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Tony Albertson

The Resilience Checklist

Car salesman

Recently, I was invited to moderate a session at a DrivingSales Conference in Miami, Fla. The topic at hand was dealer resilience. The meeting asked dealers in the room, “How would you handle a 20 percent decline in volume or a 50 to 100 basis point rise in interest rates and what about a labor shortage?” Think it can’t happen?

Increasing interest rates

The last few years, we have seen the government prop up the nation with prolonged stimulus and loose monetary policy while impairing sustainable growth. In December 2015, the Federal Reserve raised rates by 25 basis points; this was the first increase since 2006. The Fed has recently increased it another 25 basis points, and the projection is for 2 to 3 more increases next year. How will this affect your profitability, your property values, rent factor, or your ability to acquire new stores?

Changing marketplace

What of other external threats to our business, such as negligence from the manufacturers, disruptive markets, or the state of consumer finance? Internally, dealers may suffer from a poor reputation in customer experience, labor inefficiencies, and a stagnant business model that can ruin net worth. A 2015 Customer Experience Research report by DrivingSales stated that only 26 out of 4,000 consumers prefer the current car buying process. As they explain—and I agree—the Apples and Amazons of the world have trained modern shoppers to seek out a different buying experience.

Experian has reported that auto loans reached an all-time high in Q1 of 2016. The debt totaled over $1 trillion, up 10 percent from Q1 2015, and they are watching delinquencies closely. According to the Federal Reserve Bank, the average length of a new car loan is 64.6 months.

A 2015 Cox survey had some good news for dealers despite the abundance of those disruptive market sites capitalizing on direct-to-consumer transactions: 81 percent still prefer to buy in-person versus online. The customer still doesn’t like the process, but they want to deal with a real person and be able to touch and feel the vehicle.

Rising labor costs

Operationally, the automotive industry’s biggest expense is labor. According to NADA’s Chief Economist, dealers often pay 15 percent more than US averages for labor and have been increasing wages at twice the rate of comparable sectors all while experiencing turnover rates up to 3 times the US average. On the topic of expenses, David Spisak, President of ReverseRisk and one of the speakers at the conference, stated that “many dealers fail to quantify their true costs when manufacturers redistribute margin on their financial statements.” So what happens when the OEM pulls the program?

The Resilience Checklist

Despite the brilliance of the speakers at the conference, none have “THE ANSWER” to all of the questions we face in today’s car business … I don’t believe anyone truly does have all the answers. However, I think this short resilience checklist is a useful tool for your dealership:

  1. Stress test your profit and loss (P&L) and balance sheet for a 30% SAAR drop and/or interest rate increase of 3-5%.
  2. Secure long-term financing while rates are low, if possible.
  3. Develop and track a “true” P&L independent of OEM incentives and financial manipulation. Wean yourself off dependency on manufacturer programs. Operationally, modernize your labor practices. Build and implement an attractive employment ‘brand’. Culture, compensation plans, internal policies, and positive impacts of the organization externally should be optimized to attract and retain a more diverse, more cost-effective talent pool that can deliver a superior customer experience.
  4. Re-engineer inefficient departments and processes. Streamline organizational structure to provide a seamless customer experience to remove hand-offs and overhead. Used cars and fixed operations are huge areas of opportunity to recover lost margin in new cars and execute a customer retention strategy.
  5. Future proof your business by exploring how to position your dealership to benefit from changes in how consumers purchase mobility.

So many questions in so many areas. The truly great news is that—almost to a man (or woman)—car dealers can adapt and overcome challenges. Well, some faster than others. Make sure you’re one of the fast ones!

Learn more about Tony Albertson and how he and his NCM colleagues can help your dealership through 20 Groups and in-dealership consulting.

Permanent link to this article: http://blog.ncm20.com/2017/04/the-resilience-checklist/

Kendall Rawls

Generational Tensions: 4 Barriers to Automotive Leadership

Stressed boss and her female colleagues posing in office

Ensuring the future success and sustainability of a dealership is not based solely on operational knowledge and efficiencies. In addition to creating robust processes, identifying and developing future leaders is critical to building sustainable dealership value. But first, you must overcome the leadership barriers that sabotage your goals.

