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Bad Medicine-Who’s Really Getting Better?

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(Posted on Jul 13, 2013 at 04:53AM by William Cosgrove)

First I want to thank Jim Ziegler and Manny Luna and others for their due dilegence in the Autogate affair that is currently unravelling and have made it possible for me to get some attention on a topic close to my heart.

I want to take advantage and seize the moment concerning all the controversy surrounding Cars, com among others with hints of more to come.

Why? Because I hope that finally YOU the dealer who is following this mantra will come out of the ether and realize that the medicine that the giant classified Ad and Services Companies have been prescribing Dealers is showing its nasty side effects and is WRONG.

Let’s take a look at some numbers to see just how much these churn and burn marketing strategies can affect Dealers. One side effect of this strategy is that you are always chasing inventory to sell more to make less money – who does that benefit?  

Another side effect is management and salespeople are working harder to make the same or less money and if you have worked at a dealership in the past few years these guys have more responsibilities than ever before. This leaves the possibility of losing conversions and inventory purchasing errors. Plus, you are probably spending more money to drive that traffic to churn those cars and - who do you think benefits from that.

Another side effect is that you start taxing you facilities ability to do the MPI (Multipoint Inspections) reconditioning e.t. and unless you spend more to fill the gap you chance having other problems with Inventory presentation. WHO DO YOU THINK THIS AFFECTS?

Sure there are dealers that sell for one take or leave it price and do well but how long do you think it would be when this becomes the rule and not the exception. There will be more consolidation and small and medium size dealers will be put out of business by the churn and burn stores that need to gobble up more and more market area to survive. And who do you think this will benefit? –

I am not a conspiracy theorist by you can’t help but see the correlation here especially with what has been surfacing over the past couple of weeks.

According to FirstLook, total sales in April climbed 0.7 percent vs. year ago to 3,819,127 units. vs. 3,792,604, transaction prices across all three channels were down 6.46 percent to $8,928 from $9,545 in 2012 excluding aftermarket product.

So let’s do the math.

$9,545.00- $8,928.00 = $617.00. Let’s say on the average you sell 50 pre-owned units per month. Let’s say you could have sold just 25 of those 50 units and grossed $309.00 more per unit.

$309.00

X 25 units

$7,725.00

Let’s say that you could have made another $800.00 dollars per unit on the back end.

$800.00

X 25

$20,000.00 Let’s add it up

 

You just made at $27,725.00 more in gross that in a year adds up to $332,700.00 plus what you have just saved on all the added costs of churning and burning units and the costs of potential Presentation of inventory and inventory purchasing errors, losing conversions in the rush to churn e.t. in the rush to churn.

 

Let’s say that you sell an additional 10 cars a month with the churn and burn method. Using $1200.00 as an average gross and gross $800.00 on the back end you would have grossed $20,000.00 Dollars or $240,000.00.

 

$332,700.00

$240,000.00

($92,000.00)

 

You grossed ($92,000.00) less plus all the additional overhead it took to Market, Buy, Prep and sell them. -Who is does this benefit?

If you need to go outside your market area to gain market share and have the population density within you geographic market area for growth YOU need to look inside not outside and fix the problems  within- Who will benefit from this?

If you set your goal of growing within your market area the benefits are greater and put those additional resources you are using to draw in people from outside your market area you will be better for it. People who purchase from outside your market are price buyers only because you have no value to offer them.

So think about it and do what you think is the right path for you to take. For most of you-you will realize the only ones that are getting feed are the Dragons.

One of the rules of value creation is: if your actions don’t create value, then your actions decrease value. If your sales or marketing presentation does not increase the perceived value of your products or services, it decreases the value your customers or prospects perceive they get from you.

Author Bill Cogrove

DealerNet Services

AFTER THE BAD MEDICINE- WILL YOU BE READY FOR THE TOUGH MEDICINE?

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(Posted on Jul 13, 2013 at 04:48AM by William Cosgrove)

If you the Dealer think you could or should be doing better, you need an experienced independent Consultant.

 

If you the Marketing Company are putting your reputation on the line and driving traffic to a Dealer who is not prepared to sell them you need  an Independent Consultant in there first.

