PAGE 2 PAGE 3 PAGE 4 PAGE 6 TIME TO EMBRACE TECHNOLOGY The importance of embracing technology is critical to defining success. KEY INDUSTRY INDICATORS Check out how your business compares to these best practice norms. October 2015 Auto Retail Best Practices from Across the Globe DEVELOPING A COMPETENCY FRAMEWORK Understand how a competency framework provides a formal structure to measure current performance against standard role competencies. AUTOMOTIVE INDUSTRY’S DISRUPTIVE TRENDS Read why there is a lot more to auto industry disruption than meets the eye. INDEX Editorial ............................................................... 2 Key Industry Indicators ........................................ 3 Automove Industry’s Disrupve Trends ........... 4 Developing a Competency Framework .............. 6 Leading with the 8 Leadership Spheres.............. 8 The Psychology of Online Response ................... 10 Dealer Interviews ................................................ 13 Changing Tradions in the Middle East .............. 16
Transcript
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TIME TO EMBRACE TECHNOLOGYThe importance of embracing technology is critical to defining success.
KEY INDUSTRY INDICATORSCheck out how your business compares to these best practice norms.
October 2015
Auto Retail Best Practices from Across the Globe
DEVELOPING A COMPETENCY FRAMEWORKUnderstand how a competency framework provides a formal structure to measure current performance against standard role competencies.
AUTOMOTIVE INDUSTRY’S DISRUPTIVE TRENDSRead why there is a lot more to auto industry disruption than meets the eye.
Changing Traditions in the Middle East ..............16
EDITORIAL
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GLOBAL EDITION BENCHMARKER02 OCT 2015
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As I meet our valued clients across the Sewells Group footprint, I frequently hear a resounding theme: “technology is changing our business at a rapid pace and we are not sure that we are making the best use of the technology available to us as yet”. There is no simple answer to this. We need to face up to the fact that consumer behaviour is changing and the digital environment is playing a major role in that and the real change is yet to come.
At Sewells Group, we strongly believe that embracing technology is a critical element of defining success in the automotive retail space. Internet usage and Interactive technologies continues to evolve at a rapid pace, and our customers who are benchmark leaders in auto retail are actively adopting these new technologies as a game changer, in both developing and retaining their dealership teams as well as in the customer interaction process.
“TECHNOLOGY IS CHANGING OUR BUSINESS AT A RAPID PACE AND WE ARE NOT SURE THAT WE ARE MAKING THE BEST USE OF THE TECHNOLOGY AVAILABLE TO US AS YET.”
Continuing our discussion on technology, this issue of Benchmarker brings two insightful articles on technology and the potential disruption in the auto Industry. These articles are well complemented by another two articles on people and leadership. As always we bring to you our regular update on Best Practice Performance Indicators from markets that we operate in. Finally there are two dealer interviews that you will definitely find insightful.
“WE AT SEWELLS GROUP STRONGLY BELIEVE THAT EMBRACING TECHNOLOGY IS A CRITICAL ELEMENT OF DEFINING SUCCESS IN THE AUTOMOTIVE RETAIL SPACE.”
Benchmarker reaches to a diverse audience across auto industry with their common interest being “auto retail”. We would like to keep making this publication more and more insightful and enjoyable for our readers. Do share your feedback with us and write to us if you are interested in contributing to the publication.
TIME TO EMBRACE TECHNOLOGY
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Michael BonehamGroup Executive Chairman
Michael chairs the Executive Management Board and works with the leadership team of Sewells Group to
guide them on strategic issues of the business and also engages with key clients. He is a senior auto
industry leader and has worked in multiple leadership roles with Ford Motor Company. [email protected]
GLOBAL EDITION BENCHMARKER03
24%
33%
30%
20%
25%
23%
PROFIT BEFORE TAX AS A PERCENTAGE OF TOTAL DEALERSHIP GROSS PROFIT (RETAINED)
VARIABLE OPS / FIXED OPS / F&I% of Dealership Fixed Overheads Covered by Departmental Gross Profit Contribution
TOTAL DEALERSHIP GROSS PROFIT AS A PERCENTAGE OF SALES (MIX)
16% 14%
8%
13%
11%15%
NEW ZEALANDROS: 3.2%ROA: 18.4%
AUSTRALIAROS: 4.0%ROA: 28.4%
ASEANROS: 2.6%ROA: 8.8%
CHINAROS: 2.4%ROA: 16.6%
INDIAROS: 3.6%ROA: 18.8%
SOUTH AFRICAROS: 3.6%ROA: 30.9%
STH AFRICA INDIA CHINA ASEAN AUST NZ
0
60
40
20
80
100
ASSET TURNS (ACTIVITY)
STH AFRICA INDIA CHINA ASEAN AUST NZ
8.6
5.19
6.94
3.4
7.1
5.72
10
8
6
4
2
SOUTH AFRICA
INDIA
CHINA
ASEAN
AUSTRALIA
NEW ZEALAND
55% 54% 54% 55%
65%
10%
58%
24%
49%44%
62% 62%
39%
26%
18% 18%22%
79%
KEY INDUSTRY INDICATORSTHIS EXCLUSIVELY COMPILED TABLE PRESENTS THE KEY PERFORMANCE INDICATORS FOR FRANCHISED MOTOR DEALERS IN THE LISTED COUNTRIES.These have been assembled by the Sewells Group operations in the listed countries and represent current ‘best practice’ norms in these markets. Each item is an independent key indicator.
