Great question with unlimited correct answers since the question is the first step to the solution! Recognizing that our present economy is unique, and that surviving to sell another day will require hard decisons to minimize exposure and preserve capital and hard assets - including but not limited to key people, is the first step. Unfortunately, the next step may still find you falling off the cliff!

Rather than recap the obvious need to focus on ROI rather than the initial expense and the importance of a P&L engineered with journal entries accountable to specific percentage guidelines to insure profitability based on department and individual accountability it is important to recognize that those wisdoms only apply if the US dollar and the basic infra-structure of our "capatilistic" society remains intact.

A simplistic example is that many GM's have "memorized" certain expense guidleines from the cheat sheets supplied by the OEM's to develop an acceptable NET ROI for the dealership but few of them recognize that if the Gross Revenue from sales and fixed operations dosen't meet certain minimums there won't be enough cash flow or revenue to maintain them. Unfortunately, you can't force the market! Advertising, for example, can be ball parked at 12-15% of Gross Income to maintain minimum market share and presence but that may swell to 30-40-or 50% if you only sell 4 new cars a month and 10 RO's per day - as some domestic dealers are now faced with.

Cuts made as a "re-action" to these new levels are not actions unto themselves and therefor they will only lead to more reactions and a downward spiral unless a longer objective and "end game" is applied now - while a dealer's minimum working capital requirements and market share responsibilities are being met. If not, the decisions may be taken out of the dealer's hands and into the OEM's who unfortunately have a different agenda in today's troubled times.

The likliehood of "hyper-inflation" and depression resulting from our "floating" dollar that is no longer supported by Gold reserves or even Military options to preserve and protect our interests suggests that our economy will be impacted by forces beyond our control. The falling price of oil hides an exposure of Russia and other oil based economies to force a conflict to restrict oil production to get the prices and their economy back on track. Recent shifts of american based corporations and their assets off shore have also left industries tied to the mainland US - like retail car dealers - on their own. Now that I have scared the heck out of you - let's answer the question posed by this article.

Expenses must be cut to preserve minimum working capital and preserve cash flow long enough to survive at least one - maybe two years - without any expectations of profit. Sorry, but you asked! Those dealers that can't survive losses for one to two years by drawing down on in-house assets - not dependent on credit lines or encumbered assets but actual available cash - are at risk of going out of business. The consolidation efforts being forced by the OEM's is a reaction - not an action - and the "trickle down" impact will force undercapitalized dealerships out of the business. If you are not currently positioned to survive 1-2 years with no profits, and if even after expense cuts your current debt service and minimum fixed and sem-variable expenses place you in a negative cash flow - then the best advice is to look to cash out now while the decision is still yours. If you are a domestic dealer seek the highest and best use for your real estate with the expectation that there is no "blue sky" left to your franchise and protect the assets that you have before they are gone.

Now, for the good news! If you have properly analyzed the ROI on every expense within their own limited areas of responsibility and you control expenses to minimize your expenses to preserve as much cash flow as possible and you are still able to maintain your debt service, staff and minimum working capital and you survive the forest fire that is about to take place then you can expect to benefit from the new growth that will surely follow. Those dealers that survive will increase their market share and when the market comes back - AND IT WILL - they will recoupe their losses ten fold. The trick is to be one of those dealers that survive!

Hi Alex,

I can see why dealers are so anxious when it comes to spending in general. I think you nailed it when you asked for thoughts and feefback on reporting, statistics and conversion
Imagine if every marketing company that pitched a dealer today was required to walk in with their written guarantee as to the results they would deliver?
It would be a different economy don't you think?
I think the spiral effect of fear and lack of advertising spending has run its course and now its time to stand up and take advantage of this market.
The current Market desperately needs leadership, courage, and most of all marketing dollars in play stiring up the buyers that are definately here today.
I own along with a partner a marketing company named Team Velocity, and As crazy as this may sound, our company is growning like never before. Its growing because we are willing to guarantee our results.

To us a written guarantee is easy, especially when you actually do something that works.

I believe all dealers begining today should require a written guarantee from all their marketing partners.
This would do 2 things, it would eliminate the pretenders and make it easier on companies like Team Velocity, that are serious about growing a dealers business.
This is the best market of all time to TAKE market share away from your competition, as most of them are asleep at the wheel waiting for a sign from above that all is well.

Thanks, Budd

Alex, thanks for the great article! You bring good points from a unique perspective.

>> Consumerism -- this is something the last few months, as the big 3 have shown their struggle more and more, has dramatically changed in our area. Consumers always have felt the buyer's market we're in; however, lately they're bolder by the minute. And when we show that we feel the same way in the showroom -- the down numbers, cutting deals to mini deals first bat, talking to customers about how bad business is, etc-- we rub that attitude off on them and it gets worse.

