An Example of Used Car Management Done Right in the 21st Century

by dpollak on 09/29/2009 · 16 comments

Take a look at this memo written by an extremely enlightened Used Car Director at a highly sophisticated velocity-managed enterprise group. This memo sent to the GMs of their various stores exemplifies best practice management of what I call “Pixel” (virtual) Management. Today, it is not enough to just manage the traditional used vehicle metrics- you must also coordinate and manage the virtual side of the business as well.

Dale Pollak introduced a grading system to help evaluate online efficiency including “SPR’s per Vehicle”. There are many factors that drive SPR’s. Four of the factors that drive SPR’s are:

1. Screen Real Estate – quality of your online package

2. Price – are you priced to the market

3. Appeal – do you have the vehicles that customers are looking for?

4. Size of Market – this should be about the same for all Ohio stores

Total SRP’s are divided by your total inventory to compare yourself to others since the size of your inventory will affect the total. This is not a perfect indicator of the success of your online merchandising but I think it warrants watching. In theory if buyers are searching the internet for certain vehicles or types of vehicles, and you have what they want, they should show up in the search. If you don’t have what they want it won’t.

I have added two boxes to end of the report that recaps AutoTrader.com and Cars.com- your SRP’s per vehicle and your VDP’s. VDP’s, as we have discussed, are the virtual equivalent of a customer actually opening up a vehicle. Of course when your vehicle shows up in a search your goal is for someone to open it up. The higher the percentage the better, but if the percentage is high and the phone isn’t ringing or vehicle isn’t getting shown then something is wrong.

Just like you, I am just beginning to see and understand the importance of these metrics as they relate to our online merchandising. Questions that jump out at me as I look at this are:

1. Is it a coincidence that the stores with the most missing photos have some of the lowest VDP’s? Customers are less likely to open the ad if there are no pictures to look at.

2. Store C has much higher SPR’s per vehicle than Store D but lower VDP’s. So do they have the right variety of vehicles but for whatever reason are their particular vehicles or ads not appealing? Pricing is good so could it be miles, colors, equipment?

3. Are the high SPR’s per vehicle and VDP’s at our High Line Store legitimate buyers or curiosity seekers?

4. Store A and Store B have about the same SPR’s per vehicle but Store B has higher VDP’s- so why does Store A still sell more vehicles? Is it something that happens on the phone call or the lot?

I don’t have all the answers, these may not be the right questions and there may be many more but we need to start including these metrics in our evaluation of our inventories. You need to start looking at these metrics on each vehicle as you reevaluate them through the aging process.

  • Ted Heater

    Dale, you know what would be helpful (atleast to me)? We are kicking A#$ with vAuto. I get calls, ups, lot ups, e-mails and everything else I could dream of. But we can’t “close the door.” We can’t convince customers that this is the “best buy” when it really is! They still want to shop. How does someone like Bill and his crew at Finishline actually sell these “non-believers?” We honestly can’t figure it out…and we have alot of retail experience…Maybe vAuto brings in the mooches and the flakes? But like I keep telling my staff, somebody sold them the car they are driving. Any help or the link to the “vSales” site would be a great help!
    Ted

  • Ted Heater

    Dale, you know what would be helpful (atleast to me)? We are kicking A#$ with vAuto. I get calls, ups, lot ups, e-mails and everything else I could dream of. But we can’t “close the door.” We can’t convince customers that this is the “best buy” when it really is! They still want to shop. How does someone like Bill and his crew at Finishline actually sell these “non-believers?” We honestly can’t figure it out…and we have alot of retail experience…Maybe vAuto brings in the mooches and the flakes? But like I keep telling my staff, somebody sold them the car they are driving. Any help or the link to the “vSales” site would be a great help!
    Ted

  • dpollak

    Ted,

    Thanks. When you price vehicles to sell rather than to negotiate, the first thing you need to do is to convince your sales people that that is the case. We’ve built a culture in our showrooms over the years that says that we need to give a customer a couple grand off just to start the negotiations with credibility, and that needs to change. So how do we change the culture?

