Setting Up an Auto Service Business Development Center

Staffing

Our Service BDC does all inbound/outbound service calls. We also have a Sales BDC that handles all inbound/outbound sales calls.

In addition to the calls that they are paid for (see below), our Service BDC reps also follow up on reservation no shows. Our current no-show rate is about 6%, down from a high of 15% that occurred before we changed our reminder emails/texts (which now go out at the time the Customer makes the reservation, the night before their reservation, and the morning of).

Conversica has also proven useful as a data mining/contact tool. Our results have declined, but the volume of reservations that it generates is still very reasonable for the cost. We just wish that it was able to text Customers, as we find that far more effective than emails or calls.

Metrics

• Answer speed: 94% on the first ring. 100% by 3rd ring.
• Abandon rate: Less than 4%.
• Outbound calls/texts per day: Minimum of 120. Texts are better than calls – they get many more responses.
• Reservations per day: Minimum of 20/rep, goal of 30.

Breakdown of reservations

• 50% as the result of outbound calls
• 20% online
• 20% Service Advisors
• 10% combination of email and snail mail

Necessary Resources

• I highly recommend having a call recording system to playback calls and for training– at least 90 days of storage, ability to track calls by extension, ability to forward calls as .wav files, and ability to generate reports that show call length, successful/unsuccessful outgoing calls, and wait time
• Booking system – The same system has to be used by the BDC and by the Service Advisors; BDC reps must be able to leave notes that the Service Advisors can see, and the BDC reps must be able to see recommended services, including quoted prices; the booking system must be able to report on volume by date, rep, show/no show, service(s) performed
• ACD Reports – answer speed, abandon rate, call volume by day of week, date, time of day (to help figure out staffing), wait time (to corroborate with recording system)

Training
We give each of our BDC reps a training manual. It contains our scripts, a phone operation manual, breakdowns of our processes, a reference guide, maintenance service guide and prices, contact list of Motorcars employees, our department’s priorities and philosophy, and a set of flashcards. We use the flashcards as a fun way to train new reps on questions that they won’t likely get very often but should still know the answers to (see below, after Scripts).

We also have up-to-the-minute versions of all of this – plus the schedules of all employees – in the cloud (Google Drive).

A typical new hire shadows the entire team and begins to make outbound calls within 2 weeks, and inbound calls within 4 weeks. Because there is so much to know, we would rather they learn things well, rather than quickly.

Outbound Calls/Lists

• No shows
• Declined services
• Collect updated email addresses, textable phone numbers
• Purchased recall lists
• Sold not serviced
• ToyotaCare (each cycle, plus late, ToyotaCare Plus, and Toyota ServiceCare)

Compensation
We have a daily spiff to drive the next day’s reservations. The spiff is paid out to every member of the team, and starts at a combined total of 70 reservations for the following day:

• Less than 70 reservations = $0.00
• 70 reservations = $12.50
• 80 reservations = $15.00
• 90 reservations = $18.75
• 100 reservations or more = $25.00

The team can see where they are constantly throughout the day by checking the Workbook in Xtime, and I tell them how much money they have in their ‘bank’ every time it goes up. This has proven to be a winning strategy – everyone makes extra calls to get over the next hump.

Outbound Campaigns

Conquests

• $7.50 for Customers 9 to 16 months without service
• $10.00 for Customers more than 16 months without service
• Recalls – Payout per ‘show’ for proactive outbound contact - $5.00
• ToyotaCare - $0.75 for each ‘show’
• ToyotaCare Plus - $20 for each credit card number collected
• Toyota Service Care - $10 for each credit card number collected

Detail Center

• Complete Detail - $12.00
• Interior Detail - $6.00
• Exterior Detail - $6.00
• Pet Hair Removal - $2.00
• Floor Shampoo - $2.00
• Seat Shampoo - $2.00
• Exterior High-Speed Buffing - $3.00
• Engine Clean & Degrease - $2.00
• Rubbing Compound - $5.00
• Steam Clean Dashboard - $2.00
• Ionizer - $3.00
• Add Fresh Air Scents - $2.00

Recommended Services

• Alignment - $5.00
• Battery - $5.00
• Brakes - $5.00
• Tires - $10

Marketing Plan

We have found that our most successful campaigns have several traits in common:

• They are a combination of email, postcards, and outbound calls.
• They are narrowly targeted – not ‘shotgun’ ads. For example, there are 5 different ToyotaCare email templates – one for each of the 5 services – plus one to transition Customers to ToyotaCare Plus and another to get all Customers, regardless of brand or model year, onto Toyota ServiceCare.
• As a rule, our eBlasts and postcards rarely feature pictures of cars. Instead, we use humor, children, single panel comics, puppies, kittens, and images of the folks who work at our stores. ‘Dad’ humor seems to work best.

Scripts

Incoming Call

• Thank you for choosing Motorcars. This is ___________ speaking and I can help you!
• My pleasure, I’ll be happy to assist you with this.
• Please allow me to gather some personal information from you. May I have your home telephone number?
• (If Customer does not appear under the phone number given, let them know, and ask if they have brought vehicle in for service before.)
• (If yes, thank them for being a loyal Customer and try to find them by last name.)
• (If no, thank them for the opportunity to earn their business and create a Customer profile for them in XTime.)
• Which vehicle is your call regarding? (Year/Make/Model)
• (If Honda) What service codes appear on your Maintenance Minder?
• (If Toyota) Your next recommended maintenance service is XXX. Is this the service that you wish to schedule?
• (Check Dealer Daily for Toyota recalls. If there are open recalls, let the Customer know, and ask if they wish to have them taken care of during their visit.)
• Anything else that you’d like us to check out, since it’s coming in anyway? We also offer complete Detail services, if you would like to schedule that at the same time.
• Will you be arranging your own transportation or taking advantage of our shuttle service? (Unless oil change or other Waiter. If the concern is an electrical concern of any kind, it must be a drop off. The Customer’s SA will be able to give the Customer a good idea of how long it will take once the technician has an opportunity to see the vehicle.)
• What day works best for you?
• Let me check our service calendar for a convenient drop off time… We have an opening on ______ (day) at ______ (time) - will that work for you?
• What email address/textable phone number may we send your confirmation to?
• We have you scheduled to meet with your Service Advisor at ____AM/PM on _____ (day). You will be meeting with _______________. Our goal is to complete your visit in roughly XX hours, but your Service Advisor will be able to give you an exact time when they check in your vehicle.
• (If new Customer, explain service drive and shuttle process.)
• Again, my name is ____________and if for any reason you need to reschedule, will you please give us a call?
• Have I answered all of your questions and provided you with excellent service today?
• Thank you for calling and have a great day!

