Fiesta dealer training

[Noah Harbinger]

It's not that big a deal to me....

 

Eh I like that site. They summarize most books in one or two short sentences (though the Animal Farm one is a whole page!), generally with a heavy dose of sarcasm. It's been around since the early days of the interwebs, too.

 

For instance: A Farewell to Arms:

 

Frederic Henry: I'm separated from my true love in World War I Italy.

Catherine Barkley: Here I am. Let's hide in Switzerland, whoops, (dies).

Frederic Henry: War has made me cynical.

 

THE END

[Marginal Economist]

On a recent morning I had one of my vehicles at the dealer for routine maintenance. As is customary, I toured the lot and proceeded to the showroom to see what was inside. Upon entering the showroom I saw the sales force having a meeting. I assumed it was a normal sales meeting, but after listening for a moment I learned it was a trainer from Ford headquarters. I asked if I could listen in, and he said it was OK.

 

He started with some points about the Raptor (one was in the showroom) then took the group outside for a presentation about the EcoBoost Flex. Then the group reconvened in the showroom for the main training regarding the Fiesta.

 

Using his PC and a small flatscreen monitor, the trainer went through a slick PowerPoint presentation. He started by highlighting the car itself, focusing on its attractive styling, many desirable features, 30+ year European heritage, etc. He discussed the competition, noting that the Honda Fit is a great car but many other B segment cars really aren't very desirable (e.g. Chevy Aveo). "We are making a car people WANT TO have, not just because it's all they can afford." Speaking of affordability, during banter with the sales force, he asked what was appealing to them about the car. One salesperson said, "it's cheap!." To which the trainer replied, "never say this car is 'cheap.' It may be inexpensive, but it's definitely not 'cheap'."

 

After this, the trainer proceeded to the next part of his presentation: a discussion of the sociology and psychology of the typical Fiesta buyer. Actually this took up most of the presentation. It included a detailed discussion of the Fiesta Movement, information about social media (Facebook, Twitter, YouTube), and demographics. Some of the statistics were staggering, such as how quickly these social media have become prevalent in society. There were many comments along the lines of --- the Fiesta customer may be young but they are very savvy, many of them have never set foot in a Ford dealership, we finally have something of interest to them so we must get the whole experience right, or within minutes the whole world will know about their bad experience.

 

Apparently there will be info forthcoming after the LA Show about actually being able to reserve a Fiesta. If I heard it right, he explained how those reserving a car will be assigned a "big brother" within Ford who will be responsible for helping them through the process, including keeping them posted on exactly when their car will be built. (Shades of previous well-appreciated insider help on this forum!)

 

At the end I thanked the trainer, noting that as a 'car guy' I found this all extremely interesting. I said that the whole thing had Jim Farley written all over it. He smiled and commented that the Fiesta Movement was a tough sell due to its cost and its out-of-the-box approach, but he noted that it had all the marks of extreme success. An example was that the name recognition for Fiesta is many times more than Flex, even though the car isn't out yet (I guess there are companies which count and analyze these sorts of things).

 

I also found it interesting that this training was being done so far in advance. I guess it will take some time to get the dealer network oriented to a new product in a new segment with a new customer base.

 

You sales folks may find training like this just part of the job, but I was fascinated by it. Hope you enjoyed the write-up.

 

PS The trainer was driving an orange Raptor.

 

Here is a link to the social media video they used:

[Edstock]

For instance: A Farewell to Arms:

 

Frederic Henry: I'm separated from my true love in World War I Italy.

Catherine Barkley: Here I am. Let's hide in Switzerland, whoops, (dies).

Frederic Henry: War has made me cynical.

 

THE END

 

Wherever he is, Ernie is probably pissed.

[JETSOLVER]

Since we are for the foreseeable future wedded to the the "salesperson" model of doing business, this is makes me wonder...

 

How do we change the game?

 

If a young person with acceptable credit who pretty much could research, directly compare numbers, run the numbers, build, price and order online could just drop into a bright and clean dealer to meet their, er, "friend" to pick up their first new car, would that change the game?

