Top 5 ways to understand market share and market performance

1. Control Group: Create consistent factors
Select realistic radius around your dealership
Use only Franchised dealer sales in that radius (if you are a franchised dealer)
Count both new and used vehicle sales in that radius
2. Measure with empirical data: Compare your new/used totals against the market on a monthly basis using method above (these numbers can be obtained through AutoCount)
3. Use statistically significant time periods: Select statistically significant period of time. 4 months period is more so than 3, 5 more so than 4 etc.
4. See how you really did against your market: Measure your initiatives over statistically significant period in terms of how you performed in your market (1 or 2 months does not qualify as statistically significant)
5. See how you compare with your brand’s performance: Measure and compare New car sales in the radius against the brand(s) you sell in the same way you measure you overall market share. Are you performing better, the same or worse than your brand(s) are performing?

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The Mafia doesn’t advertise on Television…or do they?

The commercial goes: ‘This is how car buying was always meant to be’…we get a cut of all the deals…in most cases more than the salesman gets!

What’s the difference between True Car and lead providers such as or Auto Trader: The claim of attribution. and Auto Trader give exposure to your inventory and charge the dealer for the opportunity. True Car basically puts a brown suited guy in front of your dealership to intercept the customers, decide the price and then escorts the customer into the dealership for $600 for new and $400 for used. The ultimate middle man or racketeer, however you decide to look at it.

True Car attributes the sale to their presence like a scalper in front of the stadium on game day. But, unlike the scalper, they decide on a fair market price, make the stadium accept it and then have the stadium also pay them for the transaction.

A $400 or $600 finder’s fee goes to True Car which cuts into the profit of an already slimmed down gross. The scalper gets their profit from the customer; True Car gets it from the dealer. Sounds brilliant, but these people are not your friend, they’ve insinuated themselves into the transaction much like the Mafia does in a protection racket.

Does the Mafia attribute the business that the protected dry cleaner gets? They’d like to think so, I’m sure. True Car has done them one better – they’re legit, they advertise on Television!

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Attribution (or, TrueCar is the Mob)

The new ‘buzz word’ of the business? It’s a sham
Attribution has become the buzz word in the auto marketing world. TrueCar is the leading profit taker of this sham. A sham? Yes it is. Marketing is essentially continued exposure to a brand. That’s what it is. To ‘attribute’ one particular entity and one point in time as the ‘overwhelming tipping point’ is intellectual fallacy and a very bad joke; a bad joke and an expensive one in the case of TrueCar.
I may not have to explain this further, but I will because it may not be obvious to you. On second thought just read the first part of this blog 3 or 4 times and think about it. If you hid your dealership inside an airport hangar and removed all your signs and took down your website and all other advertising, then you could work with TrueCar and not be party to the sham. They have figured out a way to intercept the buyer and get in on the deal. When they say ‘this is how car buying was always meant to be’, they really mean that this is a great way for a third party to get in on the profit!
TrueCar figured out a way of grabbing your profit so that you wouldn’t have it to promote your brand. Instead, you get a thinner deal and help to promote them. We should all be hoping mad, but we’re used to this kind of thing on a much less aggressive scale ( and AutoTrader).
Other than that scenario, no dealer actually increased their market share or bottom line by working with TrueCar. It’s like the Mafia. You need TrueCar because all of your competitors are paying the protection money to them, so you have to as well.

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The Appearance of Success vs. Reality

Why do dealers refuse to appreciate empirical evidence of successful marketing strategies? Because there is a hoard of voices trying to convince them that anecdotal evidence is more important.  It’s an age-old story.  The appearance of success is more sexy.  It appeals to emotions, much like a customer’s choice of vehicle to purchase.  It’s part of the business, right?

Let’s review:

Anecdotal – Appearance of reality

  • Traffic
  • What the salesmen say
  • What the non-customers (paying, that is) say
  • How something feels or seems

Empirical – Reality

  • Market Share
  • Market Share
  • Market Share
  • You either outperformed your market or you didn’t
  • You either outperformed your brand or you didn’t

I will use an example with a huge sample size to illustrate.  This is an 8 year study. Four years before taking on a highly touted national marketing concern and 4 years with that firm.  You know what, I’ll name names because the data is all public record from the state of Georgia. Allan Vigil Ford is the dealer and Team Velocity is the national marketing concern.The study takes into account only franchised dealer sales (new and used) in a 25 mile radius around Allan Vigil Ford.

Market share for Allan Vigil Ford during the 4 years WITH Team Velocity was down 17.28% compared with the previous 4 years (without Team Velocity).  Market Share for New Fords was down 7.69% compared to the first 4 years.  For Allan Vigil to have just kept pace with the demand for their brand, they brand would also have had to be down 17.28%, but it wasn’t.  That is empirical evidence that Allan Vigil lost about 28 vehicle sales a month to the market and adjusted for the lower Ford demand, lost about 16 vehicles a month net.

Here is where the appearance of success overrides the actuality of success.  The market volume in the 25 mile radius of Allan Vigil was 11,150 (new and used, franchised dealers) during the first 4 year period, but it was 13,853 during the second 4 year period.  In other words, the dealer’s actual monthly volume was up about 3 sales a month during the Team Velocity 4 year period from the previous 4 year period.  The fact that it was really down 28 vehicles (or 16 adjusted for brand demand) never sunk in because the appearance of success (due to a stronger market) completely overshadowed the reality of the situation.

I know dealers are not stupid, but clearly Team Velocity was party to them losing in the market (to the extent that marketing contributes to sales).  Yet, for some reason, it appears successful and felt good.  That’s a lot of profit thrown out the door.  Had Allan Vigil merely kept up with the market and the demand for their brand, they would have sold 16 additional vehicles a month just for standing still.

Let me know if you would like a copy of the study or want to discuss this further.

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You are paying large sums of money to put yourself out of business

Spending your marketing dollars to promote 3rd parties (, AutoTrader, TrueCar, etc.) are filling their coffers and making your ‘brand’ less and less important. You pay big bucks for their leads and they use that money to promote themselves, not you. You’re used to it, however. You pay DMS companies large sums and those companies charge all your vendors as well and you pay for all of it. Yes, you are taken advantage of on a daily basis.

But, when you’re spending your marketing dollars, why not promote your dealership, not the TrueCars of the world? How? Spend your money on promoting your dealership. You might think this means spending money on TV and radio. These two mediums target people without DVRs who actually watch broadcast TV without streaming services and people who don’t exclusively listen to satellite radio…some ‘target’, huh?

The ‘target’ consists of people who will eventually buy cars. Almost all of these people have mailboxes, computers and some kind of smart phone. That’s the start of the equation; use the mediums that the vast majority of car buyers use, not the shrinking minority. When you promote yourself, promote yourself to their apps, the web sites they visit, their email and, yes, even their mailboxes. Work with a company who can successfully select those who are most likely interested in buying and then use the proper mediums to approach those people…and do it systematically and consistently. Successful marketing has never been a once-and-off beast. Ask any successfully marketed entity how they became successful and you’ll find that the words ‘consistently’ and ‘systematically’ come up all the time.

In closing, if you continue to pay your adversaries (TrueCar, AutoTrader and the like) you will fall further and further out of the consciousness of those you are trying to sell.

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Your TV audience (target) is shrinking fast!

If you advertise your auto dealership on Television, you are targeting a smaller and smaller portion of the consumer base.

First off, you are targeting people who watch local TV who don’t use a DVR. The people you are targeting exclude most millennial who don’t even watch TV using a cable or satellite. These people are watching shows on Netflix, Hulu and other streaming services. They are also starting to purchase vehicles in larger and larger numbers.

By advertising on television, your audience is not only shrinking at a heightened rate, but they are becoming less affluent as well. They are also becoming less young.

You could almost make the same case for radio, but there are a few factors that keep radio a viable medium for advertising your dealership. Radio has no DVR (yet). You are targeting people who don’t listen to the vast majority of their radio on satellite services (XM and Sirius). The good news is that most people who listen to XM radio also listen to local radio stations, so radio has a way to go before it becomes the dinosaur that television has become when it comes to marketing your dealership.

It’s time to put your ego on hold and think about better ways to spend your TV ad dollars. One thing is for sure, these dollars can be spent in a systematic, targeted and quantifiable way that allows you access to the much larger share of your intended audience that TV simply does not reach!

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Forget the Path to the Sale. That’s how you want to sell, not the customer

The ‘Path to the Buy’

Let’s flip the Path to the sale on it’s head. We’ll call it the Path to the Buy.  Why?  Because the ‘Path to the Sale’ is the way the dealership wants to sell cars.  The ‘Path to the Buy’ is the way people want to buy cars!

Let’s do this strictly from the consumer’s standpoint.  If we can facilitate the ‘Path to the Buy’, we can eliminate most of the anxiety and other contentious ‘stuff’ associated with the currently taught and practiced system.

The consumer starts to look at vehicles, mostly on the internet, prior to making any contact with a dealership.  Okay, we already facilitate most of this by having a website and inventory on our lots.  This part is already in place – our product is visible.  We have facilitated this phase of the buying cycle.

The ‘flip’ starts when the first contact is made.  Here is the first thing that should be said (or written) when the first contact is made: “Whether you end up buying from us or someone else, we are here to provide one thing; straight answers to your questions – what do you need to know? How can I help you?’  Then, answer the questions or find the answers to their questions and get back to them ASAP.  The only next question you ask after you have answered their questions is ‘Tell me what you want to do next and I’ll be happy to assist you’.  Then shut up.

This is the ‘flip’ We’re now asking the customer to direct us to the next step.  If the next step is ‘nothing at this time’?, you say, “i hope I have helped you in some small way – my name is John Brown, let me know if I can be of service to you in the future’.  You notice that the salesperson’s name is more effectively inserted in the interaction at a more appropriate time here.  Your name is not as important as getting to the customer’s questions, so you start with the questions and answers, not your name.

‘Nothing at this time’ is going to happen only a small percentage of the time. Most of the time, the customer will suggest a next step.  When they do, you arrange to facilitate that next step.  Once a customer feels they have ‘control’, you will notice a much easier path to the sale because it has now become a ‘Path to the Buy’!  They are buying, you are not selling, but you really are in a Judo fashion.  You keep making their next move so effortless that you are now a Zen master and they, without anxiety or resistance, move in the direction they want to move…and that direction is towards a purchase.  Or, at least a purchase in the near future – but only from you because this sense of well being is not going to be provided by your competition.  They only give the customer anxiety, you have provided the opposite.  You win by allowing them to win all through the first stages of the ‘buy’.

Sure, the actual final deal may not be exactly what they want, but they’re in such a state of well being that they will me much more amiable to making concessions on the deal side because now…everything is viewed as REASONABLE.

The ‘Path to the Buy’ is like Judo.  The ‘Path to the Sale’ is like mud wrestling with a pig.

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Wasting your time: misinterpreting what marketing actually is

Trying to identify each and every sale an auto dealer makes to a particular source may sound like a ‘scientific’ approach, but it misses the big picture and the actual nature of successful marketing.  Marketing is a collective effort to make your brand (dealership) a known factor to potential buyers.  The successful result should be increased market share. That is what successful marketing is; an aggregate effort to increase market performance (market share).  If you think it’s anything else, you are wasting your time.

When reviewing marketing efforts you have two questions:

  1. Am I outperforming the market (my geographical area) and outperforming my brand in the same area?
  2. Am I spending the right amount of money to do the above (point of diminishing returns)?

