Six Transformative New Best Practices For a Healthy, Vibrant Auto Industry

What a year 2009 was for the once dominant and powerful auto industry. Saturn and Pontiac are out. Fiat and Tesla are in. Two of the Big 3 ‘survived’ bankruptcy – and the verdict is still out on their long term fiscal viability. Nearly 1800 dealerships have or will close by this time next year. Ten million new cars were sold in 2008 versus 16 million in 2007, and it looks like this year’s results will be even worse. The economic and human trajectory of this demise, collapse and to a high degree, mismanagement, of the domestic leaders has yet to be truly calculated.

In the midst of such a shocking 12 months, what does the industry do to create a transformative working and healthy model? Is there enough ‘forward thinking’ in the minds of the multi-generational industry leaders and dealer owners that can shift this industry into the marketing giant it once was? Are there enough players to transcend the old ways of doing things with a new paradigm that mirror today’s sophisticated and transparent buying options now available to 21st century consumers?

To help get a jump start, here are six transformative new business practices that will shake up the old and offer the auto industry an opportunity to land squarely on all fours.

1. Lose the ‘tude, Dude

Car buyers have very little interest in negotiating. In fact, most loathe it. Women, for example, often have powerful positions at her workplace. While an estimated 80% of women initiate and motivate the family car purchase, many of those women expect their significant other or, the nearest man, to go with them to the dealership to ‘buy the car’.

Women-Drivers.com, a consumer rating web site connecting women to women-friendly car dealers, reports that even as women account for 54% of new car purchases 62% of them visit the dealership with another person, and, 78% of the time it’s a man – even when the car is exclusively hers.<

The classic days of piranha car salesmanship are over. The one -liners like “Hey little lady, what can I do for you today?” or ‘This deal is good today only’ or the ‘I have to check with my manager again on this”, or, my all time favorite “Let’s wait until your husband gets here.” – are coming to a close.

With traditional WOM (word of mouth) now being expressed in social networking platforms, as well as car dealer rating websites like Women-Drivers.com or Dealer Rater.com the days are numbered for the old-school car salesperson.

So, what can the new rules of engagement be for the salesperson?

  • Treat consumers respectfully. Don’t assume anything about anyone coming through your doors based upon their looks, clothes, age, style, marriage status and depths of wallet size. Ever.
  • Debates ensue about whether female or male customers are to be treated the same or differently at the car dealer. Here’s the skinny.
  • Women use more words than men in a given day and are more social with a need to share more frequently – in words and in writing. So, when a woman comes into your showroom, listen (which actually means, stop talking). Listen to what she says, not what you think she said or what you think she meant. Speak with her, not to her.
  • Don’t waste time going back and forth taking every single line item and pricing request to the manager. As a sales advisor, you are the expert and should be granted the responsibility to make the call. Customers are busy and being held ‘hostage’ for an hour or two is simply a waste of time. In our today world of ‘I am so busy’, working professionals and parents are not interested in wasting their number one precious resource- time. Be a solutions provider.
  • No smoking outside, or standing around in the parking lot with colleagues.

2. Change the Pricing Paradigm

Humans are such creatures of habit. And ‘industries’ are just enormous groups of humans, so as a natural extension, industries have habits, too. But as societies and customers shift and evolve, so, too, must industries.

Back in the day of buggies, men negotiated for their horses. And, so, it went for cars. In the 1970’s and 80’s, the divorce rate started to climb, women were entering the workforce in non-traditional roles, and families started having fewer children. The long standing dance of negotiation that is 100 years old simply is out of context today.

While many customers love haggling, the truth is that a ‘good deal’ is completely subjective. Most consumers truly have no idea what the qualitative value of a good deal is.

Saturn and Scion are clear about the writing on the wall. Short of collusion, the industry can simply flip the switch. Go to one price shopping. OEM’s can build in respective margins; dealers build on theirs, and add in any other hidden cost that may need to be absorbed.

Dealers still will still have sales, rebates, coupons and trade-ins as ways to market and keep competition strong. One price shopping will save the dealerships’ time and increase efficiency. Think about how well a car company will do if they market themselves as the brand that guarantees customers can buy a car in one hour(1). Paperwork included.

