Professional Community for Car Dealers, Marketing, Advertising and Sales Leaders
|by Joe Tarell, Performance Improvement Consultant|
For many consumers, the mystery is gone from the car sales transaction. The Internet has leveled the playing field for negotiating car deals while dealers and car salespeople find it increasingly difficult to hold gross on a car deal. In the last article in this series, we noted that the NADA says the current net profit on a new car sale is down to $69 from $111 in 2012. While this is alarmingly low to those who don’t follow the industry, many new car departments were losing money in 2009 and 2010 during the recession. Given the lack of profits and consumers being more educated on the ways in which car dealerships make money, it's surprising that there are still so many car dealers clinging to negotiated prices. What is even more remarkable is that they still pay their salespeople on a percentage of gross. When you marry those two strategies you create the perfect storm for bad customer service. Whenever I argue this point with dealers they tell me, “we can’t just give away our cars.” The numbers in the paragraph above tell me that we already are…
In researching this article, I read dealership reviews on Yelp and Google+ in nine different markets across 13 different brands. In order to understand if there was a correlation between commissioned salespeople and common factors to explain the automotive customer service failures, I focused on the one-star reviews. After looking at 134 one-star reviews what I found was staggering. 82% of the negative sales-related reviews could be directly tied to the price negotiating tactics of the dealership. I would bet my last dollar that almost all of these stores use a pay plan that pays a percentage of gross and pay straight commission. To be fair, each of these stores also had plenty of five-star reviews too. The consumer reviews I studied tended to lean towards extremes. In the vast majority of cases, customers either rated dealerships at a 1 or a 5. The concern is that the one-star reviewers consistently used terms like, “buyer beware”, “never coming back” and“do not buy here”. This tells me that dealerships are losing future revenues for their other departments when they could actually be making a profit.
The typical car salesperson paid a percentage of gross and asked to be the front line negotiator in a store’s quest for more profits is the last person I would hire for Public Relations. Then why does it seem okay to create a pay plan and strategic plan that puts these salespeople right in the middle of a public relations nightmare waiting to happen? We know we have a turnover problem, so in addition to the other issues we can assume that many of these poor negotiators are also ill-trained. And in many stores this group of sales negotiators is led by someone in management that is likely nicknamed the “Hammer.”
I realize that this topic will probably ignite a firestorm of critics, but it is time for dealerships to move to one-price selling. No-haggle prices and sales people trained to sell cars instead of negotiating gross should become the norm. The advantages are too great to ignore and the pitfalls of business are mounting every day. The fear is that the customer will walk next door where they can undercut your price by $100 and make the deal. This can certainly happen, but it can also be defeated as many stores are learning after they make the switch. Making the switch does not mean “we tried that for awhile,” it means committing to it and transforming your culture in the store.
In making this switch, the store sales personnel will likely turn over. Many car salespeople of old are not really salespeople, they are skilled negotiators. Selling is a different skill set and some of your people have it and some don’t. Training them to sell on value, sell against other makes, sell the long term vision of buying a car from people you trust and schooling them in customer service first and foremost will take commitment. The initial worry that people will leave and go find a better price will be strong and learning the art of inviting them to leave takes time and skills. One of the hidden benefits to this model is the fact that you now pay these people a salary, or more likely an hourly wage. It is very difficult to get someone working straight commission to do anything beyond what earns them a dollar. When you pay them hourly you can write a job description that includes all those little things like cleaning up the showroom, moving cars, prospecting the service drive, etc. No more broom ups, we can now ask that they broom the lot and know it will get done. We can also find a different type of employee, one who loves cars, one who loves people and hates confrontation, one who will treat their store like it is their home. I realize that many stores already have this and they do it with strong management and a great dealership culture, but having walked into easily 1,000 stores across 31 different states in my career, this is not always the case.
Another requirement to making this model work is a very strong marketing and advertising plan. It is paramount that the marketing department has a strong say. That way every part of the dealership and the culture being created permeates the entire organization. It is also necessary to coordinate all advertising channels and make sure the message is carried consistently. Consumers do not trust car dealers so they will look for any inconsistencies that prove this is just another ploy to get you in and work a deal. With Google stating that the average automotive consumer uses 24 different research points along their consumer journey, consistent marketing with a strong online presence is vital. The time is now to move to a better way of selling cars and become salespeople again. I have worked in sales almost my entire adult life and know that employees work their pay plan. I think poorly written commission based plans are the product of lazy managers and inattention from senior leadership. In today’s Internet world where the planet keeps getting smaller and the knowledge keeps getting larger it is time to get in alignment and end the one-star reviews that are plaguing our industry. Let the debate begin.
Joe Tarell is a Performance Improvement Consultant at CDK Digital. He brings a rare blend of offline advertising, agency management and over 15 years of automotive digital advertising expertise. He spent nearly two years as an Internet marketing consultant including working with Gulf States Marketing helping Toyota’s Signature dealers improve their marketing and lead handling processes. He has presented to NADA 20 groups, OEM regional teams for Hyundai, General Motors and Toyota and worked directly with some of the largest dealer groups in the country. Feel free to reach out to Joe at email@example.com.