Dave Smith Motors sells 400 Internet-lead vehicles a month with technology created in-house – and sells about $600,000 a month in accessories – from a single-point, multi-line dealership in a county of just 14,000 people. But for Ken Smith, 42, president of this Kellogg, ID dealership, size doesn’t matter. His aggressiveness and creative mind has helped the dealership he took over from his father grow to a $250 million business. DEALER magazine recently interviewed him to learn how this rather isolated dealership has become King of the Internet Mountain.

How did you get started in the car business, Ken?

My dad, Dave Smith, started in business here in 1965 with a Chevrolet dealership. We are still just the one new-car store selling Chevy, Oldsmobile, Pontiac, Buick, Cadillac, GMC, Dodge, Chrysler, and Jeep. I also have a used car store under another name in Coeur d’Alene, just 30 miles away. At the Kellogg store I retail 6,332 new and 1,600 used vehicles a year.

With our 25 showroom and 25 Internet salespeople, we have a pretty good size sales staff. I purchased an old school across the street and remodeled it to accommodate the Internet staff. I built a $400,000 employee gymnasium there because there wasn’t a decent gym in town.

I also put in an accessory showroom. Dave Smith Motors sells about $600,000 a month in accessories. I believe we’re the largest accessory dealer in the country. I decided to build up our accessory business after I noticed that while we were selling a lot of trucks, somebody else was accessorizing them. I figured out right off the bat that there was good money to be made in accessories and I wanted a chunk of it. Accessories help sell trucks because the buyer that drives a truck or car fitted with $8,000 to $10,000 in accessories makes a statement and others ask where they bought the truck, which doesn’t happen as often with a truck off the lot with nothing on it.

We also have our own window tint shop that does custom window tinting and sun roofs; we manufacture different fiberglass components for the front and rear end of Prowlers; we make custom hoods and we’ll customize vehicles through different performance shops. We started off doing drop-in liners and grew to the largest drop-in liner dealer for Penda, which makes Duraliner. When the spray-in liner industry took off we formed our own spray-in company, Turbo Liner, which is actually worldwide now. In fact, we just set up franchises in Europe – and signed up Ranger Bass Boats here last week, which is going to spray its new boat trailers with our product.

How is your retail automobile business managed?

We’re a C corporation, with mostly family members as stock holders. I’m the president and CEO and the majority stock holder. My brother Eric is the general sales manager, my sister, Michelle Dahl, is the controller and her husband Derek is the finance manager. My other sister, Julie Lenox, is the accessories manager and my cousin, Matt Smith, is another finance manager.

Autodealerdaily.com has again ranked Dave Smith Motors Internet Dealer of the Year. How’d you get there?

In 2001 Dave Smith Motors sold 316 new and used vehicles a month over the Internet and in 2002 we sold 403; we’re on track for this year too. We use a system that we developed in-house called Lead Rocket. It’s a fully customized Internet lead Web interface system that takes us through the whole Internet marketing and sales process. We get approximately 100,000 visitors on our site at www.davesmithmotors.com a month, and we get anywhere from 100 to 150 Internet leads a day.

We’re physically located in a town of only 2,500 and in a county of only 14,000, including Kellogg’s population. The nearest cities of any size are Missoula to the east with 100,000 people and Spokane to the west with 200,000 people. But from Lead Rocket we’re attracting customers from throughout the northwest – Alaska, Washington, Oregon, Idaho, and Montana – and yet it’s not unusual for somebody to buy from us from most every state. While it wasn’t an Internet sale, we just took a deposit from John Walsh from “America’s Most Wanted.” He’s going to fly up with his son in a couple weeks and pick up a truck. He saw this vehicle in one of our advertisements in the Dupont Registry where we market high-end vehicles such as Vipers and custom vehicles that we build up here. He bought a souped-up little Dakota. It was a truck that had been featured in Trucking Magazine and a few others. We build one such truck a year for our Turbo Liner bedliner business and this truck was one.

Lead Rocket also helps us track leads throughout our system. It requires site visitors to provide some extensive information before they can submit the request, which helps us get better-quality leads. Lead Rocket time and date stamps the leads, and then turns them over to our Internet team manager who distributes them among our 25 dedicated Internet sales associates. Overflow leads go to the other sales associates in the main showroom.

