Learn some valuable lessons on how to avoid the USA nightmare. David Martin is well known to dealers throughout Australia having already spoken at five AADA Conventions. He has a complete understanding of the auto industry and is one of the USA's leading sales trainers for auto dealers.AADA 2010 National Dealer Convention Closing Keynote Address - International Guest Speaker David Martin
Thank you very much. I am so glad I didn’t have to follow Robyn Moore, Allan Pease or Jean Kittson or Shane Jacobson. What entertainers! If you could just bottle the manic energy of Robyn and Jean, the world wouldn’t have to worry about alternate fuel sources – those two could power Melbourne by themselves.
By the way, I admire how Aussies feel the freedom to express themselves in public. If Jean would have dropped that “F” Bomb on an American audience, the P.C. police would have arrested her on the spot. And I have a confession to make, when I first heard Blinky Bill, I thought Robyn had gone mad right before our very eyes. And this morning I was so glad to hear Shane tell us that exercising is a total waste of time. That lets me off the hook. And he definitely let us know that humor and laughter are the anecdote to difficult times. And thank goodness for Allan Pease. Someone finally understands me. Now I know that when I come home and Lisa asks me, “How was your day?” Good is an appropriate answer. And then using the technique of answering a question with a question, I’m now going to say “and yours?” I’m then off the hook because the conversation will go on for hours. Lisa will think I’m sensitive and caring—and where will I be, gentlemen? In my nothing room!
Wow, what a convention! I’ve had the privilege of speaking at a great many conventions worldwide and I must tell you that AADA is my favourite. The combination of warmth, hospitality, fellowship, inspiration and the sharing of knowledge is unsurpassed in the industry. Yes, NADA is huge, but bigger is not always better. Thankfully. An undertaking like this is the culmination of many months of hard work by a dedicated group of people. I hope you don’t mind, but I would like to take just a moment to thank some special people who have made this all possible.
First, the sponsors. Yes, I know a lot of people have thanked the sponsors. But I want you to think about it on a more personal level. Without the financial contributions of companies like Motor One, Car Sales.com.au, Pentana Solutions, Castrol and so many others, the costs of attending would be greatly increased and perhaps even prohibitive for many delegates – so let’s show our appreciation.
I would like to personally thank Chris Lancaster and his fantastic crew for always making us speakers look and sound better than we deserve. I want to thank Belinda Holt and Jess, Kathy, Shelly, Julien and Joanna and all the wonderful Salefest team tasked with making this convention run so smoothly. That Belinda – she is remarkable. And I would like to thank the consummate professional – Ian Leslie. What an incredible job he does year after year. You have no idea how lucky you are to have someone like him in this important role of convention host. And last but not least, what can I say about Patrick Tessier. With all due respect to Tom Hopkins, Patrick is the real master of sales and this convention is proof of it. Patrick, on behalf of everyone in the room – Thank you.
Okay, now please allow me to take you through all the wonderful speakers we were privileged to have heard over the last 3 days. I am going to attempt to remind you of the key points that each was trying to make as a reminder for you to take home.
The first speaker on Thursday morning was – me. My topic was '21st Century Leadership'.
The things I would like you to take home would be that leadership is the cornerstone of any dealership. It is the straw that stirs the drink. Every leader needs to ask him or herself a question. Do you want to run a loose ship and make a little money? Or do you want to run a tight ship and make lots of money? Look, I’ll be the first to admit that money isn’t everything, but it’s a great way to keep score. I also want you to remember that you should become Brilliant at the Basics. Why? Because it is easy to get caught up in the big picture when you should be concentrating on how our business really works. We sell cars one at a time, we mess up a deals one at a time, we make hiring decisions one at a time, we mishandle showroom guests, internet inquiries and phone calls one at a time. You get the picture. And then finally, please remember that great leaders with great attitudes and great processes always find a way to thrive.
Our next speaker was Sue Klose, the publisher of CarsGuide. Sue spoke to us about the need to understand what drives customers to your dealership. Through a series of graphs, she showcased the research her team had done illustrating which type of vehicles were being purchased by the various categories of age, income, demographics, education and Region. Great information to have when determining marketing strategies. She also showed us that the search for most expensive cars are done close to home, less than 10ks and that the less expensive segment is more price sensitive and buyers are more willing to search over a wider area. Sue told us that car buyers are an extremely diverse group with varying needs and often not what we think. It is her feeling that those in the market for cars will naturally gravitate toward information sources that suit their needs for a given situation.
