I'd like to share some thoughts about car dealers.
I wrote his letter to an automotive publication regarding the dealership vs Tesla sales model. I'd love to hear your thoughts.
I would like to comment on the debate of allowing manufacturers direct sales to the consumer that doesn't seem to get much attention. While there is definite value for the consumer in both the direct sales model and third party sales model, I believe that solution lies in a mix of both. I believe that manufactures want and need to have more control over the sales process within their dealership networks. This is where the consumer spends most of their time interacting with the brand and will base their opinion of the manufacturer, it's a very critical process. This of coarse is where the rub lies, because it's where the money is made.
For average consumers, they truly dread the process of buying a car. It's a time consuming, stressful and complicated process that really wears you down. Much like flying, what should be an amazing marvel of technology has been turned in to a tiresome, agitating process. Yet, what you're really doing is hurtling through the air in a metal tube 36,000 feet up in the air at 600 miles per hour! how cool is that? Cars are awesome feats of engineering, it should be fun and exciting to buy a car!
In the past few years, the process certainly has gotten much better, and dealerships are really beginning to turn their focus back to the customer. We're seeing less of the wacky waving inflatable tube men and "what will it take to get you to drive this home today" mentality. With the advent of internet reviews and car buying services like TrueCar and Costco, they have too. Consumers don't want a car lot, they want an Apple store, and it's slowly shifting to that.
What hasn't caught up yet is the pricing structure and the consumer experience. The auto industry has a truly unique and enthusiastic group of consumers, fans and brand loyalists, that are largely ignored by the manufacturers and dealers. This kind of loyalty and PR is something that marketing teams in other industry's just dream of. You don't see people walking down the street with Safeway grocery tattooed on their forearm, or Marriott hotels ball caps on. Yet, these companies have far grater brand retention than most auto makers. Why? they encourage it. Safeway has discount cards, the more you shop, the more you save. Marriott has the most successful reward point system of any hotel chain, people go back there time and time again.
How does the automotive industry leverage their most valuable sales and brand asset? $500 owner loyalty incentives... sometimes.
Look at who is willing to pay the most for cars and who pays the least. My years of selling cars will tell you the one that pays the most for the car is the buyer who perceives the most value in the car they want. The person that pays the least? That's the one who doesn't care which brand or make the car is. They're the jerk on the phone cross shopping 3 different cars from different dealers at the same time, spending 3 hours fighting over 100 bucks between a base model Civic, Corolla or Focus. This buyer consumes the most dealer time, effort and resources for the least amount of profit.
Why do we give the best prices to the least loyal customers and make the most loyal customers pay the most money?
Because we can. Who pays the most for a car? It's the person that believes in the product they choose. It's the person that want's that brand's prestige, or that knows something about the engineering that went into the car, how or where it's made, if the labor force is well paid, or made in a sustainable manufacturing facility. These are your loyal customers that are less likely to spend time and effort haggling down the price of the car they want. They shouldn't have to turn to an out of dealer network or service to get the best price on a car. Manufactures should know who their loyal customer base is and work to grow and retain them. They should be rewarding them with the best consumer experience and prices, make them feel like part of a special club, a reason to come back.
This to me is the crux of the problem with the current dealership sales model. High sales staff turnover rates, pay programs based on gross sales figures, and poor service after the sale is the recipe for unhappy customers, lost repeat sales, and make it extremely difficult to build brand prestige and loyalty.
I believe this is why the manufactures want more control over the sales process. If the dealerships were succeeding in this area, there wouldn't be such an outcry from the general public to remove the current model. If the industry could provide a real fixed pricing structure, transparent sales process, and turn their sales staff into true product professionals that stay with the brand for years, working in professional clean modern storefronts, then you would see drastic improvement in the perception of car dealers by the public.
I would like to comment on the debate of allowing manufacturers direct sales to the consumer that doesn't seem to get much attention. While there is definite value for the consumer in both the direct sales model and third party sales model, I believe that solution lies in a mix of both. I believe that manufactures want and need to have more control over the sales process within their dealership networks. This is where the consumer spends most of their time interacting with the brand and will base their opinion of the manufacturer, it's a very critical process. This of coarse is where the rub lies, because it's where the money is made.
For average consumers, they truly dread the process of buying a car. It's a time consuming, stressful and complicated process that really wears you down. Much like flying, what should be an amazing marvel of technology has been turned in to a tiresome, agitating process. Yet, what you're really doing is hurtling through the air in a metal tube 36,000 feet up in the air at 600 miles per hour! how cool is that? Cars are awesome feats of engineering, it should be fun and exciting to buy a car!
In the past few years, the process certainly has gotten much better, and dealerships are really beginning to turn their focus back to the customer. We're seeing less of the wacky waving inflatable tube men and "what will it take to get you to drive this home today" mentality. With the advent of internet reviews and car buying services like TrueCar and Costco, they have too. Consumers don't want a car lot, they want an Apple store, and it's slowly shifting to that.
What hasn't caught up yet is the pricing structure and the consumer experience. The auto industry has a truly unique and enthusiastic group of consumers, fans and brand loyalists, that are largely ignored by the manufacturers and dealers. This kind of loyalty and PR is something that marketing teams in other industry's just dream of. You don't see people walking down the street with Safeway grocery tattooed on their forearm, or Marriott hotels ball caps on. Yet, these companies have far grater brand retention than most auto makers. Why? they encourage it. Safeway has discount cards, the more you shop, the more you save. Marriott has the most successful reward point system of any hotel chain, people go back there time and time again.
How does the automotive industry leverage their most valuable sales and brand asset? $500 owner loyalty incentives... sometimes.
Look at who is willing to pay the most for cars and who pays the least. My years of selling cars will tell you the one that pays the most for the car is the buyer who perceives the most value in the car they want. The person that pays the least? That's the one who doesn't care which brand or make the car is. They're the jerk on the phone cross shopping 3 different cars from different dealers at the same time, spending 3 hours fighting over 100 bucks between a base model Civic, Corolla or Focus. This buyer consumes the most dealer time, effort and resources for the least amount of profit.
Why do we give the best prices to the least loyal customers and make the most loyal customers pay the most money?
Because we can. Who pays the most for a car? It's the person that believes in the product they choose. It's the person that want's that brand's prestige, or that knows something about the engineering that went into the car, how or where it's made, if the labor force is well paid, or made in a sustainable manufacturing facility. These are your loyal customers that are less likely to spend time and effort haggling down the price of the car they want. They shouldn't have to turn to an out of dealer network or service to get the best price on a car. Manufactures should know who their loyal customer base is and work to grow and retain them. They should be rewarding them with the best consumer experience and prices, make them feel like part of a special club, a reason to come back.
This to me is the crux of the problem with the current dealership sales model. High sales staff turnover rates, pay programs based on gross sales figures, and poor service after the sale is the recipe for unhappy customers, lost repeat sales, and make it extremely difficult to build brand prestige and loyalty.
I believe this is why the manufactures want more control over the sales process. If the dealerships were succeeding in this area, there wouldn't be such an outcry from the general public to remove the current model. If the industry could provide a real fixed pricing structure, transparent sales process, and turn their sales staff into true product professionals that stay with the brand for years, working in professional clean modern storefronts, then you would see drastic improvement in the perception of car dealers by the public.