The car biz has changed, period. We all understand the issues that we face, and trust me when I say that some dealers are doing pretty well with the current e-market situation.

We are to blame for the price wars, we are the ones that decide to sell the cars for a $50 mini. However I also agree with some comments (circuit city example) and realize that this is not unique to the car biz, the Internet has had similar effects in many other industries and therefore we can perhaps talk about a social change when it comes to how consumers view and undestand the sales process rather than just how car buyers do.

As a vendor I find CS's comment very funny: "Have you ever tried to sell something to a car dealer?", we face exactly the same problems that you face. As a Diamondlot distributor I face dealers that request a meeting to ask for a .50c discount per car--after 4-5 years of good service with NO hickups--just because they got a lower quote from DS. Lets make the math: .50c times 100/month means that the dealer will save $50/month. In my end, the reason why I have 95% of the market and DS does not is because I spend the money in having 4 (yes, FOUR) layers of field support while DS has 1, yet the dealers need a meeting to save $50/month just because someone left a quote...

We all face the same issues, it is just biz.

The way I handle my biz is by trying to stok to what my uncle Carlos told me long time ago while trying to decide my future carrer:

"Be the best at what you do and you will do well".
I provide (at least try!) my customers with the best service, response, respect, and knowledge as possible and if they must save the $50/month, well... that is whay Wall Mart is in biz.

My avergae gross just for Internet deals for last month was $2750, new and used. Mini-deals? You have to learn how to correctly engage the customer. Yes you will get mini-deals. But customers are largely on the Internet looking for honesty, that's why they want to know your invoice. Doesn't mean you have to give them invoice, they just don't want to be lied to. So they may bust your balls a little, you have to be aggressive in a completely different non-confrontational way. And you will make good grosses.

My Internet customers are some of my most loyal, and I always get a great survey back.

And you wouldn't believe how many customers I've had tell me they hate CarMax's fixed pricing. I would hate to think that's the future for the car business.

Customers and the car business haven't changed, just the way they go about getting their info and their level of knowledge has. You need to learn to leverage it, and use their advanced knowledge to your advantage. Customers understand you're doing what you're doing to make a living, and if you do things right, they'll be very understanding about it.

First of all, the internet is here to stay, and we might as well get used to it. It's kind of like being a New York Giants fan and knowing your stuck with Eli Manning as your Quarterback. You don't like it, but you know there's nothing that can be done about it.

Our challenge is to adapt and change our sales methods and techniques to take advantage of well informed customers. Personally, I love dealing with customers who come in to the showroom with clipboards and magazine articles. Many of them know more about my cars than I do! In the old days you had to spend a lot of time explaining to potential customers why they should buy your car as opposed to someone else's. Now they come in actually pre-disposed to buying your car. It's just a matter of price.

The modern sales person is going to realize that building value in himself and the dealership could make the difference. People WILL pay a little more for a car if they are given a reason to do so.
The same applies to internet customers. Of course they're all going to send you an email asking for your "best price." Wouldn't you? But that doesn't prevent you from giving them more reasons to buy from your dealership. Personally, I'd rather deal with informed and motivated buyers than wishy washy tire kickers.

Brandon: I completely agree with your comment, and good summary Alex.

Has the Internet ruined the car business?

No, blame the manufacturers and dealership owners that have not adjusted or want to adjust for the paradigm shift on how to market and sell to those consumers, and how us as industry professionals that sell those vehicles get paid.

If Im selling a Chevy Impala to an internet shopper, and there is a Chevy dealer 5 miles to my east, 5 miles to my west, and 20 miles to the north... how the heck am I going to sell this vehicle with any profit when they sent the quote to all of us? Then, great luck on having the exact color and options in stock, so now I start on a dealer locate and trade.

Why? Because the Internet Consumer is vehicle specific and why shouldn't they be if they're spending $25,000?

OMG... It never ends. 8 hours later after taking the lead, contact, search, financing, and delivery I made an entire $100 mini. Great, after taxes, I can go fill my car up with gas.

Give me all the phone scripts and email templates in the business, but what it comes down to is that first customer contact, building the trust, then what really matters: PRICING. "You're a great guy Jeff, but XYZ Motors can get the same car and sell it to me $300 cheaper." All this AFTER I had comittments to purchase at pricing quoted initially. UGH!!