Generational tensions

In the past, when someone took on the position of “dealer,” it was assumed employees would fall in line and follow the owner’s lead. Today, with up to five generations working together at the same dealership, this expectation doesn’t hold true. Instead, good people check out or leave after a transition in leadership if they don’t feel respected for their contributions and see opportunities for growth.

Generation X and even the up-and-coming Gen Y/millennial leaders have to navigate an additional barrier that can be awkward and uncomfortable. These up-and-comers must earn the respect of the team around them for them to be seen as a true leader. This is a drastic shift in leadership from previous generations where moving into the dealer role was an expectation given tenure and relationships in the dealership.

Contributing to the problem is that the automotive industry has changed so much. No longer is real-life knowledge and experience enough to sustain and lead a dealership into the future. Innovations in technology, a lingering fear of economic uncertainty, ongoing regulatory changes and generational perspectives of “old school” and “new school” way of thinking can build organizational tensions, impacting performance. Put simply, what may have been good enough previously is no longer good enough to lead your organization into the future—instead, formal education, operational training, and a thorough understanding of best practices will be key.

The “old school” versus “new school” issue often causes Gen X and millennial team members to conflict with their baby boomer leaders and employees about fundamental issues impacting the business, such as:

  • What work means. Perspectives of how work fits into our lives—the type of work culture one finds inspiring and the gratification they want from their career—are in constant flux. It’s not uncommon for Gen X and millennial workers to want more time outside the dealership, and older employees/leaders may interpret this as poor work ethic.
  • The nature of leadership. Generational perspectives on who should be considered for leadership may differ. Some feel leadership positions should be earned through tenure, while others think it is earned through performance.
  • How the pecking order works. When performance is rewarded over tenure, older staff may struggle with accepting the authority of younger personnel in more senior positions. (This is especially problematic for employees in family business—heavily scrutinized, your advancement may be viewed as favoritism.) This volatile mix can send an entire dealership into chaos. Loyal employees feel betrayed, and rising stars can find that they lack the buy-in to make changes. After all, the best operations person in the world can’t accomplish a thing without employee support!
  • How to lead effectively. Differences in leadership styles can damage relationships. There are some leaders who feel that motivating others is best done through a directive approach – “Do what I say because I hold the power.” Others appreciate and are driven more by personal influence – “I feel respected for my contributions. I understand the mission; so, I am on board.”

Although they can be subtle, these dynamics impact you and your developing leader’s ability to build respect and trust, as well as motivate and inspire your team to commit to the organizational mission and vision.

Leadership challenges derail performance

If you want to ensure your dealership is driven by strong leadership—today or in the future—knowing how to inspire a variety of people and having the necessary skills to stay operationally cutting-edge are two critical leadership barriers you and any developing leader must overcome.

However, you cannot address these problems simply by working in or “growing up” in the dealership. That’s why The Rawls Group partnered with NCM Associates to create the NCM-Rawls Dealer Executive Program™. The NCM-Rawls Dealer Executive Program™ combines NCM’s operational excellence and Rawls’ deep understanding of how to develop a high-performing dealership culture. Our collaboration allows us to go deeper into leadership development and tackle some of the harder issues and topics that most programs are afraid—or do not have the knowledge and expertise—to offer.

Whether you work with NCM-Rawls or pursue learning on your own, I urge you to think differently about how you want to lead. Choose to invest in yourself, as well as future leaders, to build solid leadership skills based on knowledge and real experience gained working in the dealership. If you do so, I’m confident that you will not only overcome these leadership barriers, you’ll create a thriving dealership for years to come.

Learn more about the NCM-Rawls Dealer Executive Program and how it can prepare you and your successors to lead your dealership into the future.