Declined Service(s)

If You Get Voicemail
Hello, __________, this is __________ calling from Motorcars. Please call me at XXX-XXX-XXXX. Thank you! Have a great day.

If a Human Being Answers
Hello, this is __________ calling from Motorcars. Is __________ available?

Hello, __________, this is __________ calling from Motorcars. Your Service Advisor recommended some work during your most recent visit, and I’m calling today to schedule your reservation.

We have an opening today at __________. Will this work for you, or would another day be better?

If They Push Back
I understand. Do you mind letting me know what obstacle we might be able to help with?

If It’s About the Cost
I realize that this might be an unexpected expense. If it will help, we have a special coming up next week on (depending upon which service was declined):
Alignment - $95.96 (normally $119.95)
Brakes - Save $50

We also offer a deferred interest credit card that allows you to take up to 6 months to pay for any work that you have done. It can also be applied to needed parts, such as tires and so on. Would this be helpful to you?

IF IT’S ABOUT BEING WITHOUT A CAR (only applies to brake jobs)
If it will help, I can offer a 1-day rental at no cost to you while you have this work done.

IF YES
Great! What I’m going to do is to schedule your reservation and I’ll add a note to your Service Advisor, so they’ll know about this.

(Make sure you schedule them with the same Advisor who made the original quote.)

IF NO
That’s fine. When you are ready to schedule this service, please let me know. My name is __________ and you can reach me at XXX-XXX-XXXX ext XXX. Is there anything else that we can help you with today? (Pause) Thank you! Have a great day.

No Show Follow Up

Hello, this is _____ calling from Motorcars. The reason I’m calling is that it looks like you may have missed your recent service visit. We understand – life happens.

Would you prefer to reschedule in the daytime, evening, or on a Saturday?

I have 3 times open on __________ … one at __________, one at __________, and one at __________. Which is best?

Great! I have you scheduled on AT . We have you scheduled for . Is there anything else that you wish to add?

Excellent, we’ll see you at ON . Have a great day!

IF THEY PUSH BACK
I understand. When you’re ready to reschedule, just call us back at XXX-XXX-XXXX. We look forward to seeing you again soon!

Recall Script
If You Get Voicemail
Hello, __________, this is __________ calling from Motorcars about an urgent safety recall.

Please call me at XXX-XXX-XXXX extension XXX. Thank you!

If a Human Being Answers
Hello, this is __________ calling from Motorcars. Is __________ available?

Hello, __________, this is __________ calling from Motorcars. Your vehicle is subject to a safety recall by Honda/Toyota, and I’m calling today to schedule this service. This service is intended to improve the safety and reliability of your vehicle, and it’s completely free to you. If you like, we can schedule the recall service at the same time as your next maintenance service.

We have an opening today at __________. Will this work for you, or would another day be better?

If They Push Back
In addition to improving the safety and reliability of your vehicle, Honda/Toyota requires this service to remain compliant with your vehicle’s warranty.

Would an evening or weekend reservation work better for you?

ToyotaCare

If a Human Being Answers
“Hello, this is __________ calling from Motorcars Toyota. Is __________ available?

Hello, __________, this is __________ calling from Motorcars Toyota to schedule your ToyotaCare service. This is a free maintenance service that we provide that includes everything but air filters and wiper inserts for the first 2 years that you own your vehicle. We have an opening at __________ on __________. Will this work for you, or would a little later be better?”

If You Get Voicemail
“Hello, __________, this is __________ calling from Motorcars Toyota to schedule your FREE ToyotaCare service. Please call me at __________ ext. __________ to schedule this service. I’ll be happy to help. Thank you!”

ToyotaCare Plus

If a Human Being Answers
“Hello, this is __________ calling from Motorcars Toyota. Is __________ available?

Hello, __________, this is __________ calling from Motorcars Toyota to schedule your next maintenance service. I see that your ToyotaCare service plan is about to expire/has expired. Would you like to extend your ToyotaCare coverage?

Extending your ToyotaCare will extend your coverage for maintenance for an additional 2 years. This will cover your first major service, which is normally $160. It will also cover 3 additional services after that. Extending your plan will also extend your roadside coverage for an additional 2 years. This covers flat tires, no starts, running out of gas, and they will get you to the nearest Toyota dealership anywhere in the United States.

There are 2 ways that you can extend your ToyotaCare. One is to pay the total amount of $329 plus tax.”

If They Say No
“That’s fine. Let’s go ahead and schedule your next maintenance reservation.” (Continue with service scheduling process.)

When They Say Yes
“Excellent! Let’s go ahead and schedule your service, and then I’ll take your credit card information so that we can extend your ToyotaCare coverage.”

Equality, Part 1

There's a long-standing tradition in sales that's about as self-destructive to a sales team as it's possible to get: Treating salespeople differently depending upon their sales metrics.

You all know what I mean - making exceptions for things you would never normally allow because a particular salesperson generates high numbers. While it's great that they are consistent achievers (wait - they're not consistent? then why are you rewarding them for sporadic results?), think about the door that you've opened. These are salespeople we're talking about; it's their job to open doors as wide as possible, and you can't expect them to act differently with internal doors than they do with external doors. They will push those exceptions as far and as wide as they possibly can, and that's not their fault - that's what salespeople do, by nature, and you're the one that opened the door.

Now think about the other members of the sales team, the folks who consistently hit goal but don't soar above it. How much of a motivator is it for them to see that the fellow who occasionally hits a high note is permitted to break the rules, sending their sales even higher, while they have to rigidly observe procedure?

It's not. That's why they're sullen. That's why their results decline. That's why they leave, and go do terrific work for your competitors, taking knowledge about your company, your Customers, and how you do things with them.

There's nothing wrong with compensating salespeople based on results - that's what sales is all about, and everyone understands that. It's the arbitrariness that makes unspoken benefits evil, not the concept. If you're going to bestow privileges based on results, put them down in black and white, for all to see and aspire to. And, rather than have them kick in when a salesperson goes above and beyond just once, make them effective with consistent high results.

