With limited supplies of new cars, many dealers charging significant markups or market adjustments. A recent survey by GfK Automobility shows that 80% of buyers paid MSRP or more for a new car this year, and 34% report “paying fees they’ve never heard of.” This isn’t just painful to consumers, the markups are hurting brand loyalty for dealers and automakers, too.
I experienced this myself when I was shopping for a new EV this spring. I found a Brand X car I was interested in at a nearby dealership and the markup listed on the website was $2,500, which I was willing to pay. When I called to check if they had the car on the lot, I was informed — in quite a rude manner — that the markup was actually $15,000, which I would sooner walk barefoot over hot broken glass than pay. Then I did what many consumers would do — I went to a different brand that provided a better experience and bought from them instead. And I will never do business with Brand X again. Ever.
The same survey found that 30% of buyers who paid over sticker price “said they would tell others not to go to the dealership they used.” Just 14% of those who paid MSRP said the same. And the markups aren’t just hurting the sales side of the dealership business — 32% of buyers in June said they won’t go back to the dealership they bought from when their new car needs service. Just 23% said the same in May. The bottom line is, if your customers think you’re gouging them, they probably won’t return.
Of course, some reasonable dealer markups are necessary due to reduced inventory causing lower sales volume — you have to make up the profits somewhere. But you don’t have to alienate your customers in the process. Here is how dealers can maintain and build customer loyalty, even if they have to charge above MSRP.
I know, easier said than done, but you’re starting to see it more often in dealership advertisements. Consumers have made it clear that they are fed up with dealer markups, and by selling at MSRP or below, you immediately stand out as the good player in the crowd. It’s also an easy hit for an ad campaign, because you don’t need to say much else.
If you can go in with no markups, you’ll likely drive streams of loyal, happy customers to your dealership. You’re building a level of trust with your customers by starting the relationship with an honest deal, and that will bring them back for service and maintenance, bring their friends and family in for new cars, and bring them back for their next one.
If you absolutely must use market adjustments to make your margins, be honest about them. When I found out that Brand X lied on their website about their markups, I immediately made the decision that I would never do business with them again. And not just the dealership, but the OEM brand altogether.
If consumers are willing to pay some level of market adjustment, they’ll still come in and they will likely appreciate that you did not try to hide it. If they can get to the box without having to haggle about add-ons like ceramic coatings and anti-theft etchings, they will leave a lot happier and be much more likely to return.
This is also an opportunity to get ahead of upcoming FTC rules that will likely prohibit some add-ons deemed to be “without benefit” and require online posting of all add-ons and their prices, as well as truth in advertising rules that will require disclosure and declination in writing of the “cash price without optional add-ons.” Simply by being transparent about pricing now, you can basically say “oh, we already do that” if and when the new rules are applied and customers inquire about it.
It’s also imperative that you train all of your staff to properly and politely explain the reason for any market adjustment. Far too many dealers are taking a “too bad, this is the way it is” attitude and that’s a huge turnoff for buyers. Come up with a script to help make sure that salespeople are able to empathize with the customer, share their pain, and show other ways that your dealer is providing them value. The market is tight right now, but your customers do have choices and they won’t return if they feel you’re pushy or dishonest.
After getting done dirty by Brand X, I went to Polestar and received the absolute best car buying experience that I’ve ever had. The price on the website was the price I paid. There was no haggling, no fees, no hidden extras tacked on. There was no box to sit in, either. I did my credit application online, came in, did a test drive, and completed my order. In a few weeks, I came back and picked up my new Polestar 2. The whole process took less than 2 hours and I only signed a couple pieces of paper. Bing, bang, boom, they have a customer for life.
And it wasn’t just the honest, haggle- and hassle-free process I appreciated, it was the approach of the sales staff. I walked away feeling like I was helped by a person who cared about me leaving happy and making an informed decision, not just about making the sale.
She showed me all the cool features. She asked open-ended questions about what I was looking for and was incredibly knowledgeable. Any question I could think of asking — and I’m a car guy, so I had more than a few — she was able to answer. It’s obvious that everyone who worked in the showroom was extraordinarily well-trained. What made the experience unique was that she was a guide, not a salesperson.
This is how you build value in the service you provide. Well-trained salespeople and a culture of helping people find the right car and navigate this tight market will take you a long way, even if you can’t avoid the markups.
You know how important it is to properly handle phone ups and get people on the showroom floor or in the service bay. And it’s highly likely that they will call before stepping foot in your dealerships. We found that nearly 70% of automotive consumers called at some point in the buying process, so mishandling calls can cause serious damage to your business. This is especially true in today’s market where your phone ups are expecting bad news, whether that’s markups or the car they want being unavailable.
This is one of many reasons why it’s critical that dealerships analyze all of the calls they receive. Dealership networks frequently rely on mystery shoppers or manual call listening to monitor the quality of service that customers are getting on the phone. There are many faults to this approach, the primary one being that only a tiny fraction of calls end up getting scored.
When you use Invoca’s automated call quality assurance (QA) to monitor your calls, you get full visibility into 100% of the calls that come into your dealership. Even if calls are transferred between a call center and the dealership or between locations or departments, Invoca enables you to monitor and score the entirety of every single call.
Automating call monitoring and scoring with conversation intelligence software enables you to create a scalable and repeatable QA process across all of your dealerships. Better yet, it frees managers from searching for problems so they have the time to focus on strategies that don’t just provide consistent service, but continually improved service. Just imagine if every time you called a business, your experience got better! You’d probably be a customer for life. Automating your call monitoring and scoring enables you to provide that always-better experience for your customers, accelerate revenue, and boost those CSI scores.
Once you can analyze all of your calls, you need to examine how you are scoring your sales staff. Are your metrics just based on setting appointments, or are they based on taking actions that will make customers happy? Even scoring calls on simple things like a warm greeting, asking for the caller’s name, and asking what they are looking for are customer-focused metrics that show your salespeople are taking the time to get to know callers and getting to the core of their needs. From here, you can coach the sales staff to handle calls more effectively and empathetically to get people excited about coming into the dealership and doing business with you for the long haul.