1. How To Turn CRM Strategy Into A Profit Center
By Ralph Paglia
For many dealers and car companies the concept of Customer Relationship Management (CRM) is
more about Customer Satisfaction, Concern Resolution, Ownership Experience and other “warm and
fuzzy” objectives. Although these areas are improved during most CRM strategy and system
implementations, many dealers have found that there is a much more effective way to design,
implement and evaluate CRM programs and their effectiveness… The CRM Profit Center.
Although the practice of tracking CRM as a profitable business function has been around since the
first Internet departments cropped up, developing the concept into a “CRM Profit Center” came to me
while I was at a dinner meeting in Toronto with the largest Chevrolet dealer in Canada. I was
describing the evolving approach to dealership CRM installations that I had been working on when he
coined the term. What he said was “So, it sounds like you are proposing that CRM be treated like any
other profit center in the dealership…” And, that is when it hit me… Yes, CRM technology, people
and processes should be held accountable for expenses and associated revenue, all of which must be
tracked on a monthly basis just like an F&I department, or any other profit center in the dealership.
Most dealers would agree on the issue, but what are the actual best practices that make it happen?
So, if you care at all about these things, you have got to be wondering how, exactly, can this be done.
After designing, installing and participating in several hundred dealership CRM implementations,
many under partial OEM program funding, and quite a few that were 100% dealer funded, I can share
with you that tracking expenses is something most dealerships are actually pretty good at… So, for the
purpose of this article, let’s focus on what needs to be tracked relative to CRM processes and results.
Basically there are 5 things that must be tracked for all CRM customer contact activities:
(figure 1)
The Five Key Retail Automotive CRM Measurements
# Metric Title Description of the measurement
1 Customers Refers to the dealerships total contacts received from, or made with
Contacted customers within that process category
2 Appointments How many appointments resulted from those contacts
3 Shows How many customers contacted showed up on the showroom floor or in
the service drive
4 Sales How many cars were sold, or Repair Orders written
5 Profits How much total profit on sales, F&I, parts and labor was generated from
customers contacted within each CRM process category who showed up
at the dealership
The first process that should be installed is one that tracks the 5 numbers above, and the activities of
people assigned to execute CRM-related customer contacts, whether inbound or outbound… BY
PROCESS CATEGORY! That’s right, if it is an unsold showroom visitor follow-up call, then it has
to be counted along with every other time an unsold customer is contacted. If it is an incoming sales
call, then it must be counted… Fresh showroom ups must be counted, along with Internet Leads and
all sales and service customer contact activities.

2. Here’s the list of what we have found must be counted as far as customer contacts within the following
CRM Process Categories:
(figure 2)
The Eight Primary Retail Automotive CRM Process Categories
# Metric Description of the measurement
Title
1 Incoming Refers to the dealerships total floor traffic that was not a sales
Showroom appointment or a “Be Back” in other words… “Fresh Ups”
Visitors
2 Incoming How many incoming sales calls did the dealership receive for both
Sales Calls new and used vehicles departments (did not request a name)
3 Incoming How many electronic leads did the dealership receive from all
Internet sources, including the dealership’s web site, the OEM and all third
Leads party lead providers and online listing services
4 Incoming How many people contacted service by just walking in, without an
Service appointment, or made a phone call for service, or tried to schedule
Inquiries service online or make a service request by email
5 Outbound How many prospects did we contact after they came to the
Unsold dealership and left without buying? Includes Internet & Phone
Follow-Up appointments that show up, but leave without buying
6 Outbound How many previously sold customers that bought a car from us at
Sold any time within the previous 3 years did we contact?
Follow-Up
7 Outbound How many prospective customers that have not done business with
Prospecting us during the previous 3 years, if ever, did we contact by phone,
Contacts email or letter to tell them about what we offer?
8 Outbound How many customers that have ever had a Repair Order opened
Service and closed within our Service Department did we contact?
Follow-Up
You probably noticed that there are 4 inbound, or customer initiated categories and there are 4
outbound, or dealer initiated categories… Within each of these broad based CRM process categories
there may be several subsets.
(Continued on next page)