Salespeople are like racehorses: It's their job to run, but it's your job to clearly lay out the track and the stakes.

'Awareness'

Hey! How are you? How's your organization doing? Really? Hm. Yeah. Well, you probably won't be interested in this, but I've got a great way to make people more aware of your brand. Lots of people. Oh, you are interested? Okay, great. I mean, are you sure you want to do this? I don't want to push you into something that you're not 100% sure about, because I'm on your side. Okay... if you're sure...

Give me $25,000 and we'll get the ball rolling.

What? Well, brand awareness costs money, and this level of brand awareness isn't cheap. I'm making nothing on this, you know - this is all overhead for the camera guys, the web developers, the talent, plus purchasing the ad spots. I'm only even doing this for you as a favor - normally this would cost twice as much...

What's that? How many sales will you get out of this? Well, that's hard to say, exactly. I mean, this campaign will go out to about 25,000 people, so a buck a person, that's pretty good, isn't it? What? You want to have some kind of way to tell how many of these people come in and buy because of this campaign? Well, you don't want it to be too sales-y, you know. This is brand awareness, we're talking here. If it's too much like a pitch, it will turn people off. Huh? What's the point of awareness if it doesn't generate sales?

Excellent question. The answer is: none.

'Awareness' is used by some ad and PR agencies to pay for vacations to Cabo when winter gets on their nerves. From their perspective, there's no downside: They've gotten your message out to the number of people they said they would, you have no way of proving them wrong, and they've made a tidy sum without having to deliver a single sale, because that's your job. Is it their fault if you have a message that doesn't stand out, or isn't clear, or the people who saw the spots aren't ready to buy yet, or or or?

Yes. That's what you pay them for, isn't it? If they can't deliver new Customers, what good are they?

To avoid setting your money on fire, awareness should always and only be this: The top of your sales funnel. Because of this, making certain that your message is clear, stands out from your competition, and is sent to the right demographic at the right time are all key. Web stats are a great way to measure this, because they are collectible and fairly straightforward. Print, radio and television are disappearing because they have a much harder time proving reach and Return On Investment. And if something can't prove ROI, why are you wasting your money on it?

Once you are confident that your campaign will reach the right audience at the right time and the reach has been verified (by someone other than your agency; Alexa is great for online stats, the Radio Advertising Bureau will help you figure out frequency and schedules for that outlet, and TV information can be found here and here.

So now that you've got the top of your sales funnel defined, what comes next?

• Awareness - Potential Prospects know who you are, what you stand for, and what makes you better than your Competition.
• Consideration - Potential Prospects compare measure you against your competition.
• Preference - Your message has convinced potential Prospects that, if and when they need your product(s) or service(s), you are where they'll go (unless, of course, they see a more convincing competitive message between now and then).
• Purchase Intention - They call, look at your website, or stop by your place of business. From then on, it's up to your Sales staff to record them as a Lead, get them in the door, and close the sale.

Like all sales funnels, every stage contains fewer potential Customers. This is why knowing how many people you're starting with - and verifying that number as many ways as possible - is key. Your agency should be able to provide you with a fairly accurate estimate of the conversion rate for each stage. If they can't, you need someone with more metrics expertise.

The idea that your message should not contain some means to identify whether or not the campaign is what brought a particular Prospect to your door, website, Facebook page, or phone is nonsense. Just because someone came in doesn't mean they did so because of your campaign - unless your agency can prove otherwise, these folks probably would have come in, anyway. Again - you should only ever pay for what you actually get.

The easiest way to do this is via a response tag - a special offer at the tail end of your message that is specifically trackable to a particular medium for a particular campaign. The response tag and offer for each medium should be different. This will help you determine where to spend your money most effectively next time, and where your message either didn't get through or wasn't effective.

Of course, you should be sitting down with your marketing manager, sales manager, and agency rep(s) to review the metrics and adjusting according on a regular basis, and comparing each campaign to the last one, and also to the most effective one. Your results should improve over time. If they don't, it's your agency's job to figure out why, and your marketing manager's job to take corrective action.

(This doesn't mean you can't still beat up your sales manager. We all know they expect it, and what fun would life be if you couldn't complain about sales?)

Sales 101

Before we get too far ahead of ourselves, it's time we start our conversation about Sales. The fact is, most companies do Sales wrong: Wrong expectations, wrong incentives, wrong communication, wrong, wrong, wrong.

Let's start with Incentives. I mentioned in a previous post that an adequate Sales rep should generate 10 times as much revenue as their total compensation. To help make this happen, goals should be based on this metric. Otherwise, you are underpaying some reps and overpaying others vs. what their value is to the company. And believe me, they know it.

Expectations: You spend a lot of money to generate leads, right? So what's the close rate for each of your Salespeople? You should know this, your Sales Managers should know this, and your Salespeople should know this, too. At a minimum, it should be reported monthly, and it should be public information. (Nothing drives performance like spectators.) Regardless of your industry, if you have effective marketing (you do, right?), your Salespeople should close at least 1 out of every 3 leads (a 33% close rate), or you're wasting your money.

Communication: If you sell a physical product, rather than a service, your Sales reps should know exactly how much gross margin each product has. This will make it easier for them to negotiate volume deals - especially since their pay should be based on margin.

Splitting Territories: Because this is often done incorrectly, Sales reps feel like they're being punished when a productive territory is split. This is exactly the opposite of what you want to convey. Generally, if you're thinking about a split, it's because there are Prospects in the territory that the original rep isn't getting to. That's how you need to explain it, and that's how you need to approach compensation: reward the 2nd rep for new business generation, and make sure that the two reps work together by giving the original rep an incentive for turning over Leads that they have not touched. It need not be a large amount - they know they're being comped for zero work; it's more the fact that you are acknowledging the fact that you expect them to be team players and reward them for it.

CANI: The important thing is to look at everything that your Sales staff does, every day, and ask yourself "Why?" It is incredibly easy to fall into the rut of doing things a certain way just because you've always done them that way. The way to keep your company growing is to constantly improve everything you do. Don't expect to fix it all in a day, but do make a list of what to change and do set deadlines and milestones for those changes. (Think CANI - Constant And Never-ending Improvement.)

