I recently watched the Freakonomics Movie on Netflix.  The chapter on Bribing Students in 9th grade to improve their scores reminded me of a lot of incentives that I have seen dealerships and manufacturers run – with similar results.

In the movie, the University of Chicago approaches a high school in Chicago and offer to run an experiment providing financial incentives for students in 9th Grade who achieve and/or maintain a C score or better in all their subjects.  For each month the students achieve that, they get $50.   For all qualifying students, there is also a lottery where they can win $500 and a ride home in a Hummer limousine.

In my ten years in retail, in several dealerships representing different automotive brands, it was a scene I saw played out repeatedly.  Either the manufacturer, or more often, the dealership, would be under pressure to move units and would introduce a financial incentive for the salespeople.  Most incentives ran for several months – some ran shorter, some ran longer.

The odd thing that (you may have seen as well if you work with salespeople) was that a few salespeople who were the top salespeople in the sales team would get to work and, predictably, compete for the prize.  The same few people kept winning all the competitions.   The rest of the team might get excited early on in the incentive, but their excitement and results would return to their normal levels in the first week.

Even with this evidence clearly on display, there are some Sales Managers who persist with their demonstrably incorrect belief that financial incentive programs work.  I have even heard one very ineffective Sales Manager complain that all salespeople are coin-operated, even while he squandered tens of thousands of dollars on ‘incentive’ campaigns that repeatedly did not work.

Taking it to an extreme example, if you give a ten-year old kid the sum of $50 Million to build you a nuclear reactor, and the ten-year old does not build you a nuclear reactor, would you solve the problem by giving the kid more money?  Would you not check if the kid had the necessary skills, knowledge, experience, resources, habits and desire to build you a nuclear reactor?

Comparing that clearly ridiculous example with a dealership: so many incentives are wasted as a desperate reaction, thrown at sales teams who do not have the necessary:

• Skills
• Knowledge
• Experience
• Resources
• Habits
• Desire

…to achieve the desired result.

Something else that was revealed in several parts of the Freakonomics movie is that providing poorly-planned controls over incentives like this drive a percentage of people to cheat.

One of the students profiled in the 9th Grade experiment had no skills, knowledge, experience, resources, habits and desire to achieve good results at school and was not shown to be given an other way to improve his grades other than just the financial incentive.  He wasn’t taught any study skills, organisational skills, time management skills.  He wasn’t shown how to take responsibility and the action to take to get results.  So the $50 just became sour grapes: he disparaged what he ‘knew’ he could have.

Those people who already wanted to improve had more rewards for improving. Those who didn’t already want to improve gave the incentive program lip service and stayed at the same level of performance or even got worse.

This experiment broke several rules for running successful incentive campaigns that I developed in dealerships and then used successfully when working for Mercedes-Benz.

Before you run an incentive program, assess whether your sales team has the skills, knowledge, experience, resources, habits and desire to achieve the incentive goal.  If they don’t, your incentive program is not only wasting money, it could be getting you a worse result, conditioning most of your team to disengage from incentive programs and building resentment in your team.  Save the money that you were going to waste on the incentives and invest it instead on good training for your sales team.

With many manufacturers recently running promotions with low interest rates, many salespeople have encountered customers coming in and mentioning the advertised finance deal.  Unthinking, unprepared salespeople immediately refer the customer to the F&I Manager then wonder why the customer got a lot of info about the finance and then left without buying a car.

In response to requests from numerous clients we put together some strategies for salespeople asking customers about vehicle finance:

1. Focus on Customers’ Needs

Customers’ needs are their greatest motivation to do anything, including buy a car from us.  There are six categories of logical needs and six categories of emotional needs.  We cover these in our sales training.

Because customers’ needs are the greatest motivation that the customer has to do anything, it should be the primary focus of the salesperson to investigate, identify and develop those needs.

When salespeople do not accurately and comprehensively find out the customers’ needs, they have automatically and significantly reduced their chance of helping those customers buy the right car.

One of the easiest traps for salespeople to fall into when there is a promotion is on is for the salesperson to focus on the promotion and automatically make assumptions about the customers’ needs relating to the promotion.

For example, with finance promotions (like an advertised low percentage finance rate), we have heard of salespeople who expect customers to come in fully prepared to buy immediately based on the low finance rate.  Poor salespeople shortcut the sales process and rush to close and scare the customers away.

So even though the low finance rate offer may have got the customer curious to contact your dealership, you should still conduct a full and proper ‘Road to a Sale’ process and properly establish all of the customers major needs before showing the car, test driving, and negotiating.

I recently spoke with a Sales Manager who is doing well with his manufacturer’s low finance rate offer.  I asked what he is doing to get such strong results and he confirmed: “The customer is in the showroom because they want to buy a car, so we are going back and asking about all their vehicles needs first, then talking about the car and then revisiting the finance offer only when we have established the right car for the customer’s needs. The finance is a closing tool, not the entire sale.”

2.  It’s not all about the Finance

As a sales professional, you should have a planned, prepared printed check list of questions and information that you cover with every customer before they start looking at your cars.

When you use a check list with your customer:

1.    You don’t forget to ask any important questions about the customers needs (that may cost you or the customer unnecessary time, money or a deal later on)

2.    The customer can see that you are professional, organised and methodical.

3.    The customer can see that you ask these question to every customer so they are not personally being targeted by questions such as:

a.    How do you normally finance your vehicle?
b.    Who else is involved in the buying decision?
c.    When do you need your new car?

4.    You have a clear set of priorities for your presentation and test drive, based on the customer’s needs.

5.    You have high quality information to follow up with, instead of simply throwing away the dealership’s money to apologise for your poor sales skills and customer service skills.

6.    You have a check list of the customer’s needs to summarise before closing, which is scientifically proven to improve retained gross, sales closing ratios and CSI scores.

7.    You are able to better equip your sales Manager for an effective double-close.  Instead of blindly coming out to the customer and throwing away money, a professional sales manager can revise the customer’s needs and make beneficial suggestions or alternatives that do not necessarily involve sacrificing gross.