3. For example, within Outbound Sold Follow-Up we have frequently tracked and measured the results
from the following CRM process activity categories:
(figure 3)
Outbound Sold Follow-Up Sub-Categories (4 Examples)
# Metric Title Description of the measurement
1 Lease Refers to the total number of customers who were contacted by
Renewals the dealership because their Lease is coming due soon
2 Retail Refers to the total number of customers who were contacted by
Retention the dealership because their Loans are paid down to an equity
position (finance contracts now in Equity)
3 Sold Customer How many previous sold customers did we contact for the
Referral specific purpose of finding out if any of their relatives, friends
Mining or co-workers might be interested in a new or used car?
4 Sold Customer These are customers that we contacted because there is a new
New Model generation of the vehicle they currently drive being introduced
Introduction and they are a VIP customer (such as next generation “SL”)
Within the Inbound Service category there are three distinct categories of customer initiated contacts
that must be counted:
(figure 4)
The Three Inbound Service CRM Categories
# Metric Description of the measurement
Title
1 Service Refers to the service department customers who “walk in” or arrive
Drive at the dealership without prior notice or appointment
Walk-ins
2 Incoming These are the multitude of incoming phone calls to the dealership
Service that request the service department. There are a wide variety of
Calls reasons for these calls, but the majority are seeking an appointment
3 Online These are inquiries regarding parts and service that come in via the
service Internet. There is a wide variety of web based forms used by
inquiries customers, but the majority are seeking a part or an appointment
Likewise, there are quite a few outbound service processes that fall into the overall Outbound Service
Customer Contacts… In fact, when you really analyze the separate and distinct Service CRM
processes, it is the OUTBOUND, or dealer initiated contacts that drive the most direct incremental
profits. In many dealerships, the same team that has been created to execute Outbound Service CRM
processes also handles the incoming Service inquiries via telephone and the web. This results in
additional profits from increased average Repair Order revenue resulting from Service Advisors being
freed from telephone inquiry duty and empowered to focus completely on the customers already in the
service drive. Once freed from the tyranny of the telephone, Service Advisors will have the time to
use the phone for more effective customer contact regarding vehicles already in the service
department, thereby gaining more approvals for additional needed service work discovered after
diagnostic procedures are completed.

4. Above and beyond the efficiencies provided by a dedicated CRM Team handling inbound service
inquiries, it is the Outbound Service CRM Processes that drive dramatic uplifts in Fixed Operations
revenue. A few of these outbound service CRM activities that should be considered, and must be
counted (even if zero) for an effective CRM profit Center are:
(figure 5)
Outbound Service CRM Categories
# Metric Title Description of the measurement
1 Completed R.O. Follow-Up & Customers who are contacted after completing a
Service Reminders service visit, with next visit pre-scheduled
2 Special Order Parts Customer contacts made after special order parts
(SOP) have arrived for their vehicle
3 Recall Appointment Contacts These are customer contacts made for the purpose
of scheduling appointments as a result of an OEM
recall or campaign
4 Unsold Additional Needed Service CRM follow-up to encourage or empower
Repairs customers to get repairs made that they turned
down while their vehicle was in
5 Unsold Additional Needed Service CRM follow-up to encourage or empower
Maintenance customers to get declined scheduled maintenance
completed at a convenient time
6 Unsold Service Contract Follow- Contacts initiated as a result of a vehicle
up/Prospecting approaching end of eligibility for a Service
Contract when not previously purchased
7 Unsold Body Shop Estimates Service CRM follow-up to encourage or empower
Follow-Up customers to get collision repairs made using
genuine OEM parts
8 Lost Service Customer Recovery These are contacts made with customers who have
not been in our service dept. for over 6 months and
are probably servicing elsewhere
9 Service Marketing/Prospecting Contacts with people who may be likely
prospective service customers
10 New Vehicle Sales-to-Service Ensuring that new car buyers are personally and
Transitioning directly guided to our service department
11 Used Vehicle Sales-to-Service Ensuring that used car buyers are personally and
Transitioning directly guided to our service department
So, all in all, there are 20 distinct CRM process categories with customer contact activities (if there are
any) that should be counted and tracked on a daily basis. Although many CRM applications will count
these contacts, activities, appointments and results, it is recommended that manual “tick sheets” be
used for a period of time and compared with the automated reports out of the CRM application to
determine whether or not the manual tracking validates the CRM software. I usually recommend at
least 6 months of manual tracking, and have found that the best dealerships continue with manual logs
as a backup to the automated reports, due to the ease of getting basic “counts” and the importance of
these raw metrics.
Why is it so important to tally up the activities, appointments, shows, sales and profits? Because this
is how a dealer, general manager or CRM director can begin to apply the management principles of a