One dealer group using a highly sophisticated method of identifying each sale to a particular source took on one of our partners as a marketing partner.  This partner successfully identifies potential buyers and puts the dealer’s message in front of those people in a systematic, consistent way.

During their involvement with our partner, the dealer’s market share was significantly higher compared to several previous months prior to their involvement.  The dealer was not only outperforming the market by a significant amount, but, was outperforming their brand by a similar margin.

But, because they had in place a ‘highly sophisticated method of identifying each sale to a particular source’, they concluded that our partner was not accounting for enough sales (directly, that is). So, they decided to look elsewhere for their direct marketing and dumped our partner.

The logic here is that because you can’t identify specifically the source to the sale, the system is no good.  This is not what successful marketing is all about.  Successful marketing provides an improvement in market performance because the people who need to know about you (because they are in the market), do, in fact, get to know who you are. The result is that incremental sales do occur.  Can you identify which of those sales are ‘incremental’?  No, but you can measure the success by seeing if you are out performing your market and your brand.

Nitpicking direct marketing that has proven to quantifiably improve your market performance is an exercise in futility.  It doesn’t prove anything except that you have people trying to identify the source of each sale.  It does not address the actual performance of your dealership in the market, market share does!

This story is, unfortunately, repeated many times in this business.  The dealer, not understanding the nature of what marketing is supposed to accomplish, will throw out successful formulas just because it doesn’t  fit in with their ‘scientific method’ of measurement.

I have been studying this phenomenon for over 10 years now.  I’ve seen dealers throw out (fire) successful marketing (market share growth) for sundry reasons; not enough leads, not enough traffic, I want more Facebook Likes, they want something more ‘sexy’, or just their inability to look at the evidence or lack of desire.

The only measurement a dealer should worry about is market performance.  I can’t stress this enough.

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When you give credit where none is due (and visa versa).

In Jan, Feb, Mar and April, you sell an average of 180 (new and used) vehicles per month. You hire a marketing company for May, June and July.  During that time you average 210 vehicles per month.  Best money you ever spent, right?  WRONG!  You don’t operate in a vacuum  What did the market (overall demand) do in May through July compared to Jan through April?  What did your brand do?

The calculations below exhibit why you are being fooled by both ‘good months’ and ‘bad months’

Average number of vehicles sold in a 20 mile radius of your store Jan – April per month = 10,000

Average number of vehicles sold in a 20 mile radius of your store May – July per month = 15,000.

Your 180 per month average Jan – April = 1.8% (market share)

Your 210 per month average May – July = 1.4% (market share)

Just to give you an idea of what you LOST, yes lost, not gained with your new marketing company: 1.8% of 15,000 = 270 vehicles sold!

You are giving credit to your new marketing for selling 210 cars instead of 180, but what really happened is you failed to sell 270 per month had due to your LOSS of market share!

It also turns out your brand (say Ford in this case) was actually slightly up in May – July over Jan – April as well.  This means you lost even more.

Let’s say Jan – April in a 20 mile radius of your store, an average of 4,000 new vehicles are sold per month.  That gives your brand a 10% market share (among new vehicles sold in that area). However, during the May – July period in the same radius, an average of 5,500 new vehicles are sold.  New Fords account for an average of 572 per month = 10.4% share of the new car market.

Is it beginning to sink in?  New Ford’s share of the market were up and YOUR share was down.  If you had ridden on the surge of your brand’s demand AND retained your market share (at 1.8%), you would have sold even more vehicles per month in the May – July period.

Conversely, if you are doing something right when the market goes down (less vehicles sold in your area) and you increase your market share, you’ll probably sell less cars than you did in the up market, but you’ll sell a lot more than you would if you share goes down.

Without measuring your performance in comparison to the market and your brand, you are being fooled and you are often giving credit (good and bad) where it is NOT due.  You think something worked…and it didn’t really (it was just the result of an up market, but not fully taking advantage of it).  Or even worse, you think something didn’t work because the market was down.  If you gained market share in a down market, you didn’t know it and you threw away a good marketing system because you didn’t even know it was working for you.

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What do you do when the market shrinks?

When the market goes south, which it most certainly looks like it’s going to do in the next several months, you can’t expect to sell more cars than you did during the up market of the last few years. You can survive with a few fundamental moves to take more than your present share of the market, no matter how small the market becomes.

Capturing a larger share of the available market

Strategically acquire used vehicles that are actually selling in your area. There is one absolute way of doing this; a used car report based on model and year for the last several months from REGISTRATIONS. If you don’t have AutoCount from Experian, get it. It’s not expensive and you need this information. By having the right vehicles, you will improve your turn rate and therefore, take a larger share of the market

Market consistently to households that are currently interested in buying. Pull back on broadcast (which is expensive and not quantifiable) and concentrate on narrowcasting. This needs to be done systematically and consistently otherwise you’re just spinning your wheels. Remember, people in their buying cycles could be there a day or a year, you have to be there all the time when they finally pull the trigger


F&I needs to offer loyalty products such as life time oil changes and other maintenance related conveniences that keep your retention penetration well beyond what you’re done in the past. Charge for it, so that it has value, but make that charge low enough so that it’s easy for customers to swallow and they see the value in the proposition.
Make improvements in your service drive including concierge salesmen working the drive, real-time updates to customers and reducing the time it takes to provide the services


Address negatives on the web. You can’t always fix all complaints, but you can attempt to do something.

Train your salespeople to stop ‘controlling the intercourse with the customer’. Regardless of what you think, people buy when they want from whom they want. For each sale you make by controlling, pressuring, pressing and all those things that sale trainers preach, you lose at least 2 sales. And, you will never get referrals (so important to increasing your market share) from unhappy customers who feel they were pushed. Believe it or not, you’ll also improve your gross, because happy customers pay more than unhappy customers.

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You’re doing it wrong – there is only one way to measure marketing success

It’s not traffic
It’s not leads
It’s not even sales, at least not the way you think of them.

Market Share/Market Performance: two ways of saying the same thing.

When demand for vehicles and demand for your brand in your market area are down substantially, you cannot expect to sell more cars!  But what share of those sold in your area that you manage to capture is the ONLY measurement that means anything – especially when you’re measuring the effectiveness of your marketing efforts.

I’m gonna go over this for the hundredth time:  In May, 10,000 vehicles are sold in a 20 mile radius of your store.  That 10,000 represents 100% of the market.  You sell 200 cars that month.  Your market share is 2%.  Okay?

The next month in June, 15,000 cars are sold in that same area.  You sell 240.  Do you think your marketing was effective?  No it was not!  You lost your share.  (do the math, 240 divided by 15,000 = 1.3%). Somebody else is selling to your share.

The next month in July, only 7,000 vehicles are sold in the 20 mile radius of your store.  You sell 190. Do you realize that you did something right or do you fire your marketing partners?

By the way, 190 out of 7,000 is a 2.7% market share – that’s quite an improvement.  If you do think so, 2% of 7,000 is 140 vehicles sold.  50 additional vehicles IS your gain, your incremental growth.

We are in the business of selling market performance.  We’ve performed for our clients to the tune of 15, 20 or more vehicles per month based on market performance (see above) while with us as opposed when they weren’t with us.  At $2,400 per copy front and back-end, that’s $48,000 in profit extra per month (at 20) with us as opposed to without us.

Too often they will shrug this off because they want something else (more traffic, more leads, more something) and we continue to measure their market performance after they leave us and…they’re still down 20 or so cars per month based on market share/performance.

Everything else is irrelevant. If you’re measuring the success or effectiveness of your marketing on anything other than your market performance, stop it.

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There is no DVR on your mailbox

Automotive News, May 23, 2016: Survey was conducted May 2-11, 14,667 respondents.

It doesn’t specify whether the 14,667 customers who ‘visited’ the dealership bought on that visit, serviced on that visit or ‘other’.  It refers to them a ‘customer visits’.

The article states that 24% of the respondents stated that they did not visit the dealer’s website.

Paradigms change, but significant exceptions continue to exist.  Ignoring the exceptions is a big mistake if you are running an automobile dealership or other business that deals with the public.

There is no DVR on your mailbox.

How many emails to you get per day? How many did you get 10 years ago? 15 years ago?  Same with your mailbox; most people get a lot less mail than they did 10 years ago and even more so than 15 years ago, but they get a ton more emails.

In the 1970’s, cassette tapes challenged the LP as the medium of choice for music.  By the time the CD came along in the 80’s, the cassette was falling off the planet and LP’s were also declining in popularity.  Today there are no cassettes.  LPs are still sold (as well as online) in stores in both new and used condition along with CD’s. But, CD’s are by no means the preferred medium for music nowadays; the download has pretty much put it out of the mainstream.  Yet, there is still a market for LP’s.  Granted, it’s not huge, but it is enormous compared to the extinct cassette.

Each time the paradigm shifts, certain aspects of ‘old fashioned’ creep into the following morphs of the shifts to come.  What that means is that the things that people like the best about something that has been left behind by a current paradigm shift, finds a way back into the next paradigm shift in some form.

Or, take TV.  There is more and more evidence (TV stations don’t share this information) that more and more people don’t see local TV commercials because they either don’t watch local TV stations or they have a DVR and rarely see any commercials…or in many cases, a combination of the two.  To make it worse, those with the most disposable income are more likely to be these people.  We are approaching a time where 50% or more of people in many markets don’t see any substantial amount of local TV commercials.  Would it be prudent to assume that if you are spending more than 50% of your advertising budget on TV, you’re probably not reaching the optimal amount of people for your dollar? You would have to conclude that you are not reaching a good portion of the most affluent people at all!

If 24% of your customers do not visit your website, should at least 24% of your marketing center on alternative ways of reaching them?

Exposure is the name of the game, especially exposure to the most likely buyers.

The paradigm dictates that email, social media and other electronic mediums are where you put your efforts, but as I have discussed, these mediums are loaded with ads as never before. As a result, they are more and more ignored because of the volume of the ads that are bombarding us all.  Even if you look at the same percentage of these ads (email, social media, website ads and other electronic mediums), 10% of 10 is 1, 10% of 100 is 10.  Get my drift? You end up not reading 90 instead of not reading 9.  This is why I brought up your mailbox.  You get less and less in the mailbox.  Sure it cost more to deliver to it than the electronic alternatives, but people cannot put a DVR on their mailbox.  There is often important correspondence that comes in your mailbox that you cannot ignore…and there are fewer things in there now then there was before.

With every paradigm shift, there are significant exceptions.  Those exceptions have a way of working their way into the next paradigm shift.  Ignoring the significant (24% is significant) minority to only concentrate on the majority is a good way of fighting the entire community over the last pork chop when there is a perfectly good pork roast that no one seems to notice right around the corner.

Don’t ignore the paradigm shifts, but at the same time, try to anticipate those things that are deemed ‘old fashioned’ that will most likely work their way back into the next paradigm shift.  There are usually good reasons for this phenomenon; most have to do with logic and personal preferences.

Cadillac is now proposing to have Virtual Dealerships where there is no inventory on hand.  This may well appeal to some and will certainly keep some expenses down for the manufacturer as well as the dealer.  If this Virtual Dealership idea of Cadillac’s becomes the norm, someone will come along and offer Cadillacs with inventories and just watch the paradigm shift again.  Why?  Because we know that human nature associates a tactile relationship between people and their vehicles.

Stay creative in your thinking and use logic as your basis.

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Demand unrealistic results – The Ferguson Effect

The “Ferguson Effect” describes  a demand to stop proactive policing.  Once the Police pull back as a result of this demand, crime and murder rates soar. Those who demanded the end of proactive policing now demand a different outcome than what followed as a result of their demand.

