sewells group global edition benchmarker may 2016

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EDITORIAL - DISRUPTION IS GOODAt Sewells, we are excited about the ‘disruptive’ context we find ourselves in.

REDEFINING THE CUSTOMER EXPERIENCEDelivering a consistent, defining customer experience requires dealers to lead from the front.

May 2016

Auto Retail Best Practices from Across the Globe

TIME OUT FOR SERIOUS FUNOne of the areas of growing interest in today’s business world, is ‘gamified learning’ or ‘gamification’.

BUILDING YOUR DEALERSHIP BRAND A strong brand can have a significant bearing on organisational value.

INDEX

EDITORIAL ........................................................................ 2

KEY INDUSTRY INDICATORS ........................................... 3

THE ROLE OF LEADERSHIP IN REDEFINING THE CUSTOMER EXPERIENCE ................................................ 4

CHALLENGES FACING AUTO DEALERS IN CHINA’S NEW ‘NORMAL’ ECONOMY ........................................... 6

FOUR THINGS TO KEEP IN MIND WHILE DRIVING OPERATIONAL IMPROVEMENTS ...................................9

BUILDING YOUR DEALERSHIP BRAND ..........................11

NETWORK HEALTH OPPORTUNITIES IN ASIA .............13

TIME OUT FOR SERIOUS FUN ........................................15

DEALERSHIP INTERVIEWS .............................................. 18

EDITORIAL

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GLOBAL EDITION BENCHMARKER02

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The term ‘disruptive’ is becoming an increasingly used descriptor when it comes to the automotive retail industry. Whether it’s a reference to organisations such as Tesla, Carvana and Uber, or a nod to continued shifts in consumer behaviour, there is no doubt that it rings true. The question is whether or not ‘disruption’ is a bad thing.

Formal definitions of ‘disruption’ point to words such as disturbance, disorder, interference and confusion; it suggests a sense of negativity and reason for pessimism. There is however an alternate perspective. Industries such as ours are often targeted for disruption due to inefficiency and latent opportunity, and the inevitable sense that things could be done better. Outsiders are often the first to realise it and incumbents often feel threated by it. It does, nevertheless, present a significant opportunity to reshape and regenerate, to listen to customers and add new dimensions of value.

In this edition of Benchmarker we reflect on disruption and on the broader environment in which we operate. This includes articles by Simon Weller regarding the role of leadership in shaping the customer experience and Abhijit Joshi on driving operational improvements at a dealership level. Chee Tuck Yap and Kyle Dickie explore China’s new economy and network health opportunities across Asia, while Dave Lowrie and Jillian Barrie consider the emerging world of Gamification and the importance of brand building.

AT SEWELLS, WE ARE EXCITED ABOUT THE ‘DISRUPTIVE’ CONTEXT WE FIND OURSELVES IN. WE VIEW IT AS AN OPPORTUNITY TO GENUINELY SHAPE THE FUTURE OF AUTOMOTIVE RETAIL.

We trust that you share this anticipation and are challenged by what it means for you professionally and for your organisation. We also hope that you will enjoy and be challenged by the content that we have included in this edition of Benchmarker, that it gets you thinking and excited by the times we are living in.

DISRUPTION IS GOOD

Dr. Greg Strydom Group Head - Solutions and Innovation

Greg leads a global team of subject matter experts developing solutions,approaches and technology to address the opportunities and challenges in the auto retail domain.

Greg also leads the Performance Consulting Practice and works closely with the company’s strategic clients.

He can be reached on [email protected]

MAY 2016


PROFITS AS A PERCENTAGE OF SALES Total Dealership Gross Profit % of Sales / PBT % of Sales

NEW ZEALANDROA: 14.48%

AUSTRALIAROA:15.69%

ASEANROA: 20.80%

CHINAROA: 9.30%

INDIAROA: 16.06%

SOUTH AFRICAROA: 22.00%

ASSET TURNS (ACTIVITY)

STH AFRICA INDIA CHINA ASEAN AUST NZ

7.20

6.07

7.08

6.135.77

5.95

10

8

6

4

2

SOUTH AFRICA

INDIA

CHINA

ASEAN

AUSTRALIA

NEW ZEALAND

KEY INDUSTRY INDICATORSTHIS EXCLUSIVELY COMPILED TABLE PRESENTS THE KEY PERFORMANCE INDICATORS FOR FRANCHISED MOTOR DEALERS IN THE LISTED MARKETS.

STH AFRICA INDIA CHINA ASEAN AUST NZ

0

15

10

5

20

15.67%

11.43%

6.71%

10.60%

17.96%

13.24%

3.48% 2.71%1.43%

3.47% 2.90% 2.88%

MAY 2016

75.19%

66.60%

72.54%

82.02%

74.89%

76.83%

TOTAL EXPENSES AS A PERCENTAGE OF TOTAL DEALERSHIP GROSS PROFIT

PROFIT BEFORE TAX AS A PERCENTAGE OF TOTAL DEALERSHIP GROSS PROFIT

24.81% 26.07% 25.11%

17.87% 22.62%33.50%

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INSIGHT


As mentioned in the editorial, ‘disruption’ is the big buzzword in business right now, and while it sounds new and exciting, it is actually being used to describe a phenomenon that isn’t new.

