Here is Every Reason You Should NOT Create a Centralized BDC

 

Quick Quiz: If you’re part of an automotive dealer group comprised of anywhere between 2 and 290 stores and you do not run a centralized sales BDC, then you’re:

A. Wasting Money
B. Losing Sales
C. At a Competitive Disadvantage
D. Not Leveraging Your Economies of Scale
E. All of the Above

If you answered E, congratulations! You’ve recognized the downside of sending your inbound leads and phones to those black holes of mediocrity known as The Internet Department.

Don’t get me wrong, there are plenty of end-to-end internet departments (those where a salesperson handles the lead, the appointment and the sale) that are showing success today. (I put showing in italics for a reason: There is actual success and then there is showing success with internet teams – we’ll explore the difference below; and start with that reason.)

Here is Every Reason You Should NOT Create a Centralized BDC

Reason #1: Some of our internet teams are showing success and we don’t want to upset that.

As I wrote above, there is actual success and then there is showing success. Most “successful” internet teams I encounter are really just staffed by those best at fudging the numbers and working their pay plans. Moreover, because your general managers have little idea how to actually manage internet sales, digital marketing or the related processes, these number-fudgers not only get away with it, but are often bragged about at your GM meetings.

Recently, I worked with one of the laziest internet managers I’d met in a long time – a person whose team became so good at number-fudging that their GM (and even some on the leadership team at their extremely large dealer group) would hold this internet manager up as an example of internet sales mastery.

On the morning of one of my store visits, a member of the internet team upped and sold a previous customer in service. After the sale, he created a lead in the CRM for this customer, set an appointment, marked the appointment as shown, and then marked the deal sold. (While I applaud his aggressiveness and would likely move his desk into the service waiting area, his fraudulent entries in the CRM allowed him to skate a fellow salesperson while paying him an unearned appointment bonus.)

If the successes they are “showing” with that internet team aren’t reason enough to make you deep dive into what is truly happening with your stores’ internet teams, let me give you one more example that I also discovered recently at another extremely large dealer group.

An internet salesperson legitimately selling 30 units each month is an asset to any store, right? That’s what tCar Dealer BDC Best Practiceshe sales managers thought of one such salesperson I discovered, who was receiving about 450 inbound leads each month, initiating zero outbound calls (except to return actual calls from a few of these 450), and selling about 30 units each month. How did he do it? Simple, he sent every prospect an email that vomited the absolute lowest price of the vehicle they inquired about and in bold letters told them that they must ask for him to receive this price. After that, it’s just a numbers game. He sat back and waited for the Ups.

So, did he sell 30? Sure. Could he have sold more if he worked these 450 leads a little differently? Perhaps a few, but that would require work, wouldn’t it?

Let’s do the math as if these 450 were handled by a well-run centralized BDC:

  • 450 leads with a 25-30% Show-to-Lead rate would equate to 112-135 valid Appointments Shown
  • For an average floor team, 112-135 valid Shows would result in 56-68 deals
  • For a great floor team, 112-135 valid Shows would result in 90-108 deals

Fifty-six on the low end to 108 on the high end is a lot more than 30!

So, if the reason you think that you cannot create a centralized sales BDC is that you will upset successful stores, think again. Chances are they might not be all that successful.

Reason #2: But, we really do have legitimately successful internet teams!

Great, make one of those legitimately successful internet managers your Director of BDC Operations and let him or her create the centralized sales BDC for you.

“But, why would we want to dismantle our successful teams?” you ask. One simple reason; and it’s called math.

Let’s say you have twenty stores in your group and in ten of these you have legitimately well-run internet teams. (Highly unlikely that half of any group’s stores have legitimately well-run internet teams, but I’ll give you the benefit of the doubt here.) This means in the other ten you are losing sales and wasting money. Moreover, in all twenty stores you are starving the sales floor. In fact, in the ten most successful internet stores, you probably enjoy high floor sales turnover. You see, when the internet team is really successful, there is little left for the floor team except for Ups and their database.

