Of Auto Dealers and Icebergs

There’re Not Enough Life Boats! Few phrases are as closely linked to tragedy as this one.  For the remaining 1500 men, women and children left on the Titanic with nowhere to go but the frigid waters of the North Atlantic on that historic night in 1912, the grim realization of their fate must have been devastating.   

As I build towards a marketing point I see parallels in this tragic event to what is happening in the auto dealer industry. With deep conviction I feel as though I am recording it as it happens. I see the water rising above dealers’ ankles and I wonder why more of them are not reacting to the danger.

There is no doubt today’s auto dealer is experiencing the business equivalent of Titanic’s grave situation.  A jagged berg of competitive pressure and a new, sophisticated customer with much higher expectations have pierced the industry at its weakest links. It is life or death. The parallels between Titanic and the Auto Dealer Industry are chilling; both rely on moving metal for survival.

•Both segregate their customer. Titanic: 1st, 2nd and 3rd class. Auto Dealers: Men and Women. There is a clear distinction in how each are treated.

•Both recklessly race to their destination. Titanic: New York. Auto Dealers: The Sale.

•Both consider themselves ‘Unsinkable’. Titanic by Superior Technology. Auto Dealers by Superior Sales Process. The very strength of which they boast proves to be their weakest link.

•Both dismiss warnings. Titanic: Icebergs. Auto Dealers: Customer Dissatisfaction with the sales or service process.

•Both take dangerous risks. Titanic: Sail Faster. Auto Dealers: Sell more, faster. One risked lives. One risks relationships.  Relationships are the lifeblood of existing and repeat business.

•Both struggle to change course. Titanic: ‘Iceberg Dead Ahead’ Auto Dealers: ‘Follow Whatever is Ahead’. Today’s dealers are drowning in a sea of sameness. They cannot resist the influence of their crowd; even as it pulls them deeper.

•Both waste critical opportunities. Titanic: Fill the Life Boats. On Titanic many were launched half-empty. Auto Dealers: Build Customer loyalty. Many Auto Dealers launch half-empty relationships.

•Both experience dramatic collisions. Titanic: The Iceberg. Auto Dealers: Customer Needs, Desires and Expectations.

There is no denying, the auto dealer industry has squarely hit its iceberg. It can be argued it repeats the collision with every negative customer experience.

For the Titanic, slow reflexes contributed to its demise. The same is true for auto dealers; as slow movers grasp false hopes onboard a sinking ship.

•Secure your safety. One of the biggest opportunities in this industry is in serving women. They influence 85% of the purchase decision. Tune into their frequency and offer a sincere experience that is tailored to them. Master this and you will find a safe and rewarding harbor.

•Slow down. Do not collide with your customers…bond. Customer sensitivity is heightened during the car-buying experience. Customers are on the defensive. They are expecting a push. But, a push leads to push-back. End this vicious cycle by moving at the pace they set.

•Get your bearings. The best companies know their customers and strive to evolve their products and services to meet customer needs and desires. Many times companies discover unmet needs which when addressed lead to additional revenue. No business is unsinkable. It must be constantly evolving. Titanic exceeded needs until the needs changed.

•Melt the Ice. Understand that humans are emotional beings. In purchase decisions emotion trumps reason every single time. Unfortunately, most dealers focus on reasoning or misuse emotion. Championing lower prices versus a sincere, respectful buying experience, auto dealers fail to realize customers do not remember prices, they remember how you made them feel. Others use fear and intimidation to force a hand. It is time for those dealers to go down with the ship.
 
•Follow a truer compass. Get back to the basics of building relationships. Car buyers are looking for someone they can trust. Today, staying on the charts with customer expectations is harder than ever.  How do you think the experience you create for your customer compares with their Starbucks experience?  Customers are contrasting their best consumer experiences (regardless of product or category) with their experience with you. Do you think you are headed in their direction?

•Take the helm. Unfortunately, fewer and fewer executives are involved with marketing. Noted business management pioneer Peter Drucker once said “there are only two functions that generate customers; Marketing and Innovation. The rest is overhead.” The top needs to be involved and focused on building a sales experience that takes the sell out of the sale.

•Sail under a new flag. It is extremely hard for the consumer to distinguish one dealer from another. The buildings are the same, the products are the same and the gimmicks are the same. Is there any reason to believe the experience is different from dealer to dealer? Differentiation is about communicating and delivering a meaningful difference to your customer.  It is finding that one value or niche that strikes a fundamental cord.  Differentiation from your competition will prove a major advantage if you are committed to it. There are 100 years of poor car buying experiences associated with this industry. As a dealer you need to distance yourself. You need to become the Un-Car Dealer...and fast.

•Stay together. Building customer loyalty affords great opportunity for those who embrace it. That means staying in touch. Caring after the sale. Growing the relationship post-purchase is investing in your future. Dealers - do you have quarterly ‘Thank You’ events for past customers? Does the GM or others in the management tier regularly call and thank customers? Evaluate your relationship building skills right now – can you name your last 5 customers?

