On the heels of the last post, it only makes sense to offer up some further thoughts and potential solutions. After all, so many babies were called ugly. I firmly believe the best employees are already working for you today. Human capital is so precious in the car business, and it’s up to us to create an environment for them to get the most out of their talents. If you’re reading this, thanks for sticking around.
Whether the reader perceives it or not, investment is a constant theme throughout many of my posts. The exercise analogies allude to needing some pain before the gain. The dieting examples gesture towards making sacrifices, or going without, to get to a point of health. These parallels are used because many of us have gone through these periods in life, so it’s a simple connection.
But, at their core, these examples all come down to making small sacrifices today that can make larger payoffs in the future. This is the return on investment. The payoff from diet and exercise is better health and potentially longer life. When it comes to business, it means more money in the bank…and potentially longer life.
A few years ago, ROI vs ROMI (ROAS, or Return On Ad Spend, as it’s now more commonly known) was published to support a session at DigitalDealer I did with the multi-talented Brent Wees. While the reader can go back to review the whole post, the premise is pretty simple. Advertising spending is just sunk cost unless it somehow pays back in the future. It could be done to retain customers and maximize their total value. It can reach more potential customers based on their similarity to core customers.
It could just be plain going after incremental business. Regardless, that ad spend should have set a mission to pay the business back sometime soon. If it doesn’t, it’s just wasted money that could’ve been spent elsewhere. Sorry agencies.
When the HR Investment Paid Off
Now, let’s scope that thought process around human resources, specifically traditional sales staff (fully realizing I’m in a sacrosanct territory with managers, please take a deep breath and open your mind). A lot of swipes get taken at older car guys/gals; however, many play a very important role for car dealerships. They’re the boots on the ground, doing work with community organizations like Rotary, or charitable organizations like the Eagles, hanging out with their fellow veterans at the VFW, or even hobnobbing at the country club.
Long before social media was even conceived, these salespeople embedded themselves in the community, cultivating lifelong relationships, and establishing themselves as the go-to resource for transportation needs. Their patience and decades of commitment continue to pay off, as they often don’t have to make an outbound call, send an email, or even walk onto the lot because their customers know how to get ahold of them. Nothing but the deepest respect for them.
This type of salesperson is an example of a strong ROI for the dealership. The investment in the cost of that person’s desk, phone, computer, insurance, training, and incidentals is a pittance compared to the 20-30 cars per month they generate for the dealership, month-in and month-out. They deserve a demo because they’ll inevitably sell it to their dentist or accountant after a couple of months.
Their bankable sales offset the cost of the website, CRM, leads, and advertising expenses because their deals don’t require any of those resources to happen. They’ve earned that commission, just as any athlete generating merchandise sales for their team. The dealership is getting paid.
As we’re nearly through a quarter of this century, the salesperson is now the exception, not the rule. We can’t simply wish for more of them. There isn’t any type of accredited degree program for this type of person to ensure they have all the necessary skills. The skills can be trained, but the desire to perform them certainly can’t be.
The last Baby Boomer was born decades ago. For those stores that are blessed to retain them, it’s a generational talent. While we’re limited to restraints of physical biology, these individuals will get worn out. They absolutely cannot be scaled.
When HR is Just Sunk Cost
Look around the showroom and count the salespeople that fit that relationship collector description. Then count all the people who are constantly asking about new appointments on the Internet. Then count all the people who you didn’t even know worked there. Do they have what takes to qualify as solid sales performance examples?
My guess is that your eyes are locked on some awkward guy with shaving cream on his collar or some gal checking Instagram on her phone. Gazing across the showroom, who is actually paying the dealership back for that investment?
This is the very reason why the skills of the perfect salesperson had to be broken into pieces and divided amongst the many during the advent of the Internet age. This is nothing new. There has always been a finite supply of the perfect candidate, which is what spurred the age of mass production over a hundred years ago.
Salespeople are making more money than they ever have, not even accounting for inflation. In some cases, more money after six months on the job than the veteran made four years ago. The difference is that a new person probably won’t be there after another six months. The NADA (in its 2021 Workforce Study) estimates that 67% of salespeople turned over last year, and only 39% will make it three years.