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OCT 2015
INSIGHT
GLOBAL EDITION BENCHMARKER04
Google search “Disruption in the Auto Industry” and you can access hundreds of blog posts, news items, research reports, statements, claims and innuendos on how the auto industry is about to be disrupted. People may have divergent views on the type and pace of this disruption depending on which side of the fence they are, but everyone seems to agree that significant disruption is in the offing.
Some in Detroit believe that a lot of the disruption talk is Silicon Valley trying to spread Fear, Uncertainty and Doubt (FUD), while the valley folks see this as a natural extension of what they have been doing to other industries. People in Europe also have two camps like the US, and then there are those in Japan who have their own convictions about the future, and are quietly but boldly busy creating what they believe the future will be. Finally, there are businesses in China raising millions of dollars at unbelievable valuations with a promise to disrupt the automotive industry.
Consumers, especially the younger ones, are excited about the future regardless. They have one more topic to discuss and follow through
the new media. They are excited about what mobile phones and social media have done to their lives. Steve Jobs and Elon Musk are the Gods of their generation, so disruption is akin to a religious belief for them. They are certainly looking forward to it.
“MY ATTEMPT HERE IS MERELY TO UNBUNDLE WHAT WE ARE SEEING AROUND US TODAY AND ASK DEEPER QUESTIONS.”
If you are one of those who want to dig a little deeper into the talk of disruption and are looking to go beyond the fashionable discussions, you might want to think about following three questions. However, my disclaimer is that I do not claim to forecast the future. I am in fact a proponent of Nassim Nicholas Taleb’s Black Swan Theory, which says that you really cannot and should not predict the future. My attempt here is merely to unbundle what we are seeing around us today and ask deeper questions.
AUTOMOTIVE INDUSTRY’SDISRUPTIVE TRENDSBEYOND THE OBVIOUS
Manish K JarGroup COO
Manish oversees Sewells Group operations across the globe. He also engages with
strategic clients. His areas of interest within auto retail domain are Network Strategy
With Tesla’s success, and the ongoing drop in battery prices along with continued government support, many of us seem to have concluded that electric cars are the future. Whether they are or not, only time will tell. However, there are some related developments that perhaps offer bigger and more meaningful opportunities for the car of the future. You might know that Tesla already pushes software updates to their cars like Google does to mobile phones. These updates now, and more so in the near future, will have the capability of upgrading or enhancing the features of the car. This simple rethink on the architecture of the car and opportunity to connect it with its ecosystem has some far-reaching implications on how we think about cars, their design and their usage. A software, sensor-optimised, and processor controlled and connected car might also change the way we think about manufacturing, selling and servicing cars today. The current manufacturing ecosystem of the auto industry, which is a super-efficient network of operators that collaborate to deliver real value to the customers, is controlled by the auto brands that assemble the hardware and do not necessarily make the software. This ecosystem, and the interlinkages and dependencies within it, so far have been and continue to be the auto industry’s biggest defence against sudden disruption. Therefore, the real disruption might be caused at the level of the value chain, which may be possible because of the changed architecture of the car. This paradigm change is in fact an opportunity for the auto makers, as it might assist them in reinventing their business model and moving to a more efficient one. So, you should neither be surprised nor consider this as tokenism if Ford and Mercedes have gone and set up shops in Silicon Valley.