Double Dipping is Dumb

Many organizations break their Sales teams down into 2 functional groups: Business Development (sometimes called Outside Sales) and Account Management (sometimes called Inside Sales). While the names might be misleading (for example, Inside Sales reps might actually travel to see Customers and Outside Sales reps might spend a considerable amount of time on the phone, depending upon the industry and the organization's needs), what we really mean is that one group consists of Hunters and another group consists of Farmers.

Hunters find new Customers. Farmers grow the spend of existing Customers.

Some organizations add a 3rd layer: Sales or Account Administration. Typically, this layer appears when the organization's internal processes have become so dysfunctional that you need a whole other - and cheaper - person to make sure orders are entered, processed, completed, and delivered. If your organization has this layer, usually everyone agrees that it's a necessary evil. "We have these extra people," goes the argument, "because our Sales Reps' time is too valuable for this type of work, plus it would cost too much to improve our processes to make a change."

So you teach your Salespeople that certain tasks - like entering and following through on the orders that they are paid for - are beneath them? That certainly is an interesting culture you're building. Of course, it inevitably leads Salespeople to believe that other tasks might be beneath them, too, like returning Customers' calls, but hey - it's your business, and you can make everyone who actually does those tasks resent the Salespeople who have been taught to dump on them if you really want to.

But let's look at that second excuse a minute, shall we? You don't have enough money to improve your process. Fair enough. It might even be true. But just to be sure, let's kick the tires of that argument. Let's say you have just 3 Sales Admins (3's not too bad, right?), and you pay them $30,000 a year or, by the time you add healthcare and other overhead, let's conservatively say $45,000 each. Per year. For as long as your business exists. Which won't be very long if you keep paying 2 people to do one job.

Get the picture?

If you apply just one year of what those 3 admins cost to process improvement - even if it means investing in a much better CRM, accounting system, or whatever it takes to make that job practical for a single person to do - you have $135,000 to work with. And, after the first year, that savings (plus any cost-of-living adjustments you would have had to add on) goes right to your bottom line.

Friend, you can't afford not to be lean. And you never will.

Now let's look at another example of paying 2 people to do one person's job. Let's say you have Hunters and Farmers. Do you pay your Hunters only for a new Customer's initial purchase, or do they receive some type of residual pay for each order thereafter? If the latter, for how long? If you continue to pay a Hunter after they have handed a Customer over to a Farmer, you're double dipping.

Never double dip.

"Okay," you say. "Fair enough. But let's say a Customer took a long time and a lot of work to land. Plus their initial purchase was small, but later purchases weren't. How do I motivate a Hunter to hunt if we immediately take a Customer away from them?"

The issue isn't comping your Hunter for landing the Customer. The issue is paying them a) when they no longer have any connection with the Customer, and/or b) making it easy for Customers to keep going back to their Hunter, preventing the Hunter from hunting.

The secret to handling this situation properly is as follows:

• Bring in the Farmer on the day the Customer signs with you. Identify them as the Customer's Account Manager. Never for a moment suggest that they are the Hunter's assistant, or allow anyone else to suggest this (especially the Hunter).
• Pay the Hunter for the initial purchase, and for every subsequent purchase for a maximum of one year. (If your margins and/or commission percentages are high enough, you can and should gradually wean this amount down. If not, just cut them off after one year.)
• After one year, only the Farmer gets paid for this Customer's purchases.

This approach keeps your Hunters from being able to live on residuals - every year, they have to completely replenish their Customer base. This will encourage them to help make the transition to their corresponding Farmer as smoothly and as quickly as they possibly can. The quicker and the smoother this happens, the more money both reps make, and neither one feels subservient or entitled.

And, since we're on that topic, anyway, if you are like most organizations, chances are that you pay your Hunters more than your Farmers. Am I right? But if a Farmer retains Customers and grows each one's spend beyond their initial purchase, don't they typically make more money for your organization than your Hunters?

Then why do you pay your Hunters more?

The argument that I hear most often is that landing a Customer is harder than keeping one. This hasn't been true for awhile, and it's time that your culture caught up to reality. Keeping Customers is harder than it's ever been, and it's much harder than taking Customers from a competitor. Landing a Customer is a finite period of time, no matter how long it seems. Plus, if you follow the model above, you get to walk away from any problems after the initial order or two and wine & dine the next Prospect.

Am I saying that you should pay Farmers more than Hunters? No - but only because I don't think you're ready for that yet. But paying them in such a way that they end up making about the same if they hit their respective goals? Yeah. If anything, I think you're overdue for that one.

And if you think this was fun, just wait until we talk about the right way to split a territory.

Databases for Dummies

Have you ever noticed that database people are fussy? Really, really fussy. (It's okay for me to say this, first because it's true, second because I am one.) It's because we have to be, because literally everyone else in the company constantly tries to mess everything up. Our lives are spent rolling our eyes and fixing problems that cost you a tremendous amount of money and lost man-hours, and that never should have happened in the first place.

If you don't have a database of your Customers and prospects, it's time to create one. If you do have one, it's time to clean it. The first will help you make money; the second will help you save money.

A database, for the purpose of today's topic, is a place to save Customer information. There are 5 main must-do's when creating a database:

• Only have one database, ever.
• Figure out in advance what information you want to save in your database, now and in the future.
• Create clear, meaningful names for each database field, with no redundancy.
• Decide which data fields are mandatory and what constitutes acceptable data for each field.
• Require that everyone use the database, always (especially salespeople).

And there are 2 must not's:

• Never, ever use Excel in place of a real database.
• Never, ever use Act in place of a real database.

The reason that you only want one database is to avoid pocketing and the cost & aggravation of having to merge dozens of databases later (trust me; I used to do this for a living). You have to figure out in advance exactly what information you want your database to include, now and in the future, because of a triusm that applies to a lot of things in business:

Plan carefully now, or regret expensively after.

You always want your database fields to have real-world names, without cryptic acronyms. Otherwise, you are just begging for people to put the wrong info in the wrong fields, means turns your database into worthless crap. Never use the same field more than once. You've already asked for the info; why do you need it twice? Some fields can be optional, like the Customer's birth date, but you should set most so that they have to be filled in. What good is a Customer name without an address, phone number, and email address?

