the way we see it




Inside the
Customer/Dealer
Relationship
A Qualitative Study Examining the Shift of
Power and the Inf...
Contents



Introduction                                                                    1



Executive Summary        ...
Automotive                the way we see it




Introduction


               “The web is making the consumer much        ...
Clearly, the traditional asymmetrical      This study provides a close-up look        fact adjusting their practices accor...
Automotive         the way we see it




Executive Summary
Examining the customer/dealer relationship in a new light.



I...
To achieve a balanced               This does not imply that a situation            relationship with customers in order
r...
Automotive         the way we see it




The move toward greater                            ■ The more knowledgeable consu...
■   Improved customer intelligence is a                  the consumer’s universe, the tools
    critical success factor in...
Automotive          the way we see it




The Initial Search for Information
In this new era, where customers can get near...
“Sometimes, websites are not        to take more control in automotive              version of the car to come out,
very w...
Automotive          the way we see it




                                                     The Internet’s Limitations ...
and they will court you. They are                                               Indeed, this observation is crucial to    ...
Automotive                the way we see it




Key Dimensions of the Buying Process
Each prospective customer who enters ...
Line 3. The proportion of prospective                            On the whole, today the actual
     customers who visit t...
Automotive          the way we see it



Figure 2.      Key Dimensions of the Buying Process


                           ...
What Happens Inside the Dealership
The customer/dealer relationship varies considerably depending on a consumer’s
degree o...
Automotive               the way we see it




                                                     Figure 4.       Scenar...
“We’re real human beings.           During our research, several typical          “There’s a breed of car salesmen who you...
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
Tl Inside The Customer Dealer Relationship
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Transcript of "Tl Inside The Customer Dealer Relationship"

