Setting Targets
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by
Peter Kahn
| 10/12/2018

Setting Targets

Recently, I had an opportunity to discuss dealership goals with a colleague. We can all agree that most, if not all, dealerships are focused on growing revenue, profit, and improving customer satisfaction. But are these the only business metrics that matter? What about community standing? Business longevity and improving workforce morale and retention? Aren't those important goals too? And to whom? Ownership clearly favors revenue, cash flow and profit. The General Manager would agree, but they could also be thinking of morale and retention. After all, these other goals also play a role in long-term profitability.

Finding the Right Goals for Your Business

Goals drive behavior, and having the right goals across the store should drive the right behavior. Choosing metrics that evaluate our performance toward achieving a goal is critical, but what are the right goals? And what metrics do we use to see if we are winning or losing?

Let's dig down a bit. When thinking about goals for your Service Manager, what typically matters most? Some Service Managers may focus on increasing the size of the average repair orders where others would rather work toward increasing the number of repair orders. CDK Global recently completed a research study of Service Managers and found that neither of these were as important as customer satisfaction. Why was customer satisfaction most important? To drive repeat business.

New Goals to Drive Change

This brings us to another type of goal that isn't often found in many dealerships: Customer Lifetime Value, or CLV. What's your typical customer worth? Is it just gross on the vehicle sale? Does it include aftermarket accessories, parts or service? How long do you keep customers? Can you improve CLV by increasing their loyalty through the services you provide? Most likely, the answer is yes. Will changing the goal to optimize CLV change the behavior of the Service Manager? It very well could.

Do we see goal conflict that leads to dysfunctional behavior? Absolutely — particularly between departments. Take trade-ins, for example. The New Car Manager is being measured on units sold and wants to achieve the monthly OEM target. This could lead to a higher than market trade-in appraisal to close the deal. The Used Car Manager could also be impacted by this action. To improve gross, the Used Car Manager would rather drop the appraisal value down to cushion the reconditioning expense and increase time on the lot. If both the New and Used Car Manager are measured on dealership gross, that could help align goals. However, it could also impact the goal of hitting the OEM target and cost the store the monthly incentive.

Alignment through Multilevel Goals

These are just some examples of how we need to think about goals. It starts with a clear understanding of what the store is trying to achieve overall, and how each department contributes. Having both department-level and dealership-level goals probably leads to the best chance of attaining alignment —and achieving what matters most to the store.

CDK would like to know what goals and metrics your store uses. With that in mind, please take this brief survey. We’ll share the results when we have enough responses.

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Peter Kahn
Peter Kahn

Peter Kahn is the Director of Retail Insights at CDK and is tasked with building tools to help dealerships understand the value of Internet-based marketing. With a focus on helping dealers connect with shoppers, Mr. Kahn has built out a team that focuses on the automotive shopper experience as a way of providing actionable insights that will improve shopper satisfaction and dealership profit.