Demanding a illogical result of your policy is not just for policing policies, it also occurs in Automobile dealerships.

Example one:  Your sales process demands that salespeople ask questions and not answer questions.  When the outcome is customers who don’t trust you and become adversarial, you demand that they also should enjoy buying from you and tell their friends, associates and family what a great place you are to do business.

Example two: You have no systematic and consistent approach to marketing and you demand that your ‘pot-shot’ approach produce systematic and  consistent results.

Example three:  You offer $10 gift cards for people to visit your dealership and then treat them like ‘mooches’ because very few of them come in and buy a car.  But then you demand that giving out $10 gift cards to come visit you produce more sales!  Hey, they got in their car, came to visit you in person and you’re pissed because only a couple of them bought cars? They came in their car.  They drive, their sister, co-workers, friends and mother drive.  Do you really want to make a bad impression on them by treating them like mooches?!!

Expecting magical results from you policies is very much in the vein of the ‘Ferguson Effect’.

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I’ve been told it’s too complicated for Dealers to grasp

My guys in the field and everyone else tell me that dealers understand UPs, Traffic and volume.  They don’t understand Market Share, Point of Diminishing Return and Out-performing their brand.  I’m told ‘It’s too complicated’.

I’m not giving up.  Three concepts that need to be applied to marketing dollars are essential even though I appear to be shouting in a vacuum.

Simply put:

Point of Diminishing Return: You spend 1 dollar, you make 2 dollars.  You spend another dollar, you make 2 more dollars.  You spend a third dollar and you make 75 cents.  You have passed your point of diminishing return.

Market share:  There are 10,000 vehicles sold this month in a 15 mile radius of your store.  You sell 200 – that’s 2% market share.  The next month, 12,000 vehicles are sold in that same 15 mile radius and you sell 220 – your market share that month is 1.83%

Out-Performing your Brand:  Over the last 6 months your brand’s market share in the same 15 mile radius of your store goes up 2% for those 6 months.  Your market share goes up 5% during the same period – You’ve Out-Performed your Brand.

I can break all of this down more comprehensively, but this is the simple introduction to market performance and dollars you spend on advertising.  Hopefully this might start an intelligent conversation that goes beyond UPs, Traffic and Volume.

These are the reasons I am so adamant about the concepts above.

  • Your dealership does not control the market.
  • You only can get a piece of what is out there.
  • You don’t control the demand for your brand.
  • You shouldn’t be spending money on marketing that goes beyond your point of diminishing return.
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A Scientific Approach to Profit – The Point of Diminishing Return

How do you go about finding the Point of Diminishing Return when it comes to marketing for an Automotive Dealership?

First of all, you have to determine how many vehicles you would sell based on just your location and time in business along with the brand you represent.  I’m going to do this the only way you can, by referring to your market share and by doing it quarterly using averages.  The reason for this is that each month the amount of vehicles sold in a market area varies depending on demand.  Over the course of 3 months (or a quarter), that average mitigates, to an extent, those variances.  The reason to do it by market share is also part of the scientific method.  If there is an average of 10,000 vehicles sold in your area per month over a three month period and you sell an average of 200 a month during that quarter, you have a quarterly average market share of 2%.

To do this in an even more scientific way, you would do what I’m describing here annually or over a 6 month period to further mitigate fluctuation caused by other market inconsistencies such as brand demand, inventory mix and elements out of your control.

When I use AutoCount to determine the market, I focus on the new cars and used cars sold by franchised dealers only because most of our clients are franchised dealers.

So, let’s say that you determine that you would sell at a rate of 2% market share each quarter without the expense of marketing.  You come to this conclusion because you are currently averaging 3% market share with marketing dollars spent and your contention is that you would sell 66% of what you currently sell without any dollars spent on marketing.

Over the period of a quarter, you spend $50,000 ($150k over the 3 months) on marketing per month.  That $50,000 yields an increase of 1% market share.  That’s very good, by the way.  The next three months, you spend $75,000 on marketing and the result is that you now are averaging 3.6% market share (or 360 vehicles sold per month when the market is yielding 10,000 vehicles per month on average). The additional $25,000 in marketing yielded you .6% market share.

The next quarter you spend an average of $100,000 on marketing and the result is a market share of 3.9%.  That additional $25,000 only yielded you .3% market share.  The following quarter you spend an average of $125,000 and the result is a 4.1% market share. You have exceeded the Point of Diminishing Return. You can summarize from this that somewhere between $75,000 and $100,000 is that point.  Logic would tell you that it’s closer to the $75,000 mark.

At this point, we would now look to what consists of the most efficient way to use that $75,000 or $80,000  to bring down the monthly costs and still achieve market share strength.  You want to spend the marketing dollars where your message is Consistently in front of the most Likely Buyers.  If you make the backbone of your marketing efforts a direct marketing strategy that does this, then you will find that the point of Diminishing Return can cost less than $75,000 a month, perhaps even $55,000 or $60,000 a month.

How is this done?  By deploying direct marketing (using mail, email, social media, etc.) to the Most Likely Buyers based on their actual behavior and doing so in a manner that approaches those people of which the vast majority have no history with your dealership (Conquest), you will fine tune your strategy to not only strengthen your market share, but lower your costs in the process.  This would mean hundreds of thousands of dollars in additional net profit per year, even millions.

The scientific approach is not really complicated when you mitigate variances by using market share and by extending the period of time being measured.  Quarterly is good, 6 months is better…and so on.

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Dealers can add $300K + profit a year with investment of knowledge

The knowledge you need is right under your nose, your Used Car Manager.

Used Car product knowledge. Your salespeople need to know what’s on your lot and they need to know more about those non-brand vehicles than your customers. The result; 10% better turn on your used car inventory.

If you’re a Honda dealer with 100 used vehicles and 40 of them are GMCs, Fords and Chevys, the more you know about those vehicles, the better you can improve a 45 day turn into a 40 day turn.  Just that 5 days alone translates to 9.1 turns per year from 8.1 turns per year.  That’s 100 additional sales at $3,000 per copy (if that is your front and back for late model used vehicles).

The investment is simply taking the available information and making sure that your salespeople have access to it and spend their ‘standing around’ time studying it.  People who come to your lot and find that nobody has any in-depth knowledge of their off-brands, are less likely to buy them because they don’t feel that the dealership has any investment in the product that they have on their lot.  When the dealership presents product as an ‘after-thought’, that is the way it is perceived.  And if it is perceived as an after-thought, the value of that product diminishes.

This is not an ROI on money spent, it’s an ROI on time spent and it’s a pretty damn good return because going forward, you are improving how your salespeople approach their job.  They are approaching it as an expert rather than someone just trying to move metal.

If you have a better turn rate than 45 days to begin with, the ROI can be even greater with a 10% improvement.  A 30 day turn dealer who improves to 27 days goes from 12.166 turns per year to 13.518 turns per year.  That’s more than 100 additional sales per year, it’s more like 138.  138 times $3,000 = $414,000.

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Month–to–Month is killing a dealer’s market performance

You are successful, despite yourself.  You are in a business where you sell something people want and need.  The potential for big success is highly probable.  Unlike a lot of businesses (like restaurants) that have a low probability for success.

I’ve been told there are dealers who get their marketing budget on the 4th of the month based on volume from the previous month. ..They’re budget for the current month!!!!

Pardon me while I gulp.  This is incredibly poor planning and a wonderful way to either spiral into oblivion or, at best, use inferior methods and pay too much for them.

Let me count the ways:

  1. Cost: Everything cost more when you do it on the fly.  And, a couple of weeks to do the things you want in marketing is…on the fly.
  2. Systematic: Taking pot shots is not systematic. It is the opposite.
  3. Consistency: Marketing is consistent exposure to the right people. Explain to me what is consistent about getting your budget on the 4th and then trying to deploy over the next 3 weeks. Ok, that’s consistently poor planning.
  4. Efficiency: Intelligent direct marketing can’t be launched in a couple of weeks. You’ll have to settle for the least scientific methods, but hey, you will also have to pay more for them.
  5. Market Performance: Your volume; if it goes up and down with the market, you’re treading water.  If you want to grow you have to out-perform the market, not out-perform yourself.

Month to month planning is not planning at all.  Why do you think major companies do their reporting by quarters?  That’s 3 times the amount of time that you use.  Because they know something you don’t know? And, they set up their marketing on an annual basis and then review it on a quarterly basis. It’s called foresight.

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Does demand for your brand dictate your market performance?

Yes and No.

Yes, less demand for your brand means less of that brand sold in relationship to other brands in your market area.  That’s a given. I’ve seen this situation mitigated, however.

Your dealership can increase market share even when demand for your brand is down.

  • Gaining a bigger share of your brand against same brand dealers in your area
  • Gaining used car share: Your competitors here are more than just same brand competition, it’s all brands and Independents as well.

Doing both of the above will mitigate the downward trend and in some cases, reverse it.

How do you do that?  You can give cars away, but let’s not go down that road.  Or, you can systematically keep your marketing in front of the ever changing list of those most likely to buy.

Well, you have to know who those people are first and since that list of people keeps changing (albeit, slowly), you have to have something in place that continues to market to that ever-changing list of people.  (The data does exist, talk to me)

Will they all buy from you?  No.  Will they all buy from anybody?  No, interest in buying does not always ensure a purchase.  However, ‘most likely to buy’ is a hell of a lot better than ‘who knows what they’re up to’; which is what most direct marketing is about.

Look, seriously.  Marketing doesn’t necessarily cause people to buy.  But, continuous targeted direct marketing acts as a ‘tipping point’ or Accumulative effect of multiple exposures at opportune times.  And, doing it regularly, produces gains in your market share: More ‘tipping points’.

Picking up 8, 10, 14 or 20 additional sales each month with this approach makes all the difference, especially if demand for your brand is down.  If demand for your brand is up, you’ll be up even more!

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Facebook and Auto Marketing – a perspective

Today’s conventional wisdom is as hollow as a smiley face or, in this case, a ‘like’.  Your dealership just has to have a Facebook page, you just have to have ‘likes’, you might just have to have your head examined!

Exposure is very important.  People need to know you exist.  Facebook can help that to some extent.  It does give you a chance to touch people in the avenue it provides.  As for ‘likes’, what do they mean in reality?

Not much, unless those ‘likes’ click through to your web site and actually view your inventory or other aspects of your dealership. And, not much unless those ‘click throughs’ are in significant numbers and those numbers are represented by people who are actually interested in automotive sales or service.

So, let’s put this in perspective.  You have a location and a sign.  Every driver that goes by your dealership sees you – that’s an element of exposure, right? If you also have a sign that asks folks to honk as they go by, that’s a ‘like’. This analogy is pretty accurate.  Did you interact with those ‘honk-likes’? Not really.  Same thing with a ‘like’ on your Facebook.

So, to make Facebook relevant in terms of creating opportunities, you have to touch as many people as possible and get them to interact – get them to your website, which is a form of interaction.  50, 100, or 1,000 ‘likes’ does not do that on its own, a click through to your website, however, is exposure, interaction and possibly opportunities.

Use your head.  Facebook for marketing a dealership’s sales and service is only relevant if many thousands of interested people actually see it, otherwise it’s just a cool looking gimmick.

When you measure your success or lack of success of Marketing initiatives, you should measure consummated transactions and market share growth…PERIOD. Measuring anything else is folly.

If you want to quantify this, check the ‘likes’ you received in the last 2 months and see which ones of them actually consummated a transaction at your store.