If we look further beyond the electric car, the Japanese are currently focused on fast developing and commercialising Hydrogen Fuel Cell Technology (HFC), which is a functionally superior rival to the Electric Car Technology. HFC is considered to be a genuinely eco-friendly technology. Some may argue that in an electric car, you do not really reduce the carbon consumption - it’s just that the electric power plants burn coal instead of a car burning fossil fuel (at least today, which might change as we develop more renewable-based power plants). There is also the talk of rapid advances in solar technology. Futurist Vivek Wadhwa suggests in his Washington Post blog that in 15 years, we may have most of our energy needs fulfilled by solar energy. Well, whichever is the popular prime mover technology of the future, it is the new efficient architecture of the car where the new opportunities and threats lie. This kind of architecture can also radically transform the experience of owning and maintaining a car (if consumers still choose to own cars). And all of this only to realign the existing relationships and interdependencies of the current ecosystem, such as the consumer’s dependence on the car brand and its dealer, and a component supplier’s dependence on the car brand, etc. To summarise, it’s the changing architecture of the car and resultant impact on the value chain of the auto industry that presents bigger opportunities and threats for players both inside and outside the auto industry, and not the electric car technology itself.
MOBILITY SERVICE: COMMODITISED OR BRANDED?
Car sharing is on and it’s growing. Outsiders to the auto industry may have started it, but auto manufacturers like BMW, Volkswagen, Ford and Mercedes are already on it and are trying to understand what it means for them. So, when people talk about car sharing and a little
further in the future, about autonomous driving, the logical extension is to consider a change in the notion of car ownership. Consumers may choose not to own cars, but rather subscribe to a mobility service or to more than one mobility service. The option seems real and it’s already happening, and the debate is not about the acceptance of car sharing or the arrival of a viable full autonomous driving technology in the next ten years. Everyone, including the car manufacturers, is ready to jump on the bandwagon. The real question then is that if consumers do choose to go for mobility services as a mainstream option, what will drive their decisions? Will there be a role for a service brand, or will it all be commoditised? Commoditised offerings threaten to disrupt the auto industry more than anything else. So will there be scope for branded offerings for mobility service and an opportunity for the car makers in that space? It perhaps depends more on the market players than the consumers. Consumers are always willing to consider an offer, branded or commoditised, as long as it delivers value. Within the mobility service market, all the players - existing or new ones, from the auto industry or from outside the auto industry - may have an opportunity to build the right proposition for the consumer and benefit from it.
DESIGNER, MANUFACTURER, SOFTWARE MAKER OR THE BRAND: WHO WILL OWN THE CUSTOMER RELATIONSHIP?
The current value chain of THE auto industry and the new economy companies (supposed disrupters) like Google and Apple are different. Auto brands today design, assemble and market their products and own the customer relationships. Google only makes Android software, but it would not be an exaggeration to say that it still owns the relationship with mobile phone customers in more ways than the hardware makers. Apple designs its hardware and software, but contract-manufacturers own the customer relationships. Tesla, which is a Silicon Valley company, actually chose to have its own assembly plant, causing it to be more like a car maker and unlike its Silicon Valley cousins. It also owns the customer relationship. So, beyond a point, it’s really about ownership of the customer relationships. The question is that in the case of the car of the future or mobility service of the future, who will own the customer relationship? If the Teslas of the future don’t need drivers to drive them and the consumers only want to buy a mobility service, will they still prefer the Tesla company and brand? And if they did, will Tesla continue to operate the current assembly line? Mercedes, Ford, GM and all other players in the auto industry are perhaps all asking the same question. Add to that the fact that the manufacturing itself is about to be disrupted with the arrival of 3D printers, robots and connected machines, and it’s safe to predict that a disruption in manufacturing may be a potential disruption for all alike, legacy car makers and the new car makers. If Apple did choose to get into the car or mobility business, what exactly would its offer be? The key question therefore would be: who owns the customer relationship and why? Winners of the race would have answered that question better than others.
In conclusion, there is a lot more to auto industry disruption than meets the eye. It’s a large global industry with complex linkages that drive unparalleled amounts of cost efficiencies. It seems obvious today that a disruption to the hundred-year-old business model of this industry is inevitable. However, the winners of this disruption race will be those who will go beyond the obvious, ask deeper questions and have the ability to find better answers.
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OCT 2015
GLOBAL EDITION BENCHMARKER06
While the retail automotive industry relies heavily on product quality, pricing and availability, it is impossible to ignore the impact of the human factors. OEMs require their dealership networks to grow and prosper in order to build the brand and create stronger market demand. Dealers within the network require skilled employees who are able to engage with customers and provide professional service. Employees want to take pride in their work, be appreciated and progress in their chosen profession.
Aligning these motives is an important consideration and one which is increasingly addressed through the introduction of a Competency Framework.
A Competency Framework provides a formal structure to measure current performance against standard role competencies across a network or dealership. If designed, communicated and used correctly,
a Competency Framework can guide dealerships in managing a range of staff performance functions, such as training and development, recruitment, performance management and succession planning.
