September 24, 2007 – Don’t hide behind the occurrences on Wall Street

I have had a few dealers ask me what I thought the effect of the recent turmoil in the financial markets could have on their business. The truth is I lost any comprehension I might have had of the financial marketplace long before all the new technology — with the strange acronyms for fancy derivatives that seem to securitize everything — happened. So, don’t ask me.
What history has shown is the retail motorcycle business is only negatively impacted by high interest rates and the lack of financing. If your sales are down, don’t hide behind occurrences on Wall Street until you have a full grasp of what is happening on your own street. You are much more likely to be impacted by a failure to adjust to our changing customer base than anything the housing or financial market can throw at us.
At a recent meeting with some of my dealer partners, a dynamic young manager challenged me over my change in position on who we should hire as salespeople. In the past, I was much less prone to hire enthusiasts. Their passion for the product and the sport has always been great. But, it was such a challenge to get them to understand and follow the sales process. So, we made a priority of innate sales skills and taught product knowledge as best we could. The difference in the past was we were able to make a living catering to people who did not need to be sold on the fun of motorcycles.
With the mainstream acceptance we now enjoy, a much higher percentage of showroom visitors really don’t know what motorcycling is all about. That is good news if we are prepared to deal with them. These buyers need a lot more education than they received when they bought their flat screen TV from a big box retailer, and the entry-level sales staff who did not have a clue about what they were selling. Our buyers today are much older, more sophisticated and have lots of resources at their disposal. In spite of all their sophistication and all the information they can glean off the Internet, they are hungry for someone to give them goosebumps. We have to provide a quality experience for them when they visit the dealership.
I used to say that half the people visiting our showrooms had not made a buying decision. Today the data from our call center confirms that the number is north of 70 percent. They will of course, usually two minutes after saying they are “just looking,” proceed to ask you for the price. Most are price “justifiers” not price “shoppers.” They have not yet gotten their head around spending what it takes for our high-price toys. They need to encounter someone with genuine passion for motorcycles when they enter the showroom.
There is no shortage of enthusiasts who would love to work for you if all they had to do was be a great host and talk about the fun of the sport. They are not up to the trauma and drama of negotiating price, trade-in and financing. What an enthusiast on the showroom floor can do is provide a quality experience for the customer. They can create a desire on the part of the customer to own a motorcycle. But the enthusiast has to be supported by front-line proactive management to make it easy for customers to buy. If you are only equipped to wheel and deal, you will spend all your time fighting for the bad business.
‘Back End’ Income
The opportunity and need for “back end” income is not new, although it suddenly has become a revelation for many. Please let me share a lesson learned long ago. Back in 1982 —yes, 25 years ago — it had become obvious in the “20” club exercise that the only dealers making money, in what were truly tough times, were the ones who were benefiting from F&I income.
So, we traveled across the country setting up F&I departments and also talking for the first time in the industry about collecting Doc Fees and freight and set-up charges. For the most part we failed miserably. What we did was get the cart in front of the horse. We were teaching people how to manage the back end, when they had no control of the showroom. The same is true today. I often refer to back-end income as the “control dividend.” What we could not do then, and cannot do now, is allow the salespeople to control the showroom.
Many things have changed since the 1980s. What we sell is totally different and so are the customers, yet the industry still suffers from making it hard to buy. We salivate over the huge income we can now attribute to F&I, but we still, as an industry, have the same lack of control that stopped us from cashing in 25 years ago.
No, we are not immune to turmoil in the economy, but given the amount of headroom for improvement in the sales process, we need to focus on what we can control. Chances are you are spilling more than you would lose because of a slump in the housing market.
I am not offering an easy answer. I talk every day to the best operators in the business, and they constantly moan about how hard it is, and how easy it is to get off track. We have to have the ability to make a quality experience for the customer happen much more often. Sell the fun, brand, dealership, ease of buying and provide a reason to buy today. Then, have someone who is comfortable doing so, talk about the price.
Cheers, Ed.
Ed Lemco has been involved with the powersports industry for more than 30 years. Lemco, the former owner of Lemco Management Group, is the founder and executive director of the National Council of Motorcycle Dealer Associations. Lemco currently operates a call center for dealers in St Croix. psb

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