Last year, Planet Honda was in the top 30 nationwide in Internet sales with 1,844 new Internet sales units and 483 used Internet sales units and 7th in national sales volume for Honda. And 2012 promises to be yet another winning season. Plus, Planet Honda’s long term growth is projected to be 20 to 30 percent per year.
Planet Honda Owner Tim Ciasulli and Business Partner/GM Bill Feinstein bring together a bold vision and finely honed skills for metric analysis to fuel this dealership’s growth.
Bill Feinstein recently discussed their strategy for success with Dealer magazine.
First of all, Bill, how did you get into the car business?
After graduating law school, I spent a few years as a corporate attorney and as an investment banker. I ended up marrying a woman whose father owned a dealership and ended up partnering with him in 2000. I’ve been in the business since then.
In early 2009, I left that dealership, and a former competitor of mine, Timothy Ciasulli, asked me to do some consulting. Tim had the reputation of being a fierce competitor and a great innovator. In the past, Tim was hands-on and ran a terrific store that was always at the top of the Honda rankings, but he took some time away from the dealership to pursue business opportunities outside of the automobile industry. In the interim, he had the wrong people managing the store and they tarnished a really good apple.
So Tim wanted to rebuild his business, and when I gave him my report on what needed to be fixed at the dealership, he said: ‘OK, now let’s fix it.’ So, we decided to go into business together. It’s been a terrific ride and a ton of fun.
Tell us about the synergy between your management style and Tim’s and how that has fueled growth at Planet Honda.
From the day Tim founded this store, he had a very clear vision. In a short three-year period of time from 1997, he took this store from being a relatively small Honda dealership to being one of the largest in the country.
His vision and his leadership set the tone in a number of ways. First of all, the one thing we don’t have here is institutional arrogance. We have humility and we are constantly striving to be better. None of our top people are satisfied with the status quo. We participate in the NCM 20 group and we benchmark everything. We keep stretching and working for more and I think that’s what makes a sustainable organization.
We have a great management team and a lot of longevity here. People are pleased to work here because they are playing with some of the best in the field. When I walk down the hallways every day, I see both pride and humility. There’s pride in the job and how they do it, but they’re not egotistical.
You focus on building good morale and team spirit.
Yes. As dealers, it’s all about your people. I spend 70 percent of my time dealing with personnel issues — evaluating, motivating personnel. Do we have the right player in the right spot? I’m constantly trying to improve the breed – making sure that if we have to terminate someone here, there’s a sense of failure on management’s part as well. What did we do wrong in the hiring process? In the integration process? In the management process? Why weren’t we able to make this a success? We’re all about our people.
Besides constantly striving for improvement in our people, process and performance, another aspect of Tim’s management style that fosters growth is his enthusiasm for swinging for the fences.
As an operator, he has never ever reprimanded me for swinging and missing, but he might get upset if I didn’t swing at all. It’s great to have a partner that has that big vision and wants big bold moves. Sometimes you are going to miss or strike out, but occasionally you do hit those home runs. A lot of times we’ll sit at management meetings and we’ll say: ‘Let’s try this. And, if it doesn’t work, so what?’
That attitude was one of the things that helped us in 2009, when everyone was in the doldrums. Planet Honda came out blazing with heavy advertising and we stuck to our guns and grew at a 50 percent higher rate than the zone average.
We want to keep growing, so we stay aggressive. There are times we will overspend on advertising, but we look at advertising as an investment in the future. The dollars we spend don’t just affect today. They affect what happens tomorrow and next year. Not everyone is in the market today, so you need to plant the seed.
Dealers that manage on the basis of per vehicle retail advertising – whether it’s digital or traditional media – are missing something.
Most of the key advertising decisions are made by myself and Tim. Tim takes the perspective from 20,000 feet and makes sure we’re consistent with our branding. In contrast, I get a lot more granular and look at the nitty gritty.
You’ve talked about Tim’s management style. Tell us about your own.
Given my background in law and investment banking, I’m very analytical and try to manage by the numbers. I have a million spreadsheets and measure everything. If you can measure it, you can improve it. So we’re constantly looking at numbers: Internet leads, third-party leads, website performance, BDC performance, show rates, closing rates, you name it. Tim’s outgoing and engaging manner has definitely helped me hone my management style.
Let’s start with your aggressive advertising campaigns. How do you measure their effectiveness?
We measure advertising effectiveness a lot of different ways: Are we busy? How is our traffic? Are we bringing people in? What do our leads look like and how are we doing against our competitors?