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Touching the right people

Let’s  say there is a person who lives within a 15 mile radius of your dealership who is going to buy a vehicle sometime over the next six months.  Let’s also say that this person is considering a brand you carry and let’s also say that they are even considering buying from you.

Would you say that it would be to your benefit to have mail, email and perhaps Facebook (or other apps) delivering your message to this person on a consistent basis during the approximately 6 months prior to this person ‘pulling the trigger’?

Absolutely: Regardless of all that is stated above that is working in your favor, you are still only one of this person’s many options.  By staying in front of him/her during their buying cycle, you are keeping your dealership’s option in play.

This is called Intelligent, Consistent and Direct Marketing.  The result of this approach is that while consistently fishing where the fish are, your market share will show improvement.  And, I say market share instead of volume, because neither you, I or anyone else knows how many vehicles are going to sold in any particular month.

How do you find the right people to ‘touch’?  By using data that identifies people who have shown interest in automotive sales and/or service.  This data is available through the programs that we (AP Level 4) have been providing over the past several years.  Our clients unilaterally show strength in market share as well as out-performing the market share of the brands they sell.

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As the market slows down in 2016

2016 will be the first year ‘hangover’ from the pent up demand that drove 2014 and 2015.  As a result, it is doubtful that auto sales will surpass 2014 or 2015 in volume.  There are no factors in place such as a robust economy to boost sales, because the economy is anything but robust.

My prediction is that used vehicles will match or slightly exceed 2015 levels, but new car sales will lag.

If you are a dealer who is also a ‘knucklehead’, you’ll only look at your volume to assess your success.  If you are not a ‘knucklehead’, you will pay close attention to your overall monthly market share based on actual registrations in your area.  You can’t get blood from a stone, but you may be able to accumulate more stones than the other dealers in your area.

I’ve only spoken about this a hundred times, but it remains true: There are only so many cars that are going to be sold in any particular month based on the demand of the market.  When the market tanks, your job is to tank less!  Market share is the only accurate measurement from which to make that assessment.

Call me if you need help (205) 967-9405. I can put a market share study together for you – time permitting.

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The 2 best ways to measure the success of direct marketing

No, the first one is not how many people came in with a mailer or to get a premium.  That would be called anecdotal evidence; we’re looking for actual quantified results of your performance in relationship to how much you spend.

The first best way is to determine the ratio of INFLUENCE the direct marketing against your dollars spent.  INFLUENCE should be measured during a reasonable period of time from when the postal, emails or other direct methods of touching a potential customer was delivered and the resulting sale or service RO that ensued.  Usually, 2 months is a good cut off point because you would want to touch those people at least that often due to the length of people’s buying cycles which can vary from a couple of days to many months.  Those who take many months to pull the trigger would require being touched by your ads on a somewhat regular basis for the duration.

So how do you quantify INFLUENCE?  You take your marketing manifest (at the household level) and match it to your sales and service ROs during the appointed period of time (in this case, 2 months).  INFLUENCE is derived by what percentage of your total sales were people you marketed to (or serviced in the case of service).  If your direct marketing relates to 15% of your total sales during the 2 month period, the INFLUENCE factor for your direct marketing is 15%.

The diminishing return factor now comes into play.  If you spend $25,000 over two months for 15%, can the same system get you 25% if you spend $35,000?  At what point are you spending efficiently and at what point are you over-spending?  This is what you monitor.  Also, over time, does the same ‘spend’ grow in influence or decline?  If it declines, your method of creating a marketing list (or your marketing company’s) has a built-in expiration or ‘shelf-life’.  If it grows, your method of list creation is always refreshing the list with the right people, dumping the wrong and creating a pipe-line.  That’s the best of all possible worlds for direct marketing.

If you find that you are marketing with the same dollar amount every two months (say, $30,000) and the influence continues to grow, you’ve learned two things.  The methodology for list creation is sound and you have been building a pipe-line.  As an example, let’s say the first 6 months you average 18% INFLUENCE and the following 6 months you average 27% INFLUENCE with the same ‘spend’.  That’s a very good sign that you are efficiently building a pipeline that will allow you to eventually reduce some of your ‘spend’ elsewhere. One example of a list creation that has a ‘shelf-life’ is using ownership data.  One example of list creation that grows is using behavioral data.

The second best method is measuring your month to month MARKET SHARE.  This method would be the very best of the two if all things were always equal…but they’re not.  The factors that have to be taken into account when looking at market share are:

  • Am I spending the same amount of money on marketing each month?
  • Do I have a consistent inventory?
  • Does the demand of my brand (Ford, Toyota, etc.) stay constant?

If the above were always true, your month to month MARKET SHARE would be the best way to determine if you are effectively marketing.

A note about MARKET SHARE:  Use the registration data from Auto Count an Experian Company in a radius that is reasonable for your market (15 miles in a metro area, more in less metro areas).  All new registrations and used registrations going back to model year 2008 or 2009 will give you the number from which to compare your sales numbers.  Are you getting a bigger piece of the pie going forward, or are you slipping?  You MARKET SHARE is the only accurate and quantifiable way of determining this.  There are only so many cars sold in a month.  You may want to beat last month’s numbers, but you are heavily restricted to how many vehicle sales the market will yield.

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WHY do DMS providers limit historical data to 5 years?  There is a wealth of information that can be used with cleansed historical data well beyond 5 years.  For starters, the majority of people keep their cars for more than 5 years now-a-days, in case you haven’t noticed.

WHY do dealers measure success of marketing by ‘UPs”?  Tracking market share vs. dollars spent on advertising is infinitely more accurate and useful.  UP’s can be anyone, usually people who are looking for a freebie which takes time away from servicing serious buyers.

WHY do UCM’s not keep track of which cars are selling in their market?  Auto Count gives you registration data for any mile radius you want and it costs so little, it’s embarrassing.

WHY do you train your sales staff to take ‘control’ of prospects by answering their questions with questions?  It isn’t easy to hold gross with a pissed off prospect…if they buy from you at all.

WHY do dealers employ staffed sales events?

  • They cost money.
  • They cost reputation.
  • They cost market share on at least the next two months.
  • They alienate your sales staff.  But, maybe you don’t care if you alienate your sales staff because it’s always been a revolving door anyways.  Staffed sales events will guarantee that the door stays revolving.

WHY do dealers allow DMS providers to profit from the dealer’s data access to vendors and not even share the proceeds?  Oh, that’s right, they are ‘protecting’ it….

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It’s a War

All of the first volleys have been lobbed by Reynolds and Reynolds.

They are probably going to succeed in defeating at least a couple of companies whose business model is to extract a dealer’s data for various purposes (all legit, I might add).

Authenticom is one of the main targets because they dare to provide a service to dealers and vendors that doesn’t line the pockets of R&R.  They will probably be the first casualty in this war as R&R continuously disables Authenticom’s data access – even though the dealer has asked, requested and contracted Authenticom to do just that – extract their data!  They’re the grocery store in the neighborhood that refuses to pay for protection.

It’s like you hire a butler to take care of your house and he takes it upon himself to only allow your invited friends and family to enter your house if they pay the butler a large sum.  Once he does let them in, he will require that they continue to pay him.  And, if you try to fire this butler, he requires a larger sum to go away or he will take your house with him.  Can you say extortion?

It’s a war that eventually Reynolds and Reynolds will lose, but the cost to all who have contracted with them as well as all of their vendors, will be great.  By the time the enemy (R&R) is defeated, they will retire rich in defeat on some island in the South Pacific while the world they left behind picks up the pieces.  ADP (now CDK) anyone?

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Reynolds and Reynolds: We get paid on both sides of the transaction

Pretty sweet arrangement. If your data were your daughter, you could pay big bucks to Reynolds and Reynolds to watch after her while they rent her out for even bigger bucks. To become a Certified Reynolds Integration partner (and have access to your daughter), the fee is in the range of $60,000 to start…to start!  Each ‘date’ with your daughter then costs a bundle as well. Remember, you, the dealer, are also paying for the privilege of having the daughter (data maintenance).

Reynolds has always been pretty much a one-way street vendor for dealerships, but when UCS bought them a few years back, they turned up the extortion-like racket to new heights.  The Mafia could learn a few things from these guys. In most protection rackets only the merchant is on the ropes.  In Reynold’s case, the merchant and all of their vendors have to pay homage to the ‘protector and collector’.  Try to get out of it and you don’t get your legs broken; instead you face a couple of hundred thousand dollars in ‘separation’ fees or a similar amount if you want to take it to court…you’ll probably win in court, but the attorney fees will be similarly substantial.

Someone may come to the rescue.  Perhaps Ford, GM or Honda will come to the rescue of their dealers and offer an open-ended platform that all dealers can (and will) use at a fraction of the price Reynolds is charging.  While we wait for that day to come, I would recommend having your state’s Attorney’s General go over your R&R contract for illegal clauses dealing with restraint of trade and unreasonable requirements.

I’ve gone over this before in several blogs.  Your data is only unique because of the combination of customers therein.  Each individual that you have in your data base is more than likely in other dealer’s data bases.  It’s the combination that makes it unique. Without the ability to profile (using statistically significant attributes) your customer base, you have your hands tied behind your back when attempting to scientifically grow your business or accurately measure the results of your efforts.  Vendors need to use your data for your benefit only…it’s of absolutely no use to anyone else!

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Statistically Significant Profiling – It’s your data, what are you going to do with it?

Your data is only valuable to you.  It’s worthless to anyone else. Oh, sure, we have heard tell of fly-by-night entities that have taken a dealer’s data and sold it to another dealer.  My question is, was this entity in business for more than a couple of weeks and how much could you possibly get for selling names to another dealer?

So, how do you make your data even more valuable to you?  You use it to Profile and you use it to quantify results.

What attributes set your customer file apart from the general population around your dealership?  Reynolds and Reynolds can’t tell you, but they can sure make it hard for you to find out.  They’ll hold your data hostage and tell you that they are protecting you.  What they are doing is protecting you from using it in any scientific way that might actually help you find potential customers in your market area.

There are many reasons why a dealer needs to have their data available for practical and scientific purposes.  The main point here is that your data isn’t valuable to anyone but you.  Why, because the combination of customers that make up your data base is the only unique thing about it.  Just about everyone in your customer data base is in some other automobile dealer’s data base.  What makes it unique is the whole, the combination of consumers that create the possibilities for statistically significant profiling for future sales and service customers as well as being able to accurately measure your efforts.

Another important reason for you to have control of your data (not your DMS company) is to be able to fully quantify any marketing you do.  You need to be able to match your marketing manifest with the sales and service contracts that ensue.  Counting on anecdotal evidence such as ups is not the way to measure the effectiveness of your marketing.  It needs to be quantified against the actual business that associates your marketing with the actual results, not the impression of results.



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Reynolds and Reynolds: ‘Thanks for paying us to collect your data, now it’s ours!’

Reynolds and Reynolds puts their position in a positive light by saying ‘we’re protecting your data as if it were our own’.  That sounds like a good thing, but like so many things that sound good, it’s a far cry from how things actually transpire. Reynolds and Reynolds is like a bank that gladly receives your money and then informs you that they are in charge of it.  Or, the computer company that sells you a laptop and then informs you that all the data you put on the computer belongs to them.  Hey, it’s in the fine print of the contract you signed.

I am sure there are attorney generals in several states that, given time and the circumstances, would deem those contractual clauses illegal.  Restriction of trade comes to mind.