5. CRM Profit Center. First and foremost, we must be able to measure the value of each customer
contact opportunity. By tracking what happens when we execute our CRM processes within each
category, we can determine a value for each part of the process. Once we can see the relative values
of each type of CRM process, we can then manage our resources to ensure that the most profitable
activities are the ones that get done first. Ideally, at the end of each day we will have some incomplete
activities, but they should be the lowest value ones from a profit generation perspective.
This is where dealers and their CRM professionals can use a basic Microsoft Excel Spreadsheet that
becomes a critically valuable tool in managing the CRM Profit Center. By dropping in the 5 Key
CRM Metrics for each process category, we can rank and compare them to each other to see where to
focus immediate efforts that will pay off right away. This analytical approach shows us where there is
the most room for improvement through process training, CRM tools, or additional resources if the
value is there. Here’s what the Sales CRM spreadsheet I use looks like with dealership CRM process
metrics filled in as an example:
(figure 6)
Inbound and Outbound Sales CRM Metrics
What the above numbers and measurements allow us to do is to analyze the value of each type of
CRM activity… After all, we need to know where the money is so that we can decide whether or not it
is worthwhile to pay people to do these CRM activities. So let’s take a look at the rest of this Sales

6. CRM spreadsheet and get some idea as to how we can make management decisions in regards to our
CRM Profit center.
(figure 7)
Sales CRM Profit Center Metrics
Let’s fold the above image so we can better see the Green, Yellow and Red “Analytic Cells” and take
a look at how they can be used to better manage a CRM Profit Center.

7. (figure 8)
Sales CRM Process Analytics (raw data folded under)
We can now see (in this example) that the most valuable Sales CRM customer contacts, or business
opportunities are the customers who are coming close to their Lease Termination… They are worth
$803 per customer contact. So, it would make financial sense from a Profit Center perspective that we
make sure we have the resources, then train them and assign them to Lease Renewal opportunities. If
nothing else, at least have people assigned to contact these customers and arrange for them to come in
on an appointment basis to take a look at their options.
Next we see that Showroom “Ups” are worth $272 each, which puts a whole new spin on making sure
that showroom processes are followed, customer info is captured, and we log all the ups. Internet
Leads are worth $262 to the store in this example. But, would better processes make the results turn
out better, increasing the net returned value of our Internet Leads? That’s where the Green, Yellow
and Red shading come into play. In this spreadsheet tool, the analytics cells all use “Conditional
Formatting” that is based on industry Benchmarks as performed by several hundred dealers whose
data was automatically sent in by their CRM applications on a daily basis. These are for the ratios
(percentages) only, the dollar values turn Green, Yellow or Red depending on how they compare to
the average for their category. As you can see, there are no Red cells within the Internet Lead CRM