Enterprises and organisations are under continuous pressure to adapt and respond to the threat of competition and innovation. Almost always the trigger is technology – think forged metal, printing press, steam engines, the motor car, air travel, personal computing, the internet and smartphones. Disruption is actually a cycle which renews the way we learn, work, access and experience products and services. And once this renewal has occurred and the new model becomes entrenched, the new model also becomes vulnerable to another cycle of disruption.

The automotive industry hasn’t changed much since Henry Ford opened the highways to humankind and profoundly changed the mobility of the middle classes. Sure there have been improvements in the engineering, design, safety, comfort and driving dynamics of cars. However, the fundamental model of manufacture, wholesale, retail and repair has been unchanged for 100 years.

The automotive industry ties two symbiotic organisations together – manufacturing and retailing. Manufacturing is incredibly expensive and high tech, making it reasonably safe against innovators and potential disruptors. A huge amount of capital is required to design, engineer and manufacture an automobile at a scale large enough to be affordable to many and profitable to the organisation. Some challenges are occurring: Tesla is one example, and the interest that technology companies like Apple and Google are showing in autonomous cars is also a threat to the entrenched model.

THE ROLE OF LEADERSHIP IN REDEFINING THE CUSTOMER EXPERIENCE

Simon WellerKey Account Manager

Simon is the head of the Ford Academy for Australia and New Zealand. His responsibilities

include developing and implementing competence development, process refinement and profitability

solutions across Ford’s retail network. He can be reached on [email protected]

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MAY 2016


Automotive retailing is arguably more vulnerable to disruption as it is easy to sell vehicles online – and companies doing that for used cars are getting very good at it. An example is Carvana, which facilitates all aspects of selling used cars without requiring a customer to physically visit a car yard to inspect and purchase a car. Customers go online, select their vehicle, access financing and then pick up their vehicle at a designated delivery location. Customers have the assurance of a ‘no questions asked’ handback guarantee and the whole experience is designed to be different from the traditional, more adversarial, dealer experience.

The delivery experience is particularly important to Carvana. As the only physical touchpoint with the company, they have designed a range of delivery methods to suit customer needs. One method is the vending machine – where a customer is given a token to redeem their vehicle from an elaborate, car-sized vending machine device. This experience is designed purely for the customer, creating a sense of fun and wonder when they pick up their brand new used car.

The only thing stopping online used car sales companies like Carvana from applying their model to new cars, is the exclusive franchise agreement between a Manufacturer and a Dealership. However, if a manufacturer decided to wholesale their vehicles to an organisation like Carvana as well as to a Dealer network, how many consumers would choose Carvana over their local Dealership? It comes down to price and experience. The market will determine price, which is becoming more transparent all the time, so I would argue that experience is the most significant factor.

There is no doubt that when a Dealer gets it right and builds trust, genuine relationships and excitement in what the customer is doing, then they can compete. Nothing can replace the human-to-human connection that a traditional retailer can offer, and if that connection is positive, then Dealers stand a strong chance of seeing off an inevitable challenge. However, this must be the rule and not the exception.

So while there is the protection of the exclusive franchise agreement, Dealers need to be looking to change the way they facilitate and deliver the experience they provide their customers. The key to this is leadership.

So what are the facets of leadership that are so important to a Dealer in delivering a consistent, defining customer experience?

1. LEVERAGE MANUFACTURER INVESTMENT

Manufacturers are very interested in branded customer experience design, which defines how they want their brand to be represented to their customers. It includes designing how a customer interacts with Dealer staff, facilities and online presence, from the beginning to the conclusion of an event. A lot of investment and research is going into it and Dealers are the hotspot – it is in the retail environment where it all comes together.

Take up everything that your manufacturer has to offer – why not use the tools, training and collateral on offer and buy into a network-wide branded experience? Also, seek a seat at the strategy table with the manufacturer to contribute to the experience design.

2. CREATE A CUSTOMER CENTRIC CULTURE

Reward Behaviour, not just Outcomes

What sort of behaviour do we expect when so much of the remuneration Dealers pay to staff is so heavily based on sales outcomes? This approach to remuneration achieves a result – but visionary leaders identify and reward behaviours as well as results, to ensure their people are keenly focussed on facilitating a unique experience, creating engaged customers who come back year after year.

Hire for Attitude

Skills are much easier to train than behaviour is. When hiring, be scrupulous in looking for people who are optimistic, positive, energised by helping people, and who enjoy working with others. Then train to give them the technical skills they need to do their job well. Don’t hire the experienced person who can achieve the result but who isn’t a good culture fit.

Walk the Talk

Employees in any organisation look to their leaders to model the right behaviours. Make sure your leadership team are all demonstrably customer focussed through their acts and words. Find ways to treat your employees like you want your employees to treat your customers.

3. EVOLVE AND RENEW

What is new and different today may well be worn out in 12 months. Always look for new ways to offer your customers an experience that only real people working out of a physical retail facility can offer. Don’t rely on your leadership team to come up with all the ideas either – engage your staff (and their friends and family), your customers, your OEM representatives, anyone who can give you an insight.

4. CROSS DEPARTMENTAL COMMITMENT

Customers aren’t just sales or service customers. They are both - and they are also parts and finance customers. Make sure your whole leadership team is committed to the customer experience and have specific and documented plans for implementing it in their department. Map the customer journey through the Dealership for each experience and ensure every moment of truth is considered and executed well.

In your leadership meetings, ensure you raise and discuss cross-departmental processes and how a customer transfers between departments. This will ensure a customer feels as though the whole Dealership is aligned and working for them. It will also ensure the good work done by one department isn’t undone by another.

