Does the Traditional Automotive Sales Process Inhibit the Trust Building Process?

[jsteverichards]

I work with retail sales teams and service teams. They don’t need any help understanding the importance of trust; I show them how to build it more effectively with a very distrusting public. The reason trust is important is both simple and obvious; the quicker a sales, service, or parts consultant earns a prospective customer’s trust, the faster transaction consummates and the more profitable the transaction turns out. The Atlanta Business Chronicle reported that consumer trust in the auto dealer has dropped 19% during the past year.
The problems I encounter are interesting and consistent; no one ever denies or takes issue with the value of trust, yet integrating trust-building skills into the retail automotive sales framework is virtually impossible without changing retail automotive culture and revamping the 40-year old sales process. I advocate specific trust-building skills and each has its own set of hurdles before one can practically apply it with a prospective customer. The sales people who attend my seminars applaud and welcome the skills, but claim that management will not allow them to practically apply the trust-building skills once they are back at the store. The reason is the trust-building skills fall outside the guidelines of their sales process. I addressed sales team members representing over 150 different stores in every part of the USA and the response was absolutely identical in every part of the country.

I just concluded a 40+ city tour for a major Asian manufacturer and the 7 trust-building skills I address below were the centerpiece of a seminar whose attendees came from both the retail sales and service teams. The objections, roadblocks, and hurdles to applying the skills were consistent across the USA.
1. Talk Straight - impossible said the attendees. By definition, this skill requires telling "the whole truth and nothing but the truth." Even in the stores I visited that tried the hardest to adhere to “talking straight” there were huge gaps. “I don’t know” was considered straight talk even if the sales person knew the answer; in the retail automotive sales culture no answer to a question that has an answer is often considered talking straight.
2. Treat the Customer Fairly - impossible; the 40 year-old business model used by virtually all stores is based upon maximizing the profit on each "individual" transaction. Further, if a prospect inquires at a single store via the Internet, the telephone, or visits the store in person they will almost always receive 3 different price quotes for the same vehicle!
3. Create Transparency – very difficult to do because this runs counter to "the way it's always been done." This is particularly perplexing, because there really are no secrets left - the retail business is transparent via the Internet, but the retail automobile dealer's sales process hasn't changed to accommodate this reality.
4. Clarify Expectations - to the sales team this meant "get the commitment to buy today" from the prospective customer or face the wrath of management. Clarifying expectations is a two-way street, the sales teams embrace it, but the process too often prevents its transactional realization.
5. Extend Trust - this extremely powerful trust-building skill is the exact opposite of what every sales person is taught by trainers and managers alike from day one, - "buyers are liars." (The buyer thinks the sales person is a liar and the sales person is taught the buyer is a liar – these ingrained beliefs don’t exactly set the stage for a smooth or pleasant encounter. If you’ve ever wondered why the auto purchase process is so confrontational you now have at least part of the answer.
6. Listen First – this makes reasonable sense and at first glance would not seem to create any issues. Anyone over the age of 3 understands the importance of listening; whether you’re listening professionally or listening socially. However, the retail automotive sales culture while giving “lip service” to listening actually coaches the sales team members to first “suck" information out of the prospect prior to giving up any information or answers to their questions. Don’t believe it? Go find any incoming telephone call script authored by one of the industry experts/idiots and read it. And who hasn’t heard this type of management direction; “don’t listen to what the customer said, just go out there and say/do this!”
7. Keep Commitments – easy to agree with, until the sales process dictates otherwise. In fact the traditional sales process promotes not keeping commitments.

New cars sales processes have hardly changed in spite of the entire world changing around them. Thirty (30) years ago sales people didn’t know the invoice cost on the vehicles they were selling, the bankers that financed them didn’t either; no consumer had any idea the amount of the invoice. Dealer hold-back money was a grand secret, “upside down” referred to a pineapple cake because finance customers had to put cash down and couldn’t finance for any longer than 36 months. People also had to have a history of having paid to get finance – imagine that. The factory pricing policy allowed for large margins, a BMW 3-series stickered for $13,500, trucks didn’t sticker at all, factory incentives were rare, cell phones hadn’t been invented, Kia, Hyundai, Lexus, Acura, and Infiniti weren’t around, but Oldsmobile, Sterling, Citroen, and Yugo were. And Nissan was still Datsun.

