In many cultures, the transition to male adulthood involves some feat of strength. It might involve a grueling run on one continent or painful body modification on another. In traditional Scottish culture, it means placing a giant stone on a plinth. This stone, well in excess of 200 pounds, takes the whole body to lift and manipulate. As the elders are not able to do it any longer, youthful men take their place. Is there anything special about these stones, or is it universally made from the same stuff? No. It’s just super heavy. So is one man less of a man because his stone was 256 pounds and another’s was 254 pounds? No one knew because they couldn’t effectively measure it. But, it’s likely his children didn’t care.
In the car business, there are certain metrics that any veteran would consider traditional. Revenue per vehicle, cost per car sold, closing ratio, inventory turn rate, of course, total volume, and the list goes on. Much like those metrics from the highlands, dealerships of yesteryear didn’t have a precise way to measure success. They just knew some stones were heavier than others and made the choice to stick to those traditional benchmarks. As has everyone else.
The entire dealership ecosystem supports the traditional metrics. As if the measurements from yesteryear were chiseled into those heavy stones, dealer associations and university programs still emphasize them. Technology, new and old, put these metrics front and center. If they don’t, then the manufacturers force them to. Even with their infinite wisdom, the OEMs still only pay attention to tradition. You’re not a mature dealership until you can lift that stone…that doesn’t have a specific weight or composition.
The truth is there are so many ways to measure strength. We all know a wiry veteran who survived battle and demonstrated valor. We’ve all seen a bodybuilder crumble under one punch. And, if you’ve ever been present at, or participated in, a natural childbirth, you’ve experienced a strength that can only be described as supernatural. In today’s hyper-connected world, these traditional measurements just aren’t enough.
With any business, objectives vary with the mission. Foot traffic is a key result for a low-cost brick-and-mortar retailer, but has nothing to do with the results of an online retailer. Cost per thousand views is a benchmark that billboard advertisers have used for decades, but has as much relevance for website traffic as dumping a can of Bud Light into the Pacific Ocean (arguably a better use for both examples). If monthly revenue (and not profit margin) is the most important indicator for a given dealership, then the closing ratio doesn’t really matter that much. Sometimes measurable objectives need to shift from evolutionary to revolutionary.
Retail automotive is evolving at a blazingly fast pace, almost forcibly so. Inventory management and acquisition technology has been growing quickly. With the pandemic-induced supply and demand, it’s accelerating even faster. Credit decisioning technology has also been on the rise. As the possible elimination of FICO scores looms on the horizon, more inclusionary algorithms are starting to take priority. As our entertainment methods continue to change, as streaming and on-demand content continues to shift, traditional advertising cannot adapt fast enough. As the whims of Google change more frequently, digital advertising must be more nimble. Dealership employees can’t hope to keep up. And, while vehicles have continued to get cleaner, several countries, and now US states, are legislating the end of the internal combustion engines by the next decade, the dealership’s cash cow will turn into a tasty steak. With the pace of change increasing to a break-neck speed, ironically enough, there’s an even more traditional solution we should consider.
Instead of measuring success on just feats of strength, with the help of technology, we should embrace the decathlon approach on how we treat success in retail automotive. This is said staring right in the face of Detroit. Dating back millennia, any athlete competing in the pentathlon, the all-around, and recently, the decathlon, had to be very good at all of the events, but not expected to win them all. The winning order is determined by who finishes best across the entirety of the events, not just the winners of one or two of them. Endurance, precision, technique, AND strength are all contributing factors.
As an industry, we need to lean on each other to do a better job in capturing and sharing the data that matters most. That’s right. It takes dealerships, vendors, and manufacturers, and all the ancillary people in between to work together. When industry titans like Alfred Sloan and Henry Ford were calculating to the second and measuring costs by the bolt a hundred years ago, even the newest CRMs do an embarrassingly bad job of measuring and reporting. And, we happily pay each other for this laughably poor job. If little ole’ DealerKnows can build and maintain its own performance management technology, vendors raking in millions have no valid excuse. We will never know the true strength of the industry when volume and profit are all that matter. If we’re only using eyeballs to measure success, we may only see a hulking dealership, muscular enough to lift all the heavy stones. If we’re using MRIs and laboratory tests, we may see that same dealership riddled with every form of cancer. We wouldn’t know unless we were using the most modern technology.
Some traditions are worth breaking. The service contracts that have been propping up dealerships for the last decade, will have zero value in the coming electric car era. Sorry. Miraculously increasing frontend gross isn’t going to fix it. Increasing closing ratio isn’t going to fix it. Increasing site traffic isn’t going to fix it. Increasing advertising spend isn’t going to fix it. None of these changes create a lasting strength by themselves. It’s a combination of these traditional metrics, and several more, that indicate the transition from growing to sustaining. Much like strength, success can be temporary, especially after becoming fat and lazy. If the heavy stone is smashed to bits, anyone can move it. By measuring performance beyond the traditional metrics, businesses can be built to last the test of time.
