Dealership Business Modeling DSES 2018
Grandpa Bay/Trolley Corner
Learning Objectives 1. Understand how automotive business model evolution is impacting your dealership. 2. Discover strengths & weaknesses of prominent dealership models to react accordingly. 3. Align Marketing, Processes and Structure to make your Model
Business Model: The rationale by which an organization creates, delivers and captures value.
Transactional vs Subscription
Blockbuster founded. Grows to 8.4 billion 1985 Netflix founded because Hastings was by 1994 frustrated with his late fee. 1998 Blockbuster turns down offer to buy 2000 Blockbuster enters 20 year deal to stream Netflix for $50mm on-demand movies. 2001 Enron files for Bankruptcy. 2004 Blockbuster enters DVD by mail subscription business. Blockbuster markets ”no late fees” and is 2005 sued in 48 states. Blockbuster reaches 3mm subscribers on 2006 pace to double in 2007 Netflix reaches 6.3mm subscribers Netflix partnership discussions. 2007 Blockbuster fires CEO over free rental from stores, refuses offer, raises prices, growth halts.
Refusing to let go of the past is usually more dangerous than ignoring the future.
1. Commitment to a clearly defined model
Revenue One-Time vs Subscription Subscription Revenue 10% churn Revenue Conditions: Conditions: +333% ! +333% !! 20% Customer Growth $2,000 Per Transaction Subscription Revenue 20% churn One-time Revenue Time
Cash Flow Subscription generated cash +330 Deals per month Conditions: Conditions: Cash flow $180 CAC +165 deals per month $15 MRR per Cash BE Time
Metrics One -Time Subscription Customers sold Subscriber base Avg Transaction MRR % Late Fees Chun $ Late fees CAC LTV
2. Deliberate choice of key metrics.
Education Sale Demand Gen Marketing Online Conversion Point of purchase Recommendation Engine Concessions Process Fulfillment Late fees Digital CX/UX/UI Low skilled workers Logistics Real Estate leasing Structure Robotics
3. Alignment of assets to model achievement.
Applying model innovation to dealerships.
Distributors are model and experience innovators.
Isn’t our model constant?
Our old metrics are incompatible. ! Inv. Front Back Gross Annual Total Gross Mix Gross Volume A (Unique) 17% $1919 $1000 201 $586,243 B (Plentiful) 39% $34 $1000 472 $488,013 C (Traditional) 23% $939 $1000 276 $535,456 D (Inexpensive) 21% $1352 $1000 251 $590,460
Our old metrics are incompatible. Inv. Front Back Gross Dealer Annual Total Gross Mix Gross Gross Volume A (Unique) 17% $1919 $1000 201 $586,243 B (Plentiful) 39% $34 $1000 472 $488,013 C (Traditional) 23% $939 $1000 276 $535,456 D (Inexpensive) 21% $1352 $1000 251 $590,460
What is “Dealer Gross”? All gross that is triggered by the sale, that is not front or back gross. Dealer Dealer Gross Gross Doc $399 Doc $399 Recon $540 DMA $540 Pack $450 HTB $450 Total $1389 Total $1389
Our old metrics are incompatible. Inv. Front Back Gross Dealer Annual Total Gross Mix Gross Gross Volume A (Unique) 17% $1919 $1000 201 $586,243 B (Plentiful) 39% $34 $1000 472 $488,013 C (Traditional) 23% $939 $1000 276 $535,456 D (Inexpensive) 21% $1352 $1000 251 $590,460
Our old metrics are incompatible. Inv. Front Back Gross Dealer Annual Total Gross Mix Gross Gross Volume A (Unique) 17% $1919 $1000 $1389 201 $865,205 B (Plentiful) 39% $34 $1000 $1389 472 $1,143,575 C (Traditional) 23% $939 $1000 $1389 276 $919,029 D (Inexpensive) 21% $1352 $1000 $1389 251 $939,163 B cars are 234% more valuable than thought.
Our old metrics are incompatible. Which store would you rather be? A C B $35,000 $31,000 $30,000 $30,000 $30,000 $29,500 $5,000 Discount $1,000 Discount $500 Discount $1,500 Gross $1,500 Gross $1,000 Gross
Our old metrics are incompatible. Which store would you rather be? A B 100% Commission Salary + Hire 10 to keep 3 Time to productivity 70% Turnover Performance Review Score Gross only focus Focus to match your model
Metrics Match the Model Modern Traditional Front Gross Avg Discount Back Gross Dealer Gross Volume Turnover % Commission Time to Productively
Alignment Traditional Modern “Meet or beat price” Transparent price Marketing Come in to deal Transact where you are Late disclosure of info Responsive Selling “If I could, would ya?” Digital Retailing Process Commission only Strong Customer Experience Low Skilled “Stay stupid” Salary based + Structure Turn & burn employees High Retention
How do you create alignment? Process. Employee Training & Recruiting & Onboarding Development Hiring Performance Variable Reviews Compensation
Grandpa Bay/Trolley Corner
Thank you Jared@DrivingSales.com
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