Robpurfield.com “29 Common Mistakes Motor Dealers Make –...

www.Robpurfield.com “29 Common Mistakes Motor Dealers

Make – Costing Them Money Every Single Day”

www.robpurfield.com

Prepared by | Rob Purfield the Uk’s No1 Profit Consultant for the Motor Industry and author of “The Ultimate Knockout Closing System” ©copyright Rob Purfield

31 OCTOBER

2011

“29 COMMON MISTAKES MOTOR DEALERS

MAKE – COSTING THEM MONEY EVERY SINGLE

DAY”

www.robpurfield.com for your free copy of the “Ultimate Knockout Closing System”

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Contents

Introduction page 4

SALES DEPARTMENT

1. Referrals page 5

2. Retention page 6

3. First kill page 6

4. The Part Exchange Appraisal page 7

5. Valuing the Part Exchange page 7

6. Negotiation – General page 8

7. Negotiation -New Car Price page 9

8. Negotiation -Presenting the P/X price page 9

9. Negotiation -Cost to change page 9

10. Negotiation -Monthly Payments page 10

11. Negotiation -High Pencing page 10

12. Negotiation -High pounding page 10

13. Negotiation -VAT Roll page 11

14. Negotiation -CAP ‘Average’ page 11

15. Negotiation – Always ‘Under Allow’ page 11

16. Negotiation -No Round amounts on Valuation page 11

17. Negotiation -The Low Balloon page 12

18. Negotiation -Paint protection, GAP insurance etc. page 12

19. Follow-up Strategy page 12

20. Call back strategy page 13

21. Win back strategy page 13

22. B2B Sales Strategy page 13


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Contents (cont...)

23. Advertising Vouchers page 14

24. Telephone answering strategy page 14

AFTERSALES

25. Aftersales Incentives page 14

26. VHC page 15

27. Amber Work page 15

28. Service plans page 15

GENERAL

29. Focus page 16

Assessment Chart page 17

About the Author page 18


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Introduction

The following report is the result of 20 years research and study of some of the biggest and most

successful names in the Motor Industry.

I have been fortunate enough to work with, research and study Groups such as Inchcape Retail,

Jardine Motor Group, Pendragon, Hartwell, Marshall Motor Group, and manufacturers such as

Volkswagen, Hyundai, Vauxhall, Honda, Fiat, Toyota, Volvo to name a few...

I have spent many hours and days working inside Dealerships and discussing strategies and tactics

for maximising profits with many talented Sales and Aftersales Managers as well as Dealer Principals.

The results I share with you here are not intended to represent an exhaustive list and it is, by no

means, meant to say that all Dealers make all these mistakes all the time.

The report is meant as a compendium of ideas to stimulate conversation and debate within your

Dealership, not as an A to Z guide which needs implementing in chronological order. Experience tells

me that when you start interrogating your business and your managers you may meet some

defensive resistance. This is only to be expected, as I believe everyone does the best job they can,

with the resources they are given within the constraints of their own experience and knowledge.

With this in mind, if no-one has ever discussed the ideas in this report with your management team

it would be unreasonable to expect them to be being used. Indeed it’s really difficult to ask the

questions you should, when you can’t know what you don’t know.

Please do not dismiss any of these ideas as too simple or too easy or even too difficult to implement,

take the opportunity to investigate thoroughly how well you implement those that you think you are

doing, and ensure that your control processes are robust and evidence is available of

implementation.

Plus, sit with your management team and discuss each one of these profit making tips and ideas to

make more profit in more areas of the business.

Many you may already know, but may not be doing, or maybe you have have forgotten about. Very

often, people say to me “oh yes, we used to do that, but..” and when they revisit the techniques and

strategies it is a simple thing to re-introduce them.

One final word of warning, don’t try and implement them all at once. Pick the most appropriate and

integrate them into you current business and sales process until everyone has got to grips with how

they work, and you can successfully measure the financial benefit.

Good luck and good selling - don’t wait, choose an idea and get it working to start making more

profit immediately!