Permanent link to this article: http://blog.ncm20.com/2017/04/generational-tensions-4-barriers-to-automotive-leadership/

Adam Robinson

Employee Turnover is Killing Your Dealership

AdobeStock_128893720

The auto industry has dealt with a number of changes in recent years, largely in response to new spending habits and expectations of millennials both as consumers and employees. While dealerships have made great strides in connecting with this new generation of consumers, many businesses are still in need of significant improvement to retain their employees. In fact, the employee turnover rate within the industry is currently at an average of 67 percent according to the NADA Dealership Workforce Study, correlating to an industry loss of billions of dollars annually with the average dealership suffering an average of half a million dollars lost each year.

An issue half a decade in the making

This decline in employee retention has been steady since 2011, with the average sales position lasting a little over two years, according to the NADA, compared to nearly four years ago when the study began. Furthermore, data showed that while only 45 percent of dealerships had an average retention rate of three or more years; that number fell to about 33 percent when looking exclusively at those in sales positions. The private sector, by comparison, reported an average of 67 percent retention for the same amount of time.

Not surprisingly, the best-in-class dealerships with the highest revenue and profitability also suffer the lowest turnover rates. What’s more, dealerships across the board seem to be notably lacking at hiring and retaining women, with less than 20 percent of the workforce made up of women in 2015.

Another factor accounting for the loss in dealership employee retention is the changing landscape for consumers. Instead of going into a dealership and meeting with a salesperson when looking for a new car, customers are now spending up to 11 hours researching online and less than four hours inside a dealership speaking with a representative. With significantly fewer trips to a dealership, the salesperson has less of an opportunity to interact with, and push product on, customers. This new lack of negotiation skills, however, provides dealerships with the opportunity to hire a more diverse, and perhaps qualified, pool of candidates.

Retention issues impact sales

The employee retention rates not only cost dealerships a monetary loss in the form of search and training expenses but ultimately result in lost vehicle sales due to inexperienced sales staff and a lack of continuity with customers.

According to AlignMark Corporation, there are four main categories to help employers quantify the expense associated with employee turnover:

  • Separation – unemployment compensation, exit interview costs, etc.
  • Replacement – advertising, pre-employment testing, time, and materials
  • Training – time and effort required to bring new hires up to speed
  • Productivity – lapse in morale and production, as well as low-quality output

How to find the right employees

By 2020, millennials are expected to make up 40 percent of all new-vehicle buyers. Millennials also now form the majority of the workforce and currently account for 60 percent of new dealership hires, making it critical to maintain a focus on retaining this demographic to keep dealership floors stocked with quality salespeople. Millennials, however, dislike the conventional dealership commission-based compensation and instead prefer salaried positions with more steady income and advancement opportunities. This makes it difficult for many dealerships to retain their new hires, requiring those in hiring positions to reevaluate the interview process and hiring strategies altogether.

According to ESI Trends, common mistakes dealerships should avoid during the hiring process include:

  • Hiring quickly out of desperation
  • Hiring someone after just one interview with one person at the dealership
  • Overselling the position’s earning potential
  • Not trying to impress the recruit

Some additional best practices dealerships should consider to boost retention include:

  • Keeping job descriptions updated with the most relevant, accurate information
  • Implementing a business development center to funnel sales leads to salespeople
  • Offering creative compensation in addition to stable base wages
  • Providing a career growth and professional development plan

By switching to more base-waged positions with bonuses, dealerships make room for employees to meet customer needs versus negotiating the best price for the dealership. Dealerships that take things a step further and create a career path for their employees will significantly increase employee retention rates, especially for today’s millennial who places priority on career advancement.

The auto industry has recognized there is a problem in its employee retention and has taken steps to improve retention rates. However, there is still a long way to go in creating the industry culture and offerings to not only attract today’s top talent but to keep them there for the long haul. Until then, employee retention will continue to wage a significant toll on your dealership and the industry as a whole.

Thanks to NCM Associates’ partner, Hireology, for sharing their guidance on attracting and managing millennial employees. Learn more about Hireology and join NCM’s experts for more actionable advice on hiring the best people for your team in our Hiring Top Talent and Success-Driven Pay Plans classes.