There are some real challenges ahead and disruption will come – be ready for it by leading a customer revolution for your Dealership.

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MAY 2016

INSIGHT


Since the global financial crisis in 2008, China’s economy has entered into a ‘new normal’ stage marked by a single digit low-to-medium growth rate of less than 10%. In 2015, the year-on-year GDP growth for the first three-quarters hit a record low of below 7%. Similarly, the auto industry also saw a plunge with the commercial vehicle market suffering negative growth for two consecutive years.

The year 2015 has delivered a ‘cold winter’ for all the car brands in China. To cope with the downturn, the auto manufacturers started to reduce production, revise down sales targets and wage price wars amongst themselves. These were evidenced by the data from China Association of Industry and Commerce that about 90% dealers were losing money in the first half year of 2015. However, this was just the beginning. As the economic slow-down continues, China auto dealers are still facing 6 main challenges.

CHALLENGES FACING AUTO DEALERS IN CHINA’S NEW ‘NORMAL’ ECONOMY

Chee Tuck YapCEO - Sewells Group China

Chee Tuck is responsible for managing the overalloperations of Sewells Group in Greater China includingHong Kong, Taiwan and Macau. He has extensive retail

operations experience and he works closely with OEMs and dealers in the area of retail performance.


Data source: China National Bureau of Statistics & China Association of Automobile Manufactures

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MAY 2016


1. INVENTORY BUILD-UP WILL MAKE THE COMPETITION AMONG DEALERS OVERWHELMINGLY FIERCE

China’s auto market will be set to grow at a low-to-medium speed in the future under the influence of the overall business climate of China; global macro-economy and the increase in urban cities restriction on vehicle’s running on the roads to tackle the hazy weather. Furthermore, comparing the 90,000 dealers (data unveiled by China’s Ministry of Commerce) with a market size of over 40 million units, the industry is suffering a serious imbalance.

2. THE BUSINESS MODEL NEEDS TO BE ADJUSTED/OPTIMISED DUE TO THE DECLINE IN PROFITABILITY

The new vehicle sales and year-end manufacturers’ incentives have been the main income sources for most Chinese auto dealers. However, with this current market situation and the manufacturers’ frequent ‘price war’ strategies, the listed dealer groups’ profit margins have dramatically shrunk in the first half year of 2015, an average drop of 21.77% for the 14 dealer groups below.

Data source: financial reports published by dealers

3. DEDICATED 4S STORES ARE FACING COMPETITION FROM MULTI-BRAND OUTLETS AND E-COMMERCE

The single-branded 4S stores will face challenges as more multi-brands auto outlets join the competition. The policy issued by China’s State Administration for Industry and Commerce on 1st Oct. 2014 terminates the requirements of registration for all general automobile dealers and authorised brand dealers. In other words, this provides legal assurance and comfort for the operations of multi-brand auto stores. Meanwhile, more car supermarkets or shopping malls are joining this competition too.

Electronic suppliers turn out to be a new arch-rival to 4S stores. During China’s Single’s Day (identical with the cyber day sales) on 11th Nov. 2015, over 150 000 units have been sold through the internet, amounting to sales of RMB 30 billion. E-commerce is booming for its relatively competitive price and transparent sales process, which is matching the behavior pattern of modern vehicle consumers — to experience offline and purchase online.

-6.34%Sunfonda Auto

Meidong AutoRundong Auto

Harmony Auto

Yuantong Auto

Baoxin Auto

Zhongshen Auto

Yaxia Auto

Zhengtong Auto

Grand Auto

Guoji Auto

Yongda Auto

Pangda Auto

-6.30%

-5.60%

-4.26%

-3.89%

-3.74%

-3.01%

-2.17%

-2.17%

-1.83%

-0.61%

-0.28%

-0.13%

TABLE 7.1 REDUCTION IN CHINESE DEALER GROUP PROFIT MARGINS - 2015.

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MAY 2016

Five

Mai

n M

odel

s of E

-Com

mer

ce in

Chin

a’s A

utom

otive

Mar

ket

Main Players Model Features

Alibaba, Jingdong Coverage expansion of traditional e-commerce platform

Expansion of business area from normal media scope

Sales channel built and supported by auto brand itself

Model built by dealer groups or co-built with IT enterprises

New competitors

Autohome, Yiche

SAIC

Pangda, Yongda

Ichefeng, Emao

4. PROFOUND CHANGES ARE TAKING PLACE THROUGHOUT THE AFTERMARKET, PUTTING DEALERS ON THE LINE

Monopoly is likely to be eradicated by the new provisions. With the Provisions on the Administration of Motor Vehicle Maintenance coming into force on 8th Aug. 2015, car owners can repair their vehicles wherever they prefer and the monopoly on parts sales will be eradicated, aggravating customer loss.

The aftermarket transformation is intensified by China’s strategy of ‘Internet Plus’. In addition to the traditional quick repair and service chain stores, some emerging operations of ‘Internet Plus’ model have also emerged to seize a foothold in this aftermarket space.

Data source: Reports by China Passenger Car Association and Forecast Analysis by Sewells Group

5. CUSTOMER LOYALTY

As the ratio of repeated purchases is estimated to reach 67.9% in 2020, how to enhance customer loyalty and win them over from competitors will represent a huge challenge for the dealer.

