When Adam Simms took over Toyota Sunnyvale in 2003, the dealership dynamic began evolving. Upon arrival, he set goals, and in order to meet those goals, the culture and processes needed to change. Prior to the new management, the store was selling around 130 units a month, and Simms’ goal from the get-go was to sell 600 units a month—300 units via the Internet and another 300 through the new and used vehicles departments. So, about six years ago the store began the slow and steady climb.

It wasn’t until 2008 that the dealership reached 600 sales, and only for a couple non-consecutive months. The last month the store topped 600 was September 2008. Its three-month average for December ‘08, January ‘09 and February ‘09 was about 350 units per month, and while those three months are typically the slowest months of the year at Toyota Sunnyvale, Scott Pettitt, direct sales director, said the dip in sales was also partially due to market conditions. The direct sales department, which is similar to an Internet sales department, regularly accounts for over half of the store’s sales, according to Sunnyvale’s general sales manager, Mike Shum. 

Progress in Process
For the direct sales department to account for half of the dealership’s total sales, the process for handling Internet customers had to make some serious progress because Internet sales were practically nonexistent. Pettitt said, “When [Simms] took over the dealership, there were three computers in the whole dealership.”

The department started out small with one director selling about 15 units. That director grew the department to six people selling about 100 units a month and thought that was the best they could do, simply because it was bigger than any other Internet department in their area. That’s when the second director came in to further grow the department, but only reached 150 to 160 units per month.

In ‘07, four years after the department was established, Pettitt came in as the new director of direct sales. In ‘03 and ‘04, he’d worked at Toyota Sunnyvale on the sales floor, so he knew what the goal for the department was even before Shum, a long-time friend and colleague, called to offer him the position of direct sales director.

10 Point Customer Guarantee
 1. You will always get our very best price, up front.
2. Your price will always be below the manufacturer's suggested retail price.
3. Most vehicles three years old or newer are priced below Kelly Blue Book.
4. Every vehicle comes with a 3-day/250-mile money-back guarantee
5. Every vehicle comes with a 7-day/700-mile exchange policy
6. Every vehicle comes with a free 119-point annual inspection
7. Every vehicle, as long as you own it, will be towed for free to Toyota Sunnyvale, within 25 miles.
8. We will buy your used vehicle, within seven days of appraisal, whether you buy from us or not.
9. We will give you a loaner car at no charge for any service repair over $400.
10. We provide free scheduled shuttle service to all customers.

Pettitt rejoined the Toyota Sunnyvale staff and was confident that the department could reach 300, so he strapped in and went to work. The direct sales department averaged 220 units per month in 2007. Once they reached that point, Pettitt said it seemed like they hit a wall. “When we were trying to grow this up to a certain point, there were some huge bottlenecks we found that we couldn’t overcome.” So, he did a little in-house research. “We took 2,000 of our own leads, and we looked at the closing ratio based on time that we got back to them … The first thing we noticed is we weren’t getting back to people fast enough.” The average response time was about 45 minutes. He added, “We noticed if we got to people within 10 minutes, our closing ratio was in double digits. When we got back to them after 15 minutes or so, it fell down tremendously.”

The second discovery he made was that long-term follow-up wasn’t being completed with 100 percent of the Internet leads. He said the direct sales managers would eventually begin to cherry-pick leads after they’d already been working them for a while.

That’s where advanced technology entered the process and helped open the response-time bottleneck and ensure long-term follow-up was completed. Toyota Sunnyvale chose to partner with ResponseLogix, a company that worked very closely with the dealership to develop some of its products. At first, the company was actually working in the dealership. Shum said, “Initially, they’d come in every day and they’d say, ‘What do you want? What would you like to see? How would you like it? What would help?’ And they watched us do our jobs in-house, and then they figured out a way that they could help on both the pre- and post-communication of the salesperson. They keep evolving.”

“The first thing we wanted ResponseLogix to do … was to get back with a message that gave not only price but our invoice, our MSRP and what made us different,” said Pettitt. Now, all Internet inquiries receive an e-mail that introduces them to Simms and the dealership and lets them know the name of the direct sales manager who will be e-mailing them shortly about their inquiry. The customer will then get a second e-mail from that direct sales manager specific to the vehicle the lead was submitted on. If submitted on a new vehicle, the e-mail breaks down the pricing of the vehicle in the different trims available. Plus, it displays three to four similar pre-owned alternatives.

