Vital Metrics for Tomorrow’s Dealer

Les AbramsDirector – Training & Dealer Services Cox Automotive Atlanta, Georgia404.456.7100les.abrams@coxautoinc.com

#NADA100

Dick ParrishDealership Management ConsultantNADA 20 GroupsMcLean, Virginia678.565.4329rparrish@nada.org

The views and opinions presented in this educational program and any accompanying handout material are those of the speakers, and do not necessarily represent the views or opinions of NADA. The speakers are not NADA representatives, and their presence on the program is not a NADA endorsement or sponsorship of the speaker or the speaker’s company, product, or services.

Nothing that is presented during this educational program is intended as legal advice, and this program may not address all federal, state, or local regulatory or other legal issues raised by the subject matter it addresses. The purpose of the program is to help dealers improve the effectiveness of their business practices. The information presented is also not intended to urge or suggest that dealers adopt any specific practices or policies for their dealerships, nor is it intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service.

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Data-Rich — Analysis-Poor

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-Assess the health of their dealership utilizing the combined visibility of NADA and Cox Automotive-Differentiate the most vital metrics a Dealer Principal must personally monitor -Formulate an action plan to address the most crucial opportunities in their dealership

Operational Best Practices

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2.2%

Average performer

and external factors

0.5%

Region and demographics

0.6%

Brand / origin

0.8%

Size and structure

2.9%

Operational practices

7.0%

Top performer favorable external factors

Source: NADA McKinsey Report 2015

Net profit before taxPercent of sales

Internal Dealership Practices = Biggest Component of Potential Profit

Fixed Operations Excellence

Vital metric: Introduction to service at time of sale = 100%

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41% were introduced to service

department at the time of purchase.

53% said it came into play when

deciding where to repair the

vehicle.

How many more times those who were introduced to the service department at time of purchase returned for service

in the past 12 months.

1.5 times

Source: Cox Automotive Maintenance & Repair Study, 2016

Service BDCCustomers don’t track needed service & recalls

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• Declined ASR’s• Check-in confirmation• First service• Due/overdue for service• Special order parts• Recalls

Outbound Calls Increase Business

Source: Cox Automotive Maintenance & Repair Study, 2016

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15 to 18 RO’s/day per Advisor (max)Service Lane Vitals

Under 5 minute welcome– Check-in time– Recognition– Notification– RFID– Texting

Engage customer, ‘Pay it Forward’

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Walkaround

5-8 minutes

No Walkaround

Drops Keys Off

Trust

Upsell Confidence

Additional ASR Effort

Ease of Quality Delivery

WalkaroundAdvisor engage customer to help

Check lights, tires, raise hood

Explain courtesy Multi-Point Inspection (MPI)

Ask permission for MPI’s

Time you will contact customer (text?)

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-Recommended services-Previous declined repairs-Maintenance items-Damage

Multipoint Inspections (MPI)

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Complete, communicate in first ¼ time

Utilize ServicePricing Guide (SPG)

Generate Service Recommendations (ASR’s)

MPI Upsell Results Observed*% MPI Upsells

ClosedAvg. Labor + Parts

$/UpsellAvg. GP

$/Upsell**

Non-Luxury 41% $162 $81

Luxury 57% $185 $93

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* Approximately 150 Dealers Surveyed** Estimated GP = 50% Labor & Parts Combined

Technician Productivity

Proficiency

Flat-Rate hours (FRH)/ hours available

Standard Repair = 120% (9.6 FRH / 8-hour day)

Express = 100% (8 FRH / 8-hour day)

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Strategy / Process / Goal Measurement Vital Metric

Service Introduction Introduction to Service at time of sale 100% New & Used

Service BDC

Call efficiency (time on phone) 2:30 per call vs. 4:35 average

Email address capture 90%

Inbound call-to-appointment ratio 40%

Outbound call-to-appointment ratio 10%

Appointments that show 88%

RO’s with appointments 50%

% time-slots utilized 2pm - close 80%

Service Lane Advisor RO’s per day 15-18 max

Customer arrival to greeting time Under 5 minutes

Quality walk around time with customer 5-8 minutes

MPI - Multi Point Inspection

Time to completion of MPI First 25% of total time allotted for repair

Inspection % Over 90%

ASR % Vehicle age & mileage dependent

ASR Presentation time First quarter time of job

ASR Presentation % Over 90%

ASR Closing % +/- 50%

Technician ProficiencyStandard Repair 120%

Express Lube 80 -100%

Variable Excellence

Job 1 = Commitment to CRM

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Closing under 35% of walk-ins and be-backsQuick Usage Check

Deal Protection

True Business ToolSpeeds sales process

• Trade vin scan• Driver’s license scan• Imports info customer

completed online

Quality communication with unsold prospects

• Automatic price reduction notifications

• Similar vehicle notifications• Unique content creation

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Commitment to CRM

Commitment to CRM

Develop Overdue Tasks Utilization Reports Manager = Less than 5% over 2 hours

Salesperson = Less than 20% over 24 hours

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Pre-Owned ExcellenceValue Proposition – Why come to your store?

