Tackling the tough issues with grit and optimism is something the Scott Family has been doing for four generations. So when the recent economic downturn hit the automotive industry, Dealer Principal Andy Scott and his son Douglas P. Scott met its challenges head on with innovative solutions that actually increased the Scott Family of Dealerships’ revenues and profits.
By adopting new approaches to F&I, launching a dedicated used car store, Scott Select, investing in the Scott Bid Sale silent auction, and embracing Internet marketing and social media, the Scott Family of Dealerships in Allentown and Scott Honda of West Chester, PA had a successful 2010.
With Andy’s five franchises – Chevrolet, Cadillac, Mazda , Volvo and Saab – and Doug’s marketing help at the family’s other stores, Scott Honda and Scott Select, this dynamic father-son duo are bullish on the future – projecting a 10 to 12% increase in business in 2011.
And to top it all off, Andy Scott was named Time Magazine’s Pennsylvania Dealer of the Year for 2010 – the third time a member of the Scott family has received this prestigious award.
Dealer magazine recently spoke with Andy and Doug to learn how they’ve prospered despite the economic downturn.
What have been some of the toughest challenges you’ve faced in the last three years and how have you handled them?
Andy: We’ve had tremendous upheaval. Growing our business during that time has been a real challenge. We lost two franchises: Hummer and Chrysler.
We were the first dealership in Pennsylvania to build a Hummer showroom and had invested heavily in Hummer. Yet, despite the upheaval, we actually made money until the last Hummer was sold. They were very popular in our area.
As for Chrysler, we had the best sales performance of any dealer in our area, but we couldn’t devote a building or land to the franchise, or add Dodge and Jeep like Chrysler wanted, because we are basically tied up with GM, Mazda and Volvo.
Incidentally, before the downturn, we had purchased the Mazda and Volvo franchises in 2006, and Cadillac in 2007, so we’ve gained and lost as we’ve gone along. But, we’re in great shape with the franchises we have now.
Our family has made it through much tougher times that this though. My grandfather, Raymond P. Scott Sr., founded our first dealership, a Plymouth and Dodge franchise in May 1929, on the eve of the Great Depression, but he managed to endure and prosper again.
World War II was another great challenge for his business and in order to keep his employees working and help the war effort, my grandfather converted his shop to make aileron controls for the Grumman F4F Wildcat fighter planes and catapult carts for the Navy. When you look back on events like that it really puts into perspective the economic troubles were are navigating through right now.
Are you hitting your stride now or are you still feeling pressure from the manufacturers to perform even better?
Andy: We had been on a rollercoaster with GM. When GM terminated 800 Cadillac dealers, two of those dealers were near us. Our planning potential doubled and GM wanted us to set up a dedicated Cadillac showroom. 10 months later, GM brought back many of those same dealers. Our planning potential went back down and GM said we could house Cadillac with Chevrolet.
The pressure continues because a GM study found their facilities had fallen behind Honda, Toyota, and other manufacturers. GM wants our facilities to be updated and that costs money, but is worth the investment. We’re going to start on GM’s new image program in the next six months. We are planning to remodel our existing facility to house both Chevrolet and Cadillac.
I’ve always been a firm believer that your facilities should reflect your success. We’ll be the first dealership in our area to upgrade our facilities and we believe that right now that’s a good thing. The construction industry is hungry for business and construction costs are very low.
We have been through quite a bit, but we landed on our feet and we feel like we are moving forward again.
Specifically, how are you moving forward?
Andy: We’ve improved our F&I process and profits significantly by taking a negative situation and turning it into a positive one. When we lost Chrysler, we had an empty building on our hands and we decided to use it to create a more efficient way to handle our F&I traffic. We previously had one F&I manager in each store. Customers were waiting in line in one store, while an F&I manager was sitting idle in another. Centralization seemed to be the answer, so we transformed our old Chrysler showroom in October 2009 into our newly dedicated F&I/Delivery Center.
We moved all our F&I managers out of our individual showrooms into the Delivery Center, which is conveniently located less than 200 yards from all our rooftops. Now our salesmen escort our customers to the center when they are ready for F&I processing. This move has not only increased our profits, but increased customer satisfaction, as well as improved workflow for our staff.