Permanent link to this article: http://blog.ncm20.com/2017/04/employee-turnover-is-killing-your-dealership/

Brandiss Drummer

Employee Retention: Why Just Having a Pay Plan Won’t Work

Hispanic businesspeople talking

The automotive industry faces some unique challenges managing people, as evidenced by an average dealership turnover of 40.5%, with some positions, such as sales consultants, reaching up to 67%. Also, over 42% of dealership personnel are classified as millennials, whose turnover rate exceeds the average at 52%. In black and white terms, the average dealership will spend half a million dollars a year in turnover costs.

Retention problems are personal

I’ve heard of many approaches to combat retention issues in automotive. Some dealers recommend defining a career path and creating stability through a pay plan. Others point to providing a work-life balance or empowering people to make their own decisions. While all of these points are valid, I prefer to concentrate on a singular approach: relationship.

There are two reasons why I think all roads lead to relationship building: 1) perks are easy to find, and 2) one-size-fits-all solutions don’t work.

Perks are replaceable

First, let’s look at perks. If we’re honest, even the best benefits package is easily replaced. And there are a lot of businesses out there offering flexible schedules, bonuses, and other benefits. That’s the problem with focusing on material things: Your great employee could jump to the next job as soon as there is a better offer!

Everyone is different

Secondly, focusing on specific items like pay plans or flexible schedules leads to a “one size fits all” solution. But each employee has different ideas of what is important to them. For example, it may be vital to Betty that she works in a job where she gets weekly feedback on her performance. However, for Mark, that may make him feel micro-managed. Mark may prefer to have more autonomy, which makes him feel trusted and important.

Relationship building with each of our employees ensures that we are giving them what they need as individuals. Perks can be replaced, but it’s hard to replace a person you genuinely believe cares about you.

Think about it like a marriage. There is always someone out there who may have just a little bit more in this one area than your spouse, but they can never replace the feeling of someone who knows and loves you, the relationship that you have built with your partner over the years. This is the reason why factors such as “I have a best friend at work” and “my supervisor seems to care about me at work” show up on the Gallup study on positive business outcomes, “First, Break all the Rules.”

Building better relationships

So what can you do today to start building or cementing your relationships with your people?

  1. Recurring, one-on-one meetings. Take this time to get to know your employee. Let them lead the first part of the meeting, and be sure to ask questions about things going on at work, as well as significant events in their personal life. The point is to make them feel comfortable around you so that they will open up and you can get to know them. The key is consistency. Set up recurring meetings in your Outlook calendar and try your best not to cancel or move them. By keeping to the schedule, you will demonstrate their importance to you.
  2. Keep track of personal information for each of your employees. This was a great tip I got from one of my mentors. He kept a memo on his phone of important dates for each employee, such as their birthday, work anniversary, and wedding anniversary. He also stored information he learned in his casual conversations with them, such as favorite food, hobbies, children, interests, etc. This information became very helpful to give personalized gifts, or to help personalize the conversation in their one-on-one meeting.
  3. Be relatable. Relationships are two-sided, and your employees want to know you are human, too. Share things you have going on in your life with your employees, when appropriate. And remember, the old-school way of being the “stoic” manager doesn’t work anymore. It is OK to share concerns or stressors that you have, as long as you do so in a way that still conveys stability and competence.

For the skeptics, I am not entirely idealistic. I know that retention starts with hiring the right person in the first place. I also realize that you can’t win them all and that some factors go beyond a relationship. However, I genuinely believe that when you build a healthy relationship with your employees, the other more tangible factors, such as flexible schedules and professional development, will become more effective. As Simon Sinek says, build a great relationship with your people, and they will believe what you believe. They’ll work for you with their blood, sweat, and tears.

For more information on retention and great leadership, attend our Leadership Program in June.

Permanent link to this article: http://blog.ncm20.com/2017/03/employee-retention-why-just-having-a-pay-plan-wont-work/

Adam Robinson

Should Your Dealership Host a Career Fair?

Networking

Dealerships need bright and eager employees to fill their fixed operations and sales departments. Hosting a career fair at your dealership is a great way to find the right candidates and an opportunity to let them know about the benefits of working for you. While you may think career fairs are an anachronism, these events can deliver fantastic results—for example, AutoNation successfully held over 15 annual job fairs in cities across the country in 2016.

