CURB THE CHURN: How to Identify & Retain Your Best Salespeople

by David Metter, Co-Founder and President, AutoHook powered by Urban Science

Dealership employee turnover rates are notorious for being amongst the highest out of all retail sectors. Unfortunately, dealers have been forced to absorb the spiraling costs associated with a lack in salesperson retention, which only appears to be getting worse. NADA’s latest Workforce Study reported salesperson turnover rates are at a record high of 74% - up 7% from last year.

What we don’t often talk about is the broader implications high employee turnover can have both on dealers and on the industry as a whole. Consequences of losing good salespeople can transcend beyond an individual dealership level, as any significant reduction in customer retention or customer loyalty has the potential to damage the reputation of an entire brand.

Dealers aren’t shy about communicating the adverse effects high churn has on their business, both in their operational processes and when it comes down to their bottom line. Wards Auto says, “The impact is significant, causing decreased sales and profits, and diminished customer loyalty,” which we know can be detrimental to the health of any business.

MAXDigital recently surveyed nearly 400 dealers in the U.S. and found 78% struggle with issues related to high staff turnover. The root of the problem is two-fold in that good salespeople aren’t just hard to keep, they’re hard to find in the first place. Ninety percent of dealers surveyed said “Hiring good salespeople is hard,” and finding candidates with previous sales experience let alone automotive sales experience is even harder.

*Source: 2018 MAXDigital Dealership Process and Salesperson Turnover Survey

Over time, chronic retention problems add up and can cost dealers hundreds of thousands if not millions of dollars a year. A study by Driving Sales and Hireology determined the average cost of recruiting, training, and lost productivity for each salesperson is $45,000 (and that was back in 2016). In my last blog, we defined the value of a good salesperson over the course of one year to be more than $325,000 in pure gross profit. Add that to the cost of recruiting and training and dealers are losing out on over $365,000 per salesperson, per year.

The need for dealers to be able to identify their best salespeople in order to retain them is more critical now than ever before.

Why? Because people still heavily rely on face-to-face, personal interaction - especially when it comes to making big purchase decisions. The larger the purchase, the more inclined customers are to buy from someone they trust. Despite the abundance of online vehicle research tools at their disposal at any given micro-moment, relationships will always take precedence. And people naturally gravitate towards both consistency and what is familiar to them. They’re also much more likely to buy a second and a third car from the same person they already know and trust.

So how do we solve this industry-wide employee retention problem? There are three components that we know make up the formula for properly assessing your salespeople in order to help curb the churn:

1.     Know What You’re Losing

When it comes to evaluating the true performance of your salespeople, having the ability to view CRM data through a scientific lens is essential. CRM companies do what they do very well, but they only show one dimension of a highly multidimensional story – the wins. But what about the leads your salespeople touched that defected? Without that defection data, it becomes near impossible to properly identify the best performers on your team based on the opportunities they’re working.

In order to see who the real winners and losers are representing your dealership, you need a way to visually compare the number of leads each person sold each month in addition to the ones they lost and who they lost them to. Only then can you see who is really the most effective or ineffective because you have the complete story. You can make much better decisions on who or what needs to change based on a real visual of what you’re losing.

2.     Leverage the Right Technology – Rooted in Science

What we’ve never seen before at the dealership level, is science taking a leading role in how we evaluate our sales staff. If science-based technologies can tell you the people that consistently prove to be growing in a positive direction, or reducing their defection rates over time, then science can play a role in helping dealers implement compensation plans that serve and reward only their best people.

Keep in mind, it’s important to give newer technologies or data-driven solutions time to build, learn and improve. The more sales and defection data we can collect over time, the more accurate and actionable the tools that leverage this data will be at identifying your best (and worst) employees.

3.     Play to Your Strengths

I’ve been in this business for 27 years. If there is one thing I know without a shadow of a doubt, it’s that the chances of a salesperson closing a sale are greatest when the customer is physically in front of them. So, in addition to leveraging the right technology to evaluate your staff, leverage technology that will support what we know to be the greatest strength of any person that knows how to sell a car… get the customer in the showroom.

If the goal is to improve your lead follow-up process and eliminate inefficiencies in the way you operate (which by the way is always the goal) then it’s absolutely vital to have the tools in place that can pinpoint both the strengths and the weaknesses of your team. When it comes to retention, dealers are much more likely to foster an environment of happy employees if they play into their peoples’ strengths instead of wasting money, time and energy attempting to fix what they’ll never be good at. As stated in the national bestseller, StrengthsFinder 2.0, “People have several times more potential for growth when they invest energy in developing their strengths instead of correcting their deficiencies.”  

The takeaway here is to place a heavier focus on solutions that are proven to get people physically in the door, where you have a much higher chance of getting them behind the wheel for a test drive, building a personal relationship, selling them a car, and retaining their business. Test drive incentives are one tactic we know works. Pair that with a bulletproof lead follow-up process and what you’re left with is a prescription for lowering defections tied to your salespeople, higher close rates, and better-rewarded, happier employees.

In summary, everyone wants to retain salespeople and everyone wants to retain the right salespeople for their respective business. So many dealership compensation plans are set up to benefit the underperformers – which is completely counterintuitive to reducing turnover. Until now, it’s been impossible for dealers to adequately compensate their all-stars and overperformers because they’ve had no way to identify them. Moving forward, dealers can take this information and adjust their compensation plans to retain the right salespeople and make the necessary changes to get rid of the rest. After all, it would only make sense to reward the people that are rewarding you.