Our next speaker was Greg Roebuck, CEO of tonight’s Grand Finale Dinner sponsor, Carsales.com.au and whose topic was 'The Digital Revolution'. Greg’s message was that dealers need to understand the enormous impact that smart phones are having on consumers and the way they shop for vehicles. Dealers need to be in a position to respond quickly to customers because that is what they expect in our microwave, got to have everything now society. Technology is changing at a rapid rate and is become more intuitive all the time. The Internet puts buyers in touch with sellers and today’s successful dealer understands the need to capitalize on this phenomenon.
According to Greg, the Smart Phone has changed what we use phones for. No longer are they just to make phone calls. Today they organize our day, put information at our fingertips, allow us to communicate on multiple levels – and we carry it around with us in our pocket or purse. The use of App technology allows customers to have a better experience when interacting with your dealership, when browsing your inventory, researching financing options, determining the status of their car in service and even paying for those services.
Greg told us that he feels that in the next 3 years, more people will access the web thru mobile phones and it will generate more than 50% of sales. He also wanted the audience to know that photos sell cars and they influence both the volume and quality of inquiries, so make sure you use plenty of photos and video. In fact, Greg says that video is the fastest growth segment online and savvy dealers need to incorporate appropriate video content to improve the customer experience and appeal to younger buyers. And Greg touched on the need for technology in the used car department to help with appraising, pricing and stocking vehicles. The pioneer in this arena is Dale Pollack who wrote a book called Velocity that I think will revolutionize the business.
Justin Smirk, the chief economist of St. George Bank talked to us about the Australian economy and the outlook in the year ahead. I didn’t understand a word he said. Just kidding. He had great insight into both the world markets, the Australian market and more importantly for this audience, how car sales may be affected in Australia. In no particular order, some of his key points were:
1. He has a basic optimistic point of view – and he backed up that view with some very sound reasoning
2. He told us that Australian households have the highest debt level in the world
and that may cause a difference in consumer beliefs and actions And he ended his presentation as he began it. In his opinion, It’s Back to the Future – 2011 is going to be a lot like 2007/2008 in many respects. So if you liked things then, you should like the coming year.
3. He said the Australian dollar will remain high and volatile
4. Credit conditions should ease a bit but will remain tighter than you have
become used to. The days of cheap credit are over
5. He is bullish on Australian income growth and the economy
6. He feels there is a bias for an upward tick in rates and I believe quoted a figure
of 100 basis points
7. He also says cheap oil is over – get used to it
8. Consumer sentiment has bounced back and consumers think it’s a good time
to buy a car --but may remain cautious
9. Cars are getting cheaper to run, so he thinks new cars have an upside for
growth
10. He believes auto spending in Australia should match the growth in income
Next up was Geoff Zippel, speaking on 'The Greening of the Auto Industry'. Geoff works with Better Place Australia, which is an electric vehicle network and service provider that has as its mission, to end the world’s dependence on oil. Given that, it is no surprise that Geoff’s talk centered on the need for a change to alternative fuel vehicles. What is surprising is that Geoff spent decades working for the oil companies, so he brings a unique perspective to the debate.
There are basically 4 types of alternate fuel source vehicles at present, each with its own set of advantages and disadvantages. There are Electric, Hydrogen and fuel cell, Ethanol and Hybrids. In Geoff’s opinion, electric vehicles rate the highest efficiency, have the lowest carbon emissions and represent the next generation of vehicles. Because of global warming, or as people are now starting to call it, climate change, Geoff tells us that the auto industry will have to take aggressive steps to combat emissions.
Governments are increasingly using legislation, regulation and incentives to drive consumer behavioural changes. He tells us that there are 51 different variations of Electric Vehicles in the pipeline that are expected by 2012. He quoted a study by UCLA that said that by 2020, 18% of all cars sold will be EV and by 2025 that figure will grow to 45%. Ladies & gentlemen, that is only 15 years from now. In addition, the government of China, which now boasts the world’s largest auto market, is dictating that 50% of all new cars sold by 2020 must be battery powered. That is amazing.