Typically, the ownership and development of a Competency Framework in automotive retail rests with the OEM; however, there is increasing evidence of its applicability for dealer groups.
“A COMPETENCY FRAMEWORK PROVIDES A FORMAL STRUCTURE TO MEASURE CURRENT PERFORMANCE AGAINST STANDARD ROLE COMPETENCIES ACROSS A NETWORK OR DEALERSHIP.”
DEVELOPING ACOMPETENCY FRAMEWORKFOR THE DEALERSHIP
PEOPLE DEVELOPMENT
Carmel AckerlyGroup Head - People SolutionsCarmel leads the People Solutions Practice for
Sewells Group. An L&D expert with management background, Carmel is responsible to develop solutions to address the people development
Career pathways that are embedded in a Competency Framework aligned to current work practices serve a multiple of purposes:
For employees enables them to see a clear progression path from induction to competent professional. Provides recognition of competence and personal development.
For dealerships enables the development of their employees to benefit business performance, provides for succession planning and business stability.
For the OEM / Group enables benchmarking and standards across dealers while delivering on their brand promise to customers.
The most defined and well-known Competency Framework in automotive retail is the technical training apprenticeship. This provides the competencies required by technicians at each level of their career, and a robust framework for their development. There are however far broader applications across the dealership.
Competency Frameworks are built by defining competencies (Skills, Knowledge, and required Behaviours) for each level in each business area. By considering the breadth & depth of the required competency for each job role, logical career paths that will be recognised and accepted across the network can be created.
A Competency Framework should be current and aligned to a specific role in the dealership. Each module in the Competency Framework should include Learning Outcomes which define the competencies and serve as statements of required performance for that role. Thus, they form the basis of many people strategies within a dealership, including:
RECRUITMENT
Competency Frameworks are designed to identify the current competencies for each role. These can become the key selection criteria for evaluating prospective employees. Prior to going to market, dealers should revisit the Competency Framework to re-focus the required competencies for each role. Otherwise, they risk recruiting the person that just left them, which may be good or potentially a disaster for the business.
TRAINING
The competency framework should help inform the training curriculum and content for each role. By focusing training efforts on the skills, knowledge and behaviours sought, the best developmental outcome can be achieved.
PERFORMANCE CONVERSATIONS
Senior dealer managers are often far removed from the staff doing the task, yet still have to make judgments on performance and provide constructive feedback to allow staff to develop. By using the Competency Framework and the embedded learning outcomes as a measurement for an acceptable standard of performance, they are able to observe staff and make realistic assessments of any performance gaps (positive or negative) that might exist. The Competency Framework also provides a common and shared language on what acceptable performance means at all levels of the dealership.
SUCCESSION PLANNING
With a scarce talent pool, it is better to develop tomorrow’s managers from within the dealership. A Competency Framework can serve as a staff development tool to nurture the next generation of leaders. By challenging staff to achieve pre-defined competency levels, and then encouraging them to step up to new levels, the dealership can have skilled staff ready to assume leadership roles when they become available. If the dealership fails to develop their staff, they risk having to promote inexperienced staff who don’t have the required skills to lead, and the business may suffer as a result.
Finally, bear in mind that job roles evolve over time as the work environment changes. Competency Frameworks should be revisited with every major workplace change or at least every five years. The value of a Competence Framework will ultimately depend on its relevance in the workplace.
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COMPETENCY FRAMEWORK
MISSION/STRATEGY
RESULTS/OUTCOMES
Performance Review(TOPS)
Learning and Professional
Development
Career and Talent
Management
Reward and Recognition
Recruitment and Selection
PerformanceManagement
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LEADERSHIP DEVELOPMENT
GLOBAL EDITION BENCHMARKER08
In 2011 I published the findings of my doctoral research titled “The lived experience of the strategic leader: what effective CEOs do, how they do it and an exploration into how they think about it”. Since then, as a practitioner-researcher I have been deeply concerned about translating my academic insights into a practical tool that leaders of automotive retail organisations and manufacturer network development teams can utilise to measurably improve the financial performance of dealerships.
My research findings demonstrated that effective strategic leaders in the automotive retail industry, who all had a clearly defined Personal Leadership Philosophy, were also found to:
1. Have mastery over their financial and business performance metrics.
2. Have mastery over their internal emotional states and are the world’s best experts on how to get the best performance out of themselves.
3. Have the ability to inspire optimum personal productivity and efficiency from the top management team and staff.
4. Have the ability to create high-performance selling teams and defined customer signature experiences.
5. Have a clear process of engaging and inspiring stakeholders around their vision.
6. Have the ability to mentally process the world in a bold, positive, possibility orientated, pushing-the-boundaries way.
