Don Beyer has been a Volvo dealer since 1978, taking over a store his father founded in 1973. He has been so pleased with the franchise that he has added two stores in the Washington, D.C., area. Beyer claims to have the largest parts inventory of any Volvo dealer and also the largest used-car sales numbers.
Beyer believes Volvo has the potential to be a top-tier brand, a true luxury marque. But to do that, Volvo has to expand its product range, improve its quality and pay more attention to serving the customer.
In December, Beyer spoke with Staff Reporter Mark Rechtin.
What is Volvo's hot product? What's not?
The S40 and V50 are actually surprisingly hot, and they have exceeded my expectations. The S60 in theory is a dated product, but now we are focusing on the turbos, and we've had a good year. The XC90 has been a falloff with gas prices up and it now being in its fourth or fifth year. It finally came with V-8, which gained sales through the year, until Katrina arrived and gas prices went up. So it was not the luckiest year to come out with a V-8. The XC70 and V70 wagons dominate that segment, and they have been chugging along pretty steadily. The S80 is in its seventh year, so it's been pretty quiet.
What new products are on the way?
The S80 comes next calendar year. I haven't seen it yet, but the dealers on the product planning group who saw it in Sweden thought it was dynamite and sexy, with some real visual changes. The C30 comes the following year. Together that is great, because it takes us to new market segments. You have to be suspicious over whether there will be demand in America for the C30. The XC50 sport-utility will be a brand new position for us, probably in 2008 or 2009.
What are the dealer council's top three concerns?
1. Volvo's actual customer satisfaction ratings among its customer base. We look at J.D. Power CSI surveys as pretty important, and we've moved up a bunch of points. But the real emphasis is to move away from gaming the CSI surveys to making sure the customers are actually happy.
We are moving the philosophy so that we are taking actual care of the customers. We want to shift from spending time trying to get paid for results on the CSI survey, where a salesman changes a disappointed customer's telephone number or
e-mail address, or hold the warranty claim, so that the customer never gets surveyed. Same as where a salesman calls back a customer to make sure they give an "excellent" score so that the salesman gets his CSI bonus. That has to change.
2. We want to travel up the quality curve. We're good right now, but we want to be at the top with Lexus and Toyota.
Our quality waxes and wanes, but the council believes that if we had top product quality, we would sell more cars than we do right now. It takes some time to change perceptions. We need to be in the top two or three.
The new head of quality in Sweden, Paul Welander, is a guy who the dealers trust. And Lewis Booth, the new head of PAG and Ford of Europe, has built his career ratcheting up quality, so that's a high priority.
3. We don't have a huge advertising budget. We have to make sure we get greatest bang for our buck. A lot of that is that we don't have a Ford, Chevy or Toyota budget, so it's more about how can we be creative to hit the target audience we need.
A subset of that is some conversation about regional decision making where it makes sense. Centralizing decision making in California meant a simplification of process, but we could use some regional thinking, in terms of incentives.
What is the Volvo dealers' wish list concerning factory assistance?
Most dealers are pretty happy being Volvo dealers. We are among the most profitable franchises in the industry. I don't know any dealers who aren't profitable. The XC90 was a great gross profit stream, and demand was excellent. Many dealers have a great certified pre-owned program. The vast majority of our used-car sales are certified pre-owned, so there's a great income stream from that. We have very busy shops, because the owner loyalty for service and parts is exceptional. The customers don't disappear when the warranty runs out. But it all comes down to what's new, and when the dealer across town has something new and we don't, that's a strike against us.
Does Volvo listen to its dealer council?
The communication with VCNA has been excellent and has been for a while. It has been good with (new CEO) Anne Belec, but with (former CEO) Vic Doolan they were communicative as well.
What is your major goal for the upcoming year?
The biggest goal for me is to see some volume growth. We have moved in the wrong direction in 2005, mostly in the falloff in XC90. But the new convertible will deliver some new volume, then the new S80 arrives, so that will bring new people into the showroom.
How satisfied are dealers with Volvo?
A lot of us look at 2005 as being a difficult year. Volumes were OK until Katrina. I have talked to a lot of dealers who say consumer confidence rebounded. Yet, unless you are a Honda or Toyota dealer, you aren't seeing it on the showroom floors. But even though new unit volume is down, we're still doing fine from a profit standpoint. I pay attention to service and parts absorption rates, and we are over 100 percent in all three Volvo stores, but that only works if we keep pumping new cars out there.
What is Volvo's pricing strategy?
I don't think the margins are too thin, which may be heretical for me to say as a dealer. But I think we can make a good living the way they are. Given the fact that we often have big incentives to offer, we're in the same value pricing trick bag as every other manufacturer. There's that dance between MSRP and actual transaction price. Volvo hasn't gone as far as GM, but we are dropping the MSRP closer to the transaction price.
Are Volvo dealers making money on new-car sales?
I think most every dealer makes money on the new-car side, even the stand-alone dealers. When you count all the incentive-based money and CSI money and branded money, we are doing close to $2,800 per car.
Do your dealers have the right product mix and overall marketing strategy to be successful?
As a dealer, I would always like to have more advertising and variable marketing money to spend. There are good incentives on given models. As a whole, a lot of our cars are getting older - the S80, V70 and XC70 - and that's a disadvantage. But there's a lot of new product coming. We just have to be patient.
How many of your customers ask about hybrid vehicles?
We do get that in the showroom, and we get e-mail about it. Volvo and the environment has been one of our core values, so the customers are interested in hybrid and diesel variations.
And we have to tell them that nothing is coming yet, that it probably is the next-generation Escape hybrid engine we'll see. But there's a certain amount of appropriate skepticism on Volvo's part, when you look at the delta of the cost of getting into a hybrid vs. the cost of gasoline. It all depends on whether consumers wake up or if technology will change that delta.
How important to consumers are safety features compared to other vehicle attributes, such as styling and performance?
A very big percentage of Volvo customers are very interested in safety. We make it part of the walk-arounds, because it doesn't make sense to ignore the safety leadership. The good news is that the cars are pretty now, and they are fun to drive with lots of power and they handle beautifully. But safety is always part of our presentation. For almost all Volvo customers, safety is one of their top three priorities.
Is Volvo demanding that you adopt a uniform style of decor, or remodel the store's exterior, or build a new store? How are dealers reacting?
The philosophy has shifted. When we bought our second store in April 1999, the biggest emphasis was changing the tile on showroom floor, which was $40,000 in new tile.
But when Vic (Doolan) arrived as CEO, he said we want the stores to look great, but the tile is nothing compared to how well you treat the customer.
For our new store, we are working with designers in Irvine. They have their template, but there are many degrees of freedom. It's not cookie-cutter, more that it looks great and customers are comfortable there. The last big program was in 1996-97, when dealers got a lot of subvention money, where dealers were spending $500,000 to $1 million to upgrade.
But it's been a while since then, and some of the showrooms are looking dated. Now Volvo is using regional VPs to encourage dealers to renovate where it is appropriate. There is no carrot and stick approach. In the last 10 years, we've gone from having shared showrooms to almost all stand-alone stores.