Many vendors utilize the dealer’s data for very legitimate services, performing analytic attribute reports, creating marketing systems and many other services that help a dealer use their data to the dealer’s benefit. But, when the dealer is using Reynolds and Reynolds, it doesn’t matter to whom the dealer allows access, R&R is there to prevent anything from going forward without them getting part of the take and making life as hard as possible for any vendor that isn’t them…regardless of the dealer’s wishes.

You see, since UCS bought Reynolds a few years back, their business model was to see how much they could make from a smaller market share of compliant dealers who wouldn’t fuss about who is in charge of the dealer’s data.  Sure, they lost 14% of their market share, but they were planning to make 40% or 50% more on each client they retained by holding the data hostage.  One way is to credential vendors, at a huge cost by the way, with RCI (Reynolds Certified Integration).  This scenario is basically: Dealer pays me (R&R) to have a collection mechanism in place to collect their data.  Reynolds then sets up a system where they make a ton of money dishing it out to vendors of whom they approve, not necessarily who the dealer approves.  In other words; you pay us to collect your data and then we sell it for big bucks to the people who we can get the most money out of.  Reynolds has hit the jackpot, while telling their compliant dealers that they are simply protecting their data. This kind of protection racket is very similar to those guys who take money from merchants to make sure that the racketeers don’t break the merchant’s legs.  That kind of protection.

I guess if there were truth in advertising, Reynolds and Reynolds would have to describe themselves as a data collection and hostage company.

Oh sure, R&R will say that they can perform many of the services that those pesky vendors can perform.  That’s like saying a tricycle or a wheelchair can perform the same functions as an SUV; you’re riding on wheels, what are you complaining about?

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Honesty as a sales strategy

Sales is a science, albeit an often botched science, but a science nonetheless.

When a sales person is perceived as ‘honest’, customers tend to systematically lower their defenses.  Lowered defenses lead to a more satisfactory buying experience.

Can you be strategic in establishing your ‘honesty’?  Absolutely!  Blocking or evading questions are two easy ways to start off on the wrong foot.  Ok, how then do you positively impact being perceived as honest?

Product knowledge is a good place to start.  Here is where strategy comes into play.  I’ve discussed the ‘negative sales’ concept in earlier blogs and

Being able to bring up something negative about a product or service creates an excellent launching site from which to work.  You then counter the negative aspects of the product or service with at least 2 positive aspects that can be used to differentiate your product or service from the competition.  What can ensue now is a very productive back-and-forth dialogue with the customer, all the time building your credibility and therefore: your honesty. Remember, you were the one who brought up the first negative, not the customer. We call that ‘Preemptive Negative Selling

Always save a few positives to sprinkle into the conversation as you go forward with the sale, but always save at least one additional negative to reinforce the credibility of your discourse.  This way you are strategically achieving your number one goal of establishing yourself as ‘honest’ and credible in the eyes of the customer.

Example:  You sell Fords, you mention that the gas mileage for a Honda Accord (or similar car) is better than the Ford Fusion, however, handling and acceleration are superior in the Fusion.  Some of the positives that you hold back for using later are, perhaps the room in the back seat or the comfort of the driver’s seat as an example.

This selling technique requires your people to have product knowledge. So at your next sales meeting, go over positive and negative aspects of your brand as well as the competition to start training salespeople to use this strategy.

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Why do less than 1/2% of consumers enjoy the car buying experience?

From Automotive News April 13, 2015:  Results were based on a survey of 4,002 car shoppers and buyers from June to October 2014, as well as focus group interviews. Of those surveyed, Autotrader said, only 17 liked the car buying process as it is.

One of the major reasons given was the time it took.  It seems the magic number is UNDER 90 minutes.  Okay, that said; Do you think any of this has to do with how salespeople are trained?  let’s just say it’s highly probable – the salesperson is the entity that has the majority of the contact with the customer, so it would be extremely safe to say that it is a big factor in the dissatisfaction with the process.

Number ONE offense: Salespeople are trained to:

  1. Take control
  2. Ask questions
  3. Perform the ‘steps to the sale’ at all costs.

1, 2 and 3 are all part of the problem.  How could it be any other way?  All of the above have the unfortunate effect of creating an adversarial relationship.  It may be time to wake up and:

  1. Give control
  2. Answer Questions
  3. Let the customer direct a ‘path to the buy’

It takes skill to do the  new 1, 2 and 3 above. It takes product knowledge and listening skills. It requires a sense of understanding to know if you have, indeed, answered questions in a satisfactory manner.  It also is much more enjoyable – for both parties.

Your job now is to do things, say things that make the customer WANT to buy from you, WANT to buy from your dealership – even if you don’t have the car they eventually want.

Forget about the ‘price’ factor:

“We may not be the lowest price, but I know we are not the highest.  Here’s what you will probably have to do to find the lowest price, which may be just a couple of hundred dollars difference.  You take the price we give you and then go to these dealers (show where they are on a map that you keep with you) and hope that not only will you find the lowest price, but that the people you are dealing with will give you straight answers, etc. etc. etc.”

You want to train your people?  Train them on the word track and method above.  Price will soon become secondary as long as your prices are reasonable.

Call me at 205-967-9405 and I’ll do what I can to get you on a track to be that 1/2% that customers will call an enjoyable experience…and I won’t even charge you for it!

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You can’t control the demand for your Brand, but you can control the demand for what you sell.

Simple things a dealership can do to optimize their performance

1. Staff needs to learn how to answer questions

It starts with NOT alienating perspective customers.  Spend less time trying to control the customer and more time making the customer feel like they are in control. I know, the popular training says different, but 30 years of research contradicts popular training.  See

2. Have a ‘Chat Service’ on your website that is always available…and is HELPFUL.  I would recommend looking at

3. Use available sources of data (Auto Count,’s Star Report, etc.) to consistently review which used cars are in demand.  Don’t rely on instinct, the data is totally available to you.

4. Be systematic and consistent if you use direct marketing

  • Make sure all aspects of both Sales and Service RO’s are measured
  • Don’t rely on the anecdotal effects of traffic.  Traffic feels nice, but it’s a double edged sword (read previous blog )

5. Study actual market share using Auto Count or Cross Sell.  Don’t be fooled by ups or downs in the market. Market share is the only true indication of your performance.

6. Turn your parts department into a major profit center.  It doesn’t take that much effort to become a national parts distributor to the public.  see

7. Manage your Online reputation.  I recommend looking at

Your market share in your actual selling area (new and used) will improve.   You can’t control the demand for your brand, but you can control the demand for what you are selling!


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Forget the Path to the Sale. That’s how you want to sell, not the customer

The ‘Path to the Buy’

Let’s flip the Path to the sale on it’s head. We’ll call it the Path to the Buy.  Why?  Because the ‘Path to the Sale’ is the way the dealership wants to sell cars.  The ‘Path to the Buy’ is the way people want to buy cars!

Let’s do this strictly from the consumer’s standpoint.  If we can facilitate the ‘Path to the Buy’, we can eliminate most of the anxiety and other contentious ‘stuff’ associated with the currently taught and practiced system.

The consumer starts to look at vehicles, mostly on the internet, prior to making any contact with a dealership.  Okay, we already facilitate most of this by having a website and inventory on our lots.  This part is already in place – our product is visible.  We have facilitated this phase of the buying cycle.

The ‘flip’ starts when the first contact is made.  Here is the first thing that should be said (or written) when the first contact is made: “Whether you end up buying from us or someone else, we are here to provide one thing; straight answers to your questions – what do you need to know? How can I help you?’  Then, answer the questions or find the answers to their questions and get back to them ASAP.  The only next question you ask after you have answered their questions is ‘Tell me what you want to do next and I’ll be happy to assist you’.  Then shut up.

This is the ‘flip’ We’re now asking the customer to direct us to the next step.  If the next step is ‘nothing at this time’?, you say, “i hope I have helped you in some small way – my name is John Brown, let me know if I can be of service to you in the future’.  You notice that the salesperson’s name is more effectively inserted in the interaction at a more appropriate time here.  Your name is not as important as getting to the customer’s questions, so you start with the questions and answers, not your name.

‘Nothing at this time’ is going to happen only a small percentage of the time. Most of the time, the customer will suggest a next step.  When they do, you arrange to facilitate that next step.  Once a customer feels they have ‘control’, you will notice a much easier path to the sale because it has now become a ‘Path to the Buy’!  They are buying, you are not selling, but you really are in a Judo fashion.  You keep making their next move so effortless that you are now a Zen master and they, without anxiety or resistance, move in the direction they want to move…and that direction is towards a purchase.  Or, at least a purchase in the near future – but only from you because this sense of well being is not going to be provided by your competition.  They only give the customer anxiety, you have provided the opposite.  You win by allowing them to win all through the first stages of the ‘buy’.

Sure, the actual final deal may not be exactly what they want, but they’re in such a state of well being that they will me much more amiable to making concessions on the deal side because now…everything is viewed as REASONABLE.

The ‘Path to the Buy’ is like Judo.  The ‘Path to the Sale’ is like mud wrestling with a pig.

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Don’t you think it’s time that we supply what the market wants? – Experts

In just about all transactions and services today (due to the internet), people expect to encounter ‘experts’.  When confronted by vague or meaningless answers, we are now categorizing those encounters as ‘a waste of time’.

In the car business, you too can be viewed as a waste of time. It’s easy.  All you have to do is gear up your sales staff to be sellers and closers rather than product experts.  Most of you are already doing this…and you are viewed by your customers as ‘a waste of time’.

Congratulations!  All of those high falootin’ sales experts have given you the much sought after moniker of ‘waste of time’ in your quest for sales.

There is a store in Florida that has become the number one Lexus dealer in the world.  They did it by simply ‘not being a waste of time’ to their customers.  They made each part of their team ‘experts’.  Experts in product (both new and used), experts in financing, experts in fashioning deals, experts in how to deliver and demonstrate a vehicle.

The name of the store is JM Lexus.  They don’t have salesmen, they have product experts. They have delivery experts and just about any other type of experts that a serious customer would expect from a place where they are going to spend $10,000 to $80,000!

So, you say you only want sales people who think they are at a rodeo and want to ‘close’ the deal?  Think again.  That’s not what a serious customer is looking for.  They are not looking for an expert in closing them, that would be absurd.  That would be like seeking out an expert in manipulation.  We all know how much we like to be manipulated.

Since the internet, email and digital interfaces have taken over the world, the whole of Western (an a lot of Eastern) civilization has become highly familiar with a thing called a ‘help desk’.  If someone at the help desk were to stop helping you and start selling you, how would you view that ‘help desk’?  A waste of time!

What does it take to change the culture?  Putting people in your staff at the position they are best suited for and then having them become experts.  This means that your front line (formerly sales people) spend their time learning everything about their inventory both new and used.  They have to answer product questions and give information regarding the products that you have on your lot to people who, prior to this arrangement, often knew more about the product than the salespeople did.

You have some great closers?  Make them experts in fashioning deals.  They now become an extension of your F&I department.   They study financing and all facets of how to put together an attractive deal, they don’t pretend to be product experts, because that is the department of the front line people.

One more thing, JM Lexus has experts in delivery.  That’s all they do, deliver and demonstrate vehicles after the transaction has been completed.

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Simple Strategy – Keep track of demand

Demand of particular used car models is very easily determined. No, not on your lot, that’s not a microcosm of the market, that’s happenstance based on your used inventory.  Don’t be fooled by this kind of evidence that is so restricted by your particular offerings.

