The Flexible Fleet

Putting a sales force behind the wheel has become a complicated challenge. Auto manufacturers are offering such a wide variety of cars, trucks, utility vehicles and, often, combinations of all three that sales managers must spend precious selling time weighing options like sun roofs instead of keeping track of major accounts. While that makes no sales sense, having choices in fleet cars is a good way to attract top talent.

That’s right, choice is good. You can match the cars you secure to the needs of your drivers and to your budget for selling. You can even make cars part of your regular system for rewarding and motivating reps. The trick is knowing how to do it all at the same time.

In choosing the right vehicles for your sales force, there are three basic considerations, according to Lisa Askin, VP business development of PHH Arval. “The order of consideration can vary according to the priorities of your company,” she adds.

Cost Control

“One important consideration is cost,” Askin emphasizes. “It comes down to how much you want to spend on sales driving.” Askin notes that cost should always be measured on a full-lifecycle basis, including all standing and running costs, and must reflect the resale value of the car. Managers of new or small fleets tend to look at acquisition costs only. That is a mistake, as your firm will be paying for a sales car throughout its life. Just like the fixed portion of compensation, the meter is running whether or not you are selling. Transportation is a measurable and manageable cost of sales.

Lifecycle cost depends on purchase price and model, because each model has its own fuel usage, maintenance requirements and expected depreciation. Another critical factor is how you finance vehicles. Many options are available, including ownership and leasing. Leases come in two basic types, closed and open-ended. Leasing offers flexibility and scalability. Your finance office must be involved in discussions about cost-effective methods for vehicle acquisition.

To help clients select vehicles and project costs, PHH Arval has data by car brand and year, both from auto manufacturers and from its own fleets. Easy-to-use models can compare lifecycle costs under a variety of conditions, including monthly mileage and service life. Benchmark costs for each industry are also available. The cost of adjusting your sales force, changing the fleet composition or adopting new fleet policies can be easily calculated.

Image Counts

Another major consideration is the image you want to portray to both customers and employees. How important is model and appearance in your market? What do your competitors drive? “For example, do you need to mark your vehicles with your logo, so your company can be seen?” Askin asks. Many sales, service and delivery vehicles are painted in company colors, a great form of free advertising as long as drivers behave themselves on the road. Even sedans for salespeople who sell many commodities have company decals.

Customers and the type of markets you tap often determine the image you need. “If you are selling to an auto company, for example, you may want to show up in one of their cars,” Askin points out. “In value-oriented or price-sensitive markets, you do not want to roll into the lot in an expensive vehicle.”

Another aspect of image is the effect on salespeople themselves. “A company car is part of the recruitment and retention strategy in many industries, such as pharmaceuticals,” Askin notes. “These are markets where firms must compete for sales talent, and a company-provided vehicle in line with industry practice is an expected part of the compensation package.”

Most fleet experts thus talk with human resources staff, sales execs and other leaders to understand the company’s priorities and objectives. “Some companies turn over their salespeople very quickly, so the car is not an important perk at all,” Askin says. “Some firms sell in low-margin markets, where the emphasis is entirely on holding sales costs down, including the cost of sales driving. In these cases, managers are chiefly looking for a safe and cost-effective vehicle that gets the job done. Other companies turn over salespeople very quickly or hire entry-level people. They are concerned with cost, safety and the right fit for the job.”

Many firms assign different levels of cars to different levels of responsibility in the sales force. In these cases, executives get better cars than reps, just as they usually get nicer or larger offices. Often senior executives are given a price range, for example $30,000 to $35,000, and allowed to pick the car they want. It is not very important to restrict these vehicle choices, since the limited number of purchases is probably not going to give you leverage on price. In contrast, when buying much larger numbers of cars for sales reps, concentrating on one or a few models can help get favorable deals.

Some companies use upgraded models as awards for better sales performance. But Askin says this is not very common and generally not regarded as a ‘best practice’ in fleet management. One reason for caution is that sales cars are usually driven for at least three years. Do you want to give such a long-term reward for what may be only an annual performance contest?

Driving Needs

The other major consideration is the type of sales driving your reps do. Do they need to carry samples? Do they need to take groups of customers to lunch frequently? Sports utility vehicles are one roomy option, but SUVs tend to be given as perks, rather than for carrying purposes. Some PHH clients with substantial payloads to carry choose vans, cargo vans or trucks. One client leases pickup trucks that have a ‘cap’ stretching over the hauling section. “The finished vehicle looks professional and not like a pickup truck,” Askin notes.