Obviously, EV’s will represent a major new market, starting in the very near future. This will quickly transition from the so-called “early adopting green buyers” into mainstream buyers based on cost and functionality. New industries are already overcoming the historical barriers to further drive EV adoption. The biggest catch for the-battery powered vehicle has been the cost, the lack of range and what happens when you run out of power. Well, the technology on batteries continues to improve, costs are coming down and a network of charge & swap stations are envisioned, where a driver who is low on battery power can pull into a station much like a petrol station. And without getting out of their car, have their battery switched for a fully charged one and be on their way in a matter of minutes. Almost sounds like science fiction, but it is the wave of the future.
Our next speaker was Kevin Panozza who spoke on 'Transforming the Customer Experience'. My, what an unusual guy and what a great audio-visual presentation. Kevin had a lot to say – about everything. His opening point was that change is inevitable. Yesterday companies competed with each other. Today they simply compete for the opportunity to reach a customer because there are so many different forms of media.
Echoing the comments of Greg Roebuck, he said that SmartPhones will change the way we communicate and that there are already over 220,000 IPhone Apps and it grows by hundreds each day. He says that by 2013, mobile phones will overtake PCs as the most common web access device worldwide. How is this starting to affect you? Well, in 2000 the average customer took 7.5 visits to dealerships to buy a car. Last year that was reduced to only 1.3 visits because of easy access to information via the web. Kevin also had a wonderful message about the value of the customer experience. Ten years ago, a bad customer experience in your dealerships meant the person would go home and tell their family and a few friends. Today that same bad experience could go viral in a matter of days.
Dealerships should engage in “good for everyone” relationships. Relationships –good or bad--happen one conversation at a time. And every dealership should measure success in direct proportion to their ability to retain the customer. And Kevin’s advice on achieving that was summed up very simply: make sure that every customer touch-point is a come to work, have some fun and are well-trained. And he ought to know what he is talking about. As the founder and owner of SalesForce, he ran a company that won the prestigious Hewitt award for being the best employer in Australia, an impressive 3 years in a row.
Our next speaker was Grant Cameron, partner in Deloitte Motor Industry Service who spoke to us about 'Why Set a Budget'. The events of the last few years have highlighted just how fundamental budgeting has been to the Australian car dealer, and has proved how vital it is to surviving a tough market. Grant informed us what a budget is and what it isn’t. And he stressed that budgets don’t guarantee success but they do help you avoid failure. Budgets allow managers to identify problems in processes before they occur and act as a motivator, allowing opportunity.
He spoke of one of the key ingredients for a dealer and that is cash flow. And he told us there was a big difference between profit and cash. For instance, hold back is booked currently as profit but may not be received for 6 months. Big difference to a dealer. And he closed his remarks on 'Why Budgets Fail', the need for buy-in and accountability from all department heads and why written budgets should be an integral part of every dealership.
The last speaker on Thursday was the incredibly energetic and entertaining Robyn Moore, whose topic was 'The Power of the Word'. In between voice-overs, irreverent humor and strange characters, Robyn delivered a powerful message. She helped us discover “the power of words” in selling us back to us. In other words, creating self-determination. We can be who we want to be.
She wanted us to access “audacious leadership” so that colleagues and clients want to listen because of who you are as a leader. She told us to live with urgency before the emergency so you can take responsibility for achieving your strategic goals. She wants us to discover the 4 thieves of wellness, satisfaction and success. And to help us find our own power in the face of those thieves. She implored us to be Bigger than our circumstances and get greater access in getting the right balance between work and home. Robyn Moore is a true gift to us all.
Friday’s speaker was Mr. Tom Hopkins. Tom was battling a loss of voice, but being the true professional he is, never complained. Tom spoke to us on the critical nature of developing and pursuing goals. We all know we should, but how many of us truly plan our lives, write down the plan, and fanatically pursue the plan? It is one of the great motivators in life.
Tom shared his view of 'The Fundamental Skills of a Champion Sales Professional' and how to attain them. Tom loves the use of glamour words like Dynamic, Exciting, Unique, Brilliant and my new favourite---UNBELIEVABLE. He told us we need to be aware of the customer’s fears – fear of you; of making a mistake; of being lied to; of losing face. We discussed words that make the customer uneasy and appropriate replacement words. Instead of down payment, say initial investment. Instead of appointment, say visit.
