Happy New Year - 2008

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Well nothing to really say but wishing you and yours a very Happy New Year. Not going to bore you with a list of resolutions or stuff like that. My goals for 0...

Blogging is a two way street and to be successful you want to create conversation. If you talk at your readers in a broadcast mode you aren’t likely to create much of a conversation.

You should have a central idea and stick with it. If you are writing a blog post about the latest and greatest in the auto industry don’t talk about baking cake or the latest clothing craze.

Ask the readers for their thoughts.

You have a much better chance for success when your business model makes what's good for the users match what's good for the business. Our products/services are best sellers not because we're better sales people or markerters (a meritocracy), but because they are labors of love and the product/service is better than the competition.

Giving, giving, giving freely, openly without expecting anything in return. Open communication of thought and ideas. When you create this, it’s like planting seeds in fertile soil. Time, sunshine and watering, that seed will product a crop of ideas and concepts that will florish.

If people in the industry followed Dr. Deming's Phylosphy the industry would be in a much better place.


Thank you Jeff for creating this blog/forum and maintaining the high standards.

It has definitely been fun participating on Dealer Refresh! I've made some great friends off DR in 2007, and hope to expand on that further this year. I have a feeling this site is going to grow a lot more in 2008 as this part of the industry is more and more recognized.

Thanks Jeff!

Happy New Year to you bro and to everyone really that has become a regular part of DR. It has been a thrill to watch this blog grow in popularity the way it has.

Congratulations too for bringing into this world another glorious child.

"No, blame the manufacturers and dealership owners that have not adjusted or want to adjust for the paradigm shift on how to market and sell to those consumers, and how us as industry professionals that sell those vehicles get paid" Well said Jeff, I believe you've hit it right on the head. Many people have left the automotive sales business because they were tired of the games. Games the manufs play and games the dealership owners play in compensating us fairly for the ROI we bring into the door every month. Question is, how long are we all going to be willing to play the "Game"?

Earl - it is all about attitude that you carry in yourself. Apparently your customers you are dealing with through out the internet can read right through you and you are not building value in yourself, the vehicle your selling & the dealership you work for. Alot of customers will buy not just from the dealership but the person at the dealership. I hope that makes sense. It seems to me you need to refresh your attitude and go at it a different angle next time then you will see when you build the value and trust in the customer they don't care about price!

The internet has changed alot over the past few years with the Automotive business. Many GM's & sales managers will say "They only want price!". Uhhh yes they do and if you have a savvy salesperson / internet manager they can nail that
the online shoppepr down & pricing won't be their main concern.

There has been days I had just about snapped for which that one consumer didn't care about who he was dealing & just wanted pricing. These are the obstacles we face on everyday challenges. there are ways to get over them, under them and around them.

As a Internet Director & BDC Manager for 4 years I had grossed more than the sales man on the showroom floor because it all depended on how savvy I was & (Earl this is to you) My ATTITUDE!

It sucks getting a mini but you made a new friend in the automotive business and guess what you get referalls!

Keep your chin up and hope goes well with your selling tactics there Earl.

To All Readers:

Everyone makes one good point or another. Earl I understand your thoughts and problems with the Internet Business. Please know that I have been in the car business as a regular internet salesperson to director of internet sales overseeing 8 franchises. As we all know there are many ideas of how to sell more cars through the internet from the get the customer on the phone early to email campaigns and many more ideas.

I have read all the posts here and not one person mentioned much about location (state or city). This is what my experience tells me. Your location in the country has a major reflection on the type of mentally of your customers. Example: Customers who are born and raised in the Midwest region of the country have a less aggressive mentally than east coast born and raised citizens. What I mean is customers in the Midwest will take more time to make a decision than a east coast person. I can say this with true hard facts because I am from the east coast and now currently living in the Midwest. SIDE NOTE: I bet If I took a poll in the town which i live in of 100 internet salespeople I would bet less than 10% know what dealerrefresh.com is. My point is that the Midwest Car Business is probably 5 years behind the times. That is just an estitmate.

Along with that I also know that OWNERS and UPPER MANAGEMENT mentally are totally different. I have struggled and even argued with owners and management about theories about how to sell more cars via the internet. My departments had their best months when the management truly allowed me to run the department my way and my way only. But like typical upper management and owners once you had a successful month why didnt you make a 1,000 per copy? Or why didnt you hit 55 cars? All in all upper management will never be truly satisfied nor will owners.