Our average Internet lead response time is 4.3 hours. I’d like for response to be within the hour, but given the amount of leads this time isn’t bad. We figure that about 60 percent of all the customers we sell have actually hit our Internet site first before coming into the store, but the actual closing ratio of deals that start as Internet leads and remain Internet-only deals is 5 percent.

You developed this system yourself?

Yes. Lead Rocket is a stand-alone, PC-based system, which we’re now actually selling and installing in three dealerships in Pennsylvania. Here in our store, we have a computer on every salesperson’s desk. We have a little over 200 computers in the store. Lead Rocket is also a customer management follow-up system and it integrates with our phone system, which monitors calls to help us identify training needs. We can monitor calls in real time or for review later. Call monitoring also helps us verify whether everyone – customers and our own people – are being up front and honest.

We use two outside lead-generation sources – GM, and I’m signing up for the Chrysler Cobalt-based program because it’s free. We’ve looked at the third-party lead systems and while they’re effective, we believe we have everything we need. Our system is very simple: customers e-mail leads to us and we e-mail them back. In real-time, sales associates can check their and other associates’ results to goal right on their computer – no more running to the sales manager’s office to look at the big board. Our monthly sales contests are also available for viewing through Lead Rocket, so associates and management can track on a per hour basis where everyone is at any given time. This way we all know where we’re headed and what we have to do to meet contest objectives. The system also reminds associates of call-back times, and it can be set up so reminders pop up on the computer screen or call the associate’s cell phone or pager. So if John Doe calls and says, “Call me tomorrow at 2:30 and I’ll buy that truck,” Lead Rocket pages the associate and reminds him, “It’s 2:15 and you said you’d call John Doe back at 2:30 so make the call and get the sale.”

Lead Rocket also helps us track CSI. All sales associates must maintain a minimum of 95 percent customer satisfaction score or they won’t be here. Should they fall behind, they’re put on a 90-day probation. We expect high scores, which means they have to take care of the customer. As an intranet system, Lead Rocket lets anyone within the dealership send electronic messages throughout the store. The system features in-house classified ads, lists all accessory prices and phone numbers for all employees. And, because the system is tied into our phone system, we know who the caller is when they phone us and which sales associate they’re working with. This feature helps us avoid customers calling two different salespeople hoping they’ll get a lower price from one of them.

We use ADP for our DMS and DCI for F&I, but I believe we may be going back to ADP because ADP has a new F&I system that we’ve been looking at. When we switch over to it Lead Rocket will integrate then with the DMS and F&I.

What is your traditional media mix, Ken?

We do some TV advertising. For example, we’re getting ready to have a fire sale – a real fire sale. I bought some apartments next to the dealership so we can extend the lot. We’re burning the apartments this Thursday and it’s going to be a real fire sale ‘til the end of the month. So in our commercials we’ll have all these flames coming up out of the buildings. We are tying all our advertising to this event. I also mentioned the Dupont Registry for our high-end and customized vehicles. Our out-of-state customers come to us through Lead Rocket or Dupont Registry or some other means and wish to make a trip here to buy and enjoy the area. They seem to just keep coming back.

You’re quite the entrepreneur. When did you start to develop this?

I guess you’d have to go back a ways to tell that story. Dad started in the car business in 1965 in Wallace, ID, then in 1970 moved here to Kellogg with a Chevrolet-Oldsmobile store. At that time, Kellogg was the world’s largest mining area in the country with the world’s largest silver mine right here. I graduated from Boise State University in Idaho with a Business degree. It was about that time, the early ‘80s, that interest rates and gasoline prices went sky high, and the mine laid off 5,600 people. The town had 95 percent unemployment. My father had done very well, but we were basically broke because of the economy and we had to figure out something really fast. The staff and my father had a big meeting to figure out what we could do to bring money into the dealership. We were selling a lot of cars then, but generating very little finance income. At the time, people were earning 18 percent on Certificates of Deposit and had plenty of cash. We also were not selling many accessories. My father figured that the best solution for us was to focus on volume and make as much money on every vehicle that we could. And we started offering every accessory imaginable. Kellogg had 15 dealerships at the time, and most folded during these troubled times.