We have to be aggressive. One of our competitors is 2.4 miles away on the same highway and another is 9 miles away on the same highway. This stretch of New Jersey is Honda country.
We outsell both of those dealers at least two to one, because we are aggressive with our advertising and because we push our people based on the numbers, and because we’re not arrogant.
How many Internet leads do you get per month?
Actually, we don’t call them leads, internally; we call them opportunities. They include inbound phone and email contact. In tracking inbound phone calls, we find most are from an Internet source. We average 1,500 new car opportunities per month and about 350 used car opportunities per month.
The bulk of these come from our own website and traffic has improved greatly since last year. Then, Honda was slow because of the scarcity of inventory – with the tsunami and all. That scarcity took a lot of people out of the market who would have normally considered a Honda for purchase. They waited to see what would happen pricing-wise when more Hondas became available for purchase.
How does your website measure up?
It measures up very well. Dealer.com set up and maintains our website and optimizes it extremely well for Google. From an SEO standpoint, it’s a terrific site. I’m not sure it’s the sexiest website out there. Dealer.com has a tendency to get a little cookie cutter and you have to push them hard to get differentiation on your website, but it is a turnkey solution and it’s fairly cost-effective and we love the results on SEO.
We also spend a fair bit of money on search engine marketing. We are extremely happy with our SEM company, L2T Media in Chicago. They are very much involved in monitoring all our campaigns. We have conference calls with them at least twice a month, if not more. They conduct website effectiveness studies. They figure what’s going on in the market and where are we, and we constantly tweak what we’re doing to get the best results – making decisions whether we are going to go after position or go after cost per click.
We found when we tried to increase our position to number one or number two on the search engine results page, our cost per click went up so dramatically that the yield wasn’t worth it. We found we were able to get more opportunities more cost effectively on a lower position. So, there’s a sweet spot you have to find with pay per click.
But, it’s just as important to have a really good advertising message.
Who creates your advertising messages?
Up until recently, Market Masters Media Group did our overall advertising. L2T Media takes our agency’s messaging and turns that into our online pay per click advertising. We recently switched to The EGC Group based in Melville, New York, for our traditional advertising.
I’ve found it always pays to continually invest in our website and driving traffic to it. Digital has gone from being 10 percent of our advertising budget four years ago to being more than 30 percent of our budget now.
In January, we started advertising on Pandora Internet Radio. We were one of the first local dealers to do that and we’ve had a good amount of success driving traffic to our website from there.
Was that traffic mostly Gen Y?
It does skew younger, but that tends to be the demographic we’re looking for, especially for Honda Fit. In general, we go after consumers in the 22-to-55 age range.
You also use third-party lead providers. How do they measure up?
It’s a challenge to monitor and manage third-party lead providers. There’s a lot of garbage, frankly, that gets circulated around. Leads get recycled; the duplicate leads among some providers can be as high as 80 percent. So, we have shut some third-party lead sources off over the last couple of years.
If we see lead provider “y” is providing us 80 percent of what lead provider “x” is giving us, we’ll just keep “y,” because it’s not worth paying for both. We negotiate this with all our 3rd party lead providers: The company whose lead comes into our system first, gets paid for the lead. If the same lead comes in subsequently from another lead provider, we don’t pay for that.
Doing this takes manpower, and we find it’s really an issue on the finance side. We do a fair amount of finance business and buy a fair amount of special finance leads on the Internet and we see a lot of problems.
I’d say 80 percent of the special finance leads are not good. Generally, customers thought they were filling out something other than a form to buy a car. Or the customer submitted the application three months ago. That is one side of the business that needs a lot of cleaning up.
At any rate, every month we meet with our third-party vendors and talk about our ROI. We talk about why they need to be within a certain band, or we’re going to have a price adjustment. You can have those intelligent conversations with your vendors, if you measure things properly. But, if you don’t measure things, you can’t have those conversations.
Are the OEMs helping you generate Internet sales leads?
One of the things we struggle with as dealers is the level of engagement of the manufacturers with the Internet consumers. Sometimes the sales and advertising practices mandated by the OEMs don’t match the reality of how things really function out there in the market. Like you can’t advertise less than invoice, but yet, people are getting quoted all the time below invoice. It’s hard to square those things.
The market is going to do what the market does, and the OEMs need to do a better job of policing what happens on the Internet. If you Google your dealership name, very often there are other dealers and third parties trying to pretend to be your dealership. Sometimes pay per click is a little bit of the Wild West. And I think the OEMS should take a more jaundiced look at those practices.
