Monday, September 1, 2014

Are your sales targets being manipulated?

Steven Crea.
Are they unrealistically high?
Are your complaints being ignored?
Are you being denied a full explanation of the target setting methodology?

Dealers are entitled to and should seek a full explanation of the target setting methodology along with justification that it is equitable between dealers and applied consistently across the network. If there are flaws in the methodology or its application, you will have a sound basis for objection and far more likely to succeed in your efforts to have targets altered.

At a global level, car companies come up with a number of cars (broken down by vehicle and model line) they wish to sell into a particular market in the next year. They will then commit to production of the vehicles and not wish to change it. The vehicles will be produced and will be sent to Australia. The focus then becomes getting the cars into the market. This is where the big number gets broken down between dealers and allocated as individual dealer targets.

To set any target it is necessary to predict the future, i.e. how many cars can be sold in a particular territory. No one has a crystal ball so the best available indicator of future sales is what we can learn from history. This involves an assumption that what occurred previously can be achieved again. Not always true because there are many variables which do change but the best indicator we have. Accepting that the past will be used to predict the future, we need to break down exactly how that will be done.

The best way to do this is with a combination of metrics involving individual dealers' sales history in the last year ('Dealer Market Share') and the entire brand's sales history in the last year ('National Market Share') broken down by model and segment. This combination will measure the popularity of particular vehicles within the national market generally and within the particular territory, which can be quite different. The two metrics might be weighted unevenly which is fine provided that is consistent for everyone. This measure can then be applied to the national sales forecast for each vehicle to be sold to generate the dealers' fair proportion of this target.

This assumes that the vehicle model in question was sold in the previous year so won't work for vehicles which are new to market. It also assumes that the dealer was trading for the previous year so it won't work for new dealers. In the case of dealer transfers through buying and selling, a decision is required on whether the previous dealer's performance will be applied to the new dealer. There should also be a focus on retail and small business sales so it will be necessary to disregard sales of other buyer types which cause major distortions such as government, rental, large fleet etc.

Target setting methodology should be written clearly in policy (if not in the dealer agreement) and, as with any policy, it should be applied equally to every dealer. I would argue that under no circumstances should targets be manually manipulated at head office level. If subjective personal intervention does occur, it will set a very dangerous precedent and undermine sanctity of the entire process. This would give all dealers very wide scope to challenge targets and seek compensation if they were adversely impacted by changes outside policy.

As a dealer you certainly want to know that there is a logical methodology for distribution of the annual national forecast between dealers. If it is along the lines of that suggested above, you can take comfort but make sure it is applied strictly as a matter of policy.

There is one other issue. What about the big number that comes down from the global sales director as to how many cars will go to Australia next year? Is there a sound basis for how this was arrived at? This is also a question which can and should be asked, the answer to which would be extremely interesting in some cases where we have seen some wildly optimistic forecasts recently. I suspect that some of the 70 odd brands all competing hard to get a piece of the lucrative Australian automotive sales market may struggle to justify this aspect of their business planning.

About the writer: StevenCrea has extensive experience in the Australian retail and automotive sector, with a particular focus on legal matters pertaining to franchising and commercial property.  

This is just one of the many informative and enlightening articles that is on notice to be published in an upcoming issue of Automotive Dealer - the official publication of the AADA. www.automotivedealer.com.au

Sunday, August 31, 2014

Hanging out in San Francisco


Here’s what one reviewer wrote on Yelp after visiting the original Eddie Rickenbacker’s bar and grill in San Francisco:

‘Any place that has:
·         Smoking after 9pm INSIDE
(Great for your lungs)
·         Old motorcycles hanging from the ceiling
(Great for earthquakes) 
·         An old, overweight diabetic who eats pie and watches taxidermy shows on television in the front bar
(Great for your appetite) 
·         And funny, lively bartenders
(Great for eye candy) 
Deserves nothing less than 5 stars. I think I want to work here!’

Taking time out from a busy NADA Study Tour schedule to have a burger (HUGE) and a beer (YES, they did have Fosters) with a group of Aussie Dealers in 2011 was an unforgettable experience made more so by having lunch at Rickenbacker’s.

While Rickenbacker’s wasn't part of the official tour, it was an added highlight to what was to become an unforgettable NADA ‘San Fran’ experience.

Although socialising with colleagues is just one of the advantages of joining a AADA hosted NADA Study Tour, the fresh insights, dynamic sales strategies and innovative business practices gained will arm you with the necessary know-how and solutions to build your brand, sell more cars and boost your dealership’s bottom-line.

