Sometime about 10 years ago the car business reached a fork in the road.
The industry was challenged by a newly (or soon to be) informed and
empowered consumer base. From that point forward dealers have been faced
with a choice: hang on to those old school sales and marketing
techniques or join the ranks of the next generation dealers who rely on a
“more sophisticated” approach…a kinder, gentler car business.

This choice is still facing thousands of dealers who’ve yet to “choose a
side”…but time and distance have now created the opportunity to look
back and ask, “Are those ‘old school’ techniques really out of date?”

In an effort to simplify (but at the risk of generalizing), let’s examine some of the elements of the “old school” approach:

• Higher-pressure selling environment
• Dealer-controlled selling process
• Less price/margin transparency
• Emphasis on front-end profit
• More reliant on traditional advertising like print, radio, television or direct mail
• “Hook” based marketing messages
• Customer’s vehicle choice influenced by profit potential and bank advance
• Bigger push for substantial down payment
• Pre-qualification moved toward front of sales process
• Sales are made in person, on the spot, on the lot

Now let’s take a look at the “more sophisticated” new way of doing things:

• Low-pressure selling environment
• Customer controlled buying process
• Completely transparent pricing and profit margin
• Emphasis on making money in the long term and willingness to forgo immediate profit
• Focus on quick turn, high volume
• Less reliant on traditional advertising
• Price-based marketing messages
• Customer’s vehicle choice uninfluenced
• Little or no pre-qualification
• Sales process exists in large part in email, on the web, on the phone

So which is better? Which do you think we think is better?

Of course, there’s no right answer. Ultimately dealers should choose to
do business in a way they feel most comfortable…and find to be most
effective.

However, we strongly advise against flatly rejecting either “old school”
or “new school” techniques and instead encourage dealers to become
independent thinkers and operators who are willing to take the best and
most effective elements of any approach and use it in their business.

The real danger is in the vast assumptions that have been made about the
“new economy” and the “new consumer.” There’s a sense in the business
that all consumers are informed and all informed consumers will demand
the lowest price and reject any form of pressure. These assumptions are
simply not true.

In reality, consumers still have the same lizard brains they had a
decade ago. And as nifty as it would be if the Internet could speed up
the pace of evolution, it can’t and it hasn’t. People still have
desires, which are fulfilled by owning a nicer, newer car. They still
have fears or doubts, which prevent them from entering the buyer’s
circle. An effective dealer’s job is to leverage the desires and
overcome the doubts.

The notion that consumers in 2010 are data-driven drones who make only
purely logical decisions is false and will damage this industry. You
would be wise to reject that notion and prevent it from damaging your
business.

Tactics vs. Intent

Nowadays generalizations are made about dealers who use certain tactics.
For instance, we’ve heard dealers who consider themselves part of this
newer generation accuse other dealers who continue to make extremely
high front-end profit using “old school” tactics of being somehow
unethical.
The broad philosophical question: Is making a profit unethical?

That’s for you to decide. But for the purposes of this article, let’s
assume we all agree that making a profit is ethical. This is, after all,
the car business…not the car foundation.

In fact, dealers provide a valuable service to the public by finding,
sourcing and arranging for the transportation of vehicles to their
location, inventorying those vehicles so that customers can browse
multiple options, helping customers find and arrange for financing of
their chosen vehicle, providing the opportunity to service the vehicles,
etc.

For that service dealers deserve a profit. (As an aside, nobody
questions or criticizes grocery stores, or clothing stores, or
electronics stores for making a profit. Why should making a profit at a
car store be any different?) How much profit is the right profit? As
much profit as the market will bear, one customer at a time.

That aside, the question becomes: Is the use of “old school” tactics wrong?

We submit that the tactics used are far less important than the intent
of the dealer using them. A dealer whose mission is to help as many
people as possible satisfy their emotional desires by helping them own a
nicer, newer car is not a bad person. Can we agree on that?

Then it should follow that whatever tactics are used to make the sale,
as long as the tactics are not dishonest, regardless of “old school” or
“new school”, are good and reasonable. And a dealer should find and
execute any and all tactics that help secures sales that they feel
comfortable with.

“Old School” Plus “New School”

Makes the Most “Profitable School” In The Industry

In our view, “old school” tactics are wrongly demonized and cast aside
by an increasingly contemporary-minded industry simply because they’re
old.

Additionally, “new school” tactics are rejected by dealers who refuse to embrace new technology, simply because they’re new.

But such polarity doesn’t need to exist. This isn’t Washington! What
good do partisan-style, ideological, intra-industry politics do for a
dealer? None. The reality is the best approach is a hybrid approach.

“New School” Dealers should realize:

• The Internet has not reinvented the car business. It’s is a tool to be used and leveraged, not a savior.

• There’s much more to Internet marketing than just listing vehicles and
prices (in fact, that may be the worst thing you can do). People are
looking for information online beyond just prices.

• Traditional advertising still works and limiting your marketing to the
Internet is a dangerous proposition. You’re simply leaving money on the
table if you ignore traditional media.

• While more informed, consumers are as emotionally driven as ever.

• Lowest price is not the only, or best option (it’s simply the easiest
option, chosen by lazy and unimaginative marketers…that’s a topic for a
different article).

• Making a profit is not wrong…even in 2010.

• While making a profit long term is important, your business will grow
faster and better if you can also turn a profit immediately. The larger
profit you make on the front, the more you can invest to acquire new
customers. The more you invest to acquire new customers, the bigger and
faster you grow.

• Dealers provide a valuable service, and should strive to provide that service to as many people as possible.

• It is entirely possible to sell a decent volume and make a decent profit. High margin doesn’t directly equate to lower volume.

• Applying pressure for a customer to make a buying decision is not
wrong or evil. In fact many customers are desperate for someone to help
them finalize their decision, and a little nudge from you is all they
need.

• As of this writing, people still buy cars in person. We don’t see
customers entering in their credit card online and having their car
delivered by UPS. Until that becomes the norm, the car business is still
a brick and mortar business.

“Old School” Dealers should realize:

• You’re being talked about on the Internet whether you like it or not.
You can join and direct the conversation or you can be a victim of the
conversation that occurs without you.

• More and more customers everyday are turning to the Internet for
information. If you’re not there, you will be invisible to those people.

• Making money in the short run is important. But long-term profit and
the lifetime value of a customer are at least equally as important.

• Because of the proliferation of information, many buyers will know
more about your vehicles than you do. Now you need to go beyond
features, and start talking about benefits and helping buyers realize
how this car will make them feel good.

In the final analysis, the most successful and stable dealers are those
who provide high value in exchange for high profit and utilize all the
tools and techniques available to them, regardless of age, to accomplish
that. Like the dealer who has a video blog AND a radio campaign, or
uses a trade hook AND an opt-in form. Old and new are not mutually
exclusive and should coexist for best results at your dealership.

Love to hear your thoughts guys.

Jimmy

www.RichDealers.com