Today’s retail business model is to keep expenses lean while maximizing the revenue generating operations. Certain expenses have been eliminated while others have been reduced to a small percentage of gross. One of the expenses that have seen a drastic decline is in the area of training.
The training budget reduction brings in question, has the need to control expense created an oversight for the absence in training? Automotive dealerships utilize key performance indicators or KPI’s to serve as guidelines to manage controllable expenses. These indices are measured as a percentage against gross profit to provide optimal operating profit guidelines. Dealership operators have to ensure that there is a delicate balance between expenses and revenue.
Traditionally the expense for advertising as a percentage of gross profit is substantially higher than the expense for training. According to the NADA 2014 Data Financial Profile, the average dealership spends about $616 per vehicle sold to advertise (see chart).
There is a substantial amount of revenue being dedicated to advertising and marketing efforts. Consider on the contrary, the amount of revenue being spent to educate and train the existing employee. In some dealerships the sales training consists of paying the manufacturer a fee for online product training. While the online training is a start it falls short of the necessary substance sales people and their managers need. The average guide for training is about 0.45% of gross profit as compared to about 6% for advertising. Clearly the revenue is being dedicated to driving traffic however, is the employee trained on how to properly handle a customer the dealership worked so hard to attract?
The philosophy of “holding back” training out of concern that the employee will leave the dealership is outdated. In fact, a well-trained employee has more dealership loyalty, produces more consistent higher profits and increased customer retention. Dealerships that consistently invest in training attract more talented people as well.
The growth of the fixed operations has created the necessity for training of our service advisors and our parts counter people. A dealer wouldn’t think twice about sending a technician for training so that he/she has the best instruction to improve proficiency and fixed right first time scores. Advancements in technology for automobiles requires ongoing technician training. What about the parts counter person? They’re the catalyst for the service advisor and technician to perform the critical repair.
The fundamental role of a sales manager is to build a team of quality professionals that can serve the customers the dealership is advertising to. In addition to the numerous tasks the sales manager is accountable for, they’re faced with the arduous task of continuous education and stimulation. In some parts of the country, sales management is being downsized and managers are being asked to do more with less. Essentially we’re asking sales managers to perform training despite the absence of training provided for them. All too often the training is random, misdirected and unstructured.
So where did your training budget go? There is no substitute for professional training and instruction. With so many experts in the field and so many outlets to receive virtual training, there is no reason to sublet training to a manager. Perhaps, it is time to review the training budget and dedicate some revenue towards the development of people? The return on investment is likely to increase right along with the morale.