I have found price sells more cars than anything else in the midwest region and that a customer wont drive 20 extra minutes to save 75 bucks. If I wanted to sell more cars and steal deals from other dealerships I had to be atleast 200 bucks cheaper than someone else. And my competitors would quote right out the box close to dead net cost because that dealership wanted volume not gross. With that type of competition it was difficult for the management to make the final decision to sell a car as a loser.

These are just random thoughts for everyone to think about. I can be way off base or some of you might agree with me. I do agree with Earl and how difficult the business can become. WIth that said I did get aggreviated with the business and I left the Internet Sales Business and started my own business that is associated with the car business.

>Why? Because the Internet Consumer is vehicle specific and why
> shouldn't they be if they're spending $25,000?

I think this points out a fundemental problem with how we approach internet sales.

Think about this.. everyone is pre-occupied with getting visitors on their website to fill out a form. Why? because that way we can lay claim to their sale as being from the internet.. because thats how most of us are paid. Or, thats the only shot we have at getting a sale since a lot of dealers don't consider phone calls from the net should go to the 'internet guy' (because everyone else on the floor will cry). Or, we're paid to set appointments.

Now, let's think about this some...Who is really going to do this (visit a site and send in an email)?

Pretty much only someone who knows exactly what they want. What else could they possibly ask you when almost everything else is already on your website?

Is this really the group of people to focus on?
1) They are NOT the majority of the people on your website.
2) they are NOT the majority of the people who come to your dealership.
3) they will most likely end up buying something else anyways.
4) They have no reason NOT to shop price through email.

1 & 2 were just a theory of mine a year ago. So we started having customers fill out a small survey while the salesman put tags on their vehicle for a test drive.

The results backed up my theory - most people do NOT have much more then a general idea of what they want. This yet another another example of the Perato principle (the 80/20 rule): spending 80% of your effort to generate 20% of your sales.

Here's the framework of 'given assumptions' I used when laying out our current internet strategy:

1) most shoppers are NOT vehicle specific, so stop spending all the effort trying to cater to them.

2) the odds of having the exact model in stock that the 'vehicle specific' shopper is looking for is pretty slim unless you are a huge dealer (which we are not). again - stop chasing after these shoppers.

3) sell the dealership and our value propostition to everyone else.

4) the whole point of follow-up to email is to get the phone call. So downplay the email forms and stress the 'call us' call to action. Again though, just like with email there's not much the that majoirty of our website visitors will even have to ask via the phone.

5) The point of the phone call is to get them to come out and visit. So, encourage this - sell the dealership!

I do not sell cars, set appointments, or even talk on the phone - all I do is everything in my power to generate showroom-traffic / phone calls / emails, in that order of preference. I let our post-sale survey sort out which customers came from where.

This approach resulted in over 50% of our sales coming from the internet within 12 months (most from our own website - and no purchasing of leads). Over half of them just drove up with no prior contact with us, most of the others phoned us first. email leads make up the smallest portion of our internet sales (ok - we DO have a problem getting these folks in the door.. the sales floor handles every lead, and they are still coming to terms with how to do this properly). Our grosses across the entire dealerhsip have gone up a grand in this time as well (to over 2500) since we no longer have cut-rate internet prices dragging everything down.

We need to stop spending SO MUCH of our efforts targeting vehicle-specific shoppers and price shoppers, then struggling with the fact this is all we are getting. WHAT ABOUT THAT OTHER 90-95% OF THE PEOPLE ON OUR WEBSITES?

Dealers get what they reward, and they insist on seperating the sales staff and using a reward system that forces the ISM's to chase only a handfull of their potential prospects.

Internet Jeff Larsen - glad you liked it. I think it is pretty obvious, and hope to be one who helps influence that change. Unfortunately, I don't think dealers can do it though.

Lao - Helluva post! I think 2008 will shed some light on just how short-term things are.

HP,
Kudos on the site. Like your layout and fresh look. Like the slides. As you already know, You got to work on the geographic range aspect and you'll knock it over the fence!

Go Get 'em!
Joe

Willing buyer meets willing seller...sounds like a fair deal to me. If you think it's a bad deal...who's the fool for doing it on those terms?

Car shoppers will only demand more and they will be more educated as the "Generation ME" hits the scene in full force. This generation grew up on the Internet and they think they know everything since all they need to do is “Google it”.

Earl said “These internet customers have no loyalty to the dealer or the sales people…”
Recognizing this issue is very important and if the dealership/sales people do not take steps to address the loyalty situation they will be forced to cut Mini deals more and more.

