Kevin Murphy isn’t playing games.
Ever since he and his brother Terry started the special finance operation at the Earnhardt Automotive Group in Arizona in 1992, they’ve hewed closely to the command and control style they learned in the military – in Kevin’s case the U.S. Air Force, Terry is an Army veteran. If you want to work on their team, you learn the Murphy way to handle subprime customers. You learn how to greet them and how to treat them. You learn how to create a relationship and how to show the door to someone on the verge of causing a ruckus on the sales floor. You learn how to close the good customers. And, you learn how to follow up so the next time they want to buy a car, they know where to go.
Then you go to work and you sell vehicles. Lots of them.
At the time ADM talked to Murphy in mid-August, his subprime group had closed 4,213 subprime deals year-to-date. And they’re on track to hit a goal of 7,222 deals by year’s end; a $120,759,062 sales operation.
Murphy can hit those high numbers with an elite group of 57, a herd divided into the “stallions” that manage the sales, the “ponies” that close the sales and the “fillies” that handle the loan processing. And every time a subprime customer shows up on one of the Earnhardts’ eight car lots, they’re turned over to Mr. Ed, a handy moniker for the special finance department that was created years ago by a clever salesman from the initials of Earnhardt Dodge.
Those customers are in for some special treatment.
Says Murphy: “When we identify a customer that has credit issues, they need to be handled by specialists. And we take ownership of that customer."
“You’ve really got to treat these people with empathy and respect. They’ve been through a lot. They need your love as well as your expertise. It’s very emotional. We train our managers to know that if you don’t bust a tear every fourth or fifth customer, you don’t work here. On the other side of the coin, you had better be ready to fight. There are some extremely dangerous people in your showroom.”
And they’re rubbing shoulders with a big group of good-credit customers.
“We don’t want to interfere with that,” says Murphy. “You don’t want a bad situation on a showroom floor on a busy Saturday. You have some customers that have severe problems. If you make a mistake, they’ll eat your lunch and you’ll end up not having a sub prime department.”
Murphy is frank about most of his recruits. They’re not the top graduates of Ivy League schools. But before they hit the lot, they do have to graduate from Mr. Ed University, learn the Mr. Ed fight song, master Mr. Ed’s training manual with 60 unique sub prime closes and memorize the Mr. Ed motto: Semper Calcitramus Glutius Maximus -- Forever Kicking Ass.
Just to make sure the troops don’t forget, there’s a quarterly training session to refresh memories and build on experience. And because they don’t forget, it’s easier for customers to remember them -- especially when they’re coming back to trade their old model in for a new vehicle.
“For the month of July, our referrals were 94 sales, and previous customer sales, 78,” says Murphy. Those 172 sales accounted for 28 percent of the 624 closes his group handled for the month, which is just about standard in his line of work. “Every month, the dealer gets to turn on the light and know that they have about 172 sales.”
That’s no accident. Customers are contacted after they buy a vehicle and if there’s anything they can do to help service it after the sale, Murphy’s law dictates that Mr. Ed can turn service problems in a sales advantage.
“We feel that when a car breaks, that’s awesome. The Earnhardts give us the autonomy to do whatever is right. We want our customers as raving fans, and service after the sale is the best thing we can do. We identify the problem. If we had a part in it, we want to take care of it. If we didn’t have a part, we want to do something for the customer. If the tires are wobbling after a couple of months, chances are you bumped a curb. But we say, here’s what we’ll do for you. We’ll pay up to $200 or something like that, but we let him know we won’t be fixing the car for the rest of its life. I just recently had to change a guy’s oil. He put 30,000 miles on it in one year and hadn’t changed his oil. He thought we had delivered a car with dirty oil, so we said come on in.”
And when it comes time to buy another vehicle, he says, that’s the kind of extra effort that points customers back in his direction.
It also doesn’t hurt Mr. Ed’s sales figures to be a key player in the Earnhardt group. Founded in the early ‘50s by the legendary Tex Earnhardt, it’s one of the largest, best known automotive retail outfits in the region, and has repeatedly been singled out as a sales leader among the franchises it owns. Even in his early ‘70s, Tex is still active in the business and his sons – Hal and Jim – are both busy juggling franchise operations.
But Murphy operates with a tremendous amount of personal authority, able to call the shots on everything from service and sales to pulling the trigger on an ambitious monthly ad campaign.
“We spent $149,902 in July to sell 624 cars,” he says. “That’s $240 cost per sale, which in sub prime is unbelievably low. We track infomercials, newspapers, TV, radio, direct mail, the Internet and a number of fringe advertisements.”