8.    You have quality information about the customer’s needs to provide accurate and relevant information, invitations and opportunities to the customer in future marketing.

Initially, your blank check lists should be kept in a clipboard or similar.  After a few months, you should know what, if anything needs to be amended.  Then get your customer needs sheets printed in pads, with pages numbered for greater accountability and follow-up.

Furthermore, as a Sales management tool, if a salesperson has not completed the customer needs sheet, he/she should be refused entry to the Sales Managers’ office to discuss a ‘deal’.  If the salesperson has not done his/her job properly up this point, it is going to cost the dealership a lot of time, effort and money trying to secure a deal that has not established, let alone met, the customer’s needs.

3. Get your Wording Right and Practise

Earlier this year I went to the best restaurant I have ever experienced in my life.  I lost count of how many things they did perfectly with the service, the food and the wine.  It all started when we arrived, they asked: “What name is your reservation in?”  This implies a 100% expectation on their part that they were expecting us and that we were welcome.

Most restaurants ask: “Do you have a reservation?”  This implies at least a 50% expectation that you do not have a reservation.

Along similar lines of thoughtful questioning, I’d recommend asking a customer about finance like this:

1a) “How do you normally pay for your cars?”  OR:  “How do you normally finance your cars?”

<<Customer answers the question>>

1b) “So will you be doing the same this time?”

Asking this way implies that you naturally expect that the customer has bought cars in the past and CAN afford our cars, instead of “How do you intend to pay for THIS car” could be taken to mean “we don’t think you can afford it.”

This can now open the line of relevant questioning to include each of the following shown on the “Customer Requirements Form” about the customers current car.  Practise it with a colleague so it comes out naturally when you are in front of a customer.

Make sure that the customer can see your Customer needs pad clearly so that they can see that this is a question that you ask every customer.

4. Timing (not speed) is Everything   

The question about vehicle payment/financing should be asked in the first ten minutes with the customer in the Needs Investigation. The perfect time to do this is when sitting down with your customers after offering them refreshments.

One of the most common mistakes when completing the customer needs form is that the salesperson starts selling.  This is the investigation stage, not the presentation stage of the sale.

If the customer says “finance” and the salesperson immediately starts pushing finance, most customers will shut down and the salesperson will lose the opportunity to find out all of the customer’s other needs, severely jeopardising their chance to help the customer buy the right car car at the right price.

Find out all the customer’s needs before you start selling.

If the customer says “finance”, make a note of it, acknowledge it and keep going through the other question to establish the customer’s needs.

Once you have a complete summary of the customer’s needs written down,  the car can be presented and test driven focusing on the customer’s needs, and then you can then put the full picture together for the F & I Manager to suit the customer’s situation.

When I was younger I played in a premiership-winning football team.  At three-quarter time in the grand final, we were 30 points down and we scored 42 points to 1 in the last quarter to win by 11.

Late that night as the celebrations were slowing down, I was sitting by myself, reflecting on the day and the game.   Our coach Bob came and sat beside me, congratulated me again and asked me how I was feeling.  I told him that while I was elated to win a premiership, I felt that I hadn’t played as well as I could have today and that I was identifying the things that I could have done better in the game today.  He said “You probably won’t understand this for a long time, but that’s why you won a premiership today.”

It was later that I realised that Bob had never coached us with a focus to win.  He had always coached us with a focus on doing our best.  Which is how we won that premiership.  If we were focused on winning, the task at three quarter time would have seemed too enormous and as a team we would probably have given up.  Because we were so well practised on just doing our best, our winning last quarter of football was almost mechanical, when even our opponents expected that we would give up.

What Bob didn’t tell me (although he obviously knew) was that by consistently focusing on doing your best, you will get better and then win more than if you simply focus on winning.

In sport and in business, I have realised the importance of a best-performance focus over a winning focus.  Here are some of the differences I have learned:

‘Winning’ Puts Too Much Focus on Your Opposition

I have seen, and played in, teams who assessed their opposition as easy and then set their own playing level too low, and ended up getting beaten in an upset.  The focus was on winning against a supposedly weak opponent instead of a focus on playing the best possible football.

When the focus is just on winning, it is natural to assess your opponent and do what you think you need to do to beat them.  Even in cross-country running at school we were coached to never look back to see where your opponent is, because it will slow you down and give him a better opportunity to pass.

In business, I have seen manufacturers who set non-number-specific goals at the start of the year to ‘beat’ a particular competitor in sales results for the year.  As the year progresses, with a bizarre focus on ‘winning’ they engage in behaviour that damages their business and their brand: pre-registering cars, dumping cars onto dealers and the market, false reporting of numbers, non-strategically discounting their cars, reacting in a panic to any unexpected progress by the ‘competitor’.  All this to ‘win’ a competition they invented in their heads (often the nominated ‘competitor’ is oblivious to the ‘competition’).

A Primary Focus on Winning Can Cause Cheating

In recent years, many sportspeople have had their reputations ruined because it was discovered that they had cheated.  It has become evident that those athletes weren’t focused on doing their personal best – they were focused on ‘winning’.

In business, cheating to ‘win’ can ruin your business reputation and brand image.  In extreme cases, you can be breaking the law.

Doing Your Best Puts the Focus on What You Can Control

Focusing on doing your genuine best means you are investing energy in what you can control: your performance.  You don’t waste energy on things you can’t control.

Doing Your Best is Better Management of Your Expectations

If your team is last on the ladder and you are playing the top team and you rev yourself up by focusing on winning, you can be extremely disappointed when you are getting thrashed in the first ten minutes because your expectations are so far from reality.  It is easier to give up at that point because your goal (winning) is highly unlikely.  However if your goal is to play your best, that is possible at every moment in the game, irrespective of the scoreline.