One great source is Auto Count, an Experian Company.  I suggest you take a 25 mile radius around your dealership and query the last 4 month’s registration of used cars models and years.  Sort them from most to least.  You now have a road map for which cars to seek out at auction.

Once you have more of the cars that are in high demand based on actual data, you will incrementally increase your used car sales, regardless of all the other factors – price, processes, salesmen who can’t give a straight answer to a customer’s questions and all of the other things that you might do to discourage sales.  It’s fundamental.  Have more models people are seeking and you’ll have more opportunities for sales.

I don’t work for Experian, but I find Auto Count to be indispensable in all market essential measurements.   You may also use the ‘Star report’ that is part of’s service.  It only lists the top models in demand and the ones with the shortest supply, but even though it’s not as comprehensive and doesn’t allow you to determine mile radius, it’s still better than working from ‘feel’.

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What causes a dealership to overtake their competitors?

Brand   Personnel    Processes    Capacity    Marketing    Used Car Selection    Price

It takes all of the above to annihilate your competition.  It takes at least 5 of the above to make any noticeable move.

No one of the above will make much of a difference, but there is one that you can’t completely control – Brand.

Brand demand is not in your hands except in those few instances where a good salesperson tips the scales with their knowledge and personality. However, you wouldn’t have had the opportunity unless the customer was at least considering your brand to begin with.

Personnel comes into play here because people buy from people they want to buy from. That also includes Processes, which is an integral part of Personnel.

On this subject, why do we continually train salespeople to alienate customers?  Sure, most of the big shot trainers possess energy, excitement and most of all, ether on their side. They promote methods that would not work on them no matter how expertly those methods were deployed.  To make it worse, it’s a rare student of these methods that can deploy them expertly!

So, what happens is that those with the least training in these methods are usually the ones who sell most effectively. No wonder dealerships end up taking sales training out of their budgets.  If the sales training was effective, dealers would flock to it and increase their training budget, not eliminate it.

In just about every other industry, sales training concentrates on product knowledge and how to communicate that knowledge – not so in the car biz.  Most accepted sales

training is counter productive.  It produces customers who loath dealing with your dealership and salespeople who end up loathing the methods they are asked to employ.

There are better and less expensive ways to address this.  I welcome the opportunity to discuss this with any of you GMs or DPs out there who would like to get into this further.

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Some things remain the same – the Golden Rule of Marketing

Golden Rule of Marketing: Repeated exposure to the right people yields results.

This hasn’t changed.  The internet adheres to it. Social Media adheres to it and everything that has not yet been invented will adhere to it.  It’s going to be the Golden Rule until we are replaced by androids or fall under the grip of a socialist, Atlas Shrugged type of collectivism!

There is no Silver Rule, but we can go down one extra rung and say that there is a Bronze Rule (what is this, Obamacare?)  The Bronze Rule: Consistency of message.  This is where judgement and creativity can be infused to hone the most appropriate and digestible message.

Now, in order to achieve the Golden Rule, you can broadcast or narrowcast.  Broadcasting to repeatedly reach the right people could be very expensive.  That’s fine if you’re the biggest, richest dog in the yard, but most dealerships have to look at narrowcasting.

Broadcast media does offer a form of narrowcasting:  You have the option to use radio and TV to attach your ‘brand’ to certain types of listeners/viewers, but, after all is said, it’s still broadcasting.

Another way of narrowcasting is to pick a specific audience based on demographics or other easily selected factor and use mail and email to consistently approach those people. However, since you don’t have any indication as to when any of these people might be looking for a car (if you are a dealership), you are still, in a sense, broadcasting, only to a smaller audience.

You can also attack this at the ‘behavioral’ level.  This is what the new media attempts (and succeeds) to do.  Direct marketing can also use ‘behavioral’ data to achieve this ends using email and mail.  Even though email is a lot less expensive than mail, there is a problem: Regardless of how appropriate the target (audience), there is still a good portion of the population that pretty much ignores email that doesn’t come from someone they know.  That is why using Postal (that old dinosaur) is still a necessary expense (evil?).

How can you tell your choices are working?  Well, before you get into that, you have to remember, marketing is a marathon, not a sprint.  Repeated Exposure!

This is where measuring your market share over a statistically significant period comes into play as the only real way to make an assessment of your overall marketing strategy.

Event sales can be profitable, but in order to do them in a way that adheres to the Golden Rule, you would have to do these events pretty much all of the time…until the cost and the lack of credibility drives you into insolvency.

It is amazing how, with every new diversion, it keeps coming back to the Golden Rule.

If you are a dealer and would like a market share study done for your store, contact me.  I might be able to provide one for you at no cost depending on the demand and my ability to produce them.  Seriously.

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Measure the Right thing

Your monthly numbers don’t tell the story. Yes, they tell you how many new and used cars you sold – and you can calculate your front and back end gross. But, it doesn’t tell you how you are performing within the potential the market will bare.

Why is that important?  Riding high in a strong market can obscure your actual performance.  I often hammer the concept of ‘market share’ and I will do it once more.

Let’s say that in a 15 mile radius of your store, every month 1,500 new cars are sold and 1,500 used cars are sold (2007 model year and newer).  In this imaginary world, your monthly numbers would tell you all you need to know.  In April you sold 200 = 6.66% market share. In May you sold 220 = 7.33% market share, etc.  But in the REAL WORLD, the number of cars sold in that 15 mile radius of your store is NOT the SAME each and every month.  In the REAL WORLD you sold 200 in April and there were 2,000 cars sold = 10% market share and in May there were 3,000 cars sold and you sold 220 = 7.33% market share.  If you had gotten your April market share (10%) in May, you would have sold 10% of 3,000 = 300 cars!

It’s time to measure the REAL performance of your store.  Subscribe to Auto Count (or Cross Sell) now and start measuring how you actually are performing in your market. Then you can go back to your months with the best market shares and actually analyse what you did or did not do to achieve those highs and lows instead of having the real picture obscured by your volumes those months.

Every dealer I work with is surprised by which months in the past turned out to be their best performing even though their volume might have been so-so.  In other words, they were able to see which months they got the most out of what the market had to offer and then were able to determine which things got them there and which things may have given them the illusion of success during an up tick in the market that they didn’t take full advantage.

If you need some assistance in putting together a spread sheet and graphs, let me know and i can send you some templates.

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PMA, Really? Put your best listener on the Line!

My shortest blog to date:

Subject 1: Primary Market Area is a ruse.  Often it is determined by the OEM (Original Equipment Manufacturer) in an arbitrary manner based on a map.  When an analysis is done historically of a dealer’s DMS (Dealer Management System), there will be some correlation between the PMA and the dealer’s actual ‘footprint’, but only some! Sure, geography has its influence on a dealer’s footprint, but only to a certain degree. Before you buy into PMA, do an analysis of your sales and service customer’s geographic location and make a real PMA that actually means something.

Subject 2: Try putting your best listeners on the ‘phone front line’.  When I say ‘listeners’, I mean someone who actually hears what the caller is saying, digests it and can give satisfactory…NO…Excellent answers.  You want phone calls to turn into UPs?  Have the callers want to come by and see a car because someone actually listened to them.  You might as well give it a try, you can’t do worse than you’ve been doing.

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Stop trying to create ACTION at your dealership

You want to create Action?

Give cars away!  Sell them for $6,000 below cost and advertise the hell out of the fact.

You’ll have to fight the crowd off.  You’ll lose money on each deal.  You’ll spend money on advertising AND you’ll soon go out of business.

Creating excitement is what you want, right?!! – Well stop it and start thinking logically.

Successful marketing strategies require consistency.  It requires Logic and keeping your name and message in front of potential buyers on a regular basis.  Face the facts, people buy when they are ready to buy – maybe from you – maybe from someone else.  Your performance in the market (i.e. market share) depends on just a few people choosing you over your competitors. It’s a game of inches, not yards…or crowds…or the appearance of activity.  To grow market share it’s a fine edge, not a battering ram.

Okay, so what should you expect from a marketing company?  You should expect something logical and systematic.

And, how do you measure the effectiveness of your marketing?  You measure by how it affects your market share…PERIOD.  Any other form of measurement is the appearance of success, not the reality.  And when I say market share, I’m talking new and used in a reasonable radius around your dealership.  Most of my clients have me look at all the new cars that are sold (maybe in a 15 miles radius in a large market) and all the used cars from 2006 model year and newer.  We eliminate the older used cars because those are not direct competition for most franchised dealers.  When you look at the month to month market shares, we regularly see that the biggest gains by month do not always correspond to the biggest volume months.  Hey, it’s the market!  Markets fluctuate, you don’t have control over that.  Some months people just don’t buy as many cars as they do other months.

Just keep your eye on the real ball and stop expecting miracles from the next best marketing ploy.  If it’s not systematic, it’s just a bunch of hot air.

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How to systematically keep in front of the likely customer

Direct marketing is the present and the future.  Even mediums that are not inherently direct marketing vehicles (TV, etc.) are looking to get something into the hands of the most likely buyer of your services.

With that in mind, imagine that the most comprehensive way would be to have your dealership’s message in front of everyone in your market (in their hands or on their computer screens) at least every other month.  In the case of Emails, probably multiple times in each 2 month period.

This could be cost prohibitive.

Let’s say there are 700,000 households in your dealership’s footprint (your market area that you have the majority of your sales and service customers).

From our experience, we know that a good mix of postal and email gets the best results. Postal because it’s hard to ignore if it’s big enough and email because it’s relatively inexpensive to get it front of people.

So, let’s say that you have arrived at the 1/3 postal, 2/3 email formula with emails going out twice to the perspective customers.

1/3 of 700,000 = 231,00

2/3 of 700,000 = 469,000

Postal:  at $.80 per piece delivered: 231,000 x $.80 = $184,800

Email: at $.045 per delivery with two times for each = $.09 per x 469,000 = $42,210

That is a total of $227,010 every two months to completely expose your footprint with your message on a consistent basis.

Stay with me here.  Let’s say that $227,010 every two months is not financially feasible, but you still want to approximate the results.  You can.  Behavioral data that tracks automotive purchase (new and used) and service interest should now be employed to eliminate the households that do not show this kind of interest.   In any given month, these ‘hand-raisers’ represent between 10% and 30% of the households depending on the month and depending on the market.  Our experience has shown that the average is somewhere in the 24% range.

So now you create a marketing list every two months that averages 24% of the 700,000 households = 168,000 households. Since research has shown that these ‘hand-raisers’ buy and service at about 7-9 times the rate as the non ‘hand-raisers’, we can glean from this that using the 168,000 households will return almost as much as the 700,000 households, but at a more affordable price.

Using the 1/3 2/3 formula above:

55,440 postal @ $.80 per =$44,352

112,560 email @ $.09 per = $10,130

Wait, there’s more, this can be reduced even further.  What about the brand you sell? What about the demand of the kind of used cars and service you perform?

By analyzing the attributes of your existing customer base (new/used sales and service) and looking for the statistically significant attributes that separate your customers from the population in general (in your area), a ‘map’ can be laid over the ‘hand-raiser’ data to eliminate those less likely to do business with you.

So now you can work with a new marketing manifest (list) every two months that is more in the range of 80,000 or 90,000 or 100,000 households to lower your cost of achieving almost the same results, but instead of spending over $200,000, you can spend $30,000 – $45,000!