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THE SALES DEPARTMENT

1. Referrals (VALUE – Min 30% improvement on sales volume and profit)

Firstly lets deal with the myth “we’ve already got a referral system!” by asking you to answer

these questions honestly..

a. Do you know, specifically, how many referral sales you have closed in the last twelve

months? (2yrs/3yrs)

b. How many referral leads do you get in a year? (how many have you had in the last

month? 12months?)

c. What is your conversion rate on referrals leads? (measured)

d. What is your average GPU on referrals? (measured)

In my experience the answer to these questions is normally a question of guesswork, or more

often blank looks.

Don’t guess, find the answers, and begin to log your referral leads and your success rate at

gaining and converting referrals sales.

It may be useful to remember the equation;

2 Referrals from every customer @ 50% conversion rate equals – Double your Sales

Common mistakes that prevent successful referral marketing are;

There is no distinct and separate Referrals presentation as part of the sales process

Salespeople DO NOT Repeat the referrals presentation on Handover

Not everyone is given a bouquet of flowers on handover

Salespeople do not give customers 6 business cards with their name written on the back

to send in with their referral lead

Salespeople do not ask for referrals every time you speak to the customer

Salespeople do not send handwritten thank you notes to every customer after seven

days of ownership (with another 6 business cards enclosed)

Salespeople do not send birthday cards to every car they sell (with another 6 business

cards enclosed)

The secret to successful referral marketing is to be serious and consistent as well as persistent.


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2. Customer Retention (VALUE – Min 30% improvement on sales volume and 50% profit improvement)

Customer retention is similar to Referrals in the way people approach the marketing aspect

of gaining repeat business.

Try the following questions

How many repeat sales did we make in the last twelve months?

How many repeat sales opportunities have we had in the last twelve months?

What is our conversion rate on repeat sales leads?

What is our average GRP on repeat sales

Common mistakes people make in marketing for repeat sales

They do not stay in (social) touch with the customer

They leave the decision to chance (not asking the customer)

They leave it too late and become ‘obvious’ in their interest

They do not use their marketing intelligence to re-pitch the customer

3. First Kill (VALUE – improve conversion rate of EXISTING prospects by 30%)

This one is a really interesting measure. Most people think that selling to the customer at

the first point of contact is really important, and in some respects the more you can the

more you should.

But, let us be realistic here and face the brutal truth – the average ‘genuine’ conversion rate

of ALL showroom enquiries is 15%

This means that 85% of your enquiries walk away to think about it!

The common mistake Dealers make is in not measuring the point of customer contact at

which the sale was made.

As a general rule of thumb, if more than 50% of your sales are made at the first point of

contact then you are losing business in direct proportion to that amount

In simple terms, a ‘First Kill Rate’ of more than 50% means you are not selling enough on

follow-ups.

If you get an accurate measure of your point of contact at the ‘Sell’ you will probably find

only about 30% of your sales are genuinely made at the ‘First Point of Contact’ with another

20% happening between two and three points of contact.


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The immediate benefit of this measure is improving your follow-up skills to start selling

beyond the third point of contact.

4. The Part Exchange Appraisal (VALUE - £100 on every Part Exchange)

The most common mistake Dealers make on the Part Exchange Appraisal is not getting the

customer involved in the process; secondly the process seems to be something that

salespeople want to rush.

Apart from the Part Exchange Appraisal providing a brilliant opportunity for detailed

‘qualification’ of customer needs with the rich amount of information available from the

customer’s existing car, this is the BEGINNING of the serious part of negotiating the DEAL.

Common mistakes Dealers make are;

Not taking the customer out to ‘assist the appraisal process’

Not touching dents and scratches whilst making a ‘silent’ note on the Appraisal Form

Not using a TYRE GAUGE when appraising condition of tyres

Not driving the Part Exchange with the customer

Not reviewing the Appraisal Form with the customer and asking “anything else?”

Not getting the customer to sign for the appraisal and committing to the need for

work before re-sale

5. Valuing the Part Exchange (VALUE - improve conversion rate 10% and add £100 to deal profit)

A crucial part of customer decision making is customer confidence in the Sales Process and

the valuation of the Part Exchange.

