Dealers often overstate the value customers place on the cash discounts offered daily to them.
I am the general manager of an import car dealership in Canada and have invested 23 years of my life in the automotive industry.
My career began on the same sales floor as Darin George, a regular WardsAuto contributor. He asked me if I was doing anything different to improve the performance of my business.
I didn’t waste any time in explaining to him that five years ago I decided to make some changes, do something a little different and invest the time necessary to shift the staff out of their comfort zone.
In an effort to take a direct course of action in improving our service-department customer retention performance, our dealership created its own internal currency.
It replaced all the cash discounting that was taking place in our operation. Instead of underwriting those, we invested in a loyalty-reward program.
The program can be called any name a dealership wants, but the fundamental point is that the currency is the dealership’s and replaces cash discounts with a virtual-dealership currency that can be used to purchase parts and service.
We were correct in our belief that our car-buying customers would deem the tangible value of a dealership card that represented a meaningful amount of money that is equal to or greater than whatever value the customers had previously attached to their perception of a cash discount (both amounts being equal, of course).
Every car deal the dealership currency had attached to it was expensed accordingly.
In other words, once the rewards currency was charged to the deal (as you would any accessory or item promised to a customer), and after it was set up in a separate cash account, the dealer card became as good as any charge or debit card a customer might use for parts or service payments.
We eliminated the bonus programs our industry seems to hold onto dearly, much like a child’s grip to a tattered security blanket whose best days are behind it. Gone were the highest-volume, fast-start and highest-gross bonuses.
We maintained our core base commission program, which still included a stair-step commission percentage for volume levels produced, but the only true over-and-above bonus that was paid out at the end of each month was the “rewards bonus” that gave the sales staff a commission percentage off the total rewards currency they were able to create in their deals for that particular month.
The result was our sales staff made more money with the rewards bonus program and our dealership secured more future revenue.
We were better able to engage with our customers as we became proactive in putting forward the rewards currency being offered on our various models before customers thought they had to ask for something in the form of a discount on the vehicle. This approach substantially reduced the negotiation process, a benefit to all of our customers.
Ultimately, the root of our program’s continued success comes down to the fact that as dealers we often overstate the value customers place on the cash discounts offered daily to them.
Customers want the most value for their dollar. Dealership currency that can provide them with what ends up being perceived as free parts or service goes a long way towards satisfying a customer’s expectations when it comes to the total value associated with their purchase.
Our industry presents continued challenges. However, if we can change, do some things differently and lead our staff out of their comfort zone, then there are opportunities to do better and increase profits.
When it comes to the question as to whether a dealership operation has the ability to create its own dealership currency, an adage comes to mind: Whether you think you can or you think you can’t, either way you’ll probably be right.
Doug Shorman can be reached at firstname.lastname@example.org