Today’s progressive auto dealer faces three difficult challenges: limited scale, broad span and significant marketplace shift. How he responds to these three challenges will determine how successful his dealership will be.
First there’s the issue of scale. A dealership is, essentially, a local business serving a customer base that draws from roughly a 20 mile radius. Dealerships range in size from, say, 30 employees on the low side to 200 for a very large dealer. It has been said that working in a car dealership is a great fit for someone with ADD, because there’s always a new crisis, priority or task and it’s inherently unpredictable. Managers are “Jacks of all Trades” with little time to plan for the future: the tyranny of the urgent is always upon them.
Despite that limited scale, however, a car dealership embraces a very broad span of duties—from the logistics of used car inventory, to OEM interactions and logistics surrounding new car inventory, to Internet technology optimization, to Internet and showroom sales process and people management, to effective merchandising, social media management, service and parts functions, the financial / back office functions and more. How does the dealer have time to take each of these critical arenas and focus the sustained attention, thought and process design work necessary to optimize them?
All this is made even more challenging by the third factor: the fundamental marketplace shift that is underway. From a weak economy to the rise of the Internet savvy customer, to the emergence of social media as a critical factor in dealership success, to fundamental changes with OEM’s, the marketplace adds yet another layer of complexity to the task of running a dealership.
Limited scale, broad span, significant marketplace shift: that’s a challenging combination of factors the dealer must address every day. It’s like trying to change a bicycle into a motorcycle while pedaling: quite a trick.
Yet that’s the task of the GM / owner. You must elevate your dealership above your competitors, delivering the customer a compelling car buying and lifetime car ownership experience while running a profitable, efficient business in a marketplace wracked with multi-dimensional change. How can this all be accomplished successfully?
The good news is there are proven approaches to the task that can help the committed dealer principal. McKinsey Consulting, a top-tier international consulting company, a number of years ago developed their 7-S model for establishing a growth plan for a business. The 7 S’s are: Shared Values, Strategy, Structure, Staff, Skills, Systems and Style. In this article I’ll focus just on the first two. Next month I’ll focus on Structure, Staff and Skills, and the month after that I’ll finish with Systems and Style. By systematically attacking these seven critical arenas, you can devise a practical plan for creating a powerful, growing dealership despite the challenges of limited scale, broad span and significant marketplace shift.
Before a dealer principal embarks on developing a strategy for his store, the most basic question must be asked: what type of business do you want to be? What are the five to seven basic statements you would make about who you are as a business? Write them down. They may include things like “we exhibit the highest integrity in all that we do,” or “the customer is always right,” or business culture statements like “we practice continuous improvement” or “we believe in employee involvement in decision making.” Strategies change. Shared values shouldn’t change. Think deeply about who you are and get it on paper. Committing to these values in writing enables anyone in the dealership (from service technician to GM) to question when something happens that seems to go against a shared value.
So how do you develop a fully articulated strategy? The starting point must be your customer. Let’s focus here just on one component: the internet customer. What exactly is the car buying experience that you want to deliver to the customer who reveals their interest via an internet lead? As someone who has thought very deeply about this question, let me offer some ideas.
- The customer will receive a multi-vehicle price quote within 10 minutes of lead arrival, from 7:30 AM – 11 PM 7 days a week.
- The customer will receive a phone call (if phone number present in lead) or email response requesting the customer send a phone number (if phone number not present) from the dealership within 20 minutes of lead arrival, from 9 AM – 8 PM 7 days a week.
- The customer will then experience the following follow-up process:
- Day 1: One call, one email the day lead arrives
- Day 2: One call (different time than first day); send email
- Day 3: Email; send post card
- Day 5: Manager phone call; email
- Day 8: GSM call; email
- Day 11: email
- Day 14: email
- Then leave to automated follow-up
- Ongoing follow-up via transactional email marketing campaign; lasts 180 days.
It’s easy to just accept the current structure as a given, and say “well, here’s the level of service we can provide.” That kind of thinking leads to the world we’re in today, where 25% of all leads don’t get answered at all and the average response time on those that do is over five hours.
The better way is to define the customer experience you want to deliver (such as above), then say “How do I create an organization that actually achieves this, on every lead, every time?” What technology tools are required? What is the structure? What is the staffing level? What skills does each role in the structure need to possess? What processes do your people need to engage in, and how will you hold them accountable to ensure they’re actually doing it?
This is how strategy is formed. If you take this approach in your Internet department, you can then take the same approach for every department and every process in your dealership — from service and parts, to used car inbound and outbound logistics, to promotion, site visibility and merchandising.
Of course, it’s not enough to just solve for the customer experience you desire to create. You also need to do it profitably. So financial analysis is a key part of the planning process: how many people doing what roles, paid how much? What vendors are needed, and what are their estimated monthly costs? What is the impact in incremental units sold of your investments? This pro forma P&L will guide you to sensible decisions, and will create a baseline budget against which you can compare actual performance over time.
With a clear set of shared values and the creation of a high-level, customer-centered strategy, you have the basis to begin the next level of detail in your planning — your org chart, roles and responsibilities, job descriptions, current personnel assessments, compensation systems, key process maps, technology and metrics / accountability systems. But that’s for our next two articles.