by David Metter, Co-Founder and President, AutoHook powered by Urban Science
Dealership employee turnover rates are notorious for being amongst the highest out of all retail sectors. Unfortunately, dealers have been forced to absorb the spiraling costs associated with a lack in salesperson retention, which only appears to be getting worse. NADA’s latest Workforce Study reported salesperson turnover rates are at a record high of 74% - up 7% from last year.
What we don’t often talk about is the broader implications high employee turnover can have both on dealers and on the industry as a whole. Consequences of losing good salespeople can transcend beyond an individual dealership level, as any significant reduction in customer retention or customer loyalty has the potential to damage the reputation of an entire brand.
Dealers aren’t shy about communicating the adverse effects high churn has on their business, both in their operational processes and when it comes down to their bottom line. Wards Auto says, “The impact is significant, causing decreased sales and profits, and diminished customer loyalty,” which we know can be detrimental to the health of any business.
MAXDigital recently surveyed nearly 400 dealers in the U.S. and found 78% struggle with issues related to high staff turnover. The root of the problem is two-fold in that good salespeople aren’t just hard to keep, they’re hard to find in the first place. Ninety percent of dealers surveyed said “Hiring good salespeople is hard,” and finding candidates with previous sales experience let alone automotive sales experience is even harder.
*Source: 2018 MAXDigital Dealership Process and Salesperson Turnover Survey
Over time, chronic retention problems add up and can cost dealers hundreds of thousands if not millions of dollars a year. A study by Driving Sales and Hireology determined the average cost of recruiting, training, and lost productivity for each salesperson is $45,000 (and that was back in 2016). In my last blog, we defined the value of a good salesperson over the course of one year to be more than $325,000 in pure gross profit. Add that to the cost of recruiting and training and dealers are losing out on over $365,000 per salesperson, per year.
The need for dealers to be able to identify their best salespeople in order to retain them is more critical now than ever before.
Why? Because people still heavily rely on face-to-face, personal interaction - especially when it comes to making big purchase decisions. The larger the purchase, the more inclined customers are to buy from someone they trust. Despite the abundance of online vehicle research tools at their disposal at any given micro-moment, relationships will always take precedence. And people naturally gravitate towards both consistency and what is familiar to them. They’re also much more likely to buy a second and a third car from the same person they already know and trust.
So how do we solve this industry-wide employee retention problem? There are three components that we know make up the formula for properly assessing your salespeople in order to help curb the churn:
1. Know What You’re Losing
When it comes to evaluating the true performance of your salespeople, having the ability to view CRM data through a scientific lens is essential. CRM companies do what they do very well, but they only show one dimension of a highly multidimensional story – the wins. But what about the leads your salespeople touched that defected? Without that defection data, it becomes near impossible to properly identify the best performers on your team based on the opportunities they’re working.
In order to see who the real winners and losers are representing your dealership, you need a way to visually compare the number of leads each person sold each month in addition to the ones they lost and who they lost them to. Only then can you see who is really the most effective or ineffective because you have the complete story. You can make much better decisions on who or what needs to change based on a real visual of what you’re losing.
2. Leverage the Right Technology – Rooted in Science
What we’ve never seen before at the dealership level, is science taking a leading role in how we evaluate our sales staff. If science-based technologies can tell you the people that consistently prove to be growing in a positive direction, or reducing their defection rates over time, then science can play a role in helping dealers implement compensation plans that serve and reward only their best people.
Keep in mind, it’s important to give newer technologies or data-driven solutions time to build, learn and improve. The more sales and defection data we can collect over time, the more accurate and actionable the tools that leverage this data will be at identifying your best (and worst) employees.
3. Play to Your Strengths
I’ve been in this business for 27 years. If there is one thing I know without a shadow of a doubt, it’s that the chances of a salesperson closing a sale are greatest when the customer is physically in front of them. So, in addition to leveraging the right technology to evaluate your staff, leverage technology that will support what we know to be the greatest strength of any person that knows how to sell a car… get the customer in the showroom.
If the goal is to improve your lead follow-up process and eliminate inefficiencies in the way you operate (which by the way is always the goal) then it’s absolutely vital to have the tools in place that can pinpoint both the strengths and the weaknesses of your team. When it comes to retention, dealers are much more likely to foster an environment of happy employees if they play into their peoples’ strengths instead of wasting money, time and energy attempting to fix what they’ll never be good at. As stated in the national bestseller, StrengthsFinder 2.0, “People have several times more potential for growth when they invest energy in developing their strengths instead of correcting their deficiencies.”
The takeaway here is to place a heavier focus on solutions that are proven to get people physically in the door, where you have a much higher chance of getting them behind the wheel for a test drive, building a personal relationship, selling them a car, and retaining their business. Test drive incentives are one tactic we know works. Pair that with a bulletproof lead follow-up process and what you’re left with is a prescription for lowering defections tied to your salespeople, higher close rates, and better-rewarded, happier employees.
In summary, everyone wants to retain salespeople and everyone wants to retain the right salespeople for their respective business. So many dealership compensation plans are set up to benefit the underperformers – which is completely counterintuitive to reducing turnover. Until now, it’s been impossible for dealers to adequately compensate their all-stars and overperformers because they’ve had no way to identify them. Moving forward, dealers can take this information and adjust their compensation plans to retain the right salespeople and make the necessary changes to get rid of the rest. After all, it would only make sense to reward the people that are rewarding you.