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Live’n in a Fool’s Paridise

Today I got my Auto Count numbers from Clark County in Nevada. I have been keeping track of Hyundai market share in that area for a prospective client and I noticed something.  In a 15 mile radius of the dealer 408 new Hyundai’s were sold in May and 375 were sold in June.  Those two numbers represent a huge increase in volume over anything in the previous 2 1/2 years.   Yet, Hyundai’s market share among new cars, although on the up-tick, didn’t surpass the high of 10.192% achieved in July of 2012.  The difference between July of 2012 and May of 2014 is that the market was way down in July of 2012.  2139 new cars were sold in July of 2012 as compared with 4067 sold in May of 2014 in the Las Vegas market (15mi radius from dealer).

If you didn’t completely grasp the last paragraph, read it again and retain…one, two, three. There was a big turnabout in this particular market.

As a result of this, the dealer (the Hyundai dealer, now a client) didn’t really appreciate how good July of 2012 was.  But, he was overly-impressed with May of 2014 even though everybody was selling more cars in the area and he was just keeping up with the trend, not surpassing it.

All too often I see dealer’s trying to pat themselves on the back for a month in which the market soared, even though the dealer, himself,  was just barely keeping up with the trend.

Conversely, I have often witnessed a dealer saying they had a so-so month even though they were in a terrible market trend and the dealer, himself, actually gained market share…substantially.

‘Ok’, says the dealer,  but it should only matter how much I take in regardless of what the market is doing.  ‘It’s either more dollars in our pocket or less, right?’

Yes, it is…in a vacuum.  How about the money left laying on the table in the form of lost market share?  Or, how about understanding that you ‘reached into the other guy’s pocket’ on a down market?  As in – ‘it should have been much worse than it was this month, except I stole a bunch of deals from my competition.’?

How can you expect to identify what processes, marketing and internal capacities worked and which ones didn’t?  If you’re not measuring the results against a consistent formulation (i.e. market share), you really cannot measure anything with any amount of accuracy.

Live’n in a fool’s paradise.

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Paying big bucks for anecdotal evidence – a costly trap

Here is an experiment that has some telling implications.  Ask 100 people who are looking at cars on your lot and in your showroom over the next few days where they are.  Don’t ask people in service as they are more likely to be paying attention to where they are because they have already committed to a transaction.  You have to politely ask them to not look around before they answer (no peeking).  If you are a Ford dealership, chances are that 95 to 99 of the people will say they are in a Ford dealership.  How many of them will know the ‘name’ of the Ford dealership?  90? 80? or maybe even less like 50 or 40?

Why would you run this experiment?  A couple of reasons.  The obvious one is that people on the lot looking at cars to possibly buy are not as aware of your ‘brand name’ as you are.  Does this mean that if more of the people knew the ‘name’ of the dealership, you would sell more cars?  Doubtful at best.  Yet, there are companies out there that charge a fortune to interview people on your lot to determine ‘where’ they heard about your dealership.  This is called ‘anecdotal evidence’.

People don’t pay attention to the same details you think are important – they have their own individual set of priorities that make anecdotal evidence a poor guide to fashioning your business decisions.  Take the dealership that hired one of these customer interviewing services to determine from which advertising medium the most customers heard or saw your dealership mentioned (with the obvious intention of guiding you to use that medium more).  In this case, Radio was the overwhelming winner – yet the dealership didn’t have any radio ads running and hadn’t for over a year!

You see, people will cite the medium where the most dealerships ads are heard or seen in that particular market.  The customers are constantly hearing radio ads for car dealerships in this market and, as a result, they will cite radio as the place where they heard about this dealership – even though this dealership doesn’t advertise on radio.

Remember, even when they are standing on your lot, many don’t even know the ‘name’ of the dealership (other than it is a Ford or Toyota dealership).  I don’t think you need to hire a company for 20K, 30K or more to tell you which medium is most used in your market.  You can figure that one out for yourself.

If you want to question customers and get information that may actually have some use, question them after a transaction (when they are paying attention).

Here are two good questions: What features of the car they selected helped them make their decision?  And, what did they like or dislike about their experience buying from you?

You’ll still get a wide range of answers, but at least this particular anecdotal evidence is derived from people who are paying attention – they just bought a car from you! (and even at this point, not 100% of the people will be able to tell you the name of your dealership)

You want to measure results? Keep track of your market share each month and look at it over extended periods to determine what worked and what didn’t.  You’ll still have to do some guessing, but at least you are working from ‘results’ information rather than anecdotal evidence.

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The dealer’s dilemma – logic vs. emotion

“Ups” are not sales. Too many “Ups” brought in under dubious conditions (promotions, prizes, etc.) will chase away ready buyers.

If you don’t think so, then just continue to operate out of emotion and lose market share and profits to all of your competitors.

Logic:                                                                              Emotion:

Market Share                                                                 Month to Month sales

Training Salespeople to NOT alienate                        Training Salespeople to ‘control’

Marketing systematically                                             Event Sales/Traffic Builders

Stocking Pre-Owned based on Market demand        Stocking by ‘feel’

Product knowledge                                                         “Needs Analysis”

“Be Backs” do come back                                              “Be Backs” don’t come back


How about recording phone calls?  What’s the point if all of your critique is based on counter-productive instruction?  The person calls with specific questions and before the questions can all be answered, the salesperson starts asking questions of their own?  If you are the product of the bad training that exists in most cases, the review of this phone call will be destructive, to say the least.  3 to 5 times more phone calls result in sales when their questions are satisfactorily answered than when the salesperson ‘blocks’ or ‘evades’ their questions.  I’ve got 25 years of research that proves it, so if you don’t think so, you’re operating on emotion, not logic.

Here’s another one: Month to Month Volume vs. Market Share.  Sure, volume is a factor in your growth as a dealership, but let’s talk about sustained growth.  You can be easily fooled during strong months as well as being fooled during not so strong months based on volume.  If the number of cars sold in your region (say, 15 mile radius, new and used – excluding older used cars that you wouldn’t be selling anyways) is up 20% in a month and your volume is up only 10%, you might be congratulating each other on a good month, but you have actually lost potential sales.  Conversely, if the market is down 20% in a month and you were only down 5%, you think you had a so-so month, when in reality, you gained market share.

If you are paying for Auto Count from Experian or Cross Sell from R.L. Polk and not looking at the market, you’re really wasting your money paying for these services.  You need to know what the immediate market around you is doing to accurately measure your progress or, in some cases, demise.  If you don’t know how to do this, ask me and I’ll show you.

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You have been discouraging people from buying all along

Your growth in the market depends upon the following pillars:

  • Processes
  • Inventory
  • Brand Demand
  • Marketing

If some person from a large and prestigious advertising agency (who shall remain nameless) says that it’s all about marketing, they are a big time KoolAide drinker.

I’ve discussed opportunities vs. capacity and I have discussed opportunities vs. conversion. Your capacity should be looked at as your potential (inventory, staffing, brand). Conversion is how far you get towards realizing your potential.

With that said, let’s look at opportunities vs. conversion.  Forget about what you think your closing ratio is, you’re most likely very wrong.  You don’t count all of your opportunities and you know it.

Years of studies have shown that just on incoming sales phone calls, the closing ratio is between 1% and 3% – that’s all!  800 sales calls come in a month and you can only count on between 8 and 24 of those people who called are going to buy from you.  So, there are opportunities that are created by your marketing, signage, brand and reputation that are either being discouraged from buying from you, or in most cases, discouraged from buying anything in the near future.  A study of 1063 people who visited a very prominent Toyota dealer in Texas who didn’t buy during their initial visit were tracked using tax data from Harris county.  Over a 3 month period, only a handful of those people (less than 30) bought from other dealerships during that three month period and only ONE bought from another Toyota dealership. However, a larger number did come back and buy from this prominent dealer in the same period.

What does this tell you?  Just what I said, your sales training discourages people from buying because it alienates the buyer.  Yet very well known (again nameless) training professionals teach a method that would not work if used on them…or you for that matter.  So, who does it work on? Aliens?

It also tells us that ‘be-backs’ do come back more often than going somewhere else to buy in a 3 month period…but not as many as put it off for longer than 3 months.

Instead of conversion of opportunities, we have strong evidence that because of the experience potential buyers get from dealerships, they put off buying for months.  And when they finally do buy, it’s more than likely not from you.

The formula for growing market share is to increase opportunities to meet the potential of your capacity, which means increasing conversion of those opportunities. From a marketing standpoint, this means staying in front of the people who are looking to possibly purchase, and, from the conversion side, NOT discouraging people from buying by using counterproductive sales techniques.

If you are interested in a low cost counter intuitive training/review program that, depending on compliance, will triple or quadruple the conversion rates, I want to talk to you.  A 20% boost in market share can mean between $250,000 and $1,000,000 a year in EXTRA PROFIT – all based on incremental sales derived from market share gain (the only way to calculate this accurately).

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Average in this Business Stinks

Average is relative (that’s how average is calculated). Perhaps you’re a fellow at the Hoover Institute at Stanford University. If you are an average ‘fellow’, you’re probably heads and heals above the common man when it comes to your understanding of economics. However, in some businesses, average just doesn’t cut it.

In the world of Automotive sales, the public perception of the average salesperson is that they are irritating and overly-aggressive.  Yes, those are the standards for selling cars.  So, average in this business is a negative.

Perhaps you are a Dealer Principle, Sales managers, GM or anyone else who works in an auto dealership.  Now, let’s play the role of a car buyer: Let’s say you have done your research and you have decided that you are going to buy either a tricked out GMC Sierra or a tricked out Toyota Tundra.  Both vehicles meet your specs.  The question now is which one do you like driving the best?

So, you visit a GMC dealership and a Toyota dealership.  All you want to do is test drive the vehicles to see which one you prefer based on how they feel with you behind the wheel.

Now, what can the experience at each of these dealerships provide that will sway you one way or the other?  An average salesperson will do nothing to make you want their product, the average salesperson will only make you trend toward the other product.  Because, the average salesperson is both irritating and overly-aggressive.

Think about it.  You need a chance to experience which vehicle you like driving the most.  The average salesperson, because of their nature, can only add a negative to the experience.  Let’s list those negative qualities:  ‘selling’ questions, unnecessary questions, lack of knowledge about the other product, even lack of knowledge about the product they sell, inability to listen and answer, etc.

However, a salesperson who has excellent product knowledge about both the product they sell and the competitor, one who actually listens to what you have to say and answers the questions you might still have – that sales person can actually make the experience at least positive enough to not drive you to the competition.  They can’t make you like something you are driving a whole lot more than what you are actually experiencing behind the wheel, but they can at least not add negative feelings to the experience.

Don’t fool yourself, unless you are a magician, you can’t change how a person feels about the ‘feel’ of the drive.  But, as they say in medicine, ‘do no harm’.  That’s not a bad way to look at it.  It takes a myriad of impressions from marketing to get a person to actually come into your dealership.  DO NO HARM and you will actually sell more vehicles.

For those who want to research some of the steps in creating a professional environment, please see my blog on ‘what is a professional environment’.

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Product Knowledge – The New Training for the New Paradigm

Traditional sales training is crap. Sorry about that to 90% of the sales training companies out there, but I’ll tell you why.  When a customer comes into a dealership armed with more product knowledge than the salesperson that takes them as an ‘up’, almost all of the sales tactics that are taught are counterproductive, annoying, confrontational, irrelevant and just plain wrong.  The salesperson doesn’t need to practice ‘needs analysis’ or any other customer grilling technique – the salesperson needs to have ANSWERS; answers to the questions the customer doesn’t know, not the ones they already know.