It is vital that salespeople let the customer know that we employ a ‘Used Car Specialist’ to

get THEM the best possible price for their car (usually the Sales Manager or Used Car Sales

Manager)

This provides two opportunities;

a. The valuation we provide is not ours but the best one we can extract from the

market

b. To move the decision making over valuation to a third party (see below)


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Common mistakes people make are not using the following phrases;

After the P/X appraisal

“Our used car specialist will now phone around and make sure we get the best possible price

for your car..”

On presenting the P/X price

“He / She still has a couple of calls to make, but the best price he/she has got so far is...”

After the customer response

“How much more than do you NEED, to go ahead today?”

Before presenting the second offer

“He / She has just a couple of calls left to make, but he/she has managed to get you an

extra £..”

It is really important that all movement in valuation on the part exchange is justified, and this can

only be achieved if the customer has the perception that we are getting our prices from a third party

either; within the group or outside traders/Dealers.

And remember the philosophy – “the harder they work for the less they get the better they feel”

6. Negotiation (VALUE – 10% extra on every deal)

Notwithstanding the following mistakes within the negotiation phase, (below mistakes 7-20) one of

the most common mistakes Dealers make when negotiating the ‘deal’ is not taking it seriously

enough.

Many do not engage a professional negotiation strategy and allow salespeople to treat it as a game

or competition with the customer as an adversary, instead of recognising it as the most delicate part

of the sales process, which if managed correctly will give the customer the confidence to buy, and to

buy at an attractive price to both parties.

Remember a Win-Win solution is a matter of perception not a tangible outcome. You are trying to

make sure customers feel happy with their part of the deal whilst you negotiate a fair and

commercially acceptable deal on behalf of the Dealership.

All successful and professional negotiation should be conducted on a third party basis (even

Government negotiations are conducted on this basis – you would never see the Prime Minister or

the US President sitting at the negotiation table) – it may be an affront to your senior salespeople,

but if they are clever, they will realise the importance of never being the decision maker in a

negotiation.


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Using a third party approach give salespeople the opportunity to metaphorically move around the

table onto the customer’s side and negotiate on their behalf.

7. Negotiation - The New Car Price (VALUE – getting FULL Retail Price for the New Car)

Often make when negotiating salespeople mix all the elements of the negotiation together.

However, separating the individual elements makes it easy for the customer to understand what is

happening, and therefore easy to make a decision on each part of the deal.

An elementary mistake people make is in not using a proper ‘write up’ to re-confirm what the

customer wants in the new car and agreeing the value.

A common response to a request for the ‘Full Retail’ price on a well presented ‘Write up’ is

“It depends on what you offer me for my car..” which allows the salesperson to close on

“So we agree this is the price of the car you want to own, and subject only to agreeing the price of

your old car we can go ahead, can’t we?”

8. Negotiation – Presenting the Part Exchange (Value - £150 on the P/X Value)

Mistake number 8 centres on the failure of salespeople to re-visit the Used Car Appraisal BEFORE

presenting the initial offer.

Also, salespeople need to get comfortable with the fact that their first offer should almost NEVER be

accepted; indeed it would be a good idea to measure how many times the customer rejects your

offer before buying to understand how hard you are working to get the best possible price.

A common mistake at this point is a lack of confidence in presenting the first offer to the customer,

and Sales managers NOT explaining to salespeople the fact that the first offer is SUPPOSED to be

rejected – another reason for using Third Party negotiation

9. Negotiation – Cost to Change (VALUE - £50 per deal)

I am sure you are well aware this is really the crucial figure in just about every deal – but it is not

always the customer focus.

The mistake salespeople make is they do not qualify their customers properly and miss the

opportunity to focus on the easiest negotiation technique to deal with as price movements on this

element of the deal are smaller increments and easier to justify.


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Because customers are not always focussed on the ‘cost to change’ there is a danger that they get

confused with all the other elements of the negotiation and the deal construction becomes

complicated.

Cost to change and Monthly repayments are the simplest way to negotiate.

