Glengarry Glen Gross

Glengarry Glen Gross

By: Alan Ram

Who remembers that scene in Glengarry Glen Ross where Jack Lemmon is pleading with Kevin Spacey for the “premium leads.” “I can’t work these weak, worn-out leads anymore! You can take all of them! Just give me ONE of the good leads and I’ll close them!” In many cases, I imagine many dealers today as kind of a reverse Jack Lemmon. We already have access to the absolute best leads, yet we spend a ton of time, money and effort trying to develop more crappy ones. Here’s what I’m talking about. At every dealer 20 group meeting I’ve ever spoken at, three words seem to come up the most. Expense, volume and gross, not necessarily in that order. Let’s talk about gross and how we tend to address that topic. How do you increase gross profit per retail unit? The number one answer I get when I ask that question is “sell the value” followed by “under allow on trades” and any other things that may have been trending at a workshop in 1985. Here’s the problem with those approaches. For starters, what do the statistics say as it relates to the number of websites the average customer has visited prior to walking into a showroom? Most of the numbers I hear are in the 20s. So your primary strategy is that you’re going to “sell the value?” The fact of the matter is that by the time they get to you, most customers have already been on and submitted leads to seven of your closest competitors, shopped invoice information on Edmunds and made their rounds on True Car. While that customer might enjoy the demo drive your salesperson takes them on between Tampa and Miami, at the end of the day, most already know what they want to pay for the car. You don’t even need to show them invoice anymore because they’ll show you. So much for “sell the value” as your secret weapon.

You’re going to under allow on trades? Please send me an email outlining how you intend to do that after the customer has already had their trade appraised at four different dealerships. Although I tend to shy away from fiction, I’ll make an exception and read your email. The fact is, the rules of gross have changed over the years. The key to increasing gross profit per retail unit and making a fair gross profit is this; you have to get to customers before they get to you. You have to get to people before they start shopping and bring them into the market. You have to get to them before they’ve been highballed, lowballed and in many cases flat out lied to in three states. Where do these customers exist? In your sold customer base. People that you sold cars to 2-2 ½ years ago. While equity mining tools might be all the rage now, you don’t necessarily need to wait for equity. How many deals per month do you make where the customer initiated contact while they were still a couple thousand dollars upside down? If we waited to be alerted to equity, in many cases we would be a year too late. I have found the 30 month point in a new car customer’s ownership to be a good time to present a specific opportunity to trade up. As a matter of fact, I teach a call specifically referred to as the “Dirty 30 call”. If 30 months ago your dealership sold 200 new cars, 200 people should by process receive this call. When made properly (key word!), 50 to 60% of those calls should result in a customer interested enough to show up at the dealership. Of those, you should sell about 60%. Furthermore, you should sell them at a higher gross profit. Why? Because they haven’t yet started shopping. Notice, it’s not a letter or an email the customer receives but a specifically worded call. On preowned typically we can bump it up to a 24 month call.

A very similar opportunity exists in your service department. I have noticed that most dealers tend to be very random in the way they work their service back to sales programs, if they do it at all. Furthermore, they don’t necessarily train their staff on how to convert service customers. “Hey Billy, you’re working service tomorrow. Be there at 7 AM”. That’s the extent of the training at many dealerships. The key to working service effectively is the prep work the night before. Knowing who might be the best candidates to consider trading based on the appointments set for the next day as well as ownership information in the CRM is the key to success. You need to treat your service drive like your own private auction lane! I know and personally work with dealers who sell 150 units per month out of service. The beauty of it is, they are not doing anything you couldn’t! Best of all, when customers are at your dealership for service, they haven’t yet shopped, once again creating an increased profit opportunity.

Before you spend any more money buying leads that have already been sold to 15 different dealers or advertise to attract deals that are in many cases minis before they ever arrive at the dealership, make sure you are maximizing the better opportunities you already have access to. That’s where the gross is at. If you’re not doing the things I just talked about, PUT THAT COFFEE DOWN!…COFFEE’S FOR GROSSERS!