AutoNation was not alone in this endeavor. Hoehn Motors, an Audi dealership in Temecula, Calif., along with Charlie Clark Nissan in El Paso, Texas, conducted career fairs of their own in the last couple months. Each of these dealerships reported results that met or exceeded their expectations.

Dealerships must focus on ways to better attract millennials. The current pool of potential employees is largely made up of this incoming generation, who range in age from 18 to 34 years old. Fewer members of Generation X, who are between the ages of 35 and 54 years old, are seeking jobs at dealerships, and those in the Baby Boomer generation are beginning to retire.

In 2015, the National Association of Colleges and Employers found that employers attended an average of 31 career fairs. The youngest millennials are still currently college students, and they frequently show up to career fairs held at their campuses just to see what options are out there.

A career fair has two benefits: First, it allows your dealership to meet several potential job candidates in a short amount of time. Second, it gives candidates an inside look at how your dealership operates and the overall culture of the workplace. Sales managers, service managers, and other high-ranking employees can speak candidly with attendees about all aspects of their respective jobs, make a lasting impression, and collect resumes. The purpose is to inform job seekers about the careers and the positions available at your dealership and how they can fit into the broader picture.

Career Fairs Still Matter

Job seekers attend career fairs because they’re useful for plotting a career path. It’s possible your fair attendees are just there to find out about dealership culture and if it aligns with their current ideals and lifestyle goals; this is your chance to engage potential candidates and let them know about the day-to-day operations and responsibilities they would have to take on.

Career fairs are also networking magnets. People show up not only to meet with potential employers but also to network with each other. This networking creates a dynamic atmosphere where candidates and employees are mixing and building rapport. Relationships can pay dividends when an applicant is deciding whether or not to apply somewhere.

How to Prepare for Hosting a Career Fair

Much of the advice for job seekers attending career fairs applies to the hosts as well.

  • Be ready to introduce yourself: Have a concise statement ready about your dealership and the opportunities available. It’s likely that the job seeker is looking for work at other companies, including dealerships, so make sure you put your best foot forward.
  • Always maintain your enthusiasm: Make that job seeker feel like you want them there. Be warm, conversational, and engaging so that he or she feels comfortable.
  • Follow-up with the people you meet: After the conversation has ended, jot down a quick note about that person on their resume or business card so that you can recall them from the many faces you met at the career fair. If you’re interested in bringing that person in for an interview, they will feel a personal connection in your follow-up email or phone call.

Plan Your Career Fair

Your career fair will require some planning that will include a budget for venue space, marketing, printed materials, food, and more. You will also need to determine who from the dealership will attend the fair and whether job seeker registration is required.

Should your dealership host a career fair?  Yes—but you need to plan properly if you’re going to achieve success. If you want to try a career fair on for size, attend one at a local college or chamber of commerce where other companies also have booths set up. Study how the process works and see if you are interested in holding one of your own. Once you create an atmosphere for job seekers to come to you, then you can sit back and watch the applicants stack up.

Thanks to NCM Associates’ partner, Hireology, for sharing their guidance on attracting and managing millennial employees. Learn more about Hireology and join NCM’s experts for more actionable advice on hiring the best people for your team in our Hiring Top Talent and Success-Driven Pay Plans classes.

Permanent link to this article: http://blog.ncm20.com/2017/03/should-your-dealership-host-a-career-fair/

NCM Associates

#AskNCM: Are all dealerships losing employees over working hours?

How many hours do your employees work on average? Is it too much? Too little? Are they even working while they’re at work? Expert Robin Cunningham shares his observations about the ways successful dealerships are scheduling their employees.

Have another question for Robin or the other #AskNCM experts? Leave it in a comment below!

Permanent link to this article: http://blog.ncm20.com/2017/03/askncm-are-all-dealerships-losing-employees-over-working-hours/

Emily Johnson

To Fax or Not to Fax?

