Jeff - Thanks for all your efforts in our industry. I give you the Automotive Industry Blog of the Year.

And to all your contributors (specifically Alex), you do a great service for the industry.

Jeff,

Thank you for the 2008 recap and list of your site's most popular posts. I went to the microsite discussion and saw, for the first time, all the comments posted by one of my old Courtesy Chevrolet suppliers, David Jackson... Wow, I was pretty amazed that I had not seen it before. Must have been before I started using Google alerts on my own name. Anyways, I just wanted to point out 2 facts regarding the history of my using Mr. Jackson's services:

1. When I was first introduced to Mr. Jackson by Mike Gordon, our IT director at the time, Dave's response to my question regarding microsites was - "What's a microsite". So I taught him about the concept and submitted mock-ups of the sites I wanted him to build via MS Word document.

2. Since Mr. Jackson had never build microsites before I explained the concept to him, he also did not know how to build ADF-XLM formatted web site forms that could be easily parsed by lead management tools. I provided Mr. Jackson with the STAR manual in PDF file format, and then worked with him to change his forms until they would parse properly into any standard CRM or Lead Management tool.

The shakespearian phrase "me thinkest thou protest too greatly..." or something like that comes to mind. The fact remains that I have personally referred more dealers to Mr. Jackson's business than any other customer he has ever had... I know simply by looking at his client list.

The first dealer he ever sold a microsite to after Courtesy Chevrolet was a Mercedes-Benz dealership that I referred to him. Yet, I have never seen a thank you, my attempts to reconcile I have been rebuffed and I have been contacted by dealer after dealer who felt obligated to bring to my attention that Mr. Jackson had defamed and slandered me during their phone conversations... Sometimes, the phone calls and emails have come to me from dealers I have never met!

Oh well... One thing I learned a long time ago when I was in a fraternity in college, is that you should never help people or inspire them with an expectation of reward, recognition or pay back. Mr. Jackson has certainly reinforced that lesson learned.

Oh, and one more thing... I sure do like the way your new design and features work on DealerRefresh.com compared to the old site platform! I hope that you and Alex keep up all the great work you have done in 2009... May this be the best of all years for DealerRefresh.com!

Jeff - I agree with you wholeheartedly. Let's get it done in 2009. Thanks for the efforts of everyone on DR.

Happy New Year.

Andy

Considering the industry has almost nowhere to go but UP from here (one would hope), I too expect 2009 to be a promising year for the industry.

DR has clearly been an oasis for the industry. You have represented the art and science of relational blogging well and established a loyal following. I think this site is a true reflection of your own person Jeff.

Happy New Year to everyone who frequents DR and thanks to all for sharing your passions, positions, and ideas. It is entertaining and educational.

Godspeed. -RG

The negative spiral can only be stopped one way. By spending money! All those folks that are afraid to spend money because they do not know whether they will keep their job or just wait for the market to turn around. Well, it won't unless we start spending money.

Although I agree with Joe that their are gas savings currently. The oil prices have been going down because of the slowing/declining growth of the economy. So as soon as the economy turns around, the gas prices will shoot up again. The economy is a funny thing. You lower the rates to improve the economy, but indirectly this will affect the economy in a bad way to.

Really the answer is that we all need to go shopping our a** off, so companies will start reporting positive sales numbers, which will lead to more jobs and more people spending money.

My 2 pennies.

Joe - that's great. I have to admit that I've gotten a little caught-up in the down side of the market lately...if that wasn't obvious. Thanks for lightening things up!

Back in the day, before 24hour TV News discovered how well paranoia sells, we had to ask ourselves....

When do you know you're in a REAL REAL DEEP Recession?

You see tires being driven down to the chord.
Restraunts (all of them) totally empty.
Cigar butts smoked all the way down to the filter.
Car pooling chatter heard all the time.
You reuse coffee filters.
You add coffee to day old coffee grounds.
You don't buy jeans with holes... you earned them.

Hey!
No one talks about how recessions can produce MORE of a lot of stuff...

You see a lot More...
Bicycles
More hitch hikers
More noodle casserole meals
More drinking
More neighbors helping neighbors
More cars on jacks in neighborhoods
More college grads doing trades work (God help us all if we need to kick the illegals out to take back work in this arena)
More patches on jeans...

Lastly,
Not all places are suffering the same. Some areas are bearing most of the downturn. In the Great Depression, if memory serves me right, I recall that San Francisco missed the whole event.

Joe

A fellow cyclist acquaintance runs this site
if you ever want some positive news http://positiveeconomicnews.com/
that's why I like cyclists they always seem to find the positives in everything.

Man this is an interesting post.

First off, John as I mentioned in a previous comment, and has been reiterated here-- the spread of bad news and belief that things are terrible will continue to make things worse, not better. Hence the term "consumer confidence."