  1. 1. the way we see it Inside the Customer/Dealer Relationship A Qualitative Study Examining the Shift of Power and the Influence of the Internet on the Vehicle Buying Process in Dealerships
  2. 2. Contents Introduction 1 Executive Summary 3 The Initial Search for Information 7 Key Dimensions of the Buying Process 11 What Happens Inside the Dealership 14 Conclusion: Rethinking the Customer/Dealer Relationship 27 Acknowledgments The survey data used in producing this document was collected by the Car Internet Research Program (CIRP). All analysis and interpretation of the research and data has been made by CIRP in collaboration with Capgemini. The research and writing of this study was led by Magdalena Jarvin and was completed as a post-doctoral research project financed by CIRP. Translated from the original French by Karen Twidle. The Car Internet Research Program is sponsored by: Capgemini, Ontario Research Network for E-Commerce (ORNEC), PSA Peugeot Citroën, Renault SA and The University of Ottawa. © 2006 Car Internet Research Program Reproduction in part or in whole is strictly prohibited.
  3. 3. Automotive the way we see it Introduction “The web is making the consumer much Furthermore, during final negotiations, more aware of how the motor industry a well-informed customer is likely to works and all the tricks of the trade, be more demanding and less flexible. so companies have to clean up their act Indeed, using the Internet reduces the and become more transparent, more customer’s list of car choices and accountable.” increases their chances of obtaining a better price than if they did not “You can access incredibly specific use the Internet.1 information in a [web] forum. For example, I was able to find out, in the It has been established that the case of car electronics, which systems to process of buying a new car lasts, avoid because of the bugs they contain.” on average, six months.2 During this time, customers do their homework, As these comments from consumers narrow down their choices to a small confirm, the vehicle buying process selection of potential purchases, based has changed considerably over the last on information from word-of-mouth, few years. The increasingly pervasive traditional media sources (specialized presence of the Internet in people’s written press, television, advertising) daily lives has allowed consumers to and the Internet. However, it is usually obtain more information on products only during the last few weeks of the before choosing which one to buy and buying process that customers actually therefore become less dependent on visit a dealership to see the final two the car salesperson. In the case of a models (on average) that have remained car purchase, the Internet has had an in their consideration set. impact on a number of levels. Thus by the time many customers For one thing, using the Internet walk into a dealership, they will delays the moment when a customer have decided on the price bracket actually visits the dealership. Many within which they are willing to customers today prefer to acquire negotiate, selected their preferred initial information on their own. options, determined the trade-in When those customers visit the price they want for their old vehicle, dealership, they have a tendency as well as the terms of payment and to refuse the dealer’s help. This the acceptable delivery date for the puts salespeople at a disadvantage, new vehicle. In other words, the since the faster direct contact can dealer is faced with customers who, be established with the customer, to a large extent, already know what the better the chance of influencing they want.3 the customer’s final decision. 1 For a detailed analysis of the gains to be made through prior consultation of the web, see “Consumer Information and Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?” Fiona Scott Morton, Florian Zettelmeyer and Jorge Silva-Risso, 2003. 2 CNW Marketing Research, Inc. and Capgemini’s Cars Online 05/06. 3 Clearly, there are also customers who visit a dealership during the initial stages of the decision-making process. One of the issues for the dealer is to distinguish between those who are at the beginning of the process and those who, in contrast, visit the dealership at the end of the process, and who are essentially hunting for the best deal. The former need to be addressed according to their needs, the brand they are looking for, and so on. 1
  4. 4. Clearly, the traditional asymmetrical This study provides a close-up look fact adjusting their practices accordingly, relationship between the dealer and at this relationship, examines the shift there remains significant work to be the customer has been reversed. of power, and aims to help dealers and done. During the course of this study, Customers are now capable of vehicle manufacturers better respond we observed numerous examples of acquiring the knowledge that can to the changing market dynamics. negative interactions between customers give them the upper hand in the The study was conducted by the Car and dealers, reinforcing traditional power struggle that is played out Internet Research Program (CIRP) stereotypes. “There’s a breed of car in the dealer showroom. Dealers can and sponsored by Capgemini, Ontario salesmen who you just don’t feel terribly react to this change of circumstances Research Network for E-Commerce comfortable doing business with, and this in two ways. They can increase and (ORNEC), PSA Peugeot Citroën, is an almost universal experience. The refine their own knowledge base, thus Renault SA and The University of research that has been done says that upping the stakes; or they can adopt a Ottawa. The qualitative research, many people hate going to dealerships; different tack and provide added value consisting of observations and it can be one of the worst buying to the customer rather than added interviews with consumers and experiences anyone ever has,” said information. Key to this is establishing dealers, was undertaken in both one buyer, who was not alone in a relationship based on trust, thereby North America (U.S., Canada) expressing this type of sentiment. improving sales and building customer and Europe (France, UK) at car loyalty—perhaps the most important dealerships representing 12 North It’s clear that many dealers have not key to success in today’s highly American, European and Asian kept up with the pace of consumer competitive automotive industry. mid-market brands. change, which has accelerated rapidly due to consumers’ increasingly The research demonstrates that while sophisticated buying behavior and the industry acknowledges this shift the availability of information on of power and recognizes the need to the Internet, which is helping to change, and while many dealers are in delay their moment of entry into the dealership. It’s critical that the dealer role changes to adapt to this new world. We hope the findings of our research will provide dealers and manufacturers with insight into these changing consumer dynamics and will lead them to gain a better understanding of how to improve the customer/dealer relationship and in the process drive increased sales and strengthen brand and dealer loyalty. 2