My partner and I saw this coming a while back and this is why we are letting all dealers place their inventory on our site for free. We don’t want to focus our energy on counting every lead to justify the fees. We want to focus on helping you look your best as a Car Dealership on the Internet. Gerald said “…..ENGAGE the customer early, and sell yourself and your dealer. If you are not doing this, you are simply selling the same vehicle someone else has (assuming it is new)” and I could not agree with him more. However, I would take it a step further and say “ENGAGE the customer on the INTERNET, and sell yourself and your dealer; then reinforce your value as a sales person and the value of the dealer when the customer comes to the showroom. If you are not doing this, you are simply selling the same car as someone else and the only way to get the sale is to sell the car for less”.

call me with ? 847 780-4821
Alex B.

Is there a distribution system more poorly designed for efficiency than the one used by car manufacturers and dealers? In the present system, car prices are priced up by locked-in labor and operational costs. Manufacturers pit dealers against other nearby dealers. Dealers are pressured to accept more vehicles than they can sell, unable to make money from new cars; and turn to service and trade-ins to squeeze out margins.

At the bottom of the food chain are customers trapped in high-pressure negotiations for a car that isn't the exact model they want and usually turned off by the whole process. They are also confused by too many prices, discounts, incentives, rebates etc, etc. Is there any wonder why they are always looking for a better price? The system has conditioned them to do so.

Why do we think the consumers have embraced the Internet so closely, it is a solution to a sick process. They feel it is a way to circumvent the standard sales process where they have been lied to and pushed in ways they do not like. This is especially true now with so many women in the market place.

For the most part channels are constructed from the supplier/OEM down, rather than from the customer to the OEM. The product or service is designed first and it is only then that the supplier thinks about ways to get the product/service out to the customer. If the company achieves its sales goals, it lulls the company into the assumption that the channels must be right. For all we know an alternate channel might have achieved even better results.

The more common issue is that the chosen channel is an expedient short-term solution, often not well suited to sustain sales and profitability in the long run. Once a channel is up and running it is very hard to shut it down and construct a new one. The solution is the channel is temporarily repaired, a "band-aid" is approach, and the selling process moves on.

Toyota's channel strategy is unique. A Toyota dealer sells an average of over 1,000 cars per year compared to a dealer at the Chevrolet division of GM, which sells much less than 1,000. The Japanese company has about 1,500 distributorships in the United States; Chevrolet has about 6,000 plus. No wonder the dealers are killing each other as well as beating up clients to sell a car.

Toyota has a selective number of dealers who face much less competition, have a much larger market area, and sell more cars per outlet. Their dealers should be more profitable, and therefore more satisfied. There is also more demand on the dealers to be customer friendly and service orientated, if there are complaints and Toyota learns of them there is a team approach to work with the dealer to resolve the issues and place process in place to correct the problem.

Dr. W. Edwards Deming was teaching Quality Management in Japan, the Total Quality Management (TQM). Demming’s photo is in the lobby of Toyota’s headquarters, bigger than the photo of founder Toyoda Sakichi. Demming didn’t find an audience in the US after WW II, because managers at the time thought that poor quality was caused by people who just didn’t want to do a good job. They didn’t think there was much managers could do to improve quality except exhort employees to do a better job.

Mr. Demming’s basic message was that quality is a management responsibility, and poor quality was almost always the result of systems imposed on workers which thwarted people’s desire to do high quality work. He taught the Japanese managers how to empower production workers to investigate problems and systematically improve processes. He taught that teamwork and long term, trust-based relationships with suppliers were far better than adversarial relationships. He emphasized a culture of continuous improvement of both processes and products.

The Internet is a great complement to the industry; the technology provides the possibility of transforming a channel that can seamlessly connect the customers, channel partners, and suppliers. The Internet is the facilitator for change in the system that needs to be changed for the good of the industry.

Lucky we are part of this change.

The car biz has changed, period. We all understand the issues that we face, and trust me when I say that some dealers are doing pretty well with the current e-market situation.

We are to blame for the price wars, we are the ones that decide to sell the cars for a $50 mini. However I also agree with some comments (circuit city example) and realize that this is not unique to the car biz, the Internet has had similar effects in many other industries and therefore we can perhaps talk about a social change when it comes to how consumers view and undestand the sales process rather than just how car buyers do.

As a vendor I find CS's comment very funny: "Have you ever tried to sell something to a car dealer?", we face exactly the same problems that you face. As a Diamondlot distributor I face dealers that request a meeting to ask for a .50c discount per car--after 4-5 years of good service with NO hickups--just because they got a lower quote from DS. Lets make the math: .50c times 100/month means that the dealer will save $50/month. In my end, the reason why I have 95% of the market and DS does not is because I spend the money in having 4 (yes, FOUR) layers of field support while DS has 1, yet the dealers need a meeting to save $50/month just because someone left a quote...