    Well, it starts with taking your pricing tool into your sales meeting on a regular basis and showing your sales people how sophisticated you are at putting the right price on a car. Go through several examples each meeting where they see your car and your price relative to the competition. The idea is that they have to leave the sales meeting with a confident bounce in their step so that when they encounter the first customer that says “what are you going to do for me”, they look the guy in the eye and say “we both know why you’re here, lets take the car for a ride”. This is a process that gets repeated over and over and will eventually take hold in the showroom.

    Second, your sales staff must understand that the people who show up when a car is properly priced are there for a reason. They obviously don’t announce the fact that they drove 40 miles to get there because it’s the car they want at a great price, but that is nevertheless the case. The problem is that they put our sales people on defense right out of the gate when it comes time to negotiate price. Instead of playing defense, your sales person should say, “Sir, let me show you how we’ve arrived at the price of our vehicle.” At this point, the sales person should be trained and prepared to show the customer the showroom report showing your vehicle in the competitive set. Your vehicle does not have to be the lowest priced, but rather only a fair one. The vehicles that appear on the showroom report at a lower price need to be excluded from consideration based on factors such as excess mileage, odd-ball colors, far from home, etc.

    Ted, it definitely takes practice and work to undo decades of sales practice that depends on heavy negotiation. Believe me when I tell you that the problem lies in the minds of your people rather than the customers. They are not mooches or flakes – they are enlightened shoppers in the efficient market. You and your staff simply need to change your mindset and work with the same information that they have. Remember, information is powerful and you have as much or more of it to demonstrate value than they do. Hope this helps.

  • dpollak

    Ted,

    Thanks. When you price vehicles to sell rather than to negotiate, the first thing you need to do is to convince your sales people that that is the case. We’ve built a culture in our showrooms over the years that says that we need to give a customer a couple grand off just to start the negotiations with credibility, and that needs to change. So how do we change the culture?

    Well, it starts with taking your pricing tool into your sales meeting on a regular basis and showing your sales people how sophisticated you are at putting the right price on a car. Go through several examples each meeting where they see your car and your price relative to the competition. The idea is that they have to leave the sales meeting with a confident bounce in their step so that when they encounter the first customer that says “what are you going to do for me”, they look the guy in the eye and say “we both know why you’re here, lets take the car for a ride”. This is a process that gets repeated over and over and will eventually take hold in the showroom.

    Second, your sales staff must understand that the people who show up when a car is properly priced are there for a reason. They obviously don’t announce the fact that they drove 40 miles to get there because it’s the car they want at a great price, but that is nevertheless the case. The problem is that they put our sales people on defense right out of the gate when it comes time to negotiate price. Instead of playing defense, your sales person should say, “Sir, let me show you how we’ve arrived at the price of our vehicle.” At this point, the sales person should be trained and prepared to show the customer the showroom report showing your vehicle in the competitive set. Your vehicle does not have to be the lowest priced, but rather only a fair one. The vehicles that appear on the showroom report at a lower price need to be excluded from consideration based on factors such as excess mileage, odd-ball colors, far from home, etc.

    Ted, it definitely takes practice and work to undo decades of sales practice that depends on heavy negotiation. Believe me when I tell you that the problem lies in the minds of your people rather than the customers. They are not mooches or flakes – they are enlightened shoppers in the efficient market. You and your staff simply need to change your mindset and work with the same information that they have. Remember, information is powerful and you have as much or more of it to demonstrate value than they do. Hope this helps.

  • http://www.polarchev.com/ bill krouse

    Ted-I’ve been pricing new Chevrolet’s and used cars-not customers- at our very best price ( pure haggle-free) in a highly competitive market for the past 18 years and I can tell you flat out that Dale is right on the money with his commnets. If you would like to learn more contact me-we have a 20 group meeting of enlightened dealers meeting in Chicago next month-we can discuss you and your key players attending.

  • http://www.polarchev.com bill krouse

    Ted-I’ve been pricing new Chevrolet’s and used cars-not customers- at our very best price ( pure haggle-free) in a highly competitive market for the past 18 years and I can tell you flat out that Dale is right on the money with his commnets. If you would like to learn more contact me-we have a 20 group meeting of enlightened dealers meeting in Chicago next month-we can discuss you and your key players attending.