What's the REAL Cost of a Bad Salesperson?

| by David Metter

If you think good salespeople are expensive, try bad salespeople. In 2017 alone, dealership employee wages totaled over $66 billion and “auto retail continues to boast one of the highest average salaries of any industry,” according to NADA’s annual report. Combine infamously high turnover rates with a decently-compensated workforce, and I’d argue the ACTUAL cost of a bad salesperson in the car business is a lot more than you think. As someone who spent my first seven years at a dealership on the selling floor, I was always frustrated when it seemed like our comp plans served the worst salespeople, not the best ones. 

To attach a dollar amount to what a bad salesperson could be costing your dealership, we first have to define the value of a good salesperson by doing some simple math. According to Automotive News, last year’s average retail gross profit per new vehicle sold was just over $2,000. Let’s call it $1,500 to be on the conservative side. So, a good salesperson selling 15 cars a month at an average gross profit of $1,500 a car is generating $22,500 in gross profit a month for your dealership, or $270,000 a year.

But that’s really not their true value, and this is why…

A salesperson selling 15 new cars a month equates to 180 customers a year. Then you have to factor in the lifecycle of the vehicle and the potential service revenue associated. Let’s say out of those 180 customers, half of them serviced with you. And, of those 90, each returned for service five times over the car’s lifespan. That’s a total of 450 service visits. According to Urban Science, the cost of an average service RO is $128.88. Do the math, then add it to the gross profit and you get $327,996. (My math is below for anyone in question).

·      450 Service Visits x $128.88/RO = $57,996 + $270,000 = $327,996

So in reality, for a year’s worth of customers, we’re talking a value of over $325,000.

That number sets the stage for what a bad salesperson could be costing you – because you can apply the same logic to 15 lost sales, or defections to competing dealers. If you have someone you think is one of your top performers selling 15 cars a month, but they lost 20 quality opportunities, that’s the equivalent of $30,000 a month, or $360,000 a year in LOST profit. Are you willing to lose a third of a million dollars from employing just one faulty salesperson?

If that cost isn’t enough for concern, there’s also the fact that there could be multiple people under your rooftop disguised as your “best” performers. But when you overlay all the opportunities they touched that we know defected – or purchased from a competitor – on top of what they sold, the story shifts and their actual sales effectiveness comes into focus.

The takeaway here is it’s not just about the 20 cars you could have sold. It’s about the dollars attached to those sales and the potential future profit in service revenue and repeat buyers. We all know the closing ratio on a customer is higher if they’ve already purchased from you. Selling a second and third car to someone who already knows and trusts you is a lot easier than selling the first. It becomes easy to watch the total worth of a single good salesperson exponentially expand when you know their number of closed opportunities consistently exceeds what they’re losing – but you need that defection data to get the REAL story.

If Your CRM Could Talk…How to Expose Your “True” Top Salespeople

| by David Metter

One of the only remaining constants in the car business is an overwhelming surplus of opinions. Unfortunately for Dealers, it’s almost impossible to silence the constant stream of opinion being pitched in their direction at all times – unless, of course, they choose to operate based on what they know. The beautiful thing about science is that it turns the volume of opinion down so much we can no longer hear its intrusive racket. What we’ve come to find is that the opinions within so many facets of a dealership’s sales process can be overpowered and replaced by science, ultimately resulting in Dealers selling more cars, operating more efficiently and employing better salespeople for a longer period of time. 

Before we had the type of data we have now, we could look at all the opportunities in our CRM, whether they were Internet leads, phone calls or ups on the showroom floor, and do sales match on those opportunities using registration data. The problem with that however, is that registration data is 45 days old and CRM data can be one-dimensional. Meaning, we could see how many opportunities we lost and what they ended up buying, but we had no insight as to where they bought or which salesperson touched the opportunity before they walked out and bought from a competitor…until now.

What’s been fascinating to watch develop over the last couple of years is the ability we now have to look at data in different ways than we’ve ever have before – and one of those ways is at the salesperson level. In the past, salespeople have been judged solely by how many sales they closed out of the opportunities they had in the CRM. So essentially, we could see their closing ratio under a one-dimensional view. But we couldn’t see what they were losing. Today on the other hand, due to innovations in what we can do with a Dealer’s CRM data, we get a much more accurate, three-dimensional view of how our salespeople are truly performing based on the complete picture.

We know not just how many cars each of our people sold, but how many leads they touched that walked out and bought from a competing dealership. And we know if those defections bought from a dealer within the same brand or a competitive brand. We can also dig even deeper into the quality of the leads they’re working to gauge the true performance of your lead providers. Couple that with the performance of your salespeople, and that’s when data viewed through a scientific lens becomes incredibly powerful and prescriptive. That’s when you can start making improvements and executing more efficiently based on what you know, rather than opinion.

When a great salesperson’s defections are almost pacing what they sold, Dealers can see right away when one of their “best” salespeople is actually losing way more than they’re winning, or burning through opportunities. By layering in this defection data on top of the sales data, you can see the true success and failure of each individual player on your team. CRM data is so important, but it’s not three-dimensional in the sense that you can’t see lost opportunities or defections on top of closed sales. Having this information gives you the actual true effectiveness of each one of your salespeople.

Additionally, if one salesperson has significantly fewer opportunities but closes more sales than they lose, that all plays into the overall methodology of how effective they are. It’s just like in baseball when you have a 300 hitter, but he only gets 100 at-bats. He’s not getting regular daily playing time – but this guy is a 300 hitter! So, he should be getting more opportunities up at the plate. Same thing applies to salespeople that deserve to get more opportunities based on their true performance.

We can also track their performance or “batting average” over time to see if it improves or declines. Or, you can test to see if an individual’s batting average changes based on the number of opportunities assigned to them. Whether it does or it doesn’t, the important thing is we now have the necessary information to diagnose where our blind spots are along with a science-based prescription on how to operate more efficiently. Oh – and the best part? Dealers can rest easy knowing they can make decisions and take immediate action based on fact alone.