We all face the same issues, it is just biz.

The way I handle my biz is by trying to stok to what my uncle Carlos told me long time ago while trying to decide my future carrer:

"Be the best at what you do and you will do well".
I provide (at least try!) my customers with the best service, response, respect, and knowledge as possible and if they must save the $50/month, well... that is whay Wall Mart is in biz.

My avergae gross just for Internet deals for last month was $2750, new and used. Mini-deals? You have to learn how to correctly engage the customer. Yes you will get mini-deals. But customers are largely on the Internet looking for honesty, that's why they want to know your invoice. Doesn't mean you have to give them invoice, they just don't want to be lied to. So they may bust your balls a little, you have to be aggressive in a completely different non-confrontational way. And you will make good grosses.

My Internet customers are some of my most loyal, and I always get a great survey back.

And you wouldn't believe how many customers I've had tell me they hate CarMax's fixed pricing. I would hate to think that's the future for the car business.

Customers and the car business haven't changed, just the way they go about getting their info and their level of knowledge has. You need to learn to leverage it, and use their advanced knowledge to your advantage. Customers understand you're doing what you're doing to make a living, and if you do things right, they'll be very understanding about it.

First of all, the internet is here to stay, and we might as well get used to it. It's kind of like being a New York Giants fan and knowing your stuck with Eli Manning as your Quarterback. You don't like it, but you know there's nothing that can be done about it.

Our challenge is to adapt and change our sales methods and techniques to take advantage of well informed customers. Personally, I love dealing with customers who come in to the showroom with clipboards and magazine articles. Many of them know more about my cars than I do! In the old days you had to spend a lot of time explaining to potential customers why they should buy your car as opposed to someone else's. Now they come in actually pre-disposed to buying your car. It's just a matter of price.

The modern sales person is going to realize that building value in himself and the dealership could make the difference. People WILL pay a little more for a car if they are given a reason to do so.
The same applies to internet customers. Of course they're all going to send you an email asking for your "best price." Wouldn't you? But that doesn't prevent you from giving them more reasons to buy from your dealership. Personally, I'd rather deal with informed and motivated buyers than wishy washy tire kickers.

Brandon: I completely agree with your comment, and good summary Alex.

Has the Internet ruined the car business?

No, blame the manufacturers and dealership owners that have not adjusted or want to adjust for the paradigm shift on how to market and sell to those consumers, and how us as industry professionals that sell those vehicles get paid.

If Im selling a Chevy Impala to an internet shopper, and there is a Chevy dealer 5 miles to my east, 5 miles to my west, and 20 miles to the north... how the heck am I going to sell this vehicle with any profit when they sent the quote to all of us? Then, great luck on having the exact color and options in stock, so now I start on a dealer locate and trade.

Why? Because the Internet Consumer is vehicle specific and why shouldn't they be if they're spending $25,000?

OMG... It never ends. 8 hours later after taking the lead, contact, search, financing, and delivery I made an entire $100 mini. Great, after taxes, I can go fill my car up with gas.

Give me all the phone scripts and email templates in the business, but what it comes down to is that first customer contact, building the trust, then what really matters: PRICING. "You're a great guy Jeff, but XYZ Motors can get the same car and sell it to me $300 cheaper." All this AFTER I had comittments to purchase at pricing quoted initially. UGH!!

Alex wrote: It will be a different industry in 10 years. I believe that as well. But who is going to step-up, recognize, and adjust for the paradigm shift- the manufacturers or dealership owners?

Here's a parallell universe to chew on.

2 ad managers selling local TV ad space come into my office for a huge 6 figure haggling session.

One in Market A, the other 40 mins. away in Marketplace B.

Market A is filled with competition and excess quality inventory.
Market B is actually depressed, but the competition is weak, there is only one powerhouse in the area.

Sales Manager A cuts his already discounted rate deeper after 2 hours of haggling and leaves extremely pissed.

We already know we cant haggle Sales Manager B and we sign the order.

ITS ALL ABOUT THE BALANCE BETWEEN SUPPLY AND DEMAND. Just try and haggle for a discounted 4 star hotel room in NYC on Dec 31st.

We're the #1 volume Nissan dealer in Western New York, and when it comes to price I just tell people to shop their head off, then bring me their best offer and I will beat it. Consumer Reports prints a suggested profit to consumers along the line of 4-8% above true cost (invoice minus hold back, destination - which is added back)... how many show this to your customers? If they trust CR for reliability tests, then they will trust their recommendations for profit?