Yes, our overall economy is at an all-time low. Unemployment is high (unless you live in ND apparently). But the reason things will continue to get worse will be because of consumer confidence.

As Grant Cardone said, the power to turn this economy around is in the consumer. If the consumer is empowered (tax incentives, loan incentives, Madoff gets the chair... just sayin') then it will spur our economy.

There are still good investments to be made. Good money to be spent. Heck, if you bought trucks when gas was high, you're making good money on them now!

As a real estate investor I have followed the market very closely. I haven't bought a house in 2 years because I smelled it coming (it hit us a little later than most of the country).

But as mentioned, houses are still selling. Freddie Mac and Fannie Mae are getting their crap together. They're doing what they can to NOT put houses in foreclosure. It would be a spur to the market to start buying some of these foreclosures in the months before summer, and have them market-ready by summer, keeping in mind they won't sell for what they would have 3 years ago. BUT it's a market adjustment.

I may be wrong on that, it is just speculation. Ideas?

Joe, I love the gas price raise math! I believe the turn in consumer confidence is coming soon. Look at how many stores had half price or better offers through the holiday shopping season. So many of us love spending the money we work hard for and with prices on everything including cars being a good buy right now how can it not bounce back? The retailers that understand consumers will consume when the perceived value is greater than the price will capitalize in all economies. I know we intend on being that retailer.
Joe we've gotta get on the phone soon,
Craig

thanks for the positive post Joe!
John you can stay in your foxhole

It's not a knife falling, it's a sword, and it's only just begun to fall.

oh, one last thing...

July's gasoline shock crushed everyone's retail appetite. Septembers stock market fall sealed every families resolve to have a very simple (low cost) Holiday.

So, average Joe's gasoline windfall keeps piling up AND add a low cost Christmas and Average Joe is paying off those Credit Cards with glee!

All the while, since July, he keeps racking up miles and miles on his aging ride. He’s holding back from buying new, waiting for the smoke to clear...

While Average Joe is holding back, auction yards are spilling over with excess inventory. Lease returns, cash strapped dealers looking to raise cash, rentals, are all trying to find a bidder.

Manheim's Auction Index has had the steepest price decline in its 15 year histroy, now 2 months running.

At this point, there is NO PROOF that Average Joe is going to show up and save the day. But, you can see the potential for a rebound.

I am a firm believer that the 1st Q of 09 will be a banner year for used cars. I hope your dealer is poised to "catch a falling knife" and bravely go where no sane man dares pass… step in there and buy some really cheap inventory to flip into spring's new market.

A strategic optimist,
Joe

Alex,
I'll take the opposite side of the debate. I’ll employ yet another old trader mantra…

BUY FEAR, SELL GREED..

Where have our customers gone? They’re not in ANY stores! The TV news these days is full of fear and we all know nothing rivets an audience better than some good old fashioned "the world is ending" fear (see wikipedia: Chicken Little) haha...

Ok, the news on TV is grim, but what news is brewing behind the scenes? Good news I say! First, we know that 93 out of 100 of your customers are still working and second, they ALL have to drive to work and BETTER NEWS! 93% of the US population has been given a BIG raise recently!

Since July 4th, gasoline has fallen just over 60%. In NY, it’s fallen from $4.30 a gallon to $1.60’s. Where ever you live “The Oil Bubble of 2008” has popped, but, the Credit Crisis on TV has us all paralyzed.

Ok, while we're in our fox holes watching TV news dispense doom and gloom, how are things at your customer’s home? Let’s look at their gasoline bill, this month vs July (5 months ago).

Mr. and Mrs. Average Joe have a sedan and a SUV and drive 15,000 miles a year each.

Sedan:
Chevy Impala = 56 gallons per Month

JULY: $4.30 p/gal fill up = $240.80

NOW: $1.65 p/gal fill up = $92.40

Save = $148.40

SUV:
A Ford Explorer = 78 gallons per Month

JULY: $4.30 p/gal fill up = $335.40

NOW: $2.65 p/gal fill up = $128.70

Save = $206.70

Combined gas savings per month: $370.10

That is sweet news indeed!

Drop this Credit Crisis news and we’d be over run with consumers! Alas, the credit crisis news is grim and hides this windfall. But, as the weeks pass, the Fed intervention will make its way into the system. Fear will ebb and your customers will get that “all clear” signal to come out into the sun.

In the mean time, they’ll have been enjoying a windfall of lower energy (and falling food prices). This windfall is enormous and is piling into our laps. Remember, it was just a few months ago when everyone (me included) had resigned ourselves to the new era of $4 gasoline.

When the time comes for your customers to dump the old car and buy new, they’ll be more conservative and far more open to the value of a used car then ever before. There has never been a better time for the future of selling used cars than here and now.

Joe

No kidding! We see everyday how our attention spans seem to retract daily, but what is really funny is how inane the customer really is!

