Solving the Eternal Sales and Marketing Riddle

Solving the Eternal Sales and Marketing Riddle

For over 30 years I have worked more than 40 hours a week on creating, managing and measuring various strategies and tactics designed to optimize the results from sales and marketing investments in planning, people, tools, technologies, procedures and campaigns by car dealers… Along the way I have frequently encountered challenges created by an imbalance between dealership organizational competencies around either “Marketing” or “Sales”.  These challenges often remind me of the Greek Mythology I was once forced to read by the nuns who taught me in grade school. 

 

One of these plays (by Sophocles) involved “The Riddle of the Sphinx” and went something like this: a Sphinx with a nasty attitude sat on a road and asked all travelers who wanted to pass by to answer her riddle. Travelers who failed to solve the riddle were promptly killed. If a traveler answered the riddle correctly, the traveler would be on his merry way (and you thought New Jersey toll booths sucked!).  Here is the riddle: “What goes on four legs in the morning, on two legs at noon, and on three legs in the evening?” The solution to the riddle: “A man… He crawls on all fours as a baby, walks on two legs as an adult, and walks with a cane in old age.”

 

Which brings me to the riddle that messes with our mission of optimizing the balance between marketing and sales in the business of automotive retail; it is a two part riddle.

 

Question #1: How do you know when your marketing is optimized?

 

Answer: When the sales department cannot handle all the opportunities for business being generated by your marketing strategies, programs and advertising campaigns.

 

Question #2: How do you know when your sales team has reached its optimum capacity?

Answer: When the dealership’s marketing programs cannot overwhelm the sales team’s capacity to convert opportunities generated into sales and profits.

 

The simple reality of “Sales and Marketing” in automotive retail is that when marketing is working well, it uncovers weaknesses in a dealership’s sales operations… And, when a dealership’s sales team is set up right and running like a well oiled machine, the marketing strategies used can rarely keep the sales team operating at its maximum production capacity.  This in turn makes that latter situation look like marketing is not delivering as many opportunities to do business as it should be.

 

So, what’s a dealer to do? In my experience this is not a chicken or egg quandary, and it certainly is not the riddle of the Greek Sphinx that Sophocles wrote about… Let’s examine the tensions that will drive increased growth, market share and a dealership’s overall profitability lifecycle.

 

What are the factors at work in optimizing the relationship between marketing results and sales capacity? Let’s make a list specific to automotive retail:

  1. Marketing effectiveness is impacted by factors both within and outside the dealer’s direct control.  Factors include OEM marketing and advertising, economic cycles, product availability and other issues that include the costs of media and its availability (such as in election years).
  2. Dealership sales teams are almost exclusively controlled by the dealer and management team. There are many more people available to hire than there are unfilled dealership sales jobs.
  3. A properly capitalized dealership can increase or decrease marketing and advertising budgets on a short term cycle, often in units of time less than 30 days.
  4. Increasing a Sales team’s real world capacity can take months, yet a sales team can be decimated in a single day (I’ve seen it happen).  Recruiting, screening, hiring and then properly training dealership sales professionals is a much more time consuming and resource intensive project than creating and executing a marketing program or advertising campaign.
  5. Sales compensation expenses within most car dealerships involve a variable component based on sales results.
  6. Marketing investments made by most car dealerships are based on predetermined costs and budget allocations and rarely include performance based variable costs.

 

Since it takes longer to grow the actual “business opportunity to revenue conversion” capacity of a dealership sales team than it does to increase the output of marketing and advertising in the form of those business opportunities, the right strategy seems clear… Sales team capacity should always be managed with a focus on growth. 

 

Of course, growing a sales team’s capacity means that you have to be able to accurately determine who should be recruited, which candidates should be allowed to get an interview.  Preventing managers from interviewing the wrong candidates is an effective way to stop making bad hires.  The concept of hiring anybody who can “fog a mirror” to work in a dealership’s sales department is ludicrous and possibly the most damaging “worst practice” in the auto industry today. 

 

Chris Saraceno, the COO of the Kelly Auto Group with dealerships in Pennsylvania and Florida solved THAT problem awhile ago, and so did the dealer I worked for when I was hiring sales professionals at Courtesy Chevrolet in Phoenix.  Chris, myself and dozens of other dealers use “The Car  Sales Simulator” from www.HireTheWinners.com to determine who gets interviewed and eliminate those candidates that would almost surely be a disaster if a sales manager falls in love with them and makes the mistake of employing the wrong person in your dealership.

 

Here is the bottom line… STOP THE MADNESS of hiring incompetent sales people whose very nature and personality profile have predetermined their failure in an automotive sales environment. Stop trying to make up for a sales team capacity deficit by increasing your investment in marketing and advertising!  Throwing more money at marketing technologies and advertising campaigns when your actual problem is a sales team capacity deficit is not a profitable solution.

 

Now that there are web based automotive specific screening tools like The Car Sales Simulator with automated scoring and personality profiling from Hire The Winners, the excuse for hiring losers is gone.  The only excuse your dealership has for hiring sales people who cannot be trained to sell cars is management incompetence.