Part of the problem as I see it, is that most people do not know that 1 in 4 jobs in America are tied to the auto industry, and cannot see the importance as whole in relation to the big picture.

To most, they take their cars and gasoline for granted yet it's the most important tool freedom loving people have in their life box.

However, most people know that Union Autoworkers earn $26 an hour ($60,000 a year) average, plus benefits that bring the company's total cost per worker to a staggering $65 an hour.

So when it comes to trying to save a buck they don't consider you will make $50 on the deal, because all they see is the huge earnings at the plant.

Personally I agree with the no haggle, the price that is on the sticker is what you pay school of thought. Some major dealers are doing that in 2008... more should follow - the leader.

Jeff,

Is this a real post or something you put up for fun?(how could anyone with this view even know about your blog?) In my experience the internet customer is the easiest customer to deal with once you get them in the door, the fact that they came in means you have already broken down a lot of barriers.

The bottom line on sales with customers is the same in every facet of sales since the dawn of mankind. People want to FEEL like they got a good deal.

Everything you do in the car business, whether on the lot or on the phone or on the internet is based around this concept. Those that master the art of making the customer feel good continue to be successful. Those that refuse to embrace this strategy continue to struggle.

The reason people go out and buy a new car after 2 years of owning the one they got is because of the next best deal or option or whatever it may be. Manufacturers and Dealers entice customers with rebates and options and bluetooh and handsfree and push button start and 400 hp and continuously variable transmissions, etc. The list is endless.

All of these are designed to raise the Value of something. Since value is something perceived, there are many facets of this that control this feeling in people.

The thing that has always gotten in the way of this is fear. Customers are afraid. Afraid to make a decision, afraid to buy, afraid of not knowing. The internet has empowered the customer and made them feel more educated about what is going on. In the process of this, customers are also being educated about some of the shady tactics some dealers use. And in the absence of really knowing everything there is to know. the customers use stern tactics and statements on price and payments and holdback and whatever else they can throw out there to back you off. Now who's being sold?

The bottom line is, you still have to get along with the customer, you still need to find out what their needs are, their wants are, what their budget allows for, etc. That's why we are sales CONSULTANTS, not order takers. If you want it to be as easy as taking their order, working the drive through at McDonald's is where it's at.

The bottom line is everyone is different and as sales people we have to adaopt. Some customers are going to come at us harder and some are going to come at us easier. If they were all easy, everyone would be doing this. So get up, grab your a** and go sell your product, your dealerships and most importantly, sell yourself. That's what people really want anyway, someone to trust.

And don't forget....SWSWSWN

Some Will Some Won't So What ... NEXT!!!!

Earl,

Does your store do subprime business? There's always an opportunity to make money there. It's the fastest growing segment of the industry.

Let me know if I can help in any way.

Best,

Jim W

Chad,

You make some good points. All I am really saying is that negotiating at a retail store is not the NORM and hense buyers don't feel obligated to do so. They quietly shop the best price and then buy where they are most comfortable. If the auto industry made it so it was unusual to negotiate (sort of like what Saturn does) then the industry could possibly turn around a bit.

Earl,

I feel your pain. But, whether you like it or not, most customers now use the internet first to shop for cars. Here's some interesting bullet points on the online auto industry:

-88% of shoppers shop online first (usually with a search engine)
-60% of online shoppers request a price quote (convert to a lead)
-55% of internet leads end up in a sale
-90% buy at another dealership and purchase another brand

So, we know that half of all leads purchased cars from another dealership. Why? Well some don't like your brand. You can't do anything about that. But, for the most part, dealers don't handle leads well:

-30% of leads are never contacted at all by the dealership
-customers want dealers to respond within 4 hours but it takes dealers an average of 5.4 hours to contact leads
-only 25% of shoppers felt dealers answered their questions
-only 19% of shoppers felt dealers tried to sell them on their brand

I'm making the point that differentiating yourself from this average pattern might make a difference for you. Take a look at how old the leads are that you're getting from your internet manager. Call the customers right away and answer their questions. Try to convert them to a used car in the brand they are looking for. Sell the benefits of your brand and your dealership so they don't defect. Will you sell all internet leads? No. Will you make huge commissions on informed customers? Not often. But working the leads in a way that sets you apart puts you in a position to make the best of the situation.

I wrote more about the study where this information comes from in my blog at TheSubprimeReport.com (click my name to take you to the blog). I'll be focusing on the implications of this study in the next couple weeks. I'm sure Jeff can add to the discussion as well, given his experience on this topic.

Best of luck,

Jim Wagner
TheSubprimeReport.com