A Common Sense Guide to Evaluating Your Dealers: Part I

A Common Sense Guide to Evaluating Your Dealers: Part I

(This article is adapted from a webinar presentation by Gary Thompson, president of Ten Pound Hammer. He’s an advocate for turning dealers into brand heroes.)

Let’s start with the notion that this is a “common sense” guide to evaluating dealers. For us, this means understanding:

  • why we evaluate dealers
  • how to get the most out of evaluations, for brands and dealers
  • how to use what we learn to act

Ignoring any of these aspects of dealer evaluations endangers the practice, and threatens to turn it into a lot of navel gazing.

So let’s look at each of these.

First, why go to the trouble and expense of evaluating dealers?

Gallup conducted outstanding research about supplier-dealer relationships, which they published in April 2013. It confirms a lot of our thinking about the importance of dealers as brand heroes, and documents it very well. To paraphrase, building a strong dealer partnership is key to a brand’s success. I encourage you to take time to explore Gallup’s findings and think about them in terms of your business.

We’ve identified four components of strong dealer relationships. We start with communication and build training, marketing support and incentives onto that. We structure this in the form of a pyramid with communication at the base because that’s where you’ll put the bulk of the effort and emphasis. When you start thinking about evaluations, we view them as the critical part of that foundation of communication. It sets the expectations and it really helps establish a rapport with your dealers so we think it’s very important and a good place to start.

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This process takes time, requires resources and forces brands to make hard decisions about what they value, what is important to the brand and what kind of relationship they want with their dealers. This can become an obstacle when brands worry that dealers won’t view this as a positive step.

Keeping it positive requires avoiding common mistakes. The first mistake: Relying on magic numbers. Brands sometimes believe that there’s a number they can use to grade performance, such as a KPI or critical metric. It’s a numerical unicorn that can be applied to every defect, that’s easy to measure and track, and like the unicorn, doesn’t exist.

The second mistake: Basing grades entirely on sales. Sales matter but it’s dangerous to start and end there. Differentiating between good dealers and bad dealers isn’t a matter of whether or not they meet sales quotas. In reality sales volume and growth are two important factors but they are really symptoms of larger problems.

The third mistake: Turning the process into a witch-hunt, with dealers getting metaphorically burned at the stake. There are many reasons brands might take an adversarial posture with a dealer; evaluations shouldn’t become a pretext for putting those dealers under pressure.

None of these missteps have to happen. Evaluations are useful tools for brands and manufacturers, and there’s a way to do them well so that dealers and brands both win.

How to Make Evaluations Work for Brands and Dealers

Let’s start with an idea that’s essential but scary. You should start the evaluation process by having dealers evaluate you, the manufacturer brand. This allows brands to take that first step and send a crucial message: We will not make you do anything that we would not do ourselves.  It sets a collaborative tone and helps identify problems at the brand level that aren’t dealers’ responsibility, and that make their jobs difficult.

Here’s a quick example: We were once hired to help a brand increase sales of aftermarket warranty coverage. Feedback from dealers taught us that they refused to sell aftermarket warranties because the manufacturer almost never paid a warranty claim. And when they did pay the claim, the process was arduous and painful. We learned that this was not a problem that marketing and communication could solve. It was an operations and service problem.

Keep this in mind when you’re asking dealers to evaluate you:

  • Ask questions that challenge what you know, or your preconceived ideas.
  • Ask open-ended questions. If you’re doing a web survey, and we think a web survey is a great way to go through this process, leave room for open text responses. Encourages dealers to go off script so you learn what they really want you to know.
  • Keep it anonymous. Dealers that feel safe will offer candid feedback.
  • Share the results in summary form and demonstrate to the dealers that you’re taking action based on what you learned.

This isn’t an academic process. You must act on what you learn and demonstrate that you’re moving forward.

Once you allow dealers to evaluate you, it’s time to being evaluating your dealers. Our common-sense approach focuses on:

  • Knowing your dealer personas, which tells you what motivates them and how to communicate with them.
  • Measuring what matters. Not just sales, but metrics that track engagement, investment in your brand and understanding of your brand. We want to make sure we grade objectively, define our criteria and stick with it.
  • Sharing what we learned. We want to be transparent about how we arrived at the conclusions that we arrived at.
  • Action. Evaluations teach you and dealers important lessons, but it’s mostly up to the brand to decide how to act on these lessons.

Let’s look at each of these in more detail.

