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A case study for smaller market dealerships – Can a BDC work for you?

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We've had a lot of discussions lately with dealerships in smaller markets who are questioning whether or not it makes sense for them to have a BDC. Certainly there are specific considerations that play into that decision, but in general we know that there is a strong opportunity for dealers in small markets to increase their sales and profits by taking advantage of a properly planned, sized, and trained BDC.

We recently started working with a dealership client in a smaller market area of approximately 20,000 households who wanted to set up a new BDC. The dealership sales had been stagnant for quite some time, and they needed to get things moving forward again and increase their sales effectiveness to avoid problems with their manufacturer. They wanted a BDC that would take care of their Internet leads, their inbound sales and service phone calls, and to work their various marketing lists.

In smaller market stores, it’s very important to have a BDC that is sized to meet the needs. This keeps expenses down, and insures an attractive ROI. Based on our opportunity calculations and the dealership’s open schedule, we determined they needed 2.5 people which allowed for a very small investment in infrastructure. In fact, we were able to utilize an existing open office with a small expenditure for chairs, one additional telephone, and two headsets. Total out of pocket for this BDC was less than $1,000.

We built the pay plans and job descriptions, and were able to find and hire the people using our AVA profile testing and basic BDC skills evaluation process. We put the new team members to work on memorizing phone scripts while the all new email and telephone response process including email templates and phone scripts (customized to reflect the dealership’s philosophy, marketing, customer base, competition and product among other things) was being installed. This was accomplished completely within the existing CRM setup, so there was no additional expense to the dealership.

It took about four weeks to get the BDC up and running. In their first full month of BDC operation the dealership moved up 2 places in their factory measured district rankings, and after six months of operation they moved up an additional 3 places to the highest share of their district they had ever had. They were able to accomplish this while also reducing their advertising budget by 18%.

In smaller markets it’s often impossible for dealers to generate significant increases in their traffic by spending more on advertising. For them, the only practical solution is to increase sales and market share by doing a better job with the traffic they’re already getting, and that is exactly what a BDC can do. In this particular example, this dealership ended up with a BDC return on investment that was far above what they expected, and they couldn’t be happier with their decision. The salespeople were slightly skeptical at first, but they are all very happy now with the increases they seeing in their own sales numbers.

So if you’re running a dealership in a smaller market, and you’re not sure you can justify having a BDC, you might be missing a big opportunity. BDCs don’t have to be expensive. They don’t have to be large. They don’t have to be a project. They only have to be effective, and when they’re done right at inception that’s almost always the case in a very short period of time. The dealers and managers who aren’t afraid to take a chance and try a BDC might be left holding the proverbial bag if one of their competitors does it first.

Five things you can do to turn your BDC into a profit center.

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Having a BDC has become a very hot topic for dealers and dealership executives over the past year. Many OEM’s are putting serious pressure on dealers to install them, and some are even tying financial incentives to dealership compliance with both having a BDC, and even the results they obtain.

Still, many dealers are resisting making the change to a BDC process in their stores. In many cases they view them only as an additional expense, with little or no real contribution to their sales or profitability. Dealers who have used BDC’s in the past often have a bad taste in their mouth form their earlier experiences, and they are understandably reticent to go down that road again.

In our work with dealerships that are creating or rebuilding a BDC, we’ve successfully implemented a few strategies to help overcome not only the perception of the BDC as an expense, but we are actually able to establish obtainable performance objectives that establish, without a doubt, the BDC as a profit center. Here’s a few of the most important ones:

1.     Hire the right people – When you’re staffing your BDC, you need to remember that a good BDC rep candidate is very much different from a good floor salesperson candidate. BDC reps are information providers; they don’t need negotiating or closing skills. In fact, we discourage reps in our client’s BDCs from discussing pricing beyond the basic “starting at” numbers – that’s the kind of thing that needs to be done in the dealership. We look for people who are service oriented, who have good organizational skills, and who are able to communicate well, both verbally and in writing. Lower turnover reduces hiring and training expense, and keeps the performance level of the BDC at a higher level where they are able to generate the most appointments.
 

