the way we see it

Inside theCustomer/DealerRelationship

A Qualitative Study Examining the Shift ofPower and the Influence of the Internet onthe Vehicle Buying Process in Dealerships

Contents

Introduction 1

Executive Summary 3

The Initial Search for Information 7

Key Dimensions of the Buying Process 11

What Happens Inside the Dealership 14

Conclusion: Rethinking the Customer/Dealer Relationship 27

Acknowledgments

The survey data used in producing this document was collected by the Car Internet Research Program (CIRP). All analysis and interpretation of theresearch and data has been made by CIRP in collaboration with Capgemini.The research and writing of this study was led by Magdalena Jarvin and wascompleted as a post-doctoral research project financed by CIRP. Translatedfrom the original French by Karen Twidle.

The Car Internet Research Program is sponsored by: Capgemini, OntarioResearch Network for E-Commerce (ORNEC), PSA Peugeot Citroën, Renault SA and The University of Ottawa.

© 2006 Car Internet Research ProgramReproduction in part or in whole is strictly prohibited.

Furthermore, during final negotiations,a well-informed customer is likely tobe more demanding and less flexible.Indeed, using the Internet reduces thecustomer’s list of car choices andincreases their chances of obtaining a better price than if they did not use the Internet.1

It has been established that theprocess of buying a new car lasts, on average, six months.2 During thistime, customers do their homework,narrow down their choices to a smallselection of potential purchases, basedon information from word-of-mouth,traditional media sources (specializedwritten press, television, advertising)and the Internet. However, it is usuallyonly during the last few weeks of thebuying process that customers actuallyvisit a dealership to see the final twomodels (on average) that have remainedin their consideration set.

Thus by the time many customerswalk into a dealership, they will have decided on the price bracketwithin which they are willing tonegotiate, selected their preferredoptions, determined the trade-in price they want for their old vehicle,as well as the terms of payment andthe acceptable delivery date for thenew vehicle. In other words, thedealer is faced with customers who, to a large extent, already know whatthey want.3

“The web is making the consumer muchmore aware of how the motor industryworks and all the tricks of the trade, so companies have to clean up their actand become more transparent, moreaccountable.”

“You can access incredibly specificinformation in a [web] forum. Forexample, I was able to find out, in thecase of car electronics, which systems toavoid because of the bugs they contain.”

As these comments from consumersconfirm, the vehicle buying processhas changed considerably over the lastfew years. The increasingly pervasivepresence of the Internet in people’sdaily lives has allowed consumers toobtain more information on productsbefore choosing which one to buy andtherefore become less dependent onthe car salesperson. In the case of acar purchase, the Internet has had animpact on a number of levels.

For one thing, using the Internetdelays the moment when a customeractually visits the dealership. Manycustomers today prefer to acquireinitial information on their own.When those customers visit thedealership, they have a tendency to refuse the dealer’s help. This puts salespeople at a disadvantage,since the faster direct contact can be established with the customer, the better the chance of influencingthe customer’s final decision.

1

Introduction

Automotive the way we see it

1 For a detailed analysis of the gains to be made through prior consultation of the web, see “Consumer Information andDiscrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?” Fiona Scott Morton, FlorianZettelmeyer and Jorge Silva-Risso, 2003.2 CNW Marketing Research, Inc. and Capgemini’s Cars Online 05/06.3 Clearly, there are also customers who visit a dealership during the initial stages of the decision-making process. One ofthe issues for the dealer is to distinguish between those who are at the beginning of the process and those who, incontrast, visit the dealership at the end of the process, and who are essentially hunting for the best deal. The former needto be addressed according to their needs, the brand they are looking for, and so on.

This study provides a close-up look at this relationship, examines the shiftof power, and aims to help dealers andvehicle manufacturers better respondto the changing market dynamics. The study was conducted by the CarInternet Research Program (CIRP) and sponsored by Capgemini, OntarioResearch Network for E-Commerce(ORNEC), PSA Peugeot Citroën,Renault SA and The University ofOttawa. The qualitative research,consisting of observations andinterviews with consumers anddealers, was undertaken in bothNorth America (U.S., Canada) and Europe (France, UK) at cardealerships representing 12 NorthAmerican, European and Asian mid-market brands.

