The way consumers purchase cars has changed tremendously during the past 20 years due to a variety of factors, most notably the internet and the advent of digital retailing. Most auto dealerships, however, are still using decades-old sales techniques and communication methods. To survive this constantly evolving marketplace, dealerships must take a more customer-centric approach to sales and adapt to how the modern auto consumer shops for and purchases vehicles.
A recent story in The Wall Street Journal predicted an uncertain future for car dealerships, indicating their longtime business model is about to dramatically shift due to online purchasing and an increasing number of acquisitions by national chains and consolidation, which is causing smaller operations to disappear. This shift underscores the need for all dealerships, regardless of size, to adapt to today’s auto consumer and the ever-changing marketplace.
Today’s Auto Consumer
The average auto consumer of today is generally very well-informed compared with the auto consumer of the past. For starters, today’s auto consumer knows specifically what they want as far as manufacturer, make, and model. They are well-versed in the differences between each model, what features are included, and what they want added. While some may be slightly flexible on their final decision, most come to the table with a very specific and exact order. They have also done extensive research on how much their desired vehicle should cost. With a seemingly endless array of online resources available, most will have a very definitive idea of sticker price, invoice cost, monthly payments, and what is available and for how much from all dealerships in their area and beyond. And if the consumer is trading in a vehicle, they will also have a well-researched idea of how much they should get toward the purchase of their new car.
One unfortunate similarity between the auto consumer of today and that of the past is an inherent distrust of dealerships. Ask anyone who has ever purchased a car from a dealership, and you will no doubt hear stories of how the salesperson tried to take advantage, manipulate, and otherwise pressure them. It has become an adversarial competition, a game of cat-and-mouse, where there is a perceived winner and loser. The consumer has a natural and pre-programmed distrust of the dealer. As a result, many consumers feel they have license to do whatever it takes to get what they want because they must protect themselves from the dealer who is going to take advantage of them.
One of the most fundamental mistakes dealerships make when trying to interact with today’s auto consumer is an inconsistency between their marketing efforts and their customer experience. Dealerships will put the bulk of their energy, dollars, and resources toward marketing about how forward thinking, transparent, and customer-centric they are, but they don't train their sales staff to support that same approach. So, a customer reacts positively to an advertisement where the dealer appears to be very customer-centric, they contact that dealership, and are met with a very old school type of mentality that is not at all consistent with the marketing. Not only does this negatively impact sales, but it also means the dealership is essentially flushing a large percentage of its marketing dollars down the toilet because the leads that are coming in are being mishandled. The problem is compounded when dealers who are not getting enough sales throw even more money at marketing and advertising, resulting in more mishandled leads that do very little to increase sales.
Another problem which is rampant in dealerships across the country is the exclusive use of the old “command and control” method of communicating with the auto consumer. Today’s auto consumer is exponentially more knowledgeable than ever before and must be handled in such a way that acknowledges this. Command and control is very dealer-centric and often negates the needs of the consumer.
Many dealerships are not aware of what's going on between their sales staff and consumers, and that there is a very definite disconnect in dealer-consumer interactions. If you think of the history between consumers and dealers over the years, there is a strong level of distrust that has been created over time. Then third-party companies emerged and instilled the feeling that consumers could not get a fair deal unless they worked through the third-party platform. This built an even greater level of distrust.
To successfully navigate today’s automotive marketplace and the new auto consumer, dealerships need to adopt a “modern retailing” approach that incorporates the fundamentals of auto sales with newer tactics and methodologies that take into consideration how people are shopping for cars.
Following are some tips for dealerships wanting to better adapt to the modern auto consumer:
- Take a blended approach between the “command and control” and “educate and inform” approaches to sales. This has proven to be the most successful way to sell cars to today’s consumer and enables the salesperson to participate in the customer’s gathering of information, which will ultimately result in a purchase.
- Make sure your customer’s experience is consistent with your marketing. Reallocating a portion of your marketing dollars toward staff training will maximize the money you spend on advertising and dramatically decrease your customer acquisition costs.
- Educate salespersons to understand that all sales are good sales and to not just focus on those sales that have a high gross profit and will yield a high dollar commission. Letting 10 smaller-commission deals fall through in favor of one larger-commission deal is not a good approach. Making a $2,000 combined commission from several deals is just as good as making a $2,000 commission on one deal. In many cases, those smaller deals will result in repeat business, as well as revenue for the finance and service departments.
- Remind salespersons that they are also consumers. If you listen to conversations between salespersons and consumers, you will find that many salespersons are saying and doing things that they themselves — as consumers — would never tolerate. They start to believe things that wouldn’t work on them will work on other people. A salesperson needs to put on their consumer hat to be more effective and responsive.
- Encourage sales teams to look at customers as relationships, not transactions. If all you are focused on is the financial aspects of a particular situation, you will have a much harder time closing that deal. Relationships also result in repeat business and customers who will return to the dealership for other services.
- Acknowledge the historical distrust between dealers and consumers. Make a commitment to be open, honest, and transparent. Make a commitment to not overpromise and over-deliver. Make a commitment to the customer that when you work with them, your intent is for them to be an ongoing and lifelong customer. Tear down that contention from the very beginning and acknowledge you're a consumer too.
Today’s auto consumer is informed, empowered, and much more in the driver’s seat than ever before. And this has been the case for quite some time. If dealerships are to survive, they must very quickly catch-up and calibrate their businesses to communicate with the consumer more effectively.
Brett Kelly is executive vice president at Applied Concepts and has more than 20 years in the auto industry, having spent 15 years at Cox Automotive.