Country Club Dealerships

If you make more than you spend, it won't take long before you're solicited by folks who want to sell you stocks and other commissionable investments. If asked, those securities sales people will tell you they target high net-worth clients who like to buy high and sell higher. If you poke deeper, however, you'll find that for lack of those patrons, most stock-brokers make the majority of their income

If you make more than you spend, it won't take long before you're solicited by folks who want to sell you stocks and other commissionable investments.

If asked, those securities sales people will tell you they target high net-worth clients who like to buy high and sell higher.

If you poke deeper, however, you'll find that for lack of those patrons, most stock-brokers make the majority of their income on investors who regularly wind up buying high and selling low. Such clients are hard to deal with, justifiably cranky and generally unappealing as a group.

But stock brokers aren't the only ones secretly coveting different customers than the ones they currently attract. Casinos, too, would love to exchange the gang that fill their gaming halls with more upscale gamblers jetting in to play big stakes games on the enticement of a comped night in a fantasy suite or free front row seats to a sold-out show.

Alas, casino operators have learned to meet their needs by catering to the easier money made from busing in pensioners who are willing to dump their social-security payments into slots, baited by a free all-you-can-eat buffet dinner and a $20 gambling voucher. Again, not so glamorous, but it's a better bet to pay the rent.

This relates to car sales as follows:

Auto dealers, lacking enough of the beautiful customers they want, must use strategies to attract those they can get.

Sadly, since that customer is decidedly different than the one auto makers are fishing for, most product, pricing, and marketing strategies seriously miss the mark.

The resultant interaction between dealers and their franchise manufacturer often turns hostile and dysfunctional as each tries to educate the other on their preferred and perceived ‘reality’ (neither trusting the other's vision).

Take for example the dealer who achieves volume by pursuing an urban demographic through the allure of deep discounts and finance-based initiatives such as zero down, low monthly payments and trade-in over-allowances rather than by attacking the market with Starbucks lattes and me-too iconic dealership facades.

Inevitably, when dealers sell to different customers than their franchisors have described to their Wall Street overlords, the difference becomes noticeable in the consumer experiences, responses to surveys and the look of the showroom versus the predictions of manufacturers regarding the “ideal” retail customer.

Manufactures respond to those differences by shoving their dealers in the direction of their idea of a more desirable market demographic. Needless to say, dealers tend to resist and resent that shove.

Soon, auto makers are encouraged to concoct new weapons with which to get their way. Customer-satisfaction incentives, allocation systems and new brands become the currency of forced compliance.

On the surface, these things appear to reward rather than punish. You win and earn incentives and new franchises. But the paradigm through which customers see these things is how they show up in the price and availability of the cars and service they must pay for.

As dealerships become more opulent, the cost per-sale increases, as does the pressure that the dealership feels to make every deal no matter what.

Manufacturers often take the if-you-build-it-they-will-come approach to facility upgrades. Dealers, already burdened by the legacy costs of many brilliant strategies gone awry and smarting from the number of deals lost over a few bucks a month between they and their competition, are cautious if not downright resistant to adding overhead.

Manufacturers label dealers resistant to facility upgrades as cheap, conniving, misguided and undercapitalized.

In truth, many dealers find their customers respond to facilities and marketing that are at odds with a country-club view of things.

The only way to marry volume to profitability is to be very stingy about things that don't matter deeply to customers.

Peter Brandow is a veteran of auto retailing.

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