2.     Use the best possible scripts – Some dealers are using scripts and templates in their BDC that were poorly written initially, or haven’t been updated in decades. Buyers today are so much different than they were even five years ago, let alone twenty, that using scripts and templates that don’t reflect the way buyers approach the process today is almost guaranteeing poor BDC results. You need to incorporate Internet strategies, email follow-up, text messaging and chat in your BDC scripts and email templates if you’re going to get real results.
 

3.     Make the right phone calls – We see very positive results from having well trained BDCs with good scripts taking inbound sales calls, but there are huge opportunities to be had from incorporating other call types into your BDC. Having your BDC make follow-up calls to unsold showroom visitors yields some of the best results in terms of adding plus business, especially in the used vehicle department. Doing this doesn’t have to replace any salesperson follow-up, if scripted and done well, it works great in conjunction with any follow-up that is being done by floor salespeople. BDC s should also be expected to complete a certain number of outbound, “marketing list” calls every week, and you should be using scripts created specifically for the different kinds of lists, such as off-lease, private offers, orphan owners, trade initiatives, etc.
 

4.     Have the right pay plan – BDC pay plans need to be structured so that the reps have a fair opportunity to earn a good living for what is really a fairly easy job. These aren’t people who should be working 55 hours in a week - staff and schedule for a forty hour a week position, and compensate accordingly. In today’s economy, the opportunity to earn $500 to $600 a week in a clean, professional environment is a very attractive position for the types of people you want in your BDC.
 

5.     Hire a team leader – Unless you’re putting together a BDC for a group of stores and need more than four reps, you probably don’t need a full-fledged BDC manager. Having one of your reps designated as a “team leader” who receives some additional compensation based on the department’s accomplishments gives you someone who can provide the kind of simple management that your BDC needs in order to function well, along with some basic coaching to help reps with any challenges they face with prospect interactions. Reports should come from your CRM, and should be verified by your outside training vendor, or someone in the business office.

This list certainly is not all inclusive. There are processes you can use to create a BDC profit and loss statement. There are other techniques that your reps should master that convert lost prospects back into showroom visitors. There are even strategies that some dealers use to measure their advertising effectiveness as a component of their advertising expense. No matter how you measure it, a good BDC can and SHOULD be a profit center for your dealership, and done right it absolutely can be!

Centralize your BDC? Only if you do it right!

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At one point or another, every multi-store Dealer-Operator is going to consider having one large Business Development Center handle Internet and telephone opportunities for all of their dealerships out of one location.  It’s a tempting thought, what with the ability to have everything under one roof and ideally with one focus, sharing one message.  We’ve worked with many groups to implement this approach, and I’ve seen it work out very well many times.  To make it work, you need to understand that a structure like this brings on its own set of challenges, and plan for them.

Here are a few important things for dealers and managers to think about before they merge individual store BDCs into a centralized location.

You’ll have one message, so it better be right! – There’s always a lot of interest in having everyone in one BDC following the same scripts, using the same templates, and following the same process.  The problem is that customers tend to be somewhat unique based on the brand they’re considering, the market they are shopping in, and the method they’re using to initiate contact.  When you have one message, you’re assuming a “one size fits all” philosophy, and that doesn’t necessarily generate the highest results.  We believe that the best BDCs have a process and message that takes those unique qualities into account.

You may see a decrease in your appointment show rate. – When a BDC is off site, you risk losing the relationship that the prospect formed had with the BDC rep that was their first contact.  Prospects don’t like to be told they’ll be working with someone else when they come into the dealership, and if you don’t adjust for this in your process you’re probably going to see your show rates drop 20 to 30 percent as prospects change their mind about coming in and working with a stranger after they schedule an appointment.  We have found that this can be overcome by factoring that reluctance into your scripts and templates, and by incorporating managers and a concierge experience into your prospect arrival and greeting process.

You’ll probably have higher rep turnover. – Large offsite BDCs can create a kind of “burnout” that results in much higher personnel turnover than we see in smaller, store based ones.  When BDC reps lose most of their involvement in the complete customer experience, it takes a lot of the more rewarding aspects of the job away from them.  You need to make sure the BDC team is regularly included in dealership meetings, events, and training or you’re going to be spending a lot of time hiring and training new people all the time.

Bigger departments mean bigger expenses. – Once you have more than four people in a BDC, you’re crossing a line.  You’re probably going to have to create space, furnish the space, and supply all the needed technology and connectivity to the space.  You’re also going to need a full-time BDC manger, whereas with a smaller BDC we find that a working “team leader” can provide all the management that a well installed BDC needs.