Alex wrote: It will be a different industry in 10 years. I believe that as well. But who is going to step-up, recognize, and adjust for the paradigm shift- the manufacturers or dealership owners?

Here's a parallell universe to chew on.

2 ad managers selling local TV ad space come into my office for a huge 6 figure haggling session.

One in Market A, the other 40 mins. away in Marketplace B.

Market A is filled with competition and excess quality inventory.
Market B is actually depressed, but the competition is weak, there is only one powerhouse in the area.

Sales Manager A cuts his already discounted rate deeper after 2 hours of haggling and leaves extremely pissed.

We already know we cant haggle Sales Manager B and we sign the order.

ITS ALL ABOUT THE BALANCE BETWEEN SUPPLY AND DEMAND. Just try and haggle for a discounted 4 star hotel room in NYC on Dec 31st.

We're the #1 volume Nissan dealer in Western New York, and when it comes to price I just tell people to shop their head off, then bring me their best offer and I will beat it. Consumer Reports prints a suggested profit to consumers along the line of 4-8% above true cost (invoice minus hold back, destination - which is added back)... how many show this to your customers? If they trust CR for reliability tests, then they will trust their recommendations for profit?

Part of the problem as I see it, is that most people do not know that 1 in 4 jobs in America are tied to the auto industry, and cannot see the importance as whole in relation to the big picture.

To most, they take their cars and gasoline for granted yet it's the most important tool freedom loving people have in their life box.

However, most people know that Union Autoworkers earn $26 an hour ($60,000 a year) average, plus benefits that bring the company's total cost per worker to a staggering $65 an hour.

So when it comes to trying to save a buck they don't consider you will make $50 on the deal, because all they see is the huge earnings at the plant.

Personally I agree with the no haggle, the price that is on the sticker is what you pay school of thought. Some major dealers are doing that in 2008... more should follow - the leader.

Jeff,

Is this a real post or something you put up for fun?(how could anyone with this view even know about your blog?) In my experience the internet customer is the easiest customer to deal with once you get them in the door, the fact that they came in means you have already broken down a lot of barriers.

The bottom line on sales with customers is the same in every facet of sales since the dawn of mankind. People want to FEEL like they got a good deal.

Everything you do in the car business, whether on the lot or on the phone or on the internet is based around this concept. Those that master the art of making the customer feel good continue to be successful. Those that refuse to embrace this strategy continue to struggle.

The reason people go out and buy a new car after 2 years of owning the one they got is because of the next best deal or option or whatever it may be. Manufacturers and Dealers entice customers with rebates and options and bluetooh and handsfree and push button start and 400 hp and continuously variable transmissions, etc. The list is endless.

All of these are designed to raise the Value of something. Since value is something perceived, there are many facets of this that control this feeling in people.

The thing that has always gotten in the way of this is fear. Customers are afraid. Afraid to make a decision, afraid to buy, afraid of not knowing. The internet has empowered the customer and made them feel more educated about what is going on. In the process of this, customers are also being educated about some of the shady tactics some dealers use. And in the absence of really knowing everything there is to know. the customers use stern tactics and statements on price and payments and holdback and whatever else they can throw out there to back you off. Now who's being sold?

The bottom line is, you still have to get along with the customer, you still need to find out what their needs are, their wants are, what their budget allows for, etc. That's why we are sales CONSULTANTS, not order takers. If you want it to be as easy as taking their order, working the drive through at McDonald's is where it's at.

The bottom line is everyone is different and as sales people we have to adaopt. Some customers are going to come at us harder and some are going to come at us easier. If they were all easy, everyone would be doing this. So get up, grab your a** and go sell your product, your dealerships and most importantly, sell yourself. That's what people really want anyway, someone to trust.

And don't forget....SWSWSWN

Some Will Some Won't So What ... NEXT!!!!

Earl,

Does your store do subprime business? There's always an opportunity to make money there. It's the fastest growing segment of the industry.

Let me know if I can help in any way.

Best,

Jim W

Chad,

You make some good points. All I am really saying is that negotiating at a retail store is not the NORM and hense buyers don't feel obligated to do so. They quietly shop the best price and then buy where they are most comfortable. If the auto industry made it so it was unusual to negotiate (sort of like what Saturn does) then the industry could possibly turn around a bit.