7. Have mastery over the use of language (stories, metaphors, symbols, words) to create meaning, transformation and influence optimum performance in the organization.
8. Have mastery over the strategy formulation and implementation process, which is metaphorically similar to the “16 steps of spider web construction”.
The Personal Leadership Philosophy is the absolute foundation of effective strategic leadership capability. A detailed study of each of its elements demonstrates the complexity and the depth required to formulate one with clarity:• a deep understanding of the self • a determined expression of the true self • the choice to choose to stay the course (longevity) in an industry • developing day by day an intuitive ‘gut-feel’ leadership, a process
that takes time • making time for personal involvement in the operational side of
the business while at the same time responsibly empowering direct reports • developing a genuine passion for people
• developing a deep understanding of people • implementing performance-driven management and
remuneration systems • maintaining a thoroughly detailed focus on business processes • implementing measurements and metrics to aid in business
management • develop personal self-discipline • maintaining high personal energy levels • implementing relentless formal and informal communication
across the board • persistently and relentlessly ensuring a prioritised focus on both
internal and external customerss
I have found, from real life experience with my clients, that the 8 Leadership Spheres are easy to articulate in conversational dialogue but very difficult for them to work with when they return to the heat of dealership operations. In my quest to simplify their use I developed the 5 Value Model. The five values stem from my views of the strategic imperatives facing an automotive retail strategic leader, which are: to create sustainable value for all stakeholders and capital-invested shareholders (strategic intent); to constantly measure the impact of the value created (financial model); to constantly create new value (business process model); to sustain the value created (leadership development model); and ultimately, to deliver the created value (customer experience model): these are the 5 values in the model.
LEADING WITH THE8 LEADERSHIP SPHERESAND THE 5 VALUE MODEL
Dr. George NyabadzaGeorge is an auto retail expert and a leadership
coach. His areas of interest include leadership development and retail profitability.
Each of the 8 Leadership Spheres can be linked to one of the value models as follows:
Effective Strategic Leaders, who all had a clearly defined Personal Leadership Philosophy (The Leadership Development Model), were also found to:
1. Have mastery over their financial (The Financial Model) and business performance metrics (The Business Process Model).
2. Have mastery over their internal emotional states and are the world’s best experts on how to get the best performance out of themselves (The Leadership Development Model).
3. Have the ability to inspire optimum personal productivity and efficiency from the top management team and staff (The Leadership Development Model).
4. Have the ability to create high-performance selling teams and defined customer signature experiences (The Customer Experience Model & The Business Process Model).
5. Have a clear process of engaging and inspiring stakeholders around their vision (The Strategic Intent/ Vision Model).
6. Have the ability to mentally process the world in a bold, positive, possibility orientated, pushing-the-boundaries way (The Leadership Development Model).
7. Have mastery over the use of language (stories, metaphors, symbols, words) to create meaning, transformation and influence optimum performance in the organization (The Leadership Development Model/ The Customer Experience Model).
8. Have mastery over the strategy formulation and implementation process, which is metaphorically similar to the “16 steps of spider web construction” (the entire 5 Value Model).
In my view, any automotive retail strategic leader should be able to articulate the construct of his business using the 5 Value Model. The ability to do this successfully provides a foundation for organizational performance and is the key to sustained excellence.
Finally, I would like to conclude this article by stating that a reasonable grasp of the 5 Value Model empowers you to do things differently in your organization and even your own life; perhaps we shall meet in a consulting or coaching intervention, but if we don’t, my last recommendation, as a coach, is that you develop your own personal leadership philosophy as well as encourage everyone around you to do the same. This is how you create ever-increasing value for your shareholders.
THE STRATEGICINTENT/VISION
MODEL
The Customer Experience
Model
The Financial Model
The Leadership
Development Model
The Business Process Model
ILLUSTRATION OFTHE 5 VALUE MODEL
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GLOBAL EDITION BENCHMARKER10
Research studies are increasingly showing that buyers are turning to the internet when purchasing or considering a vehicle. In fact, Google’s latest Auto Shopper study claims that 95 percent of vehicle shoppers use digital channels during their research process, while a recent survey by Autotrader.com found that buyers spend almost 75 percent of their time online while they make their purchasing decision.
Marketers have invested considerable time trying to understand how consumers make decisions. Are they driven by price, location, advocacy or choice? The list of influencing factors is endless. The digital world provides an interesting context in which to study this behaviour. For starters, it is infinitely measurable. We are able to track clicks, time spent, referrals and actual consumption. And although we aren’t yet able to necessarily track all the way to a bricks and mortar purchase, we are able to determine what drives them to navigate or respond in a certain way.
