DEALERSHIPS ARE NOT ALL ALIKE AND SHOULD NOT BE MANAGED IN THE SAME WAY
Traditionally, management systems used by dealers are organized by departments, reinforcing somewhat of a silo approach. Human resources are also managed by department. Dealer financial statements and Key Performance Indicators (KPI) are also organized and measured by departments. Dealer Management Systems (DMS) promote departmental analytics. Even the brands we represent organize their field staff by departments.
Given that we are becoming virtual businesses driven by the Internet and social media, are traditional dealership management structure and KPI still relevant? If they are still relevant, do they tell the whole picture? Do the KPIs capture, measure and promote the unique characteristics of our dealerships?
BREAK DOWN THE SILOS
For years, dealerships measured by departmental silo. However, successful dealers have known for years that one of the greatest management skills is maximizing the inter-departmental workflows to maximize the value stream, otherwise called profit and value creation. In this case, measuring performance by department often does not highlight the missed work flow opportunities.
For example, a dealership with a weak used vehicle department is missing critical fixed operations and F&I opportunities. Do we all understand what the real benefit of a used car sale is to our dealerships? Most often we speak of $2,000 gross per unit or $900 F&I gross but rarely do we hear about the $1,500 parts and service gross created by a used vehicle.
Incremental value streams often flow horizontally across many departments cutting across traditional departmental silos. All too often no one sees or is responsible for these end-to-end value streams. The metrics and systems employed to analyze the dealerships are designed to optimize individual departmental activities rather than provide value to the whole dealership.
Today’s business activities are very different from those of ten years ago, yet many of us still use the same monthly measures to track and manage our businesses.
MEASURING DIGITAL PERFORMANCE
One of the biggest changes is how dealerships drive and measure showroom traffic. This is because the showroom has been expanded to include the virtual world.
Does your dealership measure metrics that deal with the virtual part of your dealership?
Many do not, and I believe this group is missing significant opportunity and incurring significant risk.
The definition of mainstream auto retailing has changed. The risk is that your dealership will not keep pace. This will be reflected in OEM dealer performance metrics, since your traditional metrics performance will not meet OEM network performance objectives. You do not want to be in this position.
Another big shift, and one that is not often highlighted, is the changing approach to market areas, especially in large urban centres. An Internet savvy dealer can pull customers from your market area to theirs simply by being better at search optimization. In the good old days, if a competing dealer advertised within your market area, your OEM could, if they so chose, force the dealer to stop that behaviour. With search engine optimization, this is much more difficult, if not impossible to control.
Although we are all in the same fundamental business, we all operate in different markets with numerous variables and a different human resource skill set. In effect, that makes all dealerships unique.
Just as your business is unique, so should your performance metrics be unique. Understanding this uniqueness is one of many keys to success. As an example, Store A is a destination store with significant pump-outs. Measuring customer retention in the service department of Store A might not make sense and will likely result in sub-optimal use of resources in an attempt to improve that metric.
Perhaps resources should be re-deployed in Store A to retail activities of the dealership that will reinforce pump-outs. However, Store B has limited pump-outs and as such, measuring customer retention in the service department makes abundant sense. In fact, you can take it a step further in Store B and measure new vehicle repurchase retention since this is a critical long-term success factor for this store.
Dissecting the success factors in store B would lead you to key cross departmental measures focusing on service satisfaction, service retention, social media interaction activity, online interaction activity in order to make sure the service department silo is constantly thinking vehicle sales.
Again, I stress that stores are not the same and as such should not be managed the same.
Start by measuring some additional metrics and see if you can develop the cross functional discipline to maximize market opportunities and realities.
Videos are increasing in usefulness and in many cases are becoming a very successful customer engagement tool. Try preparing some walk around videos on your own, starting with used vehicle inventory.
Put your own spin on the unit and use this video to sell and encourage prospects to visit your store to personally inspect the vehicle. Allow them to immediately schedule a test drive online. Measure the number of video downloads vs. test drives and experiment on how to increase the number of test drives. Once their butts are in the seats, then you can further measure closing ratios for that advertising stream, or stream effectiveness.
Examining the impact of the evolution of virtual automotive retailing in your specific market will reveal certain non-traditional key performance indicators that just might help you and your managers better manage the entire business and where required, break down the traditional silos to increase profits and create additional value. All dealerships are unique, the challenge is finding the KPIs that help us take advantage of that uniqueness.