In the years preceding our premiership, our team had struggled to get a full side on the field every week.  Often we would play with only the required minimum of 15 players (out of 18), frequently bolstered with a few reserves from the opposing team.  As we were hopelessly outgunned and outnumbered, it was a landslide victory for the opposing team.  But we could resist.  We could contain them in patches.  We could be more precise with our passing.  We could learn to contain the ball in our tackling and smothering.   We all became better footballers because in those circumstances we had to be.  As the ruckman, from boundary throw-ins I kept thumping the ball out of bounds to our advantage, 20 metres at a time (this was still legal in the 90s).  It gave my team mates a rest, we moved closer to our goals and frustrated our opposition, creating more pressure on them, which meant more mistakes from them.  We learned to reduce a 20-goal thrashing to a ten-goal thrashing.
If we had focus and expectation of winning we would get very frustrated very early in the season but by focusing on playing our best football, we created opportunities where there were none and surprised a few opponents by beating them, and built the skills and more importantly the mindset we needed to win that premiership.

In business, focusing on doing your best builds sustainable results and enhances your reputation, especially with your customers.

Summary: Do Your Best v. Win

Both in sport and business I have found that a focus on doing your best (and consistently pushing the limit of what your best is) creates long term, sustainable success and gives you a better chance of ‘winning’ more often.

Certainty is the Antidote for an Overdose of Variety

The automotive market offers a phenomenal number of choices to vehicle buyers.  This choice includes the number of makes and models, as well as the number of dealerships to buy from, the financing options and choice of financiers.  Additionally, there are more secondary sellers (brokers) and vast amounts of Internet (mis)information and Internet advertising.

With so many varied choices, most customers simply don’t have time to properly investigate every choice.  They don’t even have time to thoroughly consider every choice that’s relevant to them. Such an excess of choice causes confusion for most customers.  The easiest way out of this confusing information overload is to make a ‘safe’ choice.  In these circumstances, most people tend to go with what gives them a sense of certainty.

Furthermore, as vehicles become so technologically complex as to be beyond the understanding of many customers (and salespeople), the unknown becomes a risk and customers look to reduce their risk.  Manufacturers and dealers could help reduce the risk in many ways, including better trained salespeople, but most defer to the easy short-term focus of reducing price.

An intriguing aspect of the challenge in this for the motor industry is that the definition of certainty is not the same for all customers.

How is the Motor Industry Trying to Deliver Certainty?

Most manufacturers and dealers try the easiest approach to give their customers a greater ‘certainty of value’ by dropping their price.  Ever since supply started exceeding demand, manufacturers have been creating ways to ‘bribe’ customers to buy their cars – discounts, rebates, subsidised finance offers, value-adds, cash-back incentives and others.  Almost every manufacturer engages in this lazy form of marketing.

The problem with this strategy is that now almost every brand is engaging in it, the customers are faced with even more information, causing even greater confusion.  Escalating price wars create more uncertainty, not more certainty, for most customers.  Many customers sensibly delay their buying decision to see how high the discounts and incentives will go.  When so many manufacturers are employing this strategy on such a large scale, it becomes counter-productive to it’s goal of getting customers to make an easy choice of one product.

The luxury vehicle market has not been exempt from this practice, which was historically a strategy in the higher volume, lower quality market segments.

When and How Can a Vehicle Distributor Deliver Certainty?

In terms of a customer’s buying cycle, a manufacturer/distributor can deliver or try to deliver certainty before the sale, during the sale and after the sale.  Some examples of these include:

i)    Before the sale:

• Maintaining or promoting the Company/Brand/Model image
• Advertising & Marketing ( including price, as above ) / PR
• Providing consistently high quality product

ii)    During the Sale:

• Availability of accurate consistent information, e.g., brochures, websites, stock availability
• Establish & Maintain dealer requirements for level of service to customers
• Providing consistently high quality product

iii)    After the Sale

• Providing consistently high quality product
• Timely and accurate provision of parts and service / information
• Established dealer requirements for level of service to customers

In the last few years,  I have several times been invited, as a prelude to training programmes, to address teams of Sales Managers on how to grow their business without simply sacrificing profitability.  This article is a blend of the content of those addresses.

Your Market Pie

For the sake of this discussion, the pie represents the sales market you compete in, i.e., the available new sales every month.

You get your share of the market, and in a well-developed, highly-saturated market it probably doesn’t vary too wildly.  If you averaged 10% of your market last year, you may go up or down a little this year, but it’s highly unlikely that you’ll get 20% or 5% this year.

The natural tendency, (admittedly often driven by manufacturers’ short term focus on sales targets)  is to try and cut a bigger slice.

Let’s say you normally average 10% of the market and you decide to go for 12%.  The fastest way to try and do this is to sell cheaper.  So you start discounting harder but this doesn’t just affect you – it affects the other dealers of your brand as well, who may have to match or beat you on price.   It’s not uncommon for every dealer to have ‘loyal’ customers who will buy from their regular dealer, but will get a comparative price from another dealer, just to check.  As more dealers blindly pursue volume on price, our research shows that they don’t create many more customers, but they give even more money to the customers who were going to buy their product anyway. Commercial lunacy!

Imagine that your market is a ‘money pie’ and, having made the first cut into the money pie each month, you are moving the knife into position to make the second cut that will define your slice of pie.   The further you move your knife, the thinner the pie becomes.  So by trying to simply cut yourself a bigger slice, you get less and less pie ‘filling’ and end up with empty pie crust.

The wider you cut, the flatter the pie gets – but not just for you – for all your brand’s dealers in your market.   This is a compounding problem as you then educate your customers to expect bigger and bigger discounts.  You may even lose your astute customers who are suspicious of this sales desperation and are aware of what this activity does to their resale value.

What to Do?

As a Sales Manager, there are broadly two approaches you can take to get a bigger slice of pie:

1.    Try to Cut Yourself a Bigger Slice as fast as possible

2.    Make the Pie Bigger

Let’s look at these two choices in more detail…..

1. Cutting Yourself a Bigger Slice

This is what you do when you get desperate for numbers or market share.  You just try to grab any deals you can.