But one of the things I love about the digital space is that it’s constantly changing and so dynamic. It’s changing every day and there’s no room for complacency.
How does your Internet leads-to-sales closing ratio measure up to expectations?
Depending on the month and the amount of third-party leads we receive, we average between a 12 and 16 percent total closing rate. The third-party leads really do skew our closing rate. We get a lot of leads out of the area that don’t yield a lot.
In contrast, I’m extremely happy with our online chat provider, ActivEngage. We had been doing our own chat, and we weren’t happy. So, I outsourced it to ActivEngage, and they’ve done a terrific job. Ordinarily, I’m not a big fan of outsourcing, but ActivEngage does a great job of providing staff to chat with our customers.
It’s difficult for a BDC rep who is answering phone calls and e-mails to conduct a chat with a customer. ActivEngage is really cost-effective. They’ll do 250 to 300 chats a month, and we’ll close 10 percent of those chats. And 80 percent of the time, they’re getting both the phone number and email from the consumer. I wish my BDC reps got me a consumer phone number and email address 80 percent of the time.
How does your BDC measure up?
In 2009, when I arrived here, our BDC/Internet department was doing 20 percent of new car sales. In 2011, it accounted for 44 percent. In 2008, the BDC/Internet department represented 10 percent of our used car business. In 2011, it was 30 percent.
We still have a long way to go, but our growth engine has been our BDC. If we add in the deals that the BDC reps can’t take credit for because they didn’t keep good records, we believe the BDC accounts for over 50 percent of our business.
I’m blessed with an outstanding Internet director who was my first hire when I partnered with Tim. He has no arrogance, just a desire to be the best.
Once you get all these Internet leads, how do you process them?
All of our leads go into our CRM. We’ve been using VinSolutions for four or five months and I’m very happy. Certain CRMs do a good job of showroom management and others have good BDC tools. There are very few CRMs that do both well. VinSolutions does both very well.
VinSolutions is relatively easy to use from a sales person’s and sales manager’s point of view. From a management standpoint, VinSolutions does a terrific job of letting you monitor what’s going on in your store.
Right now we have five people in the BDC rotation receive email leads, one person who does equity mining through Xstream Service, and two who just do lease retention. We have one Internet Director. Our Internet director is a member of our executive management team and is on the same level as any department head. Too many dealerships subjugate their BDC to their sales managers. Not in our dealership.
BDC leads are sent out round-robin, but if we see someone with overdue tasks, we shut off their leads for the day and they won’t be given additional leads, until they are caught up.
We don’t have a separate Internet sales team. Internet sales teams, in my opinion, tend to be a complete anathema to making gross profit. I think you have to train your salespeople properly to treat an Internet customer the right way. That includes greeting them properly and introducing them to the BDC rep immediately so that paperwork and communications are reaffirmed.
There’s a lot of salesmanship that still has to be handled with those customers. When you have an Internet sales team, they tend just to process the paperwork. So I’m not a big fan of it. Our salespeople average 19 units per month per salesperson. We have 25 new car sales people and 12 used car sales people in just one location. Our average BDC rep is responsible for over 30 sales per month.
What is your response time?
Fifty-five percent of our leads are contacted by a person within 15 minutes, and that is the benchmark on a 24-hour clock. We try to contact 75 percent within an hour, given a 24-hour clock and then we recognize that there are some that are going to be missed, given we are closed on Sundays. We open daily at 9 a.m. and close at 9 p.m. If we go with actual time, 60 percent of our leads are answered in less than an hour. Most leads come in during business hours.
What is your follow-up cycle?
Generally, we work on a 90-day cycle. Our process is fairly intense for the first 14 days. After that, we continue to contact the customer every 10 to 14 days, until the customer tells us they are not interested.
VinSolutions’ calendar system is very good. It sets up a daily schedule of tasks for our BDC reps and sales reps. At any given time, management can see how many open tasks they have.
If I find out a sales person didn’t call a customer back, then I make sure the customer gets the information they need. Most customers are impressed that they are getting emails from the president of the company. Normally, I also read every email from the customers to the reps. I will also look at every lead that is shut down and find out what happened – why the customer and we weren’t able to put a deal together.
Our phone system is hooked up to the VinSolutions CRM. So we monitor phone calls –inbound and outbound – daily, and have a quota of a minimum of 60 outbound calls a day per rep.
For every two calls out, we like to see at least 1 call back. So when we work on closing rates, generally we like to see 80 percent of the leads result in an appointment. Our benchmark is 70 percent show rate, and we average a 38 to 42 percent closing rate on new car customers that show. In all of this, Vin Solutions works very well for us.
