Are car buyers just as knowledgeable as dealers today?
Thankfully, it's much harder these days for auto dealers to pull the wool over your eyes
Sunday, February 17, 2013
There’s an extremely thin line when it comes to being a little knowledgeable about a product and being completely in-the-know about it.
And in many cases, the Internet is responsible for drawing that line, because anyone who wants to learn about the ins and outs of a particular item or brand, all they have to do is conduct a little research, and pull up all the information they can to be properly armed when dealing with a store or salesperson.
Because let’s face it, being able to walk into a store or showroom with days of research at your disposal allows you to deal with a salesperson way more confidently and it also makes it harder for the salesperson to sell you something that you don’t want or need.
So in short, the Internet has leveled the playing field between the consumer and the salesperson, which was much harder to do, say, 15 years ago.
This ability for the consumer to almost be an expert if they choose, has really taken place within the auto industry and according to Craig LaRosa, Principal at Continuum, a global design and innovation consultancy firm, consumers are able to walk into a dealership with just about the same amount of facts and figures about a vehicle that the dealer possesses.
The same information
“The biggest change in the auto sales world is that the customer now has access to the same information as the dealer,” said LaRosa in an interview with ConsumerAffairs.
“So the customer can find out the dealer cost of the car. This changes the whole bargaining dynamic because bargaining is based on one side not knowing the bottom dollar price. As such, the consumer in many ways now has the upper hand.”
LaRosa also says that many dealers are more concerned with further educating the consumer instead of taking advantage of their ignorance, because 1.) the level of ignorance among car buyers has decreased over the years, and 2.) brands know it’s increasingly harder to trick customers into purchasing something they were never in the market for.
“Many dealers are moving towards a model where frontline sales employees are non-commissioned, which allows the consumers to drop their defenses — allowing them to be receptive to recommendations and education to find the right car for their needs,” said LaRosa.
“Toyota and BMW are beginning to roll out this model. Toyota has started a program in their Wellesley, Mass. showroom, where they’ve separated the education from the buying — the red shirts and the white shirts."
“The red shirts are non-commission employees who are the frontline folks who are there to only educate the consumer on the models and get them into the right model for them. Then they pass the torch to the white shirts who are the actual sellers who find the inventory and facilitate the purchasing process,” he said.
When it comes to which brands are making these changes, in terms of not being just about sales and being more about service, LaRosa says it’s hard to pick just one since state laws prevent brands from making these changes from state to state.
“One of the dynamics of the car industry is that it’s difficult for brands to create consistency from dealership to dealership,” he explains. “This is because of the state laws in place to protect dealers. Historically, dealers have had laws in their favor because originally dealers took on all the risk to get a particular franchise started.
“Still, some dealer groups are instituting changes. So it may not be reflected in the larger brand across the board. For example, buying a car at Herb Chambers in Massachusetts or at Fletcher Jones in California, though it would be the same car, will be a completely different experience.”
“That being said, some brands are making the effort to work with the dealers to create better customer experiences across their brands. Brands like Toyota and Audi have committed to prioritizing customer service. Each is doing it in their own way, testing different models, but this is the beginning of a larger trend across the board in the industry,” LaRosa stated.
He also says the Silicon Valley based Tesla Motors has taken bold steps to give the company total control in the area of selling and customer service.
“Tesla is unique because they are foregoing the dealer altogether and selling direct — to the chagrin of many state dealer organizations,” said LaRosa. “This gives them control over every aspect of the selling cycle, but a disadvantage in service because they don’t have the volume of locations to serve their customers all over the country.”
Another huge benefit for consumers in the market for a vehicle is that it’s harder for dealers to do a bunch of upselling, forcing consumers to pay more than they initially planned, which makes one wonder if overselling will eventually be an outdated technique among reputable dealers.
“There are two types of upselling,” said LaRosa. “The first is getting you into a bigger model, which is on the wane. Today, the sales team wants to get you in the right car — not the most expensive car — to provide the best driving experience possible. It’s about establishing loyalty, so you come back for your next car as well. Dealers make more money on volume than on the actual profit from each car.”
“The second type of upselling is the add-ons after you’ve agreed on the purchase price," he added. "Such as tire protection and extended service warranties. There is actually value in those plans, but the way it’s presented, often as a surprise after you’ve made one of the biggest purchases in your life, isn’t designed well.”
“For example, if you're the type of consumer who doesn’t want to worry about service, the warranty could be good for you. But in the context it’s offered, it feels like they’re trying to get a bigger piece of your wallet,” he explained.
In a recent AdAge article, BMW announced it’ll be starting an Apple-esque Genius Bar, and hiring college-aged workers who will carry tablets to answer any questions customers may have about a vehicle, while only focusing on service and giving product information instead of sales.
Whether these “product geniuses” will really be able to help consumers more than consumers are able to help themselves remains to be seen, suggests LaRosa, and the success or failure of the new program will hinge on just how well it’s implemented.
“By referring to it as the Genius Bar, they are setting up a very high expectation that the way current dealer models are set up, will make it very difficult to meet,” he says.
“Now, committing to a customer-centered service approach is great. The car dealership ecosystem is one of the most complex environments -- BMW regulations and franchise laws that vary from state to state — and makes instituting change very challenging. So the key here will be in the execution.”
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