Some activities associated with this choice include:

•    Taking a broad ‘shotgun’ approach to marketing.  Examples: Advertising in the major daily Capital City newspapers, advertising on mass-marketing websites, deliberately marketing outside your Prime Market Area.

•    Giving prices other than RRP over the phone or publishing discounted prices on the internet.

•    Letting salespeople sell management instead of the customers.  Example: A customer walks into the showroom and asks for a price and within a minute or two the salesperson is standing in your office with a credit card and a ludicrous price offer, trying to sell you on why you should sell a car at a significant loss.

•    Little or no sales training

1a.Effects of Cutting Yourself a Bigger Slice

•    Detrimental effect on customer service, customer satisfaction.

•    Rewards the customer for shopping around, so encourages them to keep shopping around, not buying.

•    Significantly reduces the profit for yourself and other dealers.

•    Sets new discount benchmark for customers, making future profit even more challenging.

•    Reduced available sales opportunities because there is less profit to invest in creating new business.

•    Less profit to invest in facilities, staff, training, goodwill, stock.

•    Loss of profitable repeat and referral business.

•    Educates and rewards salespeople to be lazy, undisciplined and unprofessional.

•    Detrimental effect on resale values (deterioration of another sales advantage v. your competitors’ products)

•    Reduced ability to attract quality sales staff due to reduced remuneration.

•    The size of the pie (and your sales) are at the mercy of the market / economy.

•    If everyone’s trying to cut the pie thinner, but no one’s growing the pie or baking bigger pies, this has a shrinking effect on your potential market size.

2. Making the Pie Bigger

This is what you do when you stay committed to fulfilling the full array of customer needs, selling value over price, and aiming to retain a fair gross profit and build customer satisfaction.

Some activities associated with this choice include:

•    Targeted marketing:    to your existing client base and to your Prime Market Area.

•    Focus on providing personal service and maintaining enough gross profit to keep the business sustainable long-term.

•    Implementing systems and procedures to ensure customers receive professional, effective service and a better experience.

•    Regular training of your sales staff to develop a higher level of sales and customer service skills.

2a. Effects of Making the Pie Bigger

•    Improves customer satisfaction and customer loyalty levels.

•    Educates the customer that shopping around isn’t necessarily the best way to get true value for money.

•    Buoys the profit for yourself and other dealers.

•   Doesn’t create future unsustainable price expectations in the customer’s mind.

•   Increases available sales opportunities because there is more profit to invest in creating new business.

•    More profit to invest in facilities, staff, training, goodwill, stock, etc.

•    Increase in profitable repeat and referral business from satisfied customers.

•    Educates salespeople to be more service-oriented (instead of price-oriented) and more disciplined.

•    Enhanced resale values (increases sales advantage v. your competitors’ products)

•    Better ability to attract quality sales staff due to better available remuneration.

•    The size of the pie (and your sales) become more insulated against the economy / market.

Some Suggested Actions (for making the Pie Bigger)

Marketing to your existing clients and your Prime Market Area is an extensive topic, so in the limited time we have available today, I’ve chosen some sales enhancement suggestions.

Furthermore, marketing has the potential to be a huge waste of money unless you have the systems and procedures in place to accurately track and convert the resulting enquiry into sales.   Here are some suggestions, or reminders on effective ways to make the pie bigger:

1. Measure the size of your discounts and over-allowances, not your retained gross.

By simply measuring gross, we can congratulate ourselves on the $50,000 gross profit we made for the month, perhaps from delivering 100 units.  Instead of counting how much we kept, if we count how much we gave away and aim to minimise it, we are already taking a perspective that is conducive to better gross (having to then justify the price difference, encourages salespeople to professionally justify pricing, focused on the customers’ needs).

2. Test your salespeople’s knowledge of your USPs (Unique Selling Propositions)

Without warning, call your salespeople into your office one at a time. Ensure you won’t be interrupted.

Ask them what is their best seller in your range (it may vary for different salespeople).

Then ask them what is the most common competitor they are up against on that model.

Then ask them what are the top 5 benefits of their top seller v. its No. 1 competitor.  If they don’t know, or give you fluffy answers like ‘styling’, ‘finish’ or ‘design’ then they are losing you tens of thousands of dollars.

Note: A salesperson knowing the answers to this is not even the ideal situation, as an effective sales professional will be far more advanced from this, but them not knowing is very damaging to your business.

3. Test your salespeople on BEST PRICE demands

Separately from the previous exercise, call your salespeople into your office one at a time.  Ensure you won’t be interrupted.

Tell them you are going to role play a customer and you want them to respond as they would to a customer.

Tell them you’ve just walked into the showroom, and then ask them: “What’s your best price for a (Model X) in silver, on road with private registration and no accessories?”

You can be as blunt as you like in answering any questions they may ask you, but observe their responses.

They get this Best Price question in different versions every day.  This is one of the most basic challenges your salespeople get.  A salesperson not being able to effectively handle best price request in the first five seconds is a bit like a professional boxer not knowing how to avoid being punched.

If they stammer and stutter, or say “aaaaaaaaaah, ummmmmm”, they are leaving thousands of dollars on the table.  They should be able to handle this confidently in their sleep, it is so fundamental to our business.

Salespeople who do poorly in this exercise may say that this is not a “real-world” situation and tell you all the reasons why they would do better with a “real” customer, but when put on the spot, salespeople don’t become wildly creative and imaginative.  They default to habit.

Do not ask them how they would handle it – they can probably know and describe what to do without necessarily doing it with a customer.  Make sure it’s a role-play.

As a guideline on how Best Price can be handled more effectively, ask about our ‘best price’ training courses.

4. Customer Needs before Negotiation

Our company offers over 20 negotiation strategies in training, but if you don’t know anything about your customer other than that he/she wants a particular car for a ridiculous price, then effective negotiation strategies (as opposed to rubbish like “let’s meet half way” and “if I could, would you?”) are rendered useless.

To negotiate effectively, we must have accurate information about the client’s needs.