 

Remember you as the Dealer or Marketer are in the Driver’s Seat So Take the Wheel -When you’re going straight ahead-you get there faster-and safer so take control and win the race. If you are not committed and prepared 1000% It is time to GET OFF THE TRACK.

The blame always lies with you. Before you blame your vendor or (presumably) competent staff- look in the mirror- maybe they are not the incompetent ones.

 

Customer Acquisition Cost (CAC) is determined by customer visits. Your bottom line lives or dies by IT- BOTTOM LINE.  And it is crutical to design your marketing campaigns and structure your staff to do what works best for YOU at YOUR location in YOUR geographic area.

 

If you're not Marketing to the Latino/Hispanic market-YOUR LOSING A LOT OF MONEY. The Latino/Hispanic population of the US is the 20th largest economy in the world so is not to be ignored. Please go to the more section above and follow the link "ENGAGING THE US LATINO MARKET" at Autospeak (Engaging the US Latino Market) to get a better understanding of impact this market segment represents.

 

 

  If someone isn't willing to tell you this to your face- Get another Consultant.

  If you didn't already know all of this -YOU BETTER GET A CONSULTANT

 

        Bad Medicine-Who's Really Getting Better?                                             Posted By Bill Cosgrove    DealerNetServices

TAKE CONTROL OF YOUR MARKETING

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(Posted on Jul 13, 2013 at 04:21AM by William Cosgrove)
First of all, let me preface this by saying that it seems to me that the vAutos, Autotraders and True cars of the world are trying to commoditize the automotive industry. This may work well for the corporate owned multi-franchise companies but for the rest……

Advances in technology are giving dealers the tools to directly market through their own websites, Social media, etc. and within their geographic area to increase floor traffic at their location. Once there they must have the confidence in their sales force to get the job done.

A good sales management team knows their market and has the tools in house to know what is selling for them and how to effectively control their inventory. My question is why are dealers paying big money to let companies come in and tell them how much to sell and/or buy their vehicles for and what vehicles to buy to increase sales. What are you paying management for? One day I overheard a rep from Autotrader tell the preowned manager that he needed to lower his prices to get better results.

That preowned manager bucked the trend of lowering prices to compete online. - And guess what- average grosses in his department were much higher than the average and his total unit sales were improving. Number one that is why you have a “good” sales staff and “good” finance people for and number two you can always come down in price but I never heard a customer say a price was too low.

Dealers should work with a marketing company who is going to help them drive traffic and not try to run their company. The bulk of dealerships sales are still made within their geographic area and that is where they should be focusing.

Author Bill Cosgrove
http://dealernetonlineservices.biz


 

The Front Lines Where The Real Battles Are Fought

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(Posted on Jul 12, 2013 at 07:44AM by William Cosgrove)




Here are some stats that Most of us already know and most Dealer Principles and GMs may already know. But let’s give it another read because this is important to your business.

Not all buyers use the same criteria to choose a dealer or are influenced by the same dealer experience and sales processes.

According to the Foresight Research 2013 Dealership Report, Taken from UCN News, based on a study of 7,543 recent U.S. new car and truck buyers, experience with a brand drives most purchases.

While 17 different automotive marketing communication channels are analyzed in this study, none are more influential to the purchase decisions of new car and truck buyers than the dealership experience with the exception of prior brand experience. Forty-nine percent of all buyers this past year report that their dealership experience was highly influential to their decision to purchase the vehicle they did. 

The average new-vehicle buyer today is older (nearly half are over age 55). They are also wealthier and experienced with the buying process. Dealer reputation and relationships are key to this group.

Younger buyers (many of them first-time buyers) bring a narrower set of expectations into their buying process. These buyers want and need dealer assistance, but one out of four say their dealership experience took too long.

Buyers aged 35-54 (representing 37 percent of current buyers) reflect a mixture of their younger and older counterparts. Like younger buyers, they are very concerned with getting a good price/deal, and financing options. Yet like older buyers,
they have high expectations of their dealer experience.

So let’s think about this. This means that the people on the front lines and by this I mean the salespeople, including those in the BDC department, Service Writers, Parts and Body Shop Departments. Now why did I just refer to all these people as salespeople?

Because they all better be. These are the people that are selling you, your services and products and if they don’t know how to sell and how to treat people-your losing a great deal of business.

