AUTOMOBILES ARE AMERICA'S MOST PROLIFIC industry, enjoyed by the multitudes yet bearing the cross of being the most stressful and unpopular experiences among U.S. consumers.
Shopping dealerships for a new vehicle often has been characterized by many consumers as akin to visiting a dentist for a root canal. Buying vehicles at a dealership is a contest between the consumers negotiating as much of the vehicle gross as they can while conversely, the salesperson's task is to preserve as much gross as possible and still sell the vehicle. Is it any wonder that vehicle shoppers abhor this stress-laden experience? Is it any wonder that automobile salespeople are held in low esteem?
The majority of vehicle salespersons, however, actually try to avoid getting into a bidding war with prospects, and do a good job of demonstrating the product, selling the reputation of the dealership and showing many other positive selling techniques.
But salespeople can do those things, then hear from the customer the line, "I'd like to discuss this with my wife."
The potential is for the customer to go out and shop the deal with four or five other same-make dealers. That possibility creates an urgency to close the sale while the buyer is still in the showroom. Often, the consumer gets confused with several prices and generally does not improve the original deal by more than a hundred bucks. To this end many dealerships employ showroom floor managers who act as closers.
Creditable surveys have shown the vast majority of closed sales are accomplished while the prospect is still physically in your showroom. Plus the chances of closing a prospect diminish significantly with each passing day they have left the showroom "to talk it over with the wife."
This motivation to close the sale during the prospect's initial visit to the showroom is the breeding ground for many of the abuses perpetrated by wheelers-and-dealers. It was not unusual "to temporarily misplace the keys to the prospects trade-in vehicle in order to delay their departure. I heard of a large volume dealer (one of the largest in the U.S.) who would send a van into the local ghetto transporting several prospective used-car buyers to the dealership. The rub was that, if they didn't buy a car, there was no dealership transportation "available" to take them home.
It seems to me that sales personnel pay plans (no significant salary and a percentage of the gross profit) are partially responsible for the pressure-packed sales environment in many dealerships.
It is reasonable to envision conflicts and high pressure tactics among veteran salespeople who must sell vehicles in order to put bread on the table. On the other hand, incentive and motivation are what selling is all about. It is important for management to provide reasonable motivation if they are to succeed in the highly competitive vehicle marketplace.
It seems possible, with all the sophisticated data processing equipment available for current dealers, that they could design more consumer-friendly pay plans that would not dull individual salesperson's motivations.
Dealership service personnel have responded positively to government regulations and solid management policies, which have recovered important service revenue from independent mass merchandisers. Consumer protection legislation to correct repair order abuses has resulted in an enhanced degree of service management professionalism and customer confidence. For example, in several states, if the cost of a repair order exceeds more than 10% of the original estimate, the customer must be advised and so noted on the shop repair order copy prior to the work being done.
Service technicians formerly were paid 50% of the labor charge, which usually was inflated from a non- factory flat rate manual. This pay plan resulted in a loss to the dealership because there was no allowance for fringe benefits and the customer was generally overcharged for the work.
Often, the highest paid technicians in the dealership were not the most able; rather they were the most proficient in wielding the pencil that affixed the labor charge.
The advent of compensating technicians based on a personal flat-rate hour was a major improvement especially if their rate per hour was based on attainments they had made as ASAE-certified technicians.
Developing equitable pay plans is a serious challenge for new vehicle dealers. Generally, pay plans are crafted to provide motivation and incentive for the employee; however, a high priority is justifiably the profit accruing to the dealership.
The manner in which an overly aggressive pay plan will affect the employee's relationship with prospective buyers and service customers should be a major consideration in the planning. That's the sort of thing that will enhance the positive image dealers decades have sought for decades.
Perhaps revising traditional employee pay plans is the place to begin to improve consumers' perceptions of car dealers.
Nat Shulman was owner of Best Chevrolet in Hingham, MA for many years.