The research demonstrates that whilethe industry acknowledges this shiftof power and recognizes the need tochange, and while many dealers are in

fact adjusting their practices accordingly,there remains significant work to bedone. During the course of this study,we observed numerous examples ofnegative interactions between customersand dealers, reinforcing traditionalstereotypes. “There’s a breed of carsalesmen who you just don’t feel terriblycomfortable doing business with, and thisis an almost universal experience. Theresearch that has been done says thatmany people hate going to dealerships; it can be one of the worst buyingexperiences anyone ever has,” said one buyer, who was not alone inexpressing this type of sentiment.

It’s clear that many dealers have notkept up with the pace of consumerchange, which has accelerated rapidlydue to consumers’ increasinglysophisticated buying behavior and the availability of information on the Internet, which is helping to delay their moment of entry into the dealership. It’s critical that thedealer role changes to adapt to this new world.

We hope the findings of our researchwill provide dealers and manufacturerswith insight into these changingconsumer dynamics and will lead themto gain a better understanding of howto improve the customer/dealerrelationship and in the process driveincreased sales and strengthen brandand dealer loyalty.

2

Clearly, the traditional asymmetricalrelationship between the dealer andthe customer has been reversed.Customers are now capable ofacquiring the knowledge that can give them the upper hand in thepower struggle that is played out in the dealer showroom. Dealers canreact to this change of circumstancesin two ways. They can increase andrefine their own knowledge base, thusupping the stakes; or they can adopt adifferent tack and provide added valueto the customer rather than addedinformation. Key to this is establishinga relationship based on trust, therebyimproving sales and building customerloyalty—perhaps the most importantkey to success in today’s highlycompetitive automotive industry.

model between dealer and customer.It’s a risk behavior in the sense thatthere exists an imbalance or asymmetryof information. In other words, all theinformation resides with the dealer.

Building a Symmetrical RelationshipThe new customer/dealer relationshipmodel can be conceptualized as theresult of an interaction between twoequal parties. In this case, there istransparency of information, with thesame or similar information residingwith both players. Trust is grantedafter an exchange, comments, wordsand gestures, in some contexts andnot others, to some people more thanothers. Trust is viewed as the result ofa construction, a dynamic process, inwhich both parties feel confident ofthe other’s intentions. By identifyingthose intentions, and ensuring thatthey do not go against self-interest,this attitude encourages powersharing and the establishment of an egalitarian relationship.

Approaching the relationship betweencustomer and dealer in this way makesit possible to go beyond traditionalstereotypes. Furthermore, this approachwidens the scope of possibilities forthe dealer, by encouraging the use of personality and human qualities to win the customer’s trust.

The final purchase decision will onlybe made when both customer anddealer consider they have establisheda relationship based on trust; whenboth feel they are in a sufficientlybalanced or symmetrical relationship.

Market relations between buyers andsellers have often been analyzed byacademics through the prism of gametheory. This approach looks at thestrategic rationale of players whoseaim is to maximize their ownsatisfaction by anticipating theiropponent’s possible choices, as well as anticipating the anticipations(the famous “prisoner’s dilemma”).However, in a lengthy and complexdecision-making process such as thepurchase of a new vehicle, whatfactors ultimately affect the customer’s actions?

Reducing this process to simplearithmetic seems incomplete, and that is why, in this context, the “human”aspect needs to be highlighted. This isparticularly true given the fact that theInternet has taken much of the controlaway from the dealer and put it into theconsumer’s hands, resulting in newpower dynamics. In addition to factorssuch as financial calculations, brandperception, discounts and vehicleavailability, companies must alsoconsider the nature of the relationshipbetween customer and dealer. The focushere is on the notion of trust: In whichcontext and in relation to whom doesit appear?

On the one hand, trust can beconstrued as compensation for lack of information. In this sense, “givingtrust” stems from recognizing one’sown lack of information and awillingness to leave a matter in thehands of someone who is seen aspossessing that information. Thisrepresents the traditional relationship

3

Executive Summary

Examining the customer/dealer relationship in a new light.

