Simplify Dealer Success: Hire Vendor Management!

When I started working at Cox Automotive, I quickly realized two things:

• Dealership decision-makers had to deal with a large number of vendors on any given day.
• Decision-makers were cycling through vendors at a rapid pace.

Dealerships are known for canceling and re-signing the same vendors multiple times, creating a cycle within the vendor space: cancel → re-sign → cancel → re-sign. This phenomenon has always fascinated me. Accurately attributing results is challenging enough without constantly changing vendors and re-signing vendors. By doing this, it becomes nearly impossible, if not wholly impossible, to track attribution accurately. Numerous external factors contribute to your dealer’s success on a monthly basis such as inventory mix, pricing, personnel, and process, among others. Despite these factors, dealerships seem to be as quick to blame and cancel vendors and marketing strategies as they are to sign up for them. This is one of the reasons why measuring vendor performance is so difficult. If we constantly cancel and re-sign, how can we truly understand the underlying issues? You can read more about tracking vendor performance in this article.

Ineffective measurements drain costs, frustrate decision-makers, and disadvantage dealerships significantly. As a result, some stores, and groups, like Lithia, have started implementing changes by hiring designated marketing managers within specific regions. These individuals are responsible for vendor management, data review, and marketing mix audits among other things.

What To Do?

So, should dealerships hire companies like DTVMS (DT Vendor Management Solution) to alleviate and manage their vendor relationships? We are obviously biased, but our conclusion is a definite yes.

Hiring a management company is the right approach for small groups and individual single-point stores and here’s why:

Hiring an internal/in-house marketing manager can be a costly endeavor. This individual needs to possess comprehensive knowledge of multiple platforms such as CRM’s, DMS’, vendor dashboards, inventory management software, etc. In addition, this person will also need to dedicate a significant amount of their time to keep up with industry trends, changes to Google, Facebook, and any number of platforms and algorithms as well as attending demos and pitches, reviewing analytics, understanding vendor culture, facilitating communication between decision-makers at the dealership and vendor representatives, and on and on. However, even with an internal/in-house marketing manager, measuring vendor performance can be challenging due to ineffective industry-standard measurement methods.

Another thing to consider is the personal relationships built between these members of your staff and the vendor account representatives they work with. This creates two main issues that we repeatedly see:

• The perpetuation of the canceling and re-signing cycle.
• Delayed cancellations.

These challenges can be mitigated by partnering with a vendor management company like DTVMS. Our staff constantly researches and establishes connections to stay informed about the latest developments within the vendor world We actively test products through different efforts such as free trials, demo’s, and implementations of products in any given number of stores. By hiring a vendor management company like DTVMS, dealerships can save valuable time and avoid the hassle of engaging in multiple vendor meetings that often yield limiting to none actionable results. Companies like DTVMS filter out irrelevant options and only provide solutions that align with your goals and objectives.

Our Approach

At DTVMS, we utilize a four-pillar approach:

• Discovery: We conduct thorough discovery sessions to understand your dealership's unique needs and objectives.
• Data and Benchmarks: We analyze vital metrics such as digital traffic, lead volume, and staffing, going back 3-5 years to establish benchmarks and identify areas for growth.
• Marketing and Inventory Mix: We help determine the right marketing strategies and inventory mix for your region, customer base, and brand.
• Ongoing KPIs: We create key performance indicators (KPIs) that help decision makers clearly understand what is working in terms of marketing, people and processes, inventory management, and market conditions. This allows you to assess performance immediately and make informed decisions.

Because of our established relationships across the industry, we can often secure volume discounts that individual stores wouldn't receive directly. This provides additional cost-saving benefits for our clients.

By partnering with DTVMS, dealerships can offload the complexities of vendor management, benefit from our expertise and industry connections, and focus on what matters most - running a successful dealership.

