Dealership  Technology  Insights:  Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 “You  don’t  get  what  you  deserve,  you  get  what  you  nego5ate”  

The  most   powerful   tool   in   any   nego8a8on   is   leverage.   Of   course,   dealers   know   this  ins8nc8vely.  A  dealer  nego8a8ng  for  a  new  DMS  contract  can  maximize  the  leverage  he  exerts   not   only   by   carefully   planning   his   strategy,   but   also   by   using   every   tool   at   his  disposal.   Let’s,   therefore,   review   the  essen8als   along  with  a   few   less  evident  ways   to  take  control  in  these  financial  skirmishes.  

The  price  you  pay  is  dependent  solely  on  your  nego5a5ng  strategy.  

The  strategy  many  dealers  employ  is  simple.  They  rely  solely  on  their  nego8a8ng  skills  and  assume,   if   they   talk   tough  and   threaten   to   leave,   their  vendor  will   just   surrender  and  give  them  a  great  deal.  There’s  only  one  drawback  to  this  method  –  it  doesn’t  work.  

Since   so   many   dealers   aJempt   this   tac8c,   the   vendor   reps   are   well   prepared.  Remember,  the  reps  do  this  every  day,  the  average  dealer  only  once  every  five  years  or  so.  Everything  has  changed  since  the   last  8me  the  dealer   looked  at  this  and  while  the  rep  can  spend  all  his  8me  on  the  deal,  the  dealer  has  his  business  to  run.  The  results  are  predictably  poor  for  the  dealer.  Veteran  reps   just  don’t  believe  the  dealer’s  blustering  and,  since  most  dealers  don’t  really  intend  to  change  vendors,  they  just  have  to  wait  for  the  dealer  to  cave.  

It  comes  down  to  credibility.  

Nego8a8on  8ps  to  be  sure  you  hold  on  to  your  leverage  and  get  the  right  deal:  

 

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Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

©  2014  Gillrie  Ins8tute  

 

1.  Start  the  DMS  selec5on  process  early  enough.  

If   you  absolutely  must  make  a  decision  by   a   certain  date   and   the   vendor   knows   this,  your  power  diminishes  with  each  passing  day.  Furthermore,  since  most  vendors  need  at  least  six  months  to  schedule  an  installa8on  and  get  opera8onal,  you  should  ini8ate  the  process   at   least   a   year,   and   in   some   cases,   eighteen  months   in   advance.   There   is   no  more   powerful   strategy   than   to   be   in   a   posi8on   where   you   don’t   have   to   act  immediately.  You  can  just  sit  back  and  watch  the  deal  get  beJer.  

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Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 

2.  You  are  not  nego5a5ng  unless  they  are  convinced  you  are  ready  to  leave.  

There  are  specific  steps  that  dealers  must  take  when  they  approach  a  nego8a8on  with  an  open  mind  and  a  willingness   to   leave   if   they  don’t  get  what   they  want.  Ask   for  all  your   current   obliga8ons,   termina8on   dates,   and   buy-­‐outs   in   wri8ng.   Cancel   any  agreements   that   contain   automa8c   renewals  making   sure   you   leave   an   incontestable  paper   trail.   Under   some   contracts   you   are   required   to   no8fy   the   vendor   six   months  before  the  termina8on  to  avoid  an  automa8c  renewal!    

You  can’t   fake   it.  Every  dealer  tells   the  vendor  that  he   is  considering  the  compe88on.  Vendor   reps   from   compe8ng  firms   talk   to   each  other   all   the  8me.   If   you   tell   the   rep  from   ABC   that   you   are   leaning   towards   XYZ   without   really   considering   XYZ   or   even  ge`ng  an  XYZ  demo,   the  ABC   rep  will   know.  He’ll   assume  you  aren’t   going   to   switch  and  your  leverage  will  vaporize.  Take  the  8me  to  seriously  consider  all  your  op8ons.  You  may  actually  discover  a  superior,   less  expensive  alterna8ve.  At  the  very   least,  you  will  be  able  to  play  the  “I’m  going  to  leave”  card  credibly  and  effec8vely.  

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Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 

3.  Control  your  informa5on.  

Vendor  reps  oeen  cul8vate  friendly  rela8onships  with  dealership  personnel  who  are  not  directly   involved   in   the   process.   Oeen   these   employees   can   inten8onally   or  inadvertently  pass  sensi8ve   informa8on  to  the  other  side.  Some8mes  these   informers  have   their   own  agenda   (e.g.   “I   don’t  want   to  have   to   learn   a   new   system  –  we   can’t  change  to  XYZ”)  or  they  think  they  are  “helping  their  friend”,  the  vendor  rep.  In  either  case,  a  carefully  constructed  plan  can  be  undone  by  a   leaked  comment.  Control  what  the   reps   gather   from  within   your   store.   Rather   use   vendor-­‐friendly   staff  members   to  unknowingly  disseminate  disinforma8on  that  is  to  your  advantage  (e.g.  “You  had  beJer  do   something   fast,   Mr.   Dealer   is   going   to   change   to   ABC”).   Only   the   dealer   and   his  nego8a8ng  team  should  be  privy  to  the  dealer’s  actual  plan  and  inten8ons.  