  5. 5. Automotive the way we see it Executive Summary Examining the customer/dealer relationship in a new light. It is essential that dealers Market relations between buyers and model between dealer and customer. and manufacturers learn to sellers have often been analyzed by It’s a risk behavior in the sense that understand the consumer’s academics through the prism of game there exists an imbalance or asymmetry universe, the tools at their theory. This approach looks at the of information. In other words, all the disposal, and the state of strategic rationale of players whose information resides with the dealer. mind they are in when aim is to maximize their own deciding to buy a car satisfaction by anticipating their Building a in a dealership. opponent’s possible choices, as Symmetrical Relationship well as anticipating the anticipations The new customer/dealer relationship (the famous “prisoner’s dilemma”). model can be conceptualized as the However, in a lengthy and complex result of an interaction between two decision-making process such as the equal parties. In this case, there is purchase of a new vehicle, what transparency of information, with the factors ultimately affect the same or similar information residing customer’s actions? with both players. Trust is granted after an exchange, comments, words Reducing this process to simple and gestures, in some contexts and arithmetic seems incomplete, and not others, to some people more than that is why, in this context, the “human” others. Trust is viewed as the result of aspect needs to be highlighted. This is a construction, a dynamic process, in particularly true given the fact that the which both parties feel confident of Internet has taken much of the control the other’s intentions. By identifying away from the dealer and put it into the those intentions, and ensuring that consumer’s hands, resulting in new they do not go against self-interest, power dynamics. In addition to factors this attitude encourages power such as financial calculations, brand sharing and the establishment perception, discounts and vehicle of an egalitarian relationship. availability, companies must also consider the nature of the relationship Approaching the relationship between between customer and dealer. The focus customer and dealer in this way makes here is on the notion of trust: In which it possible to go beyond traditional context and in relation to whom does stereotypes. Furthermore, this approach it appear? widens the scope of possibilities for the dealer, by encouraging the use On the one hand, trust can be of personality and human qualities construed as compensation for lack to win the customer’s trust. of information. In this sense, “giving trust” stems from recognizing one’s The final purchase decision will only own lack of information and a be made when both customer and willingness to leave a matter in the dealer consider they have established hands of someone who is seen as a relationship based on trust; when possessing that information. This both feel they are in a sufficiently represents the traditional relationship balanced or symmetrical relationship. 3
  6. 6. To achieve a balanced This does not imply that a situation relationship with customers in order relationship, the dealer must not of absolute transparency is always to build this more symmetrical sell; he must instead enable the possible; rather, this is the ideal relationship. While in some cases consumer to buy. It’s a subtle situation for which to aim. these changes are being made, they but critical difference. are not keeping up with the pace To achieve this balanced relationship, of consumer change. the dealer must not sell; he must instead enable the consumer to buy. Understanding It’s a subtle but critical difference as the New Dynamics reinforced by our research. As one Our research identified a number of customer commented, “I felt no pressure key findings that can be instrumental at all. The sales rep would say ‘We believe in helping automotive companies this is a good car’ but he didn’t try to sell better understand and respond it. And he wouldn’t say ‘These cars are to the shifting dynamics of the going away fast, you better buy it today.’” customer/dealer relationship: ■ Greater transparency is essential Of course, the approach to the to improving the customer/dealer relationship will vary depending on relationship. The Internet, as a kind whether the buyer is a new customer, of bottomless well of information, has where the aim must be to build trust encouraged consumers to demand from scratch and enable the purchase, higher levels of transparency. And this or an existing customer, where the aim trend shows no sign of dissipating. is to strengthen brand and dealer loyalty In this new era, where customers in order to enable a re-purchase. In can get nearly all the information either case, however, the goal should they need without even having to be a more balanced interaction. visit a dealership, dealer salespeople must view customers as partners on In response to changes in the an equal footing. Their collaboration automotive industry, including should be based on a transparent heightened competition, declining attitude and information sharing—in loyalty, more sophisticated consumers other words, a relationship based on and the importance of the Internet trust. Their interaction should turn in the buying process, dealers must into a co-production, where both can make corresponding changes in their obtain satisfaction. 4
  7. 7. Automotive the way we see it The move toward greater ■ The more knowledgeable consumers personalization and customization become about the vehicle buying is an increasingly important process, the more the balance of element in the entire vehicle power shifts in their favor. Although buying process. the Internet does not exclude traditional dealership visits, the salesperson is justified in evaluating the growing use of this tool in the information-gathering process. Our research made it clear that the Internet has an impact on the overall approach manufacturer and dealer websites, of the consumer. During individual to advertising and promotional research, customers can build up programs, to the approach taken by sound background knowledge, a salesperson inside the showroom. which can make them more nimble While the industry acknowledges and strategic in their interaction the need for this kind of approach, with salespeople. This ultimately our research makes it clear that reduces the latter’s influence. practical application is lacking ■ Consumers increasingly demand in many dealerships today. a personalized and customized ■ The customer/dealer relationship is approach during the vehicle buying not a one-size-fits-all formula. During process. In today’s world, customers our research, several typical scenarios want to be seen as individuals, as inside the dealership emerged, ranging people in their own right who from one in which both parties bring cannot be reduced to a box in strong negative preconceptions, to a a grid. Success inside the dealer scenario in which the interaction is showroom rests in the salesperson’s more open and collaborative. These ability to deploy a formal sales differences demonstrate that the method in a personalized fashion. customer/dealer relationship can Certainly no easy task. However, vary considerably depending on it is essential that the salesperson a consumer’s degree of advance make an effort to learn about the knowledge as well as existing individual customer’s vehicle stereotypes on the part of both wants and needs and factor that the customer and dealer. In each information into their approach. scenario, there were critical points The move toward greater where the potential for a breakdown personalization and customization in the relationship was particularly is an increasingly important element high. Understanding how each of in the entire vehicle buying process, these scenarios can play out is from the features offered on essential to a positive outcome. Inside the Customer/Dealer Relationship | Executive Summary 5