Fax vs Bike

After four years’ experience as an NCM client services and meeting coordinator, I’ve become a strong advocate of “out with the old, in with the new.” While I don’t consider myself a millennial, I am firmly planted somewhere between the generations currently active in the workforce. This position allows me to appreciate the ways of my predecessors, while also eagerly staying on the lookout for new and exciting improvements to technology, business practices, and social strategies.

It then comes as no surprise that I have some opinions about the fax machine and the role it plays in the modern workplace. And here’s my position: If you haven’t already, now is a good time to begin phasing out your company fax machine.

Lost in translation

Coordinators request specific information from clients for their 20 Group meetings, and that information frequently gets lost in translation when the fax is utilized, simply because of the technology.

The biggest issue is that faxed documents are usually handwritten in some capacity. Once these documents pass through dated machinery, over phone lines, and print out on the other side, they often end up a blurry, illegible mess. As a result, clients spend valuable time corresponding with coordinators to confirm faxed data, something that could have been avoided by using a typed, legible email.

The story of Joe

One coordinator—let’s call her Megan—shared a story with me about a client—we’ll call him Joe—whose meeting was derailed because of the fax machine. (Just to be clear, I’ve changed the names to protect the innocent!)

Joe thought he had faxed his 20 Group meeting registration form to Megan but had instead “faxed” it to Megan’s phone number. Megan hadn’t even included a fax number on the meeting registration form! Joe received a reminder email from Megan and didn’t see his name on the meeting attendance roster. He immediately called Megan and was very upset because he had faxed his forms, but wasn’t on the list. He thought he had done what he needed to do, but Megan had no idea Joe was even planning on attending the meeting.

To make matters worse, Joe had to book a room at a nearby hotel, not the hotel where the meeting was held. By the time Megan realized he needed a room, the hotel was completely sold out, and the group’s block of hotel rooms was full. This cost Joe valuable time and additional money, all because a fax was sent but never received.

Need for speed

NCM gets its faxes on a machine that integrates faxing, printing, and copying. So, how does this affect our ability to get your faxes? When you send a fax, it gets mixed in with all the other materials in this machine’s output tray. It’s not unusual for faxes to be temporarily misplaced, and it’s common that a fax never reaches the coordinator.

If a coordinator knows about a fax, she can go searching for it, but if she doesn’t, it could be a while before she receives the fax in hand (or never receives it, like Megan). In comparison, an email arrives in the coordinator’s inbox in an instant, and she can respond immediately. The speed of delivery is increased dramatically. Even if you choose not to switch to a scanned document or PDF file, I highly recommend that you at least email your coordinator every time you send a fax so she can watch for it.

Be sure to look for emailed reservation forms and other documents from your coordinator. Scan and email those forms back to NCM, or fax them (to a verified fax number–don’t be like Joe) and immediately call your coordinator to let her know to watch for it. If your document includes sensitive information, like a credit card number, go ahead and call NCM to give it to us over the phone. Or, for a safer email option, check out this free system for sending secure emails that’s been hailed in Forbes as the most difficult to “hack.”

Overall, when you switch to email, your NCM coordinator will be able to help you faster, enter your data more accurately, and provide a better customer experience. And you won’t end up at La Quinta instead of the Four Seasons, taking an Uber to your meeting like Joe.

Permanent link to this article: http://blog.ncm20.com/2017/03/to-fax-or-not-to-fax/

Brent Carmichael

BHPH Basics: Inventory Acquisition

Vehicles in Lot

One of the hottest topics in the Buy Here Pay Here (BHPH) world is—and has always been—inventory. Not only where to buy vehicles, but also what stock to select and where to find it. Like most other areas of the BHPH business, the most successful dealers are those who focus on the basics. I’m also a firm believer in the K.I.S.S. philosophy: Keep It Simple, Stupid. No need to over think, and thus, over complicate things.

Repeat customers

The first fundamental that successful dealers focus on is repeat business, aiming for 30 to 40 percent of their monthly sales from repeat customers. These people will be either low-balance customers who traded into a new vehicle or previously paid-out customers who have returned to purchase again. With this approach, a sizeable portion of the dealership’s monthly inventory needs could be satisfied with vehicles with known histories. Pretty valuable information to have!