Since the move, our per car F&I average is up about $250 over what it was before. We sell about 3,000 cars per year, so you can get a feel for what that’s meant for us. With gross profit on new cars being very tough to come by, F&I income has become even more important over the last two or three years.
Our customers tell us they feel more comfortable focusing on F&I away from the showroom floor, and as a result, we’ve been able to expedite the finance process and have the time to sell more insurance products.
Our F&I managers use ADP to process customer paperwork and DealerTrack to submit our customers’ electronic applications to the various lenders. DealerTrack speeds up the approval process from lenders significantly. With less time spent on loan application processing, we can focus on selling more insurance products. In the new center, we’ve increased our sales of Zurich insurance products (extended warranties; gap insurance; paint and fabric protection with Zurich Shield; Zurich Security Guard, an anti-theft program; and Zurich’s Road Hazard Wheel and Tire Coverage).
Our F&I managers also offer our new Scott AdvantEDGE rewards-based incentive program free to anyone who buys a new or used car from us. With Scott AdvantEDGE, customers get a lifetime guarantee on the car engine, free inspections and towing, and they get points for discounts on services or a discount on their next vehicle purchase at the dealership.
We run Scott AdvantEDGE with Dealership for Life software. It’s extremely efficient for us. Plus, it’s very user friendly. Our customers don’t even have to remember to bring the card to be swiped, when they come in for service, because Dealership for Life tracks customer usage through our DMS.
Our F&I/Delivery Center provides one-stop F&I shopping, plus vehicle delivery, and our customers are really excited about it. It’s helping our CSI and the manufacturers are extremely satisfied with our delivery process.
Doug, you do the marketing for Scott Honda, and you recently helped to open Scott Select, a dedicated used car center. How has adding that into the family’s mix of dealerships helped?
Doug: For years we’d been selling 20 to 30 non-Honda vehicles a month but we had limited space because of our large Honda inventory. If there’s one thing that has done well during this down economy, it’s used cars. So my cousin Duke Scott, vice president, decided to maximize that used car business at Scott Honda by creating Scott Select.
Duke had purchased a lot down the street from Scott Honda. We paved it, the curbs were cut and plans had been approved to build a green facility. As luck would have it the Saturn dealership next door to Scott Honda closed and he jumped on the opportunity to purchase it and we quickly converted the old Saturn dealership into the all-new Scott Select. We were able to help the local economy and prevent a large building on a busy corner from sitting empty with no employees. We turned the situation into a positive by filling that spot with Scott Select and 15 busy workers.
We’ve been able to triple our sales of non-Honda vehicles with Scott Select, since the grand opening last summer. We remain the #1 volume combined New and Certified Honda Dealer in the state and we finished #5 in the country for Certified Hondas.
With great drive-by traffic and our family’s long standing reputation for top notch customer service, in our first full month in operation we were able to sell more cars than any of the smaller used car dealers in our area. August was our best month when we sold 93 cars and our average is about 70 cars per month, but we haven’t been through a whole year yet.
We’re still fine tuning our web sites to advertise Scott Select. And, we also have 50,000 names in our ADP database that we can draw on to increase business at Scott Select, via direct mail and e-mail campaigns.
Our message to customers is consistent; we sell “Simply the Best Pre-Owned Cars”. We know our pricing is very competitive because we use vAuto to compare prices to Kelley Blue Book, Black Book, Edmunds.com and also other dealers, to help us set our fair, no haggle, Select Price. Sometimes we even set it below what they suggest and thus far customers have been very accepting of our program. Beyond our Haggle Free Select Pricing, we offer:
- A six-month, 6000-mile comprehensive warranty
- Rental reimbursement, trip interruption insurance and emergency roadside assistance for the first six months or 6,000 miles.
- Lifetime engine guarantee
- Free lifetime PA safety inspections
- Three-day return / 30-day exchange policy
- ‘Like New’ cars with no surprises
- 150-point inspection certification process
- Free CARFAX with every vehicle
- State of the art service center
- Scott Advantage Program with more than $1,500 in savings in members-only pricing, members-only coupons and 20% back on every service at Scott Select.
I see Scott Select as its own franchise. Once we are able to fine tune it, we should be able to copy its processes and open others in areas where a good used car is hard to find.