It's gotten worse. Truly, our numbers are very close to what they were this time last year (used cars is better). And even if yours aren't, attitude makes all the difference to how our customers react when they enter the showroom. We help them feel like they can have the whole kit-n-kaboodle when they walk in because they know dealers are struggling.

Since our numbers really aren't that bad (we've bought out a local Ford dealer in the process to help), I try to encourage everyone to talk like business is great as always! Let our customers know we're not going anywhere, and top-notch service is worth something. Of all times, anyways, we need the gross now more than ever.

I think that goes along with conversion ratios.

>> We've constantly been measuring our results, and when something doesn't perform we move the money into something else that will. The difference now is that we're not putting extra money out there to try new things.

But really, we get tight this time of year every year. Except this year we don't know if business will pick back up to where it was or not.

-- William

Happy Holidays!

Are you serious?

That is a good question on why a 2 year old would be in the car, however as common sense again, to tow a vehicle with the child in there.

Another question is, the towing company would be in trouble by law for endangering a child within that vehicle along with the parents for leaving the child in the car.

The city must need money...

I wonder if the towing company left the child in the impound yard? hmmmmmmmm.......

This story is getting a lot of attention amongst the various car enthusiast forums. I seem to be spending most of my weekends in DC these days and have heard all kinds of stories about "city officials" and their towing principles. Recently they towed a car with a 2 year old in it. Who leaves their 2 year old in a car for that long is a MAJOR QUESTION, but you'd think the person calling the tow truck or the tow truck driver would at least look through the window first.

Are we growing dumber or just benefiting from better reporting?

EEEKKKKKKK!!!

I get chills when hearing the metal and Cement blocks being rubbed togethor. Just as similiar to the Nails on a chalkboard.

If there was a police report posted in the car as they mentioned it seems like common sense would kick in for the city to read it. Duh....

I would be afraid of having that towing company pick up my vehicle if they are not taking the proper precautions to pick up the vehicle.

Have they heard of jacks and wheel dollies? Apparently not.

Even picking up repo cars we never dragged them like that. Disgusting!

I would send the city the bill...

Crazy and ridiculous..hope they got gap

Wow that's nuts

I guess this means that Mazda has to come up with a strong way of driving traffic to the dealerships sites and the dealerships should really tighten up on that. I think that it gives Mazda a chance to be innovative in their ways and open the doors to something new providing that they have someone smart enough to do it.

If Mazda dealer paying $10 a for quality lead. I was wondering how much money small indepnedent dealers are willing to pay for a lead. We are thinking about a "performance based" program for dealer due to the slow of their business. Is $2 for independent dealer sounds reasonable. Does anyone know, in this market, how much small dealers are paying for a lead? Thanks

I know that other OEMs are working on similar efforts to measure third party lead effectiveness and then use that information to make decisions about their programs, but Mazda seems to be ahead of the pack. Thanks for passing this on!

Jeff,

Not to circumvent your initial question/intent for discussion, but dealers need to own the lead rather than just provide a value. That is why I recommend GetAutoAppraise to dealerships. Aside from that, GAP allows you to admin the tool, trending with the market for values, separate truck and car, allow you to cook in coupons/incentives that are unique to the store and more.

vAuto and FirstLook seem to augment any value tool very well (as pointed out above by a number of comments) but I believe the primary purpose of your question was to look at the effectiveness of a B-to-C tool rather than B-to-B.

GetAutoAppraise has my vote. Keep up the great work on DealerRefresh.

Coming into this conversation a little late, but had to put in my 2 cents...

We started with KBB Lead Driver and switched to BB Activator about two months later. I never discuss closing ratios without knowing the scrubbing method, but we are very happy with the BB results in our stores.

Logistically, BB is superior in delivering leads to our system efficiently...i.e. New Leads and Used Leads to different inboxes...KBB did not have a way to distinguish between the two.

The BB training and follow up system is far superior, IMHO. They have visited several times, provided email templates and phone scripts and KBB provided no supprt whatsoever.

From a consumer standpoint, having a trade evaluation tool that provides immediate, automatic values is vastly superior to a "Value My Trade" form on the site...same as having real time online appointment scheduling for service is superior to having the customer send in a "I hope I can get this appointment" email and have to wait for a reply.

As to the discussion around the name recognition...our pre-owned managers use Black Book to establish trade value...having the same information online offers both relevancy and transparency - both essential building blocks of relationship selling. It matters not that the consumer is more familiar with the KBB brand name.

Thanks to all for your comments and contributions - I have several really good ideas percolating after reading the comment stream - that's why I love Dealer Refresh!

All great tools but real time trading will be the next innovation on the dealer level.

It all starts somewhere but if someone where to ask you what steam locomotive train your traveling with or did you get my Western Union telegraph...you would probably give a big huh?