Automotive the way we see it

It is essential that dealers and manufacturers learn tounderstand the consumer’suniverse, the tools at theirdisposal, and the state of mind they are in when deciding to buy a car in a dealership.

This does not imply that a situation of absolute transparency is alwayspossible; rather, this is the idealsituation for which to aim.

To achieve this balanced relationship,the dealer must not sell; he mustinstead enable the consumer to buy.It’s a subtle but critical difference asreinforced by our research. As onecustomer commented, “I felt no pressureat all. The sales rep would say ‘We believethis is a good car’ but he didn’t try to sellit. And he wouldn’t say ‘These cars aregoing away fast, you better buy it today.’”

Of course, the approach to therelationship will vary depending onwhether the buyer is a new customer,where the aim must be to build trustfrom scratch and enable the purchase,or an existing customer, where the aimis to strengthen brand and dealer loyaltyin order to enable a re-purchase. Ineither case, however, the goal shouldbe a more balanced interaction.

In response to changes in theautomotive industry, includingheightened competition, decliningloyalty, more sophisticated consumersand the importance of the Internet in the buying process, dealers mustmake corresponding changes in their

relationship with customers in orderto build this more symmetricalrelationship. While in some casesthese changes are being made, theyare not keeping up with the pace of consumer change.

Understanding the New DynamicsOur research identified a number ofkey findings that can be instrumentalin helping automotive companiesbetter understand and respond to the shifting dynamics of thecustomer/dealer relationship:

■ GGrreeaatteerr ttrraannssppaarreennccyy iiss eesssseennttiiaall ttoo iimmpprroovviinngg tthhee ccuussttoommeerr//ddeeaalleerrrreellaattiioonnsshhiipp.. The Internet, as a kindof bottomless well of information, hasencouraged consumers to demandhigher levels of transparency. And thistrend shows no sign of dissipating.In this new era, where customerscan get nearly all the informationthey need without even having tovisit a dealership, dealer salespeoplemust view customers as partners onan equal footing. Their collaborationshould be based on a transparentattitude and information sharing—inother words, a relationship based ontrust. Their interaction should turninto a co-production, where both canobtain satisfaction.

To achieve a balancedrelationship, the dealer must notsell; he must instead enable theconsumer to buy. It’s a subtlebut critical difference.

4

manufacturer and dealer websites, to advertising and promotionalprograms, to the approach taken bya salesperson inside the showroom.While the industry acknowledgesthe need for this kind of approach,our research makes it clear thatpractical application is lacking in many dealerships today.

■ TThhee ccuussttoommeerr//ddeeaalleerr rreellaattiioonnsshhiipp iissnnoott aa oonnee--ssiizzee--ffiittss--aallll ffoorrmmuullaa.. Duringour research, several typical scenariosinside the dealership emerged, rangingfrom one in which both parties bringstrong negative preconceptions, to ascenario in which the interaction ismore open and collaborative. Thesedifferences demonstrate that thecustomer/dealer relationship canvary considerably depending on a consumer’s degree of advanceknowledge as well as existingstereotypes on the part of boththe customer and dealer. In eachscenario, there were critical pointswhere the potential for a breakdownin the relationship was particularlyhigh. Understanding how each ofthese scenarios can play out isessential to a positive outcome.

■ TThhee mmoorree kknnoowwlleeddggeeaabbllee ccoonnssuummeerrssbbeeccoommee aabboouutt tthhee vveehhiiccllee bbuuyyiinnggpprroocceessss,, tthhee mmoorree tthhee bbaallaannccee ooffppoowweerr sshhiiffttss iinn tthheeiirr ffaavvoorr.. Althoughthe Internet does not excludetraditional dealership visits, thesalesperson is justified in evaluatingthe growing use of this tool in theinformation-gathering process. Ourresearch made it clear that the Internethas an impact on the overall approachof the consumer. During individualresearch, customers can build upsound background knowledge,which can make them more nimbleand strategic in their interactionwith salespeople. This ultimatelyreduces the latter’s influence.

