How To Solve Dealership Turnover & Staffing Issues Forever (PART 7)
TRANSCRIPT: All right, second guideline is to pack carefully, just like going on a big trip. You want to pack carefully. Those of you not in the car business have no idea what I’m talking about, but those of you in the car business, flat packs. Those that are not directly related to an actual cost, those are largely artificial in today’s market. Let me prove it. Who sets the price for your vehicles today? Who sets the selling price for the vehicles today? The market does. You might think, “No, no, my used car manager sets used, my new car manager sets …” No, no, the market is setting those prices with rare exception. The guy that’s not online, the one what? The one out of 50, one out of 100 people who’s not only who bops in to your dealership to buy a car. The market sets the price.
That’s who sets the price for your vehicles, so if you have a pack that’s not related to an actual cost, like some sort of reconditioning that you had to do to a vehicle, something special you had to do to it, any pack that you have that’s a flat pack, that can only reduce your sales team opportunity to earn commission. Some of you are saying, “Yeah, it does, Steve. That’s why we pack, so we can bring their commission down.” I’m going to ask you this. Are you the only dealer in town? No. Do you think your pack is hidden? It’s not. We already agreed that everybody knows what’s going on at your dealership and they do. You might be saying, “Hey, we pay 25% commission and boy, the guy up the street only pays 22%,” but if you have pack that makes every deal a mini and your competition is net-net paying better, where am I going to work? Why would I work for you if your pack makes every deal that I have a mini?
Listen, other people know what’s going on in your store besides your own sales team and people won’t come work for you. It’s the pigs and hogs scenario. Pigs get fed and hogs get slaughtered, so pack carefully, all right? Don’t think that you’re out-smarting people. Again, it’s not the pay plan. It’s the perceived fairness of the pay plan. It’s not always about pay. It’s about perceived fairness in the pay or perceived unfairness rather than the pay. That’s what always increases turnover.
All right, third guidelines for our pay plans. If we’re going to have exceptions, let’s commit early to those. Some of you are like, “What do you mean exceptions?” I’m talking about exceptions to your pay plan. Some of you who are paying a percent of gross as your commission. You might have a cap, say of $1,500 or $2,500 or whatever, commission on any given vehicle. Let’s write that out, that exception out, in advance before you get the Batmobile on your lot. For example, if you have a cap of $2,500 commission on any vehicle, whatever you want to write, let’s write it out. Let’s make sure everybody understands it. Let’s put in bold in the rule book we’re having them sign because if you tell me when I start for your dealership that you’ve that cap, I’m okay with it, but if you tell me after I sell one, after I sell a Batmobile, then I’m going to be checking out and I will.
Let me give you a real world example of a dealership that I was working with. I happened to be there this day. They had a beautiful pickup truck, brand new truck that they had sent out to get some after-market accessories put on. You do the lifted. The markup on that truck was $20,000, a gross of $20,000 if somebody sold it at frontline. Nobody expected them to sell it at the addendum price. A salesperson sold it for addendum that day, the day I was there. They were a 25% commission house, so what’s he thinking? He’s thinking, “I made $5,000” right? “I made $5,000 gross on that truck.” Then they told him, “No, no, no. We have a $1,500 cap on commissions.” What happened? You know. The guy quit. He quit working there. He left.
All right, fourth guideline. You want to pay for performance. You got a BDC, Business Development Center call center that’s setting appointments for your internet leads? Only pay them on shown appointments. You can pay them a base, a draw against commissions, but why are you paying them on sold units? They have nothing to do with sold. I don’t want them selling on the phone. I want to pay for the performance that they can affect, pay for the performance that they can make happen. By the way, I’ve got great BDC pay plans. If you’ll send me a note, I’ll send you one. I’m not going to go through the whole thing today, but BDC pay plans that will get you 50 appointments that show per month on average, minimum from your BDC agents. For salespeople selling a BDC appointment, that’s a split deal.
I want to pay for the performance. If the BDC set the appointment and a floor salesperson sells it, they only deserve a half deal. I’ll give them a full mark towards their volume bonus, but if you start paying them for a full deal, you’re wasting your money. Your BDC becomes a cost center. Don’t believe me? Let’s do this. Remember the salesman Bob? Bob and I worked together. I’m a salesperson on your floor. So is Bob. Bob caught an up on Saturday. They became a be-back. He did the right thing. He set an appointment for Monday morning, 9:15. Sunday night he got sick and he calls me up on the phone.
He says, “Hey, Steve, I’ve got this customer Barbara Jones coming in tomorrow at 9:15. She was looking at a Camry yesterday. Can you take my Monday appointment at 9:15?” I say, “Sure, Bob.” I take the appointment and I sell the car. Bob set the appointment. I sold the car. How much commission am I getting? What kind of deal is that for me? It’s a split deal, isn’t it? That’s a split deal 100% of the time. I don’t argue about it. Bob doesn’t argue about it. It’s a split deal. It makes sense. Why does this dynamic change just because it’s a 23 year old girl wearing a headset who works upstairs who set the appointment?
Pay for performance. Now do you pay a bonus for good CSI? Great, but make sure that they affect the CSI. You pay a bonus for backend? Great. I worked with a dealership that would give a bonus if you’ve got at least five LoJacks a month, that they would pay for floor salesperson for five or more LoJacks because that meant that the salesperson was talking about LoJack, handing the brochure, talking to the customer while they’re waiting to get in the F&I office. Again, they’re paying for the performance.
Fifth guideline. Let’s limit the cuteness, okay? This is where we get crazy in the car business. We try to get too cute and our goals get circumvented. I’m talking about spiffs. Let me give you a real world example. I was working with a dealer. He absolutely wanted more Saturday appointments. He just wanted Saturday to be more orderly, so he says, “We need more Saturday appointments.” He spiffed an extra $50 on all Saturday appointment shows. Put it out there, $50 extra for every Saturday appointment shows. Guess what happened. The floor faked Saturday appointments.
How did the floor fake Saturday appointments? Easy. Up walks on the lot. Floor salesperson ups them. First thing he’s doing is he’s walking them to the desk, he’s putting them in the CRM as a phone up. Then he puts in an appointment for, I don’t know, 20 minutes later. He goes to the desk and says, “Hey, that’s Mrs. Jones. I got a 9:20 appointment for her. There she is.” The sales manager was marking them as shown and so they got a $50 spiff just for that. People work their pay plans, okay? The BDC in this store, by the way, was interesting. The BDC took internet leads, the phones went through the floor, so the floor salesperson faked Saturday appointments. The BDC team was setting Saturday appointments on Monday.
They get a hold of a prospect on Monday. Prospect may have wanted to come in Monday night, Tuesday morning. Didn’t matter. The BDC was saying this on the phone. “Well, my first available appointment open on that Camry is Saturday at 9:45. I’ve got a 9:45 and a 10:15. Which one works better for you?” You might be saying, “Steve, didn’t they get more Saturday appointments?” I don’t know. I know they had a lot of faked appointments and they had a whole lot of BDC no-shows. See, you can’t set an appointment on Monday and expect them to show on Saturday. It’s just not going to happen.