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Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 

4.  Know  what  you  need  and  know  what  to  pay.  

This   is  much  more  complicated   than   it   sounds  and  you  will   likely  find  you  need  some  professional   help   to   figure   it   out.   In   a  marketplace  where   the   standard   is   chaos  with  even  the  very  names  of  the  products  changing  constantly,  it  can  be  almost  impossible  to  know  when   you   have   the   op8mum   deal   on   the   right   configura8on.   The   best   deal   is  oeen  made  by   the  dealer  who   knows  exactly  what   he  needs   and  what   it  will   cost.   A  “low  ball”   offer   can   be   disastrous   if   it   is   too   high   and   the   vendor   greedily   accepts   it.  Conversely  an  offer  that  is  really  unreasonably  low  can  also  create  problems  as  the  rep  loses  interest  or  scrambles  to  find  ways  to  de-­‐content  the  proposal  and  cover  his  tracks.  The  best  offer   is  one   that   is   just   a  bit   less   than   the  best  deal   the  vendor   is  willing   to  accept.  A  vendor  will  pull  out  all  the  stops  to  make  that  deal  happen.  

At  the  Gillrie  Ins8tute,  we  see  thousands  of  DMS  deals  every  year.  Do  you  know  which  dealers  have  the  worst  deals?  Invariably  it  is  the  ones  who  have  been  the  most  loyal  to  a  par8cular  vendor.  Vendors  don’t  like  to  give  up  robust  revenue  streams  and  reps  are  under  tremendous  pressure  to   increase  income.  No  maJer  how  many  spor8ng  events  or  dinners  you  share  with  reps  from  your  DMS  provider,  remember  that  the  perceived  personal   rela8onship  will   not   ensure   any   special   treatment.   Business   is   business   and  dealers  who  are  “friends”  with  their  reps  usually  pay  more  than  dealers  who  follow  our  rules.    

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Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 

5.   Pay   as  much   aMen5on   to   the   contract   terms   as   you  do   to   the  price.  

Ignore   this   rule   and   you  will   find   that   the   great   “deal”   you  nego8ated   can  evaporate  almost   immediately.   Read   the   vendor’s   contract   and   make   sure   it   includes   all   the  provisions  you  need  for  your  protec8on.  We  regularly  make  up  to  thirty  (30)  changes  to  vendors’   standard  contracts.  An  example   is  an  addendum  that   requires   the  vendor   to  make  any  addi8onal  agreement  that  is  signed  during  the  term  of  the  original  contract  to  be  coterminous  with   the  master  agreement.  Scru8nize  every  “add  on”  agreement,  no  maJer  how  small,  with  the  same  fervor  that  you  applied  to  the  original  contract.  Ignore  this   advice   and   you   will   find   yourself   with   staggered   termina8on   dates,   seemingly  endless   obliga8ons   and   no   leverage   to   nego8ate   when   the   master   agreement   does  terminate.    

Lastly,  monitor   your   vendor  billing  on   a   regular   basis   for   compliance  with   the   agreed  terms.  You  will  certainly  find  “errors”  and  they  will  almost  never  be  in  your  favor.    

7  ©  2014  Gillrie  Ins8tute  

Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 

6.  Never  nego5ate  when  you  are  under  pressure.  

Vendors   always   seem   to   have   a   reason   why   you   have   to   act   without   hesita8on.  Recognize   that   these   are   their   8metables,   not   yours,   and   the   pressure   is   usually  ar8ficial.  Good  deals  will  s8ll  be  around  when  you  are  ready  to  move.  Especially  in  this  market,  you  can  almost  certainly  count  on  a  beJer  deal  coming  along.  The  other  kind  of  exerted   pressure   is   some   sort   of   ominous   deadline.   Your   contract   is   ending.   Your  computer   will   no   longer   be   supported.   There’s   a   price   increase   coming.   If   you   have  followed   the   first   rule   above   and   started   early   enough,   these   are   doubtless   there   to  create  urgency  that  will  force  you  to  act  precipitously.  Verify  the  bona  fide  situa8on  by  asking   a   professional   who   is   knowledgeable   about   industry   prac8ces   and   history.  Ascertain   what   other   successful   dealers   have   done   in   this   circumstance   and   remain  faithful  to  your  plan  and  your  schedule.  The  economic  events  of  recent  days  have  put  inordinate  pressure  on  dealers.  The  same  pressures  affect  the  DMS  vendors.  With  some  dealers  holding  back  and  wai8ng  for  the  dust  to  seJle,  the  deal  you  can  nego8ate  now  may  be  the  best  you  will  ever  make.  

8  ©  2014  Gillrie  Ins8tute  

Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

 

7.  Ask  ques5ons  and  ask  for  help!  

Professional  help  levels  the  playing  field.  Call  us  with  your  ques8ons  and  consider  le`ng  us  assist  you.  Our  services  always  save  you  much  more  than  our  fee.    

   

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Dealership  Management  System  –  DMS  Nego5a5on’s  Guide  

100+  years  of  combined  dealership  experience  enable  us  to  share  unparalleled  and  unbiased  insights.  

With  7,000+  dealers  we  are  the  most-­‐trusted  dealer  technology  advisor  in  North  America.  

If  dealers  want  us  to,  we  can  contact  vendors  directly  to  nego8ate  or  de-­‐escalate  with  any  issue.  

We  provide  the  highest  value  to  our  dealers  by  guaranteeing  we  save  more  money  than  they  pay  for  our  services.    

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The  ins8tute  is  commiJed  to  research  and  educa8on.  Since  1992  we  have  trained  dealers  in  over  500  seminars.  

We  are  independent  and  don’t  get  commission  from  vendors.  NO  conflicts  of  interest  –  guaranteed!  

Our  benchmarks  cover  13,000  items  from  300+  vendors  and  tell  dealers  exactly  what  others  pay.  

   

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We  look  at  each  component  of  a  deal  and  help  dealers  understand  the  Total  Costs  of  Ownership.  

Our  mission:  Help  dealers  nego5ate  with  confidence.      

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