■ CCoonnssuummeerrss iinnccrreeaassiinnggllyy ddeemmaanndd aa ppeerrssoonnaalliizzeedd aanndd ccuussttoommiizzeeddaapppprrooaacchh dduurriinngg tthhee vveehhiiccllee bbuuyyiinnggpprroocceessss.. In today’s world, customerswant to be seen as individuals, aspeople in their own right whocannot be reduced to a box in a grid. Success inside the dealershowroom rests in the salesperson’sability to deploy a formal salesmethod in a personalized fashion.Certainly no easy task. However, it is essential that the salespersonmake an effort to learn about theindividual customer’s vehicle wants and needs and factor thatinformation into their approach. The move toward greaterpersonalization and customization is an increasingly important elementin the entire vehicle buying process,from the features offered on

Automotive the way we see it

Inside the Customer/Dealer Relationship | Executive Summary 5

The move toward greaterpersonalization and customizationis an increasingly importantelement in the entire vehiclebuying process.

6

the consumer’s universe, the tools at their disposal, and the state ofmind they are in when deciding to buy a car in a dealership.

On the pages that follow we take alook inside the vehicle buying process,from the initial search for informationthrough the final negotiation that takesplace in the dealership.

■ IImmpprroovveedd ccuussttoommeerr iinntteelllliiggeennccee iiss aaccrriittiiccaall ssuucccceessss ffaaccttoorr iinn rreessppoonnddiinnggttoo tthhee cchhaannggiinngg ddyynnaammiiccss ooff tthheeccuussttoommeerr//ddeeaalleerr rreellaattiioonnsshhiipp.. The useof the Internet by customers increasesthe diversity and complexity of theirsearch for information, making it moredifficult for automotive companies to predict their behavior. It istherefore essential that dealers andmanufacturers learn to understand

About the Study and Methodology

Qualitative research by the Car Internet Research Program (CIRP) into the changing dynamicsof the consumer/dealer relationship has been ongoing for several years. This research methoddraws on ethnological practice, which involves spending prolonged periods of time in thefield alongside the individuals under study. In contrast, a quantitative research approachis based on statistics. A qualitative study provides the additional dimension of viewingactual behavior.

Approximately 150 hours were spent at a dozen dealers in Canada, France, the UnitedKingdom and the United States, representing brands such as Ford, GM/Chevrolet, Honda,Hyundai, Mazda, Nissan, Renault, Subaru, Volvo and VW. Research was conducted using amixture of direct intervention and mystery shopper techniques. Direct intervention was withthe agreement of dealership owners. The research included observations of the exchangesbetween customers and dealers and their behavior in the showroom. Furthermore, interviewswere conducted with customers and dealers, without a predefined structure being imposedupon them. An additional element of the research was a staff training course on salestechniques in a Canadian dealership, which provided a greater understanding of the role of a dealer salesperson.

The advantage of this kind of approach is that it enables the reality of different practicesand behavior to be observed in greater detail than is possible with a quantitative survey.Observing consumer and dealer behavior, which can be both consciously and unconsciouslyplayed out, reveals attitudes and representations that are difficult, sometimes even impossible,to put into survey responses.

The combination of observation and interviews takes into account both what was saidand what was done, thus revealing any discrepancies or contradictions, which are inthemselves rich in meaning. Being immersed in the field also makes it possible to decodeand understand non-verbal communication. The analysis contained in this report focuseson these “human” elements more than the influence of macro sociological factors likeage, gender or employment. The aim was not to determine consumer profiles, but ratherto outline behavioral trends and types of practices. From a methodology standpoint, theobjective was not to quantify these practices, but to spot their possible range, from themost ordinary to the most unusual, without taking into account the number of times theyoccurred. Information obtained in this manner is of a different nature than that which astatistical survey can provide.

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Automotive the way we see it

perceived as more tiring for the eyes, and a magazine is easier to carry around and therefore to dip into more frequently forinformation. Lastly, because buying a vehicle can sometimes involve morethan one person, an Internet-basedapproach can be seen as limiting inthe sense that it does not allow forsimultaneous shared access for allthose involved.

