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Aiming for more profitable dealers

December 1, 2008
Filed under Uncategorized

By Neil Pascale
Editor
KTM North America is taking a practice that started more than a year ago with its dealer advisory board to a national level in the new year.
The effort is aimed at improving dealer profitability in all profit centers, including those that the Austrian manufacturer hasn’t necessarily been intricately involved with. To do that, KTM North America is putting together an incentive program for dealers to become part of a 20 group, a collection of noncompeting dealers that share their financial numbers and their business practices in order to improve store profitability.
“There’s never a better time than now,” Jon-Erik Burleson, KTM North America’s CEO, said of dealers joining such business groups. “The amount of dealer financial trouble we’re hearing about further burns the fire to keep this thing up and moving.”
Just what type of incentive KTM dealers will receive to be part of a 20 group wasn’t finalized in mid-November but Burleson expects the program to cover some of the dealer costs to participate. KTM North America is working with industry consultant Gart Sutton to set up the dealer 20 groups. “But we also would be happy if they (dealers) joined any 20 group because that gets them in the mind frame of benchmarking and looking at their full profit center capability,” Burleson said.
Benchmarking different dealership profit centers is something KTM North America started doing with its dealer advisory council — nine dealers from Canada and the United States — more than a year ago. The results, which did not happen overnight due to accounting issues that had to be sorted out, provided some surprises. One of those was the lack of profitability seen in service departments.
“We’ve seen it in a couple of good dealers,” Burleson said of profitability in the service department, “but as we benchmarked a select group of dealerships, we found that KTM dealers as a whole are not really taking advantage of that.
“They’re doing what they think is best for the brand, but they are not really taking advantage of the profit center possibilities behind the service department. So we’re going to work on some programs to support that, from menus to packages to better opportunities for them to get online training.”
The lack of service department profitability was not the lone surprise that came from the benchmarking activity. “Everybody that came out of that said, ‘Wow, there’s a lot here I can probably benefit from by taking it to the next step and actually trying to improve each of these metrics I’ve now reported,’” Burleson said.
KTM North America will not be taking an active role in determining what those metrics should be, however. “We didn’t want it to be us setting the standards or defining the rules or defining the practices,” he said.
KTM will encourage dealers to submit their monthly benchmark analysis to the manufacturer. “Then we could have a good feel on our dealer network, where they’re struggling, where they’re doing well,” Burleson said, noting KTM will use that input with its dealer advisory council “to develop projects on a long-term basis that would help improve the potential profit centers that are not doing so well.”
KTM will set some standards for dealers to meet before they can participate in the program. Those standards could include hitting a certain market share in their territory and having the appropriate brand representation in the dealership, Burleson says.
Along with the incentive to participate in dealer 20 groups, KTM North America is looking at developing regional nontechnical training that could improve profitability in key areas. KTM also is looking at whether to provide its demo program, the Ride Orange program, free to dealers who participate in the new program.
“The market is going to come back,” Burleson said. “It’s a question of when and how much. But when it does, those brands and those dealerships and dealer networks that are really able to come out of it still with their heads above water, even if it’s a little bit, I think really are in a good position to be very strong when the recovery does come.”

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