When I was a dealer, I thought increasing sales was a good thing. We trained employees in all departments how to become better salespeople, how to provide our customers a higher level of service through effective communication and, of course, how to increase gross profits. That’s the only way we could get a good return on our investment.”
A House Divided
As a dealer or department manager, how do you expect to increase net profits and earn a reasonable return on the dealer’s multi-million-dollar investment if you don’t increase sales? So again, I ask my question, “Since when is selling a bad thing?” Allow me to explain my point by sharing with you some real-life examples of what I’m talking about.
I have personally spoken with, preached to and worked with thousands of dealers. Far too many dealers and managers have a great divide within their dealerships. I like to call this divide the “demarcation line.” It divides the variable operations (new, used, F&I, special finance) from the fixed operations (service, parts, collision center). When some of these dealers cross over the demarcation line from the variable operations to fixed operations, the word “selling” takes on a whole new meaning.
Let’s Get Real
When I ask a dealer, “What would you do with a salesperson who only sells five cars a month?” the most common response is, “Get rid of them and replace them with someone who can sell.” Conversely, when I ask, “What would you do with a service advisor who is only selling 1.0 HPRO?” far too often the response is “He’s a good guy, everybody likes him and I don’t want him to oversell our customers.”
By this logic this dealer would fire a salesperson for underselling and fire a service advisor for overselling?
Let’s take this one step further. Using this example, you would fire a sales manager who could only close 10% of the sales opportunities coming in the door because he is underselling and losing you thousands of dollars in gross profit each month and you would fire a service director who is closing 50% of the service menu presentations in the service drive because he is overselling and making you thousands of dollars in additional gross profit each month? Really?
Afraid to Sell?
Dealers tell me they don’t want to oversell their service customers, yet they cross over the demarcation line to the variable side and tell me they expect their sales team to maximize F&I revenue PRU with 100% turnover from the salespeople, 100% F&I menu presentations with 100% finance presentations. They expect a strong closing ratio of 25 to 30% on the sales floor with above average gross profits PRU, 100% turnover to a sales manager by the salesperson, minimal wholesale losses from used cars and a 45-day turn on inventory.
The managers responsible for achieving these sales benchmarks are usually supported to the max with healthy advertising budgets, professional training programs and full accountability for their end results.
These same dealers cross over the line to the backend of their dealerships and they tolerate far too many underachievers who are losing thousands of dollars in additional gross profits with zero walk-around presentations by advisors, zero service menu presentations by advisors, zero turnover of declined repairs to a manager, a 10% closing ratio by advisors, 60% one-item ROs (oil change), grossing below 70% on retail labor sales and below 35% on retail parts sales, with $50,000 in obsolete parts inventory supported by a minimal advertising budget, no professional training programs for advisors or managers and minimal accountability for performance — and you’re worried about overselling your customer?
Why would any dealer tolerate this scenario? Why would any dealer think this is a smart way to run a dealership? Why would any dealer want a demarcation line in their dealership? Why would any dealer think performance-based pay plans are a good policy for the variable operations but a bad one for fixed operations? If 100% menu presentation is the right process for the F&I department then why is it not the right process for the service department?
In my 20 years of working in the field with dealers of all sizes, I have yet to find a single dealer who is overselling their service, parts and collision center customers. Of course, we should never sell a customer any product, service, part or repair that their vehicle does not need. That, however, is not what I’m talking about here.
I’m talking about the advisor not selling the customer what their vehicle does need. I’m talking about selling the safety and reliability of service and repairs. I’m talking about selling the customer on the benefits of preventative maintenance and following the manufacturers’ basic requirements and recommendations.
You Can Do This!
Recently, we did a study based on a dealer averaging 500 customer pay ROs per month and the advisors made a menu presentation to 70% of the customers coming in the door. Here are the results:
- Menu Penetration @ 70%
- Manufacturer Minimum Services Sold @ 30%
- Additional Service Sold @ 0%
- Increase in HPRO @ .2
- Monthly Gross Profit Increase @ $12,268
- Annual Gross Profit Increase @ $147,227
Obviously, the closing ratios above are nowhere near as good of job of selling, but .2 HPRO produces a lot of gross profit, resulting in increased net profits, which provides the dealer with a higher ROI and gives the employee added job security.
So again, I ask, “Since when is selling a bad thing?”