Also, don't allow anyone who uses the database to use abbreviations, or I guarantee that you will have duplicate records. If your Customer's name is 'David', use 'David' and not 'Dave'. If he likes to be called 'Dave', put that in a 'Nickname' or 'Goes By' field. Otherwise, when you buy lead lists or someone else enters him under the other name, you'll have duplicate records. Also, always spell out street names, city names, and country names. (I once had to work with a database where a single city name appeared as 6 different abbreviations, plus spelled out correctly, which meant the company was spending money to send the same mailer to each Customer 7 times. Now imagine if the street names and county names were sometimes abbreviated, too.)

If you already have a database, now you know why you need to get someone to clean it. The sooner the better.

If your organization has salespeople, I'm going to suggest that you create a new rule, if you haven't already: Any sale that takes place before a Customer is entered into the database belongs to the company. No exceptions, period. This will ensure that every Prospect is entered into the database, because there are salespeople who have a bad habit of sandbagging leads, in the mistaken impression that your Customers 'belong' to them.

Customers belong to the company. Period.

Not only will this create a more flexible corporate culture, it will also make things much easier when you have to reassign a Customer to another salesperson or split a territory.

And, while everyone who touches Customers should have access to your database, only Sales, Customer Service, Accounting, and Tech Support should be able to enter or change data. Not only that: any good database should also record who entered or changed that data, and when.

Finally, why not use Excel or Act?

Excel is not a database; it's a spreadsheet (duh). Microsoft puts all kinds of code in each field that you can't see to make it work well as a spreadsheet. Unfortunately, this code makes it difficult to do anything with the data if you try to use it for anything else, and a costly conversion if you have to convert it to a true database format when you eventually move up to SQL or some other real database, and someone has to manually clean out all that gunk (and your pockets, while they're at it; remember the Leaky Roof rule).

Act, while easy to use and great for a self-employed, standalone salesperson, does not share data well across a network - the whole point of having a database.

The D Word

Let's improve our vocabulary, shall we?

Discount: (Noun) A way of telling Customers that what you sell isn't worth what you said it was.

We've talked before about the difference between price and cost. But how do you show loyal Customers your appreciation if you can't offer them a break?

Sales is a transaction, right? You offer a product or service, and the Customer offers money in exchange for that good or service. If you're doing it right, every step of the sales process is an exchange: You tell me your name, I tell you mine, you tell me your needs, I tell you what solutions I have for those needs, you tell me your budget, I give you a proposal. If you are doing Sales right (and most companies don't), you never give anything without getting something in return.

The same is true for any breaks that you give Customers. To get a break, there must be a transaction, and i don't mean just for doing business with you. To pay less, a Customer must buy more.

This shouldn't be a secret. You should have a written breakdown of exactly how much a Customer must spend to get each specific break. That makes the break an incentive, not a discount.

Discounts are given; incentives are earned.

You don't give discounts because your products, services, and company are superior to your so-called competitors. You don't have to give discounts.

That list of incentives should be passed out to every Customer. Your process is transparent; you don't need to hide anything because you don't run that kind of business. And no Customer gets an incentive without the corresponding increase in spend.

By now, some of you are shaking your head, saying, "What about high profile Customers? They draw other Customers because of their name. Surely they get a discount?"

No.

Remember what we said about the "special situation"? If you allow even one, all of your sales will slide down that slippery slope, eat into your profits, and before you know it, your Customers and business are gone.

Because you stick to your incentive process, you have predictable metrics. By knowing your marketing conversion rate, retention rate, and sales close rate, you know how many Customers you have and will have. You can forecast revenue because each Customer has told you what they expect their spend to be.

Wouldn't you rather live inside this process than one where you have no idea where your money is coming from, or if it will continue to come, or why? Of course you would, because it makes sense, and you are a sensible person. That's why you're here.

If your organization is B2B, the same rules apply. If you have repeat Customers, B2B or not, there's no harm in applying an incentive for their loyalty, too, if you like. And if they bring you more Customers - not by reputation, but via an actual referral. Again, make sure that the terms are spelled out, clear, and followed to the letter.

Welcome back to sanity.

Chopping Up Customers

In a prior article or two, I talked about different behavioral styles and a little bit about social media. Today, we're going to tie those together and convince you to abandon ads on TV, radio, and newspapers.

First, let's talk about what those three mediums really are: shotgun marketing. You have one message, and you shoot it at the crowd that each medium's salesperson tells you they have a lock on, and then you sit back and hope that your buckshot hits enough people to at least cover the cost of the ad (you do measure that, right?).

It's easy, right? They probably even put the ad together for you, or your agency does, and everyone tells you that that's where you need to spend your money because that's where the people are. And they're right - there are people there. The problem is, those people aren't Customers. They're media salespeople and ad agencies who make a lot of money every time you produce a shotgun ad.

The problem with shotgun ads is that they're not very measurable. This is to the advantage of everyone but you. If you can't measure the results, all you have to go by is how many people buy from you in general following a campaign. How do you know that it had anything to do with your ad? And even if you have a coupon code or something similar, and your reps don't let Customers have the special even if they don't have the coupon or the code (they never do that, right?), your typical response rate is probably somewhere between 1% and 3%, and you marketing people will tell you that's good.

Missing 97% (or more) of the people we aim at is good? Since when?

The core issue is, you're trying to hit several different kinds of slippery fish with buckshot. You don't use buckshot on fish; you use bait. And each type of fish has different tastes when it comes to bait. And some like bait that floats on the surface, some like bait that moves around or has a particular scent or color or feathers or or or...

You don't need a shotgun. You need a tackle box!

The first step in fly fishing, before you ever tie a fly, is to know what kinds of fish you want to catch, and then what those fish like. That means gathering information about your Target Customers - as much as you possibly and legally can. (At this stage, not necessarily information tied to a specific person; we'll talk about that in another post.) This is the bare minimum (bearing in mind that the needs of your business may require additions):

• Age 
• Sex 
• Household Income 
• Dependents 
• Interests 
• Ethnicity 
• Sexual Orientation* 
• Sources of Information (what used to be called 'news') 
• Behavioral Style

Once you know what your Target Customer's answers are to each of these questions - and remembering that you may have more than one target Customer - you can begin to break down their demographics. (Note: The old media that I mentioned before - radio, TV, and newspapers - will try to tell you that they have demographics, too, already all broken down for you. This is a lie. At best, they have guesses and hopes, none of which are something that you should risk your revenue on.)