10. Negotiation – Monthly Repayments (VALUE - £75 per deal)

Very similar to the above, the mistake here is often in the qualification and not taking the

opportunity to focus finance customers in on the monthly repayment.

Once you start negotiating on monthly repayments there is a big opportunity to manipulate the

profitability in a number of ways.

Finance profit can be enhanced through deposit payments, balloon allowances etc. Also, there is a

great opportunity through high pencing and high pounding.

11. Negotiation – High Pencing (VALUE – up to 99p per month per finance deal)

It never ceases to amaze me how many people make this mistake – they don’t high pence every

finance deal! – There are many people who high pence ‘tight’ deals, but don’t think to do it on every

deal.

Nothing much to say on this except, if the customer will pay £327 then they will pay £327.99 and

over a 60 month agreement that amounts to an extra £59.40 (and if not then negotiate 37p or 52p

or whatever you can get away with)

12. Negotiation – High Pounding (VALUE – up to £9 per month per finance deal)

Surprisingly, even though there are some people who may high pence regularly they don’t often

think of ‘high pounding’

But, the psychology is exactly the same, if the customer has a figure of; £320 per month in their

mind, then try them with £329 (and negotiate down if you are unsuccessful to £323 0R £327 ETC.)


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13. Negotiation - VAT Roll (VALUE - 20% of the over allowance)

Just about every Dealer claims to VAT Roll every deal where possible. However, recent audits have

led me to the conclusion that in most Dealers there are approximately 3 deals per week that should

be VAT rolled and aren’t, and that is 150 deals at a conservative average of £44 Vat benefit is equal

to £6600 in lost profit.

Check your process, and make sure every deal that should benefit from the Vat Roll process actually

contributes to your bottom line profit.

14. Negotiation - CAP Average (VALUE – circa £250 per part exchange)

The standard way of valuing a part exchange is to use CAP clean as a way of showing the customer

the trade value but having the comfort that CAP clean will be less than Glasses Guide.

However, if prior to showing the customer any information, you review the Appraisal Form and

agree that the car is in ‘Average’ condition (quite easy with most customers) and then use CAP

Average as your benchmark for valuation.

15. Negotiation – Always Under Allow (VALUE – 10% profit from Used Car Value)

Once again the common mistake is standard practice. Most people start their negotiation with S.I.V.

valuation or an Over Allowance, usually based on an assumption of what the customer wants for

his/her car. Perhaps the assumption is based on information provided by the customer from

valuations provided on visits to other Dealers.

Whatever the source of your assumption, remember this is a negotiation and as such the first price

on the table is the start point, and to achieve a Win-Win position the price will only be able to go

one way.

Of course, to be able to do this effectively the negotiation needs to be positioned as ‘Third Party’

and the presentation of the first offer must be credible.

16. Negotiation – No Round Amounts on Valuation (VALUE – circa £50 profit from

Used Car Values)

This is really the reverse of High Pencing and High Pounding, when delivering the Part Exchange offer

do not feel compelled to offer round amounts. (which is the norm)

For example, £2750 could be £2725 or better still £2723.75

Two benefits here;


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a. There is an extra £26.25 in the deal

b. The very specific amount give the valuation more credibility

17. Negotiation – Low Balloon (VALUE – 10-15% of the Balloon Allowance)

Once again the mistake here is that we assume we must present the customer with the norm. Ie; the

GFV provided by the manufacturer or the finance company on a PCP

It may be better to make the first offer say 85% of the GFV. Obviously this makes the payments

higher, but as we negotiate, we can begin to move the GFV so avoiding having to discount the car,

but still achieving that elusive Win – Win situation (and even retaining some extra profit too!)

18. Negotiation – Paint Protection/ Gap and Accessories (VALUE – circa £125 per Deal)

One of the biggest weaknesses of just about every business I work with is their success at selling

Paint protection, Gap Insurance and Accessories.

In every negotiation the first offer should include a quote for Paint Protection, Gap Insurance and

any other accessories the customer has shown an interest in during qualification and the sales

process.

