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Jul 5, 2010

I believe the "art" behind presenting a trade value and generating additional front end gross to a deal will be lost in relatively short time. The "science" of programs like AutoTrader's 'Trade-In Marketplace' will eliminate the ability and need to negotiate a trade value.

These programs will essentially provide the customer a guaranteed trade value based off of market data for his/her trade vehicle before he/she even arrives at the dealership. This will be very unfortunate for dealers as it means they will not be able to acquire vehicles for below market value regardless of how skillful they are at the "art" of negotiating a trade-in.

In this new market, all dealerships will purchase pre-owned vehicles for the same price and also sell them for the same price. Thus, there will ultimately be a default profit on all pre-owned vehicle sales. This default profit will be small as well. The days of a $4,000 front end gross profit on a pre-owned vehicle sale because it was skillfully acquired for well below market value at trade-in negotiation and then sold at true market value will be gone.

Selling more vehicles at a greater velocity (credit Dale Pollack) will be the only way for dealerships to generate greater revenue/profit.

This is just my two cents and opinion on where this market is going.

Jul 4, 2010

Since the beginning of car sales, we have tried to find that elusive balance between holding gross and increasing volume.

OEMs would love nothing more than to have an army of sales professionals whose sole focus was moving product- so much so, many of them have decreased profit margin to all time lows in the name of “customer satisfaction”; leaving dealerships with fewer and fewer ways to generate revenue.

So how do we continue to hold gross in a climate that has very little of it to hold? TRADE -IN VALUE!

Trade-in value is the missing ingredient to generating and holding gross in the new car deal, and increasing revenue in the used car deal. The trade-in is one of the most emotional aspects of a negotiation. Here is a vehicle that a customer has loved, repaired, cleaned and relied upon for transportation. It is a vehicle they “feel” about and an area of the deal that causes the most stress- not because they are not ready to part with it (however I have seen my share of hair pulling and crying during delivery about the old vehicle) but due to how we handle the presentation of figures on it.

Rarely do we take the time to explain our process and how we arrived at the value. Frankly, we generally send a sales person into a negotiation with a number they do not understand or know how to defend. To make matters worse, we are then very quick to back off the number and give in if we smell a potential sale. These practices have trained our customers to distrust our figures, fight us on value and detest the overall transaction.

The best way to build Gross in a deal and trust with a customer is full disclosure on the trade.

FULL DISCLOSURE?

Yes I know this is a foreign concept in the car business, but one that is truly effective. Here is how it works:

Sales people complete a walk-around on a customer trade with the customer prior to the appraisal. At this time, they take note of any visible imperfections and discuss the hows and whys of the trade and the desires in the new vehicle.
During the appraisal, Managers record and give a cash value to any possible reconditioning requirements. These can include: bald tires, dents & dings, ripped or stained interior, etc
A 3rd party source is printed, like kbb.com on the customer vehicle along with itemized reconditioning expenses.
The sales person, armed with the 3rd party source, goes back into the deal and presents the information in the following manner:

“Mr. Customer, KBB says your vehicle is worth X, and we AGREE. However, in order to get your car retail ready, there are some reconditioning expenses we have to take care of… you remember when we were walking around your vehicle and saw….”

Using a valid and well known 3rd party source verifies value and removes barriers that get in the way of making a deal. In addition, on average, you will under allow about $500 per trade- which equals BIG GROSS in the end.

You will be amazed at how easy it is to implement. The Cardone Group is a great proponent of this system and the company that introduced it to me. Go ahead and give it a try, you might just find extra Gross hidden in all your deals!

How do you handle the Trade-In at your dealership?

Oct 25, 2010

does anyone know a very realiable car dealer in greenwell springs LA ?:;-

bpulseadmin · Jun 29, 2010

ATLANTA, GA – June 29, 2010 – Contact At Once!, the leading provider of live chat software for car dealers that want to convert more of their website visitors into appointments, today announced a ContactAtOnce! iPad chat application. The ContactAtOnce! iPad chat app enables
car dealers to answer chat leads from their WiFi and 3G iPads, making them more productive using the iPad’s mobility and unique user experience capabilities.

Features of the ContactAtOnce! iPad chat app include:

Support for both WiFi and 3G iPads
Streamlined user interface, optimized for the iPad and designed to maximize productivity and ease-of-use
Rich contextual information about the shopper and the car in which they are interested is presented using the iPad’s high resolution screen

“We are pleased to announce a native application on the iPad,” noted Marc Hayes, Contact At Once! Founder and EVP Products. “We believe that many of our 7,500 dealers will benefit greatly from the enhanced mobility and user experience that the iPad, combined with our chat app, offers.”

