dealership*technology*insights:* dealership*management ... · 7/22/2014 ·...
TRANSCRIPT
Dealership Technology Insights: Dealership Management System – DMS Nego5a5on’s Guide
“You don’t get what you deserve, you get what you nego5ate”
The most powerful tool in any nego8a8on is leverage. Of course, dealers know this ins8nc8vely. A dealer nego8a8ng for a new DMS contract can maximize the leverage he exerts not only by carefully planning his strategy, but also by using every tool at his disposal. Let’s, therefore, review the essen8als along with a few less evident ways to take control in these financial skirmishes.
The price you pay is dependent solely on your nego5a5ng strategy.
The strategy many dealers employ is simple. They rely solely on their nego8a8ng skills and assume, if they talk tough and threaten to leave, their vendor will just surrender and give them a great deal. There’s only one drawback to this method – it doesn’t work.
Since so many dealers aJempt this tac8c, the vendor reps are well prepared. Remember, the reps do this every day, the average dealer only once every five years or so. Everything has changed since the last 8me the dealer looked at this and while the rep can spend all his 8me on the deal, the dealer has his business to run. The results are predictably poor for the dealer. Veteran reps just don’t believe the dealer’s blustering and, since most dealers don’t really intend to change vendors, they just have to wait for the dealer to cave.
It comes down to credibility.
Nego8a8on 8ps to be sure you hold on to your leverage and get the right deal:
2
Dealership Management System – DMS Nego5a5on’s Guide
© 2014 Gillrie Ins8tute
1. Start the DMS selec5on process early enough.
If you absolutely must make a decision by a certain date and the vendor knows this, your power diminishes with each passing day. Furthermore, since most vendors need at least six months to schedule an installa8on and get opera8onal, you should ini8ate the process at least a year, and in some cases, eighteen months in advance. There is no more powerful strategy than to be in a posi8on where you don’t have to act immediately. You can just sit back and watch the deal get beJer.
3 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
2. You are not nego5a5ng unless they are convinced you are ready to leave.
There are specific steps that dealers must take when they approach a nego8a8on with an open mind and a willingness to leave if they don’t get what they want. Ask for all your current obliga8ons, termina8on dates, and buy-‐outs in wri8ng. Cancel any agreements that contain automa8c renewals making sure you leave an incontestable paper trail. Under some contracts you are required to no8fy the vendor six months before the termina8on to avoid an automa8c renewal!
You can’t fake it. Every dealer tells the vendor that he is considering the compe88on. Vendor reps from compe8ng firms talk to each other all the 8me. If you tell the rep from ABC that you are leaning towards XYZ without really considering XYZ or even ge`ng an XYZ demo, the ABC rep will know. He’ll assume you aren’t going to switch and your leverage will vaporize. Take the 8me to seriously consider all your op8ons. You may actually discover a superior, less expensive alterna8ve. At the very least, you will be able to play the “I’m going to leave” card credibly and effec8vely.
4 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
3. Control your informa5on.
Vendor reps oeen cul8vate friendly rela8onships with dealership personnel who are not directly involved in the process. Oeen these employees can inten8onally or inadvertently pass sensi8ve informa8on to the other side. Some8mes these informers have their own agenda (e.g. “I don’t want to have to learn a new system – we can’t change to XYZ”) or they think they are “helping their friend”, the vendor rep. In either case, a carefully constructed plan can be undone by a leaked comment. Control what the reps gather from within your store. Rather use vendor-‐friendly staff members to unknowingly disseminate disinforma8on that is to your advantage (e.g. “You had beJer do something fast, Mr. Dealer is going to change to ABC”). Only the dealer and his nego8a8ng team should be privy to the dealer’s actual plan and inten8ons.