Said one vehicle customer, “A lot of big purchases are made with a widerdecision-making unit, such as childrenand partners, who are interested and who take part in various stages of thebuying process. With the Net that’s verydifficult to replicate, because if there aretwo people sitting it doesn’t quite work;what would they do, bring up a chair,and then they will all go pointing at the screen ‘Oh, look at that.’”

Others point to the amount ofinformation available on the Internetas outweighing any disadvantages. TheInternet has encouraged consumers todemand—and automotive companiesto provide—higher levels oftransparency. Furthermore, thepossibility that the Internet offers ofaccessing third-party information isparticularly useful to those who mightbe at a disadvantage in the negotiatingprocess,4 for example women, whomay feel less empowered in thistraditionally male-dominated arena.

Consider this comment by one web forum manager: “A few possiblereasons why 65% of our visitors are femalecould include our commitment to beingexclusively third party. In addition, weoffer a lot of resources that allow you

How does the decision-making processunfold, from the initial idea of buyinga car to going to visit a dealership?Three primary sources of informationcome into play: word-of-mouth, writtenand visual marketing material, and the Internet. Customers either focuson one particular source or use themin conjunction.

These sources allow customers toobtain a wide variety of information,including “official” data (for example,options or technical specifications)and “alternative” data, including thereal prices that car dealers charge ortechnical problems that can arise witha particular vehicle. Since traditionalmedia sources and car manufacturers’websites provide only officialinformation, customers who wish toobtain different types of informationwill turn to alternative sources, likeword-of-mouth and third-party websites(for example, a discussion forum).

Paper-Based vs. Internet-Based ApproachAlthough websites offer a variety of three-dimensional animation andmeans of visualizing cars, paper-basedbrochures and magazines are “morefocused on the object itself,” notedone consumer. “Sometimes, websites are not very well designed, you can’t find all the information. Whereas in a 20-page brochure, you can be sure to have everything. I’m always worriedI’ll miss a page on the Internet, becausesometimes websites are very nice to lookat, but very impractical.”

Additional reasons were given forpreferring a paper-based approach.For example, reading on screen is

The Initial Search for Information

In this new era, where customers can get nearly all the information they need without even having to visit a dealership, dealer salespeople must view customers as partners on an equal footing.

7

4 Scott Morton, Zettelmeyer and Silva-Risso.

to take more control in automotivematters such as knowing the ins and outs of buying a vehicle without gettingpotentially cheated from a salesperson,and maintenance articles that allow theindividual to take a more active role inthe life of their vehicle. A lot of what we focus on is empowerment within the automotive world, which I believemost women appreciate.”

Furthermore, the Internet enablescustomers to make the most of otherpeople’s experiences through the useof tools such as web forums anddiscussion groups. These forumsencourage sharing of many kinds of information, including highlytechnical data, since the participantsare often passionate about cars andmight also be employees of vehiclemanufacturers. The types of themescovered include:

■ Technical problems that are rarelydealt with in car magazines. Saidone car buyer, “You can accessincredibly specific information in a forum. For example, I was able tofind out, in the case of car electronics,which systems to avoid because of thebugs they contain.”

■ Specifications for new car modelsbefore they are actually out on themarket. “I was able to decide that itwould be better to wait for the next

version of the car to come out, because the engine seemed to be better,” commented one consumer.

■ How much a vehicle price might bereduced, and by which dealership.

■ “Tips and tricks” used by salespeopleto try to “catch” the customer. Notedone customer, “The web is making theconsumer much more aware of how themotor industry works and all the tricksof the trade, so companies have to cleanup their act and become moretransparent, more accountable.”

Stereotypes Prevail AmongConsumers and DealersDoing research entirely online canhelp consumers secure the lowestprice on a vehicle and save time. Not surprisingly, dealers would rather establish face-to-face contactwith customers rather thancommunicating electronically. Said one dealer salesperson: “As the product is expensive, we’re there to reassure the customer, who inany case is anxious by nature. You’ve got to pamper and mollycoddle them.”

A web forum leader had a differentperspective: “I strongly believe thatconsumers prefer the Internet withregards to the car market due to the non-pressurized environment. There are no salespeople hassling you and you have the freedom of making a more independent decision.”

