Car Dealers Could Profit From Relationship-Building


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My wife dragged me out of a Volkswagen dealership a few years ago, even though she really wanted that silver Jetta, because the sales guy talked only to me, even though she was buying the car. We went directly to a Volvo dealer, and the next day she was driving a silver Volvo S40.

I meet a lot of car dealers in the course of a year, usually in the context of delivering seminars and workshops. They are dealer principals and their sales and service managers. I am continually struck by the consistency in their sales approach: Most tend to behave like stereotypical car dealers. Because of this, I believe that there is a tremendous opportunity for them to increase the level of innovation and creativity, and to create more meaningful long-term relationships with customers. For the most part, I am talking here about dealerships that have been in business for many years and that probably are into their second, or even third, generation of owner/managers.

When I meet senior executives of large car dealerships, I generally ask them a series of questions that allow me to learn more about where their stores are positioned, how they conduct their business and what some of their challenges might be.

I start by asking how many salespeople they employ. Depending on the size of the dealership and where it is located, the answer is typically 30 or more. Then I ask how many of those salespeople are women. The answer, more often than not, is one or two or three. If it’s one, the lone saleswoman is often the dealer’s daughter, being groomed to take over a more senior role in the dealership. I occasionally get the answer “none,” which is often followed by an explanation that “we tried that, but it didn’t work.”

I then ask about the compensation scheme in place for the sales staff. In 80 percent or more of cases, I’m told that salespeople are paid on a straight commission.

The third question that I ask of dealership executives relates to the roll-over rate on leases. I want to know what percentage of customers who, having leased a vehicle for three or four years, return that vehicle and lease another. Believing that an existing customer represents the best opportunity for additional business, I am amazed when I hear lease renewal figures of less than 50 percent and occasionally as low as 30 percent.

I want to know about the number of female sales persons simply because I have heard so many “horror stories” over the years from women who have stormed out of dealerships without buying because the salesperson talked down to them or spent the entire time talking to their husbands/boyfriends/fathers and only talked to them about color and seat fabrics. What’s astounding is that I’m still hearing these stories today, despite the fact that women buy a lot of cars on their own and probably are active participants in the decision process in 90 percent or more of the cases.

Women customers
It seems that, in many dealerships, the traditional model of selling has not been revised to reflect the current reality, and often dealers are unknowingly turning female customers into “almost customers”—they’re interested in the car or they would not be there in the first place, but they don’t buy because of how they are treated. In many cases, they have already decided what car they want to buy and just need to close the deal, only to be turned away because they didn’t like the way they were treated.

The lone saleswoman is often the dealer’s daughter, being groomed to take over a more senior role in the dealership.

I ask about commission-based selling because I know from talking with auto customers that a very large percentage of them—research from Ford Motor Co. estimates 80 percent— show up at the dealership having already decided what car they want, armed with printouts from the web and prepared to tell the salesperson exactly what price they will pay. They’ve done their homework, may have already test-driven the car, and are now ready to buy. They are there to place the order. So why is the salesperson’s compensation still based on making the sale?

I’m interested in knowing about lease renewal rates because it seems to me that having a “captive” lease customer for three or four years represents a golden opportunity to build a relationship. The fact that only 30 percent or 40 percent renew their leases indicates two things for me: (1) The dealership has failed to develop a relationship and (2) it has an incredible opportunity to increase sales through existing customers, if it were to embark on a specific customer strategy targeted at relationship building.

Manufacturers and their financial arms are culpable in low lease renewal rates in that they often make it difficult for a customer to roll over into a new lease, sending instructions on how to return the leased vehicle, with details about what it will cost the customer if the dent in the door is wider than 2 inches and with no hint that they would really like him or her to renew. This contact typically comes from the manufacturer, not the dealer, and makes some customers “feel like a criminal.”

No strategy
What’s missing in what I am hearing from car dealers is any sense of the need for relationship building. Many behave as prototypical sales organizations, backed often by manufacturers who are so devoid of strategy that their main response to competition is to match the competitors’ “employee pricing” scheme.

In this customer-centric world, most forward-thinking companies are trying very hard to build some form of connection to customers so as to increase loyalty. Auto dealers must turn their salespeople into relationship managers, and having more women in sales positions will go a long way toward removing the stereotype. They also have to look upon the three or four years when they have a customer in a lease as an opportunity to get to know her and to build a connection that will practically guarantee that she comes back and leases again.


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