So why do a lot of you think that you can get these people on the cheap and expect great results. You pay a lot for your marketing and other vendors services and hopefully they are doing the right things.

But these employees I just mentioned are your most valuable asset and you are not going to get or have the right people on the cheap. I showed in one of my last posts a dealer who was paying top dollar and getting top results. These stats just gave me the opportunity to maybe shed more light on my mission to prove my point.

You can hire consultants to train, train and do more training and give people all the tools in the world to do a job but if you don’t have the right people your just wasting your money. And by the way what are your managers doing?

You need consultants who know how to get the right people in right the positions first Which means consultants who have proven themselves on the front lines and in the trenches who can find right people you need. And again, what are your managers doing?

If you need to hire consultants, (And again what are your managers doing), find one who is going to weed out all the non-performers and who is hire by and who is looking out for you the owner and not the management that may be the root of
your problems.

A lot of good salespeople and managers have already left the Automotive Industry because they can perform in any Commission Sales Industry and are going where they can be rewarded for their talent.

There are those who would like to commoditize the Industry and have store clerks waiting on people. But I can tell you that if this happens there will no longer be room for the Small and Medium Size Franchise Dealer.

By having the right people you don’t need to train them because they’re professionals and are driven to perform. So if you take all that money you pay to train and get no return from and put the right people (Including Management) on the front lines- you will not only save most of the money you spend on consultants and realize that the ones on the front lines are your real ROI.


Author Bill Cosgrove
http://dealernetservicesonline.biz

Finding Your Style- Commission Sales

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(Posted on Jul 12, 2013 at 04:34AM by William Cosgrove)
I cut my teeth selling at an early age selling door to door. From delivering newspapers to Fuller Brush to Cash is Best, for which Ted Turner was a fugitive from the US holding offshore on his yacht in international waters for purporting a pyramid scheme, to selling the original wind up fire and burglar alarms for the home.

After having had my foot caught in the door many times I eventually found my way into Automobile sales. I was so excited to have this opportunity because here were people coming to me looking to buy what I had to sell.

I felt like a kid is a candy store and never looked back. This business allowed me to experience owning my own businesses but I always came back to what I always loved.

When I think of all the advice available to train a good salesperson I think of why salespeople would not all be superstars. After years of being around commissioned sales and salespeople both in and out of the Automotive industry it is apparent to me that the art of selling (and it is an art) is a talent that few people ever master.

I have seen so many techniques that salespeople use to make a sale that works very well for them but would never work for me. As a matter of fact, Some I could not even fathom how they even made so many sales with their “Style” of selling but it worked for them.

What worked for them would never work for me or you.. You can only observe and take those observations and find a “Style” that works for you and make it your own.

This “Style” for the fortunate ones something that comes naturally making selling for them almost effortless. Sales must be looked at as a challenge- the more difficult the sales is to make, the more satisfaction you get from the experience.

That challenge is something that the truly gifted crave, need and look forward to each and every day in every aspect of their lives. It is like a game of chess that is played and each move determines an eventual outcome that a true salesperson is driven to win by reading each move of the opponent before it is even made.

We are all actors on a stage in our journey through this wonderful life but only a few can mold and manipulate the parts they play.

There is and always has been a misunderstanding or maybe even a lack of respect for these truly gifted people. Only a secure, talented and gifted manager who driven to hit that next level knows that he must let these salespeople work their craft using their own “style” to make the relationship rewarding and successful.

These are the type of people that one needs to make a business truly successful. The ones who are in it not just for the money but because they are driven to succeed. Don’t settle for mediocrity. Constantly be looking for the people that will take, maintain and always be looking for that next rush that only these people get from their work.

If you have all the tools and have not found your “Style” as an owner, manager or salesperson unfortunately you probably never will. But if you know all this and never stop looking to surround yourself with these truly talented people you will have your battle plan and will eventually win the war.

Author Bill Cosgrove
http://dealernetservicesonline.biz

 

Forgive Me For I Have Sinned (The Cars.com Debacle)

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(Posted on Jul 11, 2013 at 09:58AM by William Cosgrove)
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 With all the noise about making the Industries more transparent you would think that the vendors that supply those Industries and say they their purpose is to provide consumers more transparency would  reciprocate and be transparent with their client base before launching their new strategies.

