There are many important elements to running a successful business (dealership). People, process and product, also known as the three P’s, can provide a cornerstone for almost every business. However, most businesses and all dealerships rely on outside variables to help pave their way to success. One such variable are the vendors dealerships choose to bring on as partners.
In the retail automotive industry, dealerships rely on vendors to provide goods and services such as sales training, software products, F&I services and consultation, advertising, banking and finance and many other important business solutions.
What’s important for dealerships to reach their maximum potential is to work with the best partners available.
In the book Good to Great: Why Some Companies Make the Leap and Others the author Jim Collins’ first chapter is titled Good is the Enemy of Great. Collins explains that the vast majority of companies never become great, precisely because the vast majority become quite good—and that is their main problem.
Dealerships may suffer a similar problem, they are performing “good enough” and not looking to become great. In Collin’s earlier book, Built to Last he explains that a visionary company has a relentless drive for progress, to explore new places, create new things and achieve new goals. It must be able to change and adapt and if it refuses it will simply cease to exist.
Many dealerships refuse to change. Diffusion of innovations is a theory that seeks to explain how, why and at what rate new ideas and technology spread. Everett Rogers popularized this theory in his book Diffusion of Innovators. The categories of adopters are innovators, early adopters, early majority, late majority, and laggards. Without getting into all the details of each category of adopters, dealerships traditionally face more complex adoption possibilities because their organizations are both the aggregate of dealership employees that are less open to change and its current system with a set of policies and procedures. This reality causes most dealerships to stick with the status quo.
Business books theories aside, dealerships that excel in today’s competitive landscape have a track record of leveraging the best products and surrounding themselves with the best of the best.
When you think of great product relationships here are a few examples:
Professional sports: Nike
PGA of America: Rolex
Lewis Hamilton: Mercedes Benz
Amazon Web Services: Salesforce.com
Netflix: Amazon Web Services
Caterpillar: Michelin Tires
United Airlines: Boeing
HP Computers: Intel
Domino’s Pizza: Tyson Foods
When dealerships partner it’s important they do the research and partner with the best of the best.
The qualities dealerships should consider when choosing a vendor partnership:
While you think producing great results is a “given” when dealerships choose their vendors, it’s not. Many OEMs pressure their dealers to work with an “OEM Certified” partner. Many dealers just accept their OEM has their best interest in mind when compiling these companies. But like everything else, these “approved” companies may have made this list for various other reasons (political, financial kickbacks, etc.).
The main question a dealership should ask is, “Is the vendor you choose for the service you need the best in their field?” Where applicable, ask to see samples of the vendor’s previous work or the results they generated for other dealerships. For instance, if you are hiring a digital marketing company, ask to see a dealership’s Google Analytics for the results they delivered.
Always remember the reason you’re bringing in a vendor. Typically, it’s more than just needing another set of hands, it’s about the expertise and results that they will bring to your dealership.
While cost plays a significant role in choosing a vendor, it is much more complex than simply picking the lowest price; however, you want to get the maximum value for the price you pay. The criteria are most commonly about quality, delivery performance, cost, capability, but the price is usually not the primary factor.
Costs a dealership should consider when selecting a vendor include the cost of the service or product, cost savings to the bottom line, time savings, labor savings, the cost of not trusting the vendor and losing sleep over it, the cost of partnering with a company with a bad reputation.
The potentially most important factor I believe dealerships should consider when choosing a vendor is the character, not only of the company they are partnering but of their leaders. Your dealership’s integrity depends on the integrity of the vendors you use. Try to learn a little bit about your vendors and how much importance they put on operating with high ethical standards. Be careful of potential partners that over promise. No one can give you everything under the sun. Make sure you feel like you’re being told exactly what they can — and can’t — provide and that they’re adequately and truthfully representing their skills. Companies that are honest about their capabilities and potential shortcomings are ultimately a better fit than those that promise you the moon but cannot deliver.
Companies with a reputation for exemplary customer service will more than likely take good care of you. Since a vendor is an integral part of your business, you must be able to depend on them to do what they say they will do. You don’t want to let your team down because your vendor let you down. Do they deliver products on time? Do they make excuses when things go wrong? A vendor that gets it right every time is a valuable asset to your company.
Open and frequent vendor communication is a valuable asset for your dealership. Make sure your vendor will always respond to you within 24 hours. Working with the same person every time you contact the company can improve communication on both sides. A good vendor is willing to contact you right away when anything goes wrong and will give you frequent updates throughout the fulfillment process. Be careful of vendors that tend to over-promise or that don’t like it when you ask questions. You want someone who is completely honest about what they can and can’t do. Make sure you are communicating your needs clearly to them, as well.
Another quality to look for in a good vendor is flexibility. Will they allow you to make changes after an order is placed? Can they accommodate rush orders? Find a vendor that fits in with the way your business operates.
Building the Best Vendor Relationships.
At the core of all successful working relationships are two essential characteristics: trust and commitment. Both must exist for the relationship to be successful. Long-term vendor relationships involve forming bonds with their dealers by meeting their needs and honoring commitments. Rather than chasing short-term profits, vendors following the principles of building a relationship with their clients forge long-lasting bonds with their customers. As a result, dealerships trust these vendors, and mutual loyalty helps both parties fulfill their needs.