A co-worker came to me one day complaining about the pay structure of the dealership. He had delivered 14 vehicles that month and had only made $2,500. I asked him how were his grosses and he said mostly flats.
He asked me how much I made that month. I said $5,000. He was shocked because I had only delivered 10 vehicles. It was obvious he had a negotiating problem, and the funny thing was he had the lowest CSI in the dealership. His customer referrals and repeat business also were non-existent. I figured there was definitely a pattern here because he was not the only sales person complaining. This is where the saying “the grass is greener on the other side” comes from — from weak sales people or should I say untrained sales people.
Do customers negotiate?
If of course you answered “Yes,” how effective at negotiating should a sales person be?
Who do you want to be?
Each salesperson in this example delivers 100 vehicles per year.
| Bob | Sue | Paul | |
|---|---|---|---|
| Avg. gross/vehicle | $800 | $1,300 | $2,000 |
| @100/year | $80,000 | $130,000 | $200,000 |
| @ 25% commission | $20,000/yr | $32,500/yr | $50,000/yr |
They all delivered 100 vehicles but what is the problem? It does not take a rocket scientist to know that Bob does not understand how to negotiate, Sue is average and Paul definitely understands the psychology of negotiating. There is an old saying in the car business — and any business — that “the customers who pay more are your best and happiest customers for life. That sounds crazy, but let's analyze it. Why are they the happiest?
Five reasons:
- A professional service was given.
- A positive mental attitude was conveyed.
- A professional product knowledge was given.
- There was a complete understanding of people's emotions.
- There was a professional knowledge of how to negotiate.
You're not going to make a million dollars off of every customer, but if you give to everyone you will see an increase in every area of your professional and personal life.
When we start in the car business one of the first things we learn is to get an offer from the customer, write it down, and get a deposit. A lot of dealerships do this because they are scared they might lose the customer and a lack of trust in the ability of the salesperson. The best sales people and top grossers have a reasoned strategy on negotiating. They aren't a worry to the sales management.
How you present and start your negotiations will determine your gross profit and if the sale is made. Higher gross profit does not mean lower CSI or SSI. It's all a matter of how the customer feels about the negotiations.
Sales people have two jobs at the dealership; one is helping people find a new vehicle and the second is professional negotiating.
What is the number one reason a consumer will purchase from one dealership over another?
And the answer is …“the salesperson.”
The following are some points to think about when negotiating.
Darin's “Not to Do's” in negotiations
NEVER ask for an offer at the start of your negotiations.
Why? Because the customer will always offer a ridiculous number or they will not want to offer anything. Professional negotiators do not ask what you want to pay. They show you a small savings or no savings and then ask you to sign. Then if the customer does not agree, they professionally negotiate.
NEVER write down the first number the customer says.
Why? Because if you do, customers will think you would not have written it if they were not close to a deal.
Also because, by writing it down, you have given them hope. Getting them to move up on their number becomes much more difficult. Keep it verbal for as long as you can. Then when you cannot go any further, write it down.
NEVER ask for a deposit at the start of your negotiations!
Why? Because a deposit is only given when the figures/price/payments have been agreed upon. Customers hate when we ask for a deposit at the start of the negotiations. Think about it! We haven't even agreed on a number yet. “We” meaning the customer and the dealership. You definitely have to get something at some point. In part two, I will show how to ask for money.
NEVER say, “What do I have to do to earn your business today?”
Why? Because if you have done your job correctly, you do not have to ask that. This has to be one of the most poorly used lines in any sales business. It's so common that it is being used in movies and TV sitcoms like Jerry Seinfeld.
NEVER say, “I told you I was going to get you a good deal.”
Why? Because they do not believe you, and if you end up negotiating further your credibility will decrease.
NEVER ask customers what kind of mark-up or profit they think the dealership has in its vehicles!
Why? Because the customer will not believe you, no matter what you say. We can even show them the invoice and they will think we doctored it or have two sets of invoices, one for customers and the real invoice.
NEVER tell the customer, “My manager must be in a good mood.”
Why? Because the customer usually will not care. Your authority and credibility as a professional decreases again.
NEVER tell the customer to believe you or trust you!
Why? Because when it comes to negotiations they do not believe you. It's not just our business, it's every sales business. People are tired of it. So don't say it. Just do your job, and earn trust that way.
NEVER let the customer write on your worksheet.
Why? Because you are letting them take control, and they are now telling you what to do. Would you ask your doctor if you could make some notes on his or her worksheet? It's yours, not the customer's.
NEVER tell the customer, “We are not making any money on this vehicle.”
Why? Because you sound foolish, and they won't believe you anyway. Most customers expect us to make money. We sound weak and unprofessional when we talk like this.
NEVER bring your customer into the manager's office, unless advised.
Why? Because this closes the door on your negotiations and you will corner the manager who might not be completely prepared. It also lowers your professionalism and authority.
NEVER tell the customer that you are going to lose your job if you take this number to your manager.
Why? Because customers do not necessarily care if you do, they only care about their own interests.
NEVER argue with the customer when negotiating.
Why? Because professionals are cool under pressure. When you are negotiating, you should only be discussing numbers. It's all about that. So keep focused.
Meeting wrap up
I know that “never” does not always apply but 95% of the time it really does. This has been part one of a two-part series, and I hope it has been an interesting one for you. Not everyone will agree with everything I write, but if you can learn something or just be refreshed from my sales meetings and the ones to follow, great. Today's meeting is a start in the right direction to understanding the psychology of negotiating. In part two I will show you how to negotiate, maintain gross and offer some closing techniques. Remember to keep your head down and your eye on the ball.
Darin B. George is founder of the Automotive Sales College, which trains people for careers in selling cars. He also conducts sales seminars and in-house dealership training. He can be reached at 1-888-681-7355 or at [email protected]
Becoming a professional negotiator will increase your CSI, SSI, monthly sales, repeat business, gross profit and your income.