These can always form part of the negotiation and can be removed if necessary.

19. Follow-up Strategy (VALUE 30% increase in Sales)

Whilst modern Dealers understand the importance of, and the need for regular prospect follow-up,

the mistake they make is not having a strategy for each call/contact. Therefore salespeople get very

little guidance on what to say on each follow-up or how to move the customer forward who is stuck.

For example

Calls 1 -3 may be courtesy calls to give the customer space to think about things

Call 4 may be a switch sell on a new stock offer or manufacturer offer or order cancellation from

another customer

Call five may be a switch sell or a new target bonus


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20. Call Back Strategy (VALUE – circa 50 units per annum)

The mistake here is in writing off customers too soon.

This one is slightly different from the Follow-up strategy. A call back strategy is a quarterly sweep up

of all outstanding prospects inviting them to a special event at the Dealership designed to close the

deal with an aggressive financial package.

Research shows that 42% of prospects who have visited a Dealership in a six month period and who

have not bought a car will still be in the market to buy, and 50% of those will be stiil willing to

purchase from the Dealership they visited.

21. Win Back Strategy (VALUE – 30 units per annum)

A basic marketing mistake of retail Car Dealers is assuming that once they have lost a customer there

is no point ever contacting them again.

However, against a background of poor customer retention strategies from competitors, a good win

back strategy will pay dividends over the long term.

Will you get every customer back? Will you get some customers Back?

22. B2B Sales Strategy (VALUE - 100 units per annum)

Small Business Owners are amongst the most profitable customers if they receive the right

treatment.

Unfortunately most Dealers make the mistake of treating them like ordinary Retail Customers and

expecting them to make time to visit the showroom.

Small business owners also shop around less than ordinary retail customers preferring instead to buy

from the Franchise and Dealership that make it easy to buy

Many manufacturers include B2B initiatives in their ‘Fleet Programmes’ but this is almost counter

intuitive to the sales executive tasked with selling to true fleet (25+ non-leasing company)


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23. Advertising Vouchers (VALUE - 30 units per annum)

A common mistake when placing advertisements is not to have a voucher and call to action included

in the ad.

The voucher could be for a discount or a minimum amount for their part exchange, something as an

incentive to take action and contact the Dealership.

24. Telephone Answering Strategy (Value - 85% conversion telephone enquiry to showroom visit)

A typical mistake in Motor Dealerships is allowing incoming telephone enquiries to be treated as an

interruption to a busy day, instead of as a hot opportunity to do business.

Customers do waste their time and money telephoning Dealerships to enquire about buying a car

without being in the market.

Plus, customers do not typically start the sales process with a telephone enquiry. However, they

normally telephone looking for a deal as they near the point of decision.

And remember “ a price shopper is a potential customer looking for a salesperson”

With the right strategy it is possible to achieve as much as an 85% conversion of telephone enquiries

into showroom visitors

AFTERSALES

25. Aftersales Incentives (VALUE – minimum £10 on every Aftersales invoice)

It is a major mistake not to incentivise Frontline Aftersales personnel. Service Advisors are pivotal in

the delivery of profit for the modern Dealership.

Many Dealer Principals and Service Managers, in my experience, are too short sighted in their

approach to the question of incentivising Service Advisors.

It is basic human psychology that if you incentivise someone to do something, they are more likely to

focus on it and more importantly, do it.

The quickest and easiest way to improve your Aftersales performance is to ensure you have a

desirable upsell incentive for your frontline people.


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26. Vehicle Health Checks (VALUE – up to £30 and much, much more on Service invoices)

The biggest mistake Dealers make with regard to Vehicle Health Checks is not using them

consistently. Many Dealers resent the 0.3hrs time allowance and have concerns with regard to

efficiencies and productivity of technicians spending time on a non-productive, un-invoicable

activity.

However, every VHC should be seen as an investment both; from the fact that it satisfies a duty of

care and is good customer service, but more importantly sets in place two upsell opportunities. They

can be seen as an immediate opportunity for anything that shows up as Red plus, a future

opportunity for items showing as Amber.