Now look at as much information as you have on your actual Customers. How closely do they match your Target Customer? If it's not a close match, you just learned a bunch about whoever decided what your Target Customer looks like (hope their resume is up to date). Adjust your Target Customer to more closely match your actual Customers.

Now, how many Target Customers did you come up with? If you only have one, you'd better be a military contractor, or you're in trouble. You want a minimum of three or four to sustain your business if interest in your product or service wanes in any one group (or, in the case of B2B companies, in case one of your Target Industries has a financial downturn). As a general rule, more is better.

Once you have your target Customers finalized, you can begin to break out where your marketing money should go, and how you need to rewrite your message so that it speaks in the language that each Target Customer wants to hear and how it addresses the needs that each one has.

This is called Segment Marketing, among many other names. And while it definitely takes more work and time on your part, it doesn't need to cost more than what you already waste (I can't say "spend", because I only spend money on things that benefit me) on old media marketing - and your conversion rate will show a drastic improvement. It's hard not to like something that earns more for the same investment.

And, lest you think I forgot my promise to tie in social media, check out Mashable's lovely infographic. If your brain isn't buzzing with new marketing ideas by the time you get to the bottom, it may be a good time to take a nap.


* You are not asking Customers to come out of the closet. But knowing if a gay person is a potential Target Customer for your product or service - because they tend to have more disposable income, for example - may help you decide whether or not to spend money with a gay-focused publication or event. You could just as easily add religious or political orientation, too, depending on whether or not these factors are related to your core business.

Margin, Margin, Margin!

To run a business, you must have a basic understanding of a few key metrics. Margin is about as key as you can get. If you don't understand margin, you are already losing money, plus you're a sucker. How did you even get this job? Let's cover the basics quick before someone finds out you don't already know them.

Margin is a percentage of the total revenue produced by a good or service. What the percentage means depends on what kind of margin we're talking about - gross margin or net margin. Gross margin is the relationship between gross profit and cost-of-goods-sold (COGS, also known as 'cost-of-sales' - how much it costs to produce the item or sell and provide the service; it doesn't include office expenses, rent, administrative costs, etc.).

Let's do some math:

(Revenue - COGS)/Revenue * 100% = Gross Margin Percentage

Let's say we sell a particular product for $50, and our COGS is $12:

($50 - $12)/$50 * 100% = 76% (or $38 per product sold)

The amount of Gross Margin that you assign to a given product is not arbitrary; although COGS covers your overhead and fixed costs such as wages, etc., it does not necessarily take into consideration the things that make your business last, such as future product development, future growth (including additional payroll), future technology requirements, etc. All of that has to come out of that $38. And if you are partnered with a venture capital firm or your organization is part of a public corporation, you may not see any of that $38 at all.

Another pressure on Gross Margin is competition. If you have a competitor who can produce a similar good or service to yours for a lower COGS, your margin is going to be squeezed. (Think of how the iPad squeezes other tablet makers, and how the Kindle Fire squeezes the iPad.)

In general, depending upon sales frequency (or inventory turns, if you're in retail), you want to choose a Gross Margin percentage that allows you to cover all of the tangibles plus unforeseen expenses such as the above. Once you figure out what that percentage is, and you know the COGS, it's easy to figure out how much to sell the product for:

Gross Margin + COGS = How Much It Costs the Customer

If we know that we want a GM of 6% and our COGS is $32, it goes like this:

((6/(100-6)) * $32 = $2.04 (this is your Gross Margin in dollars)
$32 + $2.04 = $34.04

Here are couple more formulas to add to your tool box:

Net Sales = Gross Margin + COGS

(Gross Margin/Net Sales) * 100 = Gross Margin

And here's one more that is always a toughie: Suppose you have salespeople (even if you don't call them that). How do you figure out whether or not what you pay them (or their manager) is "right"? Easy, and it's a formula that will help you stay out of trouble when it comes to compensation:

An adequate salesperson (or sales manager) should sell 10 times their wage (including commissions, bonuses, and other perks).

See how easy that was? Now gimme 10 laps and hit the showers.

Liar!

The average human being lies 4 times each day (this number does not take politicians into account, because they obviously throw off the scale). So why in the world do you expect someone to be honest with you on a survey?

Long, long ago, when dinosaurs ruled the earth, I worked for a software publisher and reseller that was building an online catalog. Online catalogs were a new thing at the time, as was the idea of a user interface that was actually geared toward an average user. To do it right, we met with a fellow who did consulting for companies that wanted to do business with big players like Microsoft, Apple, and Amazon, or to emulate them.

We walked him through what we had, and our head of new product development explained how we had structured each page to push Customers toward other pages to control their experience and expose them to useful content.

"Stop," he said. We stopped. "How successful have you been at getting Customers to go to that page?"

Not very, we admitted, but we had this great plan to change that by doing this, that, and another thing.

"Stop." We stopped again. "What makes you think Customers want this?"

"We did surveys," said our product development guy. "And the majority of..."

"They lied," said the consultant guy. "They told you what they thought they should say, not what they really do." Silence.

"Why would they lie?" we finally said. "It's in their best interest to tell the truth."

"Because people lie," he said. "The U.S. spent $24 billion on porn last year, but if you ask anyone, they don't buy porn. Somebody's buying it."

Furrowed eyebrows around the table while we digested this.

"So what do we do?" we said.

"Do what Amazon does: Don't listen to what Customers say. Watch everything they do. If they don't go to a particular page, get rid of it. If they go to another page a lot, give them more of whatever's there. Don't make anything more than one or at most two clicks away from where they start out. And recheck your results every single day, so you can anticipate shifts before they become widespread."

Another note about surveys: They are hollow. By that I mean that most people don't do them, and those who do tend to be people who are strongly motivated to say something positive or strongly motivated to say something negative. If you are like most organizations, 80% of your customers fall somewhere in the middle. And, since the average survey response rate is around 3%, why are you making business decisions based on what 1% or 2% of your Customers took the time to say?

I am not saying don't provide Customer for Life (perfect, on time, personalized) service. I am saying that watching what your Customers do - how many respond to offers and when, how many you lose or retain and why, increases or decreases in spend, etc. - matters more than what a small number of them say. Don't make major changes because of a single complaint or two, or reward based on a compliment or two. Which leads us to GAS:

Don't Guess. Assume, or Speculate. Find out. Eliminate G.A.S.