The advent of A/B split testing, i.e. comparing two versions of a web page to see which one gets a better response, has provided a tangible way of tracking online behaviour. What’s emerging is a clear set of psychological triggers which dealers and OEMs can use to influence consumer behaviour. So, what are the main psychological influencers that drive online response?
“MARKETERS HAVE INVESTED CONSIDERABLE TIME TRYING TO UNDERSTAND HOW CONSUMERS MAKE DECISIONS. ARE THEY DRIVEN BY PRICE, LOCATION, ADVOCACY OR CHOICE?”
THE PSYCHOLOGY OF ONLINE RESPONSE
DIGITAL
Greg StrydomGroup Head -
Solutions and InnovationGreg leads a global team of subject
matter experts developing solutions, approaches and technology to address
the opportunities and challenges in the auto retail domain. Greg also leads the
Performance Consulting Practice and works closely with the company’s strategic clients.
The fear of losing out, or the notion of scarcity has proven to be a major stimulus for consumers and one which retailers around the world have capitalised on. Major online vendors such as Amazon, eBay and Expedia consistently use scarcity to drive decision-making, playing with factors such as time limits, stock availability and waiting lists.
This concept has strong appeal for automotive retail with dealerships who have experimented with the scarcity message having success, particularly with used vehicles and special service offers.
INFLUENCER # 2 — SOCIAL PROOF
It is human nature to be concerned with what others think. While in the past consumers relied heavily on the opinions of friends and family, increasing online connectivity has driven the voice of the masses to the fore, and consumers are listening. There are very few products and services that have not been reviewed or where customers have not expressed a point of view, and there is little doubt that social proof plays a major role in consumer decision-making across all industries.
In the automotive world, the emergence of channels such as DealerRater, Yelp, TrueLocal and Google Reviews have taken this to a new level at a brand, product, dealership and even staff level.
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*Image used for demonstration purposes only.
*Image used for demonstration purposes only.
GLOBAL EDITION BENCHMARKER12
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INFLUENCER # 4 — CONTRAST
The final psychological trigger is visual and relates to the impact of colour and contrast. While colour has been proven to elicit emotion; the concept of contrast i.e. standing out from the clutter, is effective in aiding online site navigation and encouraging consumers to progress through the sales (or research) process.
Retailers wanting consumers to take a certain action can put the odds in their favour by making sure that a single option stands out (or is contrasted) from the rest of the options that may be available.
While there are certainly other online psychological triggers, the four discussed in this article represent practical opportunities for OEMs and Dealers. As with all marketing initiatives, the real-world application and context needs to be thought through, and some experimentation should be part of the equation. The net effect however is a set of simple strategies for connecting with and influencing consumers, the benefits of which are clear.
INFLUENCER # 3 — VALUE PRICING
Price has always been an important driver of consumer behaviour. In the online environment, the way in which price is presented has a particularly strong impact. References to ‘was’ and ‘is’ pricing and overt disclosure of how much consumers can save by buying or
“clicking now” serve as important benefit-based cues, and ones which are becoming increasingly prominent. This thinking extends right down to the font used, with savings presented in larger type than actual payments, serving to reinforce the notion of ‘what’s in it for me’.
*Image used for demonstration purposes only.
*Image used for demonstration purposes only.
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DEALER INTERVIEW
GLOBAL EDITION BENCHMARKER13
In this issue, we speak with Managing Director Karl Dahl about the practical benefits he achieved at his dealerships by being a part of the Dealer Performance Groups in South Africa. Karl is an active participant in Sewells Performance Groups and firmly believes that comparison with industry benchmarks enables a clearer focus on improving both efficiency and profitability.
What value has the in-dealer performance group provided to you?
The regular comparison of our performance against benchmarks has enabled us to identify the opportunities where we can focus to improve our own efficiencies and profitability.
How have your dealership teams benefitted?
Our dealership teams now have a greater understanding of how the business works and what can be achieved, which is a great recipe for success. The dealer principal and departmental managers from each dealership participated in the sessions. This ensures that management is accountable for performance and other managers are able to productively participate in the conversation around that performance. It’s vastly different to a traditional management meeting, because the influence of an expert external facilitator ensures that every aspect of dealer operations is considered in an open and unbiased manner.
What specific action have you required from your dealer teams after each session?
Each manager must commit to addressing two or three opportunities, which are documented, and they must report on progress at the next session.