 

Do I sound a little harsh? I hope so, because there are still far too many sales operations in dealerships across America that are not capable of maximizing the conversion of sales opportunities generated by highly effective Digital Marketing and Advertising strategies.

 

If you want to try out The Car Sales Simulator without spending any money, we have been able to get a trial usage deal set up with Steve Munyan, the owner of Hire The Winners for all members of www.dealerELITE.net by using the link provided at the top of the site’s home page.

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Comment by Chris Saraceno on July 17, 2012 at 3:26pm

If your running a dealership on a day to day basis the simulator is the single best tool I have to used to evaluate a Sales canidates ability to close a deal,ask proper questions, and evaluate their listening skills.

If we stop interviewing the wrong candidates we will stop making bad hiring decisions.

Nothing works 100%, From my personal experience The simulator has eliminated 75% of the poor canidates before our managers end up spending hours with them.

Comment by Craig Lockerd on July 16, 2012 at 2:51pm

Simulator is a GREAT tool!.....Plus

“The Decision”

       “I’ll be taking my talents to South Beach”….oh, sorry, wrong decision [Clevelander joke]

  The way many dealerships make the decision when to bring on more salespeople and how many or replace under-performing salespeople has always baffled me. I have seen countless “formulas, statistical data, seasonal hiring decisions, you name it. We have had managers tell us they need 4 salespeople, we ask them why 4?” That’s how many desk we have open” Really, hiring due to number of desks? New manager starts at store and brings his “team” with him. This one is very exact “Salesperson can properly “wait on” 2.25 clients per day x 6 day work week =13.5 clients a week X 4.2 weeks per month = 56.7 clients per month, so we are “logging” 425 clients a month which would mean we need 7.49 salespeople on our floor??? “It’s the first of the year, in with the new, out with the old” I know none of you make your decisions these ways, but you know what I’m saying.

Law of Diminishing Return

  The reasoning behind The Law of Diminishing Returns from a Dealers point-of-view in terms of hiring employees can be simplified into three stages:

  • In the first stage, the addition of more salespeople allows for specialization of job responsibilities and increased production efficiency. The result is a larger output return for each additional unit of input.
  • The second stage is where inputs equal outputs. Each new salesperson added will continue to increase production, but only at the same rate as the increased input of labor.
  • The third stage is when additional salespeople will start to decrease production efficiency because the work environment is fixed in the short-run. This results in returns that are less than the labor input.
  • Imagine this situation. You have hired a teenager to tend to your garden. He plants 4 saplings in an area of 10 square feet in 4 hours. The next day, he brings another friend along and you decide to hire him as well. The time and the area don’t increase, but the number of saplings planted increases to 8. Another boy comes along and is hired by you. Again the area and the time limit is the same. But the number of boys is now 3. And the number of total saplings planted is now 9. If you hire another boy and maintain the same condition, you will notice that the number of saplings planted may increase overall, but the number of saplings planted by each boy will reduce, until eventually it will be 0. The above explained situation is a classic law of diminishing returns example.

  My question is, do we have any idea where that third stage is? We are in the car business, our outcome should be to have as many people as possible buy our products and services at the highest possible profit margins we can with 100% customer satisfaction. We can’t do that unless we have pushed the envelope with a quantity of quality, properly recruited, screened, interviewed and trained salespeople.

“I don’t want to flood my floor”

  That’s admiral and I applaud your moral judgment in trying to make sure your salespeople all make a good living, but how many times have you invested in having a special sale or event, or your product is super hot and huge new incentives came out or you invested millions in your facility and you look around and several of your salespeople decided to come in late, stay home or move on to the next “Hot Store?”

The law of diminishing return is a bit different in our business. How many hours are your salespeople currently scheduled to be at the dealership? Wouldn’t an additional sift or shifts or teams allow them to work less hours, be more affective and in turn more productive and actually have lives outside of work as well? Couldn’t that also help the talented person at your store that has “Manageritis” and if you don’t move him or her up, make them a team captain, they are going to leave you?

   How much real time do your salespeople have to actually truly prospect, develop their own client base, properly handle all the internet leads, take vehicles to people’s homes or businesses ,be involved in the community to create more business when they are at the dealership bell to bell?

Simple question did you or did you not sell more cars when you had more salespeople? Why are some dealers that are in the middle of nowhere selling 5 to 10 times the number of cars dealers in major metro areas selling? Marketing, proper use of the internet for sure, but remember in this point in time in our industry our property goes well beyond the amount of acreage you own, take advantage of that opportunity and dominate your competition .To do that, you need better recruited and trained people. Now of course at some point to many really is to many and moral goes down and productivity would suffer, but I’ll bet very few if any have ever come close to that point that are reading this.

  Judy B. Margolis, writes:

“Employees who grow too comfortable and complacent lose their edge. The more they know, or think they know about how their particular slice of the business world works, the less likely they are to challenge their old tried-and-true methodologies and to innovate. The same holds true for companies that fail to embrace change and, instead, have it foisted upon them, often when it is too late.”

 

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