I talk to dealers almost every day about how to create a better customer experience by changing their sales model.
Invariably, someone asks, “How do I compete with the local dealer who is messing up the market by practically giving cars away?”
The question comes from a belief the lowest price is the only thing that drives customers to buy. This ignores the reality that not every retail outlet thrives solely by being the low-price leader.
Here are nine ways to compete in a market where at least one dealer is constantly promoting nothing other than having the lowest prices:
- Differentiate your sales process. If it mirrors that of the deep discounter, customers naturally will seek the lowest price rather than pay a bit more for a much better experience delivered by empowered, well-educated salespeople. For me, one-price selling is the best differentiator. It respects prospects’ pricing research. It saves time. It is fully transparent. Women and Generation Y make up over 65% of vehicle purchasers. Both groups dislike negotiations and see no value in it for themselves.
- Make sure your showroom staff makeup looks like your customer base. To gain another competitive advantage, have a significant number of female sales associates and at least 25% of your staff Gen Y (early 20s to mid-30s). Again, a traditional negotiating sales model with compensation primarily based on gross will not attract these types of individuals.
- Offer to allow customers to transact from home. When receiving an Internet lead, most customers would be delighted if you ask, “Would you like to do the majority of the transaction from your home?” This move makes it hard for low pricers to compete, as they hope to make up lost gross by low-balling the trade or hitting a homer in the finance office. Today, everyone is an Internet shopper. So, a transact-from-home process is appealing, especially to Gen Y, which makes up 40% of the online shoppers. Offering this service also can expand your market as most traditional negotiating dealers won’t compete in this manner.
- Explain your business philosophy and process on your website. If you adopt a differentiated sales process, you need to explain it. There is no place better to do that than on your website. Demonstrate key points like “no back and forth” to a manager for pricing, empowered sales associates who can give you payment estimates, money back guarantees and more.
- No questions asked money-back guarantees. I know of no retail business that sells hard goods without offering a money-back guarantee. Why should we be different? I’ve got about 150 franchised dealers offering a 72-hour, no questions asked, money-back guarantee. They rarely take back a car, as the customer is satisfied with the sales process and having easily received a bottom-line price. Again, those who sell on price and try to make gross through pressure tactics cannot offer a money-back guarantee or they will lose the big grosses they occasionally score. Pound this message home on your website, on-hold phone messages, social media and emails.
- Tell a pricing story. It is still a mystery for most auto shoppers as to how dealers determine their pricing? So educate them. Explain that you use third-party resources such as Edmunds and Kelley Blue Book along with information supplied to you by the automaker. Also, note that you consistently shop the competition to make sure your prices are competitive.
- Mystery-shop competitors. Clearly understand how they make their gross and then train the mystery shopper to shop. You want to ask your competitor, “Why should I buy from you, as opposed to the 1-price store.” Base your training around their answers.
- Shopper Training. Make a simple suggestion to shoppers who don’t buy. Tell them to ask the salesperson at their next stop to quickly get a price in writing that is signed by the manager. Also tell them, “You don’t want to see the sales manager.” Finally ask, “If they won’t do that for you, is that a place you’d like to do business?” The answer always is, “No.”
- Separate the used-vehicle valuation from the new-vehicle purchase price. Again, this won’t happen at the high pressure dealership. Simply explain how most dealers do not disclose the exact amount a consumer receives on a trade so they can try to make additional gross profit. Make sure the guest knows this is an offer to purchase, meaning you will buy the trade-in for the stated value even if he or she doesn’t buy a vehicle from you. This wreaks havoc for dealers who put over-allowance into their trade-in figures.
OK, that’s how you win your fair share of deals from price slashers. Of course, this strategy is unconventional. It’s not always easy. However, if you want to survive and thrive in today’s market, you need to change from the traditional sales process to one that is more customer-centric.
Former dealer Mark Rikess is founder of The Rikess Group, a consulting and training firm. He is one of the original advocates of one-price selling.