I personally believe that they are both are coming to an end as lead generation applications. Cost cutting or combined attrition.

I thought I heard that KBB is going to have more current valuations available but the fact is that they are not an accurate measuring tool in real time. Nobody buys a week old paper and submits an order for a stock purchase based on those historical figures. Zero use on a dealer level breakin down the p and l of a deal because I know of none that has made a deal based solely on using KBB or like kind without checking auctions.

You have to say what they are. A "I don't want to be screwed over by the dealer" tools said the consumer to themselves. How long can that business model survive.

Also, the unfortunate thing is that a great amount of money is being structured to bail out on the manufacturer level( I support it ) but not to incubate innovation on the provider level,the dealers themselves.

The factories need to create their own system of KBB and BB in to a nationwide network to wholesale trade their own products.

I am going to end here, too many thoughts and I have to get out downtown in the Windy City to do some Christmas shopping or it's a handshake with a bow on it and I'll have some really pissed off nephews and nieces not to mention my girl.

Seasons Greetings to all and D-R.

I never really had much experience using these tools. To me it is a third party lead source. This is great supplement your leads.

Are we talking about appraisal tools or lead drivers? Used both before but you may want to check out another one by vAuto. Their Appraisal tool seems to work with an awful lot of relevant pricing data.

I've been using KBB's "Lead Driver" for almost 2 years now and have had great success with the leads it has generated and now with the "true" trade-in value's being updated weekly it has really put a qualifier on our deal process. Out here in the West, I'm not convenienced Black Book is accepted as KBB, but all in all, Lead Driver has more than paid for itself and if I had a wish to enhance the feature, it would be to have the exterior color and VIN of the trade part of the required fields.

Forgive the rant I feel coming on but at this point in the comments I think it will be relevant on several fronts.
Delivering a trade value to a customer through one of these tools is a means to an end.....the end result being to acquire contact information from someone who is very interested in purchasing a car. As Jay said earlier, it’s about establishing credibility through transparency (the new buzz word) as one who is willing to provide the information necessary to assist the customer in making a comfortable, educated decision. These tools are customizable allowing the dealership to capture as much or as little information as they desire prior to providing the value number. Some gear towards requiring as much information as possible thinking they want to acquire the "serious customer" who is willing to provide detailed information. Others, me included, lean towards requiring less information prior to delivering the value making it easier for the customer to move forward, gaining the greatest number of opportunities and letting salesmanship do the rest. After all, that is the intent of the product, not to just deliver a value, but to open the door to conversation with a new customer. The big thing to remember is although the customer has received a value that is not where you want your conversation to begin when following up by phone. If you do, the conversation will invariably end up in a discussion over what the trade allowance will be...and that's not the point. The point is to establishing trust, confidence and value with the customer...trade allowance portion of the conversation should come much later in the interaction. The objective is to sell a car, not a trade value. The conversation should begin with the benefits of purchasing through your dealership (your Value Proposition)and establishing the wants and needs of the customer with the goal of setting an appt. for the customer to visit the dealership.That’s’ where the greatest chance of success lies, not in trying yo agree over the phone what a trade may be worth.
Let me address the generic trade value form versus a "branded tool". In my experience the generic trade value form does more harm than good. If the customer perceives the value they have been given was generated by the dealership (and we all know that it never meets their expectations) they then point the finger at the dealership as the one not giving them enough for the trade. It puts the onus on the dealership as the "bad guy" and could possibly cause the customer to be defensive or even resistant to conversation. The values provided by the respected "branded" tools are independent, objective,3rd party values that take the onus off the dealership yet still begin to "mentally condition" the customer as to the real value of the vehicle. It’s much the same as what happens in the dealership. It's not the value that causes so much trouble. The value is the value (of course taking into consideration regional and resource differences).It' the presentation of the value to the customer that causes so much trouble. Think about it. In the course of our needs analysis with the customer we discover there is a trade. Once settled on a car and negotiations begin we get detailed trade information to prepare for an appraisal. (A great question to ask after acquiring the information and prior to leaving the your desk is, courtesy of Car Fax and a great word track,: “Oh...by the way ..before my manager runs a CarFax report is there anything else we should know about this vehicle”?. If there is anything else to give up they will rather than risk being embarrassed later. After being given the number by the desk it’s often presented to the customer with something like “ (Customer name ) , based on the selling price of (MSRP or retail pre-owned price here) for your new car, we’re able to allow you ( ACV here ) for your trade leaving just a difference of ( net sales price here ). This again puts the onus back on your dealership as it insinuates that your dealership has determined the trade value when in fact the value was derived by using a combination of resources rather than one person at your dealerships opinion. The insinuation may initiate a bit of an adversarial relationship. Now it’s game on and at some point someone is going to feel as if they have won and someone will feel as if they lost …not a mutually satisfying way to begin a relationship with a new customer.
As mentioned earlier, much can be done to improve the delivery of the trade value information to the customer and the “mental conditioning” all starts as soon as you find the customer is interested in trading in their current vehicle.
I learned these word tracks years ago from Tom Vann of Team Hillsdale Chrysler and have seen them work time and time again to produce great results.
Try this, it works:
Upon becoming aware that there will be a trade …
“(Customer name), we handle trades a bit differently here to allow you the greatest trade allowance. I think you’ll like it. Would you mind if I shared it with you?
“To fully grasp the market value of any vehicle at any given time we rely on 4-5 different sources, one of them being you since you are most familiar. Since I find most of my customers focus is to save time and make a comfortable, educated decision we help do the legwork so you don’t have to”.
“The values we gather come from:
1. You
2. Several independent sources to see who has the most interest
3. Our own valuation expert
4. Trusted 3rd party resources like Kelley Blue Book”. ( instruct them to use the “Rate the Condition “ report on kbb.com and evaluate the car as if they were going to buy it)
“The easiest way is to start by seeing your car and you driving the new one during the evaluation. Based on the total feedback we’re able to find the most that anyone will be willing to pay for a particular vehicle at any given time. Customers appreciate receiving top dollar and the ease of getting it. We find this method to be very fair to all parties since all opinions are considered including yours”.
Now, when the trade value is presented,it is much easier to justify as giving them the “best of all worlds” rather than being held responsible as the bearer of bad news( in most cases since the trade value rarely matches the customer’s expectations).
Sorry about the rant…just thought this would be helpful information to share ..hope you feel the same way!

