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THE automotive industry is a barometer of consumer confidence and things like impending increases in interest rates and falls in property prices only make customers sit back and wait, said KPMG in its latest newsletter.

KPMG’s senior manager of Motor Industry Services Rohan Meyer said consumer confidence was putting downward pressure on the industry and though this was not being reflected in the car sales figures, dealer income “is just not there”.

“Most dealers are unprepared for these blips in consumer confidence and carry over with some bad habits that had developed in the good times,” he said.

“Many are not focusing on the opportunities. For example, we see a 25 per cent conversion rate and think that’s great – but really we should be looking at that and saying ‘we missed 75 per cent’.

“The problem with the car business is that all our profit comes from the last 10 per cent of the business we do”, which he said is the last 10 vehicles sold for the month and the last four days of service sales.

“So when that last 10 per cent drops off, the profits tend to take a much larger dive than would normally be the case as we follow consumer confidence, and the market, down,” he said.

“In reality that 10 per cent is still out there, we just need to work harder for it. We have to go back and do those good processes that have dropped off.”

Here are Mr Meyer’s Top 10 Dealer Tips.

First – Don’t waste your customer opportunities:

When a customer contacts a dealership to buy a car, they aren’t shopping – they are buying. The same for servicing their vehicles. Your last 10 per cent of car sales will come from the customers you would have allowed to walk, because:

  • no-one was interested in serving them
  • they aren’t set on the vehicle you are trying to sell them
  • we didn’t emotionally connect them with the car
  • we tried to sell them on price when they budgeted on repayments
  • we refused to deal with their trade in when getting out of their residual was the prime concern
  • procrastination killed the deal

Even in service we can miss out because:

  • no-one in the dealership answered the phone
  • we tell most customers the car is needed for the whole day even though the service takes less than two hours
  • we don’t make a “grudge purchase” pleasant for the person paying us the money

There are opportunities in these areas alone that would make up the missing 10 per cent.


Second – Road to a sale:

The sale process has become more flexible but there are still key points:

  • emotionally connecting the car with the customer leads to sales
  • the salesperson is in charge of the sale process – it is something they do every day while the customer buys about once every five years
  • sell the car the customer wants, not what the salesperson wants to sell
  • ensure all decision makers are there at the sale point
  • ensure all services are at the sale point, such as finance, after sales and so on

Third – Traded vehicle:

Many salespeople don’t help with the trade-in and if the buyer can’t sell the old car, the deal won’t happen. Done correctly, the trade-in will increase the closure rate.

Wholesale numbers of new-car sales staff are falling because:

  • dealers say there are falling retail used-car sales from franchised yards, though data suggests this isn’t true
  • the convenient excuse that everyone sells their trades privately online
  • we never see good trades. To sell more new cars, the sales staff have to love trades. The customer will appreciate the dealer ‘getting rid of’ the trade-in and that can lead to future business. Most dealers lose a minimum 10 per cent of their volumes each month because they don’t handle trades.

Fourth – We are not repayment focused:

Sales operations are very price-focused but most people don’t buy a car outright – they pay them off.

Prices can be totally irrelevant to what the customer actually pays because the customer has to work out repayments before going ahead with the sale.The two ways to fix this are:

  • the sales manager controls all price negotiations so they can quickly identify if it is a repayment deal
  • early introduction of F&I will plant repayment as more important than price.

Fifth – Ensure you maximise leads:

Four things matter – views, leads, appointments and test drives.
Dealers have to track:

  • no views – the car is not coming up high enough in searches. Get the price right
  • views but no leads – the car doesn’t match the inquiry, the pictures are bad, the competition looks better online, the descriptions aren’t accurate.
  • leads but no appointments – this is a sales problem not an internet problem. The staff aren’t getting people into the showroom so consider who is taking the calls, do they need to be trained and are they trying to sell the car on the phone rather than arrange an appointment.
  • appointments but no sales – there may be a problem with the car, the sales staff require training and/or there are not enough customers test driving the cars.

Sixth Don’t forget your current customers:

Few sales staff actively market to their existing customer base. The best way is to set a daily target of appointments. The closing ratio of appointments can be more than 50 per cent if handled correctly.

Most dealerships we work with have appointment ratios of less than one per day per sales person. To be successful you should target three appointments per day per consultant.

Sales teams should talk to:

  • current customers about new models coming into the showroom and then arrange test drives
  • customers coming in for services with more than 30,000km on their vehicles
  • out-of-warranty customers, those who have passed three years with the same vehicles

Customers who don’t shop have better CSI and create more gross on the sales.

Seventh Measure lost commission:

Dealers should encourage commission and show sales staff the potential to earn more commission. Showing them what they are missing out on can earn an extra sale a month.


Eighth Sales need to set service up for continued success:

The old saying ‘service sells the second car in every dealership’ is actually the truth. But you can only sell that second car if the customer is there for three to five years. A proper sales-to-service handover is the key.

A handover should:

  • allow time at delivery to spend about 15 minutes in the service department
  • plan a meeting with a service advisor
  • get the advisor to explain the service schedule
  • book the first service
  • send an email to the customer to confirm this appointment
  • CRM centre notified to follow up this appointment
  • weekly report all deliveries made in the showroom with dates of first service created to ensure 100 per cent of customers are introduced and booked in

Most dealers think first service retention is 90 per cent but in fact it is around 60 per cent. You are three times as likely to sell to your own service customer. If they are in someone else’s workshop, you are unlikely to sell the second car.


Ninth Setting the sales department up for success:

We go to a lot of showrooms where the reason customers leave is because of a shortage of sales consultants or a short-cut sales process. We find that this is often because of a scheduled event that could have been better managed and not lost the dealership a sale.

Some of the best practices we have seen include:

  • no deliveries on weekends. Sales staff are there to sell cars as it’s the peak selling period
  • maximum of three deliveries a day. Some sales consultants will jam all deliveries into one day meaning there are no sales that day
  • 50 per cent of cars must be delivered by the middle of the month. Back-ending deliveries destroys the last week of the month and negatively impacts on the ability to sell cars in the crucial end of month target period
  • No appointments means you are at the mercy of the walk-ins. If you have more appointments, you control the calendar
  • flags and yard changes at 8am, not 10am when the customers arrive.
  • delivery coordinators to manage delivery scheduling and checking the vehicles to ensure all accessories are fitted prior to delivery, this doesn’t take the sales staff out of play from selling cars

Tenth Be the dealership optimist:

Bad news travels 10 times quicker than good news so don’t involve yourself in gossip with fellow sales staff. Focus on what you are doing and not the market. Avoid comparisons with other dealers. Great dealers are great because they only focus on themselves, not the rest of the market, hence avoid being dragged down by the naysayers.

By Neil Dowling

KPMG
Macquarie