Peer interaction is a good thing. – Once you take a BDC offsite, you’re losing a lot of positive interaction between the BDC reps, the salespeople, and managers.  Offsite BDCs can develop a kind of “siege” mentality, which left unchecked will cause them to lose the focus you want – one where they are absolutely confident about having the prospect visit the dealership.  When salespeople and managers don’t see and hear BDC reps regularly, they start worrying that they are lying to or misleading the customers they are working with.  When the BDC is part of the dealership team, they will be viewed in a much more positive light by the sales force and managers.

There are a number of things that dealership groups can do to make an offsite or centralized BDC work well for them, and we’ve been involved in setting up some great ones, but there are some extra steps that need to be included in the design, installation, and administration of a large BDC in order to make sure that it can bring in the results you’re going to be expecting.  And if you decide to stay with smaller, individual store BDCs, that’s not always a bad way to go!

Are you playing to win, or just trying not to lose?

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Another year has come and gone and AIT clients are stronger than ever. In 2016, AIT saw many of its clients post dealership-best sales figures by setting goals and putting in the work to reach them. Most of the time, improvement is as easy as believing and achieving.

Every dealership has different needs and different obstacles to overcome in order to achieve their goals. Some dealerships require a higher number of leads and phone opportunities. They're using AIT's proven BDC and Internet sales plans effectively; all they need are more prospects looking to purchase. AIT worked with several dealerships to identify quality third party Internet leads - leads that present dealerships with genuine sales opportunities - and worked to integrate them into the lead rotation. We also helped a number of dealerships increase their phone activities by using website prompting techniques as well as helping them identify new and effective outbound call opportunities.

In other cases, dealerships received plenty of leads and phone opportunities, but did not have an effective response strategy in place. It's difficult to maintain communication with Internet prospects; many prospects are hard to get ahold of and require a high number of emails before they respond. AIT's proven Internet sales plan calls for a follow-up schedule using both emails and telephone calls. Once these dealerships implemented AIT's proven Internet sales plan, they tracked an average increase of 146% in Internet lead closing ratios.  We also launched an entirely new program for telephone prospects with all new scripts that reflect the change in customer communication habits, incorporating mobile messaging as part of an overall, very effective strategy.

The need to improve is a constant in the car business; every dealership wants to build on their current numbers because they know they have the ability to do so. The first step is setting a goal. AIT works with BDC and Internet sales teams to set personal sales goals from month to month, in order to challenge them to reach their potential. It's equally important for dealers and managers to challenge their organization; set the bar high and work harder to reach it. Once you've identified what it is you want to achieve, AIT's time tested and dealership driven BDC and Internet sales process will help you reach your goal. All it takes on your part is a commitment to being great, persistence, hard work, and a little help from someone like us.

Have a great 2017, and let's sell lots!

Key things to consider when putting together a pay plan

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When you put together the compensation plans for your BDC team, did you structure it in a way that makes it self-motivational for your reps?

A well-trained, experienced BDC rep is a great thing to have, and it can be hard to replace them quickly. Lose too many in a short period of time and you’ll hamstring your BDC’s performance, and frustrate your salespeople and managers. You want your BDC to function like a well-oiled machine, staffed with professionals who know the dealership, know the inventory, and (most importantly), know the scripts.

Building a pay plan that appropriately rewards achievement is one of the easiest ways to make sure your BDC team stays intact. Here are some key things to consider when you’re putting your plan together.

Include an hourly wage, but don’t go overboard – Straight commission rarely works for BDC Reps. They don’t have the income upside of a floor salesperson, and the skill set you want them to have is typically going to be found in those candidates with experience that is more customer service oriented, as opposed to strictly sales oriented. Having said that, you don’t want them to be so comfortable with their hourly rate that they don’t strive to achieve results that will pay them more. In general, we like to see BDC Reps have a realistic opportunity to double their base compensation; when they achieve good (not great, not incredible) results.