  8. 8. ■ Improved customer intelligence is a the consumer’s universe, the tools critical success factor in responding at their disposal, and the state of to the changing dynamics of the mind they are in when deciding customer/dealer relationship. The use to buy a car in a dealership. of the Internet by customers increases the diversity and complexity of their On the pages that follow we take a search for information, making it more look inside the vehicle buying process, difficult for automotive companies from the initial search for information to predict their behavior. It is through the final negotiation that takes therefore essential that dealers and place in the dealership. manufacturers learn to understand About the Study and Methodology Qualitative research by the Car Internet Research Program (CIRP) into the changing dynamics of the consumer/dealer relationship has been ongoing for several years. This research method draws on ethnological practice, which involves spending prolonged periods of time in the field alongside the individuals under study. In contrast, a quantitative research approach is based on statistics. A qualitative study provides the additional dimension of viewing actual behavior. Approximately 150 hours were spent at a dozen dealers in Canada, France, the United Kingdom and the United States, representing brands such as Ford, GM/Chevrolet, Honda, Hyundai, Mazda, Nissan, Renault, Subaru, Volvo and VW. Research was conducted using a mixture of direct intervention and mystery shopper techniques. Direct intervention was with the agreement of dealership owners. The research included observations of the exchanges between customers and dealers and their behavior in the showroom. Furthermore, interviews were conducted with customers and dealers, without a predefined structure being imposed upon them. An additional element of the research was a staff training course on sales techniques in a Canadian dealership, which provided a greater understanding of the role of a dealer salesperson. The advantage of this kind of approach is that it enables the reality of different practices and behavior to be observed in greater detail than is possible with a quantitative survey. Observing consumer and dealer behavior, which can be both consciously and unconsciously played out, reveals attitudes and representations that are difficult, sometimes even impossible, to put into survey responses. The combination of observation and interviews takes into account both what was said and what was done, thus revealing any discrepancies or contradictions, which are in themselves rich in meaning. Being immersed in the field also makes it possible to decode and understand non-verbal communication. The analysis contained in this report focuses on these “human” elements more than the influence of macro sociological factors like age, gender or employment. The aim was not to determine consumer profiles, but rather to outline behavioral trends and types of practices. From a methodology standpoint, the objective was not to quantify these practices, but to spot their possible range, from the most ordinary to the most unusual, without taking into account the number of times they occurred. Information obtained in this manner is of a different nature than that which a statistical survey can provide. 6
  9. 9. Automotive the way we see it The Initial Search for Information In this new era, where customers can get nearly all the information they need without even having to visit a dealership, dealer salespeople must view customers as partners on an equal footing. How does the decision-making process perceived as more tiring for the unfold, from the initial idea of buying eyes, and a magazine is easier a car to going to visit a dealership? to carry around and therefore Three primary sources of information to dip into more frequently for come into play: word-of-mouth, written information. Lastly, because buying and visual marketing material, and a vehicle can sometimes involve more the Internet. Customers either focus than one person, an Internet-based on one particular source or use them approach can be seen as limiting in in conjunction. the sense that it does not allow for simultaneous shared access for all These sources allow customers to those involved. obtain a wide variety of information, including “official” data (for example, Said one vehicle customer, “A lot options or technical specifications) of big purchases are made with a wider and “alternative” data, including the decision-making unit, such as children real prices that car dealers charge or and partners, who are interested and technical problems that can arise with who take part in various stages of the a particular vehicle. Since traditional buyingbox is for the the Net that’s very This process. With media sources and car manufacturers’ difficult to replicate, because if there are placement of a websites provide only official twoperson’s sitting it doesn’t quite work; people photo. Right-click information, customers who wish to what would they do, bring up a chair, on this box and obtain different types of information and then content to all go pointing at change they will picture and place the will turn to alternative sources, like the screen ‘Oh, look at that.’” appropriate image. word-of-mouth and third-party websites (for example, a discussion forum). Others point to the amount of information available on the Internet Paper-Based vs. as outweighing any disadvantages. The Internet-Based Approach Internet has encouraged consumers to Although websites offer a variety demand—and automotive companies of three-dimensional animation and to provide—higher levels of means of visualizing cars, paper-based transparency. Furthermore, the brochures and magazines are “more possibility that the Internet offers of focused on the object itself,” noted accessing third-party information is one consumer. “Sometimes, websites particularly useful to those who might are not very well designed, you can’t be at a disadvantage in the negotiating find all the information. Whereas in process,4 for example women, who a 20-page brochure, you can be sure may feel less empowered in this to have everything. I’m always worried traditionally male-dominated arena. I’ll miss a page on the Internet, because sometimes websites are very nice to look Consider this comment by one at, but very impractical.” web forum manager: “A few possible reasons why 65% of our visitors are female Additional reasons were given for could include our commitment to being preferring a paper-based approach. exclusively third party. In addition, we For example, reading on screen is offer a lot of resources that allow you 4 Scott Morton, Zettelmeyer and Silva-Risso. 7
