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Measuring ROI on Your Dealership's BDC Operations and CRM Implementation

Dealers can Calculate the Return On Investment (ROI) of Customer Relationship Management (CRM) Daily Work Plan Activities in a Business Development Center (BDC) by Tracking 5 Key Process Measurements...

 

From August 2005 through the end of March 2007 I worked for what was at the time, the largest sales volume and revenue Chevrolet dealership in the world, Courtesy Chevrolet in Phoenix, AZ. Based on my previous 24 years of experience in developing CRM applications and the process implementations necessary for getting up and running in a dealership, I knew that effectively communicating the concept of a CRM Profit Center to Courtesy’s entire management was one of my first essential objectives.

 

This article shows what we used to introduce Courtesy Chevrolet’s management team to the 5 most essential results measurements for a BDC operation... And, gain their buy-in and commitment to manage the collection of data necessary to have accurate measurements. These are the fundamental measurement points that must be tracked by ANY dealership that wants to be successful in managing their CRM activities as a source of incremental profits.  Once we have a return on each type of CRM process activity or task measured and calculated, we can then compare the total returns to the costs associated with the dealership's investment in a Business Development Center (BDC) to track and consider the ROI on a monthly basis… The objective being to operate what I call a "CRM Profit Center".

 

Most dealerships which have been successful with CRM implementations from a Profit Center approach usually track additional performance metrics and Key Performance Indicators (KPI) above and beyond these 5. However, these additional and sometimes more sophisticated measurements are not useful without these five essential operational measurements. 

It is critically important to keep in mind that these 5 key measurements (metrics) must be tracked for each category of CRM process execution activity. There are many sub-categories, especially in Service CRM that we must track, but here’s an illustration that displays the 8 general CRM categories:

Shown in the diagram above are 4 Inbound (customer initiated) and 4 Outbound (dealer initiated) CRM Process Categories. At the dealership management level, a summary report of CRM activities within each of these 8 buckets should be reviewed weekly, or at the very least monthly. I also want to point out that the Inbound Showroom category is best looked at from a customer information capture perspective within an overall CRM program. For every other type of CRM Process Category, here are the 5 Key Measurements:

 

  1. Quantity of Customers Contacts within the measured time period (usually monthly)

  2. Quantity of Appointments Scheduled (Showroom or Service) for the Dealership
     
  3. Quantity of Customers included in Metric #1 that showed up at the dealership for Sales or Service (whether or not they had an appointment included in #2)
     
  4. Number of Vehicles Sold to Customers in #3, or the Total Parts and Labor Revenue from all RO’s written to the Customers included in #3
     
  5. Total Gross Profit (front and back) on the Vehicle Sales in #4, and the Total Profits by Parts and Labor from the Repair Order revenue measured in #4.

 

Although just about every manager sees the importance of measuring these 5 results of CRM activities within each category (other than Internet), very few dealerships actually do it on a consistent basis. The exceptions (exceptional) are the dealership managers who “get it”… These are the ones that show up at various car dealer conferences and CRM seminars, bringing these 5 measurements with them, broken out into several categories of activities or CRM campaigns resulting from data mining programs. The managers and dealership operators who are in the top 10% of sales and service revenue performance among all dealerships will usually analyze each CRM category and data mining campaign with the following performance ratios that are made possible by these 5 key metrics:

Without the 5 Key CRM Measurements, we could not see the above analytics, or use them to manage our CRM activities. But, why are these performance ratios important? Let me list some of the more basic reasons and a few examples of how managers in dealerships use these ratios:

 

  1. Appointments Made to Opportunity; this is simply the volume of appointments generated by that specific CRM process or campaign divided by the total number of customers contacted. Whether this is an Inbound or an Outbound CRM Process, the percentage of appointments generated reflects the effectiveness of our process execution and the techniques or tactics used. For example, if Salesperson #1 takes sales calls 6 hours per week and generates 5 appointments scheduled from 20 phone calls, he has a 25% appointment ratio. If Salesperson #2 takes 30 incoming sales calls, and generates 6 appointments, then he has a 20% appointment ratio.
     
  2. Dealer Visits to Appointments Scheduled; this is in most cases the “Show Ratio” on appointments scheduled. However, there are some stores where the volume of customers contacted through a CRM process that show up at the dealership will exceed the total appointments scheduled, This results in a Show Ratio exceeding 100%, which is an indicator that the CRM process being measured is not focusing on seeking agreement from the customer to come into the dealership. This ratio should never be 100% or higher, which indicates weak appointment seeking tactics within that category. Likewise, if we see a 50% show ratio, then we need to establish better appointment confirmation processes, such as an email confirmation of the appointment with door-to-door directions to the dealership from the customer’s address.
     
  3. Dealer Visit Closing Ratio; for the Sales CRM Categories, this performance measurement evaluates the effectiveness of your sales department’s appointment reception and sales processes. If we see that Salesperson #1 has handled 20 Internet Sales Appointments that showed up in a month, and sold 5 cars, then he has a closing ratio of 25% on that type of appointment. If Salesperson #2 handled 20 Internet Sales Appointments that showed up and sold 10 cars, then #2 has a 50% closing ratio on Internet Appointments that show up… Who do you want getting these appointments in your store?
     
  4. Profit Per Customer Contact; this analytic allows dealership managers to see the relative value of each CRM Category with each other category. For example, if we have a limited staff of people available for outbound CRM campaigns, we will assign them to the Outbound CRM categories that have proven to be the most profitable. When those high profit activities have been completed, we can tackle the lesser profitable ones with any remaining time.


Shown below is a partial illustration (Outbound CRM only) of the 5 Key CRM Metrics listed in a simple Excel Spreadsheet format:

By tracking the profits generated from dealership appointments that result from CRM activities executed in our BDC, CRC, CCC, CDC or whatever name you choose to brand your CRM profit center, we can now enter the total gross into a spreadsheet and see which CRM follow-up activities are worth more than others, as well as the gross profit value (GPV) of each CRM activity completed in the BDC...

This screen shot below is from one of those spreadsheets as used by a California Toyota Dealership where the APV of every customer contact they make is just a little below $20.00:

Once a dealership starts tracking the GPV of each CRM activity executed in a closely supervised BDC environment, justifying the ROI should become more academic than practical.  When a dealership starts seeing real dollars of profit tracked back to every time somebody in the BDC picks up a phone, the real issue becomes how to enhance and grow BDC productivity!

Views: 990

Tags: BDC, Business Development Center, CRM, Customer Relationship Management, Dealership, Implementation, Measuring, Operations, ROI

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Comment by Stan Sher on October 8, 2013 at 7:14pm

Amazing as always.  Ralph is the king when it comes to these operations.

Comment by Alexander Lau on October 8, 2013 at 6:43am

BDC 101

Holy cow! Fantastic article and one that actually shows the processes needed and key metrics. This is what ADM is great for, all the rest of the fluff, those promoting their own wares without data like this means very little. Ralph, you could sell this alone to unbeknownst dealers and there are plenty.

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