For many customers, the golden ruleis that the price that is advertised isnot the price you end up paying, andsome even develop an analysis grid by which to test a given salespersonand measure his flexibility beforenegotiation. For their part, somesalespeople express annoyanceregarding customers’ use of theInternet and the new knowledgebuyers possess. They now have todeal with customers who sometimesactually have a better technicalknowledge of a particular feature or model than that of the dealers.

“Sometimes, websites are notvery well designed, you can’tfind all the information. Whereasin a 20-page brochure, you canbe sure to have everything.”

– Vehicle customer

8

Engaging directly with a person is seen in principle as allowing formore flexibility of interaction thanwith a machine such as the Internet.For example, if a customer wishes to change an order after it has beentransferred to a manufacturer, thiscould be accomplished more readilyby dealing with a person.

The second set of explanatory factors for visiting a dealership islinked directly to the vehicle itself.One of the obvious limitations of theInternet is that you cannot physicallyappraise a car, let alone try it out.

During the information-gatheringstage, some consumers have alreadydeveloped a “salesperson avoidancestrategy.” These buyers typically gathera significant amount of informationonline and limit their choice to a pre-selection of vehicles to try out at the dealership, even though theirintention may be to buy from anotherdealer. Noted an employee of a saleswebsite: “I think that people are quitesly. I don’t think anybody would ever sayto a dealer ‘I’m not going to buy it throughyou.’ I think if the dealers realize quite howmany people did it, they wouldn’t be sohappy. But you can go into a dealershipand say ‘I’m really interested in this car’

The Internet’s Limitations andthe Role of the Salesperson If consumers can become highlyknowledgeable through word-of-mouth,traditional media and the Internet, andif on top of that they prefer avoiding a potentially unpleasant meeting witha salesperson, what could motivatethem—during the process of informationseeking—to take the next step to visita dealership?

Two sets of explanatory factors emergedduring our research. The first involvescustomers who go because they dowant to interact with a salesperson.For those who do not know how to go about obtaining alternativeinformation, meeting a dealer becomesa critical stage in the research process.Said one buyer: “You can’t really get agood idea of the prices by visiting a cardealer’s or manufacturer’s website. Also, I wanted to be able to draw up a paymentplan and I couldn’t take that any furtherwithout a sales rep’s help.”

Those consumers who get informationfrom alternative sources sometimeswish to cross-cut their data withinformation provided by a dealer,since they are not able to objectivelyassess the reliability of their sources.

Some buyers prefer interacting with another human being. Thesalesperson may be perceived ashaving the capacity for empathizingwith a customer’s needs and beingable to answer questions. At best,some customers believe a salespersonmay provide personalized advice to buyers that they can’t get on the Internet.

Automotive the way we see it

Inside the Customer/Dealer Relationship | The Initial Search for Information 9

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salespeople. This ultimately reducesthe latter’s influence. Often the dealer’sresponse is to develop counter strategies,thus maintaining the power strugglebetween the two parties.

However, not all salespeople react in this way. We found that in somecases, the customer’s higher degree ofself-reliance is seen as being beneficialto both parties, moving their interactionto a higher plane. This requires that dealersalespeople hone new interpersonalskills to improve their relationshipwith customers.

In this new era, where customers can get nearly all the information they need without even having to visit a dealership, dealer salespeoplemust view customers as partners onan equal footing. Their collaborationshould be based on a transparentattitude and information sharing—inother words, a relationship based ontrust. Their interaction should turninto a co-production, where both can obtain satisfaction.

Indeed, this observation is crucial tothis report: The more knowledgeableconsumers become about the vehiclebuying process, the more the balanceof power shifts in their favor.

Although the Internet does notexclude traditional dealership visits,the salesperson is justified in evaluatingthe growing use of this tool in theinformation-gathering process. Ourresearch made it clear that the Internethas an impact on the overall approachof the consumer. During individualresearch, customers can build upsound background knowledge, which can make them more nimbleand strategic in their interaction with

and they will court you. They aresalespeople so they will try to sell thecars to you. They will give you a lot ofinformation—‘This is how much moneyyou will save if you buy it here’— butobviously the customers have researchedit thoroughly and they know that they canbuy it cheaper online or at another dealer.”