Today’s median salesperson tenure is only a touch over 2 years. In the meantime, the dealership will spend thousands on recruiting, training, and maintaining more salespeople, while the sales managers will ensure that the new folks get a massive commission because it’s in the sales managers’ best interest to do so. Even after the sales manager did 99% of the heavy lifting.
Dealerships don’t make anything that’s tangible. Yes, they can add accessories or resell other products, but nothing can be extracted from a dealer-sold vehicle and then resold that wasn’t already part of that vehicle. The only difference is who a customer buys from. If that’s that’s the case, I think one could easily argue that a dealership’s net profit is the sum of the added value of the salespeople over time. Nothing separates your new F-150 from a competitor’s if the people don’t make a difference. Zilch.
How to Measure Sales Performance
When it comes to objective added value, it can be super hard to measure sales performance from those who work on the showroom floor. As highlighted in the previous post, for a BDC or Internet sales personnel, it can be easy to measure contact metrics. If someone has the proper access, they can just dip their hand into written responses, read the content, and check the time stamps. For a whole host of reasons, managers just can’t interrupt a sales conversation to see how things are going and expect to get an honest assessment (bonus challenge: count how many cognitive biases this triggers).
And, since data is never completely isolated from showroom customers, we’ll never know how much availability, incentives, distance to the dealership, reputation value, marketing, etc., played an actual role. Repeat business is the most objective way to measure sales performance until all those variables can be ruled out. That can only be measured in a vehicle replacement time that, which will statistically exceed the average salesperson’s employment.
“The most objective way to measure sales performance is repeat business. That can only be measured in a vehicle replacement time that, which will statistically exceed the average salesperson’s employment.“
– Bill Playford
So much has been said about this or that robbing dealerships, but dealerships are actually robbing themselves. So much more has been said and written about dealerships not being able to afford certain technologies and infrastructure for fleet or EV vehicles, provide effective training for the next generation of staff, or hire skilled leadership. Dealers need to ask, “How do you measure sales KPIs?” The average store could totally afford these enhancements and more. However, they continue to support a payment structure that does not pay them back.
Free Advice for a Perfect World
If the dealership wants a truly sustainable solution, it should be to start every new sales hire in a BDC environment. In this scenario, a dealership would create an advancement plan based on goals and objectives for new hires. Responsibilities and pay plans would ratchet up until the agent was ready for the showroom. This benefits the dealership by ensuring showroom personnel have demonstrated and measured mastery of the skills for short, medium, and long-term follow-up and consistent quality in verbal and written communications.
This also helps the dealer to avoid paying excessively high commissions to temporary workers. Finally, this will meaningfully address the “us vs. them” mentality that has infected dealerships for more than two decades. These problems have not, and will not, solve themselves. Solving the organization chart requires thoughtful, meaningful, and permanent actions.
Sorry, but Retail automotive needs to give up on recreating the prototypical salesperson, thus doing away with antiquated pay plans. Instead of trying to mold the person to the job, it’s about time we mold the job to the person.
Enough throwing good money after bad to recapture the ideal salesperson. While simultaneously scaling talent and pay plans, dealerships can free up the operating capital necessary to make building improvements, upgrade technology, adapt to less franchise support, prepare themselves for the onslaught of vehicle propulsion systems that are right around the corner, AND PAY ITSELF BACK.
Disruption ripens the field of opportunity. While the traditional pay plans worked for yesterday’s salespeople, those antiquated commission structures are a megalithic barrier preventing dealerships from reaping the benefits of their investments.
If your dealership is blessed with a salesperson working their book of business for decades, do everything you can to keep them happy. But, if your dealership is riding the HR merry-go-round like everyone else, seize this opportunity to re-evaluate the division of labor, job descriptions, pay plans, dealership hierarchy, and continuity plans. Improve the method you choose to measure sales performance.
If there were ever a risk-free time to do it, it’s right now.
