Did you ever go to a restaurant that was training a new waitperson? Were they just given some basic instruction and then turned loose to sink or swim? Ludicrous, you say!
There is no way any restaurant could take that chance with their hard-earned customers. One bad experience and that customer may never eat there again. But the average restaurant is only dealing with $10 to $20 meals. How could a couple bad experiences be that big of a deal? The big deal is the word of mouth; the loss of recurring revenues from that one bad experience could end up costing 10 times as much as just losing the customer that had the bad experience.
Your dealership is no different. How much is one retained customer worth to you? How much does one dissatisfied customer cost you? In our PowerHouse Dealer 20-Groups we have discovered that in a few short years after the initial vehicle purchase the after sale gross profit can equal or exceed the initial gross profit made during the vehicle sale.
Let’s do a quick calculation. If the average vehicle purchase is worth $1,000 in gross profit, the F&I on the deal is worth $300 and the after sale profits during the next couple years is worth another $1,300, that is $2,600 in gross profit over a three year period, or $867 per year. Now, if the average “loyal” customer brings you an average of .5 new customers, that’s another $433 per year for a total value per “loyal” customer of $1300 in gross profit per year per “loyal” customer.
Do the math, if that same customer has a bad experience with a new salesperson, chooses to stop doing business with you and takes five of your customers with him. How much does that cost you over several years? You’ll lose $1,300 over three years from your original customer and another $1,300 from the .5 new customer that he would have brought in. That’s $2,600. You’ll also lose the business from the five customers he takes with him; that’s $1,300 over three years from each of them, or $6,500 profit. In total, you could lose as much as $9,100 profit. It could be a lot more if he talks to potential customers who decide not to do business with you. In that case, the $6,500 could become $13,000, and the total could be more than $15,000.
Turning Guests Into Customers
If you want to create customers out of guests on the showroom floor in a way that makes money today as well as tomorrow (loyal customers) there are two things you must do:
1. EMPLOY a strong, organized sales manager who is involved in EVERY deal, one who knows who bought and why, and who also knows who did not buy and why.
2. NEVER ALLOW a salesperson who is not competent to have unsupervised access to your hard-earned customers.
(We define Competency as the effective combination of knowledge and skill. In other words, your sales representatives must have the KNOWLEDGE of how to sell and also must have the SKILL to use that knowledge in a way that creates sales.
Now, here are a few things I have discovered that will greatly increase your chances of having your new salespeople hit the floor with confidence and competence so they can start making money for you and for themselves without costing you a bundle up front in resources, (time, training and money) or lost sales and dissatisfied customers.
Here is how you can do that. Have them “diagnose” your guest and just before they help your guest select the perfect “prescription” for their needs they would excuse themselves by saying, “I have some really good ideas about the perfect vehicle for you, based on my understanding of your needs. But before I make a suggestion I would like to ask my manager if he has any other ideas about the perfect vehicle for you.” The new salesperson then comes to the office for assistance. You can help them select the appropriate product and you— the sales manager — can decide if the deal needs to be turned over to a more qualified salesperson.
You can then confidently allow them to handle your guest from DIAGNOSE (Meet and Greet — Discovery) through PRESCRIBE (Select — Sit on — Present) where they do the presentation but get assistance with pricing and NEGOTIATION (Ask-to-Buy).
Then allow them to DIAGNOSE, PRESCRIBE, and ASK TO BUY. As soon as they can consistently maintain control through the ASK TO BUY phase of the process, put them on the team, but NEVER stop coaching.
Pay them by the hour until they have moved successfully to the close without a timeline, only a performance line. Once they can move guests confidently and consistently though your sales process to the close, then and only then, put them on 100% commission.
If you will follow this guide, you will see that by matching tasks to current competence level a new team member can be productive much quicker than you ever imagined.
As you review everything you do, ask yourself these three questions: How will it affect profitability? How will it affect quality of life (for your guest, your team, you, and the owners)? How will it impact customer loyalty?
REMEMBER: Good sales managers are great “coaches” not preachers, and the best coaches were rarely the best players. Effective sales management is a very different skill set from salesmanship. Start being a great coach today and you will have a winning team tomorrow.
To take your dealership to Top Gun status contact Bill Shenk toll free at 866/896-3759 or email Bill@phdservices.com.