Think hard before you compensate on sales – A BDC Rep should be completely focused on making appointments, verifying appointments, and getting people to visit the dealership. Once a prospect visits the dealership, it becomes the job of the sales team to sell and deliver them. Having your BDC Reps tied to that process dilutes their focus, and can also lead to some “unholy” alliances where favorite salespeople are given preferential treatment by BDC Reps when they set up the appointments. Some people worry that this will lead to lower quality appointments, but is there really such a thing as a “bad” walk-in prospect?

Make bonuses based on levels, not units – Setting up bonus levels based on realistically obtainable levels of performance keeps BDC reps focused on the big picture, and not too wrapped up in each and every interaction. It also makes them feel like a larger part of the total dealership process. Ideally, try to put together bonuses based on short periods of time – for example: 25 shows in a week pays $200, 35 shows in a week pays $400, or even shorter periods (5 shows a day pays $50, 7 pays $100). You might be surprised at how much this will fire-up a BDC Rep, who is on one show away from a nice bonus.

Include team bonuses – Having team bonuses helps to insure that the BDC team jumps in to cover each other whenever needed, and also helps build team spirit. Again, try to make them level based, on short time frames and see what a difference it makes in how well your team works together.

Have a training pay schedule – Don’t hire new BDC Reps, even if they’ve worked at another dealership, and let them take phone calls right away. You don’t want them learning by practicing on your potential sales. Start every rep on a “training pay” basis, and have a training schedule that lays out the scripts they need to be proficient with and the dates they should have this accomplished by. The BDC team leader should verify their progress, and check off each level as they achieve it.

Hiring the right people for a BDC is important, but keeping the right people is critical. Having a fair pay plan that rewards accomplishments appropriately can go long way toward achieving that very desirable result.

When your sales are hurting, do you want the placebo or the cure?

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One of my favorite adages is “Figures don’t lie, but liars figure.” In our work with dealership BDC and Internet departments, we are often reminded of this when we analyze dealership performance.

As a result of the online shopping revolution, dealers and managers are being inundated with many new statistics and measurements, and they are almost always subject to interpretation by whoever is providing them. There are so many reports, with so many numbers that dealers are rightfully nervous about the real relevance or accuracy of the things they are being told. As one dealer told me recently, “Yes, they show me all these great numbers, but why hasn’t my market share gone up if I’m doing all these wonderful things?”

This phenomena even extends down to the more basic dealership specific measurements. Very recently, a dealer who I have known for a very long time asked me to take a look at his dealership’s Internet sales performance. What motivated his call was some concern he was having about the accuracy of the sales reports he was receiving form his Internet Manager. According to the information he was being given, his team was closing over thirty percent of their Internet leads. This sounded great, but his overall sales numbers weren’t going up, his sales effectiveness had actually decreased, and some of the factory provided reports he was receiving showed a much lower rate.

We pulled all the numbers for the past year, then cleaned them up by taking out the duplicates, misreported sales, and other inaccurate classifications. Once that was done we recalculated the dealership’s performance and found out they were really running at just under a ten percent closing rate for their Internet leads. Considering the average for dealership Internet lead closing rates is estimated to be around eight percent, this wasn’t too bad, but certainly nowhere near what the dealer was being told.

How was this happening? It was all in the calculations. His team was classifying sales made to walk-in and phone prospects as Internet sales, and thus overstating their real performance. They were also subtracting a large number of Internet leads from their calculations by marking them as “bad,” for no apparent reason than the fact that these prospects didn’t respond to them. Finally, they were recording sales made to prospects who submitted online credit apps after they had already visited the dealership as though they were fresh Internet leads. So, while the reports were showing 100 leads and 30 sales, what we found was really happening was that there were 150 leads, and only 14 sales.

Unfortunately we see a lot of this when we evaluate dealership performance. A lot of dealers aren’t looking hard enough at the information that is being provided to them by other people, both internally as well as outside vendors. We have many dealership clients that are doing a great job with their Internet prospect, and regularly closing twenty to twenty-five percent of their leads - and these reports are based on accurate reporting of leads and sales. But they’re doing this with a great team, that’s well trained and uses a solid process to work these prospects, not just by pretending they’re doing it.

If you’re being told you’re doing a great job and you aren’t seeing that great job reflected in your total sales or market share, don’t be afraid to challenge the numbers and see if they’re really reflecting your results. If you find out that there is a problem, you can take the steps necessary to fix, or “cure” the problem, which is always better than taking the placebo approach of pretending it doesn’t exist!