While the used car leads do not go through the same follow-up process, it is very similar. The message from Simms is still the first e-mail the customer will get, and the assigned direct sales manager will then respond to the lead with vehicle-specific information. The goal is to get that process automated soon; however, the dealership has some templates in place to simplify following up on pre-owned vehicle leads while it’s still in their hands.

To improve follow-up, the direct sales department utilizes an automated process from ResponseLogix. Typically, the department follows up with leads for at least two weeks before transferring them to the automated process. Plus, to make sure no leads fall through the cracks, ResponseLogix monitors lead activity. If a lead has been overlooked by the direct sales department, automated follow-up kicks in on the fourth day. 

Shum added, “Being sure [follow-up] happens 100 percent of the time makes Scott [Pettitt] and I feel very, very comfortable … You think of it just as responding to e-mails, but … it’s so cumbersome to respond back and forth … It allows us to free up individuals to do more of their job.” And those individuals need as much time freed as possible because their job is much more than responding to Internet leads.

Recreating Internet Sales
In Sunnyvale, Calif., “Internet managers are a dime a dozen,” according to Pettitt, so when the store came under new management, they wanted to differentiate the Internet sales department by branding it as the “direct sales department” with “direct sales managers.” He said, “We renamed it back in ‘03 because we wanted to bring a completely different approach to [the direct sales managers’] autonomy and their roles and responsibility.”

The direct sales managers work deals in an almost cradle-to-grave fashion—taking on the roles of appointment setters, salespeople and desk managers. Upper management prefers one person handling the transaction from lead submission to the point the customer is ready to go into the finance office, as opposed to a process where the lead begins in a BDC and is turned over when it’s converted into an appointment. “Having a turn in that situation after you’ve been dealing with that customer to get them in just doesn’t work where we’re at,” said Pettitt. “We want [customers] to sit down with a sales manager, not just an Internet guy that has to run back and forth to the desk … someone that has some authority that can make decisions and help make the deals.

“We’ve empowered them to make decisions based off of criteria that I’ve set up,” he continued. All criteria are contained in what he referred to as an “Internet Bible” that can answer any question the manager or customer may have about a deal. He said, “It has everything from rate sheets, down to costs on accessories, down to a price minimum that we’ll take on every car line that we have, down to page views off of Edmunds and why their invoices don’t match up to ours … We’ve built a whole binder, which is about three-quarters of an inch thick that has all these resources for them. So I can take somebody that had no car experience and have them answering questions intelligently right off the bat.”

Toyota Sunnyvale hires direct sales directors with no car sales experience. Pettitt said he likes candidates to have some retail experience, but good phone and rapport-building skills trump retail experience. “We’re giving good pricing up front, so you’ve got to get someone who can engage [customers].” He also knows that computer skills can be learned, so he doesn’t scrutinize candidates in that department.

Toyota Sunnyvale prices vehicles competitively online with the help of vAuto. For each vehicle, Shum determines the store’s pricing by looking at, among other things, the prices of similar vehicles in his market and how saturated the market is with like vehicles. He said, “It just makes [pricing vehicles] easier. You can price based on age, equipment, color.” With such detailed information available, management integrated a one-price/negotiation-free sales process into pre-owned sales in March ‘09.

Shum said the store’s goal is to go to the negotiation-free sales process with new car sales, but that has not happened yet. Pettitt said, “On new, we really go out and mystery shop every month, finding out what other people are doing, and put a price that’s pretty aggressive right up front. If we negotiate, it’s not a whole bunch because we try to go out there with our best price.”

Also contributing to the continued success of the direct sales department is the approach the managers took when building the physical department. After Simms took over, construction of a new three-story building began, and the direct sales team was purposefully situated on the third floor. Shum said, “The whole point is you want them as far away from the walk-in traffic because it’s different.” If the direct department were on or near the floor, the direct sales managers would no doubt help walk-in customers, which would take away from their direct sales duties.