Main Players Platform Features

TmallOnline trading platform of engine oils, tyres

products, parts & accessories, etc. ‘Purchased online and installed offline’ alternative solution

O2O platform for used car sales

Car sharing platform for car rental

On-site car service and beauty platform

Xin, Guazi

UBER, Didi

Kalading

Typical Internet Plus Platform

s in Aftermarket


6. NEW INNOVATIONS IN THE AUTOMOTIVE INDUSTRY

The innovation of electrical and smart technologies also gives rise to new market dynamics, especially when Chinese President Xi Jinping clearly highlights that new energy vehicle will be Chinese auto industry’s only way to become the world leader in this industry. Following the launch of the Internet Plus initiative, many players, including traditional carmakers and IT enterprises inside and outside China have started to invest heavily in Smart Cars.

Technological innovation poses new challenges to marketing. Tesla, for instance, establishes its own direct sales channels, which means dealers will no longer be an indispensable part of the equation.

A crisis, on the other hand, can represent a good turning point. It is good, as opportunities always co-exist with challenges. Certainly, some under-performing dealers will be eliminated in the competition while for the rest, they will need to refresh their thinking to positively tackle the challenges posed by this new ‘normal’.

Based on my observation of China’s automotive market, I would like to recommend some tips for dealers:

1. To shift from high investment models to light investment models

2. To optimise/adjust the business model/focus – aftersales Parts and Service opportunities

3. To make good use of the ‘Internet Plus’ strategy

4. To focus on the Customer Loyalty strategies

5. To improve the overall customer service level

6. To enhance communications with the manufacturers so as to overcome the difficulties together

Data source: Reports by China Passenger Car Association and Forecast Analysis by Sewells Group

ANNUAL GROWTH IN VEHICLE PURCHASES (2009-2020)

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MAY 2016


FOUR THINGS TO KEEP IN MIND WHILE DRIVING OPERATIONAL IMPROVEMENTS

INSIGHT

Abhijit Joshi Group Head - Process Solutions

Abhijit leads the Process Solutions Practice forSewells Group. A dealer development expert with extensive

industry experience, Abhijit is responsible for developing solutions to address process efficacy opportunities

and challenges in automotive retail. He can be reached on [email protected]

In today’s challenging retail environment, achieving and sustaining business excellence at a dealer level is becoming increasingly important. Margin pressure, changing customer expectations and aggressive competition combine to put tremendous strain on operational capabilities, and factors such as skill shortages and other market-related disruptions require dealer managers to constantly be on their toes. The ability to thrive in this environment requires focus and commitment, and the ability to lead from the front.

In our work with automotive dealers and OEMs across Asia-Pacific, Sub-Saharan Africa and the Middle East we have come across a number of dealers who manage to excel despite the obvious challenges. Detailed analysis of what has worked in each of these cases has helped us identify four important success factors.

1. THE ABILITY TO BUILD A CULTURE OF EXCELLENCE

Culture has long been held out as a key determinant of business success, and it is no different in automotive retail. The ability of dealer management to establish and maintain a culture of excellence, around its people, processes and customers is crucial to the ongoing achievement of business goals. Management must ensure that the team knows what they are doing, why they are doing it and are supported by clear goals and measures that drive improvement. This goes a long way to ensuring the acceptance and commitment of all team members.

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MAY 2016


1. CONTINUED

In practice, establishing a culture of excellence requires a multi-faceted and sustained approach. One particular dealer implemented a complete dealership-wide operational excellence initiative, aimed at focusing attention on best practices and what was required to take their performance to the next level. The project included complete program branding and communication to ensure all team members were fully engaged. This was, in turn, supported by team sessions and activities driven by management to ensure all eyes and minds were on the task at hand, and everyone knew what was expected.

2. THE CLEAR DEFINITION OF GOALS AND TRACKING OF CLEARLY UNDERSTOOD METRICS

It is important to define improvement expectations through well-understood metrics. This involves starting with the end in mind and then working back to identify the lead and lag indicators that will indicate progress and success. By way of example, a dealership targeting an improvement in Return on Sales should translate that goal into tangible measures for its frontline staff. That might mean holding out metrics such as gross profit per unit, finance penetration and target achievement. Having specific measures for specific roles ensures ‘on-the-ground’ buy-in and engagement, and demonstrates to employees the linkages between performance metrics at each level in the dealership organisation.

In a recent intervention with a leading OEM in India, a project to improve the customer satisfaction scores of bottom quartile dealerships provided clear evidence of how an outcomes-based approach can work. The creation of performance cascades, linking individual actions to intermediate performance metrics, showed clearly the impact of frontline actions on customer perceptions. The isolation of specific measures around new vehicle delivery and customer follow-up further reinforced this message.

3. ENSURING THAT CORNERS ARE NOT CUT WHEN IT COMES TO TRAINING THE DEALERSHIP TEAM

Focus on training, or lack of it, is one of the important determinants of success or failure at a dealership level. Training should focus on skills development and the reinforcement of business processes, two pillars

which are crucial to sustainable operational improvement. Time and again, the Sewells team have seen department managers either failing to pay attention to the competence of their team or concentrating on one pillar at the cost of another.

Our research shows that dealers who are willing to invest time and effort in training their team on an ongoing basis, and who are committed to improving the overall capability of their dealership, benefit in a number of ways. This includes outperforming competitors and other dealers who do not put in the same effort, achieving greater levels of customer feedback and reduced levels of staff turnover.

