Is your Internet Business Prepared for a Recession?

Published May, 2008 by Digital Dealer Magazine

You have heard a lot of rumors circulating about a recession in the United States. Whether it is true or not is a moot point. When I sat down to ponder this question I was hit with the concept that you should always be operating your dealerships as if you were in a recession and make sure every penny is accounted for while trying to squeeze everything you can out of each and every department, including the Internet.

Today I want to focus on your Internet business, which I break down into a couple of sections for ease of analysis.

Web sites and technology
I look at this section of the business as a rock hammer to a master mason. These are the tools you need to shape our business and achieve your desired outcome. What is most important is that you have the right tools in place and you are maximizing the utilization of the tools each and every day. There are great technologies out there that do all sorts of interesting things, but as my fiancé told me when we moved in together, “If you haven’t worn it in a year, throw it out.” I thought that made good sense or maybe she just wanted more closet space; I will never know. But in our business when you are not utilizing a specific technology or tool by 75 percent or more you are not getting the most out of the technology. So maybe it is time to try to live without it or get busy increasing your utilization of the tool. A great dealer friend of mine has always brought up a good point when referencing technology. He comments that 15 years ago we didn’t have any of this stuff, yet now I have all this great technology, but wonder whether it is really helping me sell more cars or just keep pace with the local marketplace.

When was the last time you sat down and looked at your entire marketing spend and dissected it? I mean all of it. I walk into stores so often that they tell me they are spending 25k, yet after I go through the dealership doc I find out they are really spending about 40K because things are not being put into the advertising line of the statement correctly. Sometimes I hear that it got charged to this account because of this reason or that one goes there because of that reason etc. Is it advertising? Charge it to the right account. When you can get a complete 360 degree view of your advertising expenditures you can start to really focus what you are spending and where to help you create a more accurate cost per unit retailed figure.

Also, take the time to know what you are marketing and the messages that you are using. Are they in conjunction? Do they conflict? Your business is dependent on your ability to reach people in the marketplace and entice them to take action. Is your marketing doing that for your dealership?

Customer communication processes
This is one of the most overlooked and important areas of the Internet department. I know you set up your follow-up schedules when you first set up your CRM and you don’t think you need to tinker. As consumer buying habits mature online so should how you approach and manage these relationships. I would set up and print every letter in your CRM monthly and make changes. Also, change follow-up schedule length and timing. You would be amazed at how a few key tweaks can open a flood of activity within your existing lead management tool. You would be shocked that I still walk into stores that are using subject lines in their e-mail marketing and customer correspondence that I guarantee will be triggered by spam filters. Yet all you have to do is look online to see what words are triggering your messages to get spam-boxed and make sure none of your e-mails are using any of these keywords. Get involved; roll up your sleeves and dive in. Your business depends on it.

People capital
This area is still the one most dealers, including myself, struggle with almost daily. Finding the right people to execute the vision is another key piece of this puzzle to recession-proof your dealership. People are assets and must be trained and consistently driven to improve the dealership’s bottom line. Which means involving your team with not the typical, “We don’t have enough units out speech” but a much more hands-on approach to how their specific actions or inactions are affecting the operation. When people are genuinely brought into the picture a new level of teamwork happens. It takes a while but is well worth the effort. Take stock of your team and make sure your vision and message is being transferred throughout the dealership.

Today’s dealership challenges are difficult especially in the ever-changing Internet department, but with a little extra effort and some basic analysis you can watch your Internet sales grow: rain or shine, or recession.

Todd Smith is one of the leading authorities on Internet technology and its utilization in the retail automotive industry. For the past year Smith has been the general manager of a Northeast Chevrolet dealership putting into practice all the techniques he teaches. Lear, LLC, Smith’s consulting company, is focused on leveraging technology to enable other dealerships to sell more vehicles at a higher gross profit while reducing customer acquisition costs.