Contact At Once! has posted a short video highlighting features of the ContactAtOnce! iPad chat app for car dealers and is currently accepting applications for a limited-availability release. Car dealers having licensed the ContactAtOnce! Dealer Edition may apply now. Dealers interested in the iPad app but not currently licensing the ContactAtOnce! Dealer Edition may schedule a demo or request additional information by visiting www.contactatonce.com.

About iPad Chat App Provider Contact At Once!, LLC:
Contact At Once! is the leading provider of industry-specific live chat software and presence-aware networks for the automotive, apartment, and real estate industries with over 10,000 active users. Adding ContactAtOnce! live chat software to a website typically improves the conversion of website lookers into conversations and appointments by at least 25%. The presence-aware networks powered by ContactAtOnce! connect businesses to the media websites on which they advertise, increasing the effectiveness of online ads while providing consumers with a better online experience. Contact At Once! is headquartered in Atlanta and more information can be found at www.contactatonce.com.

jberger · Jun 8, 2011

We also currently offer a Life Time Warranty on all of our new vehicles. It is at the center of our selling strategy. However, we have recently been looking at the value added components that we already offer that won’t have the cost of sales (or the recurring liability) that the warranties provide.
We have found that we only sell vehicles to two types of opportunities. 1. They saw a low price on a vehicle online, or 2. They are repeat buyers or have been referred to us. Both sets of transactions could have easily been produced without the cost of the “value added” component.
I feel I will soon sunset the life time warranty also.

Jul 8, 2010

This is a FANTASTIC lesson in marketing & business.

VAPs were marketing promotions that evolved into policy. The real story is how they worked their way into "Holy Grail" status (even though they had no ROI any longer).

I love a good story!

Look at the environment VAPs were born in. We finally found a advertising message that was not about price -AND- the VAPs resonated with the audience... FINALLY... Nirvana!

Early adopters were rewarded and everyone piled on. Early adopter leverage was lost and so went the VAP opportunity.

VAPs went thru a life-cycle that many of us "old timers" here at DR (circa 2000ish) have seen many a time. Early Adopter waves come and go. Waves I've rode:

AutoTrader then to eBay, then to 25 pics, then came BZ, onto SEO, Blogging, to vAuto, and to vehicle comments, on to Social Media... what wave have I missed?

I think the real story is how the VAPs morphed into policy and onto "untouchable" status yet ROI was long gone. It took a once in a life time recession to knock it off the shelf and into the closet where VAPs will wait for a rebirth in the 2020's somewhere

Brent Palen · Jul 1, 2010

Dave-There is more than one thing different about the car business vs. retail in general. The biggest and the hardest for us to overcome is the "Car Dealers are Snakes" school of thought. While he was probably admonished for ruining small town main st. Sam Walton is generally not thought of as a shyster! Unfortunately car dealers are still thought of as the guy in the short-sleeved shirt with the tie on that only goes halfway down his belly and plaid pants if you like. "Free Oil Changes For the Hole Family for Infity*" (note the asterisk) just sounds like the same old game. I would rather sell how reputable our store is and let the sleaze-balls that can't say it with a straight face keep playing the same game while getting the same results.

The other key difference is the automotive industry is one of the few retail industries that still allows negotiation. When your key value point is "lower price" then what is the customer thinking when they sit down at the desk? The same thing they were thinking when they walked in the door. I want my customers coming through our door because we have established that we are going to take care of them.

Ditto on the fries Jeff...I'm starving now!

Jun 30, 2010

Alex, I am with you totally on this one. I view these programs as icing on the cake. Only problem is some dealers are selling just the icing and the cake is only half baked.

People really do buy People. If they like you and trust you, they will buy from you.

Jun 28, 2010

I'll say about the same thing I said in the forum, these VAP's make me cringe thinking back to the market before the big tumble. I was at a very customer service oriented Toyota store and we were trying all that we could to not get into the VAP's and just focus on the fact that we were a 15time Presidents award winner with a great track record of customer service and satisfaction. Then all the local dealers were advertising all these freebies and it made the customers mooching assholes. It almost got me out of the business. But then the market went into the shitter, those freebie giveaway dealers started to not offer any of those freebies and their reputation crumbled...and then there we are, still having to work for the business, but at least we made it through and were still making money.