Pettitt added, “If you were down on the floor and you see less traffic, then obviously that’s going to affect your mood and how you’re going to sell your attitude. By staying away from that, it’s shielded us a little bit.”

Not All Things Are Different
While the direct sales department operates under a different philosophy than many Internet departments, it utilizes some of the same communication points as other dealerships. For example, the store e-mails newsletters to their customers twice a month, and on ToyotaSunnvale.com, a drop-down instant message (IM) feature is in place. Pettitt said, “I find it to be a huge resource, but it’s a double-edged sword. If you’re not there answering them, it can be negative publicity out there. If you’re going to do it, you have to jump all in.”

The technology of the IM feature helps mitigate lost opportunities because the direct sales managers are only in rotation for the drop-down IM if they are at their computer. Once they have been inactive at their computer for three minutes, they are automatically taken out of the rotation.

The direct department will get anywhere from 25 to 40 responses per day from the drop-downs. Of course, when a direct sales manager is engaged in an IM session with a potential customer, the goal is to get contact information. Pettitt said the closing rate of leads generated from the instant messaging is around 25 percent.

Like many managers overseeing employees who spend a lot of time on the phone, Pettitt coaches the direct sales managers on their calls. They partner with a company called MeasureUp, which alerts him of both poorly-handled and well-handled calls. The alerts are immediately delivered to his BlackBerry, allowing for almost-instant feedback and coaching. The coaching, for the most part, revolves around how to ask questions to generate more positive responses. Shum said, “The good part is [the call alerts are] positive and negative, so they’re great educational tools. The best time to coach and council is right when that conversation took place.”

And there’s a lot of coaching to do because ToyotaSunnyvale.com generates 1,100 to 1,200 leads per month, many of which are phone calls. The leads that come from their own Web site close on average around 18 to 20 percent. The direct sales department also works purchased third-party Internet leads. At the beginning of 2009, the department was purchasing about 750 to 800 a month and closing seven to eight percent of them. Overall the direct sales department closes about 11 to 12 percent of leads.
In 2006, to generate the better-closing, first-party leads, the dealership enlisted the help of a technology (not automotive) expert to help build a new site and set up a plan to drive traffic to it. Three years later, the consultant still works with the dealership to monitor SEO and SEM spends to make sure the dealership Web site is reaching its full potential. Pettitt said, “We don’t necessarily know everything about the Internet and would never say we do … There are a lot of talent pools out there that you can pay a little bit of money to and they’ll come in and this is what their jobs are. [Our consultant] helps us out on tracking and trying different things.”

He said SEM is “kind of hit and miss,” adding “you’ve got to really stay on top of it as far as trying not only different word sets but the areas [in which] you buy the words.” Getting the help of a consultant has helped so well that in about eight months the dealership was able to double its SEM spend to about $4,000 per month while lowering the cost per SEM lead to about $15 to $16. Prior to that, the department was averaging $40 per lead generated from SEM.

Culture Leads to Growth
Throughout the dealership’s growth, at the very core of it all was a solid culture that management anchored into the dealership when they took over in 2003. A big part of that culture is the 10-point guarantee Toyota Sunnyvale offers.

Shum noted the 10-point guarantee has brought many customers to their store. Many customers will ask questions about the different guarantees, thinking there’s some sort of catch to them (especially with the money-back guarantee), and Shum and his staff take pride in assuring the customers that there are no catches. With the money-back guarantee, he said, “We’ve taken away the ability of our salesperson to force you into something you really don’t want.” And most of the customers who return their car end up exchanging it.

The proven direct sales processes intermingled with the store’s strong culture has worked so well that Toyota Sunnyvale recently began recreating its direct sales success when it opened a separate pre-owned location just down the street from the franchise store. And management is opening the new pre-owned store just like they did the franchise store six years ago—with a positive attitude and goals to reach for. Shum said, “We finished number-one in volume last year [in our region], and the goal is to be … the top sales department for certified used cars in Northern California … We know how to get there. We’ve done it before, so we’re starting it – so to speak – all over again.”

Vol. 6, Issue 5