Repossessions

Recycling of repossessions is the next basic. With repossessions, you have the ability and time to check out the vehicle completely to determine its reconditioning need. You also have some historical information for it. Some of my dealer clients are recycling 60 percent of their repossessions each month, on average, to put back out on the lot for sale. The only negative seems to be that the recycled vehicles tend to have a higher reconditioning cost. They may need a little more love to get lot-ready but, overall, this tactic is more cost effective than purchasing at auction.

Auctions

Speaking of auctions, they are an essential you should not overlook. It is true that there are not as many vehicles going across the block these days, but it is still an effective source. One positive to the downturn in vehicle volumes at auction is that auctions must compete for dealer business. Some sales even waive buy or post-sale inspection fees! There is no better time to expand your horizons, so check out as many auctions as travel and expense will allow.

When shopping for new or additional auction sources, don’t limit your choice to just the large national sales. Independent auctions are becoming very aggressive, going after dealer business as well. I may be a little old-fashioned, but I’ve always preferred the independent auction because they seem to provide better service and a better overall buying and selling experience.

Digital options

I also recommend utilizing the internet in your search for an auction pot o’ gold. Most auctions, national and independent, post most—if not all—of their upcoming sale vehicles online with such tools as Smart Auction, Open Lane/Adesa, or OVE. Not only can you use these systems to purchase vehicles, but dealers can also use these resources to research upcoming sales and plan their next visits. You might just stumble on an auction you weren’t even aware existed.

Dealer trades

A final basic in the K.I.S.S. approach to inventory acquisition is dealer trades. New car sales are at an all-time high, so dealers should have a few trades lying around. No, it won’t fill your overall need due to those who are holding on to their trades waiting for the super aggressive subprime market; but, you can still fill a partial need with this buying tactic.

I think the key here is personal contact with the dealer. You aren’t going to get anywhere by just calling the dealer asking what they have! Instead, take the time to visit the dealers … and develop a mutually beneficial relationship for the long run.

Not so basic: private sellers

Not necessarily a basic, but a stone that should not go unturned, would be the private seller. Craigslist, eBay, newspapers, and auto magazines are all sources to find vehicles. I’m not going to lie: I used to turn my nose up at this tactic, feeling it wasn’t worth my time or effort. But with today’s economic challenges, there are sellers out there who need the money to get by and are far more reasonable in their expectations. Will it fill the lot? No, but it could fill part of it, and that is what counts.

When it comes to BHPH inventory acquisition, I think it comes down to two very simple questions: How much do you have in the bank account? And how much of that are you willing to spend? Finding the right inventory for the right price is still possible. Just focus on the basics, and soon you’ll be working smarter, not harder, to fill your lot.

Learn about NCM’s 20 Group and consulting options for your BHPH dealership. And don’t forget to check out our BHPH training options.

Permanent link to this article: http://blog.ncm20.com/2017/03/bhph-basics-inventory-acquisition/

NCM Associates

#AskNCM: How often are NCM KPIs updated?

Ever wonder what goes into the critical NCM® metrics you use in your dealership? Expert Rick Wegley explains the differences between NCM Benchmark® data and best practice guides and tells you how we create them.

Learn how to leverage your NCM numbers.

Have another question for Rick or the other #AskNCM experts? Leave a comment below!

Permanent link to this article: http://blog.ncm20.com/2017/03/askncm-how-often-are-ncm-kpis-updated/

Chip Maher

Has Your Customer-Pay Service Business Grown? It Should Have!

Service with Customer

The U.S. automotive industry has grown substantially since the beginning of 2010 when the annualized sales rate bottomed out at a low of 10.5 million units from the previous high of 17.3 in 2000. Since then, it has steadily grown to almost 18 million units.

This increase in units in operation (UIO) begs the question: Has your dealership’s service department—specifically the customer-pay labor category—grown in proportion to the opportunities that are now available in the market? Although most dealerships have realized growth in the service department, as we drill down, it becomes apparent that some of that growth has come at the expense of the customer-pay labor category.