  10. 10. “Sometimes, websites are not to take more control in automotive version of the car to come out, very well designed, you can’t matters such as knowing the ins and because the engine seemed to be find all the information. Whereas outs of buying a vehicle without getting better,” commented one consumer. in a 20-page brochure, you can potentially cheated from a salesperson, ■ How much a vehicle price might be be sure to have everything.” and maintenance articles that allow the reduced, and by which dealership. individual to take a more active role in ■ “Tips and tricks” used by salespeople – Vehicle customer the life of their vehicle. A lot of what to try to “catch” the customer. Noted we focus on is empowerment within one customer, “The web is making the the automotive world, which I believe consumer much more aware of how the most women appreciate.” motor industry works and all the tricks of the trade, so companies have to clean Furthermore, the Internet enables up their act and become more customers to make the most of other transparent, more accountable.” people’s experiences through the use of tools such as web forums and Stereotypes Prevail Among discussion groups. These forums Consumers and Dealers encourage sharing of many kinds Doing research entirely online can of information, including highly help consumers secure the lowest technical data, since the participants price on a vehicle and save time. are often passionate about cars and Not surprisingly, dealers would might also be employees of vehicle rather establish face-to-face contact manufacturers. The types of themes with customers rather than covered include: communicating electronically. ■ Technical problems that are rarely Said one dealer salesperson: dealt with in car magazines. Said “As the product is expensive, we’re one car buyer, “You can access there to reassure the customer, who in incredibly specific information in any case is anxious by nature. You’ve a forum. For example, I was able to got to pamper and mollycoddle them.” find out, in the case of car electronics, which systems to avoid because of the A web forum leader had a different bugs they contain.” perspective: “I strongly believe that ■ Specifications for new car models consumers prefer the Internet with before they are actually out on the regards to the car market due to the market. “I was able to decide that it non-pressurized environment. There would be better to wait for the next are no salespeople hassling you and you have the freedom of making a more independent decision.” For many customers, the golden rule is that the price that is advertised is not the price you end up paying, and some even develop an analysis grid by which to test a given salesperson and measure his flexibility before negotiation. For their part, some salespeople express annoyance regarding customers’ use of the Internet and the new knowledge buyers possess. They now have to deal with customers who sometimes actually have a better technical knowledge of a particular feature or model than that of the dealers. 8
  11. 11. Automotive the way we see it The Internet’s Limitations and the Role of the Salesperson If consumers can become highly knowledgeable through word-of-mouth, traditional media and the Internet, and if on top of that they prefer avoiding a potentially unpleasant meeting with a salesperson, what could motivate them—during the process of information seeking—to take the next step to visit a dealership? Engaging directly with a person is seen in principle as allowing for Two sets of explanatory factors emerged more flexibility of interaction than during our research. The first involves with a machine such as the Internet. customers who go because they do For example, if a customer wishes want to interact with a salesperson. to change an order after it has been For those who do not know how transferred to a manufacturer, this to go about obtaining alternative could be accomplished more readily information, meeting a dealer becomes by dealing with a person. a critical stage in the research process. Said one buyer: “You can’t really get a The second set of explanatory good idea of the prices by visiting a car factors for visiting a dealership is dealer’s or manufacturer’s website. Also, linked directly to the vehicle itself. I wanted to be able to draw up a payment One of the obvious limitations of the plan and I couldn’t take that any further Internet is that you cannot physically without a sales rep’s help.” appraise a car, let alone try it out. Those consumers who get information During the information-gathering from alternative sources sometimes stage, some consumers have already wish to cross-cut their data with developed a “salesperson avoidance information provided by a dealer, strategy.” These buyers typically gather since they are not able to objectively a significant amount of information assess the reliability of their sources. online and limit their choice to a pre-selection of vehicles to try out Some buyers prefer interacting at the dealership, even though their with another human being. The intention may be to buy from another salesperson may be perceived as dealer. Noted an employee of a sales having the capacity for empathizing website: “I think that people are quite with a customer’s needs and being sly. I don’t think anybody would ever say able to answer questions. At best, to a dealer ‘I’m not going to buy it through some customers believe a salesperson you.’ I think if the dealers realize quite how may provide personalized advice many people did it, they wouldn’t be so to buyers that they can’t get on happy. But you can go into a dealership the Internet. and say ‘I’m really interested in this car’ Inside the Customer/Dealer Relationship | The Initial Search for Information 9
