SHOPSMART AUTOS – CUSTOMER INFORMATION –OCTOBER 30, 2020
How you compete in the retail automotive marketplace is a choice. Either you choose as your primary focus to compete on aggressive pricing or on creating a differentiated customer experience. It is my perspective as an industry veteran that the vast majority of dealers choosing prices do so because they don’t have a clear vision of how to compete by creating and consistently delivering a customer experience superior to the competition. The price focus flies in the face of a wide range of consumer research demonstrating the value of an outstanding experience:
The customer experience vs. price emphasis is at the opposite ends of a business success continuum, and there is a clear return on investment for dealerships focusing on selling the experience.
A primary reason dealers use low pricing as their strategy is they don’t trust their customers. They believe every customer is a best-price shopper in search of a great deal and nothing else. I’ve heard countless dealers and managers say, “Even when I give a customer a competitive price they always ask for more!”
Well, that’s because a low price is all these management teams have to offer. What else are customers going to ask for?
Sadly, this customer distrust is part of a larger negative, self-reinforcing loop. That is the opposite of the positive, self-reinforcing loop you get with a focus on customer (and employee) experience:
Perhaps you noticed that “you reap what you sow” in these strategies: The old-fashioned price focus means you need and attract old-school salespeople as well as customers arriving at the dealership prepared to do battle. At the other end of the spectrum are approaches led by dealers such as the one who told me, “I’d never run the business based on negotiation. … I wouldn’t do that to my sales team.”
Another “reap what you sow” element of the price competition model is the way sales management performance is judged and rewarded based on transactional ability.
Again, because the low-price strategy demands it, sales managers at such dealerships are “transaction artists” paid very generously to make a difficult system work. This, too, lowers net margins.
And dealerships are not operating in isolation. Today’s consumers have been conditioned by Amazon, Apple, and others to place tremendous value on the experience they get when shopping and buying. And this is to be expected, especially because millennials and even older generations are so focused on investing inexperience.
Millennials have gained a reputation for their tendency to prioritize experiences over products. A study by Harris Group found that 72 percent of millennials would rather open their wallets based on experiences rather than on material items.
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