Earl,

I feel your pain. But, whether you like it or not, most customers now use the internet first to shop for cars. Here's some interesting bullet points on the online auto industry:

-88% of shoppers shop online first (usually with a search engine)
-60% of online shoppers request a price quote (convert to a lead)
-55% of internet leads end up in a sale
-90% buy at another dealership and purchase another brand

So, we know that half of all leads purchased cars from another dealership. Why? Well some don't like your brand. You can't do anything about that. But, for the most part, dealers don't handle leads well:

-30% of leads are never contacted at all by the dealership
-customers want dealers to respond within 4 hours but it takes dealers an average of 5.4 hours to contact leads
-only 25% of shoppers felt dealers answered their questions
-only 19% of shoppers felt dealers tried to sell them on their brand

I'm making the point that differentiating yourself from this average pattern might make a difference for you. Take a look at how old the leads are that you're getting from your internet manager. Call the customers right away and answer their questions. Try to convert them to a used car in the brand they are looking for. Sell the benefits of your brand and your dealership so they don't defect. Will you sell all internet leads? No. Will you make huge commissions on informed customers? Not often. But working the leads in a way that sets you apart puts you in a position to make the best of the situation.

I wrote more about the study where this information comes from in my blog at TheSubprimeReport.com (click my name to take you to the blog). I'll be focusing on the implications of this study in the next couple weeks. I'm sure Jeff can add to the discussion as well, given his experience on this topic.

Best of luck,

Jim Wagner
TheSubprimeReport.com

This will be a very different industry in 10 years.

To Brandon Hoffman: Just want to let you know that you can indeed nogotiate pricing at Best Buy, as I did it myself a couple years ago. It involves finding the right salesperson (hmmm sound like our business?), and making it a deal that will work for both parties (sound like the car biz again?), and will probably only work if you buy more than just a tv, ie complete entertainment system. With the research to backup your claims in hand they will work with you if you take the right approach. I've negotiated pricing on many items that I never before thought possible, but when you see something at a store you like to shop at that's much more expensive than another store's advertised price, you don't just want to give your money away! But by taking the right approach you can probably get them to match that price a lot easier than you might think.

I personally believe this goes for all business though. Before getting into the car biz I worked selling assembly and packaging services for a Non-Profit Organization that helps adults with disabilities. I had to work deals in that business in an obviously different way than selling cars, but when it comes down to it, it's all about having the right research done ahead of time and being able to back up what you say. With some customers I had relationships with the right people that could tell me when I submitted a quote that I was off the mark from the competition so I could take the appropriate action if possible, I had other customers that didn't go to anyone else for quotes, I basically named by price. In the car business, there are some customers that certain salespeople may not want to haggle with, and tell them for whatever reason the price it what it is. For others we may bend over backwards to get them the truly best deal we can.

I don't think anyone likes a customer beating them up with spreadsheets and binders full of other vehicle listings similar to yours at lower prices, but it is what it is. Adapt or move on. I do believe as much as the business has changed (I've been in 2 years and seen a lot of change myself), it really goes back to the early basic sales training. Build value in yourself, your product, your dealership, and realize that price isn't everything to everyone, but it is to some.

I hear your frustration, brother, but what you need to do is ENGAGE the customer early, and sell yourself and your dealer. If you are not doing this, you are simply selling the same vehicle someone else has (assuming it is new). Why would someone want to buy from you? Is price their ONLY consideration? What about financing? What about customer service before, during and after the sale? Are these not important to them? If they answer negatively to these items and want "Your Best Price", give it to them and move on to the next.

I have found most people are simply afraid since they are on "your turf" and have all the information and power. They are simply trying to equalize the playing field by getting as much information as possible. Another tactic is to explain you and the other store are both in business for a profit, right? We both pay the same for the vehicle, right? So, how are they going to make money on the deal they are giving you? They are going to pre-sell the vehicle, load it up (if it isn't already) with dealer options, or stipulate they buy extended warranties, GAP, etc.

I don't think THAT much has changed since the adoption of the Internet. There has always been the expert who used to sell them, or he knows a guy who can buy them at auction, etc. Just kill 'em with kindness and move on.

Have you ever tried to sell something to a car dealer?