What part of the in-dealer performance group has been the most valuable?
The insights, expert opinion and fresh perspectives that an external expert can bring to the conversation on internal operations of the dealership, are thought provoking and stimulating.
What advice would you give someone who is considering participating in the in dealer
performance group process?
Don’t spend time trying to question or justify the numbers. Make a plan to fix it, then commit to the plan and support your management and staff to achieve their goals.
LEVERAGING DEALER PERFORMANCE GROUPS
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Q
Q
Q
Q
Q
Paarlberg BMW – from left to right: O’Brien Patience, Petri Cronje, Theo van den Berg, Karl Dahl, Sonja Rheeder, Linda Otto, Eugene Morkel
Karl DahlManaging Director
Paarlberg BMW and Worcester BMWPaarl, South Africa
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GLOBAL EDITION BENCHMARKER14
An experienced manager and leader, Anshul is Co-Director of the largest Quality Care, Accredited Ford dealership in West Bengal. In this interview, Anshul speaks about the measures they took at their dealership to face the changing dynamics of the Indian automotive retail industry.
Your family has been in the automobile business for many decades. How have you seen this industry
changing in recent times?
Broadly speaking, I believe that the automotive industry has moved from a seller’s market to a buyer’s market. In the passenger car industry today, the dynamics in the rural markets differ from that of the urban, but the gap is gradually reducing and fast changing with a growing base of increasingly savvy customers. This has made customers more sensitive towards the brand and service support. A strong service network and reach is imperative in today’s market.
Customers are looking for a one-point contact, with all facilities available under one roof. In India, it is not only the product that matters. Buyers are interested in brand and human relationships, therefore building trust is an important factor within the sales process. With a growth in infrastructure and road connectivity, travel by cars will further increase, leading to an increasing demand for cost-economical sedans and midrange SUVs. There is also a growing demand for automatic transmission in diesel as well as petrol in the urban markets.
What are some of the key challenges in managing a business in India at the moment?
I believe that an important issue is dealer viability: in recent times margins have been getting squeezed due to competition, and infrastructure and operating costs have surged. The key challenge here is to have the right ratio between sales revenue and service revenue and gross revenue. It is vital to monitor expenses on a regular basis based on your quarterly budgeting system and variance analysis.
Rotation of funds and stock ageing should be checked every 45 days. There should also be a large emphasis on retaining skilled and highly-trained manpower. Enquiry management needs to be strongly system driven, as margin for error is negligible due to competition and customer awareness.
How was your business performance over the last 12 months?
The overall business graph has been relatively flat in the last 12 months. Our focus has been on making the experience of purchasing a car easy and transparent to the customer. We assist the customers in choosing the right product and finance options as per their needs and lifestyle. We have mobile vans that act as mobile workshops, providing service to customers who live far from the facility or carrying out repairs that can be conducted at home.
These help promote the dealership brand and generate referrals, which is a strong source for conversion. We strongly target expense controlling to manage the bottom line. A few initiatives we have taken are reducing used car inventory to strictly 25 days, offering discounts and incentives in ageing spare parts and accessories, reducing wastage in our paint shop and recycling paper. Also, employing a hawk-eyed focus on all allied revenues has helped increase some margin.
In your opinion, what role does measurability and performance tracking play in controlling the
operations of the dealership?
Measurability and performance tracking is extremely important at dealerships and every department needs to be target and benchmark orientated. Inquiry, booking and retail achievements are monitored daily for sales. Evaluation and conversion ratio of used cars is tracked. Strong focus on allied business like finance, insurance, warranty,
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Anshul HimatsingkaDirector
Ganges FordWest Bengal, India
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GLOBAL EDITION BENCHMARKER15
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accessories and value added services really adds to the bottom line. A variety of parameters drive the workshop, like efficiency and productivity of technicians to ABC analysis by the spare parts department.
All of these checks need to be entwined with a robust incentive structure for desirable results from everyone in the organization. Contribution per employee, department wise is a strong tool for managers and will allow increased efficiency with a leaner organization. Lastly, as cash flow is high with automotive businesses, it is very easy to lose track of employment of funds; hence, alignment with the accounts department with cash flow statements and target reduction in monthly variable/semi-variable expense is a crucial measurability index.
“MEASURABILITY AND PERFORMANCE TRACKING IS EXTREMELY IMPORTANT AT DEALERSHIPS AND EVERY DEPARTMENT NEEDS TO BE TARGET AND BENCHMARK ORIENTATED”
What are some tip and tricks you have regarding manpower?
We have invested in an in-house training centre, which focuses on enhancing expertise for mechanical and body-shop technicians. Our managers are trained on profitability and customer service.