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Comment by Brian Bennington on October 2, 2015 at 4:37pm: Alan. You know how much I respect your "savvy," but I've got to take Scott Klein to task. When he suggests that lost customers might have a "smaller conversion ratio" than sold customers, I had to laugh, and then review his DE bio to see where he's coming from. Unfathomable to me, he's a Sales Trainer like you, but I didn't learn much more other than he was a long-haul trucker who never had an accident. Basically, his website is unfinished which, for the life of me, I can't figure out why he even put up.

When I say I laughed at his suggestion, it was because I attended a sales meeting where the moderator pulled out a phone book and said, "There! Now you've got plenty of prospects!" In sales training, this kind of mentality is counter-productive, sure to discourage those inexperienced enough to actually believe it. I'm beginning to think that sales reps who can't make it not only become wholesalers, they're just as likely to become "Sales Trainers." But, I'd bet he's got all of the acronyms down, to reinforce the appearance he knows something.

(An apology to Mr. Klein. I'm sorry if I offended you with my observations, but I think you missed the point of Alan's post. You want to get to known buyers before they buy, and not waste time cultivating "suspects" who were losers to begin with. You'd be better off going door-to-door in your neighborhood! Surprisingly, you didn't mention the obvious choice for a new rep. That being orphaned customers who at least bought a car from where they're working. I probably wouldn't be so critical of you if I hadn't noticed you're doing meetings with reps who are already in doubt because they're selling less than 8 cars a month. Again, I apologize, but the nature of these posts is to express your opinions, positive or negative.)

Comment by Scott Klein on October 2, 2015 at 1:20pm: Great article and I couldn't agree more. However I wouldn't limit the data mining to only solds and service. CRM's a are full of unfollowed up customers. You migh have an internet lead in your CRM that you paid for 30 month ago that bought somewhere else ("lost lead"). It might be a smaller conversion ratio than a sold customer, but you could pitch them as well. Besides, when they are ready to trade they'll go on Truecar or Autotrader and you'll end up paying for another lead from a prospect that is already in your CRM. I've seen as many as 3 different paid leads (in a 4 year span) on one prospct in our CRM. Ouch!

Comment by Pat Kirley on September 28, 2015 at 7:25pm: Hi Alan
You are right, we need to work the leads that have the best possibility of return. But modern management still believe in throwing loads of mud at the wall and believe the more you throw the better you chances of success. Just like the movie 10 good calls to the right customers is better than the list with 300 names that once bought similar cars some time in the past.

Comment by Brian Bennington on September 27, 2015 at 7:33pm: An excellent post, Alan. But, I did miss the flaming background and your well-tailored wardrobe! While my business is specifically centered on repeat and referral generation, and I nearly always turn-down any "guest vendor speaking" for my clients, several years ago I did do a meeting and, during a Q&A, a rep told me they didn't know how to handle working referrals and were much more comfortable just "upping people that drove in." Now, there was no way I could say anything without insinuating their management should maybe work a little harder training their people, and that's something I avoid doing. Experience has taught me that managers seldom appreciate being told to work harder, especially by an "outsider." (And, especially by an "old codger" who doesn't understand "new school.") Luckily, everything I do is "turn key," and while active participation by any of my client dealerships' staff can enhance their results, it's not mandatory or even required.

The body of your post is "Oh so true." Your best gross possibilities nearly always are with your past customers and their referrals, and the abundance of consumer "enlightenment" available on the Internet is the biggest reason this will continue to exist. Reps will, out of perceived necessity, "drop their pants," at the slightest provocation. Unfortunately, doing consistent past customer follow-up borders on "work," and the vast majority of today's reps really don't want to work any harder than their managers. I'm inclined to believe today's sales people have a "firm grip" perpetuating the conventional wisdom that 80% of business is generated by 20% of its sales reps.