From the vendor performance side, at DTVMS, we don't believe in single-point attribution or connecting sales to vendors. Instead, we focus on impressions, views, leads, and their relationship to budget contribution and return on investment—to learn more, go here. This approach allows you to see what is delivering results and what is not. It's important to note that vendors are not responsible for sales and appointments. Sales and appointments are beyond the scope of control for any digital vendor. This is the main reason hiring a vendor management company like DTVMS is important. When it comes to performance in the industry, even your CRM is designed to measure single point attribution from sales and appointments, and for digital attribution this is inherently inaccurate. You will not have a clear picture of what is truly working.

By hiring a management company like DTVMS, you gain access to knowledgeable professionals proficient not only in vendors but also in platforms like Google and Facebook, and others at a fraction of the cost. Hiring someone internally with similar skills would be extremely expensive. This agency approach allows you to leverage knowledge and expertise as cost-effectively as possible.

Compensation

Now, let's talk about some of the ways vendor managers are compensated. This is often a question that we get, and in a lot of cases, it is misunderstood or misconstrued. There are a few different structures:

• Flat fee from the dealership: Some dealerships pay a fixed monthly fee to the vendor management company for their services. This fee covers managing and overseeing vendor relationships, data analysis, and marketing strategy. The advantage here is that the dealership knows precisely what they pay each month without additional costs or commissions. *In some instances, we have set benchmark goals for bonus opportunities with our dealer partners.?
• Commission from vendors: In this model, the vendor management company receives a commission from the vendors they work with. This commission is typically based on the volume of business generated or the advertising spent with those vendors. It's important to have upfront conversations and transparency with your dealer clients about these commissions to ensure there are no conflicts of interest and that the dealership's best interests are always prioritized. *In some instances, this can create savings that are passed back to the dealership, akin to an agency model. This works particularly well for traditional forms of advertising where agencies can secure discounts.
• Combination of Fee and Commission: Certain agreements involve a combination of a flat fee from the dealership and commissions from vendors. Some dealerships may feel uneasy with this setup due to the perceived monetized incentives to keep certain vendors. However, it is essential to remember that all underperformance eventually results in cancellation of the vendor management services. This is why it is important to have the right mix of vendors. Vendor managers should make recommendations on performance and not based on potential commission.

While holding meetings with vendors is an integral part of vendor management, it is equally crucial to possess a comprehensive understanding of data and goals. Selling more cars is a shared objective of every dealership, but developing a realistic and achievable plan tailored to the dealership's specific needs is vital. Effective vendor management involves combining vendor partnerships, managing time efficiently, reinvesting funds strategically, and analyzing data to drive performance on a cost-per-impression, cost-per-view, and cost-per-lead basis.

Here's a test:

• Can your marketing person provide the following information?

Request a list of all your vendor partners from your marketing manager, internet manager, or whoever is in charge. Ask for login credentials, passwords, and contact information for each company.

• Can your management team quickly account for marketing budgets?

Inquire about the marketing budget totals. Do your teams understand metrics like cost per impression (CPI), cost per view (CPV), and cost per lead (CPL), and do they possess a macro-level understanding of interpreting vendor performance? Can they recite this information immediately and effectively to you?

Results

Understanding and addressing these factors is vital to making informed decisions that positively impact your dealership. If your managers cannot provide this information, it's evident that they are not equipped to do the job.

Remember, effective vendor management goes beyond managing relationships and conducting meetings. It encompasses understanding the vendors you engage with, leveraging available data, setting appropriate goals based on benchmarks and historical performance, and continuously optimizing marketing strategies. By partnering with a vendor management company like DTVMS, dealerships can truly enjoy the best of both worlds—benefiting from vendor relationships that drive results and having someone effectively manage those partnerships through a business-specific understanding of performance, free from the blurred lines of personal relationships. This enables dealerships to tap into industry expertise, cost savings, and valuable insights, allowing them to focus on what they do best: selling cars.

Herb Anderson/Charity Ann