Tom shared some tips on the proper questions to ask in order to develop rapport, uncover needs and wants and obtain commitments. We discussed customer concerns and he gave the audience the steps to handle the final concern. And he closed the day by sharing the responses to objections that all salespeople can use to keep the sales momentum going and ultimately close the sale.
On Saturday we were treated to a discussion by 4 members of the Deloitte panel— Grant Cameron, Peter Axiom, Stephen Timperley and Danny Rezek. Who knew that accountants aren’t always boring. Their presentation was broken down into 3 topics – 'Effective Commission Structures', 'Are You Paying Too Much Tax?' and 'Winning Ideas for your Business'. Unfortunately, a time conflict kept me from attending the session, but I have been told it was extremely worthwhile. And luckily the Deloitte panel was gracious enough to provide beautifully done handouts that every dealer should take back and study.
Later in the morning there were 3 speakers who repeated their workshops in the afternoon. Alan Syer’s topic was 'The Used Car Profit Center'. His message was compact and powerful - 'It’s All About People', 'Processes' and 'Inventory'. Alan told his audience that they need to have a stocking policy – and no exceptions. His recommendation was that all used cars need to be through reconditioning by Day 5 because the first 30 days in your inventory are your peak gross profit days. Don’t keep your cars away from the yard. If the vehicle has not sold by day 40, there is a reason and must be re-evaluated. A manager should personally drive the vehicle to determine if there are any fixable problems. If it has not been sold by Day 60, it must be re-priced to move quickly because it is time to get your money back and reinvest in new product. And if it hasn’t sold by Day 90, you just wholesale it immediately – no exceptions.
You must focus on your inventory every day and put an activity report in your daily diary. It is important to make the decision to wholesale or retail a trade-in your grosses are falling. Alan told us that anyone who will be involved in the sale should be introduced to the customer early on. That way, they aren’t perceived as scary, mean people at the end. They are just the nice people that the customer met earlier. And he concluded his presentation by reminding us that when you increase your turnover you increase your profit. It’s a concept we all know, but how often do we let slide.
Simon Bowkett, the Aussie turned Englishman via marriage to a lovely Scottish lass, spoke on 'Insuring Sales Performance Day In and Day Out'. Simon has an engaging, energetic style and his passion for the business comes through loud and clear. Simon told his audience that there are 3 sales in every sale. You sell yourself, you sell your product and you sell the deal. Unfortunately, in today’s Internet-driven business, too often our salespeople overlook that and just sell the deal, sell the deal, sell the deal. Sales cycles are different based on age and other factors. But regardless, most of us would agree on some fundamental truths.
Simon says that where a salesperson spends their time is crucial to success. When a good deal of the time is spent getting to know the customer, building a relationship, finding commonality and determining true buying motivations, the sale is often just a matter of wrapping up details. Your grosses are higher, brain damage is reduced and the close is quick. On the other hand, when you spend little time getting to know the customer, the close is usually long, painful, unsatisfying, unprofitable and about as much fun as a root canal without anesthesia. After all, when people want to really do something, they rarely let details get in the way.
Simon says all of this is important because when a customer first shows up, the emotions are negative. As you get to know them and they you, the emotions become more positive. As you present and demonstrate the car, the emotions hit their peak. Unfortunately, when the salesperson mentions money, usually through a premature and/or poorly worded trial close, the emotions head negative very quickly. So the trick is to close them while their emotions are still high.
And our final speaker was Paul Quilligan who gave a wonderful presentation on 'The Optimizing of Service Returns'. Paul tells us that customers want 3 things: Service, to fix it right the first time and Value for the Dollar. He also told us that value for the dollar has nothing to do with money. Sounds funny, but it’s true. Value is perceptual – it’s what you perceive it is.