 

Interesting in all the discussion of the N.A. industry, there has been no traction to breaking the model, and going to something more akin to the DELL sort of warehouse "just for you" thinking.

 

With some level of customer after sale service included of course...unlike those so and so's. :P

 

I realize the dealer one step removed legal issues, but the first manu that puts its thinking toque on is going to find an entirely new way to do business, a unique revenue model that will forever change the way we do this.

 

Or is buying a car still so different than the online sales model that it requires an entire footprint?

 

Honestly, the approach of a sales person is a toss up between who would rather least do it...

[RichardJensen]

Production scheduling is a huge issue with the 'build to order' model.

 

A computer has significantly fewer and smaller parts. Much easier to build one of them to order, especially if you've got a warehouse of parts and a robot doing the inventory picking. Robot is given the configuration, pulls the items off the shelves and routes them to the assembly floor. Cannot, just cannot do that with cars.

[dante hicks]

Production scheduling is a huge issue with the 'build to order' model.

 

A computer has significantly fewer and smaller parts. Much easier to build one of them to order, especially if you've got a warehouse of parts and a robot doing the inventory picking. Robot is given the configuration, pulls the items off the shelves and routes them to the assembly floor. Cannot, just cannot do that with cars.

 

Without a doubt, building to order would not work, but right now Ford has the configure app online and then offers to find it at the closest dealer. That is essentially the same thing as Dell -- with the addition of a middle man. If a car company could eliminate a dealer network, they could sell for less money than the competition. There are obvious issues - test drives, shipping, cars are much more different from each other than computers are - but the company that addresses them (and I think one will) will likely revolutionize the business of selling cars.

[roush235]

This talk about dealers and sales people reminded me of one other part of the trainer's presentation. Near the end was an appeal for sales staff to be more "useful" or "helpful" to the expected buyer. Suggestions included opening a Facebook account or starting to text. A few of the sales people present said they were in tune with social media.

[RichardJensen]

That is essentially the same thing as Dell -- with the addition of a middle man. If a car company could eliminate a dealer network, they could sell for less money than the competition.

Think this all the way through:

 

- That middle man foots the bill for carrying inventory in the expectation of turning a profit on it.

 

If you eliminate the middle man, Ford is stuck having to house tens and thousands of units of inventory to sell to people who expect to purchase the vehicle for less than what they would pay a dealership, "because there's less overhead"

 

I will just about guarantee you that a dealer spends more per vehicle on prep, interest, and operating expenses than they do on sales commission.

 

"But Ford won't have to borrow money to pay for their inventory."

 

True. However Ford will still expect to earn their average margin on floorplan interest, otherwise they'll be making less profit from the direct model than from the dealer model.

 

- Who will negotiate the value of a trade in?

 

- How can Ford compete with new car dealers that can profit off of used car trades, when Ford will have to sell those trades wholesale, losing the retailer's markup? Or should Ford be in the business of selling used Chevys, Pontiacs, and Toyotas?

 

- What will happen when you have gigantic storage lots that are under high security patrolled 24 hours a day, 7 days a week, that are not open to the public? Will 'traditional' customers take kindly to being kept off the storage lot and told, 'no, you can't look at the cars. You have to go home and order one over the internet". What will be the cost in time and personnel to shuttle vehicles and/or customers back and forth from these storage lots?

 

- Nearly all of these 'direct sales' models have some provision for a local service point that will have demonstrator models and staff to assist with the ordering process, pickup, delivery, paperwork, etc, as well as parts & service departments.

 

The problem is that's 90% of a dealership right there. The staff that assist with the ordering and demonstration are basically sales men and where conventional dealerships have a comparatively small number of demonstrators vs. their overall fleet, a 'direct order' shop would have to carry a greater number of 'demonstrators' because the sales rep wouldn't be able to just show the customer what a feature looked like in the stock fleet, while offering a test drive in the demo vehicle.

