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Dealership Innovation Guide

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 43

401K FEES 44 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide

Your 401k fees are now disclosed via 408(b)(2) Disclosure Rule changes.

Are you sitting down?

D

ealers have a litany of things to keep track of in owning and operating a dealership aside from your main goal of moving inventory. You are providing opportunities to your employees for personal growth, career growth and financial growth. In terms of the financial growth of your employees, many of you are utilizing some type of retirement plan that allows employees to save for retirement on a tax-deferred basis.

The Department of Labor (DOL) fee disclosure requirement for 401(k) plans has been amended and is in effect as of July 1, 2012. It is important to understand a few things that impact you as a plan sponsor, as well as the liability that you have. You may or may not be able to pass some of the liability on to your investment advisor.

The DOL initial disclosure requirement covers the following areas; services, status, and compensation (direct, indirect and compensation paid among related parties), termination fees, manner of receipt, record keeping services, and investment disclosure: platform providers and investment disclosure: fiduciary services.

As a sponsor of a qualified retirement plan, you are a fiduciary. A fiduciary is someone who has a legal and ethical responsibility to look after other people’s Dealership Innovation Guide

money. If you have been appointed to serve on the investment committee of your organization’s retirement plan, you are almost certainly a fiduciary. If you are the trustee or administrator of a plan by virtue of the position you hold in your company, you are a fiduciary.

If you are the one who contracts with service providers to the plan, you are known as the “responsible fiduciary,” meaning you are responsible for selecting service providers through a prudent process. A fiduciary’s interests must be undivided. The singular duty of loyalty means that you must serve the exclusive best interests of plan participants and beneficiaries.

Aside from your liability as a fiduciary, are the fees that your company is paying reasonable?

Some of the main changes to the existing regulation include 1. Changes to investment-related disclosures for record keeping – brokerage services must be provided at least annually instead of within 60 days of a change 2. New requirements apply to record keepers and brokers that disclose investment related fee and expense information for designated investment alternatives by passing through copies of disclosure materials of the issuer of the designated investment alternative

provide the required disclosures by July 1, 2012, the 408(b)(2) rules require the plan sponsor to take action.

Layman’s terms…

1. If you have a retirement plan, subject to ERISA rules, you should have received or will be receiving disclosures of all the fees you and your participants are paying.

2. You will be required to report the fees and have the detail of each fee and the reasons for those fees.

3. If you have not received the disclosures you are required to request them in writing from the service provider.

4. Once a request has been submitted you should receive the disclosures within 90 days. If you do not receive the disclosure within 90 days you are required to notify the U.S. Department of Labor (DOL).

5. Also, if you do not receive the disclosures within 90 days, as the plan fiduciary you must determine to terminate or continue the arrangement. If you continue the arrangement you must be able to show why that decision was made.

6. You have a fiduciary responsibility to evaluate the plan’s investment fees.

Regarding number 6 above, if you have a Fee Policy Statement (FPS) or a written statement establishing the

3. The initial disclosure requirements with respect to indirect compensation now require a description of the arrangement made between the payer and the covered service provider pursuant to which the indirect compensation is paid.

4. Additional descriptions of annual operating expenses of “designated investment alternatives” are now required.

The changes listed only apply to service providers to pension plans subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA). If an existing covered service provider fails to DrivingSales • 3rd Quarter - 2012 • 45

reasonableness of administrative fees, you are ahead of the game. Some ideas to include in your FPS would be; (1) a statement of the fee-related duties under ERISA, (2) the responsibilities and roles of the plan sponsor and any other fiduciaries, and (3) procedural guidelines for conducting a review of administrative service fees.

Evaluating a Plan’s Administrative Service Fees The review of plan fees, investment fees and administrative fees should be performed on a regular basis either annually or every two years. You should document these reviews to be able to prove the reviews are being conducted in accordance with ERISA. Here are some simple steps to help; 1. Gather enough information for reviewing the administrative fees such as: (a) service provider’s qualifications, (b) the quality of services, (c) the total fee for the provider’s services, which includes direct and indirect compensation coming from investments within the plan 2. Obtain competitive pricing – if getting competitive bids to compare pricing is too time consuming you may be able to get assistance from the plans’ advisor 3. Draw an appropriate comparison as there are many types of service fee platforms (e.g., flat rate, per-participant fee, transaction based, asset–based fee, or even a combination, etc.).

4. Determine if the fee is reasonable.

There are many factors used to determine this such as the service provider’s qualifications, the service quality as well as other relevant factors. Your advisor can help with this evaluation, and if needed, they can recommend multiple replacement providers with lower service fees and maybe even negotiate for more services.

5. Plan fees can be paid from plan assets. Prior to doing this, the plan sponsor must ensure 46 • 3rd Quarter - 2012 • DrivingSales

three key points; (1) that fee payments are authorized under the terms of the document, (2) the administrative service is in the interest of the plan participants, (3) the fee is reasonable.

In summary 408(b)(2) will help more clearly define your fiduciary responsibilities and possibly mitigate any related liabilities.

Up until now, plan sponsor fiduciaries often have not received sufficient information from service providers (such as financial advisors) to make good contracting decisions. In light of this, the DOL has decided to specify the minimum information service providers must disclose to plan providers. As fiduciaries, plan sponsors are obligated to consider this information before they enter into agreements with service providers. The best place to find the requisite information is an advisor’s proposed client services agreement.

The three key disclosures to look for, required by advisors under 408(b)(2) are: •

Services: What will be provided and what will not

•

Cost: Compensation and sources of compensation

•

Status: Does the advisor accept fiduciary responsibility? (Note: if the agreement is silent on fiduciary status, the provider is not accepting fiduciary status)

If you are seeking objective advice or giving investment discretion to a service provider, only work with a fiduciary.

of. You can find this information “en masse” at www.irs.gov.

About The Author:

J.T. Greenwood is a Senior Vice President at Concert Wealth Management. He is also a Chartered Retirement Planning Counselor® and works with company retirement plans as well as individuals plan for their short term and long term financial goals. J.T. enjoys spear fishing, scuba diving, golf and beach volleyball.

Sources of Information www.IRS.gov http://www.irs.gov/retirement/ article/0,,id=257743,00.html http://search.irs.gov/web/query. html?col=allirs&charset=utf8&qp=&qs=-Wct%3A%22Internal +Revenue+Manual%22&qc=&qm= &rf=&oq=&qt=ERISA+408(b)(2) 401(k) Fiduciary Toolkit, sponsored

by Ishares® and prepared by the Wagner Law Group; Plan Fees Fiduciary Status: Understanding the different Roles and Status of 401(k) Fiduciaries prepared by The Wagner Law Group / BlackRock® Putting 408(b)(2) disclosure rules into practice: A guide for plan sponsors prepared by the Wagner Law Group Dechert On Point : A legal update from Dechert’s Financial Services and Employee Benefits and Executive Compensation Groups

408(b)(2) disclosures can help plan sponsors: •

Reduce regulatory and litigation risks

•

Make good service provider selections

•

Delineate roles and responsibilities

•

Serve the best interests of plan participants through fiduciary excellence

“The devil is in the details.” There are many things for you as a fiduciary of a retirement plan to be aware Dealership Innovation Guide

Dealership Innovation Guide

DrivingSales • 3rd Quarter - 2012 • 47

48 • 3rd Quarter - 2012 • DrivingSales

Dealership Innovation Guide