By Deloitte Manufacturing
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 Think about this.
Last year, 65 million cars were manufactured; 55 million were sold. Right now, original equipment manufacturers (OEMs) and dealers have different objectives, different ways they make money, and different things they want to sell. OEMs complain that dealers don't execute programs correctly; dealers complain that the programs from OEMs - and there are too many of them - are irrelevant and uncoordinated. OEMs are frustrated; dealers are skeptical. The customer is simply alienated. The car buying experience is predictable in one way: It will be a hassle. Maybe it's time to rethink how automobiles are made and sold in a global marketplace. The simple fact is this: A better buying experience means more sales. And a better buying experience will come only when OEMs and dealers start working together in new ways.
Imagine that.
What would an optimized sales collaboration between OEMs and dealers look like? What if automakers were as intent on streamlining the last few miles as they are on the rest of that process? The place to begin answering those questions is in the formulation of new principles of business - new rules that could enable OEMS and dealers to start from scratch and find areas of mutual advantage.
Principle #1
"Coming together is a beginning, staying together is progress, and working together is success."
Find the common ground.
In 1776, at the signing of the US Declaration of Independence, when Benjamin Franklin said, "We must all hang together, or assuredly we shall all hang separately," he was talking about revolutionary politics. But does his message - stick together or you'll fail - fit today's auto industry? YES. Simply put, most - if not all - OEMs and dealers must change the way they sell cars. And the place to begin doing that is in a renewed appreciation of each other's strengths and skills. What can you learn from each other? The greatest teacher is experience.
OEMs: Spend a day doing the dealer's job. Dealer principals: Personally work your sales floor and your service counter; talk to customers. Provide feedback to the OEMs on what's working and what's not. Working the "other guy's" job exposes hundreds of opportunities for program design, problem solving, and goodwill. What are the critical areas for improvement? Where do you need to spend more (money, time) or less? Open your mind to new possibilities - that's the hardest thing to do, but the most necessary. Do not assume you know what's best for the "other guy" - that's the second hardest thing to do, but fundamentally important to finding a common ground.
Picture your best intentions made real
Here are three ways to work together, better.
Celebrate differences (but leverage"lessons learned")
One size does not fit all. OEMs: Stop seeing "dealers" as a homogenous group, Instead, think this way: "Each dealer is unique. Each dealer has its own opportunities and challenges." With that perspective, it's easier to imagine the value of helping each dealer address it most urgent needs and meet its most important goals (even if the means to those ends is not the "latest and greatest" program). One good idea: Take a close look at high-performing dealers and find out why they're successful, then share these insights with other dealers in similar markets (adapting the good ideas to fit each dealer's unique circumstances and opportunities).
Look for WIN-WIN opportunities
OEMs: Say to dealers, "How can we help you be more profitable?" For example, work together to devise a better way to sell used cars - a program that would take into account product quality/ pricing (OEMs) and sales compensation (dealers). Or show dealers show how they can make more money by introducing a new service, such as glass installation (traditionally outsourced, but highly profitable).
OEMs: Leverage your great purchasing power to acquire valuable sales tools - such as Dealer Management Systems - for your dealers at a far lower price than they could negotiate. (But still leave the dealers some choice or input in the process). Another great idea for US markets: Buy third-party leads, take duplicates out of the lists, and sell the leads to the appropriate dealers. By taking charge of this process, you'll take significant costs out of the lead generation cycle.
Dealers: Use the OEM's huge experience, as well as data from trade associations, to benchmark your performance against comparable dealers and, in this way, find "smarter" business practices. Together, take advantage of multiple points of contact with consumers to create a better "fit" with each other and with local markets.
Put a plan on paper
Dealers: Work with your OEM to put a plan together - market by market, store by store. (A lot of dealers don't have any plan at all.) Many dealers are "seat-of-the-pants" people; their success has come from great instincts. But while "gut feeling" works like a charm in the early days of a small enterprise, it can be the downfall of a company competing in a tight and changeable marketplace. In other words, while it's okay to be an "old car dealer," it's not okay to be doing things the same way you did them in 1979.
Dealers, you owe it to yourself (for the time you spent building the business) to put a plan on paper, at least annually (for some of you, this will be a first-time effort), to forecast what you think is going to happen, and to look back to see where you were right and where you were wrong. Work with OEMs and your own employees to surface good ideas for achieving top three (not 100) strategic objectives. What three things do you want to do this year? What's most important over next five years?
Principle #2
"A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well."
Be your brand. Worldwide. Every day. At every customer touch-point.