It is on these special requirements that the expertise of PHH consultants and engineers really comes in handy. “We have auto and mechanical engineers who can analyze how the reps drive the vehicles and make solid, cost-effective recommendations,” Askin says. “We understand both the payload and business requirements, and we can find the choices that meet your cost criteria and fit the image you need.”

If vehicles have to be fitted with special gear, to handle heavy loads safely for example, PHH can arrange to have the modifications done right and economically through a network of shops it works with regularly. The reverse happens when the vehicle is retired from sales and put on the market. PHH’s partners can economically remove decals. Structural modifications can be removed or left in place according to which choice is best for maximizing net market value.

Such on-board technology as GPS and wireless Internet is getting more important for even the most standard sales force. Initially this technology was used mostly in work fleets and had a big-brother image. But Askin sees more interest in this technology now, as benefits become real. “GPS equipment can do mileage readings, monitor mechanical conditions and be used to improve the efficiency of your routes,” she notes. “You may also be able to use GPSs to feed your sales-call reporting system.”

Combining All the Choices

Bryan Steele, VP of client relations at LeasePlan, confirms Askin’s basic point. “There are a lot of variables you must look at when you develop a selector model for a fleet,” Steele notes. “You have to look at how the vehicle will be utilized – whether for sales, delivery or service – the nature of the sales force, and who will be driving it.”

For example, one LeasePlan client puts 40,000 to 45,000 miles per year on vehicles delivering medical equipment to hospitals 24 hours a day. “The security business is similar,” Steele says.

Drivers can vary from service employees to reps to middle managers all the way up to executives. Apart from operational requirements, fleet choices depend on company culture and whether it rewards top-performing reps and upper managers with better cars. LeasePlan tries to learn the culture first, then work within it. LeasePlan first interviews sales and company executives to understand what they want from a fleet policy, in terms of both the image of their reps and perks to be offered.

Then the experts want to understand any special driving requirements, for example, heavy use or the necessity to carry bulky samples on sales calls. Some sales vehicles need roomier interiors or even the ability to tow a van occasionally. These considerations also affect the engine chosen, where there are options.

Off-road driving is a factor that must be taken into account. LeasePlan has clients that sell in the oil patch and require all-terrain models. But most sales driving is on the interstates or on suburban and urban streets. LeasePlan uses its database of driving patterns and model choices for each industry to help benchmark each new client’s needs.

Nevertheless, company culture and industry expectations often trump driving conditions in the selection of sales cars. In heavily congested New York City, for example, it seems to make sense to drive smaller models to make parking easier. But Steele says managers often do not want to move toward nimble compacts. “They say that a Grand Prix is the standard in their industry, and they don’t want good reps leaving for the competition just because of the car. Often, the car is a personal statement, and reps want to be recognized.”

LeasePlan usually offers two to three models for each level of the sales force. Senior vice presidents at some firms may even rate a Lexis or a Mercedes. For reps and managers, Steele sees more and more fleets shifting toward hybrid SUVs and light-duty trucks.

Again, it is not the sticker price that counts, but the lifecycle cost that matters most. Thus a key consideration in any vehicle selection is expected resale value. LeasePlan keeps massive records on resale values for standard and long-driven models. However, the future values of newer models are harder to predict.

To hold costs down, one essential step is to develop the right cycle for replacing vehicles. This depends partly on how heavily the fleet is driven. It also requires complicated tradeoffs between minimizing acquisition, maintenance and depreciation costs while maximizing the resale values of the cars to be replaced. “The longer you keep a vehicle, the larger the depreciation is and the more maintenance will cost,” Steele notes.

But there is another resale option that can benefit both the company and its employees. LeasePlan has developed a special Website that allows any employee to bid for any sales car coming off lease. Buyers are offered the maintenance history and warranties on the cars, along with digital pictures. Distant purchasers are even quoted a price for transportation to their front doors. Steele says the company will usually do better through these direct sales than through public auctions, and the buying employee is, by definition, happy with his choice.

The initial installation of this employee purchase Website, called ‘Redrive,’ was made at Phillips Electronics. All Phillips employees are offered the cars at slight markups over wholesale values, and the sales take place on a first-come, first-served basis for 48 hours.