Moving the Relationship to a Higher PlaneMany dealer salespeople are wary ofcustomers’ increasing independence.Rather than viewing this form ofempowerment as a positivedevelopment that might enable them to cut down on their work,salespeople feel put to the test.

Figure 1. Rethinking the Customer/Dealer Relationship

Rich

Time

Lev

el o

f In

form

atio

n Dealers

Consumers

Old model= Asymmetry of

information

New model =Transparency of information

Poor

1960 2006

Source: CIRP, Capgemini

Thanks to the Internet, some customers today may have greater technical knowledge than the dealer about thecar they’re interested in buying. This has led to a shift in the balance of power, with customers demanding higherlevels of transparency. Thus, the new customer/dealer relationship model should be viewed as the result of aninteraction between two equal parties. In this case, there is transparency of information, with the same or similarinformation residing with both players.

process, prospects engage in manyactivities (gathering information,choosing, negotiating, establishing the resale value of and reselling theused vehicle if necessary, financing,insurance, delivery, etc.) to choose, by successive eliminations, among thesubset of vehicles potentially satisfyingtheir expectations and needs, thevehicle that best suits them.

Figure 2 on page 13 (from CNWMarketing Research, Inc.) shows fivevariables essential to understandingthe buying process. The table isconstructed as follows:

Line 1. The sequence, in months andweeks, of the purchasing period ofa vehicle (in this case, in Canadaand the U.S.), of all brands and all models. CNW established that the buying process lasts an average of six months. The Internet acts as an accelerator, and intensive Internetusers sweep through this process in three to four months.

Line 2. The number of modelsconsidered by a prospective buyerat different points in the buyingsequence (shopping list). It is wellconfirmed that this shopping list isreduced throughout the six-monthprocess. The profile of this funnel willvary by brand. For example, Mercedeshas a flat funnel: Six months beforepurchasing a Mercedes (2003, U.S.), thecustomer only considers approximatelytwo vehicles in their shopping list,whereas a Nissan buyer considersslightly over four.

Why and how do consumers decide to buy a certain car of a certain brand at a certain dealer?Which steps, which buying processdoes the prospect follow? What is the length of this process? At whichmoment do they choose to eliminateone model of a given brand? Usingwhat criteria? Which of its productattributes can an automotive companyuse to influence the decision-makingprocess in its favor? These questionsare at the heart of every marketingdecision made by automotive dealersand manufacturers. They are also atthe heart of many research projects.5

The qualitative research datapresented in this report were obtainedin the dealer showroom. However, themajority of visits to the showroomoccur during the final two weeks of a six-month purchasing process. In short, by the time prospectivecustomers enter the showroom, their mood, intention, willingness to negotiate and feelings for a vehiclehave largely been determined already,outside the showroom. Each prospectivecustomer who enters the showroom isthus the “product” of a long historythat must be understood.

Research has found that the vehiclepurchasing process progresses over a period of approximately six months.Even compared with the purchase of expensive equipment such as a TV (about two weeks), it is one of the longest, most stressful and riskiestpurchasing processes. Throughout the

Key Dimensions of the Buying Process

Each prospective customer who enters the showroom is the “product” of a longhistory that must be understood.

Automotive the way we see it

5 In North America (U.S. and Canada), the automotive buying process was the object of a major research study by CNWMarketing Research, Inc. (http://www.cnwbyweb.net/). The collected data, gathered from customers who had actuallypurchased a vehicle of a given brand, make it possible to determine, for each brand and type of vehicle, the number ofvehicles taken into account at various points in the purchase process over a six-month period. Since the summer of 2003,these data are available for Canada. The data are regularly updated. CIRP (http://www.cirp.uottawa.ca) has also carried outnumerous surveys of consumers and dealers (in the United States, Canada, United Kingdom, France and Spain), whichsupplement the results of CNW.