I'm at a luxury store now but almost everyone expects loaners and free car washes....other then that it's just normal business as always with the best customer service (sales and service) in the area.....and thank God, not to many VAP's...except maybe a free hat or shirt I throw into the deal :p

Anthony Stanley · Jun 28, 2010

This is a great article. I guess you could consider dealer incentive programs a waste of money. My company offers oil changes for life, state inspections for life, and your engine is guaranteed for life. The sales person needs to support the program and process. If you build value in the dealership and customer rewards program then customers will see the benefit, but if they don't then it's a waste of time and money. Our competitors have tried to squash or discredit the program through advertising. And no some of them have even tried copying it. The program is great for customer retention, after all most people go back to places where they get stuff for free. We are all still selling our brand, dealership and ourselves. Selling is an art, anyone can take an order and write up a car deal like a cashier. That's just my two cents.

bpreston · Jun 28, 2010

We offered a Lifetime Warranty with every new vehicle purchase for about a year. It felt like it was selling us a ton of cars, but truly only sold us a few cars here and there. With a lot of encouragement from the Lifetime Warranty company, we changed our entire dealer group's branding, 20+ years of branding, from the the area's best and largest family owned and operated dealer group in Eastern OH and Western PA to the Lifetime Warranty dealer. It was a crutch that our sales department leaned on way too hard, if we were priced competitively we felt as though we "deserved" the deal because we offered a lifetime warranty on top of that.

We primarily got off of it for liability issues (that's another can of worms) 6 to 9 months ago. I remember our sales people thinking to themselves, "what are we going to do?" One of our sales people even posted on the forums looking for another value add program. Clearly we were brain washed.

Per Alex and others recommendations we went the route of selling value. Our sales people are selling themselves and building much better rapport with the customer. Additionally we are selling the dealership with virtual tours of our state of the art facility and using third party review sites like DealerRater.com where we have 48 reviews between all of our stores and a 4.9/5 rating. Additionally we use our website to promote the convenience of doing business with us like our "No Hassle" Internet Sales Process and our "No Haggle" Live Market Priced used cars.

Jun 27, 2010

This is a topic that you either love or hate (I think you know where I stand). I just want to get people thinking about it. If you ever go down this road, you're on it for a looooong time.

Eric Miltsch · Jun 27, 2010

Alex -

Interesting post...last summer, while visiting my in-laws in PA, a family member took their new vehicle in to get their 1st "free life-time" oil changes.

No joke, the oil change itself was in fact free - but the CAN OF OIL was $14.99.

Create real value. Don't spin it.

Jun 24, 2010

Hey Gary.

You make a great point with the lack of analysis of whether marketing programs work in the auto industry. I have met car dealers who don't look at the few analytic tools that they do have in place.

And I do like that you are looking at regular retail for guidance when you say, "for some reason we think that automotive retail is a truely unique business that follows none of the principles of retail"

However, I would add that the auto industry is unique in that it can not follow ALL of the principles of [regular] retail. The two big differences are 1. It's a bigger purchase than 99% of normal retail so more thought goes into the purchase and 2.there is a general distrust by consumers towards car dealers and salespeople. So building that trust value is a great way to spend your time and energy.

I am interested to read your answer to Alex's question.

Jun 24, 2010

Gary - you may be right about solely looking at the advertising practices in the automotive industry when it comes to value-added items. Do you have any suggestions or examples to look at outside of the industry? Things the industry could learn from?

Jun 24, 2010

Gary,

Well said.

Jun 23, 2010

I would offer that there is almost nothing productive to learn about value added programs in the Automobile business. If one wants to see how to do things like this effectively, look at good retailers. The beauty of making statements like "bunk" in automotive is that practically nothing is effectively or properly measured by people who typically understand little about marketing, retention and effective analysis - yet love to offer their expert viewpoints...for some reason we think that automotive retail is a truely unique business that follows none of the principles of retail..now that's something that is really "Bunk."

Michael Thompson · Jun 23, 2010

up-selling the value added program is definitely a huge bonus. the dealership i used to work at had an upsell maintenance program where you received what essentially amounted to the first three scheduled maintenances free along with a loaner car. the salesperson could upsell this for about $450 and it was wildly popular as it allowed the sales department to make a little more gross, the customers really loved the value of the program (they still have customers asking for it today) and it introduced the customer to the service dept. and after the free maintenances were up, it help form that initial contact with service that had the potential for upselling later on.

Jun 23, 2010

As a marketing person, I love these items that I can talk about, share, promote. But, they may just be drawing in those people who are looking to feel as if they got a deal. And those people are always looking for the next deal...basically they won't buy anything that is not "on sale". (This is why Kohl's business is booming).

I prefer to promote events, community involvement, and giveaways that speak to the dealership's personality as a whole. These events are important tools to make people feel more comfortable with us. No one walks into a dealership for the very first time and feels trusting and comfortable. This is a huge purchase, so the more they can KNOW us, the more they can relax a little bit when it is time to come in and buy a car.

And if we manage to get a few people to feel at ease, then it was all worth it.

Jun 23, 2010

Gerald - you're just getting a little too technical on your definition of "value-added". You're absolutely correct though.