Without information, we are neglecting our customer service duty and most salespeople in our industry put their business into these neglectful situations with customers every day.

Train your salespeople to get more relevant information and better information to get you the right customer focus for completing a sale.

Don’t let your salespeople walk into your office unless they have a list of the customer’s needs (including, but not limited to price).

5. Track your enquiry

Measure every enquiry, even the ‘tyre-kickers’.

At one dealership I work with in the first month of tracking, the Sales Manager had just accepted that one salesperson was having a particularly quiet month.

He finally analysed his tracking and found that the salesperson had spoken to 71 customers to make one sale,  and had dismissed 70 ‘tyre-kickers’.

Focus on improving your closing ratios, not finding more people from other PMAs to talk to.

I continue to be amazed at how many businesses I discover that do not measure or track their sales activities in any meaningful way.

Here are some of the guiding principles I recommend for businesses that are introducing sales tracking.

1. Salespeople must log as much enquiry as possible.

• Even customers who are, for example, browsing to dream of a lottery win
• If we’re getting 10% lottery dreamers, something is wrong and we need closer scrutiny.
• I’d suggest that the word ‘nowhere’ be refused in salespeople’s reports: it allows salespeople to lazily pre-qualify.
• Set language guidelines for your salespeople, encouraging positive assessments and articulate descriptions of customer needs.

If we’re genuinely getting lots of long-term buyers etc., we can reassess our advertising brief, our sales training agenda and other aspects of our business planning.

2. Assess if it’s being logged:

• Randomly (but at least once a week) check if enquiries just in have been logged
• Organise a phantom shopper simply to see if the enquiry gets logged.
• Perhaps offer rewards to anyone who logs 100% (based on your checks) for the month

3. We May Not Get 100%, but 95% is better than 50%

All judgments based on tracking results, from staff feedback to training to advertising, can be made with greater commitment and confidence with more accurate tracking results.  So aim to get 100% of all enquiry tracked so that you have the largest possible sample size of enquiries (and maximum follow-up opportunities) to work with.

4. Introduce, and Use Religiously, Mechanisms to Log Everything

As an example:

• For Walk-In enquiry you may use:    Computer prospecting system, Salespeople Activity sheets, Showroom Visitor’s Book
• For Phone-In enquiry you may use:     Receptionist tracking (and strategic placement of calls), Computer prospecting system, Salespeople Activity sheet, One of the Several Excellent Phone Training Systems on the market
• For e-mail  enquiry you may use:    Computer prospecting system, Automated mail tracking, Salespeople Activity sheets

5. Management must avoid using tracking to ‘punish.’

If salespeople are punished for their tracking figures, especially early on, they are more likely to manipulate the figures to avoid further punishment.  The focus of feedback should be to acknowledge what’s being done right and to improve what’s not yet being done right.

6. Telephone & Internet Enquiries must be verified the same day

Leaving Sales Managers’ verification 24, or up to 48 hours mean salespeople have too much time to forget, to dilute accountability, or to recall inaccurately. Even worse, urgent customers can be neglected and they buy elsewhere.

If we make the salespeople accountable ASAP after each contact for what they did with that contact, we improve our chances of getting accurate information.

7. Many salespeople do more of what’s inspected, not what’s expected

If reception puts through an e-mail to the relevant manager saying that a phone enquiry has just been put through, the manager can track it earlier and more effectively.

Then salespeople know that they have to provide their Sales manager with a report on the phone call within five minutes of finishing the call.  The Sales Manager knows if they do this or not because he’s been notified of the enquiry.  When the average dealership spends more than $600 to generate one enquiry, no salesperson should be allowed to judge whether or not someone is a ‘genuine buyer’.

Every customer who has done your business the courtesy of contacting you deserves the courtesy of being treated as a serious customer until they prove themselves to be otherwise.

]]> http://autoconsultants.com.au/training/principles-for-successful-sales-tracking/feed/ 0 http://autoconsultants.com.au/training/the-best-place-to-learn-to-swim-is-in-the-water/ http://autoconsultants.com.au/training/the-best-place-to-learn-to-swim-is-in-the-water/#comments Wed, 12 Mar 2014 16:09:28 +0000 http://autoconsultants.com.au/?p=130

I am often asked by clients for advice about the best place to conduct training.

My advice varies depending on the client’s individual circumstances but one of the most reliable guidelines I follow on recommending training venues is that ‘the best place to learn to swim is in the water’.

Learning to Swim

Imagine you are teaching people to swim.  You can teach them all of the theory and all of the techniques and motions of swimming, but until they get in the water, that learning is useless and in some cases detrimental to real learning relative to the desired outcome (an ability to swim).  I recall my own early swimming lessons as a child.  The swimming class we were in spent the first two weekly lessons practising stroke and head position standing next to the pool.  In the third lesson, the teacher was replaced by a new teacher who started us back at square one.  So by the time I got in the water, I had had almost a month of ‘learning to swim’ in the air.  The comfort I had learned to feel mimicking swimming movements in air felt completely unnatural in the water and I swallowed a lot of water and was panicked by the experience.  Several of my friends in the class had a similar experience and we were put off swimming for years.  When I resumed swimming lessons at 11 years of age, I had a great teacher who got me straight into the pool every lesson and got me feeling comfortable in the environment where my learning had to be translated into action.  Yes, we still practised, discussed and trialled techniques standing next to the pool, but most of each lesson was spent in the pool.

So What About Sales Teams?

So when it comes to training sales teams, the best place to train them (in most circumstances) is on the sales floor.

Training at a remote location usually involves a different (often unfamiliar) environment, sometimes different dress requirements, different training participants .  Yes, salespeople can have enjoyable learning experiences away from their sales floor, but you have added a significant step between their learning of skills and their use of those skills in their day-to-day role.