The town was over-dealered?

No, it really wasn’t. If you take 5,600 miners back then earning $60,000 a year and buying two to three rigs per household per year you’re talking 15,000 vehicles just out of Kellogg. Then the mine basically shut down. Now we’re the largest business in the county, with 240 employees. But we had good years through about 1980 until interest rates and gas prices went sky high. Then those 5,600 mine jobs disappeared and most of the dealerships here folded along with them. We had to decide whether we too would close up, relocate or figure out a way to survive.

Our approach was to sell at price lower than MSRP-plus. So we started our own pricing system. We had about 10 computer programmers at one time punching numbers so we could automate our pricing to give customers an immediate, automated price. One of my brothers had created this tool. We decided that we wanted to be ahead of the competition – ahead of the market technologically as long as we could. So when the Internet came about around 1992 we decided we wanted to be the dealer in the Internet field. Shortly after we got started we got into a dispute with the dealers in Montana and Washington that tried to boycott our dealership. We won that dispute.

Why were they boycotting?

Because they were so afraid of the Internet. They thought we would dominate the market. At the time we started we weren’t doing much Internet business though and we weren’t sure where it would take us. But we did know that if we could be first into it and could keep updating our Internet sites and keep progressing with it we might succeed. That’s why we developed our own system, because at that time there weren’t any lead-generating/follow-up systems available on the market. I then put in a full-out press on developing a Web site and then started developing our Lead Rocket. Today it’s a completely different system than what we’d originally developed.

What’s the source of your ideas?

My father, who died in ‘94, was always very entrepreneurial and innovative. Today, many of my ideas come from NADA or SEMA. I make a point of learning what I can at every exhibitor booth at those shows. One dealer asked me at NADA, ‘Well, Ken, what are you doing here?’ and I said, “I’m here to make money.” This dealer said, ‘Well that’d be a trick.’ I thought, you know what…a lot of dealers don’t get it. You can go to NADA and go booth by booth and figure out how to make your dealership better or you can just go there for the parties and the meetings and not bring back anything to the dealership to make you money. From every NADA visit I return to my dealership with a couple hundred thousand dollars in profitable ideas for my business.

Has Kellogg recovered from its downturn?

The area has been turned into a tourist destination. We have a ski area just a couple blocks from the dealership where the world’s longest gondola takes passenger four miles up to the ski area. It’s very nice. In the summer, the community offers mountain biking and concerts up there, activities which we’re integrating into our dealership. The bike path runs a block from the dealership and runs 80 miles. When buyers fly into Spokane to buy from us we pick them up and bring them to the dealership so they can take their vehicle home with them.

Our basic business is based off repeat and referrals. It’s an easy philosophy. We believe that every deal we do brings customers to us and every deal that gets away drags people away. Now we will not sell to anybody if we feel they’re going to be unhappy with the deal. We’d rather not sell to them than have them unhappy.

What advice would you share with other dealers who want to improve their business?

All dealers need to be aware of what their salespeople are saying to your customers; do you know? What messages are they communicating – their own, or do you require them to follow a script which requires them to cover key bullet points, but in their own words? Do they walk the lot with customers…do they make the decision whether the customer can buy or not? It’s important that salespeople be able to make relationships with customers because that’s what sells cars. As I mentioned, we use Lead Rocket and our phone monitoring system to make sure our people do these things.

What’s in the future for Dave Smith Motors, Ken?

We’re going to see an increase in business again this year, God willing. Everybody I talk to who’s in business, other than car dealers, seems to be struggling. But with the war behind us I look forward to turning around and our numbers improving. If things get worse, we’ll hold steady. I started washing cars when I was 10 years old. I wanted to start when I was eight, but Dad wouldn’t let me. I’ve always wanted to be in the car business. When I was in college, I worked for another dealership which went out of business. But that was good because I found out how it really works at other dealerships and why they go out of business. It’s been an interesting road.

To contact Ken Smith: ken@usautos.com