Performance-based appraisal and HR policies are focused towards increasing retention levels. A top-down approach to a simple short-term goal with a long-term vision is vital. It needs to be shared and believed by everybody. We also have various employee activities such as quarterly recognition programs, picnics, and team engagement and building exercises.
How do you feel technology benefits your business?
Digital marketing is becoming an important medium for communication. OLX is being used for used car sales and purchase rather than investing in periodicals. We use digital banners on popular sites like FlipKart and MoneyControl, which helps the manufacturing branch with great reach and results. We are using an online payment gateway via mobile banking, which allows customers to pay for products including accessories or warranties via credit cards. Our website also allows our dealerships to quickly and effectively deal with complaints. All these help increase service levels.
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OCT 2015
GLOBAL EDITION BENCHMARKER16
CHANGING TRADITIONSIN THE MIDDLE EAST It was twelve years ago that I first got involved in assisting a major distributor in Saudi Arabia to align with global standards of performance in auto retail. I remember well back then how veiled the financial data of the company was and how challenging it was to extract the right information or even find the right person to answer any appropriate financial or performance related questions.
At the time, I was assured that this ‘veil of secrecy’ was common practice across the Middle East, where the Arab tendency was to manage the business from the bank account - you know, “cash positive all good” kind of thinking. Under this culture, the Chief Accountant was typically working in a hidden back-office concealed far away from any operational activities, and enjoying more visits and attention from the owners than any of the Branch Managers. There was little link between financial results and operational strategies or decisions and consequently, flailing profits were addressed by simply implementing “sell more cars” type solutions.
In addition, almost all businesses across the Middle East and Levant regions were saturated with expatriate managers barking out instructions to local employees who were told what to do without necessarily being told why… and the thinking in the business resided with very few; surely an unsustainable practice.
“THERE WERE NO SCIENTIFICALLY DERIVED INDUSTRY BENCHMARKS, AND AGE-OLD FACTORY GUIDELINES WERE ALL THEY HAD TO GO BY IN MAKING KEY DECISIONS.”
I remember delving into what key metrics and decisions were considered important by the owners and struggling to get beyond unit sales targets in the answers given. Intriguingly, the volumes delivered by the distributor who had engaged my services were astoundingly high, whilst the ‘closed shop’ profits of the organisation were an unknown and probably well below true potential, simply
DISCUSSION
Paddy O’BrienClient Services Director
Paddy engages with strategic clients of Sewells Group in the area of Dealership
Profitability and Capability Development. He is a renowned global expert in the area of Dealership Profitability and over several
decades, has helped hundreds of dealers achieve outstanding business results.
because decisions were being made ‘in the dark’. There were no scientifically derived industry benchmarks, and age-old factory guidelines were all they had to go by in making key decisions.
At that time I sensed an opportunity for Sewells, but felt in a way like a ‘should I stay or should I go shoe salesman’ arriving in a predominantly bare-footed town… with the uncertainty that people might either embrace a new way of living or alternatively might ‘dig in’ and reject any fanciful modern-day enhancements. Sewells at that stage was fresh into the Asia Pacific Region, but I made up my mind that the difference we could bring to Middle Eastern operations were profound and presented a massive opportunity.
Today we are heavily invested with people and resources in that region and we are working vigorously to change the landscape towards more modern ‘world-class’ business practices, which have come about through consulting projects, study tours to more developed markets, and through training and the refinement of business processes wherever they can be influenced. I am happy to report that we have a solid grasp of the sorts of returns that can potentially be achieved in
all markets in the Middle East and relevant regions, and I have been encouraged by the willingness of Middle Eastern operators in opening their doors and their minds, as well as their financial data to be able to improve business outcomes wherever the opportunities might exist. From Saudi Arabia to Kuwait, to Lebanon or Jordan, the shift to a more open-minded embrace of ‘world-class’ practices gains momentum, and Sewells is at the forefront of making this positive change happen.
“I AM HAPPY TO REPORT THAT WE HAVE A SOLID GRASP OF THE SORTS OF RETURNS THAT CAN POTENTIALLY BE ACHIEVED IN ALL MARKETS IN THE MIDDLE EAST”
The recent example of a native Saudi Branch Manager from Dammam, who attended a development course and proceeded, in the space of one year, to improve his Return on Assets (ROA) from 11% to 48% by implementing a well-considered ‘Business Improvement Plan’, has cemented my faith that the critical factors of transparency and education of local talent holds the key.
“What Happens in Vegas,Stays in Vegas!”DON’T MISS OUT!
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