Published in Automotive

Retail Auto: The Case for Change in Commission Plans to Emphasize CX

Car dealers have been stuck in a “transactional model” for far too long, giving less equal priority to the customer experience. And in many cases, customer retention is automatically assumed in far too many transactions. There is a huge opportunity to differentiate the dealership beyond just price and item, and make it stand out positively to consumers.

First off, allow me to say that I am a huge fan of auto retailers. And from my past experience as the Customer Experience Manager for a top 5 Buick GMC store in the country, I learned auto retailing is a business that, by nature, has an unusual number of moving parts that may make it appear cumbersome and disorganized to consumers. But I’ve always looked at these flaws and seen them instead as opportunities to improve the customer experience for what is considered to be a person’s second most important purchase in their lifetime.

Car dealerships are an entrepreneurial model that needs to be preserved. Auto retailers contribute a great deal of support to local community efforts that range from breast cancer awareness to local schools. And if one believes that a OEM sales/service model like Tesla will replace the traditional dealership model, then think again. That model won’t work with the huge volume of vehicles sold and serviced in this country. Car makers have already tried to get into the retail model and failed miserably.

The Challenge: Balancing a Transactional Model with Customer Experience

There is a little mentioned challenge for dealer retailers in the next 5-10 years that will be critical to their success. And no, it’s not the advanced technology involved with Connected Cars, Autonomous transportation, car Sharing or Electrified vehicles (CASE…the new acronym).

Instead, it has everything to do with rising the level of importance the customer experience holds to matching that of the existing industry obsession with the “transaction”.

For several years now, consultants have been predicting the rise of the “customer experience” as the primary differentiator in every retail transaction. That’s a tough task for an industry like auto; born and raised on “price and item” as the primary sales strategy. Research shows that eventually consumers will demand a more efficient and personalized sales experience in addition to the best price. And sooner or later, auto retailers will be forced by consumers to offer an experience similar to what they receive from other sophisticated retailers like Amazon, Zappos, etc.

“Customer experience (CX) is the new marketing battlefront. More than two-thirds of marketers responsible say their companies compete mostly on the basis of CX, according to the 2017 Gartner Customer Experience in Marketing Survey. And in two years’ time, 81% say they expect to be competing mostly or completely on the basis of CX.” –Gartner Research, 2018

Current Standards for Measuring Customer Experience Falls Short of Demands

The present criteria used by most carmakers, Customer Satisfaction (CSI), encourages sales/service personnel to deliver an experience that, in far too many cases, is only sufficient or “good enough.” Essentially, the current standard reflects the belief that a satisfied customer will not be enough to differentiate dealers from each other.

However, raising the “experiential” measurements of dealer sales/service personnel is the only way to bring auto sales to a level equal to the transaction. Auto salesmen are locked into a model that pays them for the transaction first and the experience second. To implement changes and increases in CX, a new compensation is needed.

The Case for a Residual Commission Model: Solution for Transactional Thinking

Think about it…how does the dealership’s sales or service consultant define success in their job?

$$$, right? Based on income being the focus, do you believe that the sales consultant sees delivering a memorable experience as important as completing the transaction? Or does the primary desire to conclude the transaction and move on to the next place lower the customer engagement because speed and time is placed in a seat of importance?

For the sales consultant, the age-old myth that they must “sell every customer today or lose them forever” drives more attention to the transaction and less to the experience. Their perception that speed is the only priority customers want often causes the “transactional” mindset to override the entire experience. In my opinion, these are reasons why a compensation model that rewards primarily a successful sale are passé. They’re not being interpreted correctly.

My father was a career life insurance agent during the 1950’s – 1970’s. Life insurance was different back then, with the salesperson focused equally on the sale and the renewals (retention). Why? Because back then, the life insurance compensation model was based on creating a “customer for life”(…pardon the pun). Agents were paid just as much on the renewals as on the initial transaction.

While my dad earned his fair share of first year commissions, his retirement was solely vested by the renewals he received right up until his death.

OEMs can penalize the dealer for not meeting “experiential” goals all day, and dealers can put verbal pressure on the front lines to meet those goals.

But until customer facing employees are incented to do so, customer experience will be a secondary thought to that of the transaction. And we all realize that competing on price alone will not be successful long term.

A Tough Task

What I’m suggesting will not be easy for auto dealers to implement, though it is important in the changing retail  industry   Changing an accepted transactional pattern means that we’re talking about a customer behavior shift.  And not just the customer facing team will be impacted, but the  Management’s behavior will have to change also.

The change may be new to the industry itself, but as customers grown more expectant of their experiences, the transformation will be crucial to business success.

 

To view more on the subject of CX impact, refer to the past post: What Alcoholics Anonymous and Employee Behavior Have in Common.