… American market analyst Arthur Nielsen uttered those words over 60 years ago. How can we apply Nielsen’s lesson to today’s modern automotive retail sales environment? Staying on top of the analytical measurements that affect your dealership’s performance is vital. Keeping yourself in the dark comes at a huge cost.
I am going to focus on one key metric that many dealerships struggle to shine light on — floor traffic.
When you look at the simple metric of floor traffic from a general retail business perspective, it would seem obvious that it’s an easy and extremely important metric to measure. However, this is the car business and, as a whole, we are – let’s say – “a little different.” As a whole, the automotive industry gets a failing grade for accurately measuring this fundamentally important statistic. I know of very few dealers who would get an A+. This is a shocking reality. So, why aren’t dealers tracking this information effectively? I believe the answer is either egos or laziness – or, there’s a strong chance it’s both. Most dealers aren’t able to accurately answer the question, “How many customers (fresh opportunities) were in your showroom last month?” How about you – can you give an accurate answer to that question? You are in the overwhelming majority if you cannot.
In an information and data driven market how is it possible to make simple business decisions without truly knowing how many fresh customers walked through your front door? Decisions like:
- Advertising dollars and the resulting ROI
- Stocking inventory, both new and used
- Number of sales staff required to effectively cover the floor
- Creating and measuring an effective sales process
- Retention and training of sales staff
Dealers that use accurate data to measure their sales processes and the correlating results are in a far superior position to make quality business decisions than dealers who strictly use sales volume history to make those decisions. Sales history is important but is not, on its own, a clear indication of future sales. Let’s look at an example to help illustrate this point:
Salesperson Tony sold 20 vehicles last month, and salesperson Darryl sold 15. Who is going to sell more vehicles this month? Which one would you focus your training energy on? Which one is producing a higher ROI? Which one has a better sales process? You would have a difficult time providing data-based answers to those questions based on volume alone. Now, if I told you that Tony had 60 fresh opportunities (first time ups) last month and Darryl had 30, how much easier would it be to create data-based answers to those questions? You would use this data to ensure that Darryl had equal fresh opportunities, and I would break down Tony’s sale process to see if there was an opportunity to adjust it in order to improve results. Traditionally, you would just ask Darryl to sell more cars like Tony, and you would reward Tony for being top sales associate. The bottom line is that the more relevant data we have, the more empowered we are to make the best possible decisions.
Everyone wants to increase sales. When dealers get frustrated about low sales, or talk about barriers to increased sales, you’ll commonly hear them say things like “traffic was down” or “it’s dead, and no one is coming in.” Dealers are correct when they say that traffic is down, as today’s customers (on average) are visiting less than two dealerships before they purchase a vehicle. In 2004, customers (on average) were visiting around 10 dealerships before they purchased a vehicle. These days, customers are spending so much time gathering and researching information online, that by the time they arrive at a dealership, they are more informed and are, generally speaking, more ready to purchase.
Understanding the new reality of who is coming into your dealership, I assume that you have changed your sales process since 2004 – at least I hope that you have. How effective is your sales process? What processes do you have in place to give you a competitive edge in the market? As the current market conditions related to traffic are relatively new, how do you know what works best in this market? When this current market evolves how will you be aware of it? How will you be able to change? These are all difficult questions to answer even if you track your traffic accurately; they are almost impossible to answer when you don’t track traffic at all.
If tracking traffic is so important, and is fairly easy to do, why aren’t dealers doing it? The most plausible reason I can give you is laziness on the part of front line by staff (including managers) and the effect on the egos of sales staff. Tracking traffic is work, and if the leaders in a dealership aren’t holding staff accountable for tracking and aren’t creating a culture of tracking, it will fall by the wayside. Also, some automotive salespeople like to tell “fishing stories” in regards to their closing ratios, and when telling those stories they inflate their closing numbers to make themselves look and feel better. This by itself could make the sales floor more complacent and resistant to change, since they already walk around telling themselves they’re doing a good job.
Here are some ideas on how to implement a strategy to obtain and use traffic data:
- Create a culture of tracking data accurately.
- Train and explain the value of the data to all employees of the sales department.
- Don’t use closing ratios as a “carrot” or “stick.”
- Write tracking traffic into the job description.
- Create bonus or spiff plans for accurately tracking customers until it becomes part of the culture and fabric of the dealership.
- Accept your closing ratio, and always look to improve it by working on your process.
- Use data to continually measure the effectiveness of your sales processes and adjust and measure your process as frequently as necessary.
There are numerous software programs that make it easy to track and measure your opportunities.However if those programs aren’t in your budget, an excel spreadsheet along with good old up-cards can be just as effective – they just require more time and effort.I can assure you, tracking this data is not only worth your money, but your time and effort, as well.
Depending on your dealership, the idea of effectively tracking traffic may be difficult to implement, as there are many years of old habits and perceptions to change. But, it’s worth it. Getting a better handle on your traffic data will help you see the light and gain a solid understanding of where your opportunities exist, as opposed to staying in the dark and thinking your dealership is doing a good job and that there is only room for minor improvement. It is time to come out of the dark and make the journey to improvement before the market completely passes you by.
Remember, it all starts with you!
Richard Macdonald is the founder of RPM Solutions. Richard provides consulting, training and coaching services to new-car franchise stores to help them maximize their used-car department profits. For more information, Richard at (416) 894-1475 or.