Andy: There’s no question that separating your used car operation – as long as you have a good location and good curb appeal — can really help increase your used car business. I know when we moved our used car business to Scott Lot in 1990, we increased our sales by 30 %.
Besides establishing the new F&I Delivery Center and Scott Select, what else have you done to cope with the economic downturn?
Doug: I also run our used car auction, Scott Bid Sale. We’ve been making money and increasing profits significantly with Scott Bid Sale despite a down economy and it’s because we treat our wholesalers — who historically were not thought of as customers – like the real customers that they are. We provide them with good customer service, we make it easy for them to buy our wholesale cars and as a result we’ve been drawing wholesalers from all over.
Ownership has also invested money in an entirely new facility dedicated to the bid sale. We increased our parking by 100 spaces and are located in an area much more conducive to the bidding process. An added benefit to the Scott Bid Sale is we no longer have wholesalers streaming through the lot and the showroom every day looking to buy our wholesale units. They know now there’s a separate sale, every other Thursday, where they can come in on a single day and be assured that the entire selection is available, clean and ready to inspect and test drive.
How are you embracing the Internet to drive sales?
Andy: About 20% of our customers at the Scott Family of Dealerships are Internet customers. At Scott Honda and Scott Select, they are very Internet driven. I know Doug and their Internet manager, Jason Reitelbach have worked very closely with Dealer.com to individualize and optimize their web sites.
All our dealerships use a number of third-party lead services. Cars.com and AutoTrader.com are two of the best for funneling leads. We are also beginning to find great benefits in optimizing lead generation on our own web sites through search engine optimization (SEO) and lead generating landing pages. We’re spending $30,000 a month between SEO, SEM and all the lead management services that we use and that’s really important.
Our CRM is AutoBase and it’s been very good for us. We just installed it at the Scott Family of Dealerships three months ago and we love that it prompts the sales people to follow up with their customers in a timely manner. Plus, our three Internet managers receive a report on how those customers are being followed up.
If you’re not getting back to your Internet prospects in a timely manner with relevant information, you have absolutely no chance of getting them in the showroom. The better and more professionally we handle the Internet customers, the more cars we’re going to sell.
Using AutoBase is making us much more effective in creating “Be Backs.”
How do you handle online reputation management?
Doug: Reputation management is critical and we manage that ourselves – checking Google reviews, Yelp and DealerRater.com, among others to see who is commenting on us. I think you lose the personal touch when you have an outside company handle online reputation management. It’s hard to have someone who’s located 400 miles away pretending they can go downstairs into the sales or service department and solve a problem.
We want to make sure that positive remarks significantly outweigh the negative and that when we do get negative reviews we respond to them quickly and try to correct any problems. I think customers know you can’t be perfect all the time, but the key is responding appropriately when you are imperfect. When they see a negative review, but then they can read an apologetic response from the dealership right underneath it saying, “I’m sorry you had that experience. I’d like to try to help resolve this issue and ensure it never happens again,” that lends more credibility to the paramount importance of customer service for your dealership than the 50 positive reviews that came before it, in my opinion.
What advantages are you offering to your Internet customers?
Doug: At Scott Honda, we have new car incentives and finance specials that consumers can learn about quickly and easily apply for on our web site. Right now we have over 40 specials. We use Dealer.com which “talks” to Honda’s incentives feed, so that within 48 hours of a new special being announced, we have it automatically updated on our web site. Prior to adopting Dealer.com six months ago to automatically manage this for us, it had been extremely time consuming to keep these incentives updated manually.
We also use “chat” through Contact at Once, which has been a great medium for lead generation. It’s just another way to initiate conversation with our customers with the goal of getting them in the dealership and selling them a car.
How are you using social media?
Doug: Like many dealers we have Facebook pages and Twitter accounts, and we’re on Foursquare, but it’s our blog that I created almost two years ago called “Sconda” that really sets us apart, www.scondablog.com. It even got a mention at the 9th Digital Dealer Conference in Las Vegas last Fall, which I was very proud of.