4. A RUTHLESS COMMITMENT TO MEASURING PERFORMANCE

Interventions designed to improve operational excellence typically require ongoing measurement and tracking of metrics from two categories, namely input/effort metrics and output/result metrics. Measurement of both metric categories provides a highly effective way of ensuring success. While a sound operational excellence intervention design will provide the necessary framework to measure and track these metrics, it is often difficult to sustain these efforts. Dealers who do succeed in driving performance improvement typically embrace measurement as an integral part of their culture, not as a flavour-of-the-day action.

The evidence clearly supports this point of view, with a recent analysis of dealerships participating in a factory-led performance improvement program highlighting that more than 70% of dealerships failed to follow through and slackened their measurement controls, post the project completion.

While these four factors are all important, they are not a definitive list. They are however a good starting point and given the stakes and benefits associated with success, they are certainly worth taking note of.

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MAY 2016


It is a well-known fact that a strong brand can have a significant bearing on organisational value. This is a concept that holds true across all industries, specifically in retail automotive.

At a dealership level, there are two levels of brand that need to be taken into account, namely the parent or manufacturer brand – primarily associated with the vehicles sold; and the dealership brand – the franchise brand promoted in the local area.

1. THE MANUFACTURER BRAND

In mass-markets the ability to command strong pricing relies heavily on the brand name and reputation of the product being sold. In this regard, the price consumers expect to pay for otherwise identical products can vary dramatically, depending on the brand. For example, consider the Ford Ranger and Mazda B-series built off the same platform, commanding different margins depending on consumer perception. For mass-market vehicles, brand plays a key role in the consumer decision-making process and OEMs invest significant time and energy ensuring that brand integrity is maintained and that the brand is positioned appropriately.

2. THE DEALERSHIP BRAND

While the impact of the manufacturer brand is obvious, the impact of the dealership brand should not be underestimated. Research also shows that there is a direct correlation between the strength of the dealership brand and its profitability and sustainability. What’s more, a strong dealership brand also helps the dealer establish itself as an employer of choice, thereby attracting and retaining high performing employees.

For dealers looking to build their dealership brand, there are three major strategic areas which should be focused on.

BUILDING YOUR DEALERSHIP BRAND

INSIGHT

Jillian BarrieAssociate

Jillian is an auto retail expert and experienced facilitator. Her areas of interest include strategic

planning, digital marketing, customer experience management and marketing management.

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MAY 2016

CustomerExperience

StaffEngagement

Brand ReputationManagement

Consistent

Not Differentiated

Intentional

Not Valued

Consistent

Differentiated

Intentional

Valued

Inconsistent

Unintentional


The sequence of these 3 strategies is not accidental. A dealership must ensure it has its own house in order first before focusing externally. It must ensure that its processes are designed to consistently deliver an outstanding experience for its customers. It must also ensure it has a strong, performance-orientated culture in which all employees are engaged. If these two strategies are working well, then the dealership can manage its brand and reputation more effectively.

Strategic Focus Area # 1 - the Customer Experience

Bain & Company show that companies that deliver superior customer experiences grow revenues 4%–8% above their market peers. From a brand perspective, organisations who deliver great customer experiences drive positive associations. The delivery of an outstanding customer experience in turn drives loyalty, increases transactional value, promotes advocacy and ultimately helps the business generate greater returns.

So how does a dealership ensure it provides the ultimate customer experience?

The first step is for a dealership to assess its current levels of customer experience. The Forum Corporation developed a simple definition of what they called a ‘branded service experience.’ As per the model below, the dealership must provide a consistent, intentional (well-designed), differentiated and valued customer experience.

This ‘branded service experience’ must be designed to maximise the value of all customer touch points along the purchasing and servicing journey. And these touch points should be tracked and managed across all departments, from marketing, to sales, to finance, to service and subsequent follow-up.

Strategic Focus Area # 2 – Staff Engagement

It is often said that there are three key elements to successful dealerships, People, Process and Profit. Whilst great attention is given to profit outcomes and process management, people strategies are frequently neglected. It almost goes without saying that the staff of a dealership shape customer perceptions and deliver on the brand promise – both for the manufacturer and for the dealership. It is also staff who provide the ultimate customer experience, create brand advocates and drive brand value.

Dealership’s looking to drive brand value through the implementation of a strong people-led strategy should be working on driving engagement. This is best done by focusing on talent management, performance planning and engaging them in the business planning process.

Strategic Focus Area # 3 – Brand and Reputation Management

Finally, one of the most important strategic considerations for dealers seeking to build their brand is the one of brand and reputation management. In this day and age brand reputation for the most part, needs to be managed in real-time, more often than not in the online domain. Rapidly shifting consumer behaviour and the increasing importance of customer opinion has created an environment where information is democratised and every voice can be heard. In this environment, social proof has become a critical determinant of consumer perception and, in turn, brand value. Social proof or the collective voice of the customer, powered via social networks and platforms such as blogs, forums and 3rd party customer review sites, has emerged as a force which dealers and manufacturers cannot ignore. The way in which this is managed plays a significant role in building and protecting brand integrity.

Social proof as a determinant of consumer perception has become critical.

So what questions should dealers be asking themselves?

• Is our house in order?

• Do we have the best customer-facing staff?

• Do we have an effective digital strategy that enables consumers to find us?

• Are we aware of all the reviews on our social media?

• Do we have a strategy to manage our reviews in order to protect our reputation and brand?

At the end of the day, in order to build a dealership brand, management teams need to create and deliver a branded service experience, have the best people who can manage their relationships with customers and build the value of the brand; and finally, have a reputation management strategy that will define and monitor customer perception on-the-ground. After all – the customer is the reason the brand exists in the first place!