Some Advantages of On-Site Training Include:

• Learning new skills in on-the-sales-floor training means that the salespeople are more likely to raise, and have answered, their ‘real-world’ objections to aspects of the training.
• There are significantly fewer steps to processing, adapting and implementing sales techniques from training to the floor when the training is conducted on the floor.
• The salespeople are conditioned by their environment, so having the training on the floor helps ‘condition’ the new sales behaviours.
• It also ‘conditions’ salespeople that the sales floor is a learning environment, so they may learn more from their customer interactions on the sales floor.

Some Disadvantages of Off-Site Training Include:

• The extra time and cost involved in transporting sales teams to the training venue.
• Extra steps and work required by sales teams to adapt and utilise the new knowledge and/or behaviours to the sales floor.
• Some unscrupulous trainers may exploit some dealers’ beliefs that salespeople going away and coming back with any difference must necessarily mean an improvement.
• Training courses of more than a day off-site often induce idiotic behaviour in some salespeople (excessive alcohol, late nights, dangerous driving, showing off, etc.)

Naturally, Planning is Required

Of course, training has to be conducted at times when the sales floor is not full of customers, or an area of the sales floor may be cordoned off for training.  training may make use of a nearby office for group discussions and other exercises, but this should be done with the focus on getting back on the sales floor immediately to practise the skills learned, before trying them with a real customer.

Don’t Throw Them in the Deep End!

I am not advocating a policy of sink or swim.  Lazy and stupid sales managers waiting for salespeople to make a mistake and then criticise them is not true ‘on-the-floor’ training.  It’s not even training, although I have encountered many sales managers who believe their ‘seagull management’ approach is sales training.  It’s not.

Just like children learning to swim, salespeople should be carefully monitored and encouraged, and training should be flexible to address their particular needs.

Occasionally there is merit, or logistic necessity for training to be held off-site, but I have consistently found that in most cases, sales training conducted on the sales floor gets the best and fastest results.

I have noticed that several car brands in Australia have been offering free service with the purchase of a new car.  Other brands have done it before and I am not surprised that they no longer do.

We have mostly seen free service introduced as an emergency solution to try and automatically overcome the perceived objection of ‘service costs’.  Generally ‘free service’ promotions end up creating more work than they aim to save.

In training programmes, we show salespeople how to address customer objections about service costs without throwing money away or playing Three Card Monte with whatever ‘discount’ they have for customers.

Some manufacturers we have worked with have needed convincing as to why free service is such a bad idea for their business and the business of their dealers.  Here’s a summary of the Top 20 problems we have identified with promoting periods of ‘free service’ to try and sell new cars.

1. There’s a Pretty Good Chance That Your Customers May Not be That Ignorant

Most customers know that when a car manufacturer offers something ‘free’ that the cost of it is simply hidden elsewhere.  They know that the reason you offered them $3,000 less on their trade-in than they were offered on competitors’ cars is because that $3,000 is subsidising their ‘free’ service costs for the next three years.  Most of us know there’s plenty of free cheese in a mousetrap.  In the main, manufacturers aren’t fooling customers.  Are they fooling themselves?

2. Free Servicing Teaches Customers that Service is Worth Nothing

Including a significant period (e.g., a year or more) of free service conditions customers to believe that servicing is worth nothing.  The longer the free service period, the more damage is done to the customer’s perception of the dollar value of service provision.

3. Free Servicing Sets a Dangerous Precedent

After sustained periods of free service, when customers come to trade-in, they expect free service again.  Actions speak louder than words so even though you have explained (verbally and in writing) that the free service is for a defined period, the manufacturer has conditioned customers to expect it, so when the free service offer expires, many customers interpret this as a painful experience.

4. Free Service Increases ‘Dumping’ Which Hurts Resale Values, Which Affects New Car Sales

When the free service period is over, more customers are likely, and induced to sell their car because service costs them money from this point on.  This is the ‘same’ service that has cost them nothing up to this point so why should they now pay for it?  Whether or not manufacturers and/or dealers actually seek to recoup  some of the profit lost during the free service period by slightly increasing service costs afterward,  many customers now see this paid servicing as too costly and perhaps even as the dealer trying to take advantage of them.  Many customers then decide to sell the car and get a new car.  Notably, this would include customers who would otherwise have kept their car longer.  With more of the brand’s cars coming onto the used car market faster and earlier in their life, and with service that now costs and was previously free there is less demand for the cars second-hand and greater supply which pushes resale values down.  A reputation for poor resale can then affect new car sales with wary new car buyers seeking a safer resale bet.

5. Free Servicing Reduces Service Profitability

Some manufacturers claim improved service retention levels on new cars with free servicing.  But at what cost?  None that I have spoken with have claimed a 100% service retention rate – not even close.  So it’s not all about the price.  They can congratulate themselves on pricing their service so that it cannot be beaten by franchised non-dealer service centres or a local garage mechanic, but if they have sacrificed most of their own and their dealers’ profitability to achieve this, what’s the point?  If service retention rates were low enough for ‘competitors’ like Ultratune and others to be a major concern then the problem is probably not the price.

6. Reduced Service Profitability Affects The Business in Other Ways

To operate on forced lower profitability, some dealers may start cutting corners to reduce costs.  They may be tempted to use cheaper oils, reduce the level or quality of service provided.  In a time when the retail motor industry in Australia is losing capable, experienced technicians to the high-paying mining industry, reduced profitability also reduces a dealership’s ability to keep pay levels competitive for good technicians.

7. Don’t Pay for What You’re Already Getting

Several brands that I have seen employ the ‘free service’ idea already had industry-leading service retention and brand loyalty.  So a large proportion of their customers were loyal repeat customers both in sales and service. The manufacturers were already getting that business.  They provided a ‘free service’ offer that cost the manufacturer, say $2,500 per vehicle.  The manufacturer has just paid those customers $2,500 each to do what they were going to do anyway!

They have taken customers who valued the certainty provided by their brand experience and re-educated them to value money-throwing offers, increasing the susceptibility of those customers to be lured away to other money-throwing brands.  A story of a goose and a golden egg comes to mind.