In just five happening days you will:

-          Hear keynote addresses from some of the most influential industry leaders and high profile individuals in the USA.

-          See over 500 of the hottest new products and technologies designed to propel your business to the next level.

-          Discover how emerging technologies can help you sell more cars.

-          Participate in NADA University-approved workshops covering digital marketing, legal and regulatory issues, Fix Ops, Variable Ops and more.

-          Network with industry colleagues from around the world.

-          Enjoy three exclusive dinners at San Francisco’s finest restaurants and a Welcome reception at the ‘go-to’ bar and restaurant, @620 Jones.

-          Participate in two Deloitte business breakfasts with the NADA Chairman.

-          Visit one of California’s biggest NADA-approved dealerships.

-          Stay in the ‘5 Star’ Westin St Francis in the heart of San Francisco.

-          Take advantage of competitive airfares on all airlines including Qantas and discounted travel insurance.

-          Be guided by travel hosts with 20 years NADA experience.

Don’t miss this unique opportunity to be part of the first ever combined AADA and Deloitte Study Tour to the NADA Convention & Expo in San Francisco, California USA 21 – 25 January 2015.

NOTE: Unfortunately the original Eddie Rickenbacker’s bar and grill is no longer having been shut down   when the original owner Norman Jay Hobday – aka Henry Africa – died in 2011. Furthermore, the bar’s 30 classic and vintage bikes and other memorabilia have been auctioned off. 

photo credit: Scott Beale via photopin cc

Friday, August 29, 2014

A reward that keeps Ken Morgan 76 years young

Ken Morgan.
In 1989 the Burdekin Report was published by the then Federal Human Rights Commissioner Brian Burdekin, shocking the Australian public by revealing the number of young people who were homeless and the appalling lifestyle they lived.

This landmark report was also the trigger that set Ken Morgan off to form Kids Under Cover.

Burdekin said to Morgan at the time: ‘Ken, it’s not going to get any better, it’s going to get a hell of a lot worse. You can cut-through the clutter and get some of them, but don’t think you’re going to go out there and save a hundred out of a hundred, because you won’t.’

According to Morgan, there are over 140,000 people designated homeless at this very minute in Australia and approximately 46,000 of those are at-risk young people.

For a former car dealer, who has one of the most recognisable names in the industry and experienced more than his fair share of life’s ups and downs, including being homeless at 16 and ‘stone motherless broke at 55’, his passion and commitment for dealing with this national problem is as strong as ever, even though he retired from the Chair two years ago.

With the support of the Variety Club and many of Melbourne’s most successful businessmen, media personalities, performers and community workers, Kids Under Cover was established in 1989. That same year it also raised the necessary funds to build one of their first homes for homeless kids: ‘At one stage there, we had about 20 properties, three and four bedroom homes, with carers living there full-time.’

But as Morgan says: ‘It just didn’t work as well as a one-on-one situation or one on two.’

So, the Studio program commenced in 1993 as an innovative extension to the Housing Program and the first two bedroom fully re-locatable studio was built in the same year.

Today the program constructs one studio, complete with a bathroom, every five days on the grounds of the family/carer’s home, providing a safe, secure and stable environment to enable the young person to grow into adulthood.

Currently, there are over 350 studios and since inception, more than 2800 young people have been housed. They are also provided with a mentor, who they can ring at any time and say ‘I’ve got a problem, I feel like I want to run away, talk to me,’ and the mentor does just that.

The Scholarship program also helps young people stay committed to their education or job by covering some of their education expenses. Currently there are 70 young people on scholarships.

And the bottom line for Ken Morgan OAM is: ‘If you’re going to take from this community you’ve got to give back to the community.’ 

To donate or support the Kids Under Cover program, go to www.kuc.org.au

This is just one of the many informative and enlightening articles that will be published in the upcoming issue of Automotive Dealer - the official publication of the AADA. www.automotivedealer.com.au

Thursday, August 28, 2014

Clayton’s Review – VACC condemns Productivity Commission report on the automotive manufacturing industry


“As expected, the Australian Automotive Manufacturing Industry Report by the Productivity Commission has proved to be a complete waste of time. It’s delivered little of substance, it’s out of touch with the industry and proved economists have a complete lack of understanding about the automotive industry,” VACC Executive Director, David Purchase, said.

“The Federal Government has issued its initial response to the Report and VACC hopes the Abbott Government will talk directly to the automotive industry and listens to our views, as we are the ones who really know what’s going on.
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