Of course, since we all know the average floor team will not work their database, you were forced to bring in a third-party equity mining company and then you hired one or two agents to make the calls for your floor teams – adding costs and wasting even more money.

Finally, assuming your twenty stores are all of average size, you are employing twenty internet managers and roughly 140-150 internet salespeople to manage about 17,500 total opportunities each month. (Using the BDC math above, we know this should equate to 2,188 sales on the low side and up to 4,200 on the high side.) If you ran a centralized sales BDC you would use about half the labor (roughly 75-80 agents) and sixteen fewer managers (three supervisors and one director).

Reason #3: We can’t afford to run a BDC; our compensation will get out of whack.

You are correct. No group can afford to run a BDC that’s considered a cost center for very long. That’s why you must create your centralized BDC from the ground up to be a profit center, not a cost center. This is the only way to ensure your BDC does not become a compensation burden on your group. In other words: someone has to pay for the BDC.

When some of you read that last sentence, you immediately figured you can “pack” all vehicles another $50 and use that to pay for the BDC, right?

Wrong. Packs don’t work in most situations and they especially do not work here; because even though a $50 pack would reduce the commissions paid by $12.50 per vehicle (for the average salesperson), this additional pack would have no impact on mini deals (which describes most new car deals today), and your BDC would still be a cost center – just one that’s allegedly paid for artificially.

Also, if a pack did work in this instance, it would effectively reduce commissions across the board for all sales and you’d be left with a sales team making less money – even on the deals that did not involve the BDC. Eventually, your great salespeople would migrate to a better paying dealership, wouldn’t they?

If you want your BDC to be successful and maintain the integrity of your overall sales comp, then you need to create a sustainable pay plan. Simply put, this is a pay plan that allows you to grow the BDC without blowing up your labor expense. Here are the basics for a sustainable pay plan for a centralized BDC:

The BDC agents are paid on appointments that show; not on sold units and not hourly (though there is generally an hourly component to the base/draw that a BDC agent will make). For most markets, a solid pay plan for an Appointment Coordinator (BDC agent) would look like this:

  • $10-$15/hour in base pay that is a draw against commissions.
  • $50 commission for every valid appointment that shows (within 45 minutes of the appointment time).
  • $100 volume bonus for every 10 valid appointments that show.

The way you pay for this plan is you compensate the floor salesperson that closes a valid BDC appointment with a reduced commission. Generally, this is a half commission with a full or half mark toward their volume bonus. (After all, this is the epitome of a split deal: One person set the appointment; another person sold it.)

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For managers or salespeople who gripe about this plan by saying something nonsensical like “I did all the work, why do I only get half the deal?” Remind them that if they did their jobs correctly, we wouldn’t need a BDC.

Reason #4: We tried a BDC before and it didn’t work.

There are plenty of reasons why your BDC failed in the past – in fact, most of the early automotive BDCs are long gone. Learning not to repeat the same mistakes these early adopters made is critical to ensuring your new centralized sales BDC is a success. So, if you’ve tried and failed at a centralized BDC in the past, these are the most likely causes:

A) You had no real commitment to the BDC. I’ve watched groups build an expensive centralized BDC after the owner returned from some 20-group; only to dismantle it in six months. All of this, because the owner was never really committed to even the idea of a BDC. Creating a centralized BDC is a big decision that should not be made lightly. In order to be successful in the long term, you need to be prepared to burn the boats. You also need to be prepared for your sales managers and GMs to attempt to circumvent and even sabotage the BDC. Every manager needs to understand that the centralized BDC is your future and anyone not fully onboard can work someplace else. (Are you prepared for this level of commitment? If not, why not? Remember, if these managers were doing their jobs properly, you wouldn’t need a BDC.)