8. Alienates Customers Who Bought Before the Program

Customers who bought your product in the months (perhaps up to a year) before you offered ‘free service’ are likely to feel that they have missed out.  Some will even believe they were tricked into buying the car before the promotion began.  Naturally it follows that a percentage of customers make requests to dealers and manufacturers for some ‘compensation’.  Sometimes they get it.  So in those instances, manufacturers and/or dealers are yet again paying even more for a customer they already had.

On occasion, we have even been asked to advise on helping manufacturers clean up the mess created by this situation.

9. Unrealistic Expectations from Customers of What is Covered by Free Service.

Manufacturers who offer free service will publish disclaimers and conditions that are best understood by two groups of people:

• People who work in the industry
• Customers who know enough about service to pay for it in the first place

The target markets for free service offers are people who are ignorant of servicing and as such, can’t appreciate the value for money that service offers.  In the same action that you take to attract those people, you put in disclaimers and exclusions that those people are not likely to understand.

So customers who do not understand service and the definition of ‘scheduled servicing’ end up expecting (or sometimes pretending to expect) free tyres, brake pads, batteries, wiper blades, etc.  Even if they are not then given free of charge, there is a significant amount of time and energy that can be wasted by service advisors having to explain to customers that their latest need is not covered under the free service arrangement.

10. Removes an Important Indicator of Quality of Service

Price is an important indicator of quality.  For example, a new Tag Heuer watch may cost $3,000.  A fake copy of that Tag Heuer watch may cost $20.  The real watch will last better, keep better time.  The fake won’t work anywhere near as well.  Noone offered a $20 Tag Heuer would believe it was the real thing.

Customers who understand vehicle servicing may be bewildered or disbelieving that their car has been serviced properly for a price as low as low as $0.

As an example, when I worked for Lexus, one of our first customers in Australia was used to service costs of more than $1,000 every time he serviced his other luxury car.  A real automotive enthusiast, he had great trouble believing we could possibly have properly serviced his Lexus for less than $400.  He thought, at first, that $400 was a rip-off because it was too low!  It took some convincing, including him watching his services being performed, for him to see that his car was being properly serviced for less than $400.

So free servicing removes an important indicator of the quality and quantity of work performed and parts used.

11.  Increase Resistance to Service Recommendations.

If I am knowingly investing $450 on a service and the dealer calls me during the service and says I need a new pollen filter (for example) and it will cost $45, that price , compared with the cost of the service, is relatively small and increases the chance that I’ll agree to the new filter.

If I am having that same service performed free of charge and the dealer calls on the same $45 pollen filter, that $45 compares very unfavourably with the $0 I am paying for the whole scheduled service.  This reduces the chance of me agreeing to the new filter.

This is just one of many examples of how free servicing increases customer resistance to service recommendations.

12. Compound Problems from Customer’s Refusal of Extra Work

Anyone experienced in working in automotive service for a few years would have seen this happen.  A customer refuses the service department’s suggestion of extra work.  Not having the work done, then causes the customer future problems.  In many cases, the customer then blames the service department for the problems caused by the customer refusing the extra work.

For example, a service department may suggest that the $70 set of front brake pads need replacing within the next 1,000 km.  The customer decides not to get the work done.  Subsequently, the customer forgets to get the work done and the brakes end up going metal to metal and damaging the brake discs, causing a $500 disc machining job.  Or worse, the brakes don’t work properly and the customer has an accident.  And the customer blames the dealership service department!

13. Dilutes the Effect of Any Dealer Goodwill

In a well-run service department, there are judicial allowances made by the servicing dealer for customer goodwill.  These are gestures made by the dealer, at the dealer’s expense, to help a customer in certain situations.  As the customer realises that the dealer is paying for something they don’t have to, to help the customer, there is ‘goodwill’ created with that customer.

When there is a culture of free service, any goodwill action taken by the dealer is more likely to be interpreted by the customer as just part of the free deal.

14. Dealers can Become Conditioned to not Provide Goodwill

As a result of point No. 13, dealers can become conditioned to not provide goodwill.  Dealers can  become cynical about goodwill because its effects have been eroded by ‘free service’ mentality.  So they reduce or even stop providing goodwill.  This in turn, can harm the service reputation of the dealer and the brand.

15. Can Create a Type of Buyer’s Remorse

Customers who have bought your product previously and spent thousands of dollars on service with you are now getting the same service free.  It can make those customers wonder how much they were being ‘overcharged’ previously.

16. Doesn’t Necessarily Alter the Customer’s Perception that Your Service is Expensive (when it’s not free)

Some manufacturers who head down the road of offering ‘free service’ do it to try and address reported customer perceptions that the manufacturer’s service may be expensive.  Offering that service for free doesn’t necessarily alter that ‘expensive’ perception – and creates other problems listed on this page.

17. Makes Other Service Offers Redundant

Let’s say a manufacturer offers a three-year free service on new cars.  During that period, any service marketing by dealerships to that customer are redundant at best.  For example, some dealers promote pre-holiday safety check services. Even though these may be priced extremely keenly to generate more work for the service department, free service customers are likely to either ignore the special or expect it free.

If you give a customer all of your profit in your first offer:

• The customer thinks you must have a lot more to give because noone in business would be so desperate to give their profit away in their first offer.
• You have nowhere left to go in any subsequent negotiation or offers.

18. Hurts Your Dealerships’ Late-Model Used Car Business

Dealerships that sell late model used cars of the same brand will notice that the free service offer on new cars either:

• Diminishes demand for their late  model used cars  and/or
• Pushes used car prices down to ‘compete’ with the free service offer.

19. Creates Extra Work

The free service programme has to be administered.  Usually it has to be coordinated and validated at the manufacturer/distributor office.  Often subsidies are paid to the dealer.  Of course the dealer also has to process the free service claim and check that the car is within the parameters of the free service agreement.  This extra work is generated to give service away free, so the cost of this extra work further diminishes the profitability of service departments.

20. Makes Sales Teams Lazier

New car salespeople should be professionally helping customers to buy – not just new cars, but also the dealership and its service.