Why is it we are OK with a six percent or $12,000 sales commission payment to our neighborhood realtor on a $200,000 home, but not a flat fee of $1,000 – $1,250 (4.-5.0% commission) when purchasing a $25,000 vehicle?

3. Shift the Employee Make-up & Compensation Model

The current physiological make-up of car salespeople does not mirror that of the car buyer. Specifically, in 2007, 93% of all car salespeople were men. While women buy 54% of all cars, they request 65% of all mechanic work done at dealerships. It’s great that women are the ones fielding the customer service calls at dealerships, and, to a high degree managing the Service Centers.

But that is not enough.

Build the sales force up to 50% women – and hire more minorities Encourage more women in executive and managerial posts; from the Board of Directors to sales and product managers, including General and Sales Managers at the dealer level.

A dimple in this old boy’s club occurred in early October when General Motors announced that Susan Docherty was elevated to Sales Chief. Bravo. Keep the dominos bumping.

The annual turnover for an average dealership sales team is 100%. There is an overwhelming cost to this. According to The Total HR ToolKit for Auto Dealers published by John Putzier, President of Auto-Motivation.com, “Between lost productivity, recruiting, selecting and training, the calculated cost to replace a $40,000 salary is almost $50,000.”

Pay salespeople a decent wage, a commission or bonus structure, provide benefits to them and make them happy enough that they are respected by the business, and they won’t shift gears to another dealership or another industry after 10 months on the job.

4. ‘Small’ does not have to mean ‘Frumpy’

What is it about smaller cars in our country? Must the industry continue to make smaller vehicles look like full or mid-sized cars, only downsized? There are younger and more eco- and cost-conscious consumers just waiting to buy smaller cars.

Provide small or compact sized vehicles with their own design cues, and offer the consumer an alternative to a matchbox on wheels. Much like the 2003 Mini Cooper S introductions, create a smart look, with a safe and technological sound product at an affordable price. And, mitigate the mini-me’s.

5. More Moms & Abs in Ads

Sexy women have been used in all traditional media to sell cars since the dawning of this enterprise. Margery Krevsky’s 2008 book “Sirens of Chrome: The Enduring Allure of the Auto Show Models” is a remarkable photograph collection of how automobile companies have used thrilling and glamorous women to sell cars. Whether in the sexy TV commercials or at the international auto shows, this age old use of ‘Sex Sells’ is still in play today.

With so many women buying cars today, it’s time for advertising campaigns in the automotive industry to bring on the boys and balance things out. Inject a few more hot men who are not necessarily NFL types speaking forcibly into the camera. Begin using men to appeal to the female buyer. Soccer dads, too.

And, add more moms- regular moms, too. Of different ages and flavors. Let her see herself in the ad-driving, with her children in tow, as she really is. And please, please show moms who are doing their marketing driving other vehicles other than just the sacred mini van.

6. Get off your High Horse (Power)

The electric carriage came almost 60 years before Fords’ Model T.

Yet, the electric car has always been a step-child. With America’s addiction to gasoline, we ignored its benefits and distilled any opportunity for mass appeal, until, of course, most recently. Toyota with its Prius and the Chevrolet Volt are the front runners and favorites in this small arena.

Tesla Motors and other auto companies are coming on strong. Tesla will not be moving to Detroit anytime soon; in fact, they won’t be moving there at all. They see themselves a much more technologically advanced, sophisticated company – and so are headquartered in Silicon Valley.

Tesla has recently received two sources of funding: one from the United States Department of Energy, and a second from Daimler AG who purchased 9% of the company to get a big foot in this new auto frontier.

Tesla has real challenges, but its vision is that the electric vehicle (EV) be mainstream in the next decade. China alone has over 200 companies creating and working on electric vehicle’s (EV) batteries, cars and charging infrastructures.

I know old habits are hard to break – both for consumers and especially, a long enduring industry. But, it’s a new day. As the industry sits ‘idling in the service center’ (so to speak) waiting for the recession to pass, its time to take a look at some new best practices that can be long lasting and difference -making to build back a healthier, more vibrant car business.