Dealer's Edge
June 4, 2001 Vol. 7, No. 21

Benchmarking is key - In defense of the Business Development Center
Some dealers have given up on the BDCs citing a lack of tangible results. But consultant John Traver says adherence to some basic principles can make all the difference.
Business Development Centers, or BDCs, were all the rage in retail car dealerships for a few years. And while many stores still have a BDC, they’ve lost some of their luster, and may even have fallen into disuse in the last year or so. Why? Depending on the approach taken by the dealership, a BDC can be expensive to equip and operate, it requires consistent effort, and, most importantly, there are questions about whether the return on investment is worth the trouble.

John Traver, president of Traver Technologies in Houston (281-752-6262), remains a believer, however, and presented a compelling case in favor of BDCs during the 2001 NADA Convention and exposition in LasVegas. Success, he notes, depends on adherence to the basics of people, training, process, and tracking the measurables.

The purpose of BDCs, according to Mr. Traver, is to develop more appointed-based sales opportunities (phone ups, unsold prospects, previous owners, and referrals) for showroom sales people. Appointments result in higher closing ratios and higher gross profits per delivery. That’s pretty self-evident but Mr. Traver backs up his argument with some hard statistics.

Need for basic information
The average automobile salesperson sees an average of two fresh ups each day. If those two fresh ups come in within an hour of each other, the sales rep is unlikely to do a good job with both. Even if they arrive three hours apart, what is the salesperson doing the rest of the shift? Mr. Traver counsels his clients to work toward getting sales reps to book three daily appointments to complement the two fresh ups. Statistically, two of the appointments will show, if handled properly, and one won’t. One key to booking more and higher quality appointments is gathering more basic information from customers.

While many dealers use a logbook or individual cards to track their leads, Mr. Traver is clearly in favor of using cards. For one thing, the cards are portable and can be carried into a BDC or call center. Name, home address, e-mail, and even a driver’s license swipe in states where these are legal, form the basic data needed for customer follow up. But, according Mr. Traver’s observations, about 30 percent of the prospect cards he reviews don’t have the prospect’s home address. Another 34 percent have only a home phone number, although most BDC activity takes place during the day when people are at work.

Simply asking for the information is the best way to get it. Mr. Traver suggests saying something like, “What would be the best way to reach you during the day?” and “If I’m not able to reach you there, what would be another good number to call?”

Protection plans
To emphasize the importance of getting customer data, managers are advised to establish a policy for customer information and to have it blown up to poster size along with a sample prospect card and to hang it in the sales training room.

Manager’s can help motivate the sales staff to be more diligent in collecting and using customer information by instituting what Mr.Traver calls short term and long term protection policies. A short term protection plan might involve assurance from the sales manager that the sales rep who collects the information will get at least half credit if the customer buys a vehicle within five days, provided all the required data is on the prospect card.

The same protection for half credit can be extended longer term if the sales rep send a letter, completes a phone call, or sets a date for the next follow up contact at least every five days. An automated lead management system is a necessity.

Some numbers
How many income sales calls should a dealership be fielding in a month? A good benchmark, according to Mr. Traver is 2.5 times the average number of units delivered by the store monthly. So a 100-car-a-month dealership should be getting 250 incoming customer inquiries a month to be “in the game.” Obviously, a good lead management system is invaluable here as well.

Of those 250 calls, at least 30 percent to 35 percent should result in scheduled appointments (with a verifiable date and time.) Look for 40 percent to 50 percent to show up and about one-third of the prospects that keep their appointments can be expected to close. That works out to about 12 deliveries or a closing ratio of five percent on the total number of incoming calls handled.

With the right people, training, and processes, dealerships using the BDC model will see their closing ratios on incoming calls rise to ten percent.

Improving “show” ratios
Since customers that come into the dealership by appointment are more likely to buy, it makes sense to find ways to get more of those customers to show up after they make an appointment.

That’s where appointment confirmations come in. Using the dealership’s lead management system, a sales manager can quickly see the appointments scheduled by each sales rep in his or her charge. Mr. Traver notes that having a manager call a prospect merely to confirm an appointment has a “big brother” feel to it, so he suggests an alternative approach. The sales manager should start by thanking the prospect for contacting the dealership and for setting aside time for a visit. The manager should offer to fill in any gaps in product or service information, and then tell the prospect that he’ll make it a point to introduce himself at the date and time scheduled.

Now, ten or twelve extra calls a day is a lot of extra work for a sales manager, but there is a big payoff. Statistically, says Mr. Traver, confirmed appointments have a 75 percent show rate, substantially better than the 50 percent show rate for unconfirmed appointments. Since we know that customers who come in by appointment have a higher closing ratio (33 percent), a 50 percent increase in the number of appointments kept should translate into a 50 percent increase in vehicles delivered as a result of appointments.

One last idea: When customers come in by appointment, do something to make them feel special. Mr. Traver likes the idea of using an automated message board, much like the ones used by Hertz for their Number One Club members, to display a personalized welcoming message. The customers show up for their appointment and they see their names in lights. It can make them feel like they’re part of the club.