When launching new programs that impacts the clients that you serve it is critical that you take the initiative to collaborate with them to understand their point of view and communicate yours.

How do these big companies stumble and make these grandiose errors that cause such uproars. There have been so many instances of these blunders and right or wrong it is always better to first apologize to control the damage done and institute measures to repair the damage that has been done. If you do not it projects arrogance and produces animosity and distrust.

Whatever Cars.com's intentions, they were wrong if not for any reason but for not collaborating with their dealer base and should have apologized. It was even more damaging to find out that they were doing other things that they were not communicating. One blunder is bad enough but when it causes other things to be uncovered it makes the situation worse and the saga seems to be uncovering more.

Do the right thing and Apologize Cars.com and the sooner the better. Don’t just stop doing the things you obviously realized you shouldn’t have been doing hoping it will all just go away. Don’t appear to be like the some liberals who are for big government because they think that they know how to run things better than their constituents.

Classified Ventures, LLC who owns Cars.com is a strategic joint-venture owned by five large media partners whose objectives are to collectively capitalize on the online revenue growth opportunities in the automotive, rental and real estate advertising categories. Our strategic partners are A. H. Belo Corp. (NYSE: AHC), Gannett Company Inc. (NYSE: GCI), The McClatchy Company (NYSE: MNI), Tribune Company and The Washington Post Company (NYSE: WPO).


Author Bill Cosgrove
http://dealenetservicesonline.biz



 

Special Finance At Your Dealership-Qualifying

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(Posted on Jul 11, 2013 at 09:53AM by William Cosgrove)
This is one reason that you need qualified personnel in your Special Finance Department. Your personnel must have an in-depth and thorough  knowledge of
the entire operation of the Special Finance Department.

Whether or not your dealership interviews every customer, if you’re serious about Special Finance you need to be interviewing every Special Finance customer.

Your personnel must have a complete and thorough understanding of your financing sources and  completely review the customer’s application and credit report. Let the customers know the financing process and keep them engaged. Review the application and credit report with the customer to confirm its completeness and accuracy.

Prepare your customers for the sale and sell based on a complete understanding of income, credit, desired vehicle, down payment and trade information. It will load you with all the information you need about what your customers’ primary concerns are, build your customers’ confidence in your ability to help them and give you the knowledge on how to structure the best deal.

The interview  will get you all the information you need and establish repoire all of which will help you find the best fit for your customer while involving them in the process at the same time.

There are many things to consider if you are to have a fully functioning Special Finance Department. If done right you will be will have an effective program and another profit center that will drastically increase your average front and back end grosses and sell more units.

By Bill Cosgrove
http://delernetservicesonline.biz



Do You Want to be a “HERO OR A ZERO?”

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(Posted on Jul 10, 2013 at 07:30PM by William Cosgrove)

Part IV of A Business Model That’s Just Plain Bad For Business.

Do you want people who are going to tell you “What You Need To Hear” or do you want people who are going to tell you want you “What You Want to Hear?” If you are the later than you might as well stop right here because I am not here to stroke your ego, I’m here to make you money and make you proud of your business and of what your accomplishing.

Have you heard the expression that you need to “Spend Money to Make Money?” Have you heard the expression that you need to “Save Money to Make Money?” Let’s Get Real!

Bottom Line Growth is not sustainable only Top Line Growth is and only Top Line Growth will get you the results that will take you where you want to go with the rewards and pride that come with it. (Tell your bean counting consultants to put that in their pipe and smoke it.)

So how can you think or where did you get the idea that you will get the best Marketing, Sales, Service or Parts minds on the cheap? These people who are on the front lines day after day “Are you Business” and are the one who are going to make or break it.

Saving Money is all well and good but Making Money means that you are doing the right things to be successful and to be successful you need to have the kind of people that can get the results and this means you need to “Pay for Performance.”  If you want to save money save it on office supplies, Press your vendors for discounts, change your electric company but don’t think that a gift certificate for dinner or a pat on the back is going to recruit or retain the talent you need to be successful.

Let me ask you a question.  Were you born a business owner or did you have to pay your dues and earn what you have today? Did you seek out the companies that thought people with your experience and talent were a dime a dozen and didn’t want to pay what you were worth? I think not.

