BrandingWire: Kicking the Tires on the US Auto Dealership

It's time for a new car, what do you do? Chances are you do a lot of research online, then you take a deep breath... and ask your friends and family for a direct recommendation of where to go. The truth is you can do a lot of browsing and building online and what you've got is a virtual car. That may work for Second Life; in this life, the only place when you can actually buy a real car is through a dealer. Now  let's go for a raise of hands -- who loves to visit auto dealers?

This month's BrandingWire challenge was brought to us by a whole industry in need of help -- automotive. Former chairman of American Motors and now business lecturer Gerald Myers said that today's dealer/factory model is "a supremely inefficient system, with a minimum of 60 days worth of cars and sometimes 100 sitting on lots." Why do the physical cars sit in the lot? So you can have as many choices as possible and still drive off at the wheel of a new car. "Those dealers are accustomed to having many vehicles around," Myers continued. "And dealers don't kowtow to a factory. They are independent businessmen."

Are you beginning to see the challenge? We may not be able to solve the complex issues of the franchise distribution system, where the cars are sold. Let's take a look at the current model used for marketing them. There are many efforts, often overlapping:

1. The national advertising or Tier 1. Those gorgeous and sexy TV and print visuals of cars driven in exotic places -- of note is that some of the BMW TV commercials were shot in the narrow and hilly roads of Sardegna, the big island off the coast of the main Italian peninsula. Kudos to the drivers, those can be treacherous, especially in wet conditions.
2. Then there's the Tier 2, which is more regional and makes use of snipes or tags to offer more localized incentives and deals.
3. The Tier 3 ads are usually low-budget, targeted to local dealers and less attractive. Unless you do enjoy the style. There is a mix of radio, newspaper, billboards, and infomercials here.

The challenge from a branding side as I see it is to deliver a cohesive message and appeal to potential buyers. According to a survey of 600 people conducted by Internet auto sales and marketing company Outsell in March 2007, 61.9% still prefer to buy a car from an auto dealer and 80% want to test drive a car before buying it. However, when asked if they could buy a car online and then have it delivered to their homes for a test drive, 74% of respondents said they would be interested in doing that.

So is the middle man (car dealer) adding value? If you take a look at factory-owned stores in Europe, things could be aligned much better and cars may end up costing a lot less. A controversial 2003 op-ed in the Wall Street Journal by J.D. Power II, pegged the cost of a dealer network at 30%, inclusive of franchise laws, multiple level marketing, and transport cost. Ouch!

A 2007 consumer outlook study by Rob Tregenza and Kate Muhl of iconoculture sums up another aspect of the branding challenge: abundance of choice and the fragmentation of segments have created a highly competitive automotive landscape.

"With the abundance of choice today, the consumer-vehicle relationship must be increasingly meaningful to lifestyle as well as lifestage. To connect, automakers must resonate with consumers' desire for flexibility, relevance and access. And with cars the new Third Place, cross-category opportunities are growing." [emphasis mine]

Trying to be all things to all buyers will not work anymore. Vehicles are now being considered on the basis of relevance to our lives. The same report makes three distinct recommendations:

1. Build a brand beehive by defining your product or service as a communal gathering place. To borrow a page from a book that is working look at Mini Cooper, Scion, Toyota Yaris.
2. Take advantage of the milliseconds available in people's lives, and target the fit to each generation's tolerance level. Carmax and eBay Motors are both reported as working well.
3. Today's consumers expect 21st-century performance and full-impact style in every toy, tool and trip they buy. Some models are appealing, Mazda CX7 and Ford Edge.

At the end of the day, what I expect from a dealer is a good grasp of manners in maintaining our relationship and supporting my purchase, and straight talk. I ended up being a loyal customer of Toyota. Many years ago, I bought my first Camry because I wanted a reliable and maintenance free car that got good mileage. I used to commute first 118 then 78 miles each way -- on the New Jersey Turnpike.