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MAY 2016

RANDOMEXPERIENCE

PREDICTABLEEXPERIENCE

LOYAL CLIENT

BRANDEDEXPERIENCE


In thirteen years working in greater Asia, including during the boom times of 2007 to 2015, there are a number of common opportunities observed that Dealers and OEM’s across Asia could, and should, be focussing on irrespective of their share, and share aspirations.

OPPORTUNITY # 1: SALES STAFF PRODUCTIVITY

The first and most glaring issue when comparing Asia to long-established markets, is sales staff productivity. It is not unusual for dealers in Asian markets to have sales productivity as low as 1 to 3 vehicles per sales consultant per month. This creates a destructive cycle. Sales consultants can’t live on what they earn, so they leave. Managers, in turn, subscribe to the fact that sales staff don’t stay, so treat them as commodities. The situation is often exacerbated by OEM sales teams who, when looking at monthly or quarterly sales plans, take a dealer’s current productivity rate, overlay it against the aggressive target, and tell them to employ more staff.

Building a lean, productive and stable sales team is in the best interests of all stakeholders, but requires Dealers and OEM staff to be brave. Focus should be on employing quality people, and then inducting, training, supporting and incentivising them so that they can succeed. The net result will be higher levels of compensation for individuals and an increased likelihood of the business achieving its sales targets. By not addressing this issue, OEM’s and Dealers are perpetuating a cycle that is bad for consumers, bad for profit and bad for employees. There are shining examples of Dealers achieving this in markets from China to India to Indonesia.

NETWORK HEALTH OPPORTUNITIES IN ASIA

INSIGHT

Kyle DickieGlobal Account Director

Kyle engages with strategic clients of Sewells Group in the area of dealer development and integrated network performance.

He is a noted industry expert, with vast experience across Asia Pacific, and is also a member of the Sewells Group Board.


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MAY 2016


OPPORTUNITY # 2: THE DEVELOPMENT OF A ‘RETURNS-BASED’ MINDSET

Second, dealers in Asia have traditionally viewed the business as one whose primary purpose is to generate cash. This has created a situation where the ‘health’ of the business, as measured from an investment perspective, has largely been ignored. OEM’s have a significant opportunity to work with their networks, to create a ‘value of franchise’ mindset measured by Return on Operating Assets. This shift from cash to P&L, to Balance Sheet management, not only future-proofs the franchise, but also drives a far deeper understanding of the relationship between the ‘profit-process-people-consumers’ continuum. There is, of course, the significant additional benefit of current and future investors being emotionally connected to the business because of the returns it can generate, relative to other investment opportunities.

OPPORTUNITY # 3: FIXED OVERHEAD ABSORPTION

Finally, there are a number of OEM’s and retailers who have failed to capitalise on the size of the car parks they are building. This lack of focus on the back-end of the business has been exacerbated by market-led growth in sales volumes and the ongoing push for market share. Retailers who have been in business for a long time know intuitively that the secret to sustainable profitability and performance is the generation of solid gross profit contributions from fixed operations (Service, Parts, Bodyshop). The aim should be for these contributions to offset the fixed costs of the business, leaving the profit from vehicle sales as ‘cream on top’. Further benefits of this include reduced exposure to the cyclical nature of sales and product performance. The focus on costs absorption through fixed operations is a significant opportunity which should not be ignored.

MAKING A CHANGE

If one takes a macro view of why these seemingly obvious, and interrelated opportunities are not capitalised on, there appear to be three primary causal factors at OEM level:

1. There is seldom an articulated vision of what ‘network health’ is and a gap in comprehension regarding the key drivers of performance across the business.

2. Within the OEM environment, the ‘health of the network’ is not seen as a strategic priority and does not get sufficient senior management attention.

3. Too many OEM’s present themselves to their Dealers as independent silos of sales and after-sales. This fragmentation diverts the attention and resources of all stakeholders and means that a single, integrated view of network performance improvement is hard to achieve.

The failure to address these underlying issues means that the development of the retailers’ business is often limited to low-level training interventions, with budgets inevitably soaked up by product training. This has little to no impact on improving the way a dealership functions, and certainly no sustainable impact on becoming a franchise of choice.

In my experience while there are some clear differences between emerging and developed markets, improving the health of the dealer network, particularly from an Asian market perspective, is a choice. The question, however, remains whether it’s a choice that the stakeholders are willing to take.

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MAY 2016


TIME OUT FOR SERIOUS FUN!One of the areas of growing interest in today’s business world, is ‘gamified learning’ or ‘gamification’. This isn’t new, and has been used to great effect in the past, but the use of technology and better connectivity has brought it to the forefront as people look for new ways to drive employee engagement and learning. There are a lot of businesses out there (OEMs included), that have already invested heavily in what they believe to be gamified learning. There are some who have achieved success, but quite a few who have missed the mark or simple got it wrong. Like online learning, when it goes wrong, it goes seriously wrong, costing organisations a lot in terms of money, time, support and promises. So how has this happened?

Perhaps it’s best to start by clarifying what gamification is basically all about.

Gamification is the application of gaming mechanics and gaming metaphors to non-gaming scenarios to make difficult tasks and learning more palatable. Basically when we add gamification to learning – or to any situation – we make the entire experience more enjoyable and fun.