Just about everything about the retail automobile business has changed save for one item – the retail automotive sales process today differs imperceptibly from the way it was 30 years ago. The consumer’s complaints about the automotive purchase process are the same now as they were then. It defies every business principle known to mankind; a business which refuses to change but still survives, even flourishes (if the economy is humming and the banks are buying anyone breathing). It would be a case-study worthy of the Harvard Business School if the answers as to why it has survived weren’t so simple.
However, it should be no surprise; this is a sales process, when the telephone threatened to impose upon the way it worked, merely developed scripts for sales people to use that neutralized any chance the consumer had of using the phone as an effective shopping tool.
The auto industry is one of the few retail business left on earth that uses a business model built on a management-centric platform. The rest of the world discovered that building a sales process around the person with the money (customer) was a profitable endeavor. It’s known as customer-centric selling. The dated sales model is the primary threat to profitability and the leading candidate to drive the new car business into “commodity hell.” If the business model and the sales process don’t change, how can a sales consultant sell in a customer-centric manner when the sales desk, occupied by a sales manager, is the center of his sales universe? Answer; it’s not possible. The automotive sales process is the only retail sales model left on the planet that causes high levels of anxiety and misery for both those doing the selling (sales people) and those doing the buying (consumers)!

The retail auto industry applies a “hub-and-spoke” sales model, with the desk being the center of the sales process. The desk's “goal” is to optimize gross profit with every customer transaction, an outdated model considering the knowledge level of today's highly informed consumer and evidenced by today’s plunging gross profit figures.

So, how can this dated, tired and worn out sales process continue to survive? Why hasn’t the Harvard Business School created a case study? Not even the advent of the Internet and handheld mobile device (which have practically made the telephone itself obsolete) has created a perceived need for a change in the traditional sales process. The answer is simple and twofold in nature. First, new car sales are protected from competition by law. By law, franchise law, new vehicles can only be purchased from new car dealers. The new car dealer has no competition. Second, the automobile is arguably the most popular product in the history of mankind. Anyone living in the USA either needs or wants an automobile; most need one to survive professionally and socially.
During the past year much has been written about the ills of the automotive industry. No one writes about how most consumers are much better prepared to buy a vehicle that the sales teams are prepared to sell them. What’s written is all about how tough the dealership business is these days and the blame is aimed at, take your pick, the factories, finance companies, unions, foreigners, Internet, government, and on, and on, ad infinitum.
Why don't people find it odd that the most used vehicles are sold by individuals, not car dealers? Isn't it odd that the public would rather buy an expensive product from a seller with no legal restraints to stop them from lying, making false claims, or any legal obligation to warrant the product? There is no easy legal recourse against this type of seller. Yet the public willingly takes these potentially expensive risks rather than go to a car dealer where they have legal protection and recourse. Go figure; lack of trust maybe?

There is a better way. There is a less offensive way. There is a less expensive way. There is a more profitable way. But it’s not the WAY it’s always been done. If you want to stick with “tradition” and “magic wands” visit the former helicopter mechanic’s site or the “bejeweled” one’s site. They can give a good dose of how it worked in the early ’80’s and why nothing has really changed.

[CarguyCO]

Good post...looking forward to seeing the rest.

At my dealership, which by the way is my first and only dealership, things are a bit different. We attempt to be old school, however, we have been forced to be a bit "new school" most of the time..even on used vehicles. If you want to sell cars you have to be I think right now. The consumer knows the prices, knows the msrp, knows the invoice, and oftentimes even knows about holdback and other things.

I'm okay with that....I build trust immediately and usually maintain that trust throughout my sales process. On the occassion that I cannot maintain trust, I usually lose the deal...and it is usually because of price.

We hold gross when we can, we give it up when we can, and we sell more cars than most in our area because of it.

I have never experienced "old school" so I cannot comment...however I am looking forward to the rest of this post.

Thanks for taking the time to post it.

[The StraightShooter]

I think the domestics jumped the shark a long time ago. 'Twas not the dealers that commoditized their products. I used to hear my District Mgr, DOM, and even a Network Mgr laud the practice of Chrysler selling their "cost" or invoice info to 3rd parties like edmunds.com as a means of being transparent and how this was a positive thing for the OEM and dealer alike. By May 14th of this year, 2 out the 3 individuals I speak of took early buyouts and their company went BK. I don't accept this ethos that a customer has the right to know my margin or what I own a car for as a means of better serving them. That information should remain proprietary, just like what parts and components cost the OEM. I'm not anti customer, quite to the contrary. I think there is no better thing in this business than taking care of the customer which is how you build lucrative lifetime relationships. What is and should be transparent is that it takes real PROFIT to do such things. The line of demarcation is clear. When the OEM's diverted from worrying about operating fiscally sound and quality controlled operations and delved into the retail process, things began to go south. To be sure the Big 3 would undoubtedly have encountered slippage from the Asians, but some proactive measures 30-35 years ago with regard to their own(OEM) throughput and vehicle development processes may have staved off catastrophy. Turns out you can't overproduce and whore your way to profitability.