  12. 12. and they will court you. They are Indeed, this observation is crucial to salespeople. This ultimately reduces salespeople so they will try to sell the this report: The more knowledgeable the latter’s influence. Often the dealer’s cars to you. They will give you a lot of consumers become about the vehicle response is to develop counter strategies, information—‘This is how much money buying process, the more the balance thus maintaining the power struggle you will save if you buy it here’— but of power shifts in their favor. between the two parties. obviously the customers have researched it thoroughly and they know that they can Although the Internet does not However, not all salespeople react buy it cheaper online or at another dealer.” exclude traditional dealership visits, in this way. We found that in some the salesperson is justified in evaluating cases, the customer’s higher degree of Moving the Relationship the growing use of this tool in the self-reliance is seen as being beneficial to a Higher Plane information-gathering process. Our to both parties, moving their interaction Many dealer salespeople are wary of research made it clear that the Internet to a higher plane. This requires that dealer customers’ increasing independence. has an impact on the overall approach salespeople hone new interpersonal Rather than viewing this form of of the consumer. During individual skills to improve their relationship empowerment as a positive research, customers can build up with customers. development that might enable sound background knowledge, them to cut down on their work, which can make them more nimble In this new era, where customers salespeople feel put to the test. and strategic in their interaction with can get nearly all the information they need without even having to visit a dealership, dealer salespeople must view customers as partners on Figure 1. Rethinking the Customer/Dealer Relationship an equal footing. Their collaboration should be based on a transparent attitude and information sharing—in New model = other words, a relationship based on Rich Transparency of information trust. Their interaction should turn into a co-production, where both Deale rs can obtain satisfaction. Level of Information s er Old model= s um Asymmetry of C on information Poor Time 1960 2006 Source: CIRP, Capgemini Thanks to the Internet, some customers today may have greater technical knowledge than the dealer about the car they’re interested in buying. This has led to a shift in the balance of power, with customers demanding higher levels of transparency. Thus, the new customer/dealer relationship model should be viewed as the result of an interaction between two equal parties. In this case, there is transparency of information, with the same or similar information residing with both players. 10
  13. 13. Automotive the way we see it Key Dimensions of the Buying Process Each prospective customer who enters the showroom is the “product” of a long history that must be understood. Why and how do consumers process, prospects engage in many decide to buy a certain car of a activities (gathering information, certain brand at a certain dealer? choosing, negotiating, establishing Which steps, which buying process the resale value of and reselling the does the prospect follow? What is used vehicle if necessary, financing, the length of this process? At which insurance, delivery, etc.) to choose, moment do they choose to eliminate by successive eliminations, among the one model of a given brand? Using subset of vehicles potentially satisfying what criteria? Which of its product their expectations and needs, the attributes can an automotive company vehicle that best suits them. use to influence the decision-making process in its favor? These questions Figure 2 on page 13 (from CNW are at the heart of every marketing Marketing Research, Inc.) shows five decision made by automotive dealers variables essential to understanding and manufacturers. They are also at the buying process. The table is the heart of many research projects.5 constructed as follows: Line 1. The sequence, in months and The qualitative research data weeks, of the purchasing period of presented in this report were obtained a vehicle (in this case, in Canada in the dealer showroom. However, the and the U.S.), of all brands and majority of visits to the showroom all models. CNW established that occur during the final two weeks the buying process lasts an average of a six-month purchasing process. of six months. The Internet acts as In short, by the time prospective an accelerator, and intensive Internet customers enter the showroom, users sweep through this process their mood, intention, willingness in three to four months. to negotiate and feelings for a vehicle have largely been determined already, Line 2. The number of models outside the showroom. Each prospective considered by a prospective buyer customer who enters the showroom is at different points in the buying thus the “product” of a long history sequence (shopping list). It is well that must be understood. confirmed that this shopping list is reduced throughout the six-month Research has found that the vehicle process. The profile of this funnel will purchasing process progresses over vary by brand. For example, Mercedes a period of approximately six months. has a flat funnel: Six months before Even compared with the purchase purchasing a Mercedes (2003, U.S.), the of expensive equipment such as a customer only considers approximately TV (about two weeks), it is one of two vehicles in their shopping list, the longest, most stressful and riskiest whereas a Nissan buyer considers purchasing processes. Throughout the slightly over four. 5 In North America (U.S. and Canada), the automotive buying process was the object of a major research study by CNW Marketing Research, Inc. (http://www.cnwbyweb.net/). The collected data, gathered from customers who had actually purchased a vehicle of a given brand, make it possible to determine, for each brand and type of vehicle, the number of vehicles taken into account at various points in the purchase process over a six-month period. Since the summer of 2003, these data are available for Canada. The data are regularly updated. CIRP (http://www.cirp.uottawa.ca) has also carried out numerous surveys of consumers and dealers (in the United States, Canada, United Kingdom, France and Spain), which supplement the results of CNW. 11
  14. 14. Line 3. The proportion of prospective On the whole, today the actual customers who visit the showroom. function of the showroom is to be It is observed that the trip to the dealer visited during the last two to three generally occurs very late in the buying weeks of the purchasing process for process, most often during the last two negotiating the price of the almost- weeks. It has also been established that chosen vehicle and for putting into Internet users, at least in North America, competition dealers of the same are willing to travel up to 100 km/62 brand. The showroom is thus a miles (in Canada, see CIRP study) to battlefield for price. buy the car that exactly corresponds to their expectations, with the A prospective customer at the end consequence of transforming the of the buying process is already well limits of exclusive dealer territories. equipped to negotiate, probably better than many sales representatives.6 Faced Lines 4 to 9. The focus of the with such a prospective customer, consumer at various points of salespeople (often inadequately the buying process is described. compensated with commission) It is observed that, during the first have to: three months, consumers clarify their 1. Sort through the customers in needs and choose the type and style the showroom—those who are of the vehicle. They then reduce the in the beginning of the process size of the shopping list to examine and to whom, in principle, they a small number of vehicles in detail, would have to deliver a speech studying their features. During the last centered on their needs, the brand, month and especially during the final etc., an exercise often perceived as weeks, consumers concentrate on the a waste of time—from those who prices of the vehicles that remain on are at the end of the process and the shopping list, which has now are essentially seeking the best become very short, not even two price and, overall, the best deal. vehicles long on average. 