I come from a newspaper background, so I enjoy writing. I spend a few hours a week blogging about the dealership, about Honda, about Scott Select or other interesting things that set us apart from the competition. We now have a forum to communicate the softer side of our dealerships, our employees and even our customers to the public. Another benefit is the ability to promote all the great work we do with non-profits in the community. The public needs to know how much local dealers nationwide contribute to churches, schools, and other non-profits. Using social media can do that for you. It has also been a great help to our SEO as far as Google is concerned.
Being genuine, staying on top of it and providing interesting content is the whole key to social media – being able to have conversations online with customers that you were never able to connect with before is great. And, you have more opportunities to promote events at the dealership for little to no cost. I know there is much more that we can do with social media and I really enjoy keeping up with trends and maximizing this ever-changing arm of marketing.
What are some of the other strengths of your dealerships that have made it possible to weather economic ups and downs over the past 81 years?
Andy: We’ve always had a very good reputation for consistent service and reliability with our customer base. We deliver quality cars and quality service. We also work hard in other ways to retain our customers’ goodwill. We sponsor many local charitable organizations. My parents were very much involved in the community and I’m a big believer in the private sector giving back.
Doug: My dad is too modest; he can’t walk through a local restaurant without three people thanking him for something he helped them with. For example: he led the United Way campaign for Lehigh Valley in 1989 raising $11 million; he started the high school Lacrosse team in Emmaus, Pa; he is a member of the Chamber of Commerce Board of Governors; he helped the Rotary Club sponsor plastic surgery for third world children with cleft palates; he was the inaugural president of the Greater Lehigh Valley Auto Dealers Association; and he started the Philadelphia Auto Show at Lehigh University that has raised $500,000 for the community.
When customers are asked how they’ve heard about the dealership, they frequently say they are a Friends of Andy’s, a term so common that the acronym F.O.A. is used within the dealership. They know him through his involvement and his work in the community and during this economic downturn, part of the reason he survived and prospered is because of all the business and goodwill he has done over the years.
Andy: Our employees and the way we communicate with them are really the key to our success. I’ve been here 37 years and have always had an open door policy for our employees. We’ve had our ups and downs with the economy and our employees know that when we do well, they’ll go up with the rising tide, and when we’re not doing well, we believe in shared sacrifice.
Our people always know how we’re doing. The more you open up information to employees the more ownership they take in the company and that has worked out very well for us over the years. When you communicate well, you retain employees. We have 145 full-time and 20 part-time employees. Most of our managers have been here for more than 10 years. For example, our service manager, Eric Feinour, started with us as a lot attendant at 18-years-old, he became a technician for four years, and then a service advisor for 10 years. He’s now been our service manager for the past 15 years and customers and employees love him. It’s nice to have your service manager be the most popular guy in the place. That’s not usually the case.
How do you motivate your salespeople?
Andy: We have a general sales meeting the first Saturday of every month that I run personally. I’m a big believer in communicating directly with our sales staff. We have sales managers and they do a great job, but I think the individual sales people need to know directly from the owners what we expect on a consistent basis. Everyone here knows what’s expected of them, and they are given the tools and support they need to do their jobs. We find that if you have happy employees, you are going to have happy customers. We treat both employees and customers in a first class manner.
You’ve won a number of awards over the years. Tell us about the most recent.
Andy: I just received the Time Magazine Dealer of the Year Award for Pennsylvania for the Scott Family of Dealerships. I was nominated by the Pennsylvania Automobile Association.
My dad, Raymond P. Scott, Jr., who is 82 and now retired, won this same award in 1985, and my uncle, Craig C. Scott, who is 73 and an owner of Scott Honda and Scott Select, won the award in 2003.
Craig and I started out as partners in Allentown, but he won the award for his work at Scott Honda. My Dad was honored with the award while as president of Scott Oldsmobile and Saab on the Main Line for many years.
While we are quite obviously a family business, I do have a partner, Richard Salezze, who is an integral and extremely valuable part of our business. I’ve known him for 35 years and I hired him into the business. He’s been a partner since the mid-90s. He concentrates on fixed operations and accounting. I focus on marketing and sales. The nice thing about our partnership is we’re talented in different areas, but we have the same goals for the dealership.
It’s our common goals and singular vision that unite us in a shared belief to treat our employees like family. That’s how we’ve weathered the tough economic times and are extremely optimistic about the future of our dealerships. We project a 10 to 12% increase in business for 2011.