Our previous articles have been largely aimed at buyers, but we would also like to share some insight with all the dealers out there as well. Here are three things all car dealers should know about car buyers:
The media make a good living out of demonizing you.
During any given week, we (buyers) are sure to find several articles on Yahoo! news, CNN, or one of the other news sites that tells us how car dealers try to screw us over. And when we are actually in the car market, we are flooded with "how-to" articles detailing how to avoid your tricks.
The media isn't just making these stories up, though. After all, according to the Better Business Bureau new car dealerships were the 4th most complaint ridden industry in 2009 while used car dealerships ranked 7th. But even still, it seems that whenever it is a slow day on the news desk pumping out another article describing dealers' awfulness is an easy way to produce some content.
Buyers' expectations when they walk into a dealership are that they will get pushed around by a salesman, they will endure time-consuming and uncomfortable negotiations, and that they will overpay for the car that they actually want. And that is just what buyers expect. Buyers are generally not surprised when the vehicle they came to see is no longer on the lot or that the advertised price was an amazing sales deal that just ended yesterday. This tends to cause a lot of unwanted stress and anxiety on the buyer's part. In the car business, dealers call this "burn-out." Nothing is worse for a dealer than a burned out buyer because that buyer will always feel as if they've been taken for a ride.
Although this seems bad for dealerships, I'm not so certain that it is. Because dealers have the ability to change many of the negative perceptions of the buying process, this is an easy way for any dealership to enhance its competitive advantage. Imagine a courteous dealership that genuinely tried to figure out its customers' needs and recommended appropriate models and features. Imagine a dealership that understands that buyers have so many other matters in life and that the car-buying process needs to be quick. Imagine a dealership that trades unpleasant negotiations for transparency. That is the dealership buyers want to patronize.
We Want To Find Our "Go-To" Mechanic
Unless we have an established relationship with the mechanic around the corner, most of us think that we get ripped off every time we bring the car into his shop. The waiting area (if there is one) is small and uncomfortable, the coffee's been brewing since last Christmas, and the mechanic always finds a way to "save me big time" by repairing something before it actually breaks. After walking out of there feeling like a fool one too many times, I'm looking for an alternative.
This reality presents dealerships with a fantastic opportunity. We're hungry to service our vehicles at a place we trust. If we had a great car-buying experience, we're happy to take our vehicles back to the same dealership for regular service for the life of the car – even if it does cost a little extra for an inspection and an oil change.
We offer dealerships this loyalty because they have earned our trust in previous transactions. Instead of selling me a car, you walked me through my options and empowered me to make the best decision based on my needs. Instead of just telling me you "saved me big time" when you replaced the alternator belt, you showed me the belt so that I could see why you needed to fix it. These are small, seemingly trivial actions but they are necessary to gain my trust.
The learning point here is that dealerships must have a holistic approach to customer engagement. The salesman on the floor must understand that the way he treats me directly impacts how much I trust the entire dealership, which directly impacts my desire to service my vehicle at that dealership and my inclination to return to that dealership when I'm searching for my next vehicle.
"You don't earn loyalty in a day. You earn loyalty day-by-day."
In 2010 Chrome reported that brand loyalty continues to slide, with only 35% of buyers responding that they want to purchase a car from the same brand they previously owned (down 4% from 2009). Dealer loyalty is also on the decline with only 24% of respondents claiming that they chose a dealer based on a prior purchase, or someone they knew purchased, from that dealer.
There are a multitude of factors contributing to these falling numbers. The internet, for one, has made it much easier for buyers to weigh the pros and cons of different car brands. The internet also makes it much easier to see the competing offers different dealers are making, reducing the opportunity cost of physically visiting multiple dealers just to get an initial offer.
The internet has also degraded buyers' relationships with dealers to a certain extent. 15 years ago car salesmen served the dual role or educator and salesperson simply because information about different vehicles was not as easily accessible as it is today. The internet is somewhat marginalizing car salesmen by obviating their role as educator. Without that role, buyers understand their relationship with salesmen, and dealerships, as largely transactional – buyers want a car and dealers want to close the deal – without clear mutual understanding. Transactional relationships are the most superficial form of human interaction. Engaging in a transactional relationship implies that the relationship is severed as soon as the two parties are finished extracting value from each other.
Therefore one obvious way to improve loyalty is for dealerships to cultivate relationships with buyers that aren't purely transactional. Instead of dealers thinking about how they can extract the most value from a customer, dealers should be thinking about how they can create the most mutual value from their relationships with buyers.
How does a dealer do this? A good starting point is being honest and fair with every customer. It's really that simple.