However, during my research many Dealers waste profit by not thinking about the words they use

and almost leading customers into saying No!

It is important for Dealers to optimise the opportunity by having a well defined 3 part process for the

presentation (on booking-in), sales (mid repair call) and follow-up (afterwards) of the VHC message.

27. Amber Work (VALUE - £30+ on all Amber Work)

The re-booking of Amber work is amongst the biggest mistakes Dealers regularly make. This is

because when customers bring their car in to be repaired they may not be aware of the extra work

required, that will be identified through the VHC.

In psychological terms, when you notify the customer of Amber work, you open a ‘Thought Loop’

and the customer’s unconscious mind will want to close the loop.

By only agreeing to diary Amber work for future follow-up you actually leave that psychological

thought loop open, and the customer’s unconscious mind actively looks for opportunities to close

the loop.

So, when they are at home (after you have agreed to follow them up in a few weeks) and they see

an advert for Kwik Fit or another independent, they want to close the loop and then book their car in

with the independent.

Think, how many times do your Aftersales Department follow up Amber work only to be told, “Ive

already had it done!”

28. Service Plans (VALUE – Customer Loyalty plus £30+ on service invoices)

I am always amazed at how many Dealers do not offer customers a service plan. Having customers

paying for their Vehicle Servicing through Direct Debit is not only good for cash flow but also

guarantees future customer loyalty.


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However, the real bonus from Service Plans is that customers do not have an invoice ‘on the day’

and so are much more acceptable to upsell offers, and adding £30 to every future invoice shouldn’t

be difficult

GENERAL

29. Focus (VALUE – Hundreds of thousands of pounds)

Without any shadow of a doubt, the biggest mistake Dealers make is a lack of SERIOUS FOCUS on

profit making strategies.

Too many Dealers are happy to jog along at the mercy of customers and staff apathy. It never ceases

to amaze me how so many Dealer Principals and Business Owners are passionate about cost saving

and overhead control (and quite rightly so) but seem somewhat lax in their approach to pro-actively

exploiting every profit opportunity.


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1 2 3 4 5 6 7 8 9 10

Referrals

Retention

First Kill

Part Exchange Appraisal

Valuing the Part Exchange

Negotiation - General

Negotiation - New car Price

Negotiation - Presenting P/X price

Negotiation - Cost to Change

Negotiation - Monthly Payments

Negotiation - High Pencing

Negotiation - High Pounding

Negotiation - VAT Roll

Negotiation - CAP 'Average'

Negotiation -Under Allow

Negotiation - No Round amounts on valuation

Negotiation - Low Ballon

Negotiation - paint protectio, Gap insurance etc.

Follow-up Strategy

Call Back Strategy

Win back Strategy

B2B Sales Strategy

Advertising Vouchers

Telephone Answering Strategy

Aftersales Incentives

VHC

Amber Work

Service Plans

Focus

Use the Table above to assess your current implementation of the 29 areas of profit improvement.

Box 1 indicates not using or hardly using a strategy – Box 10 indicates full implementation.

ASSESSMENT CHART


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About the Author

Rob Purfield is the Founder of iN3 Ltd, an Specialist Automotive Profit Consultancy.

For the last 20 years Rob has provided advice on the Psychology of Leadership, Sales, Aftersales,

Marketing, Negotiation, Customer Care and Dealership Performance within the Motor Industry.

He has a reputation for delivering tangible results that are measurable. A pragmatic problem solver

Rob’s skill is in finding a solution to fit the culture of the client business.

Contact Rob on 01482 661177 to discuss your challenges and his amazing portfolio of Sales and

Profit building initiatives and programmes

Rob is also the author of top sales book “The Ultimate Knockout Closing System”

For your FREE COPY go to www.robpurfield.com

Rob has had the privilege of Working with, Studying, and Researching

Volkswagen, Vauxhall, Saab, Chevrolet, Hyundai, Volvo, Honda, Toyota, Inchcape Retail, Jardine

Motor Group, Pendragon, Hartwell, W.J. King, Marshall Motor Group, International Motors and

many others.


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