8. Process row, and until we address the other Red cells, we have better opportunities within other
processes, as evidenced by the Red cells in Unsold Follow-Up and Retail Retention.
Basically, what the CRM Profit Center methodology delivers is an objective, or facts based approach
to managing CRM activities towards objectives focused on increasing both profits and process results.
These improved CRM process results mean more traffic into the showroom floor and the service drive.
Let’s take a look at the same approach described above for Sales CRM process measurements applied
to Service CRM processes:
(figure 9)
Service CRM Profit Center Metrics
As you can see in the report above, there were 8,950 Service CRM Customer Contact Opportunities
within the reporting time period… But, what if the dealership simply does not have the resources, or
even the willingness to complete 100% of those 8,950 Outbound Customer Contacts? That is when
the management principles within the CRM Profit Center methodology become most valuable.
Because we have measured our key CRM Metrics over time, we now know which process activities
generate the greatest value to the dealership… So, how many customer contacts CAN we handle?
If we have a staff of 4 people who are capable of averaging 60 direct outbound customer contacts each
day, and we have those 4 people working an average of 22 days per month, then we have an Outbound

9. CRM Process Execution Capacity of 88 resource days per month multiplied by 60 customer contacts
per resource day, which means we can handle 5,280 planned Service CRM Outbound Contacts. With
8,950 Service CRM Outbound Opportunities available, and a capacity to handle 5,280 it becomes clear
that we will need to manage those resources so that the 5,280 customer contacts they complete, are the
ones that will yield the most profits. How is this done?
First of all, let’s isolate the lowest handing fruit, or the unquestionably most profitable Service CRM
Outbound Customer Contacts. In the above example we see that Special Order Parts (SOP) and
Recall Campaigns have historically delivered a contact value of $80.19 and $73.72 respectively. So,
we know those 2 are “in” the mix, and then we have Unsold Body Shop Estimates follow-up activities
that have previously generated a profit value of $220.47… Can we get a few more of those?!?!?!
Alternately, we see that Service Marketing activities yield a value of only $6.92 per customer contact,
and there are 865 of those activities available, which from a CRM Profit Center perspective will
simply not make the cut. Neither will “Lost Service Customer Recovery” contacts which, in this
example are historically yielding a value of $7.34 per customer contact. So, what if we have a Service
Manager who simply wants Service Marketing Lost Customer Recovery activities to happen? Since
the basic strategy around a CRM Profit Center is to deliver the most profitable customer
communications at the right time, then there is one of two ways top go; either we increase the number
of CRM Profit Center resources, or we outsource the customer contacts using a Virtual Business
Development Center (vBDC) vendor.
Let’s take a look at Service Marketing for example. Even though at $6.92 it is the lowest performer of
all the Service CRM activities tracked, it does bring in unquestionably INCREMENTAL business. So,
if a CRM Profit Center Resource can make 60 Service Marketing customer contacts each day, those
contacts are worth 60 x $6.92 = $415.20 of incremental Parts and Labor Profits. If hiring an additional
CRM Profit Center resource costs $10 per hour, times 8 hours, plus additional employer expenses
means that the daily expense is [8 x $10] x 1.33 = $106.40 Which, when subtracted from the $415.20
yields a profit of $308.80. Or, as previously mentioned, we could outsource the Service Marketing
and Lost Customer Recovery efforts to a vBDC vendor.
Regardless of which way we choose to resolve the issue, we will know how to calculate our
expectations, measure our results and we have historical CRM Profit Center Metrics with which to
compare those results. The real key to the entire CRM Profit Center strategy is to measure the 5 Key
CRM Performance Metrics across each of the various CRM Process Categories and then compare the
results by looking at the Profit Yield for each activity within each category.
About the Author:
Ralph Paglia has been working in the automotive industry for 24 years and during the past 8 years as a
consultant. He has designed various CRM, Internet Lead Management and BDC implementation
programs for several car companies, including Ford, Jaguar, Mercedes-Benz and Honda as well as
large enterprise level dealer groups, such as UnitedAuto Group and individual dealerships. He can be
reached by email at CRM@RalphPaglia.com or by phone at 505-301-6369.