What's This Car Dealers With Souls?David Woodruff
Two years ago, Dan Rossmiller's car-shopping went awry. First he test-drove a Laser at a Plymouth dealer in Madison, Wis., then a salesman showed him to a small, windowless office. After 15 minutes of haggling, the manager walked in to step up the pressure. "It was the whole good-cop, bad-cop thing," says an annoyed Rossmiller, who left without buying.
But last fall, Rossmiller tried again--and had a pleasant surprise at a local Saturn dealer. The salesman showed him an SL2 sedan and--wonder of wonders--encouraged him to comparison-shop. And when Rossmiller decided to buy, there was no haggling in an airless cell. In fact, there was no haggling at all. Rossmiller simply plunked down the sticker price of $14,200 and walked out satisfied. "I felt real good knowing somebody else wasn't going to walk in and get the same car for $1,000 less."
Car shoppers have long dreaded the hard-sell tactics practiced in many auto showrooms (table). But with few alternatives open to consumers, dealers felt little pressure to change. Now, though, the success of customer-friendly brands, such as Toyota's Lexus on the high end and Saturn at the entry level, is fueling a reform movement in car retailing. Carmakers from Hyundai Motor America to Ford Motor Co. are constructing ways to simplify pricing and reward salespeople for actually satisfying customers.
`MOROCCAN BAZAAR.' Of course, it's hardly time to nominate dealers for collective sainthood. But the need to woo customers is more compelling than ever. In the U.S., more than 600 different car models jostle one another for buyers. Auto companies are desperate to stand out in this mob, and better dealers could be the way. "We cannot continue to treat the customer the way we have for the past 20 years and be successful," says Richard E. Strauss, president of the National Automobile Dealers Assn. (NADA).
One simple improvement is to end haggling, which can leave customers angry and bewildered. Among Saturn dealers, negotiating is largely out, thanks to a policy of sticking with suggested retail prices that still leave a $1,200 profit per car for dealers. In Saturn showrooms, options are packaged together into a few simple choices. The intent is to "avoid the Moroccan bazaar atmosphere" of traditional car-buying, says Donald W. Hudler, Saturn's vice-president for sales, service, and marketing. Last year, Saturn sold more cars per dealer than any other nameplate, the first time since 1976 that an American brand topped all models.
Saturn isn't alone. Three years ago, Ford tried out a one-price strategy for Fiestas in Italy. This tactic, says Ford, helped boost Ford's market share there eight points, to 12%. So last fall, Ford tried the same program with Escort in a few U.S. markets, nudging its share up from 3% to 3.3%. Now, Ford is going national with the plan, which offers a suggested price of $10,899 on four Escort models with such popular options as AM-FM radio and air-conditioning. Ford is encouraging dealers to stick to that price, though some still are horse-trading, concedes Alexander J. Trotman, executive vice-president of Ford's North American auto operations. The program, if successful, could expand to other models.
Some individual dealers aren't waiting for Detroit. J.D. Power & Associates reckons that there are more than 30 dealers trying some variation on the fixed-price, no-haggle sales approach. One is Earl D. Stewart, a Pontiac dealer in West Palm Beach, Fla., who last December decided he had had enough of the old ways. Says Stewart: "We've operated on the edge of credibility for a long time."
Stewart ditched his commissioned sales staff, hired salaried order-takers, and slapped low, nonnegotiable prices on every car on the lot. Stewart also has his trade-ins auctioned off; if they fetch more than he offered, the customer gets a check for the difference. So far, the response is good: Sales tripled from 30 cars a month to about 90 in January and February. Stewart expects to sell about 110 cars in March, even though he has cut advertising spending by 85%.
Dealers are applying nice touches to service, too. Jack A. Terhar Jr., owner of Sill-Terhar Ford in suburban Denver, gives a beeper to service customers, so mechanics can be sure to reach them during the day with estimates or questions. Customers also get follow-up calls two days after the repairs.
INCENTIVE PAY. Getting most auto dealers to treat customers well will take some structural changes, though. Until recently, only sales and service managers at dealerships received any specialized training. The salespeople learned to hustle for commissions on the job, where they don't stay for long: The average annual turnover for car sales forces is about 50%.
So some companies, such as Volkswagen, have been testing programs to stretch out commission payments over several years to keep salespeople in one place. Others, such as Infiniti and Hyundai, pay dealers extra according to how they rank on customer-satisfaction surveys. And almost every major auto maker is picking up the tab for at least a portion of training programs for dealer personnel.
At new companies, such as Saturn, Lexus, and Infiniti, everyone from the owner down to cashiers and receptionists attends customer-service school. Infiniti customers receive a business card from each staffer they meet. Follow-up surveys pinpoint workers who need more training.
It's a more daunting task to reeducate established dealerships steeped in years of traditional sales techniques. This spring, Chrysler Corp. is kicking off a $25 million program to educate 100,000 employees at the 5,000 dealers nationwide selling its brands. The training could be crucial to the success of Chrysler's new midsize sedans due in the fall, the Dodge Intrepid, Eagle Vision, and Chrysler Concorde. The cars are aimed at buyers who are more likely than Chrysler's traditional customer to buy imports. "We're going to see a new customer coming into the showroom," says Thomas C. McAlear, Chrysler's head of sales development.
`MYSTERY SHOPPERS.' Much of Chrysler's program sounds like good old common sense. It will include tips from Chrysler's research showing that customers particularly resent gouging tactics such as sudden jumps in finance charges and mandatory service contracts. And it will teach new skills--such as selling to women as sentient adults. All too often now, "the salesman will say, `Honey, get your husband, and we'll talk turkey,' " says Theodore Cunningham, executive vice-president for sales and marketing. After the program, Chrysler will send "mystery shoppers" to dealers to see how well the lessons have been learned.
Ford also is imposing new performance standards and training programs on its 7,000 dealers. It has just started telling dealers about the program, which will spell out everything from how many times a phone may ring before it's answered to how salespeople should treat customers. And the NADA has launched its first certification course for salespeople "to put ethics back into our business," says William A. Wolf, a Chevrolet dealer from Belvidere, Ill., who helped design the course.
This flurry of training won't transform the car-buying experience overnight. Dealers have often clashed with Detroit over the direction of car retailing, and many deeply resent what they decry as carmakers' efforts to interfere with their business. "We know better than they do," says Ron B. Tonkin, owner of 10 dealerships in Oregon. "We want to be in control of marketing the product." But at least the debate between Detroit and the dealers is showing service in the showroom for what it is: a crucial battleground for customers.