Any fluctuations in cost cause an immediate shift in the way the ad budget is handled.
“If the cost of infomercials goes up, we cut back and try to adjust,” says Murphy. “If the cost goes down, we spend more there.” And by continuing to maneuver and stay flexible on the ad budget, he can keep that cost-per-sale low.
And everybody, tracks where their sales leads come from.
“If you don’t source,” says the ex-military man, “you don’t work here. If you don’t follow ad sources, car sales are lost. The dealers’ return is lost.”
And this is not a job they want to lose.
Pay for Mr. Ed’s troops goes into one collective pot and then is divvied up, with a percentage set aside for the stallions, ponies and fillies. Each pot is then split with the most productive earners at the top of the pyramid to the least productive and lowest paid at the bottom. And while Murphy isn’t spelling out anyone’s take home pay, he makes it clear that the successful members of the team do quite well.
By constantly rotating his sales force among eight different lots, Murphy has also learned that he can cover time off more efficiently and keep his overall staffing down by 25 percent -- and that adds 25 percent more money to take-home pay. There’s another reason for the rotation: Ponies are required to follow up on every sales lead, and rather than have the same closer calling the same number over and over again, fresh faces bring fresh enthusiasm and often mark up fresh sales.
That’s one reason why his sales force has an average of eight years of experience, an uncommonly high number in special finance.
Figures flow continuously in Murphy’s conversation. And it’s no accident that he can put a precise figure to everything he’s talking about.
“We track just about everything,” says Murphy. “We’re kind of crazy that way.” Crazy, but highly efficient.
Murphy runs an operation that plays by a unique set of financing rules. When a customer closes on a deal, his group writes the note on the spot. After the sale, he finds a buyer within 10 days. And they’re not playing a guessing game. His team will match a note to a willing lender on the first try 98 percent of the time. If it was left up to him alone, says Murphy confidently, it would be 100 percent.
“It’s not that I’m so smart,” says Murphy. “It’s just that I have a lot of clout with lenders. Let’s say I roll a car at (a rate of) 14.95 and the bank wants it at 18.95. So it’s going to cost you 4 points. So I owe you. Buy it at 14.95, make the exception and I’ll give you five in a row at 18.95. That’s why our percentage is so high.”
To keep his clout, Murphy and his group are careful to cultivate a good relationship. Rather than try to keep a mob of 20 different lenders happy, he focuses on eight. The notes he sends their way are tailored to their portfolios, and he’s always seeking feedback to gauge the quality of the relationship.
“We care about the performance of our lenders’ portfolio more than they do. We can get them to buy paper they shouldn’t, but we don’t.”
He’s careful to set goals with his lenders, and he’s even more particular about hitting them. If Mr. Ed says the group will average 150 contracts a month with a lender and Edquarters is at 60 halfway through the month, Murphy’s team will pick up the pace to make up for the shortfall. And if the lender is falling short on his end, Murphy also has the option of cutting back to 50 contracts to see if that gets his banker’s attention.
But he always keeps it personal.
Sometimes, if the relationship is getting stressed, he’ll catch a flight and take his lenders out to dinner. In August, three people from headquarters flew to California to help one of the finance people they deal with to celebrate a birthday.
“Day after day,” says Murphy, “you’re grinding hard. You have to put a face on this monster. We do that all the time and we spend a lot of money visiting our lenders, talking to them, going out to dinner. We want to be friends.”
And he wants to keep families together. Back in the early days of Mr. Ed, Murphy and his group routinely worked anywhere from 80 to 100 hours a week. The wakeup call came one night at dinner when his son asked why he was home.
“That was chilling.” Now, for all the tough expectations, the Murphy's also know that you have to be family-friendly if you want to keep your best people.
“We pride ourselves on providing days off,” he says. “We try to accommodate baseball games, weddings, weekends. My goal is to get everyone 49 hours a week. For six months of the year we can. The other six months, it’s 55 to 60.”
For Murphy, it’s easier mixing family with work. There’s a contingent of Murphy's in the ranks. Aside from brother Terry, sister Colleen – wooed from a banking career – and his nephew Brian with 14 years car experience both play a big role on the financing end of the operation. Another brother John – a Marine with two years in Vietnam -- works as a closer.
And just because he’s home more these days doesn’t mean Murphy isn’t available for closing a deal.
“I’m a 24/7 kind of a guy.” And, with PCs and the Internet, you can be available anytime you need to be available. “The business is small enough that we can be involved in every deal.”
Swapalease.com’s latest report show U.S. lease approval rates improved slightly to 70.9% in October following a 3.9% dip in September.