I stayed at the last Dealership I worked at because they knew the value of people from Management to salespeople to every worker there and paid accordingly. I and my co-workers made more money than we could at any other place and the Dealership made even more and were consistently in the top tier of highest average front and back end grosses- A business that PROVES this all out. How can this be? It is a direct result of sharing and respecting the people who make it happen for you. It means making an investment that unlike the stock market is guaranteed to pay off. There is no complex formula here to figure out.

 Do you want to attract Independent thinking people who can create value for your business? Then you need symbiotic relationships.  Or do you want parasitic people who are going to attach themselves to you on the cheap because they have few or no other options?

If you are the former, send me an e-mail at billcosgrove@dealernetservicesonline.biz and I will send you a commission plan that will attract and retain the talented people you need and should want if you want to be successful and stand above the rest.

By Bill Cosgrove
Pesident

DealerNet Services

Automobile Manufacturers-Who are "they" really looking out for?

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(Posted on Jul 10, 2013 at 07:21PM by William Cosgrove)

In my last post “Bad Management It’s Also Just Plain bad for Business“ At Dealerelite.net, David Ruggles brought up a good point when responding to a comment made by Steve Richards.


Steve stated that "The retail culture incubates mediocrity and as gross profits continue their downward spiral good luck attracting quality sales personnel. Can you name another product that sells for $30K and pays a $100 commission?”

David replied that “Gross profits continue their downward spiral because the previous asymmetry in information has become more balanced, creating a more efficient market. While that might sound good to consumers, an efficient market leads to disintermediation.  For those not familiar with this term of economics, it means cutting out the middle man while the product becomes a commodity.  Can you name us another product that sells for $30K, where consumers expect to know our base costs, and 10% is considered to be an obscene profit by industry outsiders and many "insiders?”

My mission to get Dealers to improve their business model goes back to 2010 when I started discussing what I saw as a growing movement, which was a perfect time to execute due the pain caused by the recession,  in the Industry to commoditize the Automobile Industry and that is that I saw the Giants in this Industry buying up the vertical and convincing Dealers that they need to sell for one price and buy for another and our way of marketing is the right way. That is that in order to compete and move product you need to turn more product at a lower price to survive in today’s Marketplace. This plays right into the hands of the Mega Dealers who’s Business model is based on churning out more and more numbers at low marigins.

To do this they need more and more territory to churn those higher numbers to make their business model work. Where is that territory coming from? I think you know the answer to that.

Automobile Manufactures mandate Dealers to selling numbers which is the most basic contradiction in the Franchise model for the Dealer. The Manufacturer doesn’t really care where those numbers come from as long as they are met. After all the Manufacturers profit is built in and booked as soon as it leaves the factory to its destination.

You saw what happened to True Cars when they tried to reach into the pockets of the Manufacturer but who is looking out for the Independent Dealer? No One.

Between the Manufacturers and the Giants of the Industry owning or controlling the vertical from Inventory to marketing whose mission is churning higher and higher numbers you wonder if commoditization it is inevitable.

And believe me. If this takes place the Independent Dealer is not the only one that will be affected. All of us from Marketing firms to Consultants to any Vendor in the Industry will be fighting for less and less dollars as our customer base will shrink

Where do you think the Industry is headed? Right now Franchise Laws as David stated "By law, franchise laws in every state, a new vehicle can only be purchased from a franchised dealer.” Is this being circumvented by the creation of Mega Dealers? Will Franchises as they exist today become non-exisitent in the future?

Is the only way for the Independent to fight back to start running their businesses more effectively and efficiently. This is a topic that needs to be discussed because all of this it is already happening whether you want to open your eyes to it or not.

By Bill Cosgrove

http://dealernetservicesonline.biz

 

Government- You've Gotta Wonder?

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(Posted on Jul 10, 2013 at 08:58AM by William Cosgrove)
 


No wonder our government can’t get anything done and spends so much of our money.  The office of Fair Trading (OFT) is being asked by The “NEW”, more money spent on duplication, Financial Conduct Authority ( FCA)  ), (these offices and regulatory agencies are popping out of the woodwork- Get the roach spray out), to transfer control of Consumer credit regulation to them because they think they can do a better job (Right)

 

So are they going to close down the (OFT)? Apparently they are not doing a good enough job (Believe that and I have the car for you.)