•Abandon pride and ego. Have you noticed that dealer advertising is focused on dealer ego? “We have the largest volume”, “We’re #1”,“We can’t be beat.” Advertising is meant to attract your potential customer, not to pound your own chest. The fact is, the customer does not care about any of these things and they are officially numb to the hype. They are watching and listening for proof points that a car buying experience with you will be positive.

As an auto dealer, the time to scramble for a life boat is now. There are not enough life boats and the most discerning customer to ever shop the planet is choosing who gets a seat.

More for Auto Dealers Here...

Comments

[Eli Portnoy (The Brand Man Speaks!)]

Derrick, interesting post about auto dealers. I have done some branding work in this arena and have different opinions on this subject.
1) Consumers buy primarily on price and convenience. Although the service experience might be key to repeat business the consumer rarely makes any effort to deal with service until after the purchase...if they have to deal with the service group during the sales process it highlights concerns about the reliability of the product which sales folks wish to avoid at all cost.
2) The product is more important to the consumer than the dealer. A bad dealer experience does not necessarily make a consumer change the product/brand choice.
3) Consumers may indicate they want an emotional connection with their dealer, but their behavior shows they care very little about the dealer other than getting a good price and having no service hassles. The connection they seek is with the product brand.
4)Many times consumers will drive hours to buy a car not because the dealer experience is extraordinary but to save a buck...this is an expensive purchase and the actual out of pocket is more important than the sales experience for most despite complaints.

For example one of the country's most successful dealers for a European luxury brand has a reputation for being arrogant, nasty and uncaring (both in their sales and service). Despite this poor standing they continue to be a top selling dealer, breaking records yearly. Consumers say the dealer's proximity to their homes/work and their pricing offsets the lousy experience...the brand trumps the dealer.

Saturn was able to build their brand based on consumer satisfaction with the sales experience but found in the long term the product brand was more important than the dealer brand.

Some dealers have tried the no-hassle pricing approach and abandoned it because consumers still want to negotiate price...to "win" by getting a deal.

I agree it would be wonderful for dealers to embrace the unquestionable (in our minds) benefits of branding their retail entities but I have found in my work, especially the focus group work I have done in this industry, that dealers feel there is little incentive to develop a dealer retail branding effort. They feel the investment would be a waste of limited resources better suited for results through promotional marketing.

Eli

[Stephanie Enders]

Hi Derrick,

This post carries a unique yet very needed message.

1. Desperation
I agree with Eli on the point that customers want to win and say they 'got a great deal.' However the dealers have a lot of room to improve the sincere human relationship. It's all too obvious that they are rushing to the sale. It's too obvious that that their "survival depends on moving the metal." True, they have to sell cars to stay alive---but some of the desperation needs to be concealed. I have never been to a car dealership that doesn't scream DESPERATION. When someones food is brought to the table from a commission check
what other choice is there right? What about the dealerships changing the commission/salary structure of the sales people. Take some of the desperation out of the job that puts that puts the food on the table. Probably out of the question but a thought to chew on.

2. STAY IN TOUCH is one of the most overlooked actions in the sales industry. I have received a very rehearsed phone survey on "customer satisfaction" after a sale---but this is not what I'm talking about. If the car salesperson called or sent a personal email to see if "I'm happy with the purchase" what an impact that dealer would make on me. Don't say they don't have time--I see 'the standing around time' to wait for the next kill. Talk about 'missing the boat' If car dealerships think that having a relationship post sale would be a waste of time then forget about missing the boat---the boat is already sunk.

Stephanie

[Eli Portnoy (The Brand Man Speaks!)]

Stephanie
Absolutely agree with your comments...especially about the boat already being sunk.
A change in dealer brand behavior would take a very enlightened dealer owner/manager. I have met a couple, but the actions/steps required to re-train a hard-core car selling staff would take more effort than the dealer owners I have met would be willing to invest.

It would, in my opinion, take a dealer owner that wasn't totally in it for the money...made his/her money elsewhere..and was just passionate about the business. This would be necessary so that the investment in the re-branding process and the resulting changes could be tolerated.

We all know major re-branding efforts take time, sometimes years to have full impact. Dealers tend to have very short attention spans...wanting more sales NOW not in ten minutes.

But how great it would be for one dealer to make this evolutionary change. It probably would require hiring sales people who had never sold a car before to be able to adapt to more consumer friendly, brand and loyalty building activities.

Eli

[Derrick Daye]

Eli & Stephanie thanks for your comments.

Eli, let me bring you closer to my thoughts on this, beginning with your points numbered...

1) Consumers buy primarily on price and convenience.

Why is this? On price: The perception (and reality in most cases) is the dealer has stripped everything but price from the buying experience. That is, money is all that matters. On convenience: What reason does the consumer have to go out of their way? Without a point of difference there is no reason. It is indeed a cold sea of sameness.

2) The product is more important to the consumer than the dealer. A bad dealer experience does not necessarily make a consumer change the product/brand choice.

I agree. But how does this impact an auto dealer? It's no secret customers share bad brand experiences with approximately twice as many people as they do good brand experiences. Clearly bad experiences deliver lost sales. Now, after decades of poor treatment consumers are heading for the internet, demanding something better and are determined to find it. The days of consumers only considering the product are over. The future is reserved for the dealer who gets this.