Dealer Personas, Performance Categories and Evaluation Criteria

Dealers aren’t all the same, but they’re often treated that way. Each is a special snowflake, but they all fit into categories, which we call personas. These are:

  • Tradespeople love what they do, appreciate the craft, and are happy to put money in the bank. They don’t necessarily think of themselves as dealers. These folks have very little business savvy and don’t focus on marketing, growth or expansion.
  • Strivers are often tradespeople who are more interested in the business side of their craft. They may have expanded their operation to improve their profitability, might work with a designer or a salesperson, or have opened a showroom. But deep down they are still rooted in an emotional connection to the craft, and have much in common with tradespeople.
  • Experts or consultants are dealers that operate in a more business-minded fashion. They know how to read a P&L, they’re more emotionally detached from craft, and often choose to outsource components or processes to make the business more efficient and profitable.
  • Masters of the universe are dealers that have all the details of their business on lock down. They think ahead, they watch their cash flow and the bottom line, and they focus on growth. They don’t need lessons in running a business; they could teach one. They are the most emotionally detached from the craft and the product.

It’s possible to place dealers of all personas within performance categories. These categories help you evaluate what kind of actions to take. These are:

  • The problems. Problems are always the first to come to mind and these are your “partners” who sell some product but cause the majority of your headaches. They don’t give their customers a good service experience; this neglect tarnishes your brand. The only attempt they’d make to communicate is to pass on their customer complaints to you like a hot potato.
  • Silent partners are dealers that seem to operate in a bit of a black hole. You don’t hear from them much. They move some product but other than that they keep to themselves. Their performance is okay and their customers are left feeling lukewarm. In many ways this is the most perplexing group to figure out.
  • Partners are your solid B performers. With a few changes they could evolve into brand top tier dealers. They might not participate to the level that you would like and they may leave some resources untapped but they serve your brand well.
  • Brand Heroes live at the top of the food chain. These are the dealers that understand your brand. They know your product, they participate and utilize your programs, and they’re buttoned up from a service standpoint. They give consumers a great experience that makes your brand stronger by association.

For most brands, if you were to plot these performance categories on a chart it would look like a bell curve. You would have a few problem dealers, while the majority would be silent partners and partners, and then a few heroes. Of course, our goal is to create more heroes and fewer problems.

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Let’s take a step back and look again at what we’re trying to accomplish with evaluations:

  • We want to create a shared understanding of each dealer’s performance. Dealers need to know how you rate their performance and the criteria you used to assign them grades.
  • We want to use what we learn and take action. These actions can span a range. We may reward dealers for exceptional performance. We might want to offer detailed guidance to those who are capable but not advancing and we may want to cut ties with dealers that drain the bottom line.

To get there, we suggest five evaluation criteria to use as a starting point. Every business is going to add some nuance to this; there are things they’re going to want to look at based on specific products and markets. But this is a great place to start, especially if you haven’t been through the process.

First, is how invested is the dealer in your brand? Is your brand a focal point? Does it receive prominent placement in showrooms? Is it advertised? You want dealers who are as committed to your success as you are to theirs.

Here is tangible example I’ve seen that illustrates how a dealer eats up resources without supporting the brand: I’ve been on a lot of brand websites that sell through dealers. I click on a link to find a dealer or locate a showroom, enter my zip code and get a listing of authorized dealers. I go to my local dealer’s website and see no mention of the brand that sent me there. Often, competitive brands are prominently featured. The brand, out of misguided loyalty to an uncommitted dealer, has given a lead to its competition.

Second, do they participate in your marketing programs and if so, at what level? Do they communicate with your sales and marketing team? And when they do, is it productive?

Third, are they growing? While flat or downward sales trends don’t tell a complete story, they’re an important indicator of the health of the relationship.

Fourth, what is the number and severity of problems connected to any given dealer? We’re avoiding witch-hunts, but it’s important to take an objective look at the problems associated with dealers, assess the severity and the frequency of those problems and determine the causes. You’ll find that the 80/20 rule comes into play. Twenty percent of your dealers will account for 80% of your problems.

Fifth, and finally, sales. We do want to look at sales and understand the trajectory, but sales performance doesn’t happen in a vacuum. This is an opportunity to dig beneath the surface and understand what causes poor sales performance.

The Evaluation Process

Your evaluation process should be objective, systematic and repeatable. The first step is to choose the team that is responsible for evaluations. Select people who understand dealers’ interactions with an understanding of the brand and their customer service and sales performance. We’re looking for a holistic view of each dealer. Make these people accountable.

Second, define the process so that it can be easily learned and implemented by staff that later join the evaluation team. Make it repeatable. And, store evaluations so you can track today’s performance against future performance. A simple database that your team can share is a great asset.

Third, determine how you will share evaluations with your dealers. Make sure it allows an understanding of how they are being graded, including your evaluation criteria.  Deliver these results in a format that allows dealers to respond and ask questions. Make this part of the process constructive and helpful, not accusatory and confrontational.

And finally, prepare to take constructive action. Reward heroes; collaborate with partners to turn them into heroes; question and engage your silent partners; and, fire your problems. This means addressing each type of dealer in an appropriate way – developing those with promise, and making the least productive another brand’s problem.

Our next article will address questions from brand representatives who attended our webinar.