Power Shift: How car buyers are leveraging information

rethinking automotive industryIn Chapter 3 of Daniel Pink’s book, To Sell is Human: The Surprising Truth About Moving Others, he speaks of the changes occurring in how people are shopping for automobiles. For years, automotive dealers held the power because they had the information about the vehicles being sold. The shopper was limited by a lack of information, especially when buying a used car.

Sooner or later, someone is going to feel like they got a raw deal by the salesman. It happens. So the next time they set out to buy a car, they decide they are not going to be manipulated by the salesman, but they will be the one who gets more from the salesman than the salesman gets from them. They “won’t get fooled again”, to quote the English band, The Who.

Thus, in the car shopping process, there exists an antagonistic relationship shoppers have with car salesmen, especially used car salesmen. I actually wonder if this may be the source of the dreaded negotiation process that goes on when buying a vehicle.

With the advent of services like Carfax and AutoCheck, sites like AutoTrader.com and Cars.com, and the internet in general, car shoppers have research available at their fingertips. In fact, roughly 75% of car shoppers have researched vehicles online before they even step on the lot. New car shoppers are spending over 13 hours researching vehicles online. (Internet Is Making Car Shopping More Efficient As Role Of Traditional Media Declines, According To A Polk Study Commissioned By AutoTrader.com)

I see most of the internet leads that come into our dealership every week. I talk to some and email with others. What I am seeing in our small town in Alabama is that people now know information only dealers used to know. For instance, I had a customer who sent a lead that looked like a government RFP – a request for proposal. The consumer had dealer codes and pricing for specific options and knew the rebate process from the manufacturer as well. He requested a quote based on a car he built himself. He wasn’t looking to accept what dealers had. He wanted what he wanted.

This shopper’s RFP gave four dealerships the opportunity to send him a quote, and then one opportunity to beat the best price. He knew exactly what he wanted and leveraged competition and information to get the best deal.

Pink, mentioned above, notes, “When buyers can know more than sellers, sellers are no longer protectors and purveyors of information. They’re the curators and clarifiers of it—helping to make sense of the blizzard of facts, data, and options.” Car salesmen no longer have the power of information. Shoppers now have access to the same information, and that shifts the power from the dealer to the consumer. The dealer is now competing against other manufacturers, other dealers with the same vehicle, and the leverage held by the shopper.

When this happens, car salesmen (and other types of salesmen as well) become coaches, not closers.

When the cars are the same and the prices are roughly equal, other factors will win the shopper. The question for dealers at this point is, “What separates you from the others?”

The power has shifted and dealers have been slow to adjust. The ones who do adjust will close more deals and be more profitable.

So what is the prescription? I propose that new car dealers (and manufacturers) should become transparent. Completely transparent. Show the customer the MSRP. Show the customer the cost to the dealer, the dealer’s invoice. Show the shopper the rebates. Chances are, the shoppers know it anyway.

If that happens, and the customer sees the transparency of the process, they realize nothing is being withheld from them. That increases trust, and lowers the shopper’s defenses. The deal no longer becomes a transaction not to get screwed on, but a relationship.

Also, offer other services: deliver the car for free, offer other services, and make the service department the best in the area among other things. The price, while a big factor, is not the primary factor now in the car shopping process. The relationship with the dealer or salesman, the location of the dealership and other services the dealer provides become as important.

So coach the buyer. Don’t close them.