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July 24, 2006: Identifying the culprits behind lagging profits

July 24, 2006
Filed under Archives

This series of articles recaps a portion of the opportunities that were uncovered by GSA powersports specialists during consulting visits. These opportunities are followed by recommended actions that address the issues.
The goal of this series is to provide you with ideas to help you improve your dealership.
Last issue, we examined the dealership from the customer’s viewpoint. This issue, we look at the dealership’s sale processes.
Dealership Details
The subject dealership is located in an affluent suburb. They have recently moved into a well-designed, new facility. They are selling 1,100 units per year, but their overhead is high and profits are minimal. Their F&I department has low penetration rates on the few products they sell. The focus of our visit was to provide the dealer with a needs assessment of the facility and the sales and F&I departments. The goal for the recommended actions was to (a) increase their unit sales, (b) create an effective F&I department and (c) increase overall profitability per vehicle sold (PVS).
The sales process
There is a written 12-step sales process for the sales department, but there is no written prospecting process. There is no written procedure for the operation of the F&I department.
While the sales team has received training on the 12-step sales process, they are not following it consistently. Interviews revealed that the sales staff feels the 12-step process is hard to follow. Observation revealed that the sales staff generally spends little time understanding their customer’s needs and wants. Because of this, they often present the wrong product. This results in lost sales and poor customer satisfaction.
The sales manager is allowing the salesperson to dictate the deals. Consequently, the salespeople rarely work each deal for maximum profit. They simply drop to the lowest possible price instead of building value to overcome price objections. The salespeople are paid a high base salary with a fixed bonus for every unit they sell.
Each salesperson is supposed to capture contact information on their personal customer logs. This information is to be used for prospect follow-up. Inspection of their logs revealed that very few contacts are being recorded and minimal information is captured. There are no goals or incentives provided for prospecting.
The two F&I people have had no formal training. They are paid a straight salary with no commissions for F&I products sold. Although all unit purchasers are seen by one of the F&I staff, they are not always offered the F&I products. On busy days, the F&I staff may have the customer sign the final paperwork without presenting the F&I offerings. When they do offer F&I products, they consist of manufacturer or local bank financing, or manufacturer extended service contracts (when available). They do not offer GAP, pre-paid maintenance, ESCs for pre-owned units or any insurance programs. F&I products are not being presented by a menu-driven system.
The service department delivers the unit to the customer. After the delivery, there is no personalized follow-up contact. The dealership utilizes a commercial service for follow-up mailings at 30 and 90 days, six months and one year following the purchase.
Recommended Actions:

  • Replace the 12-step sales process with a simpler system. Provide training for the sales staff. Require the process be followed with every customer. This will increase closing ratios and customer satisfaction.
  • Revise the sales department compensation plan. Consider paying the manager and staff a smaller base salary and a commission based on gross profit. This will encourage them to work each deal for the most profit.
  • Revise the compensation plan for the F&I staff. Provide a base salary with a commission on F&I products sold.
  • Provide individualized, written, monthly goals for unit sales, F&I product sales and prospect calls and appointments. Provide bonus incentives for achieving these goals. This will increase productivity and accountability.
  • The sales manager must approve all unit deals and be held accountable for the profitability of the department.
  • Implement a showroom log in the sales manager’s office. It should be reviewed daily. The salespeople transfer customer information from their logs to the showroom log. Require that all contacts are recorded, including walk-ins, phone-ins, e-mail contacts and Internet leads.
  • Provide training for the F&I staff. Expand F&I product offerings to include after-market ESCs for pre-owned units, GAP and insurance products. Consider developing a pre-paid maintenance program.
  • Develop a written procedure for the operation of the F&I department, including the requirement that each customer be notified of F&I products. While appointment scheduling will help on busy days, you must also have adequate staff.
  • An F&I menu system must be implemented to present the F&I products.
  • Establish relationships with as many lenders as possible. The goal is to be able to finance any customer.
  • Implement a personalized post-sale follow-up system. At a minimum, require phone follow-up within 48 hours and mail follow-up within seven days. Continue to utilize the commercial follow-up as well. psb
    Author, speaker and educator, Gart Sutton has been retained by every major powersport manufacturer/distributor. He is a frequent keynote speaker for national motorcycle conventions and state motorcycle dealer association events. Visit www.gartsutton.com.

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