Why now is the Time To Step Up Lead Efforts

Published: June 05, 2008, iMedia Connection

With consumers tightening their purse strings, it’s more important than ever for marketers to reach out to potential customers with relevant offers they can’t refuse.

Debate continues in the media as to the fate of the U.S. economy: Are we in a recession, or merely flirting with one?

For brand marketers, it turns out, the effect is the same. Consumers, made wary by gas prices over $4.00 a gallon, the mortgage mess and less-than-stellar employment forecasts, have tightened their purse strings. And when consumers spend less, marketing — traditionally a company’s first budget-cutting line of defense — is in trouble.

Yet there is much evidence, scholarly and anecdotal, that points to the wisdom of maintaining marketing spend during a recession. In fact, a recession is an ideal time to take advantage of consumers’ comfort with familiar brands by creating web-based interactive, direct-response campaigns that offer special promotions and savings.

Why web-based? A recent report by the Pew Internet & American Life Project reveals that 81 percent of internet users research products online — for convenience (78 percent), time savings (68 percent) and the ability to find bargains (ranging from 38 percent of 50-to 64-year-olds to 62 percent of 18- to 29-year-olds).

Tough economic times not only lead consumers to do online research, they lead to more time spent researching and comparing brands and prices. A recent Prospectiv survey, which discovered that 84 percent of those polled had changed their shopping habits due to concerns about recession, gives further clues to consumer behavior in this economic downturn:

  • 66 percent are logging more hours online researching and comparing brands and prices
  • 74 percent would welcome more online offers, coupons and e-newsletters from their favorite brands and products
  • 60 percent are more likely to sign up/join a website or online community that offers recipes, healthy meal ideas, cooking tips and savings they can use at home

As consumers under financial pressure ponder a switch from favored brands to generics, brand marketers must seek out ways to engage consumers online, using direct-response interactive marketing to reinforce the value of brand.

We strongly believe that marketers should consider countering the effects of the downturn by stepping up programs that build strong relationships with consumers who have exhibited interest in your goods and services. Take the opportunity to add to your in-house opt-in email newsletter list and reach out with these tips:

  • Consumers are eager for special promotions and savings during tough economic periods — now is the time to consider a brand-building campaign.
  • Consider campaigns designed to generate leads as well as near-term sales. Whether you have a brick-and-mortar store or website, use a well-timed, anti-recession campaign to drive traffic.
  • Provide information that’s clear, relevant and easy to find online. The Pew study found that 43 percent of searchers were frustrated by a lack of information, or the difficulty of finding information about brands they were interested in. Another 32 percent were confused by the information they were able to locate.
  • Be selective in your programs. Market only to consumers you identify who have an interest in your product/brand and have requested your offers and promotions.
  • Be aware that some 70 percent of internet users are still concerned about giving out personal information or credit card information online. Treat your customers with care — many of them are wary.
  • Monitor campaigns closely for performance and redirect your efforts as needed to improve results.
  • Consider using pay-for-performance lead-generation programs. You’ll pay only for results, versus clicks or impressions.

Don’t forget the most important metrics of a brand campaign — quality and relevance. In difficult times consumers aren’t shopping for nice-to-haves; they are focused on must-haves. Here, pay-for-performance lead-generation campaigns that build your own opt-in email lists and produce consumers who are interested in your product and brand are particularly useful because they make it easy for marketers to ensure relevance, and simple to measure lead quality at several points in the campaign, before handoff to sales.

Finally, in a down market brand marketers must maintain a laser focus on lead-generation best practices to ensure high quality leads and maintain a respectful relationship with consumers to build trust and discourage abuse of consumer privacy.

Opportunity for brand marketers comes in many forms. In these unstable economic times, it is incumbent on marketers to reach out to consumers with offers, promotions and information that reinforce brand preference, provide much-needed purchase information, and offer advice, tips and ideas for living well while saving.