Paul emphasized that customer retention for the franchised dealer is only about 30% at the end of the typical warranty period. Think sell 100% of the new cars. But along the way, you lose a stunning 70% of them to the aftermarket for various reasons. Acquiring new customers costs 5 times as much as retaining the current ones and yet many of the things that your sales department takes for granted aren't provided for service customers. Paul made a great point when he said that he often hears, “We need more customers.” His response is “you don’t need more customers. You just need to take care of and pamper the ones you have.” The fact is that consumer profit rate increases dramatically as the vehicles and the kilometres mount. Customer retention is the key to these increasing profit rates.
Paul ended his presentation with a 5 point checklist. First, he suggests a Health-Check – determine where you can get better. Second, make sure you have the right people doing the right jobs. Third, focus on real retention activities and spend some money on service customers. Fourth, consider sponsorship rather than conventional marketing. And fifth, ask yourself, “How easy is it to do business with my dealership?”
Ladies & gentlemen, this year your AADA had a wonderful combination of speakers who delivered powerful messages and I hope I have fairly summarized the messages they were trying to send.
My Insights into the Business
I have been an observer of the auto industry for more than a few years now. And I have had the good fortune to view it from many perspectives. Patrick asked me to do a number of things in this closing address, and one of them was to share my insights into the challenges that the U.S. dealers have faced and continue to face, in hopes that the Australian dealers can learn some valuable lessons and avoid the same nightmare. For me to share everything that has happened would take a week, not a few minutes, so let me try to summarize.
First, the U.S. market is definitely on the mend, but we went from new vehicles sales of about 17 million to approximately 9 million in a very short time. This year we should bounce back to approximately 11.4 million, and next year the forecast is to hit over 12 million. But let’s look back for a minute. Our market started slowing down in early 2008 and in September it fell off a cliff. Between Sept 08 and the end of ’09—just 16 short months—over 2000 dealers closed their doors for good. To put that in perspective, that is equivalent to every single dealer in Australia AND New Zealand and more closing up shop. Now at the risk of sounding callous, a good number of them deserved to close because they were lousy operators. You see, for years all it took for most U.S. dealers to make money was for them to unlock their front door. It took little talent. The economy was good, credit was plentiful and Americans love to over-indulge and spend $$.
So a lot of dealers and managers mistakenly thought they were doing well because of how good they were. In ’08 all of that changed and their weaknesses were quickly exposed. Unfortunately, an equal number of very fine dealers also lost their franchises for various reasons, including political. Many of them that had been around for 30, 40, 50 years shut their doors and over 500,000 people lost their jobs and their dreams. During this time there were dealers who kept thinking that it was all just a nightmare and they would wake up and be able to resume their comfortable lives. In fact, I got a couple of calls from dealers midway through the year asking, “What are we doing wrong?” I told them that they weren’t necessarily doing anything wrong; they were just waking up to the new reality a little slowly and they needed to get their heads out of the sand and back into the game.
I recently read an article in which a reporter posed an interesting question. He said, “Knowing what we know now, what should dealers have done differently prior to the market collapse?” In other words, if they could go back to July of ’08 and they knew that in 2 months the financial world would drastically change, what steps should dealers have taken? Here is my answer to that.
First, the dealers should have undertaken an immediate assessment of where they stood in regards to expense management. A line item review should have taken place and any unnecessary expenses should have been eliminated. Actually there should NEVER be any unnecessary expenses in a dealership, but that’s another story.
And speaking of expense management, I will say that we have now lived and learned the real definition of an ESSENTIAL expense. Things dealers thought they just had to have, they easily learned to live without.
Second, the organization should have been re-sized to the point where, when coupled with expense management, the dealership could be profitable on the smaller amount of business being transacted. Once again, unnecessary personnel should not have been employed in the first place, but many of you in the audience know how that can creep up on you. Sometimes you have to take a good hard look and determine whether a position has outlived its usefulness or whether an employee has. I don’t mean to sound cold, but that is an unfortunate reality.
Third, they would treat their cash as almost sacred and would educate their personnel on cash management and where the cash actually comes from. Tough times give a whole new meaning to the phrase “Cash is King.” No longer would they have a cavalier attitude in regards to their new and used inventories, their parts, their receivables, etc. We now know that customers come back into the market slowly and sometimes reluctantly. We also know that our “finance Partners” with whom we enjoyed such a great relationship during the good times will back off and lose their willingness to work with us. That puts added strain on getting the marginal customer into a vehicle they would like to own.