Gamified systems can achieve increased focus, deeper engagement and many other behavioural results simply by tapping into the human need for achievement and success. Forrester analyst Elizabeth Shaw described the tactic as “The insertion of game dynamics and mechanics into non game activities to drive a desired behaviour”.

DISCUSSION

David LowrieCEO – Sewells Group Australia & New Zealand.

David is responsible for managing the overall operationsof Sewells Group in Australia and New Zealand.

He is an international expert in product education and technology in training.


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MAY 2016


At Sewells we have taken the methodology of Shaw and other notable gamification experts and used the four I’s in the following way:

• Involvement: Gamification allows the organisation to increase participation among players, leading to a much greater level of engagement than can be achieved through traditional learning, including online learning. This in turn leads to increased learning and practice, which is particularly advantageous as some require practice to learn, and some require practice to become engaged

• Interaction: Gamification incentivises players to interact with activities, leading to increased learning outcomes. For example, businesses can leverage an action/reward dynamic for specific activities and behaviours they want to increase or improve. Physical interaction time can be greatly reduced while still achieving great results. In fact, in some of the most successful Sewells gamification activities we focus strongly on a short term play and long term engagement approach for best results

• Incentive: Gamification allows incentives of many and varying types to be combined to shine focus on participation, this sparks real time, intimate connection with players, leading to long-lasting interest in the activity

• Influence: Incentives such as tokens, badges (these act as a virtual pat on the back) and visible competition leader boards encourage players to share with their social group. Encouraging “social bragging rights“ helps boost word of mouth and encourages peers to join and better themselves within the game

WHY GO FOR GAMIFICATION?

Gamification, if done correctly, has significantly higher levels of engagement compared to any other form of learning. It does this by engaging learners and making the learning process much more enjoyable (or in some cases they are learning without even realising) with the addition of fun features, competition and recognition.

It has been proven that engaged learners are far more likely to log onto a game or their LMS, work their way through games and modules and complete assignments. They also pay attention, participate, respond to challenges, interact with others more and take control of the process.

So we all know that it works, but what else can it do for an organisation? It’s been found that gamification significantly boosts knowledge retention, engagement and enjoyment in many different ways.

There are a lot of well researched and known cognitive benefits. Apps like ‘Elevate’ and ‘Lumosity feature a really unique range of mind training games. On top of this, research has shown that people who play games recognise the value of extended practice and aside from the obvious problem solving and decision making skills, develop qualities like persistence, creativity and resilience.

As a player is guided through a game, the player learns through what is known as the ‘mastery’ process, where their self-perception changes from passive to active, from novice (noob) to expert and onto master, or, in some cases, ‘visionary’ status.

All of this motivates the player to participate more deeply and strive to become master of their own destiny and act accordingly. Add to this a

leader board arrangement that lets them see where they are ranked in regard to their peers and this increases dramatically - the player starts to aggressively consume content. Their motivation and engagement increases accordingly.

Aside from the cognitive benefits, gamification is useful in business for its emotional bonuses as well. Games evoke a variety of powerful emotions in us, from curiosity, frustration and joy, to optimism and pride.

Gamification can help players to progress through negative emotions (like boredom, frustration or fear, especially when they don’t understand the task) and transform these feelings into positive emotions such as a great feeling of accomplishment at having succeeded.

Gamification, if done well, also enhances the feedback loop. This can be done in many ways but the two main ones are through informal and peer feedback (other players), which also incorporates peer learning and idea sharing. The second, and most important benefit is the ability to obtain player gaming results and analyse these to provide really powerful business reports around capability, knowledge and competence.

The other unique part of Gamification is that it can be used for so many differing types of education and interventions from product education to process, customer engagement, self-assessment, decision-making and cultural change. In fact there are a huge range of areas where this can be applied. While technology has been a key part in the recent growth, other non-technology based alternatives are alive and well. Perhaps one of the most notable is Lego Serious Play which has been utilised by a range of larger companies with great effect.

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MAY 2016

N O V I C E

VISIONARY

THIS ISHOW I ROLL

MASTERTop contributor

EXPERTGo ask Rob, he’ll know the answer

PROBLEM SOLVERI can help you with that problem

WHAT’S THIS THEN?


SO WHY HAVE SOME GOT IT WRONG AND WHAT ARE THE MOST COMMON MISTAKES MADE WHEN ADOPTING GAMIFICATION?

What are the top 5 most common mistakes when adopting a gamified approach?

1. Games for the sake of games

When we speak to a lot of OEMs, they tend to dismiss the concept but assure us that they are already doing this. The problem is in most cases they have simply developed some form of online quiz or simplified game that has no real impact, feedback mechanism or business outcome tied to it. Or they have taken an existing online learning module and tried to adapt points, badges and leader boards to it.

2. Games designed by people who don’t play games

This one is very common. People who are regular players of multiple games understand what makes a game enjoyable, and the things that make a player come back and play. This is why the people who make games like ‘Plants vs Zombies’ are now in such high demand, as they understand how to take a simple format and get a player back and motivated time after time. All too often in the interest of just getting something out there (see above point), the development is given to someone without taking this crucial point into account.

3. Thinking that gamification is just about technology

As previously mentioned, gamification is not new and has been used to great effect in the past and in fact still is. I have personally as part of a Six Sigma program, been a part of a gamified session on process improvement which was great. Sewells has actively been developing a board game for use in dealership business modules. More recently we have looked at Lego Serious Play, which is a really unique way of taking something that we may have all played with at some time in our life and creating games which produce really powerful outcomes from a business perspective. The levels of interaction and engagement with this program are incredibly high, if run correctly. The only challenge with these is the need to have people together in a facilitated environment.

