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Why Customers Bolt Without Buying


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Why Customers Bolt Without Buying

  1. 1. 8/11/2005 Why They Bolt Without Buying By Steve Finlay, Aug 11 2005 What top-performing auto dealerships do right and under-performers do wrong in trying to seal the deal. When customers leave a dealership without buying, 27% blame it on the way the staff treated them, while an equal percentage decide against the store’s make of vehicles, according to J.D. Power and Associates. Those two reasons top a list indicating why surveyed car shoppers say: “Thanks, but no thanks.” (Or, in some cases, say worse.) Runner-up reasons for walking: price (21%); desired vehicle not in stock (14%); and the nebulous “other” (12%), says a J.D. Power study. The number of customers who cite dealership treatment, while relatively high, should be kept in perspective, says Chris Denove, a J.D. Power partner and director of its automotive retailing and distribution research. “I’m willing to bet more than half of them came in with an attitude or an unrealistic expectation, such as wanting to buy a vehicle for $2,000 under invoice,” he says. “It’s that perception vs. reality again.” Still, some dealerships enjoy consistently high sales closing rates while others see lots of shoppers walk out and not come back. To learn why, J.D. Power in a study of Nissan dealerships in seven major markets sent in mystery shoppers, surveyed buyers and non-buyers, interviewed dealership employees and observed showroom activity. Here is what the research found: Lack of sales pressure is the biggest differentiator between high and low closers, and dealerships that close the most get higher customer-satisfaction scores. Chris Denove “You would think higher pressure would have higher close rates, but that wasn’t the case, especially if a dealer wasn’t able to close from the start,” says Denove. “Low-pressure stores have higher returns of ‘be-backs.’ The second most important differentiator: Higher-closing stores are better at dealing with negative price situations and handling price requests. The number of no-sale shoppers citing dealership mistreatment is 48% at under-performing stores, 29% at top performers. While sales pressure and pricing games top the turn-off list, also on it are perceived dishonesty, lack of Why They Bolt Without Buying Page 1 of 3
  2. 2. 8/11/2005 attention, rudeness and lack of product knowledge – although the latter plays less of a role than some auto makers think. “The product-knowledge ratings were no different between the under-performers and top performers, yet it’s what manufacturers spend the most time on,” says Denove. “They don’t spend enough on making dealership staffers better sales people.” One-price stores – another darling of some auto makers – faired poorly in the study. Those dealerships had many customers get a price, then use it during negotiations at another dealership, where they most likely end up buying. “A few one-price stores have high close rates, such as Jack Fitzgerald (head of Kensington, MD-based Fitzgerald Auto Malls' 12 stores and 35 franchises in three states), says Denove. “But usually the one-price stores had not-good margins and a higher percentage of people who didn’t buy because of price. Not a good combination.” Dealer principals at the best stores “loved writing big checks to their sales performers,” says Denove. In contrast, “dealers at the struggling stores saw their sales staff as an ‘expense.’” The study found other key differences between the two groups: l Sales people at top-performing dealerships are employed at those stores four times longer. They earn twice as much. l While both groups try to get customers to commit to a price, top performers are much quicker to provide a price to customers who refuse to initiate an offer. l Top performers exert far less pressure to buy, allowing customers to exit gracefully and enhancing their chances of returning. l Top stores complete the sales process an hour faster, partly because sales people are less likely to be “green peas,” who repeatedly consult with the sales manager on price. l Top sales people demonstrate better raw communication skills. l Top-performing stores spend less money on advertising ($232 vs. $425 per unit sold), relying more on repeat business, referrals and the higher close rates. “Advertising only gets them in,” says Denove.: l Top performers gather more customer information (i.e., types of vehicles considered, stage in the shopping process). Top performers were not deemed better across every area investigated. For example: l Under-performers approach customers faster. But this is sometimes seen as pouncing. l Top performers are no more likely to follow up with sales prospects than under-performers. l The staffs at under-performing stores are more enthusiastic and slightly more likely to treat shoppers as serious buyers. Of surveyed customers who walked out because of dealership treatment, 59% ended up buying a same-brand Why They Bolt Without Buying Page 2 of 3
  3. 3. 8/11/2005 vehicle from another dealer. Most likely to do that were Jeep shoppers (77%); least likely, Saturn shoppers (19%). Those second stores that clinch the deal often benefit from the first store breaking bad news on price, softening up the customer and otherwise “doing the dirty work,” says Denove. Meanwhile, high-pressure tactics apparently works better in some parts of the country than others. “Customers in New York are more tolerant of the aggressive approach than are customers on the West Coast,” Denove says. © 2005, Primedia Business Magazines and Media, a PRIMEDIA company. All rights reserved. This article is protected by United States copyright and other intellectual property laws and may not be reproduced, rewritten, distributed, redisseminated, transmitted, displayed, published or broadcast, directly or indirectly, in any medium without the prior written permission of PRIMEDIA Business Corp. Why They Bolt Without Buying Page 3 of 3