Free servicing is a short term strategy that creates significant long term problems for manufacturers, dealers, and most importantly, customers.

Instead of teaching salespeople to sell the dealership and its service and manage them properly, some manufacturers relieve the salespeople of their professional responsibility by offering service free of charge.

It incorrectly teaches salespeople in the affected network, on a large scale, that the way to ‘sell’ something is to just keep making it cheaper.

Summary

These are just some of the most obvious problems I have seen caused by free service offers.

I would never advise a client competing in a premium market to run a sustained free service offer.  With minimal and dubious short term benefits, it does too much significant long-term damage to your business.

As Mark Twain said; “Nothing astonishes men so much as plain dealing and common sense”.

I was driving between appointments today and listening to music.  In my playlist was a song called “Hard Act to Follow” by Split Enz.  This song was a favourite of mine in the early 1980s and I started singing along.

As I drove and sang it occurred to me that I was singing some incorrect lyrics.

I stopped at the bank and while I was parked there, I Googled the lyrics on my phone.  I laughed at how much the correct lyrics varied from my version of the lyrics.

When I started singing along to this song back in 1981, a printed confirmation of the lyrics was not easy to obtain so I sang what I interpreted the lyrics to be and I had been singing the incorrect lyrics over and over, every time I heard the song.

Noting how much more sense the correct lyrics made, I resumed driving and resumed singing and I noticed something significant.

It was extremely difficult to stop singing the incorrect lyrics (which have been in my head for over thirty years)!

Even though I knew ‘my’ lyrics were wrong, when the song was playing it was incredibly difficult to sing what I now knew to be the correct lyrics.

I immediately phoned a sales trainer who I have been teaching and shared the story with him.

He had recently been frustrated with some of the sales teams he was working with and how they had been taught and shown the correct way to conduct certain sales behaviours and yet were slow to change.

I pointed out that my experience today with the Split Enz song was a graphic example of how hard it can be to change long-held behaviours, even if you readily admit that they are wrong.  I advised him that he had to remain focused on helping his sales teams change their behaviours without falling into the trap of making them bad and wrong.

I also highlighted that learning the lyrics to a song correctly if you wanted to learn it today was easier because the lyrics are usually available online, so you don’t have to guess the lyrics as I did back in 1981.  Similarly, it is often easier to teach a sales trainee to do the right thing, than to try and have an experienced salesperson ‘unlearn’ bad habits learned over many years.

In sales and song-lyrics, long-held habits are a hard act to follow!

In recent discussions with colleagues, we have talked about the importance of effective product knowledge in providing good customer service.

One example I gave was a concierge in a hotel, who may be extremely polite, considerate, enthusiastic and eager to help. However if he/she doesn’t know the hotel and its facilities, doesn’t know the local area, doesn’t know the right restaurants to recommend based on guests’ needs, doesn’t know what shows and movies are playing in town, then his/her ability to deliver customer service is extremely limited.

I’ve read on other motor industry websites that several manufacturers are engaging concierge trainers to train their salespeople in customer service. This is a great step in improving customer service skills as long as the salespeople have the product knowledge and associated skills to match.

An enthusiastically helpful service person or salesperson who doesn’t know his/her ‘product’ can be an infuriating waste of time for a customer.

The BLT with Gluten-Free Bread

My partner is coeliac. Like other coeliacs, her immune system reacts abnormally to gluten (a protein found in wheat, rye, barley and oats). So eating normal bread (which contains gluten) makes her sick for several days.

Having breakfast with friends in a cafe recently that had several gluten-free (GF) options on the menu, including gluten-free bread, my partner ordered the BLT with the Gluten Free bread.  Fifteen minutes later, the waitress brought out a BLT (made with normal bread) and a side order of Gluten-Free bread.  The service was prompt and friendly but the waitress (and, it seems, the chef) had no understanding of why they had gluten-free items on the menu and why customers would need gluten-free food.  Naturally , the BLT was sent back and the ignorant waitress seemed a bit put out.

My partner had to wait for a new sandwich to be made (correctly) and got the right sandwich, fifteen minutes after everyone else got their breakfast orders.

So the end result was a below-average customer service experience.

A Motor Industry Example of Poor Product Knowledge = Poor Customer Service

Relating this ignorant customer service experience to the motor industry, I recall the story of the buyer of a brand new 4WD, printed in an Australian motoring publication a few years ago.  The new 4WD buyer had recently upgraded his old four-wheel drive to a brand new model.  He seemed to assume, as did his salesperson, that he was already familiar with the brand and the model so little time was ‘wasted’ on product knowledge and a ‘deal’ was done.

What both of them missed was the fact that the very old model 4WD that the customer was trading in was old enough to not have Anti-lock Braking System (ABS).

Naturally, the new car did have ABS but the customer wasn’t aware of what it did (and didn’t) do and the salesperson simply supplied a car for a price.

On his first weekend drive in his new 4WD, the customer was driving along a gravel road. As he approached a bend in the road, he braked heavily. The ABS activated, but did not slow his vehicle as quickly as he’d expected with his old 4WD and he ploughed into a tree. He blamed the ABS and the vehicle for his misfortune.  His blame would be better placed with the salesperson.

I recall reading a survey of Australian motorists years ago and, among other things, it revealed that over 60% of the survey respondents who drive cars with ABS had no idea what ABS did. Around that time I was training a large group of salespeople with a prominent prestige brand, so we started training one morning with a product knowledge quiz including a multiple-choice question on the function of ABS.

Almost 90% of salespeople gave the wrong answer on the function of ABS!

We quickly amended subsequent training to focus more on this and other important product information.

Product Knowledge Must Solve a Customer’s Problem

In his book SPIN Selling, from a comprehensive study of 35,000 sales calls, Neil Rackham shows how effective product knowledge is in sales, as well as the most effective way to provide product knowledge to a customer.

Furthermore, Rackham identifies a vital focus of customer service: What customer problems does it solve? If it doesn’t solve a customer’s problem, your product and your product knowledge are of little value.