 

Basically, you're eliminating a fraction of the dealer's overhead, creating a need for a whole new bureaucracy at Ford, and adding significant cost with the expense of stock lots.

 

Not to mention that you won't eliminate 'deal shopping' as many customers will still insist on price negotiation.

Edited November 22, 2009 by RichardJensen

[theoldwizard]

If production scheduling for build to order is that big of an issue, then it needs to be fixed. Last I knew the Ford system mimicked a system based on keypunch cards which was why it was easy to move one order to the head of the queue.

 

Something new to me in the last car purchase I was involved withe (my son bought a car and I co-signed) was the "processing" fee. For the few minutes it took to run the credit checks and print the orders I figure those people were making $200-300/hour ! Processing fees leave a bad taste in my mouth.

[RichardJensen]

Well you're going to pay the processing fee one way or the other. Fees are one of the ways that businesses respond to price pressure. "Sure we'll go $1500 below MSRP, but we're going to shortchange you $500 on your trade in and take another $50 from you for processing fees. That's how we'll get back the $500 we're giving up on the sale and then some."

 

---

 

Build to order is DOA. How many tens of thousands of variables would you have to account for in that scenario?

 

You think that Ford's going to spend millions and millions and millions of dollars, lobby to have laws changed in all FIFTY states, all for the pleasure of taking every aspect of order fulfillment IN HOUSE, having to create a huge new sales organization, having to institute thousands of policies and controls that don't exist and which, furthermore, have no acceptable models anywhere, all in order to save maybe, MAYBE fifty bucks off the sale price of a car? Maybe?

 

Ford should assume 90% of the dealer's costs, plus the expense of thousands of new employees that they don't have, and tear up the supply contracts with every single tier one supplier, causing ripples all the way down the line to Bob's House of Discount Gaskets, which manufactures grommets for the rear door handles on the Fusion and Milan

 

This ain't the computer industry.

 

And even at that, guess what? I can buy Dells at Wal-Mart. If direct to consumer were the end all and be all, big box stores would be going away instead of proliferating, and items would be disappearing off retailer shelves and becoming available exclusively online.

 

Instead direct to consumer is being supplemented by retail sales.

 

And that's with simple easy to assemble any teenage kid could do it not to mention some second graders stuff like computers.

 

With cars----sorry, but you're doing this:

 

Edited November 22, 2009 by RichardJensen

[RichardJensen]

I mean shoot. Why don't I just buy all my groceries on line and have them delivered to my door!

 

Direct to consumer just doesn't work everywhere -- even though we've been conditioned to think that it should

[rmc523]

I mean shoot. Why don't I just buy all my groceries on line and have them delivered to my door!

 

Um, they do that...

 

Publix (you probably don't have them up there yet) did exactly as you described (you order online and they deliver it all to your house) for a while anyway - not sure if they still do though.

Edited November 22, 2009 by rmc523

[RichardJensen]

PublixDirect is done. Nobody's figured out how to make money off direct to consumer groceries.

[Marginal Economist]

PublixDirect is done. Nobody's figured out how to make money off direct to consumer groceries.

Alice.com for non perishables. Your point on car dealership is dead on. You;d still need a service center and a place for test drives. Try getting the franchise laws changed in a state. Owners donate a lot of money and are huge in local politics.

[Noah Harbinger]

PublixDirect is done. Nobody's figured out how to make money off direct to consumer groceries.

 

 

Two of the big three around here do it:

 

* http://shop.safeway.com/superstore/default...p;page=corphome

* https://shop.albertsons.com/eCommerceWeb/Sh...on=browseOnline

 

Well, I don't know if they make money off of it, but they're at least offering it.

[dante hicks]

You make a valid point in that direct order companies tend to go retail as they grow. There is obviously a set of people not comfortable with that model.

 

The other issues you bring up can be addressed. While there are issues with having huge car lots, are those issues mitigated by the fact that you don't have to have them in populated areas? You don't have to have numerous dealerships in the Dallas-Fort Worth area, you can have one big one out in the middle of nowhere.

