Most Americans don’t like negotiating over a price. However, one icon remains at the epicenter of haggling: the auto dealership. The activity is so painful that CarMax built a successful company skirting this tradition. On Trustworthiness, Americans rank car salespeople almost equal with members of congress. However, dealerships are attractive to automakers for one giant reason: they take manufacturer’s inventory and sales expnenses off their books. This is good from an accounting standpoint. The drawback is the auto manufacturer loses control over the customer experience. This is bad for consumers of automobiles.
Enter Tesla, a company known for challenging the status quo. Their sleek sports car flipped the stodgy perception of the electric vehicle. However, one of the boldest moves of the company wasn’t created in an R&D Lab. Tesla decided to sell directly to their customers. This is different from the traditional model, where dealerships are owned by third parties. Across the nation dealers attemepted to block the move.
The dealership is an example of the indirect sales channel. Not all indirect channels are bad. Fast food and department stores are two examples of successful indirect channels. For many companies, the indirect channel is the best way to reach customers at the lowest cost.
It offers the following advantages:
- To acquire a Sales Force without incurring a massive salary expense
- To engage in markets and geographies previously out of reach
- To sell goods cheaply without investing in retail space
- To provide Installation expertise and support for Complex products
Download our “Choose Your Channel” Guide to learn how you should Go To Market.
The downside to the indirect channel is that somebody else engages your customers. Tesla doesn’t want to lose control of these interaactions. According to Tesla, prices would be fixed (no haggling). Sales reps could be paid on salary instead of commissions. This would eliminate the pushy, abrasive salesman pacing the lot. This direct model allows Tesla to shape the entire customer experience. They can brand and market themselves more effectively. Every interaction and detail will be aligned with the corporation. This might sound creepy at first. But consider another direct channel success story: the Apple Store.
If Tesla can outlast the political opposition, it may revolutionize the automotive sales channel. But should other industries be scared? Yes. Now more than ever, manufacturers are challenging traditional middlemen. Cloud companies are delivering and installing software virtually. Auto insurers like Esurance (Allstate) engage their customers with websites instead of brokers.
Is your channel threatened? Here are four quick questions to ask yourself:
- Do my customers prefer to purchase my products like this?
- Would my channel exist without government regulations and laws?
- Can my channel partner deliver my product as well as the internet?
- Do my customers require face to face interactions over virtual ones?
If you answered yes to three or more, chances are your channel is in good standing. If you have 2 or more “NOs” your Go-To-Market strategy may be threatened.
Download our Choose Your Channel Guide and decide on the best method to engage your customers. The channel may never disappear, but it is constantly being threatened. Even traditionalists rethink their strategy.
….the realities of guerilla marketing for a high-priced and innovative niche player in the competitive, and often cutthroat, automotive sales arena. Until, and unless, Tesla becomes more mainstream, the company is not likely to adopt what would be considered ‘traditional’ dealership sales and customer relationship approaches. When and if they do, it may well look like this: http://www.customerthink.com/article/how_auto_dealer_group_builds_trust