How to Turn Around a Car Dealership

How to Turn Around a Car Dealership

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Steve Niswander is a remarkable guy:  young, excited about ideas and, in addition to being a great thinker, a doer.  He does things differently, and he gets things done.  And he has chosen a curious field to operate in.  Steve is a car dealer.  A successful one.  (Note that this is being written as the heads of the big three are in Washington DC, shamelessly pleading for money, and all this while, Steve is making money in a GM dealership.)

After graduating from college in the early 1990’s, he entered the car business.  He managed a sales force, then the finance function (the so-called f and I department) at a couple of prominent Washington, DC area dealerships.  And in rising through the ranks, he formed some strong opinions on how to cost-effectively sell cars.  And his own dealerships’ history bears out his convictions:  he bought a Pontiac, Buick GMC franchise in March 2005.   His first nine months of revenues were 40% higher than the entire prior year.  In 2006 his revenues were up 25%. He also purchased a Saturn dealership and in early 2008, a Chevrolet dealership, where year over year sales to date are up 100%.  His stores are also the 2007 Mark of Excellence Winners for BPG, Chevy & Saturn.

There’s a short version to how he does it:  don’t spend money on image advertising.  In 1997, according to NADA, (National Automobile Dealers’ Association) TV and radio made up 33.5% of ad spend;  in 2007, the proportion actually went up, to 34.3%.  Newspaper fell from 52% to 26.7% over the period.  The balance is primarily Internet.

Steve is firm on this point:  image advertising doesn’t work.  His stores emphasise direct marketing, both by internet and by mail, and the managers monitor the results on a minute by minute basis from the Admin screens of the store’s customer relationship management system.  Prospect calls and emails result in visitors making appointments with salespeople.  Sales visits result in sales.  There’s a process, and it is one that can be intensely managed.

In addition, the stores emphasize service as both a profit center as well as a traffic builder.  One salesman told me that the store reliably brings in a new car sale every day by paying attention to the needs of the people in the service line.

I recently had this email exchange with Steve on his industry and his techniques.

Q:  Auto dealers are having a terrible time now.  Is there any hope?

A:  Yes, I believe there is hope. It is just that each organization is going to need fundamental changes driven from the top down.

Q:  What are the techniques you use for sales?
We advocate a steady growth strategy that emphasizes the internet as a driver of direct marketing, for BDC calls (business development center-outbound telemarketing) and mail lists.  We de-emphasize newspaper and television, because it is so hard to measure their effects.  But many dealers are trying to use these media because they appeared to work in the past.  Dealers tend to be very reactionary, changing or adding different types of advertising based on weekly or individual months’ sales performance. When times were good most dealers didn’t really know what was making them successful, so how could they know what to focus on when times are tough?

Q:  You have purchased three dealerships in the last 2 ½ years.  How have you done?

A:  We are up double- and in some cases triple-digits.  The industry is way down, but it is still going to sell 12-plus million cars this year.  We look to get our share or better.

Q:  Does it matter if the store sells foreign or domestic cars?

A:  We focus on the management techniques, and we don’t worry whether our brands are in favor or not.  And our products sell!

Q:  What else do you manage?  How about cost control?

A:  We emphasize sales and service, with customer satisfaction being a key measurement.  We ask customers what they like and don’t like, and we meet the staff and encourage customer oriented behavior.  We find it means something when we get recognized not only by our national dealer organizations, but when we get notes and emails from customers.  You don’t worry about your future when customers send notes of appreciation.

On costs, we say that everyone is on commission.  We have high productivity expectations, which we express by putting all jobs—even new car prep and used car detailing—into the RO [repair order] system.

Q:  Can old line car people make these changes?

A:  Of course old line car people can make the change.  We have been referred by our dealer organizations to help other auto retailers nationwide.  We are considered radical by some, but we have sales results and fewer uncontrolled costs than many of our peers.  So we often get requests for assistance, and we’re glad to help where we can.”

November 23, 2008

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Walter Simson is experienced as both a CEO and CFO in successful startups and turnaround companies. In addition, as the principal of his own firm, he has consulted at senior levels to companies in industry, financial services and biotechnology.

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