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Opinion: Important considerations for a successful implementation of the agency sales model

Sponsored post: Tom Carr, the managing director of automotive consultancy PHM Group, explains how to overcome the challenges of moving to agency sales for the benefit of all

Time 7:15 am, June 17, 2024

Transitioning from a traditional franchise model to an agency sales approach in the automotive industry has sparked considerable debate in recent years.

This shift, prompted by evolving consumer behaviours, technological advancements and the emergence of agile new entrants, holds the promise of transparent customer data, reduced distribution costs and seamless services across interconnected vehicles and dealer networks.

However, despite initial enthusiasm, notable instances have seen automotive OEMs retracting from fully committing to the agency sales model, raising doubts about its viability.

The decision to embrace an agency model is typically motivated by several factors.

Competitors offering cost-efficient solutions, soaring production costs for next-generation vehicles and the escalating value of customer data are among the primary drivers.

Moreover, there’s a growing recognition that the true value of a company lies less in the products it makes and more in the data it holds about its customers.

Lastly, the impending renewal or renegotiation of franchise agreements also plays a role.

Historically, some OEMs have rushed into issuing new contracts to their dealer partners once the decision to adopt an agency sales model is made.

This approach often encounters resistance from dealers who perceive these changes as threats to their established positions, some of which have thrived for more than a century, so overcoming this resistance requires transparent and candid dialogues between OEMs and dealers.

PHM Group, a leading automotive consultancy behind some of the largest agency sales model integrations, emphasises the importance of such dialogues in mitigating potential issues, pitfalls and missed opportunities during the transition.

By articulating the shared challenges posed by new market entrants, electrification costs and shifting consumer preferences, OEMs can foster a collaborative mindset and strengthen relationships with their dealer partners.

However, emphasising the drawbacks alone isn’t enough.

OEMs must also underscore the benefits of the agency model in a manner that resonates with dealers, illustrating how the transition can bolster profitability, sustainability and future-proofing efforts.

Tailoring the message to different roles within the dealership – from owners to sales managers – helps stakeholders identify their specific ‘WIIFM?’ (what’s in it for me?), fostering buy-in and enthusiasm for the change.

For instance, typical owners are primarily interested in boosting sales and profitability, thus highlighting how a centralised contact centre can expedite lead follow-up, increase test-drive appointments and elevate sales figures, which can be compelling for them.

Sales managers and executives, on the other hand, may value how the agency model streamlines paperwork, optimises the sales funnel and enhances the overall customer experience.

Despite potential resistance from traditional sales staff, the transition presents an opportunity to recruit service-orientated team members.

Restructuring remuneration to prioritise higher base salaries with modest customer experience-linked commissions can further incentivise staff and enhance customer satisfaction, thereby making the agency model more appealing.

With stakeholders aligned on the rationale and individual benefits, implementing new systems and processes becomes more manageable.

Ensuring that new IT systems function seamlessly from the outset is imperative, as user adoption hinges on systems that do not burden them with additional workload or inefficiencies.

When introducing a minimum viable product (MVP), transparent communication regarding its scope and capabilities is essential.

Users must understand what to expect, which aspects of the customer journey are covered and where legacy systems remain necessary.

Offering high-quality, hands-on training in a simulated environment close to the launch date can bolster user confidence and competence.

Moreover, accessible on-demand training materials are indispensable.

Quick access to instructional guides can help users navigate system functionalities and enhance the customer experience. Providing refresher training whenever new system features are introduced ensures that users remain proficient and up to date.

Ultimately, transitioning a sales model is undoubtedly challenging, and always will be, but with a people-centric approach that addresses individual needs and desires, agency implementations can succeed.

While the benefits of the model are well documented, their realisation hinges on the commitment and collaboration of all stakeholders to navigate the transformation effectively and successfully.

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Car Dealer has been covering the motor trade since 2008 as both a print and digital publication. In 2020 the title went fully digital and now provides daily motoring updates on this website for the car industry. A digital magazine is published once a month.

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