Dealing with the Big ‘R’ — Recession doesn’t have to be what it’s feared to be

by : Jim Richter
From: Dealer Fixed Operations Magazine April 2008

A recession is kind of like the common cold; it’s a natural phenomenon, it happens every so often, it’s usually not life threatening, and if you’ve taken reasonable precautions it usually is just an inconvenience. Those who don’t take care of themselves can get pretty sick, but the ones who are in good health to begin with usually ride it out with a minimum of pain and suffering.

Get past the fear!
A recession is a normally occurring correction in our economic cycles. We’d all like to think that our market will continue to climb forever, but that’s not the way things work. When the economy is too good to be true it slows itself down until it levels out and gets ready for the next charge forward again. Dealers who have not prepared for this get hurt; those that have will simply have a downturn for a short time period. If the core profit centers of your fixed operations are sound and fixed absorption is high, then the worst scenario will be fewer profits coming from the variable-based profit centers. Many of my clients have learned this lesson from previous cycles and are better prepared for this one. Others with short memories, who focused their efforts on the quick money from sales are not prepared, and will end up suffering losses again as a result.

Putting basics in place
The first thing to do, if you haven’t already, is to get your parts house in order. Service and collision both feed from your inventory and the more you are counting on them to provide needed revenue, the more important the levels of service from parts become.

  • Clean up obsolescence: Remember your parts inventory is all net working capital. At a time when cash becomes a critical factor make sure it’s all usable. Factory based opportunities must be utilized effectively. This means sending back everything you can and applying purchase discounts to scrapping rather than gross profit, which saves tax payments. You’re only kidding yourself if you hang onto this stuff; junk today does not turn into gold tomorrow, it’s only Fools Gold at best.
  • Control the backflow of unsold service special orders and police returns from wholesale accounts and your collision center. Review your special order policies and procedures. I often find that these are not being enforced or have never been communicated to new employees. Don’t assume that they are working, Check it out! Contact me if you need to know how to do this.
  • Review the DMS settings for stocking levels. Many manufacturers have changed their terms and conditions since the last recession and many managers have not adjusted accordingly. If you’re on multiple weekly orders, or better yet a daily stock order, be sure that you are not stocking more pieces than you need. If they have it and you can replace what you sold today tomorrow, how many do you really need to stock? Frequently it’s only one.
  • Cut down on sheetmetal, especially if you can replace it quickly and reliably. This kind of “comfort stock” can tie up a lot of cash.
  • Make sure that you are aggressively developing a broad selection of valid stocking numbers through proper use of the lost sales function. Every job that gets finished today is one less special order, and you get paid today, not days or weeks later. It also reduces unapplied time in the shop and reduces work in process, all of which impacts your retained profits.

Review marketing strategies
Recessionary markets become very competitive. Just like the big box retailers are now experiencing, customers are looking for more cost effective ways to get what they need. Price becomes more of an issue than it had been before.

  • Review your matrix formulae and price levels. If the revenue levels are dropping and the gross profit percent is still high, you may be pushing business to competitors. Shop yourself on specific parts that are down in sales to see if you are still competitive. When that’s done, adjust your DMS price settings to bring yourselves back in line with the market. Revenue flow is the critical issue now and it’s OK to give up some margin to pick up increased dollars. When the economy comes back you can readjust it then.
  • Update your maintenance menus. The dollar has been taking a dive recently and most importers have been adjusting their prices accordingly. The market shopping exercise you did should also lead you to where you need to re-price parts used for scheduled maintenance. Once this is done get it to service so they can do their update and get competitive prices in effect in the service drive.
  • Get more aggressive in communicating with your customers, especially the wholesale ones. Just like your prices, the aftermarket has gone up substantially too. Much of what they stock has offshore origins so their prices have gone up as well.

Get ready for the ride   
Once you’ve got your basics in place you have to watch the business flow very closely and adjust accordingly. If you have the basics in place, then you should be able to ride out the storm. It’s very much like the person who takes vitamins and extra precautions during the flu season; hopefully he or she won’t get sick, but if they do it’s usually a lot less serious for them than the ones who are not prepared. Get going now!