04/04/2005: Article in Dealer Marketing Magazine

How Managed Sales Events Increase Sales And Profits

Editorial »  

Imagine selling more cars in one to four days than you would in one month. Well, for an increasing number of dealers who participate in managed sales events or performance-based sales events, this is the potential pot of gold lurking at the end of the rainbow. With modest sales growth projected this year by industry analysts, and a marketplace that remains as competitive as ever, both franchised and independent dealers are paying more attention to sales events as a way to either boost sagging sales, reduce wholesale losses, or to maintain market share. Whether your dealership chooses to stage a super sales event on your own lot using your own sales staff, or hire a staffed sales event company that comes complete with their own sales and management professionals, the goal remains the same: sell as many cars at the highest gross possible. And, provided the right ingredients are available, such as effective pre-event advertising, a good inventory mix, competent sales people, and favorable weather, the result can be substantial gross profits for the dealer (and a healthy boost in CSI!).


There are many success stories from dealers all across the country that have experienced proven and consistent success with managed sales events—some even prospering in the rain and snow. Karl Malone Toyota located in Utah held a four-day event in March 2004 staged by AcquisitionSale.com/Preferred Dealer Services, Inc., one of the industry pioneers and specialists of the staffed event concept. During the four-day event, of which three days were effected by rain and snow, PDS, Inc. and their team sold 140 units for a total gross profit of $450,000! Not bad. However, not all dealers end up with such favorable results. In fact, many have been burned either by the weather (uncontrollable), or a sales event company that failed to deliver or broke promises tainting their dealership’s good name.


Dealers who prefer to have an outside company do the leg work, and assume the responsibility of co-coordinating the logistical details (especially with off-site sales) and financial risk, should consider hiring a sales event company that is compensated on the basis of sales performance, and one that offers a money-back guarantee. Why performance-based? Traditionally, dealers who have put on a sales event, whether at their own lot or off-site, incur all of the advertising expense to promote the event, assume the potential legal pitfalls of off-site sales (permits, applications, and sub-contractors), and hope (with baited breath) that their event will be overrun with buyers and they’ll gross a ton. The reality: sometimes it works; sometimes it’s a nightmare that damages profits and, potentially, the dealership’s standing in the marketplace. For those dealers who want to sell cars in a carnival-type atmosphere, with most of the planning executed for them, performance-based sale events may well be the answer.


Here’s how it works: Dealers are still expected to make the upfront investment, but it is secured with a guarantee from the sales event company that they will generate a pre-determined amount of gross profit. Each sales company has their own guarantees, but dealers can expect to gross anywhere from $75,000 to $450,000 for a four-day sale, with an industry average of $100,000 for a four-day, managed event considered acceptable and obtainable. Generally, if after the event, gross profit (often includes both front and back end) falls to around $50-75,000, the performance-based company will refund the full advertising cost to the dealer. It is commonly accepted that most dealers should expect to invest between $10,000 up to $75,000, depending on budget and the event theme. The event company generally provides the selling power by bringing in their own proven sales teams and management. However, some companies view the dealers’ own sales teams as a valuable tool to the overall success of the event, and will work side by side to achieve maximum profits. Mark and Ann Proctor, nationally recognized dealers with 25 years experience and principals of AcquisitionSale.com/PDS, Inc. are firm believers in providing the highest quality sales and management teams available. “We’ll work with the dealers’ own salespeople and management team, and teach them how to maximize profit and CSI in a non-confrontational selling environment,” says Mark Proctor. “We’ve operated some of the most profitable and highest CSI/QCP stores in the nation. We build dealerships.”..........


Before the event, both the dealer and event company agree to a level of compensation provided minimum gross profits are achieved, with the industry standard being approximately 25-30 percent of the total gross profits after the sale going to the event company. And, the numbers can be appealing for dealers: Should an event generate $100,000 over four days (less the 30 percent fee, or $30,000), the dealer is left with $70,000, which is often more revenue than would normally be achieved in a month. “In addition to facilitating hundreds of customers to the event, and placing the dealership’s name and brand in front of thousands of prospects, staffed sales events turn aged inventory into profit that otherwise would be a wholesale loss,” adds Proctor.


Creating a carnival-type atmosphere


Provided the pulling power of pre-event advertising has worked by enticing hundreds of ups to the event, one of the keys to helping ensure a successful sale is offering a fun incentive, or hook. While popcorn, hotdogs, and soda may satisfy the hungry few, holding their attention while waiting for a test drive or in line at the F&I desk may require a different approach. Increasing numbers of dealers are turning to insured prize contests to meet that need. Giant prize contests such as giant cash back bonus, or having an opportunity to win a brand new car using a lucky key or remote promotion can enhance your direct mail and advertising efforts, offering dealers a compelling hook. Insured prize contests such as hole-in-one contests are an inexpensive way to boost traffic while removing the risk to dealers of having a participant hit the jackpot.


Whether your dealership chooses an on- or off-site sale, or hires a performance-based event company, Mark Proctor of AcquisitionSale.com/PDS, Inc. best sums it up: “All things being equal, a dealership will sell X number of cars primarily based on four things: inventory, advertising, personnel, and market conditions. The question is, how much profit will you make and how much will you keep?”