Most customers love to negotiate! If you believe that, then read no further. If you think most customers care more about squeezing the last dollar than getting a great experience…. stop here.
When discussing One Price with dealers I often hear, “We negotiate because the customer feels they have to win something”. Before the internet, perhaps that was true. But today’s customers know what they should be paying. As long as your price is in the “bandwidth of their expectations” that is all they care about. They don’t expect buying a car is a “battle” they have to win.
Today’s highly knowledgeable customers are shopping more for a hassle-free experience than the lowest price. Women (who make up over 50% of today’s automotive purchasers) and Gen Y (over 25% of sales) especially hate negotiating, which they view as a lack of transparency and game-playing.
Below, find the top reasons for transitioning to a One Price Sale process:
- Sales Associate Recruiting. The number one reason to move to One Price is your ability to recruit a younger, well educated, gender balanced sales force. The number one challenge for most traditional dealers is recruiting and retaining outstanding salespeople. Women and Gen Yers have not had to negotiate for anything in their lives and don’t understand why in the world they should have to negotiate a car deal. So, why would they apply for a job where the primary core competency is negotiating and a commission plan that rewards them for trying to make as much money as they can off of everyone they greet? They won’t! Eliminate negotiations and your window of recruitment opens much wider.
- Transaction Expense Reduction. In an era of margin compression, dealers have to lower transaction expenses, which are mostly personnel. One Price salesperson are paid around 18% of the variable gross – typically $100-125 less per car than a negotiating salesperson – but they average about 14 cars per month – so they still make a very good living. Some One Price dealerships pay salespeople hourly. Fixed labor costs further reduce expenses. There is one manager for every 2.5 salespeople in a negotiating store (including Finance/BDC). The long-term goal of One Price dealers is to collapse the F/I department and operate with less management (no more “desking” deals) to achieve a ratio of one manager for every five salespeople. Also, One Price dealers are not on split programs with their lenders. Because all customers are “rated” accurately 94% of all reserve dollars “stick.”
- 5 Star Sales Reviews. You wouldn’t go to a doctor or eat at a restaurant that had a 3.5 rating or less. Why would a customer consider a dealership that’s sales process is rated under 4 stars? Dealers who execute the proscribed One Price sales process automatically get high customer ratings. Ratings drive leads. The One Price process is fast, fair, simple and transparent. These attributes don’t apply to traditional dealerships where negotiating is an adversarial event for the majority of customers.
- Sales Management Effectiveness. Desking deals and taking “T.O.s” are the core competencies that make a good negotiating sales manager. Conversely, One Price sales managers focus on developing people while managing a very well defined sales process. The key element of One Price success is “out presenting” the completion. Developing and training the sales staff is a must for success. Customers expect to find “Geniuses” on your showroom floor. Think Apple Stores selling cars…
- Improved Grosses. This is counter-intuitive, but One Price stores have slightly higher grosses than negotiating stores. Simply put, when you add value to a transaction you can charge more. Think about yourself. Would you pay a small premium for an outstanding experience? Of course. Now factor in reduced transaction expenses, and you wind up with higher net gross sales profits.
So, what are the challenges?
- Executive Management Commitment and Support. There will be “bumps and bruises” when launching a radically new initiative. The Executive team needs to go into One Price with the feeling that “If I can’t make this work I should get out of the car business.” Only that level of commitment will create success with this new sales process. This group also needs to be patient, not a strong suit for most dealership Executives. You’ll need a vision of what you want your showroom and online experience to look like and support that in an unrelenting manner.
- Sales Management Buy-in. The biggest drag on One Price success is the lack of buy-in from sales management. On average one-third of the existing sales management team won’t make the trip to the “new world.” They either don’t have the desire or the skill set to take the journey. What’s worse is many stores have managers will “quit and stay.” They like the dealership and feel they can “out wait” the new process till it goes away. They wind up under-mining One Price either overtly or covertly. If you don’t have the right “managers on the bus” trying to transition to One Price will be a time consuming and costly experience.
- Not Becoming a Learning Organization. As previously noted, One Price success is contingent upon out-presenting the competition. Most dealerships today don’t have a laser like focus on training their sales people in product and process. Putting training calendars in place, managers conducting daily one-on-ones, instant coaching, generating extreme product knowledge by the sales consultants are not found in most stores today. Without these attributes expect to fail when attempting to install a One Price process.
Implementing One Price isn’t for the faint of heart. But it is the only way to transact what the majority of customers are looking for. If you would like to schedule a webinar further explaining One Price Selling, email manderson@rikessgroup.com