Special Offers and Slippage

From time to time, you may offer your Customers some kind of discount or other special offer by means of some type of coupon, etc. Here are a couple of rules regarding offers of this type that no one seems to follow, and which end up costing you more than the coupon is worth:
The whole point of this type of offer is to make sure that as many Customers as possible know about it. Make certain that you send it out on a day that it will be seen (if via email, Tuesday or Thursday are best; if via social media, try Wednesday just before lunch in your target markets; snail mail, use an unusual envelope or arresting graphic on postcards).

Especially today, when Customers are barraged by marketing messages in literally hundreds of mediums, the best way to keep your message from getting lost in the howl is to send it to your Customers more than once, and in a variety of mediums. Post it ahead of time on your company's website, send snail mail the week before, do an email or newsletter blast the day of, have your reps call key Customers the next day to make sure they got the flyer/email/etc... The squeaky wheel really does get the best results and, if you do it in several mediums instead of hitting Customers multiple times using just one, your opt out rate is far less likely to spike.
Make sure that your employees - especially support and sales - know about the offer before it goes out. Nothing is more unprofessional than a Customer who knows more about your marketing efforts than your employees.

You have enough competition, right? So make certain that other departments don't have competing offers going out at the same time. (How dumb is it to compete against yourself? Yet I can't count the number of times that I've seen this happen, simply due to a lack of communication between departments and/or managers.)

Now let's talk about a key component of any special offer: slippage.

Let's say that you send your special offer out to 1,000 Customers. The offer should require that Customers validate the offer in some way - bringing in a coupon, entering a code into a web form, etc. This serves two purposes:

• It allows you to count the number of conversions so that you know the response rate. Without this, you have no idea whether or not the offer was successful. Remember: This is a business, not a club; guesstimating is for hobbyists. 
• It allows us to exclude Customers who did not actually respond to the offer - a practice known as 'slippage'. The worst thing that you can do is allow employees to push your offer to Customers who have never heard of it (and they will, believe me, unless you order them not to). 

There are two reasons for this:

• Your metrics regarding the actual response rate go out the window. 
• Your employee is offering a discount to a Customer that was willing to pay full price! Don't get me wrong - you want as many Customers to respond to your offer as possible. But you don't want to offer a discount to a Customer that was willing to pay full price, or you'll go broke, because it becomes habit and then 'the way we do things' overnight.

I can already hear you: "But Dave, if our Customers find out afterward that we had a discount and they didn't get it, they'll be mad at us!"

Bullshit. They may take it out on you, but they'll actually be mad at themselves for missing your offer. And we even have a way around that: Have a second offer available for exactly these Customers, not quite as good as the first offer, and let them know that you are doing this one time only and only because they are such a good Customer. (This will only work if everyone in your chain of command holds the line.)

You want everyone to hear about your offer, but you only want a certain number of people to cash in. That's how offers work: They drive additional business your way without you having to give up revenue. Of course, you honor the offer for everyone who complies with your terms, but for no one else. And from then on, your Customers will watch for your offers, and make sure they save them.

Out of the 1,000 Customers that you sent your offer to, you'll likely get 20 to 30 who convert and comply - 2% to 3%. But your traffic should bump at least 10%. That's a 7% to 8% uptick in business without any discount beyond what you would normally give a Customer without a special offer.

Ain't slippage grand?

YG5FWXED2V2D

Miserable SOB's & the (Self) Entitled

I have run a few call centers, now, and one of the things that you learn early on in that business is that customers come in a few basic buckets. Each bucket has its own needs and requires its own approach. Today, we're going to talk about two of the hardest buckets to tote.

MISERABLE SOB’S
Let’s start with the group that everyone really wants to talk about, anyway: Miserable SOB’s. Don’t you hate those? They have a shitty attitude and a shitty life, they’re having a shitty day, and all they want to do is spread that shit around. Whether complaining about something that was actually their fault, a change that actually makes things better for everyone but them, or some perceived bit of tomfuckery that was actually an honest mistake, Miserable SOB’s are the bane of customer service and support teams everywhere.

I know that you or your call center manager(s) and staff have probably been to more seminars and classes regarding this class of customer than you can count. How can so few people (roughly 3% of customers - less, if you’re lucky) inspire so much attention and dread?

And, of course, the big one: How do you handle them?

That’s not really what you’re asking, though, is it? If you’ve been to even one webinar on the topic, you already know what to say. The real question is, how do you successfully rebound from an MSOB call so that it doesn’t make you feel shitty for the rest of your day?

Simple: Pity them.

They have a shitty attitude, a shitty day and a shitty life for a reason. You’ll probably never know what it is. You don’t need to know. Maybe their parents were just like them, or worse. Maybe their spouse, boyfriend, or girlfriend treats them badly, or just left. Maybe they just found out that they got passed over for a job or a raise that they deserved, or found out that they’ll be laid off right after the holidays.

Maybe their son or daughter died.

The thing is, no one thinks of themselves as a Miserable SOB, but all of us have been one. The secret to not letting that call shit on the rest of your day is to ignore your natural instinct to bitch back or talk down. Instead, feel sorry for the miserable SOB. They have a shitty life, and you (hopefully) don’t. Why not be the little bit of sunshine in their otherwise shitty day? Whether or not they reciprocate, you’ll feel better, and isn’t that what you wanted to hear, anyway?

THE (SELF) ENTITLED
Who died and made them king (or, more likely, queen), anyway? No one, that’s who! You don’t give a rat’s ass that they’re doctor so-and-so’s wife, or that your company or another employee has ‘always done’ this or that for them, even when you know damned well that they didn’t, or they shouldn’t have, or that you’ll get in trouble if you do.

These royal-pains-in-the-ass constitute about 5% of customers, but consume roughly 20% of your resources, including your time and the time of your employees. And in return, they wheedle for every discount (whether entitled to them or not), freebie, and exception that you’re dumb enough to give them.

And there’s the issue in a nutshell: It’s not them, it’s you. They wouldn’t act like this if you didn’t encourage it by letting them have what they want. In the end, they are no different than spoiled children (hell, we both know that’s exactly what they’ve been since conception), and should be treated exactly the same way that you cure a spoiled child:

Say no.