[crowe]

Welcome Aboard!
Open a small market dealership. It will only take a few million for the building, franchise & equipment, plus a few more million for inventory & a couple of thousand per day in operating expenses. You will pay up front for everything you get from the manufacturer at non-negotiable prices, which they will often raise after the orders are placed. You don’t even have to write checks they will take the money right out of your bank account before you receive a thing. Plus the manufacturer will dictate to you what you will buy including everything that you really don’t need.
The manufacturer will own the vehicles for weeks & make a gross profit of 10 to 15 thousand per vehicle while you the greedy dealer will own the vehicles for many months & make a gross profit of 2 thousand per vehicle if you are lucky. How so? Because the MFG designed your P&L statement they can see exactly what you sold & how much you made on it. This should keep the price just right for somebody.
Many of your potential customers will tell you what they are willing to pay for your vehicle along with what they think you should pay them for their used trade-in. See if you find this price negotiating or trade-in in other retail sales, go try this at Wal-Mart, Home Depot, your local department store or grocery.
As the dealer you will get to repair the mistakes the manufacturer made & be reimbursed for about half the time the repair actually takes if the repair is authorized by the manufacturer which is a maybe. You will get to know some really great customers that really appreciate the service you supply plus some that will try to beat you out of every dime & blame you for everything that goes wrong.
The manufacturer will regularly survey your sales & service customers and expect perfect scores. Don’t worry the customer that bought a new car with faulty factory parts that quickly failed will be ready to tell the manufacturer how to score your dealership. The manufacturer will use that score as a weapon against your dealership instead of a tool to fix the manufacturer’s errors. When it’s all said & done if you’re really good you will net 2% or a hair more on sales before taxes. If not or even if you do well don’t worry the manufacturer may take your franchise to sell it to the next guy & you will only lose everything you have. Oh btw I love this biz.

[The StraightShooter]

That about sums it up.

[Ralph]

I couldn't have said it better in 2-3000 words. LOL

[Ralph]

Crowe, I have copied and pasted your paragraph, can I maybe print it out on some really nice card stock and frame it?

[crowe]

Originally Posted by Ralph

Crowe, I have copied and pasted your paragraph, can I maybe print it out on some really nice card stock and frame it?

Sure. I think parts of it are tattooed inside my eyelids because I keep seeing it in my sleep.

[possum]

Crowe, that is fantastic.
You summed it all up in a neat package!

That should get published somewhere, so maybe, some public could halfway understand.

[dodgequality]

That MUST be forwarded to members of Congress before they vote on this latest salvation for rejected dealers. No compensation is a travesty.

[Txflyer]

Originally Posted by dodgequality

That MUST be forwarded to members of Congress before they vote on this latest salvation for rejected dealers. No compensation is a travesty.

Agreed, but from the latest report on Automotive news it sounds like they've already made up their minds, and compensation is definitlely out of the picture.

Small comfort to us as a GM dealer who has already wound-down, had our signs removed, changed our name, reprinted all our stationery, modified our logos, sold off our parts way below wholesale prices, etc. etc.
Even if we won the franchise back in arbitration it has already cost us more than it's worth. All this solution does is give the politicians an easy way out.

[dodgequality]

I copied Crowe"s "Welcome Aboard" to the comment section of the Auto News article.
Has many clicks on the "recommended" post.
(Hope the comments aren't copyrighted!).

[LJS]

Originally Posted by Txflyer

sold off our parts way below wholesale prices, etc. etc.

Who did you find that would buy your parts and how much were they willing to pay. We have had no luck finding a buyer at any price.

[Txflyer]

Originally Posted by LJS

Who did you find that would buy your parts and how much were they willing to pay. We have had no luck finding a buyer at any price.

Dealermine hooked us up with some stores that bought a small percentage of them for 45 cents on the dollar. Scoggin Dickey in Lubbock offered us 20 cents on the dollar for the remainder. You might give them a call.

I can possibly see the GM dealers who haven't wound down yet thinking that this latest offer is good, but for the rest of us it amounts to practically nothing.

[CarguyCO]

what happened to the OP.....hit and run? Would love to hear more...