Value-creation selling (VCS) is a new model for the retail automotive industry. This is one of a series of articles that will help explain this concept.
VCS allows sales consultants to create optimum customer value during the sales presentation through empowerment and knowledge.
VCS sales consultants always do what's best for the consumer and become their advocates. Sales presentations are no longer purely transactional; they rely on creating value for each individual customer as the lever to close sales.
Sales management conducts all negotiations. By eliminating the need for dealerships to seek out sales consultants with negotiation skills, stores recruit a higher caliber of sales consultant.
The VCS process relies on sales consultants' presentation skills to create more conquest and incremental sales at higher grosses, eliminating the traditional method of “deal desking.”
A Tradition Unlike Any Other
VCS re-engineers the highly traditional desking sales model. The traditional model depends on desk management to achieve sales and gross profit goals.
The auto industry is the only retail model that is management-centric as opposed to sales consultant-centric.
The retail auto industry applies a “hub-and-spoke” sales model, with the desk being the center of the sales process. The major problem with this is the desk adds little value for customers. The desk's goal is to optimize gross profits with every customer transaction, an outdated model considering the knowledge level of today's highly informed consumer.
Due to significant market changes, the hub-and-spoke system has become inefficient, bloated and expensive. There is one manager for every 2.3 sales consultants in most stores. If you have 20 sales consultants you'll have at least 9 individuals with the title “manager,” including finance and insurance.
It is the opposite of the lean sales model that most retailers strive for.
The underpinnings of hub and spoke only get worse. It's time for supply and demand to kick in. The demand for good desk management exceeds supply.
Therefore, above-average compensation flows to dealership sales management.
When you couple excessive management costs with diminishing new-vehicle profit margins, there are not enough variable dollars available to recruit and retain a superior force. So, most dealerships are left with an inexperienced and unskilled sales force that creates little or no value for consumers.
The end result is the catalyzing of consumers to treat new vehicles as a pure commodity. That's why they shop a number of dealers in their efforts to determine the lowest price in the market.
This type of commodity-based shopping could be eradicated if dealers created a differentiated sales process based on building value in the product, person and place.
Let's look at a threshold question: If you bought a dealership today and had never utilized a hub-and-spoke model, would you implement one?
Consumer Defines Value
Today, every successful retail model depends on sales consultants to create a differentiating experience to not only outperform the competition, but to optimize productivity, profit margins and owner retention — which is the guts of VCS.
The VCS process focuses on selling automobiles to customers who desire a value-laden, fast sales process facilitated by highly knowledgeable sales consultant advocates. Bottom-feeding customers only after the best deal won't buy from a VCS store.
The VCS store markets to high-value purchasers, consumers who are interested in product solutions and applications and who put a premium on advice and help.
They expect salespeople to give them a new understanding of needs and options. They will willingly invest time, effort and cost in working with knowledgeable sales people to create customized solutions. And in the end, they willingly pay more for the experience.
Value can be defined as cost benefits. Clear customer benefits are investing time to understand the prospect's needs, using technology to get exact answers to questions and following up with additional information that will help the decision-making process.
Product and customer knowledge are what differentiates a VCS store creating a competitive advantage.
Although most shoppers today have done their homework before entering a car store, they often need a sales professional to help them sort it all out.
The VCS organization creates value by raising awareness of some of these factors, solving customer problems and developing unique, innovative solutions.
A retail maxim is that when you add value to a transaction, you can charge more. VCS is based on improving grosses through value creation. There are a number of ways to create customer value including:
- Recognition of needs: Helping customers understand their problems, issues and opportunities in a new or different way.
- Evaluation of options: Helping customers arrive at new or better solutions than they would on their own. Great sales consultants create “discovery solutions” that the guest didn't know or understand beforehand.
- Purchase agent: Acting as the customer's advocate inside the dealership. Sales consultants provide customized solutions that take into account every prospects individual needs.
The following will allow sales consultants to improve your store's gross profits:
- Extreme product knowledge: Customers enter your facility with a significant amount of product knowledge. It is the job of the VCS sales consultant to add additional layers of information and knowledge — especially when it is applied to how the customer will use the vehicle.
- Caught between products: The vast majority of customers are in such a situation. It lets consultants add significant value including new vs. used or certified pre-owned; competitive products in the same segment (Toyota Camry vs. Honda Accord); and conventional loans vs. leasing.
- Financial counseling: VCS consultants, just like in real estate, address and provide financial counseling throughout the sales process. The goal isn't to replace the F&I producers, but it is to help customers land on highly affordable products early in the process.
The need for “creative destruction” is a tenet of capitalism. Now is the time to apply this to auto retailing.
Mark Rikess of the Rikess Group in Burbank, CA, is a veteran automotive retailing consultant. He's at [email protected].