5 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
4. Know what you need and know what to pay.
This is much more complicated than it sounds and you will likely find you need some professional help to figure it out. In a marketplace where the standard is chaos with even the very names of the products changing constantly, it can be almost impossible to know when you have the op8mum deal on the right configura8on. The best deal is oeen made by the dealer who knows exactly what he needs and what it will cost. A “low ball” offer can be disastrous if it is too high and the vendor greedily accepts it. Conversely an offer that is really unreasonably low can also create problems as the rep loses interest or scrambles to find ways to de-‐content the proposal and cover his tracks. The best offer is one that is just a bit less than the best deal the vendor is willing to accept. A vendor will pull out all the stops to make that deal happen.
At the Gillrie Ins8tute, we see thousands of DMS deals every year. Do you know which dealers have the worst deals? Invariably it is the ones who have been the most loyal to a par8cular vendor. Vendors don’t like to give up robust revenue streams and reps are under tremendous pressure to increase income. No maJer how many spor8ng events or dinners you share with reps from your DMS provider, remember that the perceived personal rela8onship will not ensure any special treatment. Business is business and dealers who are “friends” with their reps usually pay more than dealers who follow our rules.
6 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
5. Pay as much aMen5on to the contract terms as you do to the price.
Ignore this rule and you will find that the great “deal” you nego8ated can evaporate almost immediately. Read the vendor’s contract and make sure it includes all the provisions you need for your protec8on. We regularly make up to thirty (30) changes to vendors’ standard contracts. An example is an addendum that requires the vendor to make any addi8onal agreement that is signed during the term of the original contract to be coterminous with the master agreement. Scru8nize every “add on” agreement, no maJer how small, with the same fervor that you applied to the original contract. Ignore this advice and you will find yourself with staggered termina8on dates, seemingly endless obliga8ons and no leverage to nego8ate when the master agreement does terminate.
Lastly, monitor your vendor billing on a regular basis for compliance with the agreed terms. You will certainly find “errors” and they will almost never be in your favor.
7 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
6. Never nego5ate when you are under pressure.
Vendors always seem to have a reason why you have to act without hesita8on. Recognize that these are their 8metables, not yours, and the pressure is usually ar8ficial. Good deals will s8ll be around when you are ready to move. Especially in this market, you can almost certainly count on a beJer deal coming along. The other kind of exerted pressure is some sort of ominous deadline. Your contract is ending. Your computer will no longer be supported. There’s a price increase coming. If you have followed the first rule above and started early enough, these are doubtless there to create urgency that will force you to act precipitously. Verify the bona fide situa8on by asking a professional who is knowledgeable about industry prac8ces and history. Ascertain what other successful dealers have done in this circumstance and remain faithful to your plan and your schedule. The economic events of recent days have put inordinate pressure on dealers. The same pressures affect the DMS vendors. With some dealers holding back and wai8ng for the dust to seJle, the deal you can nego8ate now may be the best you will ever make.
8 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
7. Ask ques5ons and ask for help!
Professional help levels the playing field. Call us with your ques8ons and consider le`ng us assist you. Our services always save you much more than our fee.
9 © 2014 Gillrie Ins8tute
Dealership Management System – DMS Nego5a5on’s Guide
100+ years of combined dealership experience enable us to share unparalleled and unbiased insights.
With 7,000+ dealers we are the most-‐trusted dealer technology advisor in North America.
If dealers want us to, we can contact vendors directly to nego8ate or de-‐escalate with any issue.
We provide the highest value to our dealers by guaranteeing we save more money than they pay for our services.
$
The ins8tute is commiJed to research and educa8on. Since 1992 we have trained dealers in over 500 seminars.
We are independent and don’t get commission from vendors. NO conflicts of interest – guaranteed!
Our benchmarks cover 13,000 items from 300+ vendors and tell dealers exactly what others pay.
10 © 2014 Gillrie Ins8tute
E W
N
S
We look at each component of a deal and help dealers understand the Total Costs of Ownership.
Our mission: Help dealers nego5ate with confidence.
We Dealership Systems
Learn more about our services [email protected] or visit gillrie.com
Call us at 800-‐576-‐6959