A few years into that job, with a promotion, I got a company car so it made sense to sell mine. The dealer who had sold it to me did not want it although they knew I had an impeccable maintenance record (I had just had my 60,000-mile service, and that costs a penny, let me tell you). The other problem they cited is that it was a stick and had lower resale value.

Another Toyota dealer ended up buying my Camry -- they recognized that it was well maintained, the miles where highway and the interior of the car looked new. They quoted me an honest price and the deal was done. When I switched jobs because of an acquisition and lost my company car, guess where I went to buy?

That's right. I buy my cars from Pat at the local Toyota dealer, and I let Steve and Mark from the service department assist me with maintenance and recommended repairs. They are courteous, respectful and generous with their time -- and never, ever pushed something on me that I did not need. Instead, they give me the heads up on specials. Those are all things I value above the car model and type.

What sold me on the dealer was that they could stand behind their promises. Was it a magnificent experience? I have no idea, I have always gone in and requested exactly what I wanted. Would I buy online? Probably, since I know what I'm after.

I suspect you have your own ideas about what works. And that is the point of my post. What would you suggest to help this industry who is in obvious need? What would work for you?

[Maserati, my aspirational car]

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Check out the other post by fellow BrandingWire members Steve Woodruff, Derrick Daye, Lewis Green, Patrick Shaber, Becky Carroll, Olivier Blanchard, Drew McLellan, Martin Jelsema, Kevin Dugan, Gavin Heaton and Ann Handley.

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UPDATE: [From a conversation I had with an industry insider] -- "It is my considered opinion that the entire industry needs to be reworked, from the manufacturers and their union taskmasters to the sales floor and the service bay. I'm not sure how to go about it exactly, but I know that it involves putting businessmen in the managerial roles, rather than some dudes who sold a lot of cars ten years ago. Service depts need to become more responsible about how repairs are handled and billed, and finance - don't get me started on finance. Change the commission structure, create openness in pricing, and purge the sales floor of the fast-talking shysters who will say anything to make a sale.

Customer Service needs to be the watchword, respecting them, caring for them, providing them with a quality product up front, and then remarkable service after the sale. Brand-building will come organically to the dealership that takes this philosophy to heart."

Comments

[Lewis Green]

Valeria,

As I mentioned to Becky, I haven't purchased a car from a dealer in 20 years. I don't need the hassle nor do I need the feeling that I am getting ripped off.

[Patrick Schaber]

Valeria,
It's nice you have that good relationship with a dealer. Finding that "straight talk" you mention is not easy!

[Valeria Maltoni]

Lewis -- I don't look forward to a new car purchase for the very same reason. And the issues with transparency and trustworthiness transfer on to mechanics as well.

Patrick -- my relationship is with a person or a few people at the dealer. There's no question that things would change if they all left.

Anyone else found a way to make the process enjoyable? After your house, this is the second biggest purchase you will ever make!

[Martin]

It seems most of the BrandingWire pundits, including me, have a pretty negative perception of the auto dealership. Nice to know you've found a user-friendly one. But I'm pretty sure they suffer just by being an auto dealer. I'll bet they would rather be able to position their operation outside of the dealership category.

[Carolyn Ann]

There are some good dealers out there! The idea of customer service is foreign to too many dealers, though.

My motorcycles have come from "excellent", "okay" and "you're still in business?" dealers. But at least they didn't leave me to "think" about it...

Motorcycle dealers are having to learn how to sell to women, though. It's a different process than selling to guys: the sales effort is defined by talking to the customer. (There's a concept for you...)

Overall, I prefer the American/British system of (nominally, or maybe "supposedly") independent dealers to the factory-controlled dealers of Europe. The pub trade in Britain suffered with the loss of the independent publican; the choices were dictated by some anonymous "weenie" over in Head Office, and not by what the guy-with-a-stake-in-the-business thought.

