Sometime about 10 years ago the car business reached a fork in the road. The industry was challenged by a newly (or soon to be) informed and empowered customer base. From that point forward sellers have been faced with a choice: hang on to those old school sales and marketing strategies or join the ranks of the next generation dealers who depend on a “more sophisticated” method… a kinder, gentler car business.
This kind of choice is still facing thousands of dealers who’ve yet to “choose a side”… but time and distance have now created the opportunity to look back and ask, “Are those ‘old school’ techniques really out of date?”
In an effort to simplify (but at the risk of generalizing), now let’s check out some of the elements of the “old school” method:
• Higher-pressure selling environment
• Dealer-controlled selling process
• Less price/margin clearness
• Emphasis on front-end revenues
• More reliant on traditional advertising like print, radio, television or direct mail
• “Hook” based marketing post
• Customer’s vehicle choice affected by profit potential and bank advance
• Bigger push for substantial down payment
• Pre-qualification encouraged toward front of sales process
• Sales are designed in person, on the spot, on the lot
Now let’s take a glance at the “more sophisticated” new way of doing things:
• Low-pressure selling environment
• Customer controlled buying process
• Completely transparent pricing and profit margin
• Emphasis on achieving money in the long term and willingness to forgo immediate profit
• Focus on fast turn, high volume
• Less reliant on traditional advertising
• Price-based marketing messages
• Customer’s automobile choice uninfluenced
• Little or no pre-qualification
• Sales method exists in large part in email, on the web, on the phone
So which one is better? Which do you feel we think is better?
Of course, there’s no right answer. Eventually dealers should choose to do business in a way they feel most comfortable… and find to be most effective.
However, We strongly suggests against the flatly rejecting either “old school” or “new school” techniques and instead encourage dealers to become objective thinkers and operators who are ready to take the best and most effective elements of any approach and use it in their trade.
The real threat is in the vast assumptions that have been developed about the “new economy” and the “new consumer.” There’s a sense in the business that all consumers are educated and all informed consumers will claim the lowest price and reject any form of pressure. These assumptions are simply not true.
In reality, To be frank customers still have the similar lizard mindsets which they had a decade ago. And as nifty as it would be if the Internet could speed up the pace of evolution, it can’t and it hasn’t. Individuals still have desires, which are furnished by owning a nicer, newer car. They still have anxieties or doubts, which prevent them from entering the buyer’s circle. An effective dealer’s job is to influence the desires and overcome the doubts.
The idea that consumers in 2010 are data-driven drones who make only purely logical decisions is false and will harm this industry. You’ll be very careful to reject that notion and to prevent it from harming your business.
Tactics vs. Intent
These days generalizations are made about dealers who use certain tactics. For instance, we’ve heard dealers who think themselves part of this newer generation accuse other dealers who continue to make extremely high front-end profit using “old school” tactics of being somehow unethical.
The broad philosophical question: Is making a profit unethical?
That’s for you to decide. But for the reasons of this article, let’s assume we all agree that making a profit is ethical. This is, after all, the car business… not the car foundation.
In fact, dealers offer a valuable service to the public by finding, sourcing and arranging for the transportation of vehicles to their location, inventorying those vehicles so that clients can browse multiple options, helping customers find and arrange for financing of their selected vehicle, providing the opportunity to service the vehicles, etc.
Atleast for that the services dealers deserve a profit. (As an aside, nobody questions or criticizes grocery stores, or clothing stores, or electronics stores for making a profit. Why should making a profit at a car store be any different?) How much profit is the right profit? As much profit as the market will bear, one customer at a time.
That aside, the question becomes: Is the use of “old school” tactics wrong?
We submit that the tricks used are far less vital than the intent of the dealer utilizing them. A dealer whose mission is to help as many people as possible satisfy their emotional desires by helping them own a nicer, newer car is not a bad person. Can we agree on that?
Then it should generally follow that whatever tactics are utilized to make a sale, as long as the techniques are not dishonest, regardless of “old school” or “new school”, are good and reasonable. And a dealer should find and execute any and all tactics that help secures sales that they feel comfortable with.
“Old School” Plus “New School”
Make the Most “Profitable School” In The Industry
In our view, “old school” tactics are wrongly demonized and cast aside by an increasingly contemporary-minded industry simply because they’re old. Additionally, “new school” tricks are refused by the dealers who are not willing to embrace the new technology, simply because they’re new. But such division doesn’t need to exist. This isn’t Washington! What good do partisan-style, ideological, intra-industry politics do for a dealer? None. The certainty is the leading approach is a hybrid approach.
“New School” Dealers should realize:
• The Internet has not reinvented the car business. It is a platform to be used and leveraged, not a savior.
• There’s much more to Internet marketing than just listing vehicles and prices (in fact, that may be the worst thing you can do). People are now just looking for the information online leaving beyond just prices.
• Traditional advertising still works and limiting your marketing to the Internet is a dangerous proposition. You’re simply leaving money on the table if you ignore traditional media.
• While more informed, consumers are as emotionally driven as ever.
• Lowest value is not the only, or best option (it’s simply the easiest option, chosen by lazy and unimaginative marketers…that’s a topic for a different article).
• Making a profit is not wrong… even in 2010.
• While making a profit long term is important, your business will grow faster and better if you can also turn a profit immediately. The larger profit you make on the front, the more you can make investments to acquire new customers. The more wealth you invest to acquire the new clients, the better you grow.
• Dealers provide extremely valuable service, and should strive to provide that service to as many people as possible.
• It is completely possible to sell a decent volume and make a decent profit. High margin does not directly equate to lower volume.
• Applying pressure to the clients to make up with the buying decisions is not wrong or anything evil. In fact many customers are desperate for someone to help them finalize their decision, and a little nudge from the people is all they need.
• As of this writing, people still buy cars in person. We don’t see customers entering in their credit card online and having their car delivered by UPS. Until that becomes the norm, the car business is still a brick and mortar business.
“Old School” Dealers should realize:
• You’re being talked about on the Internet whether you like it or not. You can join and direct the talk or you can be a victim of the conversation that occurs without you.
• More and more customers everyday are turning to the Internet for information. If you’re not there, you will be invisible to those people.
• Making wealth in the short run is important. But long-term profit and the life span value of a customer are at least equally as important.
• Because of the proliferation of information, many buyers will know more about your vehicles than you do. Now you will need to go beyond features, and start talking about all other benefits and helping the buyers to realize how his car will make a difference to feel good.
In the final analysis, the most successful and stable dealers are those who provide high value in exchange for high profit and utilize all the tools and techniques available to them, regardless of age, to achieve that. Like the dealer who has a video blog AND a radio campaign, or uses a trade hook AND an opt-in form. Old and new are not mutually exclusive and should coexist for best results at your dealership.