 

This is a direct result of Big Government thinking they know how to control our lives better than we do.

 

I propose that we write a grant and get funding to set up our own regulatory agency the (GODB) GET OFF OUR DAMN BACKS! AND LET THE MARKETS DECIDED WHAT IS FAIR PRACTICE OR A GOOD PRODUCT.

 

Now they want to look at GAP Protection. What is wrong with GAP insurance anyway? It is a good product that provides value to the consumer and has been being sold for ever. No wonder our Government can’t get anything done or do it right when they do. I doubt if they even know how many agencies are out there wasting our hard earned tax dollars that we pay based on our income. Now they want to play with our income. Does anyone see anything ironic here?

Author Bill Cosgrove
http://dealernetservices.biz

 

 

 

 

FCA issues call for evidence on GAP competition

 

 

The Financial Conduct Authority (FCA) has begun a study into general insurance add-on products with an appeal for evidence of competition in the marketplace.

GAP (guaranteed asset protection) insurance sold by the motor industry is one product under scrutiny. Others include home emergency insurance, gadget, travel and personal accident cover.

The market study will consider evidence from companies and individuals and look at the nature of competition in these markets, in particular whether these products represent good value for money and whether consumers understand what they are getting with their policy.

The FCA’s call for evidence, to be submitted to FCAGIadd-on@fca.org.uk before September 10, reveals it will consider whether prices are excessive for a given quality, whether the quality is what consumers reasonably expect, any profitability differentiation between add-on and standalone sales for underwriters and distributors, and whether the consumer actively considers alternatives.

A key focus of the study is to investigate what impact add-ons have on consumer behaviour and expectations, how firms respond to those, and whether poor market outcomes arise as a result. 

Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), told the Association of British Insurers (ABI) Biennial Conference: “Our new competition duty is the single most significant change in our objectives as a regulator. It means that we don’t just wait for problems before we try to promote competition in the markets we regulate.

“We have our first market study underway looking at general insurance add-ons.  We’ve called for evidence and approached a number of firms in the market for information. We are testing whether poor outcomes in add-on sales could reflect particular consumer behavioural traits and firms’ responses to them.”

“One of the questions I was most frequently asked 101 days ago was: ‘Is the FCA going to be genuinely different from the FSA?’.  We understand why people reserved judgement - the FSA needed to change.

“100 days later I think we are taking steps in the right direction. The FCA is in many areas a very different animal from the FSA.

“We’re not just asking: Is this product compliant? Does it tick every legal box? But actually: is the outcome good? Is the market competitive? And is fair treatment of consumers designed into products and culture?”

The results of the FCA's findings will be reported in 2014.  

 Author Tim Rose

 

 

 NEW FCA TO REGULATE CONSUMER CREDIT

 

The Office of Fair Trading (OFT) is facing calls from the Financial Services Consumer Panel to transfer control of consumer credit regulation to the new Financial Conduct Authority (FCA).

The Financial Services Consumer Panel says the FCA, who will succeed the Financial Services Authority (FSA) upon enactment of the Financial Services Bill, should be given full responsibility for the regulation of retail financial services, including consumer credit. 

The Panel believes that a two stage process is necessary starting with the FCA taking over responsibility for regulating credit under the Consumer Credit Act.  A second review would  further examine when it would be appropriate to move to an integrated Financial Services and Markets Act-based regime.

Adam Phillips, the FSA Consumer Panel’s chairman said :

“If the FCA is an effective consumer regulator, they would be able to intervene in the issues we have seen developing. A single regulator looking at all the conduct issues in financial services has to be a good idea.”

Gillian Guy, the Citizens Advice chief, said:

“It is vital . . . that not only lenders but also debt collectors, brokers, debt managers and retail lenders selling insurance products are regulated by a single body.”

Director general of the FLA Stephen Sklaroff said:

“Whether or not regulation transfers to the new FCA, the regime which the FCA will inheritin the deposit and savings markets is not appropriate for credit.”

A spokesman for Which? said :

“Key protections in the Consumer Credit Act must be maintained.”

A spokesman for the OFT said:

“The government needs to consider the evidence and determine whether and where change is needed. We are engaging with the government about what improvements we think would make a difference.”



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