 

If a company does not have a service department, a car company could "license" shops (which, I think they already do) that could be reimbursed for warranty work.

 

It's interesting that you bring both trade-in and price negotiation up. It seems to me that the person looking for the easy sale of the trade in would rather avoid negotiation and the person looking to negotiate would rather sell the car him or herself. We would just have used car dealers -- that's where dealers make their money anyway. The used car would give the owner what it's worth, and the car company would sell a new car for what they need to sell it at to make a profit. Honesty in pricing.

 

In no way would this model work now with an established company, but in 20 years with a player who is new (insert Chinese company or electric car start up here) to the market? I could see it happening.

[nelsonlu]

PublixDirect is done. Nobody's figured out how to make money off direct to consumer groceries.

 

Safeway has been doing it for a few years now. Surely I doubt that they'd be continuing to do it if they are losing money on it.

[RichardJensen]

Two of the big three around here do it:

 

* http://shop.safeway.com/superstore/default...p;page=corphome

* https://shop.albertsons.com/eCommerceWeb/Sh...on=browseOnline

 

Well, I don't know if they make money off of it, but they're at least offering it.

They're charging for the 'convenience' of home delivery.

 

You try and get people to pay more for a car they buy online.

[RichardJensen]

The other issues you bring up can be addressed.

The problem is that the cost of addressing them takes you right up to dang near the cost of running a dealership.

 

It's interesting that you bring both trade-in and price negotiation up. It seems to me that the person looking for the easy sale of the trade in would rather avoid negotiation and the person looking to negotiate would rather sell the car him or herself. We would just have used car dealers -- that's where dealers make their money anyway. The used car would give the owner what it's worth, and the car company would sell a new car for what they need to sell it at to make a profit. Honesty in pricing.

 

In no way would this model work now with an established company, but in 20 years with a player who is new (insert Chinese company or electric car start up here) to the market? I could see it happening.

It won't happen because those franchise laws are universal.

 

It won't happen because a direct seller will give up significant margin on used cars.

 

It won't happen because the costs of running a direct sales organization with something as complex as a car is going to put you right up there with the cost of running a dealership.

 

You'll save money by not having to pay for a huge lot in a high traffic area, but you'll still have to pay for a medium sized lot in a high traffic area. You'll then spend that money paying for a storage lot somewhere, where vehicles will be shuttled back and forth to the medium sized lot in a high traffic area.

 

I won't even touch the notion of licensing service shops to do factory work----not to mention that you haven't covered parts, which is a huge part of any dealership's operation.

[Noah Harbinger]

They're charging for the 'convenience' of home delivery.

 

You try and get people to pay more for a car they buy online.

 

Don't get persnickety just because you were wrong about home delivery! And because you happened to select a very poor analogy in the first place.

 

People will pay more if they think there's value in the service. Having the car you ordered online delivered to your house doesn't add much value, and could be seen by many as subtracting value (losing the ability to test-drive and get a feel for a car, losing the ability to haggle for a lower price). Find a way to add value by ordering online, and you'll find customers.

 

Groceries are a poor analogy to auto purchasing because you're losing almost nothing by ordering online, and you're gaining a convenience. You can't haggle for groceries, and 95% of the time you're getting something you've bought before - so there's little lost from the experience there. Eliminating a weekly trip has some value to a busy person, a disabled person, or a person without access to transportation.

[dante hicks]

It won't happen because a direct seller will give up significant margin on used cars.

 

It won't happen because the costs of running a direct sales organization with something as complex as a car is going to put you right up there with the cost of running a dealership.

 

You'll save money by not having to pay for a huge lot in a high traffic area, but you'll still have to pay for a medium sized lot in a high traffic area. You'll then spend that money paying for a storage lot somewhere, where vehicles will be shuttled back and forth to the medium sized lot in a high traffic area.

 

I won't even touch the notion of licensing service shops to do factory work----not to mention that you haven't covered parts, which is a huge part of any dealership's operation.

 

Don't pretend you know how much it costs to run a dealership or what it would cost to run a direct sales organization.