B) You created convoluted comp packages. When thinking about your failed BDC, ask yourself: Did you compensate for the performance you wanted? The two compensation plans I see fail with BDCs more than any others are: (a) Paying the BDC on sold units; or (b) Paying a good hourly wage and just “spiffing” on appointments. Here’s why these fail:

1) When you pay a BDC agent on a sold unit, you are asking them to sell. This is just not possible over the phone and leads to agents who set fewer and fewer appointments, because they try harder and harder to sell the prospect before they ever arrive. (It’s important to remember that in automotive you cannot sell an empty seat. You should only pay your BDC agents on what you want from them: A shown appointment.)

2) When you pay a good hourly wage and only spiff on appointments, you get agents who learn to live off their hourly wage and end up setting only 10-15 appointments that show each month. (A good BDC agent handling 200 leads should set 50 appointments that show each month; and you’ll get this performance when the hourly portion is just a draw and not the bulk of their compensation.)

C) You had weak rules that encouraged weak performance. Do you have a 72-Hour Rule in place? The 72-Hour Rule is my favorite example of a weak rule that encourages weak performance. If you don’t know what I mean, let me explain it. The 72-Hour Rule was put in place to stop skating and to encourage your team to record Ups in the CRM (because it protects salespeople from losing a sale so long as they can show they had some sort of meaningful interaction with the customer in the last 72 hours).

So, if I catch an Up on Monday, put them in the CRM, and they buy on Wednesday (my day off), the 72-Hour Rule dictates that I get half the deal. It doesn’t matter if the Up hates me or that I made zero Be-Back calls, I still get half the deal. (Why would I ever make a Be-Back call again?)

For a BDC, this rule means they never need to set firm appointments, they just need to show some interaction in the CRM to get credit for the deal. This weak rule encourages the weak performance, because it compensates BDC agents for data entry and not for actually driving a real appointment that shows on time.

D) You allowed the BDC team to cheat. A famous BDC trick that some stores not only allow, but actually encourage is called “reconciliation.” Reconciliation is a way for managers to show the owner just how great they are at this internet thing while compensating the BDC for work they never accomplished. Reconciliation works like this: last month a woman named Barbara Jones submitted a lead; today a woman named Barbara Jones bought a car. Ergo, Barbara Jones is an internet customer and a BDC deal. Mark it! (“See boss, we’re closing 30% of our internet leads!”) Your centralized BDC will not last unless they’re creating what we call “plus business;” and when you allow them to reconcile to find internet deals, there is no reason for them to actually work the leads they’re given.

E) Your BDC was a cost center. When the BDC cannot pay for itself, their costs grow as they become more successful. Go back and read Reason #3 if you don’t know how to keep your centralized BDC from being a burden to your group’s total compensation.

F) You staffed your BDC incorrectly. A lot of failed first attempts at a BDC went like this: find your most technologically savvy salesperson and make him your BDC manager; then have him hire a bunch of mediocre salespeople and have him teach these folks how to sell cars over the phone. Now, sit back and wait for the magic that never happens.

A true centralized sales BDC is not a technology play, nor is it even a sales play. It’s a process play that requires call center-like rigidity and measurement. This is because a BDC has more in common with a bank call center than it does with your sales floor. Staffing it with technology geeks and failed salespeople only ensures you will not succeed. You need to find someone great with process who can supervise others and who is a slave to metrics; and enlist them to build a team of phone pros who can stick to your scripts. (It really is that simple.)

G) You measured your BDC like you measure your sales teams. As I wrote above, your BDC has more in common with a bank call center than your sales floor; so it’s important that the metrics you use to grade performance and how you compensate this team should have less to do with how you measure your floor teams and more to do with what you want them to achieve.

For example, you want them to make lots of outbound calls, right? So you should accurately measure call volume, call length and call results. Next, you want them to set lots of real appointments that show, right? Okay, so you should also measure their ability to not only set appointments that show, but also compare this to how many leads they worked. It does you no good to have a BDC agent setting 50 appointments that show each month producing 40 buyers, if that agent is managing 1,000 leads. (At that volume of leads, you should expect a minimum of 125 sales.)