Compensation as Behavior Modification

A currently popular saying regarding compensation goes like this: Hire 5, work them like 10, pay them like 8.

This philosophy is interesting, if a bit simplistic. You should of course keep your boat's crew as lean as possible, not only because it keeps costs low and productivity high, but because in the long run it will also save the overhead and stress of layoffs. Rewarding people for working hard is also good compensation policy, but the real issue is that lumping all of one's employees into this pot means that some are going to make more money than they earn, while others will make less.

There is a tendency to see compensation as one of two things: a necessary evil (in the case of hourly and salaried employees) or a means to drive performance (for salespeople and executives). But compensation is actually one of the most powerful tools that you have to shape all employees' behavior.

Employees tend to do what they are rewarded for, and tend not to do what they are penalized for. Setting an employee's entire compensation package according to some arbitrary measurement (such as local cost of living) or fixed rate (a so-called "industry norm") does not drive a desired behavior or penalize an undesirable one. Instead, why not start with a base package of some kind that is based on the lower end of the suggested range for a given position, and let anything above that - up to 20% of the employee's total possible compensation, let's say - be earned according to the accomplishment of specific, beyond-the-minimum-effort milestones over the course of the year?

The milestones, of course, must be mutually agreed-upon, and the reward clearly spelled out. You must schedule regular meetings to closely follow progress and ensure that the employee has the resources necessary to accomplish the agreed-upon tasks. And there should be public recognition for those who do (for some, this is even more motivating than money).

If employees fail to accomplish agreed-upon goals, they should not be rewarded. This may seem obvious, but it is amazing how often it happens. If you're running things correctly, only those who perform according to clearly defined metrics should get anything - not those who go out for a beer with you or happen to work in the home office, where promotions seem to happen faster than at any other location in the company.

A reward system allows employees in each department to communicate where they think the holes are in the organization, empowers them to address them, helps them to grow (and shows you who is ready to move up), rewards employees for doing more than the minimum, and even makes them feel good about it.

If you're lucky, it might even take that chip off of everyone's shoulder about how salespeople are paid.

Penny Wise, Pound Foolish

Keep a diary for a week of everything that you do at work and how long it takes. Either fill it out on the PC as each event/task happens to you or get a notebook and carry it around with you each day.

Enter the following:

• What you did. 
• How long it took. 
• Whether it was something that A) drove the business toward a key goal, B) was merely urgent (ie, putting out a fire), or C) a waste of your time (either no one needed to be there, or you should have delegated it).

At the end of each day, sit down, look at each line and think, “Does this task need to be done by anyone, or is it just noise? Does it have to be done by me? If not, who else can/should do it?”

Add up the hours for the tasks that can be delegated, and that’s how much of your day you’ll get back when you delegate those tasks.

It’s amazing how many hours we waste each day doing tasks that are below our pay grade! I used to work with a VP that spent hours every week reviewing the company’s phone bills to see what we could get credit for from the phone company (errors, etc.). He saved us an average of $200 a month. But because of how much his time cost per hour, we were actually losing $1,200 - $1,500 per month in productivity. In other words, there were other tasks worthy of his pay grade that only he could do that he neglected because he was chasing pennies. (We later assigned a support rep to do that task, at a cost of less than $40/month.)

The Helsinki (Sales) Syndrome

One of the truisms about sales in any business is this: After a certain period of time, sales representatives begin to offer discounts before Customers ask for them. At first, I thought that this had to do with having a stable of regular Customers - people that the sales representative began to think of as friends - but it turned out to be true when I managed call centers with one-off Customers, as well.

For obvious reasons, you don’t want sales representatives to proactively offer discounts. It’s the Customer’s job to ask for a discount, not the sales representative’s place to throw it out there. To keep this from happening, there are several things that you can do. I recommend using more than one:

• Constantly check each sales representative’s numbers. Challenge them on each discount given. Remember: You can’t expect performance if you don’t measure results. 
• Regularly shift territories. Quarterly, annually - the shortest interval that you think your business allows. This way, if a sales representative is getting too close to the Customers in a given territory, they have a whole new group of Customers often enough that the effect is minimized. 
• Shift sales representative’s duties regularly so that they only spend a certain amount of time directly interacting with Customers. This may be a regular shift from inside to outside sales, to scheduled sales training, cross-training time with the marketing staff, the product development staff, etc.

You Are Your Company (and So is Everyone Else)

First, some statistics. Stop me if you’ve heard these before: 

• If we receive good service from someone, we tell between 9 and 12 people. 
• If we receive bad service from someone, we tell 20 people. 
• If we have a problem, and the first person that we speak to responds quickly to that problem, 82% of us will do business with that person's organization again. (Significantly, 1 out of 5 of us still won't.)
• If we have a problem, and the first person that we speak to responds slowly (or not at all), 91% of us will never do business with that person's organization again. 
• All other factors being equal, we will pay up to 10% more for the same product just to get better service. 

Source: Customer Service for Dummies

We don’t receive good or bad service from companies - we receive good or bad service from people. For the duration of each and every interaction that each employee has with a Customer, internal or external, they are your company. Your Customer’s entire impression of your organization rests on their shoulders.

Try This Experiment
Using an outside line (preferably one that will not identify you), call your organization's most-advertised telephone number. Tell the first person who answers that you have a problem with your account. Make it a relatively simple issue. Write down how many times you are transfered, and how many times you are put on hold.

Call again. This time, you have a technical problem with a product. Again, write down how many times you are transfered and your total time on hold.

Last call. This time, you are just generally unhappy with how you have been treated. You may need a new sheet of paper for how many times you are transfered and how long you are put on hold for this one.

Now you have something interesting to discuss at your next management meeting. Start with this: Today's Customer is willing to wait on hold about 20 seconds before hanging up and calling your competitor.

Metrics: Lifeblood of Your Organization

If you don't kick the tires, you can't complain about the ride.

If you are not a 'numbers person', hire one to be your #2 - then listen to them. 99% of all companies that fail were led by people that led with their gut, rather than by a clear understanding of their metrics and what they meant.

There are three parts to the metrics equation:

• Knowing which numbers are significant. 
• Tracking and reviewing those numbers on a daily basis. 
• Knowing how what you do impacts those numbers positively or negatively. 

This is harder than it sounds. But, like any other behavior (positive or negative), it becomes habit with daily practice.