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Attractive Inventory

Online price aligns with desirability

• Under 20 days old = each vehicle stands on its own (NO BUCKETS)

• Over 30 days old = under 90% of market average price

Transactional Discount (tGap) • by Manager/Salesperson• Less than $200

Aged Inventory

Age Intolerant

% of vehicles retailed in under 30 days

Good = 45%Great = 60%

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WholesaleAged Wholesale

10%

Immediate WholesaleGood = 15%Great = 10%Immediate Wholesale Profit/Loss

+/- $250 unit

Appraising-New Car Sale-to-Trade Ratio = over 65%

-Appraisal-to-Trade Ratio = over 55%

-Why Would They Be Low?Lack of sales staff confidenceAged inventoryHard Packs

Under $200 per vehicle

Recon policiesDiscount for older vehicles

-Spiff for trades (or street purchases)$100-$200 each

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Should I sell my trade myself?

Vital Metric-Average Used Vehicle Price

-Turn by Price Band

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Source: Manheim Consulting Source: NADA Industry Analysis Division

Strategy / Process / Goal Measurement Vital Metric

CRM UtilizationWalk-in / Be-Back Closing % Under 35%Manager Overdue Tasks Under 5% over 2 hours oldSalesperson Overdue Tasks Under 20% over 24 hours old

Pre Owned

Price Aligns with Desirability

1st 20 days Vehicle Specific - No Buckets

Over 30 days Under 90% of Market Avg Price

Transactional Discount Under $200 per carBy Manager / By Salesperson

% Retailed in under 30 days Good = 45%Great = 60%

Aged Wholesale 10%

Immediate Wholesale Good = 15%Great = 10%

Immediate Wholesale Profit / Loss +/- $250 unit average

New Car Sale-to-Trade Ratio Over 65%

Appraisal-to-Trade Ratio Over 55%Hard Pack (Charged to vehicle) Under $200Reconditioning Markup Discounted for Older VehiclesVehicle acquisition spiff $100 - $200 per trade / purchaseAverage price per vehicle Monitor and drive lowerTurn by price band Monitor for health

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New Car / F&I /Leasing Excellence

Positive Service Experience Is Crucial

State their experience with the service department has influenced their likelihood of purchasing another vehicle

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Source: Cox Automotive Maintenance & Repair Study, 2016

85%Among the 22% purchasing from a dealer and using

them for service in the past 12 months:

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Employee Retention

Salesperson

Hours

Career Path

CompensationRethink Comp as % of Gross

Guaranteed Salary

+ Volume Bonus

Vital Metric = 13 units per month

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Annualized Turnover Median Tenure

Salesperson 67% 1.6Service Advisor 39% 2.3

Service AdvisorTraining

CompensationFRH’s producedELR’s $ Part salesTargeted spiffsCSI

Recognition

Source: 2016 NADA Dealership Workforce Study

As Sales Margins Tighten …

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Source: NADA Industry Analysis Division

… F&I Income Must Fill the Void

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Source: NADA Industry Analysis Division

Finance & InsuranceF&I Manager = 65 – 70 Deals/mo.

$1,000 – $1,200 Per Vehicle Sold (net)

Products Penetration = 150% of total unit sales volume

Finance Penetration = 75%

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Measure & Reward cash down payment

Finance & InsurancePenetration %

Vehicle ServiceContract - New 55%

Vehicle ServiceContract - Used 65%

Guaranteed Auto Protection 60%Maintenance Contracts 15%Environmental Protection Products 20%Tire & Wheel Protection Plans 15%Key Protection 5%

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Car Payment: Share of Personal Income

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Source: NADA Industry Analysis Division

Leasing Higher to Go

23.7%

33.6%

19.2%

28.9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015

Lease % of new financing Lease % of all new

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Source: Experian Automotive

Leasing Best PracticesLease Benefits Training – Salespeople, Managers

Point-of-Purchase Stickers/Addendums“Lease for $249/mo.”Include lease disclosures

Present Lease Payment(s) as Option on Every Deal

Lease F&I ProductsGap, excess wear & tear, maintenance, wheel-and-tire, key

Manage PortfolioAssign portfolio managerStart early-outs six to seven months before term ends

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Data Mining

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Have a dedicated “Vehicle Purchase” team

Protect “tenured” salespeople

Call customer asking, “Can we buy your car?”

If They Are Interested in Selling,Ask appointment to make a financial presentationAsk them if they sell, “Will we be giving you a ride home?”Or, “Could we present you a VIP proposal for new unit?”

