6 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.

GM Ford's Addition Philosophy To Change

The competitive selling markets of the American Automotive Manufactures has offered the US retail car market a surprising comeback from the debacle three-year death sentences from 2006- 2009 market crash. The strong comeback of General Motors and Ford Motor Company was partly due to a selfish operating philosophy that brought a crack addicted addiction of " No Change " in strategy for design and cost improvements along with "exaggerated cook the books" quarterly profit reports. Now GM and Ford announcements of profitability" has brought some really tough changes and new direction due to accountability from the tax payers, who screamed a big" Hell No" to any corporate bailouts. Chrysler is still a work in progress with Fiat.

Changing direction started first with accountability from an addictive over priced recession and manufacture lobbying for" me too "Tarp funding.

#    The Second start was the fast axing of high salaried big bonuses "good ole' car guys who nurse the stay the course philosophy".

#   Third was terminating dealerships points. This termination idea is still heavy fought by some Dealers on the tactic and criteria of what dealers truly warranted termination.
#    Fourth was the dusting off plan to build the attractive fuel efficiency car's platforms they have had for years on the dust shelf, one example the Volt. Nissan leaf is a strong competitor.
 #   Trucks have always held their stance in lucrative profits margins and lower market depreciation for GM and Ford. If the manufactures can build trucks with such passion, why not cars? One guess in the pass would have been profit margins. So for now trucks and efficient design is off the table still.

The US carmakers addiction of not playing ball to build better cars, while allowing Toyota and Honda's ( started with motorcycles engines) and Datsun, now Nissan to take leadership in sales per dealer and market representation. All foreign car makers were better innovators to build economical priced, quality cars, not trucks that took the American market by storm. In other words the Japanese market value.

The American manufactures surely knew value, it but did nothing to compete as Capitalism was King, and certainly stayed on the crack pipe not to change. The government bailout was surely a slap in the face to GM, while they were begging for survival to drive tail first, no private plans allowed to Washington. And let's just say about the historic Chrysler that they were "old school of the " been there done that " at bail outs, brought about some neck gabbing accountability changes at GM and Chrysler. I got my former GM stock holder Bankruptcy notice letter of "your assed out ". Yes, I got the picture that GM bit the pride bullet to tag a BK on there backs. Now the GM stock is back at $22.00

The American manufacture didn't change simply because of greed and complacency. Yes again, Greed and Laziness took precedence over the future of American car markers and it cost us a lot, including the core of the Car Makers Soul is the retail Car Dealership. Now the said part is the governing body of few brave Dealers fought for rights in the termination process of what's fair and many still are fighting.

Trucks have always held their stance in lucrative profits margins and lower market depreciation for GM and Ford. Now GM is paying back the bail outs and that's great news. Many dealerships will now have to decide on making a plan for tough changes as well, but not the luxury of perfectly timed bail out help needed for small business owners. These changes will take a serious game plan in management, technology and cultural and women selling as a qualified market that can buy. CarLance believes that Dealers has to change their old boy's club mentality.

An eye opener for sure for me as former stock holder that didn't see a dime of profit in the American capital dreams to invest in an American Car Company. But I am still a believer in American Car Makers and the Dealerships that sell. Surely I will invest again. Patriotic stance of Brainwash I am not, but now that the American Car Companies as great as these are be winners again for sure. But comeback kids that I know are American Winners. Yes, I am a believer in the comeback dream of America and car dealerships success to continue.

Deborah Sims, is the owner and writer contributor for Carlance Automotive Consulting and carlance.com. Ms. Sims is a 25 year trailblazer and pioneer in dealership retail sales, marketing and management. She has successfully owned and operated two franchise dealerships and have worked and managed all segments of the retail automotive industry.

It's the Dealers Stupid!

As I sat watching Autoline Detroit a few weeks back, I listened to the usual parade of marketing ad execs, industry analysts, and division managers talk endlessly about branding, shifting market segments, and well, at that point my brain went numb and I don't recall anything else that was said. I do remember saying out loud as I had done a thousand times before, "None Of You Get It!"

You see, while domestic car companies try to out design, out tech, out brand, and out source market share from each other, they are all completely disconnected from the one problem the industry has never fixed: The dealership.

The next time you find yourself driving alone in your car, I want you to do something you've never done before. Turn off the music and scan the stations in search for car dealership ads. I know that's like asking Streisand for one more encore but do it anyway. Do you hear your dealers saying how well they treat their customers? Are they stressing high customer satisfaction ratings, reliability, honesty, integrity, or building relationships? I doubt it. You're probably being yelled at about interest rates, the highest trade in values, the number one volume such and such, and guaranteed financing even if your on parole. Ahhh, there's that brain numbing sensation again.

All the millions you spent on r&d, technology, marketing, union contract negotiations, state of the art plants, and so on, was all blown out the door by your dealers "No Money Down" mentality. If you want to know why the domestic auto industry is in the toilet, look no further than your local dealer point.