Reason #5: I know a group that tried this and the store managers convinced the owner to shut it down.

Just because some other dealer group has a weak owner with no vision doesn’t mean you do. General managers and sales managers are by and large Type A personalities who need control – even of the things they have no idea how to control (like the internet sales process). When someone else is in control of anything that relates to their store, they generally don’t like it.

By the way, I actually do know a group that created a successful centralized sales BDC only to see it dismantled because the GMs pressed for it. This goes back to Reason #4A (above): the owner had no real commitment to the BDC. Consequently, he allowed his GMs to unilaterally change the BDC compensation plan as it related to their respective floor sales teams in a way that guaranteed the successful BDC would become a true cost center. Finally, he sat back while the GMs worked hard to sabotage the efforts of the BDC manager; and in the end, he had no choice but to close the BDC at their request.

Reason #6: We struggle to staff our internet teams, how can we ever staff a large BDC?

You struggle to staff internet teams at the dealership level because you have bad leaders, little training, no real process, no real structure and/or a relatively small team. Let’s tackle each of these in order:

  • Bad leaders. Sorry, but the average sales manager in automotive is great at desking and closing deals, and crappy at leading people. Great internet salespeople won’t work for these jerks and neither will great BDC agents. Of course, in a centralized BDC environment – away from the store – great BDC agents thrive, because they are led by a team of supervisors and a director focused on their short and long-term success; not someone focused on simply the next deal.
  • Little training. The sad state of sales training by industry sales managers is the very reason we have so many fabulously wealthy sales trainers in automotive today. Have you ever wondered why other industries don’t have such a plethora of expensive training offerings and conference after conference after conference teaching the same things over and over? It’s because their managers actually train their teams! In a centralized BDC environment – away from the store – BDC agents are all taught the same processes and talk tracks. Moreover, because all of the agents are in the same room with the supervisors at all times, reinforcement of the proper methods is both immediate and ongoing.
  • No real process. With internet sales, process sells cars. Period. End of story. Unfortunately, because most stores have been successful over the years at just throwing salespeople at Ups, most sales managers have no idea how to create, manage and maintain solid processes. Because of this, your results suffer and you experience turnover. (Strict adherence to processes, by the way, is the real reason your stores are not as successful as process-driven dealerships like Longo Toyota and Texas Direct Auto.) In a centralized BDC environment – away from the store – agents have no choice but to follow your processes; and because of the constant supervision, immediate process corrections are made in the rare instances they do not.
  • No real structure. I still see in-store internet teams that “sometimes” take Ups, “sometimes” have admin clerks who make “some” of the follow-up calls, “sometimes” work bell-to-bell and whose manager is “sometimes” in charge of fixing the computers in the store and “sometimes” works the desk while “sometimes” reporting to the GM and other times reporting to whichever sales manager is on duty. This is what we call a Hot Mess. There is no structure; there are no hard and fast rules for these teams. Believe it or not, your teams want structure. They want order. They really do. In a centralized BDC environment – away from the store – the agents get plenty of structure that includes a set work schedule, an actual organizational chart and written rules that guide everything they do.
  • A relatively small team. Size matters; it really does. When you have a team of five end-to-end internet sellers and two people quit, you’ve lost 40% of your staff. Who handles their leads? Do you expect the other three to simply manage these (an increase of 67% to their individual lead counts)? Do you expect the internet manager to step in? If the internet manager has to handle these leads, then who does the recruiting and hiring for their replacements? Of course, in a centralized BDC environment with 25 agents, the loss of two agents has no real impact on the team, because it’s easier for the remaining 23 to absorb 8.3% more leads over the short term than it is for three internet salespeople to absorb 67% more leads. Staffing is simply easier with larger teams (as is onboarding, training, scheduling and vacation coverage); it’s one of the great benefits of scale.

Reason #7: More and more of our customers want the Out-The-Door Price before they will even consider coming in; a centralized BDC would never have that information.