2. Lead the negotiation to its conclusion, according to a Lines 10 to end. The primary sources script narrowly controlled by the of information used by the prospective supervisor. However, two times out customer are described. Word-of-mouth of three, this negotiation will fail is observed to be a permanent source (calculation is based on the average of information present throughout the closing ratio calculated by CNW process. Prospective customers view for the United States). Moreover, advertising (from six months to two negotiating through the Internet months prior to purchase) to choose gives significant power to the and configure their vehicle, read consumer, as we’ll see in the specialized magazines, talk to their next section of this report. friends from the very beginning to the end, consult the Internet, and read ads in local newspapers to negotiate prices during the final two weeks. In short, for four to five months the sale of a car progresses mainly outside the showroom, and to some extent in the realm of advertising, representations and word-of-mouth—essentially, in a virtual space as opposed to the very real world of the showroom. 6 In the U.S., prospective customers may even obtain the knowledge, if they want, of the price paid by the dealer to the producer, including hold-backs. 12
  15. 15. Automotive the way we see it Figure 2. Key Dimensions of the Buying Process 6 5 4 3 2 1 2 Steps of the buying process months months months months months month weeks Number of models considered in the shopping list Canada (2002) 3.8 3.6 3.1 3.4 2.5 1.3 1.2 U.S. (2003) 4.1 3.8 3.5 3.3 2.9 2.3 1.9 Dealer visits by planned time of acquisition (visited a dealership within past 2 weeks) Canada (2002) 6.1% 6.5% 7.2% 11.1% 18.3% 29.8% 32.9% (93.5%, last week) U.S. (2003) 1.9% 4.2% 4.8% 6.8% 14.3% 19.7% 19.6% (85.4%, last week) Question: At this time, what is most important to you when deciding to purchase/lease a new vehicle? (scale: 1-5, 1=lowest, 5=highest) My needs Canada (2002) 4.6 4.5 3.9 3.1 2.5 1.9 1.7 U.S. (2003) 4.3 4.2 3.7 3.2 2.6 2.0 1.6 Models available Canada (2002) 3.2 3.5 3.8 3.7 3.3 2.4 1.5 U.S. (2003) 3.7 4.0 4.3 3.9 3.3 2.5 1.9 Styling Canada (2002) 3.1 3.3 3.5 3.2 3.1 1.9 1.3 U.S. (2003) 3.6 3.3 3.5 3.1 2.3 1.9 1.4 Features Canada (2002) 2.1 2.2 3.1 3.6 4.0 4.1 3.5 U.S. (2003) 1.9 2.4 3.0 3.8 4.2 4.0 3.2 Price Canada (2002) 2.4 2.6 3.1 3.2 3.2 4.5 4.8 U.S. (2003) 2.6 2.9 3.2 3.4 2.8 4.3 4.5 Primary Source of Auto Information by Intended Purchase Date Sources of Information All Intenders—Canada and U.S. (%) TV ad Canada (2002) 16.6 17.1 18.2 14.6 10.4 8.4 6.9 U.S. (2003) 16.7 17.2 17.9 13.1 8.9 7.6 6.1 Consumer magazine ad Canada (2002) 15.0 19.0 19.2 18.6 15.7 10.7 8.6 U.S. (2003) 13.8 18.7 18.4 17.7 12.4 8.4 5.9 Friend/relative Canada (2002) 14.5 10.8 8.3 8.2 10.0 12.9 6.9 U.S. (2003) 13.6 11.9 8.4 5.5 10.3 13.8 4.2 Business associate Canada (2002) 10.0 9.2 7.6 7.0 7.5 8.4 8.3 U.S. (2003) 11.7 8.8 6.5 6.4 5.7 6.5 8.2 Dealer brochure Canada (2002) 7.8 7.4 7.6 7.6 7.7 7.3 6.6 U.S. (2003) 7.1 6.7 7.2 7.1 7.4 6.4 6.2 Consumer Rpt/lemon aide Canada (2002) 6.0 6.3 6.9 8.3 9.2 8.7 6.7 U.S. (2003) 6.9 6.8 7.4 11.1 11.4 10.3 8.3 Newspaper ad (local) Canada (2002) 4.5 4.8 5.3 5.9 7.3 8.7 19.0 U.S. (2003) 3.9 4.1 4.9 6.6 6.9 8.8 18.4 Auto article (any source) Canada (2002) 3.4 3.4 3.3 3.9 4.5 5.6 6.0 U.S. (2003) 4.1 3.7 4.2 5.5 4.9 7.6 7.9 Radio ad Canada (2002 1.6 1.8 2.0 2.2 2.5 2.6 3.5 U.S. (2003) 1.1 1.5 1.7 1.8 2.1 2.1 3.4 Internet Canada (2002) 8.9 9.2 1.1 11.2 12.0 13.0 13.5 U.S. (2003) 8.5 8.9 9.1 9.6 10.9 10.2 12.3 Auto magazine ad Canada (2002) 1.4 1.5 1.5 1.7 1.8 1.7 1.7 U.S. (2003) 1.7 1.5 1.7 2.5 2.4 2.1 1.8 Auto buyers’ guide Canada (2002) 4.4 4.4 4.3 4.4 4.5 4.8 5.3 U.S. (2003) 4.9 5.1 5.8 5.1 6.2 6.1 7.3 Company store/mall display Canada (2002) 0.1 0.1 0.2 0.1 0.1 0.1 0.2 U.S. (2003) 0.2 0.2 0.4 0.3 0.2 0.3 0.2 Auto show Canada (2002) 2.0 2.1 2.0 2.4 2.7 2.7 2.6 National newspapers U.S. (2003) 2.6 2.8 3.5 3.7 4.4 4.9 4.8 Other Canada (2002) 3.6 2.9 3.4 4.1 4.3 4.3 4.3 U.S. (2003) 2.6 1.6 2.3 3.2 4.7 3.7 4.1 Source: Adapted from CNW Marketing Research, Inc. (http://www.cnwmr.com/) (1) Purchase Path Wave VIII—U.S. 2003 and (2) Purchase Path Study—Canada 2002 Inside the Customer/Dealer Relationship | Key Dimensions of the Buying Process 13
  16. 16. What Happens Inside the Dealership The customer/dealer relationship varies considerably depending on a consumer’s degree of advance knowledge as well as existing preconceptions on the part of both the customer and dealer. The more dealers can demonstrate ■ Stage 3: negotiation in the that they are trying to build a salesperson’s office (vehicle relationship based on trust, the better availability, extra options, their chances of staying in the delivery, terms of payment) consideration set as customers narrow down their vehicle choices. What Throughout these stages, the happens once the customer is inside customer/salesperson relationship the dealer showroom is critical to is put to the test, with the possibility ensuring a positive outcome. that it could break down completely at any time. All it takes is the wrong We identified three key stages move or a clumsy word, and the fragile of a customer’s visit: edifice of trust, which has been slowly ■ Stage 1: entering the dealership built, can collapse entirely. A substantial and initial interaction with on-site challenge for those who wish to see a personnel (receptionist, salespeople) sale through to the end. ■ Stage 2: interaction with a In general, certain practices should be salesperson over a particular maintained regardless of the customer’s vehicle (request for information, stage during the showroom visit. For examining the car, potential example, we found that customers test drive) Figure 3. Do’s and Don’ts in the Showroom Bad Practices Best Practices Stage 1: entering the ■ Walk up to customers as soon as they ■ Let the customer walk around on their dealership and initial enter the showroom. own for five to 10 minutes. interaction ■ Use standard tricks such as “happening ■ Then walk straight up to welcome the to walk by” just as the customer enters. customer—possibly introduce oneself by ■ Ask too quickly how to help the customer. name (but not necessarily)—and simply say “If you need me/if I can do anything ■ Insist, even when the customer answers for you I’m over there at my desk” “No thank you, just browsing.” (indicating where that is). ■ Unless they have questions, leave customers alone. Stage 2: interaction ■ If the customer expresses the desire ■ If the customer expresses the desire with a salesperson over to be left alone: Stick to them and keep to be left alone: Walk away after having a particular vehicle asking questions; follow them around reminded them that you are available to the showroom; don’t respect the personal help if needed. Come back 10 to 15 minutes “bubble” they might try to establish inside later (at least) to ask if