Let's be honest. Almost anyone can get a job selling cars. The ability to fog a mirror is about the only qualification necessary to be hired at most dealerships these days. Communications skills, math skills, product knowledge, education, a desire to help customers make informed decisions? Rarely if ever are these qualities sought after or screened for. How many units can you push over the curb this month? That's what General Managers and General Sales Managers want to know from their applicants. There's nary a word about character, integrity, professionalism or even a simple criminal background inquiry. Twice I worked side by side with salesmen wearing ankle bracelets.

Is it the fault of the salesman? Perhaps partly, but the blame really lies with the manufacturers and dealers themselves. To find the root cause we need to follow the money or lack of it in this case. The attitude of most dealer principles, and sales managers is "if we can sell 100 cars a month with 10 salespeople, we should be able to sell 200 cars with 20 ". That thought process doesn't work at McDonalds, Home Depot, or anywhere else. Yet most dealers will hire salespeople until they literally run out of desks and telephones.

Why not? Since most salespeople make a paltry $100 to $300 per week base salary it costs the dealers next to nothing to add bodies. If each sale person was salaried at $80k per year I guarantee you'd see empty desks. $300 a week may seem appropriate for the type of service you get but that's the point. The system breeds poor service. Why is this mentality so harmful? Salespeople have very little power to bring in new business to a dealership. Each dealership is only going to bring in so many potential customers each month. Those customers are going to generate the same profits to the dealership if there are 15 or 50 salespeople. The difference is the commissions will be spread over a larger workforce, meaning each sales person earns less. That's why customers feel so pressured by salespeople. The salespeople are desperate to make the sale. And every dollar the customer negotiates off the car takes money right out of the salesman's pocket.

For their $15k yearly base pay what do salesmen get? They get the privilege of working 60 hr weeks including Saturdays and Sundays, most holidays, late nights, get very little formal training, have little chance for advancement, and earn ever decreasing commissions based on shrinking profit margins. Demo vehicles are pretty much a thing of the past and benefits are dwindling yearly. And above all they get the distinction of being labeled the lowest form of life in the eyes of most consumers. So, it's pretty easy to see why there aren't many dealerships with a professional sales force. So, blame the dealer, right? Not so fast.

Remember the theory that states twice the salespeople should sell twice as many cars? The manufacturers started that type of demented math. Twice the dealerships-twice the cars sold. Ask any domestic dealer principal who his number one competitor is and I bet the most common response would be another dealer of the same manufacturer. Why? The simple answer is there are too many dealerships. The core failure lies within the dealer network itself, which is the responsibility of the manufacturers. Manufacturers should set up a distribution network where their dealers compete for market share with competing manufacturers, not with each other. Yet, in the car business that's seldom the case. Most often the Chevrolet representatives (the dealer and salesperson) are competing for the sale against another Chevy or GMC Dealership in the next town or the same town and not the Ford, Dodge or Toyota store across the street. The customer has already decided which product suits him best. So now the sale is no longer about product virtues, resale value, or features and benefits. It's about price and price alone.

All the effort and expense put into the aforementioned R&D, marketing, and labor contracts, worked. The customer, your customer, wants your product. Now, it's about to be tainted by your dealers lust for customer blood. He's about to sick his underqualified, underpaid, overmotivated, somewhat sketchy, sales vulture on your prized customer. The end result? That's been well documented. The buying public considers the car buying experience similar to root canals and prostate exams. When it's all over their left feeling numb and somewhat violated.

I'm sure I've already lost most auto execs but those of you with your heads not completely surrounded by sand think of this example. A buyer is looking for a high-end performance sedan. He's done his research both over the Internet and by test-drives at respective dealerships. After careful consideration he's eliminated the Audi S4 and decided on the new M3. He's made his decision based on product features, status, fun factor, whatever. Do you think this buyer is likely to drive to 4 BMW dealerships and start a bidding war? Not likely. First of all, his time is too valuable, second, the dealers probably wont play ball, and most of all it's not practical. Is saving $200 worth driving 2 hours to hit the nearest 4 dealerships? Not likely. Now, substitute BMW and Audi with Chevy and GMC. Chances are, this same buyer has 10 dealers within an hours drive. He knows it and so do the dealer, manager, and salesman at each dealership. What ensues is a form of capitalist cannibalism too graphic for the discovery channel.

Manufacturers can blame customers, dealers, the Internet, or even President Bush for the current situation, but the blame is squarely with them. It's a simple case of supply and demand. You've simply got too much (dealer) supply for the current demand. As a result, prices and profit margins must fall. And along with them so does the quality of the experience millions of American car buyers must endure every year. Where does service fit into the equation? Lots of dealers have started to push service after the sale as a benefit. Great! Does that mean buyers get poor service if they buy elsewhere? As a manufacturer you better hope not.
Customer service standards, sales department standards, and customer experience standards should be set and enforced at the manufacturer level. In theory that should be happening now. In reality, I worked for a domestic brand dealership that went over a year without a manufacturers sales rep. That meant there was no direct connection between the manufacturer and the dealer. None.

Sales people should be treated as employees of both the dealership and the manufacturer deriving income based on the profits generated for the dealership and the customer satisfaction generated for the manufacturer. If either of these standards is not met, pay suffers. If manufacturers want to maximize their returns they should look no further than their dealer points and their sales departments. Once there's some standards established and enforced, the experience may change. Until then, we'll all suffer.