How Greed Overtakes Sound Business Judgment
Automobile dealers invest literally millions of dollars every year on their facilities and in their employees to establish and maintain high customer satisfaction scores and to create owner loyalty. These are indeed dollars well spent and contribute greatly to insure that the dealership continues to perpetuate itself in the future.
Manufacturers also have established certain standards than dealerships must maintain. These can be very expensive to institute, but also to maintain. Manufacturers provide incentives to the dealer for complying to these standards.
Then there is the cost of advertising – money spent to attract new customers to the dealership every month. In some major markets dealer spendhundreds of thousands of dollars to attract new customers.
I want to say now, I believe that the vast majority of automobile dealers do try to provide outstanding customer service. These dealers “earn” high satisfaction scores based solely on the fact that they under promise and over deliver. These are the dealers that truly care about retaining the customer. They recognize the value of each and every customer and when new and exciting products are brought to market “their” customers are treated differently than the person that is a first time visitor. Preferential pricing is just one type of preference.
The point is this, dealers are investing large sums of money to both attract you to the dealership and then to retain you as a customer for future sales and service. Unfortunately, when an opportunity presents itself to “gouge” theses very customers their eyes glaze over and they throw aside the long term income opportunities for a short term gain. Allow me to give you an example.
When the 2003 Infiniti G35 Coupe was introduced there were literally thousands of people waiting in line for it. This car represented one of the new products that would help to reinvent Infiniti and re-launch the Infiniti brand. All of the new products, the M35 and M45, FX35 and FX45 and the G35 were spectacular and well received by the public, but more importantly, selling very well. Life was grand in all of Dealerville. I should know because I was an Infiniti General Manager in the Dallas market at the time.
In some parts of the country having a “HOT” product was not enough for some dealers…Southern California is an area that comes to mind.
Dealers in this area were adding every conceivable dealer installed option and charging three or four times what the option was worth. Some would even add an additional charge for “limited availability.” In other words they were taking advantage of an emotionally charged market for great products and gouging the customer. You say IPhone? The people were not happy! Enter the power of the Internet!
In 1999 the Infiniti dealership where I worked was asked by the Infiniti division of the Nissan Corporation to participate in a “Beta” test with a new Internet web services provider with which Nissan was working. We agreed. We were one of three dealerships nationally that were chosen. We designed an all new website and started actively using the web as a marketing tool. By the time 2003 rolled around we were far ahead of most dealerships, in this area, and well known by Infiniti enthusiasts because we were also very active on many ofthe discussion boards.
Back to the 2003 G35 Coupe! I started to get a lot of emails from people all around the country inquiring about pricing. People were asking what I thought they should pay or where do they complain about dealers that were charging outlandish prices! My advice then and my advice today is the same…take your business where elsewhere. You are no longer limited to the neighborhood dealership. The Internet has made the entire nation your neighborhood.
In 2003 California became a very good market for my dealership. We were shipping cars to customer’s homes every week. It started to spread and in 2004 and 2005 over 30% of our total new car business was out of state. Many of those customers ended up buying more than one vehicle and many stopped by when they were in the area to introduce themselves.
So what did I think a good price was for the car back in 2003 when it was really “HOT?” Well, we sold them for MSRP. Customers were very willing to pay MSRP for the car to have one of the first on the street. But, not every dealer was willing to accept MSRP. I personally think that was a huge mistake…and many dealers are about to make the same mistake all over again with the introduction of the new 2008 Infiniti G37 Coupe.
My advice, if you want one of these cars early, is don’t get caught up in the excitement of the moment and make a big financial error. There are dealers across the nation willing to sell you a car at a fair price. Take advantage of the Internet to find exactly what you want. It is easy and it may even give you an excuse to take a weekend trip to pick up your new car and drive it home. If that doesn’t interest you, many dealers will have it shipped right to you door
You might wonder why you don’t see dealers offering this on their website. It is interesting how this all turned out. Remember we started this because we were asked to participate by Nissan NNA. Well, we were too successful! Dealers around the country were complaining that we were selling “their customer’s” cars and interfering with “…their market”.
After many discussions, Nissan/Infiniti changed the rules and restricted the marketing that dealers were allowed to do and still be allowed to participate in Corporate sponsored incentive programs. That’sanother story that I will share with you in another article next week.
Remember, it is just a car. Avoid dealerships that demonstrate no loyalty to you by the fact that they are willing to overcharge you. Loyalty must be a two way street.
Even though I’m not associated with Infiniti, contact me and perhaps I can help.
Danny Mayer has been the automobile business since 1969. It has been his entire career and remains his passion today. He has sat in the chair of virtually every executive position in the industry, from single point franchises to the largest publicly owed automobile corporations. He has proven time and time again that “…creative, at the edge thinking drives success…” That is probably why General Motors of Canada tapped Danny to assist them in developing and introducing a new Customer Satisfaction program for that nation’s dealers and why Nissan Corporation asked him to participate, as 1 of 3 dealers nationally, in developing the Internet process for all Infiniti dealers. He knows the automobile business…he knows the Internet…and he cares about customers. He can be reached at [email protected].
Additional articles may be viewed via Danny’s “Street Talk” main page.