Episode THREE: Fighting Margin Compression
When 99% of shoppers expect a hassle, how can you deny that there is something wrong with the industry? Companies likes Amazon have made a friction-free buying experience the norm. Is your dealership ready to keep up or are you part of the problem?
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Any good business sets out to meet the needs of a consumer; to solve a problem. The car business was no different. From the early days of Ford, the consumer wanted...NEEDED the motor carriage. The franchise model servedas a way to deliver in full force. A desirable product was produced and the thousands in the franchise dealership network got busy delivering value to customers in ways THEY saw fit from a boots-on-the-ground mindset.
Extreme transparency and precise consumer demand is really doing a number on the old way. Dale says dealers and manufacturers need to work together to right the ship...and fast. Because today's consumers are noticing something isn't quite right. Today's consumers don't miss anything and they aren't quiet about it. The flow of delivery: Manufacturer, Dealer, End-Consumer has seen many changes over the years and has slid from consumer-centric into the minutia of self-preservation to everyone's loss.
Chapter two deals primarily with the breakdown of factory incentive programs. Although Dale writes that these below the line programs had a rather benign and benevolent beginning, he's quick to add and label them a "quiet killer of the car business". Dale recounts his experience with this incentive money when he was a dealer. He points out that it drove the mutually beneficial outcomes of improving relationships with customers and selling more cars. That is no longer the case.
Now, in the current "all-or-nothing" environment, dealers are depending on incentive money for survival. They're being encouraged, intentionally or not, to make decisions such as taking on huge losses on individual vehicles in order to get the incentive money. This cycle leads to more price confusion and overall distrust. As a result of these programs, a buyer can purchase the exact vehicle for thousands less right down the street from a competing dealer depending on how hard hit that dealer is; how hard they're willing to push for that incentive money.
No wonder there is growing pricing distrust. But it's hard to bite the hand that feeds you. And like Dale said, today's consumers notice A LOT. He cites multiple industry studies showing that consumers just don't like to buy cars from dealers. Only 4% prefer the current buying process and 99% expect a hassle. It's not a good start.
Dale gives a great historical summary of the problem all the way back to the 1900s in a wave including Henry Ford, Pearl Harbor, US Senator Mike Monroney, and more. It's a great chance to brush up on your industry history. Buyers longstanding poor perception of the industry are fueling companies like TrueCar, and Carvana, and Amazon as they look to give customers exactly what they want. A positive, friction-free, and transparent experience.
Dale's advice at the end of both chapters? The opportunity lies in dealers going all-in on delivering an individualized and pleasant experience to consumers. Only then can perceptions begin to change and the benefits of delivering a modern consumer experience begin to be realized.
So are you moving in that direction or are you letting the incentive winds blow you around?
Dale Pollak’s ‘Like I See It’