As negative as this is, it's a realistic picture of why this industry has such trouble attracting & retaining sales people. The industry has driven "mini-deals" to be the norm where it's a game to see who can drop to invoice or below the quickest for the consumer. It's a game where you fall down the well and are thrown a sheckle for managing to live after you've hit rock bottom. Thank goodness for used cars otherwise many in this industry would be starving to death.

This is the ultimate game of polynomial incompleteness.

Or, as my old game theory prof put it, five card draw with four players and three blindfolds.

Any way you slice it, information is a good thing unless you happen to be the person without it. Selling is still selling, and buying is still buying, no matter what technology we throw at this equation; the real heart of the problem is that what some buyers know has changed in ways that some sellers just aren't able to adapt to.

The solution? Either adapt to those buyers, or maybe find some other buyers... or find some nice cushy government job somewhere. Same options that have been available at the start of every new era, really.

I completely disagree with this post. You are blaming the wrong people for your issues with selling cars. It's not the publics fault for wanting the best possibly deal. Its the shady auto industry's fault for not just publishing a damn price and having that be the price (which will be the future of auto sales, mark my words). As soon as you introduce haggling and opaque pricing into an industry and encourage haggling you are pitting your sales force against the public. The public has the idea that you aren't their to help them (you are there to make the largest commission possible), hense forth they couldn't care about anything other then getting the best price on the car they want. They don't care if you make money or lose money and you can't really blame them, its not their job to care.

You don't see people in masses walking into best buy trying to haggle the price of a TV because they know that they can't. Trying to negotiate with a Best Buy salesperson is a futile effort at best. When Best Buy publishes a price, thats the price. Yes they may have a limited quantity but the price is not dependant on being a government employee, having lease loyalty, an 800+ Fico score, this much down, that much per month. The price is the price.

My personal opinion is that if you want to stop the internet bottom feeders, FIXED PRICING must be instituted. Then non discolosure agreements must be signed between dealerships and manufacturers not to disclose the cost of the vehicles. If people know they can't negotiate they will stop bottom feeding. If they stop bottom feeding dealers can make a decent amount per car without anyone knowing what the dealership paid for it.

I hope this makes sense

Like I've always said, "Selling to the public would be fun if you didn't have to deal with the public."

Wow! That sounds like my old school sales manager. You wouldn't happen to be from Ky would you? lol

I agree with you Earl!

Remember back in the day when they inveted that d*mn telephone thing? Gall dern customers would shop us hard right over the phone. We'd give out quote after quote until the managers said "stop the madness!" and handed me a script to weed 'em out.

Earl, the REAL problem is that there are too many outlets, too much inventory and too much visibility (read: internet)... All of which is COMPLETELY out of your control.

If you're too old to do some old fashioned "bloody knuckle" prospecting then you are in a bad place.

I haven't laughed that hard in quite a while! Thanks

I like the Ford BFT videos

If 66% percent of auto shoppers are positively influenced by such things as "personalized offers" as this video suggests then I hope that dealers are making sure they are marketing to this audience as its core audience.

This comes by changing the way they present themselves in the marketplace...as an Automotive Retail Center versus your traditional car dealership. This requires engaging with customers months in advance to purchase and getting to know their true needs.

Social Media gives dealers this opportunity.

With more than 20% of new car buyers finding their way to an OEM site by way of Search 6 months prior to making a purchase, just think of how dealers can and should be tapping in to this market.

The tools are here today and the dealers and vendors that take the time to utilize them effectively by presenting their businesses more appropriately can and will capture these emerging virtual markets.

Listened again and realize that I misheard his remarks around the 2:00 minute mark. He said "In other countries like China and the USA, it was still really very much around cost efficiency" but in relation to gas mileage.

I heard it in reference online behavior - totally my mistake (that's what I get for over-multitasking). It struck a chord because one of our findings has been the growing impact of online information on consumers' make/model decision. To explain the data: we ask recent new-vehicle buyers to what degree information found online impacted their make/model decision, price paid for the vehicle, dealer selection, etc. In 2007, 77% indicated some impact on make/model decision vs. 73% indicating some impact on price.

It may not seem like a big deal, but given where we started (online automotive research was primarily about price), it's a notable trend. No implications for the process consumers go through while researching/shopping online.

My apologies for violating etiquette - I was trying to reference more detailed info without dumping data into my original response. We market research folks do love data.