The NCM Institute just posted this article on the Up To Speed blog.  Written by NCM Institute Director and retail operations specialist, Garry House, you'll find a good, basic plan for how to start a personalization program in your store... 

Since the 2011 Specialty Equipment Market Association (SEMA) show has now concluded, would it be appropriate to ask why you weren’t there?  Do you realize how much profit is available from the sale of accessories and other “hard” after-sale items?  There’s not much more money to be made in the F&I office…we’ve about beat that horse to death!

I’m sure you’ve heard stories (some of them probably true) about franchised dealers who make an additional $500 in gross per new vehicle retailed by aggressively selling accessories. What I don’t understand is that, for each one of those motivated, high-profit accessories merchandisers, there are at least 50 of you who gross nothing ($0) from personalizing your customers’ new purchases. And it’s not that difficult…all it takes is a plan, a process, and a commitment to succeed!

So for the next few minutes, I’d like you to consider implementing plan to take advantage of the potential profitability available from personalizing the new and used vehicles you sell to your customers. Obviously the primary planning objective is to sell the vehicle first, then sell the personalization! The following is a 5-step plan to help you launch this business element:    

1. Form a “personalization task force” from within your management staff. The best candidate to lead this particular group and drive the planning initiative is usually the parts manager.  A sales manager, a service manager, and possibly a body shop manager, should fill out the task force. Department representatives must participate unselfishly during the planning. The question that needs to first be answered is, “What’s the benefit to the store?” rather than, “What’s the benefit to my department?”

2. The task force should first determine 6-10 personalization items that could, if priced competitively, be aggressively sold on a large percentage of your franchised vehicles (both new and used). These items should then be shopped at those independent upfitters and accessories installers with whom you’ll be competing. Your dealership’s price points should next be established. Remember, you don’t have to have the lowest prices…a strong value proposition combined with one-stop shopping will get you plenty of business.

3. The next decision before the task force is determining your cost of sale (COS) structure per personalization item. A major sub-step in making these decisions is determining the best deal you can get by subletting these items. If you can install these items in-house at, or close to, the sublet COS, you should plan on doing so. Developing the lowest possible in-house COS structure may involve using non-OEM accessories and negotiating installation times and/or flat-rate pay with technicians possessing the necessary skill levels. An incentive that will motivate dealership personnel to sell these personalization items should also be included in the COS structure.

4. Now that you have a proposed selling price and COS per personalization item, it’s a simple task to calculate the targeted gross per item. It’s now time to develop and document the detailed financial plan. Begin by determining your forecasted vehicle sales (new and used) by general model category. Then project a realistic sales penetration level for each personalization item in each of your general model categories. Whenever I perform this exercise with a client dealership, I am overwhelmed by the resulting gross profit potential for the dealership. In fact, the potential incremental gross profit improvement is normally large enough so that each involved department manager is more than happy to split the gross equally.

5. The final step is to determine what promotional tools and tactics will be employed to maximize sales penetration of the personalization items. These tools and tactics may include, but are not necessarily limited to: (a) brochures; (b) sales catalogs; (c) videos; and (d) example personalized vehicles. I have seen dealers become successful by personalizing no more than ½ dozen vehicles in inventory, while other, more aggressive dealers believe in personalizing 5%-10% of their inventories.

One of the promotional tactics I always recommend is a sound scorekeeping and highly-visible scoreboarding system whereby all sales and management personnel are continually made aware of performance against plan. Measuring what we need to manage, inspecting what we expect, and always letting everyone know the score, are proven motivational strategies.

I’m sure there is a long list of reasons why you are not currently in the personalization business. (Trust me; I’ve already heard most of them.) However, overall dealership gross profit margins on personalization items normally range upward from 35%, and we don’t come close to that margin in vehicle sales. Your customers are currently (or soon will) be spending big bucks to personalize their vehicles. Shouldn’t that money be flowing into your bank account? 

Contact Garry House at the NCM Institute at 866.756.2620 or email ghouse@ncm20.com.  For information on the NCM Institute Center for Automotive Retail Excellence, visit www.ncminstitute.com.