You’ve heard the phrase ‘we don’t want order takers, we want closers’.  Well, the problem with this is that the path to the close is wrong.  Most of the taught paths-to-sale are based on ‘control’.  Forget about ‘control’.  You can close without taking control.  As a matter of fact, you have a much better chance of ‘closing’ if you don’t try to control anything UNTIL the very end.  Why?  Because with each technique used to take control, you end up alienating and irritating the customer so that they are now resistant to being closed.

Every question that is not satisfactorily answered makes closing that much more difficult.  Most automotive sales training actually creates this situation.  You can throw 90% of sales training out the window.  Replace that 90% with product knowledge and then hone the other 10% in closing techniques and you’ll have happier customers and happier salespeople.  The salespeople will be happier because they will enjoy their interactions with the customer far more and they will increase their sales along the way.

Here is the deal: The customer contacts a dealer for something they want (a vehicle).  You didn’t prospect them out of the phone book, they came to you. As a result, the sales techniques you are being taught are inappropriate to the situation. Remember: They came to you!

So, how do you make those customers want to do business with you? Look at all the aspects of your sales training and ask yourself ‘do these tactics make a person like me (you) want to do business with them (us)?’  In most cases the answer is NO!  Product knowledge will become the key ingredient. And I don’t just mean product knowledge of your brand, I mean product knowledge that transcends your brand and makes you a real ‘car guy (or gal)’.

Most sales meetings should be an exchange of information about the products you sell, not about how you ‘didn’t ask for a person’s name or some other ridiculous ‘correction’.  You want to make yourself and your crew the sales stars you wish you had? Make them the most informed and your sales training will actually have meaning.  Not only to how professional your organization is, but to your bottom line.

And, just to address what I think some of you may be thinking at this time, if ‘price’ is still your biggest issue at closing, you are doing something wrong.  You didn’t address how you arrive at price when this question first came up…that’s just one more piece of being a product expert.

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In Marketing – There is NO SILVER BULLET

Stop looking for it, stop trying to make one out of the latest ‘thing’ that you have been sold and let’s put together a road map of how an automotive dealership actually does increase their market share.

First: Establish your month to month actual market share.

  • Look at the monthly sales of new and used cars (from 2000 model year forward) in a 15 mile radius of your store using Auto Count or Cross Sell.
  • Take your monthly sales numbers and determine what your share of the market is each month.

Each month only so many cars are going to be sold in your market, your job is to get as big a piece of that action as possible.  You have to have a measurement, the above is how you measure it.  Don’t look at one month, look at the average and the trends.

Second: Know the factors that are involved and how they are weighted.

  1. Your new and used inventory
    1. Effect on market share – 30% to 60%
  2. Demand for your Brand
    1. Effect on market share – 30% to 50%
  3. Your internal processes and staff
    1. 20% to 40%
  4. Your marketing
    1. 20% to 35%

Even if marketing accounts for 35% of your ability to positively affect your market share, there is still no silver bullet.  There is something, however, called ‘point of diminishing returns‘.  There is a point where spending more on marketing above a certain monthly budget does less and less in terms of how many sales it produces.  As an example, if you spend $50,000 a month on marketing and you average a 4% market share, spend $75,000 and average a 4.4% market share, but when you spend $100,000 a month you only get to around a 4.6% market share, the amount you spend between $50,000 and $75,000 produces a better return than the money spend between $75,000 and $100,000.  Again, you have to look at a set of months to determine this, not just one or two.  The more data, the more statistically significant. The less data, the less statistically significant.

Finding a marketing budget that does not go beyond the point of diminishing returns is one part of making an intelligent decision as far as how much to spend.  the other part is taking on forms of marketing that consistently stays in front of the right people to maximize the overall effect. And, because repeated images have an accumulative effect, there might be times when you can pull back for a couple of months and still ride the positive effects of the exposures you obtained from the past efforts.  But, you can only pull back for a couple of months before you have to start over as new people come into the buying cycle.

All this said, refer to the factors involved (processes, inventory, etc.) as these are the building blocks to a positive increase in market share.  Measure your market share in at least 3 month averages and keep this in mind.  A good month doesn’t mean anything if it’s not in context with what has happened in the market that month.  If you sold 200 cars one month and only sold 170 the month before, it does mean something if the market was static, but if the entire market was up 25% and you were only up 18%, you lost ground, you didn’t gain ground.  Conversely, if the market were down 25% and you were only down 10%, there is reason for celebration.

Even though marketing may have the smallest influence on how you do in the market, it can be the difference maker.  If your dealership is good on these accounts: Inventory, demand for your brand and Internal processes and staff, marketing can make all the difference by giving you the opportunity to ‘steal’ sales from the competition. But consistency is one of the keys here.  You want to have your message in front of the right people on a consistent basis if you want to gain ground in the marketing arena.

If you need any help with any of this, please contact me: Michael Abrams 205-967-9405

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Changing the Culture of Dealerships

One of my associates had an enlightening episode with a major dealer group recently that shows me that the culture of a dealership can be changed for the good.  My associate was presenting some factual data he had accumulated over the past several years regarding phone calls and conversion rates (to sales) to several of the managers as well as the president of this major auto group.  After a couple of hours of being drilled and seemingly dismissed by the group, my associate started to get up and leave.  The president, who had remained pretty much silent during the discourse said ‘Can you stay for tomorrow?’ much to the surprise of my associate as well as the majority of the people in the room.

The next day the entire organization was gathered.  the president then addressed them with the following: “You may never hear me say this again, but everything we’ve been teaching for the last 30 years is wrong.  We gave bonuses to sales people who said the things we wanted them to and docked those who didn’t.  I was wrong!”

The president was talking about the fact that by not answering questions by trying to control the situation (evading, blocking, over-elaborating, asking questions, etc.) instead of answering the customer’s question, statistically lowers the ratio of phone calls to sales SIGNIFICANTLY!    The statistical proof is that if 1000 sales phone calls come into a dealership each month (3 an hour, 33-35 per day) only 3% of them result in sales in the typical dealership environment.  Forget about what you think you close, it’s 3% on average.  By learning not to block or evade questions from customers on the phone, that percentage can be tripled or even quintupled!

Dealers invest in sales training – most of it is counterproductive.  Think about this:  Never is the guy with the most training the guy with the most sales.

My associate’s name is Tom Watson. He has studied this for over thirty years.  People can learn to answer questions and not alienate customers.  Tom has devised a free training site for this purpose. He has also devised a call monitoring/review system to help a dealer guide their sales people to recognize where the errors occur (that part is not free, but it’s very affordable).


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Running out of things to say…But

Over the past few years I have gone through just about everything that I have to say about the automobile dealership business. I think I’ve even repeated myself a few times in the process, although with a different emphasis each time…I hope.

Now that I’ve said that, I do want to put a couple of things in perspective.  Dealers who only look at their month over month numbers without looking carefully at how much their market yields each month are making a serious mistake.  Your marketing is supposed to help you efficiently improve your market share.  It cannot and should not be designed to create sales where none exist.  You’re going to buy a car when you’re good and ready to buy one.  The same principle has to be applied to your potential customer.

Further, every car that is sold in your market (with the exception of junk and exotics) could have been sold by you.  So, that means that every mom and pop lot and every private party out there selling cars IS your competition.  Very few people say to themselves “Self, I’m only going to buy from a private party” or “Forget those franchised dealers for a used car, I’m going Independent”.

Look at the entire local market, not just the RDR’s that the manufacturer provides for you.  You know the manufacturer, they’re the ones who could care less if you sell another used car even though you know you have to if you want to stay in business and help the manufacturer move their product.

The second point I want to drive home yet again, is that people do research.  They usually know more about the cars in which they have interest than do your sales people.  Train your sales people to answer questions, not ask them.  If you want help with this proven concept, have your guys go to on a regular basis and have them listen tot he audio bits over and over again until they understand how the vast majority of people Want to be sold.


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One step forward – One step back

You pay good money to create a bigger ‘net’ and then you sabotage it with your Used Car inventory mix. Yes, you can be a successful dealer with a used car inventory of 75% or more of your own brand, but that’s not the point.  The point is that you spend money on and AutoTrader to create a bigger net, but if you are a Ford or Honda dealer with a used car inventory that is predominately Ford or Honda, you are decreasing the size of your net.

Two things are working against you when you have more than 60% of your used inventory as the brand you sell new:

  1. The Internet: Yes, it’s been around for a long time now, but let’s review why the internet makes it silly to have your brand heavily represented in your used car inventory.  You put out your net (AutoTrader, to get your inventory viewed by the most possible buyers, but when you mostly have just your brand, the net is now being made smaller.
  2. Your brand has its limitations:  Brands like Honda and Toyota hold their value – this has the effect of limiting your price points.  If you only have Honda’s or Toyota’s in your used inventory, you’ve restricted a large number of buyers who may want a more recent model or lower mileage, but don’t have the cash because of the resale value of Honda’s and Toyota’s.  Brands like VW are even more limiting due to their actual or perceived cost of repair on vehicles with more than 50,000 miles on them.  The internet plays a part in this as well as it brings more information to the consumer that would dissuade them purchasing a used VW.

When I look around the country at some of the most successful dealer operations in their respective markets, I see a trend toward keeping the ‘brand’ portion of their used inventory down below 60%.  Milham Ford Toyota in Easton PA: 30% Ford/Toyota in used inventory.  Fred Haas Nissan in Houston TX: 38% Nissan. Tameron Honda in Birmingham AL: 30% Honda.  Carriage Nissan in Atlanta GA area: 21% Nissan. These are but a few of the dealerships that have taken this idea to extremes, but I know that these are highly profitable stores.

I know I have written about this before.  The reason I’m writing about it now is because it’s a point of operation that must be looked at seriously if you are interested in increasing your market share.  There are only so many vehicles that are going to be sold in your market in any given months.  You cannot increase your market share unless you increase the size of your net!

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Cannibalizing the Market

What happens when you incentivize buyers to buy via a ‘blow out’ or ‘event sale’?  That is to say, when you attempt to make car buyers buy on your schedule rather than in the normal course of the customers buying cycle.  Please read through the entire list.  What starts out as a positive, has many not-so-positive consequences.

  1. Spend large amounts of money to ‘move the needle’ over a short period of time.
  2. Create larger than normal physical traffic on your lot.
  3. Temporarily increase working capital.
  4. Put many of your customers into the hands of people who do not work for your dealership.
  5. Accelerate several people’s buying cycle to act now.
  6. Because incentives are being used, facility is now crowded with many who are not there to buy.
  7. Actual buyers are very likely to view the ‘event’ as a deterrent to their participation and are likely to go elsewhere to make their purchase.  Interviews with hundreds of people both who work at dealerships and others who are not connected with the car biz at all, have  stated that a crowded showroom, due to an event, would deter them from going into that dealership if they were ready to buy that day because they believed that it would be much more time-consuming than under normal conditions.
  8. My market share retention studies in Houston, Dallas, Charlotte, Los Angeles, Sacramento, Denver, Philadelphia and Atlanta indicate that market share suffers for dealers for two to three months after event sales take place.  This causes a yo-yo effect on your monthly market share as opposed to dealers who have a more consistent strategy.

People buy large ticket items mostly on their own schedule.  Attempts to make customers buy on your schedule is usually accompanied by cost (event costs, incentives, etc.).

If you are a dealer who uses event sales, you will likely find yourself in the revolving door of having to have events on a regular schedule much like the addict, because each month with an event is followed by two to three months with decreased market share requiring another bump…and another supplied by an event.

The answer is to make your marketing targeted to those who are in the buying cycle and do it regularly so that your name is in front of those who are in their buying cycle.

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