Some of the key features to Black Book Activator GPS are these:

Video enhanced.

Black Book gets their information from being in 50+ auctions each week. Physically in the lanes.

These figures are updated DAILY!!! That's fresh data.

Activatior is used on 26 OEM sites.

Many financial institutions use Black Book as their preferred valuation source.

Activator always gives the consumer a range, not a set figure. That range is rough to average. This sets the consumers expectations at a reasonable level.

With Activator the consumer can actually set an appointment to come into your dealership. Black Book will follow up with a phone call to your store to confirm that you received this appointment.

Black Book also has a follow up system. They will stay in touch with every opportunity on your behalf for 100 days!!! This will help keep these opportunities from falling through the cracks.

Black Book supplies monthly reports to show you the monthly results.

Black Book also offers training and support. Field staff that will visit your store and help train your people, free webinars, online training, available call scripts and e-mail templates for you to use.

Black Book will also show you additional ways of using the product outside of just your website.

You can call Black Book Online at 866.451.6200 and get an appointment with the rep in your area. It's worth a listen.

I think the only additional comment I have is the lead generation a trade-in tool provides. The numbers regarding monthly leads from our trade-in tool are similar to those John Hayden experienced... in the short term.

The value we receive from the trade-in tool far outweighs the immediate "benefit" of moving metal over the curb. Yes, moving metal is what we get paid for, but moving the same customer's vehicles metal over the curb for the rest of their life is what makes our job easier and easier.

The trade-in tool has EXPONENTIALLY helped our dealerships sell to customers that are more than 30 days out from purchasing a vehicle because we can continue marketing to them.

I have been using Blackbook Online as well.
I disabled the avatar but it still works great. I think these are 2 reputable companies with similar products. KBB is the Trusted Source but Blacbook is the little thing the Dealers hide from you if you are a customer. They are both good.

I have been using Black Book Online and have had much success with it. One of the main reasons any tool will be successful is the placement on your website. Both of the tools need to be in a prominent location on your main page. Additionally you need to make sure that you use the capture tools on every page of your site including your New and Pre-Owned inventory and the individual car that is pulled by the customer. I agree with Ron that it really does not mater which tool you use, it is how you use it.

Umer,
I work for Kelley Blue Book and I sell advertising to automotive dealerships in the Central region of the country. Obviously I feel that my opinion would be bias to the KBB product...so I will simply comment on the a few things: Pricing and what my dealers that have both tools on their site tell me.

Pricing: "**MSRP"
KBB LeadDriver $ 249
Black Book $ 349
**who pays MSRP anymore?

Side by side comparison, My dealers that use both tools (19 of them so far) tell me that they both yield similar results but the LeadDriver component is a bit dealer friendly since KBB has gone to weekly values and enhanced the trade in value pricing from a "good" "fair" "poor" trade-in value to a range value.

At the end of the day I really don't care what we in the industry think works well, we are not the ones using the product, it's really about what brand consumer knows and is familiar with.

Happy Selling folks!

LeadDriver Enhancements: http://www.800bluebook.com/dealer_product_LD.shtml