In hockey, when a goalie works to "be the puck," it means he is always positioning his body to be in the right place, at the right time, to block the hit into the net. The value of branding is this: In a mature industry, where quality is a "given" across OEMs, the brand has the biggest impact in the retail space. Simply put, a better brand commands both a premium price and greater market share. And as Warren Buffet says, "Your premium brand had better be delivering something special, or it's not going to get the business." How would you like your brand to "be"?
OEMs: You'd want loyal customers to forge a lifelong relationship with your brand, even recommending it to others, as the result of consistently positive experiences with your products. Dealers: You'd want your people to be unfailing polite and helpful to customers - always meeting and even exceeding customers' expectations for quick, quality service. (Of course, OEMs would want the same qualities in the people selling its cars.) How do you make these brand goals a reality? By setting in motion a virtuous cycle of behavioral improvement.
What a challenge! OEMs are global enterprises with employees all over the world, with different cultures, speaking different languages and responding to different incentives. In addition, the "front line" employees - those that interact with customers (and make, or fail to make, a good impression), hearing their praises or complaints - work for entirely different companies. If any supply chain ever cried out for collaboration, this is the one.
Consider the possibilities.
OEMs: Your first task is to connect your own people - and your dealers' people - with the brand. How does the brand translate into on-the-job behavior? What does it mean to the car salesperson, or to the service technician? What processes - and measurements - would make it possible for employees (your own and the dealers') to "be" the brand?
Dealers: Ask the same questions on a more local level. In fact, dealers promote multiple brands: the OEM's corporate brand, the cars' brands, and their own business brand. Clearly, both OEMs and dealers have to explain each brand's value proposition to the front-line sales and service people. And ultimately, their question is, "What's in it for me?" Everyone: For employees to "be your brand," three things have to happen:
- People have to know how do to their jobs, and do them well.
- The company's objectives and the employee's objectives must be aligned.
- Desirable behavior must be continuously and consistently communicated, recognized, and rewarded. (Of course, each of these steps has to be interpreted - and reinterpreted - for different countries and cultures around the world.)
It all comes down to this: practice what you preach. Henry Ford claimed that the Model T was so durable and simple to service that, if one could not be fixed, he would replace it for free. A farmer from Michigan wrote Ford a letter, claiming that no one could repair his "Tin Lizzy." Imagine the farmer's surprise when, two weeks later, he received his new automobile.
Principle #3
"When we design and architect a server, we don't design it for Windows or Linux, we design it for both. We don't really care, as long as we're selling the one the customer wants."
Create a better customer experience.
Could buying a car be fun and quick? Could the financing process be simple and easy? Could a dealer be an entertainment destination? Do these scenarios sound like fantasies? They don't have to be. Today, most customers begin the buying experience on the Internet. When the customer comes to the dealer's showroom, he or she is already well informed - about the car, often about pricing options, sometimes even about the dealer's own inventory. (In fact, Internet traffic accounts for 20-30 percent of the average dealer's sales).
On its web site, Ford shows photos of actual cars in each dealer's lots. The power of the picture (yes, it is worth a thousand words, evidently) has doubled the number of consumers who hit the "ask the dealer what this car costs" button. Clearly, a link between the OEM's web site and the dealer's web site is critically important. And if the online customer asks for pricing information, the dealer should be a part of the process for satisfying that request.
When customers get to the dealers, they want to talk to a knowledgeable salesperson - a salesperson who knows about the product and about financing options - so each customer gets the car he or she wants. According to Forrester Research, 27 percent of the time that a customer does not buy a car, it's because he or she doesn't like the dealer. Fifty percent of those unhappy shoppers buy the same car from a different dealer; the other 50 percent buy a different brand altogether. Having the right product - or access to the right product - can make all the difference. Nissan dealers can change their vehicle orders up to six days before a car is built, and they can "trade up" to the moment before a car leaves the regional distribution center. The program gives dealers more of the cars they want and can sell (on average, 60 percent of the dealer's inventory is order to specifications), reduces inventory, and reduces incentives.
Dealers: Listen to customers: what does each person want? Answer initial questions appropriately, and then put each customer in the hands of the right sales person. A good match makes a sale. Make it easy for customers to understand the transaction by making pricing transparent.
OEMs: Find a champion (a consultant or advisor, internal or external to your own organization) who can help dealers understand programs, solve problems, and apply best practices. Lead the initiative to integrate processes and systems; the goal here is a simplified, speedy process for closing the sale. (Why does buying a car require four hours of paperwork?)
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