With little or no money downKeep same/almost same payment

Explain process and ask permission at original delivery

Strategy / Process / Goal Measurement Vital Metric

RetentionSalesperson yearly turnover Under 40%Avg units / month per salesperson 13

Finance & Insurance

Deals per F & I Manager 65-70 / monthIncome PVR (net) $1000 - $ 1200Product Penetration 150% of unit sales volumeFinance Penetration 75%Cash Down Payment Measure and RewardOther 'Key' Products PenetrationsVehicle Service Contract - New 55%Vehicle Service Contract - Used 65%GAP 60%Maintenance Contracts 15%Environmental Protection Products 20%Tire and Wheel Protection Plans 15%Key Protection 5%

LeasingLease % of total sales TrendAftermarket product penetrations Trend

Data Mining Program volume Trend

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Digital Marketing Excellence

#NADA100

Vital Metrics

Time and % to complete critical tasks

Bounce & Exit Rate Reports

Specials pages

Separate Desktop from Mobile

Website EffectivenessUser Experience (UX)

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DEALER WEBSITE DEALERSHIPINTERNET

#NADA100

Measurement Vital Metric

Pre-visit Contact to

Appointments

AppointmentShow Rate

Show to Sold Rate

35% (Including

duplicates, junk, and no-reach)

65%

65%

Lead to Sale Rate 15%

Emails

Form Submissions

Phone Calls

Chats

Texts

Saves/Wish List

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CONVERSIONS

DEALER WEBSITE DEALERSHIPINTERNET

#NADA100

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DEALER WEBSITE DEALERSHIPINTERNET

PaidSEM

Display

EarnedSEO

Backlinks

OwnedBlogOEM

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Conversions

Emails

Form Submissions

Phone Calls

Chats

Texts

Saves/Wish List

Measurement Vital Metric

Pre-visit Contact to

Appointments

AppointmentShow Rate

Show to Sold Rate

35% (Including

duplicates, junk, and no-reach)

65%

65%

Lead to Sale Rate 15%

#NADA100#NADA100

56%

25%

14%

3%

1%

1%

56% of buyers who purchase

from a dealershipjust show up

Walk-ins

Phone

Email

Chat

Text

Social Media

Source: 2015 IHS & Autotrader Automotive Buyer Influence Study

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#NADA100

Marketing Attribution

“By the way ... What brought you in today?“

__ Drive by__ Walk in__ Too lazy to ask

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Source: Google

Who gets credit for this sale?

Purchased Product or

ServiceDealer

WebsiteGoogleRatings

& Review Site

Research Site

OEM Website

Purchased Product or

ServiceDealer

WebsiteYouTube

OEM Website

Online Classified

Purchased Product or

ServiceDealer

WebsiteResearch

SiteOEM

Website

-Pay Per Lead

-Pay Per Sale

Last Click Attribution

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Purchased Product or

ServiceDealer

WebsiteGoogleRatings

& Review Site

Research Site

OEM Website

Purchased Product or

ServiceDealer

WebsiteYouTube

OEM Website

Online Classified

Purchased Product or

ServiceDealer

WebsiteResearch

SiteOEM

Website

-Pay Per Lead

-Pay Per Sale

Referrals

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Purchased Product or

ServiceDealer

WebsiteGoogleRatings

& Review Site

Research Site

OEM Website

Purchased Product or

ServiceDealer

WebsiteYouTube

OEM Website

Online Classified

Purchased Product or

ServiceDealer

WebsiteResearch

SiteOEM

Website

-Pay Per Lead

-Pay Per Sale

“Multi Point Attribution”“Assist”

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Dealer Website Visit Quality Score (Click Quality)

New Vehicle

Lease Special

Dealer Website

A

C

B

Score

Social Media

Vendor B

Website A

MICRO CONVERSIONSWatched a videoPhoto Gallery viewsVisited ‘Map and Directions’ pageVisited ‘Meet the Staff’ page

DIRECT CONVERSIONSSubmitted a leadCalled dealership

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Digital Retailing: The Sales Process Moves Online

-Trade-in Valuation-Negotiation-Credit approval-F & I

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Vital Metric: Time from ‘YES’ to Delivery

Satisfaction Declines after 90 Minutes at the Dealership

Source: Autotrader Sourcing Program

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$8,018$8,120

$8,410 $8,446

$9,351

$7,000

$7,500

$8,000

$8,500

$9,000

$9,500

2012 2013 2014 2015 TopPerfomers

Average Gross Profit Per Employee

Source: NADA Industry Analysis Division

Strategy / Process / Goal Measurement Vital Metric

Website User ExperienceTime & % to complete critical tasks Trending

Bounce rate/ Exit rate reports Trending

Desktop vs Mobile reporting Trending

Website Conversions (by source)

Emails Trending

Form submissions Trending

Phone Calls Trending

Chats / texts Trending

Saves / Wish list Trending

Lead Handling (by source)Pre Contact to Appointment 35%

Appointment to Show Rate 65%

Show to Sold Rate 65%

Marketing Attribution / Effectiveness

Leads (contacts) + Assists + Website Visit Quality By source

Digital RetailingTool(s) Usage Trending

Time to complete key tasks Trending

Time from ‘Yes’ to delivery Trending

Employee Productivity Gross per Employee $9,350

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#NADA100

“you better start swimmin' or you'll sink like a stone,For the times they are a' changin'!”

…..Bob Dylan

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Questions

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