4. No clear desired outcome

In much the same way as people have games for games sake there is a tendency to also not have a clear desired outcome for some of the games currently in use. Establishing a clear outcome not only helps with the design of the actual game but can also dictate the type of game that is needed (i.e. if it is best done as a facilitated game or is it something that can be run online or on a personal device). There are a raft of outcomes for example the game could be built around industry-specific decision-making, process and process improvement, customer engagement, change and change management. It could be a game which prompts them to access information and supports an in-house information repository. Or it could be a skill-based game used to effectively allow them to self-assess, but which could be also used to assess skill levels and competency across a business with an incredibly high level of accuracy. The possibilities are endless, however these things only add value if they are done correctly. One of the things that we get particularly from technology based games is a lot of useful data, but all too often there is no thought given to how that data could be used to further enhance a business.

5. `Underestimating the development investment

Developing a gamified learning model requires a significant amount of time and expertise. Most importantly it takes a lot of user acceptance testing which quite simply means people have to play it a lot to iron out the bugs and ensure that it’s the best it can be. Unlike some other learning and development projects this can take a considerable amount of time which can lead to a lot of project scope creep.

There are many other considerations to be taken into account when looking into Gamification. For more information on the Sewells Group approach, please feel free to contact us.

TECHNOLOGY

(Ease of access, feasibility)

The area where creativity &

innovation add creative value

BUSINESS

(Visability, has a useable business

application)

HUMAN VALUES

(Usability, desirability)

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MAY 2016


Etheridge Ford have been a family owned and operated, dedicated Ford Dealer in Melbourne since 1983. For the last 30 years they have been committed to delivering a high level of Customer Satisfaction and Service. The company is currently one of the only three Ford Dealers in Australia to receive the Ford Gold Master award for excellence in Sales and Vehicle Servicing, an award which are extremely proud of.

Sales Consultants are sometimes accused of forgetting their customers after the deal has been done. How important is the vehicle delivery to the whole car sales process?

Very important. At Etheridge Ford, we believe that it is critical to build a ‘driving life’ relationship with our customers. A new vehicle purchase is still a big financial and emotional decision for most customers. The stress of affordability, Which vehicle to buy? Who to trust? Customers seek dealerships that respect them, make them feel they are in control and who celebrate with them.

While first impressions count, last impressions LAST. By creating the theatre at the vehicle delivery a lasting impression is created with customers and they feel they have received value for money and made the right choice. By introducing the Service Department as a part of the process, the customers know they can trust us with the care and servicing of their vehicle until they are ready for their next purchase.

Vehicle deliveries at Etheridge Ford are a big occasion for customers, their families and also the dealership. Who is involved in the vehicle delivery process?

Everyone is involved. From the Receptionist who greets the customer with flowers, all of our Sales staff, our Managers and even other customers and dealership visitors. The theatre we create, is very attractive and you can’t help but be involved.

The mood starts with the flowers and then when customers realise it’s their vehicle under the silk, the excitement increases. When they pull back the silk to see their new vehicle for the first time, even the most ‘blokie’ tradesmen melt with pride.

It confirms that all the stress and pain was worth it, they have made the right decision to purchase this vehicle and they have also chosen the right dealership to buy it from. We have found that this process consolidates our relationship with the customer.

How do you share the vehicle delivery process with other customers?

All sales staff have an iPad readily available. We always ask customers permission to share their photo on our social media. We click one photo before the unveiling, a video of the silk being removed by the customer and then another photo of their beaming smile. All of this is sent to the customer and posted on our Facebook page, which in turn is shared and liked by their family and friends. We show them [as rolling screen shots] on the showroom TV screens where other customers can see and love them.

Do any referrals or additional sales happen as a result of the excitement generated at delivery?

Definitely, I’m sure if you asked each of our sales staff, they would all have stories about a referral from family and friends. Our delivery process creates a positive lasting impression that fosters customer engagement and promotes advocates. Our customers share their experiences and photos with family and friends, which they click in their own phones and share with others. Their friends ‘LIKE’ their photos and it’s shared again. Kids also are seen being actively involved in the excitement of sharing. They share their experiences at school, sports etc. and so it goes, the joy of social media.

Our customer experience, our dealership and our brand is being spread willingly by our customers. Recently, we had a new customer asking if they will get flowers and the silk treatment that they saw on Facebook. The word is spreading!

What advice would you give other Dealer Principals or Sales Managers in relation to vehicle delivery?

It is important to lead by example, our Dealer Principal, Ron Logan, introduced the concept of theatre to vehicle delivery about 5 years ago and recently Ford has enhanced the process by adding the branded silks. Ron made sure everyone in Sales knew what was expected and was involved. He relied on me as the General Manager and the Sales Manager to embed the process.

It has become a core part of our culture and carries through a lot of what we do. The delivery schedule is circulated to all Sales staff and Senior Managers which helps assure they are on the floor near delivery times so we can continue to role model this standard. Besides that, we love it, it’s a great buzz to share in the experience of picking up a new car! The customer engagement and referrals are there, the investment is minimal, what are you waiting for!

Q

Q

Q

Q

Q

Simon LoganGeneral Manager

Etheridge Ford, Melbourne Australia

DRIVING RELATIONSHIPS FOR SUCCESS

DEALER INTERVIEW

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