You point out the customer running away from trucks when gas went up, but then gravitate back to them after prices fall. What slays me is- Why did you buy the truck in the first place!!!? Did you NEED a truck? If so, how did that need change when gas went up, and now that need magically come back when prices of gas rise again?

I don't remember that many people riding the short bus to school, but geez, maybe I was wrong.

As a fellow Historian, I find this as entertaining as you. But it is nice to have a good understanding how your buyers will behave in some situations.

You know Alan, extracting that information about where EXACTLY a customer came from is a struggle for our dealership. I take a look at the sales log and track to see where that customer submitted information online to see where the sale came from, but if they didn't submit info, I have no way of telling. Customer survey sheets in F&I or at the time of write-up, or in our CRM, or anywhere have failed miserably.

My attempts to tell everyone how important it is to know this information (which would of course strengthen the fact of how low our ROI is on newspaper and TV) have not gone un-noticed, just without action. I'm going to have to try harder to get my dealer's attention on this fact so that it will get enforced.

Especially now, we need to know how to squeeze the most out of every penny spent in advertising. Thanks for giving me some motivation to persist in this!

Alex,

Our dealership has always looked at performance of advertising sources to decide whether to keep or shut down the vendor. We look at Closing ratios, Cost per vehicle sold, Gross vs Cost, etc.

In addition we have never really spend a lot on branding since it is hard to see what you get as for the ROI (not that it is bad)

What we have started the last several months is let all our vendors know that if we do not get help from our vendors we will have to shut them down alltogether. We send all our vendors letters asking for a decrease in price (keeping the service the same) or increase in service. This has worked extremely well with some vendors including our CRM vendor, credit pulling vendor, oil vendor, etc.

That said, when looking strictly at the Internet, I think you can really negotitate with your vendors and monitor the quality of the leads you are getting.

Regarding Consumerism:

I have noticed that although lead volume is about the same from third party and our own website, we have seen a decrease in closing percentages. Customers are telling us they are "just looking" more then before, which tells me that our customers are being more carefull because of the economic situation. The want is there, but the need has been lowered.

Well here are some of my thoughts.

The internet marketing system is completely foreign to the automobile industry. The internet demands planning,review,corrective action when necessary. Dealerships have relied on taking what comes with little long range planning. Of course this is not everybody and is slowly changing. (at this point)
If you are not reporting your results to th General Manager on a Monthly basis I believe this is a big mistake. Show your return on investment. It takes out the guesswork and prevents quick uninformed decisions.

Conversion. I strive for 15% conversion on

1. Leads submitted to my web address, this includes sem,seo and pay for leads.
2. 15% on phone up leads generated solely by the Internet department. On a monthly basis

While I have not obtained this allways I have been within 1.5 percentage points the entire year.
Branding. Great topic.. This is the new frontier. I am right now exploring that option. If I can brand effectively will I need other lead sources?

Consumerism-People are the same today as before. Have you changed? Master the basics,believe in your product,believe in yourself. Yes they have more access to information. But so do you!!!Make it happen do not wait for it to happen!!

Hopefully this was some value from a internet persons point of view. Happy selling!!!

Yes the customer has changed. Dealers need to start selling cars the way customers want to buy them and not how the dealer wants to sell them. You're right William that consumers are bolder by the minute. They have more information at their fingertips than ever before. I would like to know just how dealers derive ROI on their internet vendors and traditional advertising. How do you catagorize a sale as coming from one vendor over another when the customer makes a general statement such as: "I found you or your car on the internet"? How do you determine ROI on radio advertising, newspaper advertising and TV advertising....and billboards for that matter? What did you cut and why? Thanks!

Alex,
I am still under the idea of mindset in your workplace. If you believe in something enough it's probably going to happen. Good or Bad. While I'm in the Midwest and I cannot speak for the coasts other than I think the coasts probably get hit harder than the midwest in terms of "economic crisis" simply because it seems that midwesterners typically live within their means a little better. I've been to both coasts many times and it just seems that not everyone and their mother can afford a BMW or Mercedes like they tend to portray. We have BMW, Nissan, Hyundai and Pontiac as our new car franchises and I oversee all internet functions of all 4 franchises including used. I now have a few sales consultants under me. Internet Traffic is barely down from where it was a year ago or even 6 months ago, but appointments definitely are. I've found myself taking an extremely active role in T.O's whether that be over the phone or in person when we do get our customer's in. Very early and often. If you can get involved and represent that your dealership is doing just fine and has not seen the kind of downfalls that other dealerships have. As long as your sincere when you say anything I feel that most of the time people will believe you. Even if your dealership is hurting. I believe Philip when he say the dealerships that do make it through will increase their market share by a ton, but Strong leaders will guide their troops through. Not the other way around. That's why is the Us's and Them's. Be the General LEAD the troops the right way and do what we know works. Qualify the right way, show the right cars, make the customers fall in love and you will make it through. Whether you make as much as you always have is still completely up to you.

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