Evaluate service performance by category

The first thing to look at is your entire service department performance. Your next step is to look at the different labor categories that make up the total service department: customer-pay, warranty, internal, and express. Although many dealers have shown slow and steady growth in total labor sales, we are finding that most of this increase has been driven by the internal, warranty, and express categories. Many times, it has been at the expense—and to the detriment—of the customer-pay category.

What has prevented dealerships from growing their customer-pay business and why is this category necessary? Two things may be contributing to this: the first is the growth of the other labor types mentioned, and the second is limited shop capacity.

Understand the relationships between labor types

The increase in warranty, internal, and express business has taken a larger percentage of the total available hours, and therefore, reduced the number of hours typically available to book for customer-pay business. While some dealers have been effective at identifying this pattern and have added capacity to accommodate this need, many dealers haven’t realized the impact growth in these labor categories have had on their customer-pay sales and growth opportunities.

Once you understand the relationship between the types of labor rates, you can then maintain sufficient shop hours and capacity to handle the customer-pay business growth.

Warranty labor

Let’s consider a warranty repair for a high-line franchise. The repair takes 12 hours; if the average customer-pay repair order is 2.5 labor hours, this warranty repair uses the normally available shop time for 4.8 customers. The result is less available time to schedule the all-important, profitable customer-pay category that is essential to the long-term health and profitability of your dealership. Warranty labor also impacts your customer retention performance (which most OEMs use to determine incentives), as these clients will find other shops to handle the repairs rather than wait.

Let’s go a step further and say that you schedule 10 of these repairs in a month. That’s a total of 120 hours of additional warranty work. At 2.5 hours per customer-pay repair order, that eliminates your ability to schedule and service 48 customers.

Internal labor

As dealers are pushing to grow the used-to-new ratio and keep more trade-ins to retail on their lot, their internal labor business has grown. But again, unless these shops add capacity, they are just shifting hours that were available for customer-pay to internal.

The emphasis on express business has also negatively impacted customer-pay growth. Some shops have committed as much as 30 percent of their capacity to accommodate express service. This is an incremental business that will increase retention and customer satisfaction index (CSI) in the long run. This approach is okay for a large shop with plenty of excess capacity. However, too often, we see a shop at full capacity, and they just shift stalls to express at the expense of the other labor categories, including customer-pay. In this instance, a customer can come in at any time and get a competitive oil change in 45 minutes, but if they call for a check engine light or brakes service, they may be scheduled for two or three days out. Ultimately, this shop runs the risk of losing this customer to another shop.

Best Practices to Protect Customer-Pay Profits

  • Consider offsite reconditioning centers. Not only are these very effective, but they also free up shop capacity by moving the work that does not necessarily need to be done on site to a separate facility. Used car reconditioning, new car pre-delivery inspection (PDI), and some warranty repairs can all be performed at these places. The benefits are substantial, as they can reduce pre-owned turnaround time and reconditioning costs, and increase the primary shop capacity that will be available for customer-pay business.
  • Include customer-pay hours and growth in pay plans. Remember that the warranty and internal business are a given, but it is the customer-pay business that is at risk. Customer-pay growth is a must to maintain retention and CSI; its inclusion in pay plans will incentivize your team to focus on customer-pay business.
  • Regularly monitor and manage your available shop hours by labor category. Ensure that the internal, warranty, and express hours have not blocked out substantial hours for customer-pay business. If they have, you need to extend your hours of operation or expand your capacity. Regardless of the shop scheduling tool your store uses, you must review the available hours by each labor category on a regular basis.

Take the time to evaluate your service labor type mix and see how it is impacting your customer-pay growth and profitability. If there’s an issue, try my suggestions above, discuss the problem at your next NCM 20 Group meeting, or have one of our consultants draft an improvement plan for you.

Learn more about Chip Maher and how he and his NCM colleagues can help your dealership through 20 Groups and in-dealership consulting.

Permanent link to this article: http://blog.ncm20.com/2017/03/has-your-customer-pay-service-business-grown-it-should-have/

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