everything is all right. a vehicle. ■ If the customer accepts the presence ■ If the customer accepts the presence of of the salesperson: Open up the space the salesperson: Block the space between between the customer and the vehicle, the customer and the vehicle by standing respect the customer’s attempts to in between, by showing the vehicle off, by examine the vehicle. Maintain an attitude encouraging the customer to have a seat. of politeness, allowing the customer to go first. Stage 3 : negotiation in ■ If the situation is tense: Show that one is ■ If the situation is tense: Do “the little things” the salesperson’s office suspicious, in a defensive mode, answer that reassure the customer (suggest a cup the customer’s attacks. Use sales tricks of coffee, adapt a soothing tone, in some such as pretending to make very special cases take a seat next to the customer). offers. Establish transparency, lay cards on the ■ If the situation is easy-going: Adopt a cool table when the negotiation starts. attitude and behave as if customer and ■ If the situation is easy-going: Keep some seller were “pals.” distance without becoming formal; do not mix up statuses. 14
  17. 17. Automotive the way we see it Figure 4. Scenarios Inside the Showroom Positive Scenario 3: Open to Buy/Dealer as Partner Consumer has no negative stereotypes about dealer and is looking for knowledge. Dealer has no negative stereotypes about customer, builds trust-based relationship, resulting in positive outcome. Scenario 2: Open to Buy/Wary of Dealer Consumer has fewer negative stereotypes about Customer dealer, brings some knowledge, is open to buy. Stereotypes Dealer needs to adapt to customer’s behavior to ensure positive outcome. Scenario 1: Internet Savvy/Dealer Averse Consumer has negative preconceptions about dealer, expects unpleasant experience, brings wealth of knowledge. Dealer has negative preconceptions about consumer, expects difficult negotiations. Dealer Negative Positive Stereotypes Source: CIRP, Capgemini During our research, several typical showroom scenarios emerged, demonstrating that the customer/dealer relationship varies considerably depending on a consumer’s degree of advance knowledge as well as existing preconceptions on the part of both the customer and dealer. We found that these scenarios can exist on their own or as phases in a continuum, moving ultimately toward the third scenario. responded better to less aggressive Customers who realize they are behavior on the part of salespeople being subjected to standardized whether they had just entered the treatment, that they are perceived showroom or had been inside for a by the salesperson as “the average period of time. However, some practices customer,” are often put off. Success were more critical to maintaining the inside the dealer showroom rests on relationship during a specific stage the salesperson’s ability to deploy a (see Figure 3). formal sales method in a personalized fashion. However, it is essential that Personalized Approach the salesperson make an effort to is Critical to Success learn about the individual customer’s In our research, a variety of behaviors vehicle wants and needs and factor that were observed. Salespeople tend to use information into their approach. The certain tried-and-true sales techniques move toward greater personalization in their approach to dealing with and customization is an increasingly customers. Although these methods important element in the entire are empirically developed and produce vehicle buying process, from the a degree of success, they are more often features offered on manufacturer than not insufficient to satisfy today’s and dealer websites, to advertising demanding customers and do not and promotional programs,7 to the always lead to the desired outcome. approach taken by a salesperson inside the showroom. 7 Capgemini’s Cars Online 05/06 research found that targeted, relevant, personalized direct-mail offers from manufacturers and dealers were influential in the vehicle selection process. Nearly 80% of consumers said they would respond immediately or consider the offer for the future. Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 15
  18. 18. “We’re real human beings. During our research, several typical “There’s a breed of car salesmen who you You have to remain polite, scenarios emerged, demonstrating that just don’t feel terribly comfortable doing you never insult. But we’re the customer/dealer relationship varies business with, and this is an almost not prostitutes either.” considerably depending on a consumer’s universal experience. The research that degree of advance knowledge as well has been done says that most people hate – Dealer salesperson as existing preconceptions on the part going to dealerships, it’s one of the worst of both the customer and dealer (see buying experiences anyone ever has,” Figure 4). We found that these scenarios said one buyer who fits this scenario. can exist on their own or as phases in a continuum, moving ultimately toward In this situation, the customer prepares the third scenario. However, in each for the fight ahead by developing a scenario, there were critical points where two-fold arsenal made up of relatively the potential for a breakdown in the precise technical information on the relationship was particularly high. chosen model and a firm decision on the maximum price they are prepared Scenario 1 Internet Savvy/Dealer Averse to pay and choice of options. Armor This scenario typically features polished and arrows sharpened, the customers who have an extremely customer feels able to counter any negative preconception about car potential attacks by the salesperson dealers. Their expectation is that the and has also prepared a number of experience will be unpleasant, during strategies to avoid being “duped.” which they will be accosted by an overbearing, potentially arrogant Meanwhile, in the dealership, salesperson who won’t listen to what the salesperson eagerly awaits a they want. This type of customer is customer—but often with mixed likely to avoid the visit to the dealership feelings. On the one hand, a dealer as long as possible and will arrive needs customers in order to make with a wealth of knowledge, knowing a living. However, customers also exactly what they want in order to represent potential “nightmares” in limit any significant interaction with the words of some dealers and can the salesperson. turn out to be a waste of their time. With the aim of maximizing efficiency and turnover, salespeople will try to determine as quickly as possible whether they are dealing with a “hot dog” customer, a “window-shopper,” “a tire kicker” or, in contrast, a “lead” or “prospect.” The Cat-and-Mouse Game Begins Inside the dealership salespeople are standing watch, closely monitoring from their office the comings and goings of customers. The receptionist is on the frontline, welcoming visitors as they step over the threshold, immediately asking how she may be of service to them. The customer is also on the lookout as he walks into the battlefield, wary and ready to counter an attack. The cat-and-mouse game has begun. 16

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