Fourth, ideally dealers would have realized that when cutting the fat out of their budgets, they should not cut into the meat, as well. And by that I mean, advertising and training. I saw far too many dealers who panicked and cut out advertising and cut out training and then they were shocked when too few people showed up and shocked that their staff wasn’t skilled enough to sell the ones who did. Dealers will always need a coordinated strategy of getting their message out to consumers. Whether it is print, radio, television, the Internet or the next great means of marketing, their names must stay in front of the buying public. Otherwise, they won’t have anyone to sell.
And what can I say about training? After spending hundreds of dollars to get a customer to show up or call, does it really make sense not to capitalize on every opportunity? And I’m not just referring to training salespeople, managers and service advisors. Those should be no-brainers because your ROI is huge.
But what about staff that we don’t often think of? How about the receptionist? You know, the hood ornament of the dealership who speaks to more customers than anyone else, and therefore is often the first impression of the dealership. Shouldn’t they be highly trained? And how about the service cashier – the last person to speak to service customers before they leave? Why are they important? Aren’t they just collecting money? Well, think about it. Almost by definition, service customers are unhappy campers. And why wouldn’t they be?
Coming to a service department is inconvenient, time consuming and they are spending their hard-earned money for what? To get back the same thing they already had. At least when they spend money on food they get to enjoy it. When they spend money on a new dress, they get to show years to come. But when they spend money in a service department, what do they have to show for it? What ego boost do they receive? Do they ever go home and have an envious neighbour say, “Boy, that’s some transmission flush you got!” No, so they aren’t particularly happy to be at a service department to begin with.
Therefore the cashier contributes greatly in making it an okay experience or a miserable one. Maybe they should be trained. Training all personnel should be mandatory.
The fifth step that I would have recommended would have been for dealers to get creative and to use all the tools at their disposal. Someone is always buying cars. The trick is to be on their radar when they do. And sometimes it takes a bit of creativity and a willingness to think outside the box to make that happen. Many dealers have already invested in technology to help them run their businesses and make money…DMS systems and CRM systems, used car management systems, online training programs. But often these tools are greatly underutilized. In good times you can sometimes get away with that. I’m not saying that you should – just that you can. But taking full advantage of all the capabilities of an asset, especially one that has already been paid for, can only make for a stronger dealership.
And the last step I would have recommended in July of ’08 would have been to recognize what all U.S. dealers now know and that is that their service departments are no longer the backend of the dealership. They are the backbone. Most dealers came up through the so-called glamour side of the business, the variable side, and consequently, many of them paid little attention to service. My, how that has changed. During this difficult time period, the profits generated in service were often the only profits in the dealership. The value of fixed operations has never been greater and should never again be ignored.
So, that would have been my answer in July of ’08, but now what? Now that the economy is beginning to improve and sales are on the rise. Well, I would strongly recommend to any dealer who would listen to me –please don’t have a short memory! Keep these experiences burned into your brain. Always make it part of your daily work plan to manage your cash, keep expenses in check, right-size your dealerships, have a coordinated strategy for advertising, train anyone who touches your customers, actually use the assets in which you have already invested and don’t overlook the backbone of your dealership.
Ladies & gentlemen, if any of this makes sense to you, I highly recommend that you consider taking these steps yourself. You may be doing well now, but you never know what’s around the corner. And as the old saying goes, “an ounce of prevention is worth a pound of cure.” Or I guess in Australia it would be “28 grams of prevention is worth 4 ½ hectograms of cure.” Somehow to an American it loses a little. Oh well, regardless – just remember the immortal words of yours truly: if it can’t hurt and could help, it should always be done.
I know most of you will go back home vowing to make changes but talk is cheap. It’s easy to talk the talk, but are you willing to walk the walk? Remember that winners make things happen. Everyone else just makes excuses. So I have a challenge for each and every one of you. You have heard some wonderful speakers here at AADA who have shared some great thoughts and strategies. Please don’t go back to your dealerships and let them become part of the graveyard of good ideas. Make leadership decisions as to which ones will benefit you the most, institute them and strive for excellence.
I would like to leave you today with a message that I find truly inspiring. It is a short 241 word poem called “The Dash” by Linda Ellis.
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