Gerald · Jun 23, 2010

A great point Alex, but not completely accurate. What is the one thing your dealership can offer the others can't? YOUR DEALERSHIP (and you, of course).

I agree, relying on free oil changes is not a value added proposition and is a crutch for those who need an excuse for poor performance.

At my first store, we sold the service department, parts, the cafe, wireless internet, loaners, shuttle, inventory, and the backing of a company for life of ownership.

Clearly, not within your realm, but it is value added sales nonetheless. I think a GOOD value based program concentrates on what the customer gets when they are buying from your store- not the "fluff" as it were, when it comes to the freebies.

Alex Snyder · Jun 23, 2010

That's right - BUNK. As in crap. Before you start chasing after me with pitch forks, at least read the rest of this article.

What is a value-added program for a dealership? It is a business to consumer incentive plan that gives a quid quo pro "bonus" when someone purchases something from the dealership. For example: customers receive free oil changes for life when they buy a car from your store. This is one of the most common value-added programs.

My experience with these programs dates back to 1999 when I started selling Volkswagens. Our competitor gave free oil changes and state inspections for life. They were one of 3 dealers in town doing anything like this. At the time, I estimate roughly 40% of all customers mentioned their program and that was mainly due to them buying so much newspaper real estate to push it. As a salesperson, 40% of the customers saying something about it translated into 100% of my customers asking for it. It really is amazing how selective our memory can be isn't it? I was all about our store offering the same or better. What we were given was a program that only tackled 5 oil changes and state inspections for life. It forced me to continue to be a better sales person by finding ways to sell around the other guys oil changes for life.

Since 1999, I saw more and more dealers bringing value-added programs into their mix. They ranged from free tires to free manicures every week. It got to a point where the focus of advertisements were no longer cars; advertisements were all about who could whore out the most free stuff in 30 seconds. This went on until the economy crashed in late 2008.

During that 9 year period I received a promotion that took me to the executive side of the dealership, giving me a 10,000 foot view of the place. It wasn't the new view that changed my perspective on these programs, it was the economy. We were forced to dump a lot of expenses and one of those we killed was our value-added proposition. Only a few others killed theirs, but we were the only big group to kill ours. Our biggest competitors still have their programs going to this day.

In hindsight the value-added program was bad for business. Yes, it probably did sell a few more cars here and there - nothing drastic. Yes, it gave us some extra advertising ammunition (always a good thing).

BUT it maintained the laziness status quo that most dealerships are so plagued by. Let's face it, America has become a society of excuse makers. Instead of sucking it up and taking responsibility we get extremely creative in finding things to blame our mistakes on. A value-added program is an excuse. "How did they beat us last month?" - "Boss, I've been telling you for months we're getting killed because they have free oil changes" ....have you heard anything like that before? Where are the flaws in that statement? What about training? What about stocking? What about a happy service department who treats customers well? A value-added program is not a silver bullet.

When we were on our value-added program we invited customers to ask for more. We loudly advertised that we are solely here to give you free stuff. To the public, who hates car dealers, that meant "let's see how much more free stuff we can pull out of those devils." Our value-added program created an air of negotiation you couldn't shake. It filled our service department with customer who had the mind-set that they didn't have to spend money, so our service departments couldn't up-sell anyone. And we had to heavily rely on F&I to make the front-end profit because our sales people were virtually just order takers (lazy). What happens when you whack the hell out of people in F&I?......charge backs and court cases.

When we got off the value added-program our front-end gross immediately went up. PVR's were higher despite the fact that it left less room for F&I to go nuts. Within a few months the service departments were selling again. This also meant they weren't so ready to gauge the used car department all the time. And the really crazy part: our sales volume stayed relative to the market.

You now know where I stand on value-added programs. What do you think?

This article was inspired by a discussion on the DealerRefresh forums: The WOW factor at your dealership

Jun 25, 2010

Great webinar. learned a lot of good info that we will put into place asap. very interested in part 2. Thanks for making the life of a car guy a little bit easier.

Jun 25, 2010

Fabulous webinar! I am really anxious for the next one. Also, I am shocked to learn that many web providers do not let their customers look at Webmasters Tools. Those tools are essential to understanding SEO and making sure you are getting as much traffic as possible. Which has to be a team effort, not just in the hands of the web provider.

And thanks for reminding us to watch our own keywords, it can be surprising when you look back that you don't use an important keyword often enough.

I am kind of wondering if anyone fired their web provider after this informative webinar.

tstephenson · Jun 23, 2010

Thank you for doing this webinar. I am very much looking foward to the Part 2! Please let us all know when that will be available. I am excited to gain more in depth knowledge about how Analytics and WebMaster can really help us come forward!

Thank you again!

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