  • Ted Heater

    Dale,
    Thanks for your response. I agree, a little bit more knowledge can go a long way. Realistically I need to “close” my salespeople on the product and train them on the ins and outs of it. If I can get them to “drink the water” then I’m sure they can sell it! Thanks Again!

  • Ted Heater

    Dale,
    Thanks for your response. I agree, a little bit more knowledge can go a long way. Realistically I need to “close” my salespeople on the product and train them on the ins and outs of it. If I can get them to “drink the water” then I’m sure they can sell it! Thanks Again!

  • Bill Pearson

    Dale

    As we have talked about in the past Vdp,s are lot ups and thats the new world they drive the virtual lot before they show up on your lot. Alot of things go into play before any of this happens and that is where the art of it begins. It is alot of hard work!!!!

  • Bill Pearson

    Dale

    As we have talked about in the past Vdp,s are lot ups and thats the new world they drive the virtual lot before they show up on your lot. Alot of things go into play before any of this happens and that is where the art of it begins. It is alot of hard work!!!!

  • http://www.milesauto.com/ Kip Miles

    Tommy Gibbs (www.tommygibbstraining.com) posted a great tip on 9/23/09 regarding communicating the ‘Internet Pricing Value’ proposition and it has worked for us. Also using the ‘Showroom’ screen in vAuto as a closing tool works as well. I have been doing this for over 20 years and one thing has never changed and never will; 10% of the people are ‘lay-downs’, 80% are the regular people that we either do not have the right product, price, or person for their needs, and 10% are “the mooches and the flakes” brought in by their own desire to ruin your day! Velocity is about turning cars and making money in every part of the dealership. You are right on with your last response. get them to ‘drink the water’ and good thing will happen!

  • http://www.milesauto.com Kip Miles

    Tommy Gibbs (www.tommygibbstraining.com) posted a great tip on 9/23/09 regarding communicating the ‘Internet Pricing Value’ proposition and it has worked for us. Also using the ‘Showroom’ screen in vAuto as a closing tool works as well. I have been doing this for over 20 years and one thing has never changed and never will; 10% of the people are ‘lay-downs’, 80% are the regular people that we either do not have the right product, price, or person for their needs, and 10% are “the mooches and the flakes” brought in by their own desire to ruin your day! Velocity is about turning cars and making money in every part of the dealership. You are right on with your last response. get them to ‘drink the water’ and good thing will happen!

  • http://www.gmguy.com/ Matt Swenson

    I’ll agree. Why do we make negotiating an issue? If a customer is there on a fair, market-based price, and they agree it is the right car from the right people, the desk should send the salesman back the first time with pre-finance paperwork, not a negotiation-oriented roll-down. Don’t tell customers (or your sales staff) to negotiate if you don’t want them to. If they insist on negotiating, show them how the pricing was determined. They came in for a car they want at a fair price. If the vehicle and your dealership were honestly presented both online and in person, most people will be able to agree to the quoted price. (If not, you’re screwed anyway.) Concerns after that should be rare and small dollar amounts, like the documentary fee, buffing out a scratch, or a full tank of gas, not $2000 of vehicle price.

  • http://www.gmguy.com Matt Swenson

    I’ll agree. Why do we make negotiating an issue? If a customer is there on a fair, market-based price, and they agree it is the right car from the right people, the desk should send the salesman back the first time with pre-finance paperwork, not a negotiation-oriented roll-down. Don’t tell customers (or your sales staff) to negotiate if you don’t want them to. If they insist on negotiating, show them how the pricing was determined. They came in for a car they want at a fair price. If the vehicle and your dealership were honestly presented both online and in person, most people will be able to agree to the quoted price. (If not, you’re screwed anyway.) Concerns after that should be rare and small dollar amounts, like the documentary fee, buffing out a scratch, or a full tank of gas, not $2000 of vehicle price.

  • http://vAuto.com/ dpollak

    AMEN!

  • http://vAuto.com dpollak

    AMEN!

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