Car sales, redundancies and the downward spiral

Now that many dealer groups have streamlined their businesses to meet the challenging new economic environment (in other words they have made a lot of staff redundant) it is becoming increasingly clear that, in some cases there are not enough sales and service staff to take care of the increased influx of customers driven to the dealership by the lure of cheap cars. When any business enters tough times the quickest way of saving money and cutting costs is by letting people go, but is that always the best way? Businesses often say in their vision statements that their people are what make their businesses successful and without good staff working for them they would not have a business, so why is it that as soon as tougher times come around the first move is to make job cuts?

Perhaps I am being too simplistic, perhaps this is the only way to protect the business as a whole and avoid death by a thousand cuts. Businesses in this situation take immediate action with redundancies and then rely on the staff, still lucky enough to remain employed, to take up the slack.

The reality from what we are hearing is that with increased footfall in showrooms customers are often waiting much longer to be attended to and some are walking away perhaps never to go to that dealership again. Some sales managers we spoke to could easily employ two more sales people to cope with what is happening but management are just too cautious and not confident to re-employ staff sometimes a few months after making them redundant. The result is dissatisfied customers, lost sales opportunities, damage to profitability and so on, which ironically the cuts were made to protect in the first place. Perhaps what is needed is, before hastily slashing the workforce, dealers first decide where there may be other areas in the overall business that they can look to increase revenue and draw more potential customers in rather than just assume that by cutting three jobs and making a short term saving whether in the long term you may actually lose more than your save.

Dealerships will get a proportion of their “back-end” bonus from the manufacturer based on them meeting agreed customer service standards. This is often ascertained by independent companies working on behalf of the manufacturers carrying out what is known as a “mystery shop”. The dealership is assessed in its handling of prospective customers and is either conducted by telephone, internet enquiry or filmed walk- in enquiry (yes the “mystery shoppers” do wear concealed cameras!). The “mystery shoppers” work to a predefined script and sales people are scored as to the quality of the information they provide and the skill with which they handle the encounter. Increasingly, manufacturers are imposing greater financial incentives for excellent results and harsher penalties for non-compliance.

In the current unprecedented economic climate the rush to cut head count and cut costs may end up having the opposite outcome to the one intended and dealerships may find themselves entering the car sales downward spiral:

We enter the economic downturn, head count is analyzed and sales staff are cut to reduce costs and improve the balance sheet. However at the same time the increased unsold stock has reduced prices and the wide availability of cheap cars has resulted in more sales prospects. Now there is a problem, not enough sales staff to deal effectively with increased number of sales enquiries which in turn results in prospects being “cherry picked” by the remaining sales staff. The knock-on effect of this is that our friend the “mystery shopper” is on the receiving end of a less than satisfactory experience and the dealerships “mystery shop” targets are then missed and the back-end bonus severely reduced. There now need to be some cost cutting and, guess what? Yes more sales staff are cut!

Without happy customers there is no business!

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