You are 100% correct – and it’s great that the BDC can’t provide this information!

Why exactly would you want to vomit your absolute lowest price on someone who’s not even willing to come in? Why would you want to build Out-The-Door numbers for someone 80 miles away on a vehicle they can get in their own market? (It’s important to stress: this is what makes a BDC great – they have almost no information to share beyond your internet price; so they just set appointments!)

Need more evidence? Look at the math in Reason #1: 450 leads, lowest price given, 30 sales. This means 420 of these 450 went somewhere else or did something else after receiving the lowest price. Is this what you want? If so, then don’t create a centralized BDC and don’t hire an end-to-end internet team. Just sign up for one of the many automated email companies who claim to use Artificial Intelligence to vomit the lowest prices on everyone.

When the lead comes in, just fire back your bottom line price automatically with a note saying this is your bottom line price. This way you save money and save the headaches of staffing any internet or BDC team. Of course, this also means you cannot set appointments; and without appointments you cannot provide an in-store VIP treatment, because you have no idea who will arrive or when. (The average store closes internet appointments at a rate 2.5 times better than Ups who arrive without an appointment.)

Your BDC agents should be Appointment Coordinators, not Customer Service Consultants and not salespeople. So, even if you are a one-price group, a centralized BDC staffed with Appointment Coordinators can and will set firm appointments that show with your prospects. You cannot get this with a group that just fires off Out-The-Door numbers at every lead.

Reason #8: Some of our stores are having their best year ever and we don’t want to do anything to slow down their momentum.

Do you seriously think that the current market growth in the US is due primarily to your sales teams? No offence, but almost everyone is having their “best year ever” right now. Some dealers – those with strong, repeatable processes in place – are also growing significant market share right now.

With a centralized BDC in place, your floor teams can focus on creating better in-store processes for Appointments and Ups, while the BDC delivers a steady stream of ready-to-buy customers that arrive on time, just when you want them.

Reason #9: Our General Managers want to control this locally.

Of course they do; who wouldn’t? The problem is they can’t control this. Again, no offense, but most of your general managers can’t control the floor team enough to ensure they make even one real Be-Back call a day, can they? And with this track record of process management, you think they deserve to control the place where 90% of your customers start their search and where more than half eventually finish it?

If you polled your GMs, you’d find that some of them like a certain DMS or CRM better than the one your group has selected. Do you allow these GMs to change their DMS or CRM? Of course not! Despite what they would prefer, you chose to centrally make some decisions because you could negotiate a better deal and because you could streamline and formalize certain decisions and processes that allow your group to benefit financially. You would never allow a GM to go his or her own way on a DMS, so why would you allow one to hurt your group’s ability to significantly grow share by going his own way on an internet sales structure?

Reason #10: Our salespeople should be making the calls we want the BDC to make.

Yes they should. So why aren’t they?

I guarantee that it’s not from a lack of trying on the group’s part or the owner’s part to get the floor teams to make calls. Simply put, they aren’t making these calls for all the reasons detailed throughout this post. Though, more specifically, your managers are more concerned about checking a box that the calls were made than actually managing their teams and generating great calls that follow your scripts.

The great news is that you don’t need floor salespeople to make any calls if you create a solid centralized sales BDC. (And because you use a sustainable pay plan, you’re not adding any costs in the process.) Once your BDC has proven successful with internet sales follow-up calls, you can assign Owner Marketing and Be-Back calls to this group with the same sustainable pay plan stipulations as internet sales appointments.

Okay, I’m All Out of Reasons…

So, are you ready to actually create, run and succeed with a centralized sales BDC for your group? Excellent; though before you overthink this and spend a lot of money moving in the wrong direction; start with the lessons from this post and also read our BDC Best Practices (The Five Absolute “Musts” for a Successful Automotive Sales BDC).

Who knows, if you do this correctly, you might also want to move all of your service activity to this centralized call center within the next six to twelve months. The only reasons you should not do this are all listed above.

Good selling!