3) Consumers may indicate they want an emotional connection with their dealer, but their behavior shows they care very little about the dealer other than getting a good price and having no service hassles. The connection they seek is with the product brand.

Eli, talk to a woman who has been insulted and intimidated by an auto dealer and ask her if low price and no service hassles are enough to keep her from going to another dealer. They want something more and today they will search until they find it.

4) Many times consumers will drive hours to buy a car not because the dealer experience is extraordinary but to save a buck...this is an expensive purchase and the actual out of pocket is more important than the sales experience for most despite complaints.

What is out there for the consumer that is willing to pay more for an exceptional buying experience? Sounds like a big opportunity.

To a few more of your points...

“Saturn was able to build their brand based on consumer satisfaction with the sales experience but found in the long term the product brand was more important than the dealer brand.”

How unfortunate for the consumer.

"Some dealers have tried the no-hassle pricing approach and abandoned it because consumers still want to negotiate price...to "win" by getting a deal."

Eli, you have to look at no-hassle CarMax - now in 22 states they are predicted to be a 20 Billion dollar business within a decade. No-hassle is becoming the new "win" for many consumers.

"I agree it would be wonderful for dealers to embrace the unquestionable (in our minds) benefits of branding their retail entities but I have found in my work, especially the focus group work I have done in this industry, that dealers feel there is little incentive to develop a dealer retail branding effort. They feel the investment would be a waste of limited resources better suited for results through promotional marketing."

Eli, what else would dealers say? It's clearly time for a new flavor of Kool-Aid at the dealership. How about a taste the customer likes?

[Eli Portnoy (The Brand Man Speaks!)]

Derrick
Good rebuttal points in all.
Some follow up.
First, we are on the same page...I would love to see dealers create a point of difference that met or exceeded consumer expectations.

Second, I have talked to women at length about the buying process. They do say they hate the way they are treated by dealers, BUT, and a big but, their buying behaviors still were governed in the majority of cases by price not customer service. Women did not want to find out or tell a "guy" that they paid more for a given vehicle. The dealer that treats a women buyer with care and still gives a great deal can be a winner.

There are more women in car selling today than ever before, but again, I found that women buyers found women salespeople surprisingly difficult to work with and not a better experience. The key is the nature of the beast...and the kind of business automotive selling is.

Third, CarMax has been very successful you are correct. Yes, taking price negotiation out of the equation is a key but also the expansive multi-brand inventory with product guarantees superior to regular used car dealers is a major reason for their success...more than just the no haggle pricing posture. They also score well for trade-in ease at fair market prices. It helps that they need the inventory as part of their selling strategy...used cars are less a factor at new car dealers than it used to be as so many trade-ins go directly to auction.

Fourth, Saturn discovered that their business declined after a while when they only focused on the buying experience and didn't do a better job at developing the product brand. If you review current Saturn marketing you will see they have gone back to more traditional auto industry ways, selling product. That is not to say that they can't do both well, but they have chosen not to.

Again, I will say that change could and should happen but it will require a very enlightened dealer owner...for branding to take hold the way we envision branding requires the commitment from the CEO on down and I have found few dealer CEO types that have the training or inclination to embrace branding.

Eli

[Derrick Daye]

Eli,

Good points.

We both know it all comes down to that one dealer who has the will and vision to start a revolution. A dealer who can turn things upside down to make them right. I've been looking for this dealer and so have millions of car buyers. I hope she reads blogs and reaches out.

Derrick

[Lewis Green]

Derrick,

Excellent post and great insight on sales and marketing generally.

If auto dealers had to depend on my family to make a living, they would have sunk to the bottom of the ocean long ago. To us (and to most of our friends and family members) cars equal transportation and nothing more.

Unlike other products and services where we do connect and are driven by our emotions, not so with cars. We own three--an '88 purchased new, an '87 acquired through a death in the family and a '98 purchased recently because my '90 was totaled. Each is a different brand and model. Each was purchased based on what we were willing to spend, based mostly on research into their reliability.

Are we typical or atypical? Don't know.

As a marketing consultant, I agree with your post. But I don't serve the auto industry and before applying general principals, I research every client and their industry carefully, as general principles don't positively impact revenues. Specific strategies and tactics applied to specific clients wants and needs melded with an understanding of their customers and their competitors are what we need to recommend. (I know you know this--just saying it to explain my position.)

So, while I think you have laid out principles that drive successful sales and marketing, I think that if we take on any client in auto sales (or the industry generally), much research needs to be done, many questions asked, and goals established with strategies and tactics customized to meet those goals.

General principles just don't solve problems. Instead, they are a starting point, and you have done a great job getting us on the road to discovering solutions.

[Joni]

Thanks for the clear and practical post. I definitely agree that auto dealers would profit tremendously by catering to the women's experience at the dealership....whether service or sales. Also, not "wasting critical opportunities". I would also broaden this term to apply to auto dealers spending a huge amount of money on print advertising and missing the boat on "free" publicity via publishing in print or on the web.
Lot's to say so little time.
www.jenningsandersonford.com