Not all that many years ago, one of the big import luxury makes decided the best way for its dealers to represent its products was to have one person handle the entire process from beginning to end. They claimed that surveys showed that’s what car buyers wanted when they purchased a new vehicle. So, the person who met you on the lot, demonstrated the vehicle, and negotiated a figure both parties were happy with would also be responsible for arranging for you to either finance or lease the product. Along the way, they would have to deal with the lenders and draw up all the appropriate paperwork to complete the transaction.
This made almost as little sense as you, on the day you want to buy a new home, demanding that the person at the McDonald’s drive-through who handles your Egg McMuffin order that morning also be a licensed Realtor, plus handle mortgages and titles in your state. Forget that each of these other jobs actually requires a different set of knowledge and skills — there’s also some time allocation involved; if that drive-through person could do all of those other things for you that day, he or she would not be passing out any more Happy Meals for the store owner.
Likewise, in a dealership, if the salesperson is doing the job of other management, his or her time is not being spent greeting other customers and hopefully doing their best to sell yet another vehicle. However, within no time at all, this manufacturer backed off on demanding that its dealers reorganize their showroom floors … until recently, that is. Now they’ve come back with yet another sales concept.
Today many dealerships have to hire so-called “geniuses” to explain the high technology that now often comes in new vehicles. For years many stores have held weekend training classes for customers on how their vehicles operate, how to pair your phone with the Bluetooth system, and so on. Many dealers have these techies on call during showroom hours; they often have to help with the vehicle delivery to show new owners how everything works. Of course, in most cases it’s information overload. Still, this is the state of modern electronics. It seems many manufacturers have come to believe that, unless it’s outrageously complicated to get something to perform the simplest task, their customers won’t believe it’s state of the art.
So, the luxury manufacturer that once wanted each salesman to handle everything involved in purchasing a new car now wants the tech kids to be responsible for selling its vehicles — then, apparently, to flip the customers to actual salespeople to finish the transaction before moving them into the business office for the balance of the paperwork. At the risk of putting 25,000 dealership geniuses out of work, the real answer is for the manufacturer to take all of the new high technology in any vehicle and simplify how it works.
I’ve used this example before, but BMW’s first iDrive system would alter over 900 operations on that generation of the 7 Series sedan. Now, somewhere in Germany a group of engineers was swapping high-fives, each one believing that, if they enabled a customer to customize 900 different operations on any BMW, that ability would build real value in the mind of their customers. But, typically, most motorists are not engineers; the person buying that particular vehicle mostly said to himself, who in the world wants a car with over 900 operations to personalize? Most customers weren’t overjoyed, they were intimidated.
And they still are today. That’s why so many dealerships have had to hire in-house techies to show their customers how their cars work.
But here’s the kicker to that story. Today manufacturers hold back large amounts of money from each car sale, and they dole it back out to their dealers for meeting different company-set goals, such as getting exceptional customer satisfaction scores, or remodeling their dealership, or even selling a certain number of cars — based on sales quotas pulled out of thin air.
One might find it astonishing to know that in Dallas Fort Worth, there are many high-volume, well respected dealerships who on paper lose money in their new car departments. Yet, if they hit their sales quota, their customer satisfaction scores and any other odd factory bonuses, they hope to break even, maybe even make a little money in the process. But as Steve Kalafer, a long-term, highly respected New Jersey dealer, told the Automotive News last month, “Stair-step programs are nothing more than a replacement of the margin that was [taken back] by the manufacturers. They’re not bonuses. What they are saying is, ‘You do exactly what we tell you to do. You do it on the day and the month, and sometimes in the 10-day period, then you will have the opportunity to make up margin that was historically taken away.’”
So, this luxury manufacturer wants to quit using customer satisfaction scores as a reason to pay its dealers these so-called bonuses. Instead, it will use mystery shoppers to make sure only the in-store geniuses are demonstrating its products to customers. That almost sets the all-time record for dumb at retail.
Still, it’s worth remembering that there was once a self-proclaimed magical car company that refused to discount its vehicles and advertised what a different kind of car company it was. It had a corporate edict of how dealerships should be run and how personnel should interact with each other. Its salespeople and managers even had to take extensive training on how to work within this new magical dealership structure. All with the promise that customers would easily identify and react in a very positive way to this magic. Heck, the company even had a cookie-cutter layout for how its dealerships should look; it may have been one of the first manufacturers to force such conformity onto a dealer body. (VW forced dealers to do that until everything fell apart in the early Eighties.)
In this latter case, we are referring to Saturn; and, as you may have noticed, it was not only a different kind of car company, it’s also an extinct one. Today all of those cute little Saturn dealerships seem to have become Mazda, Fiat and Check Cashing stores, much in the same way as several of the former DFW Hummer Quonset huts have become Subaru stores.
All of this happened because of a few incorrect assumptions by car manufacturers. One, they always forget that their dealer is their real customer, not you. Dealers buy 100 percent of the vehicles sold by any given manufacturer into their primary sales zone. The second myth that manufacturers believe is that bad dealers are running off their customers. Well, that may be true in a few cases, but it’s equally true that the manufacturer approved that particular dealer to have one of its storied franchises. In reality, it’s often the manufacturer who runs most of the customers off.
And it probably isn’t intentional. The car market in America is incredibly competitive, with some of the lowest car prices in the world. But today’s hottest car from “XYZ” manufacturer can be tomorrow’s forgotten vehicle when the public rushes to buy something else that’s the new darling of the automotive world. On a more mundane movement of customers between brands, in years that Toyota has an all-new Camry, its sales go up and the Honda Accord’s go down. The reverse is also true.
Here’s another reality of the industry. The greatest and most respected dealer, beloved by his or her customers, can’t sell a mediocre car in any great numbers. And if they did gladly sell those lesser vehicles, they would lose their clients’ respect. Likewise, customers will go do business with the worst dealer with the worst reputation if that dealer is the only one who has the hot vehicle they want today in the right color combination.
Some manufacturers today won’t reimburse their dealers unless they put their Internet web address into their ads. That’s the high-tech equivalent of “See our ad in the Yellow Pages” from 30 years ago. But who cares about going to a dealer’s website? The idea is to have such a compelling vehicle for the price that people want to go to the dealership and see it.
Everyone keeps telling me how the industry has changed over the past 25 years, but it hasn’t — because people and human nature haven’t changed. If someone is going to make a truly expensive purchase, which for the average family is buying their next vehicle, then they want to get into it, drive it, see what features there are and figure out how it can fit into their budget. The biggest mistake everyone makes in all of this is thinking that getting the lowest price is the only important factor. It’s not. What’s most important is buying the exact right vehicle that’s perfect for your needs at a reasonable and affordable price.
So yeah, dealers can make that simple mission statement complex for no apparent reason. Manufacturers can continue to weigh in and complicate what their best dealers and their best practices have been doing so successfully for so many decades. It’s not having the greatest building that makes one a successful dealer, it’s his or her having the best people to help the dealership’s customer base. I have never once heard anyone say, “I’m going to go back and buy this car from the other dealer because I really liked the layout of his showroom compared to yours, or because of the slate gray tile for the diaper changing area in his men’s room.”
There’s only one real mission statement for any given dealership. That’s to handle the needs of potential and real car owners. That is the sole reason for their existence. When dealers are spending half their week trying to make their factory reps happy, that only shows how far off they are from the primary goal at hand. The very fact that manufacturers fully expect dealers to spend their time and money making them happy is proof that they don’t know how the car business really works.
© Ed Wallace 2017
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, “Wheels”, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: email@example.com