How Do I Choose a Vendor?
Who to Choose
We all know that we can’t run a dealership all by ourselves, right? First we need to have the right people working for us and I would argue that the second most important ingredient is vendor selection. Who you choose can have a drastic effect on your operations and profitability.
So Many Vendors
And the number of vendors out there servicing the automotive industry is overwhelming. When you consider there are over 16,000 franchised dealers in the United States, there is plenty of opportunity out there for them. And the rapid pace of change in our business, especially over the past 20 years, has brought many more potential partners into view.
I use the word partner intentionally because that’s what vendors are. If you treat them like second-class citizens, you are going to find yourself frustrated and always chasing the latest craze. If, however, you approach it as a mutually beneficial relationship, you’re bound to have better results.
- What is the need I am trying to fill? And what is the desired result or continuing outcome?
For example, let’s say I want to sell more cars out of our existing customer database. There are numerous companies that will mine your database for you to find more sales opportunities (full disclosure: my favorite is Auto Alert). One can argue that if our salespeople stayed on top of opportunities there wouldn’t be a need for this, but that’s probably a topic for another column. Anyhow, let’s say I’m agnostic on the vendor and want to sell 20 cars per month.
- Next, are we staffed properly to achieve this goal?
Are we going to have salespeople in charge or hire more people to assist? If the staffing isn’t correct, it won’t matter which vendor you choose because you’re set up to fail off the bat.
- Which vendors are in the space and what do they have to offer?
I find sites like Driving Sales are very helpful in comparing who is out there, including dealer reviews. I also read a lot of industry publications like Dealer Magazine and Dealer Marketing magazine to see what others are doing and what changes are happening in “vendor world.”
- Then I like to get references from other stores that are currently using the vendor, specifically people who represent the same brand we do (in our case, Lexus).
The goal here is to get an “apples to apples” comparison from another dealer in the same situation. I generally don’t like to be the first one of my brand to try something out (been the guinea pig too many times!). Let someone else work out the kinks. Some might argue that you can get a leg up on the competition if you are first, which is a valid point, but at this point in my career I prefer to wait. I ask the GM (or other responsible executive) how long they’ve been working with the vendor and how it affected their business. Were they looking to solve the same problem as us? What insights can they give? And I try to get hard numbers if they’re willing to share. Not saying that it will guarantee I get the same results, but at least you can (sort of) measure their ROI.
- At some point, whether before or after the references, you need a product pitch, demo or webinar.
This is where I like to get my managers involved, the ones who are going to have day-to-day responsibility of using the product or dealing with the vendor rep. If it’s a service, website or app, how easy is it to use? If it’s a product, what does it do for you, your people and/or the end customer? What is the value proposition? What support will they provide after the sale? Everyone should ask tough questions (but not insulting) and play devil’s advocate to their pitch. They’ve rehearsed it thousands of times and should either be able to answer or get you the answer within a short time frame. Ask about their agreements. Most vendors these days have a month-to-month or 30-day out clause. If someone wants a longer agreement, there is usually a large capital investment involved (think uniforms, oil dispensing, etc.).
- Finally, it’s decision time. I like to have a consensus among the managers.
If everyone’s not on board, the likelihood of failure goes up immensely. If we have agreement, the last thing is price. I know this my be sacrilege for some, but the price is actually irrelevant. The ROI is more important in the long run. After all, if the product or service doesn’t work, we’re going to fire them anyway. I don’t want to buy something because it was the cheapest on the market, I want to buy it because it makes my business better!
Implementation and Measurement
After choosing which vendor to go with, then the hard part begins – implementation and measurement. People need to be trained properly and the “why” of the product or service switch will have to be explained. This is where the dreaded word of change comes in – people need to understand that you’re doing this to improve things, not make them worse. Getting buy-in quickly helps so much.
Then you have to measure how the product or service is doing. This is where I think a vendor ultimately succeeds or fails. If we have a good rep, I guarantee we’re going to stay with that vendor longer than one with little to no follow up. We figuratively need our hands held, especially in the beginning.
I hope this helps. Feel free to leave some feedback. How is your process different? I’m always on the lookout for better ways to do things.