 

A car is complex, but the ordering of it isn't (or at least doesn't have to be). Look at how many different ways you can order a Fusion -- there really aren't that many.

 

Who said anything about a medium sized lot in a high traffic area? The whole point is that you wouldn't need it. I'm not saying delivery would be a simple proposition, and I freely admit that I don't know the logistics, but I bet it can be done.

 

Factory work? What dealer does factory work? And I'm sure a shop can order parts just as well as a dealer.

 

Don't assume that just because car sales have been done one way for a long time that they'll never change.

[rmc523]

PublixDirect is done. Nobody's figured out how to make money off direct to consumer groceries.

 

Ok gotcha, didn't know that.

[RichardJensen]

Groceries are a poor analogy to auto purchasing

Actually, no. Both sectors have razor thin margins.

 

But some grocers are apparently able to recover the ADDITIONAL COSTS of direct sales, where I would be hard pressed to envision a way for manufacturers to do so.

Don't pretend you know how much it costs to run a dealership or what it would cost to run a direct sales organization.

I don't have to pretend. I know. I have experience working in both sectors.

The whole point is that you wouldn't need it

So your idea is nobody gets to see a car before they buy it. Ever. People will plunk down $30k (average transaction for a Ford product thus far this year) without ever seeing the car in real life.

I'm not saying delivery would be a simple proposition, and I freely admit that I don't know the logistics, but I bet it can be done.

Ah, the 'hand wave' of dismissal, "I don't know how you'd do it, but I'm sure you could."

Factory work? What dealer does factory work? And I'm sure a shop can order parts just as well as a dealer.

1) new car dealers do factory work using factory manuals, factory tools, and with factory training. If you think that -any- repair shop can do work on, oh, say a Ford Super Duty with nothing more than a bit of training and a Ford logo on the building....

 

2) Where are the parts going to come from? "Hi I need an oil pan for an '08 Fusion" "Great! We'll ship it to you from our warehouse in Kansas City. You'll get it in a couple days." Dealers stock a number of parts convenient to their own service departments and other service departments in all reasonably sized cities.

Don't assume that just because car sales have been done one way for a long time that they'll never change.

Ah, the 'things will change' prediction.

 

Of course things -can- change, and perhaps they will. But the current legal structure, cost structure, and buyer expectations make direct sales a non-starter.

[PREMiERdrum]

Actually, no. Both sectors have razor thin margins.

 

But some grocers are apparently able to recover the ADDITIONAL COSTS of direct sales, where I would be hard pressed to envision a way for manufacturers to do so.

 

I don't have to pretend. I know. I have experience working in both sectors.

 

So your idea is nobody gets to see a car before they buy it. Ever. People will plunk down $30k (average transaction for a Ford product thus far this year) without ever seeing the car in real life.

 

Ah, the 'hand wave' of dismissal, "I don't know how you'd do it, but I'm sure you could."

 

1) new car dealers do factory work using factory manuals, factory tools, and with factory training. If you think that -any- repair shop can do work on, oh, say a Ford Super Duty with nothing more than a bit of training and a Ford logo on the building....

 

2) Where are the parts going to come from? "Hi I need an oil pan for an '08 Fusion" "Great! We'll ship it to you from our warehouse in Kansas City. You'll get it in a couple days." Dealers stock a number of parts convenient to their own service departments and other service departments in all reasonably sized cities.

 

Ah, the 'things will change' prediction.

 

Of course things -can- change, and perhaps they will. But the current legal structure, cost structure, and buyer expectations make direct sales a non-starter.

Dang you and your logical, well thought out arguments! :shades:

[RichardJensen]

Starting from scratch, direct to consumer sales would be more efficient--marginally. Provided something could be worked out for used car trades.

 

It would cost an ever lovin' fortune to implement it at this stage of the game. Consider the cost of lobbying for franchise law abridgement in fifty states. What would that cost? Would you even be able to spend enough money to change those laws?

Edited November 23, 2009 by RichardJensen