Because our processes are very strong, we try not to quote out-the-door pricing, and one of the things our BDC is very proud of is this: Our BDC runs at 90 percent of average shown gross. A typical Internet department probably runs about 40 percent or 50 percent of the average shown gross.
When customers ask for out-the-door pricing, we respectfully decline. We tell them point blank when you get out-the-door pricing from other dealers, they are not accurate.
We tell people this is the sales price, these are the fees, you can figure out what the taxes are, but we don’t want to get in that game, because it tends to be a rigged game and the dealer is the only one who wins.
Let another dealer quote an out-the-door price and let the customer show up and find out it’s not really the out-the-door price and let them be disillusioned with the other dealer and come to us.
All things considered, we are proud of our closing rate, but we’re always looking to improve it. There is always someone richer, better looking and smarter than you and the same thing is true in the car business. There’s someone out there running at a 50 percent close rate. There’s someone running at a 90 percent show rate.
What are they doing that we are not doing? What are the new technologies that we can put into place to improve our rate? We are always looking for new technology solutions.
How do you keep up on new technologies?
I have a general rule, which is: talk is cheap. So if a new vendor calls, I’ll take the meeting, because I never know what the next great product is going to be. I talk to a lot of other dealers. Our 20 group is valuable; we share a lot of ideas, and having that sounding board is great.
Reading magazines like Digital Dealer, and others, helps me keep up with new ideas that are circulating and new technologies. I call up friends of mine who are dealers, and ask: ‘What are you trying out?’ I read business magazines and the Wall Street Journal to keep an eye on trends in other industries that will probably materialize in the auto industry.
I have conversations with our vendors, Dealer.com and ActivEngage – asking them what’s new and happening out there. We talk to VinSolutions, and ask what’s working in other stores.
It goes back to not being arrogant. The way you are doing things might not be the best way. You’ve got to be willing to listen to what else is out there and willing to try new communications channels.
So, how are you handling social media?
We’re not doing as well with social media as I’d like, but when I look at the overall automotive landscape, I’m hard pressed to see who is really doing it well.
I see dealers who every day update Facebook, but if there’s no real value to the consumer, I don’t think it makes a lot of sense. It’s very important to be relevant and impactful, so we try to limit our Facebook updates to a couple of times a week, and we try to make our blogs informational.
We need to be in the social media space. There’s value there. I just don’t think we’ve figured out the secret sauce yet.
It’s hard to measure the return on investment (ROI) on social media. It’s like branding. Everybody says they do it, but not many people do it right.
We’re about to launch a Facebook campaign where we’ll drive traffic based on a charity fundraiser. I think a social media campaign needs to have a social benefit for it to have impact. Hopefully, we’ll do something good for the community and build awareness for the dealership. That’s a win-win situation with social media.
Probably our most effective communications channel with our customers right now is our newsletter. We use IMN and we love what they do for us. They have a great product and we get pretty nice customer response from the newsletters IMN produces.
How do you handle online reputation management?
That is a large part of my day. I have a digital marketing assistant and together we monitor postings daily on every website. If there’s a negative post, we investigate it immediately, and when we are wrong we admit it and try to make it right.
My assistant is also the director of customer service and I’m involved 90 percent of the time, if there’s any customer issue.
Tim and I appear in our advertising, and so consumers are not afraid to pick up the phone and call me or e-mail me and I think that short circuits a lot of problems.
We have a 4.7 rating on DealerRater, and a 22 out of 30 rating on Google.
It’s part of our pay plan to require our sales people to get at least three positive reviews online every month. We try to push people towards Google because they are the 100-pound gorilla and that does impact SEO. But, sometimes Google is hard to work with.
DealerRater makes it very easy for a consumer to post a review and DealerRater makes it easy for us to have a dialog with a consumer. Google isn’t as user friendly. I think Google will get there – they are relatively new to this game.
Reputation management is not an option. If you are not doing it, you are not in the game. It’s so important.
What do you see for the future?
It’s very bright! We are currently building a stand-alone Honda Certified used car facility with a 9,000-square-foot used car show room and we are also constructing a 10,000-square-foot service facility to handle new and used vehicle prep. These properties are adjacent to our current facility. This will pave the way for us to increase our new and used vehicle volume substantially.
On top of that, in the next year, we’ll be completely renovating our current facility. We think there’s so much business for this Honda store. We’re blessed with a great location and we feel we can grow 20 to 30 percent per year for quite a while. So we are in the land of opportunity here.