So while the dealership is supposed to add costs (I'm not convinced it does), the fact that competition exists is good. If I don't like Dealer X, I'll go to Dealer Y.

To echo your example, Valeria: my Ducati dealer knows that if they don't provide superior service, I'll simply take the bike elsewhere. It's irrelevant to me if I have to go 35 miles or 135 miles; if the service warrants it, I'll drive that far. My Vespa dealer didn't understand that; they lost my business. (I took it to the other end of Delaware for a service, rather than go to my dealer, who was closer.)

But to make things better, American auto dealers need to understand the customer better. The factories need to be more responsive (they still act as if they control the market), and the dealers need to realize that they have to be more "people friendly" if they're going to win customers.

I have the distinct impression that auto dealers think in terms of "units sold", and not in terms of "customer satisfaction": that's something the factory claims to think about. It's an expensive purchase, and it should be addressed in that manner: not as if you're shopping for slightly more expensive Corn Flakes.

Besides offering cars that people actually want to buy, that change would help the American auto industry.

Carolyn Ann

[Valeria Maltoni]

Martin:

I think there is some truth to that. The sales reps I talk to who work for car dealers are not too happy to be identified with the system as it stands today. Some actually do want to do a good job for the customers.

[Valeria Maltoni]

Carolyn Ann:

Indeed the emphasis is still on the units sold, even for the best experiences. I called my rep only after I was sure I wanted to buy a specific car and model and gave him all the information to get a number of choices for me to test drive once I went in.

But, and here's the difference, I can call him at any time for help with anything related to my purchase and he's come through for me numerous times.

Is it possible that a newer generation of people getting involved in auto dealership can shift the focus more to customers? It seems that the old timers have gotten used to the way things were...

[Steve Roesler]

Valeria,

Every time an auto spot comes on TV, I say the same thing to my wife: "I've never gotten interested in a car because of a TV ad."

1. I don't buy American made cars. Too many bad experiences with sales, service, and quality, as well as the craziness of every feature being an "add-on" to price.

2. I've had great experiences with German cars for the past 25 years. I buy them through a local certified mechanic who specializes in them and always knows who is trading up.

The one time that I bought from a dealership, the experience cost me more money and didn't deliver a better product.

Punchline: I trust the guy who knows the insides, doesn't make the bulk of his living off of hustling cars, and has served me well for many years.

The auto industry's "middle men" add to the price and detract from the experience.

[Valeria Maltoni]

Steve:

Thank you for taking the time to stop in. You raise another interesting point I did not flesh out in my post -- used cars. With the exception of my first Camry, which was new, I always buy newer used or floor models.

Sometimes I treat myself to an upgrade on the interior -- so leather seats with seat warmers or 6 CD reader for example. I refuse to lose a couple thousand bills just for the pleasure of driving off the lot in a new car. And Toyota has excellent warranties and a track record with floor models.

Anyone else take advantage of floor models for their car purchases?

[Stephen]

I came across this set of articles while on another mission, and I must say that this is a terrific idea. The bad news is that I have to collate all of these posts into one place and pre-digest for my bosses. This all needs to get set up on a forum!

The auto industry is on the brink of a seismic change - for good or ill.

[Kevin Dugan]

Valeria - The brand beehive idea is a powerful one as many dealers have multiple locations and they could easily present a lifestyle focus at each location without completely alienating the other customers. But you're right about not being all things to all customers. The one size fits all mentality of dealerships has created a huge image problem for them.

[Valeria Maltoni]

Stephen -- hopefully you received my message about checking out the BrandingWire site where we aggregate all these posts every month. Are you speaking about the auto industry change from knowledge? Or maybe you have ideas to suggest here?

Kevin -- wish I could take the credit for the beehive idea; it was iconocultures's. One way to have personal experiences at dealerships is for service to be customer oriented. My sales rep asked me what is important to me to feel I have had a successful transaction. Little details like that make a big difference is perception.