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Line 3. The proportion of prospectivecustomers who visit the showroom.It is observed that the trip to the dealergenerally occurs very late in the buyingprocess, most often during the last twoweeks. It has also been established thatInternet users, at least in North America,are willing to travel up to 100 km/62miles (in Canada, see CIRP study) tobuy the car that exactly correspondsto their expectations, with theconsequence of transforming thelimits of exclusive dealer territories.

Lines 4 to 9. The focus of theconsumer at various points of the buying process is described.It is observed that, during the firstthree months, consumers clarify theirneeds and choose the type and styleof the vehicle. They then reduce thesize of the shopping list to examine a small number of vehicles in detail,studying their features. During the lastmonth and especially during the finalweeks, consumers concentrate on theprices of the vehicles that remain onthe shopping list, which has nowbecome very short, not even twovehicles long on average.

Lines 10 to end. The primary sourcesof information used by the prospectivecustomer are described. Word-of-mouthis observed to be a permanent sourceof information present throughout theprocess. Prospective customers viewadvertising (from six months to twomonths prior to purchase) to chooseand configure their vehicle, readspecialized magazines, talk to theirfriends from the very beginning to theend, consult the Internet, and read adsin local newspapers to negotiate pricesduring the final two weeks. In short,for four to five months the sale of a car progresses mainly outside theshowroom, and to some extent in therealm of advertising, representations andword-of-mouth—essentially, in a virtualspace as opposed to the very real worldof the showroom.

On the whole, today the actualfunction of the showroom is to bevisited during the last two to threeweeks of the purchasing process fornegotiating the price of the almost-chosen vehicle and for putting intocompetition dealers of the samebrand. The showroom is thus abattlefield for price.

A prospective customer at the end of the buying process is already wellequipped to negotiate, probably betterthan many sales representatives.6 Facedwith such a prospective customer,salespeople (often inadequatelycompensated with commission) have to:

1. Sort through the customers in the showroom—those who are in the beginning of the process and to whom, in principle, theywould have to deliver a speechcentered on their needs, the brand,etc., an exercise often perceived asa waste of time—from those whoare at the end of the process andare essentially seeking the bestprice and, overall, the best deal.

2. Lead the negotiation to itsconclusion, according to a script narrowly controlled by thesupervisor. However, two times outof three, this negotiation will fail(calculation is based on the averageclosing ratio calculated by CNWfor the United States). Moreover,negotiating through the Internetgives significant power to theconsumer, as we’ll see in the next section of this report.

12

6 In the U.S., prospective customers may even obtain the knowledge, if they want, of the price paid by the dealer to theproducer, including hold-backs.

Inside the Customer/Dealer Relationship | Key Dimensions of the Buying Process 13

Automotive the way we see it

Figure 2. Key Dimensions of the Buying Process

Steps of the buying process6

months5

months4

months3

months2

months1

month2

weeks

Number of models considered in the shopping listCanada (2002)

U.S. (2003)3.84.1

3.63.8

3.13.5

3.43.3

2.52.9

1.32.3

1.21.9

Dealer visits by planned time of acquisition(visited a dealership within past 2 weeks)

Canada (2002)U.S. (2003)

6.1%1.9%

6.5%4.2%

7.2%4.8%

11.1%6.8%

18.3%14.3%

29.8%19.7%

32.9% (93.5%, last week)19.6% (85.4%, last week)

Question: At this time, what is most important to you when deciding to purchase/lease a new vehicle? (scale: 1-5, 1=lowest, 5=highest)

My needsCanada (2002)

U.S. (2003)4.64.3

4.54.2

3.93.7

3.13.2

2.52.6

1.92.0

1.71.6

Models availableCanada (2002)

U.S. (2003)3.23.7

3.54.0

3.84.3

3.73.9

3.33.3

2.42.5

1.51.9

Styling Canada (2002)

U.S. (2003)3.13.6

3.33.3

3.53.5

3.23.1

3.12.3

1.91.9

1.31.4

Features Canada (2002)

U.S. (2003)2.11.9

2.22.4

3.13.0

3.63.8

4.04.2

4.14.0

3.53.2

Price Canada (2002)

U.S. (2003)2.42.6

2.62.9

3.13.2

3.23.4

3.22.8

4.54.3

4.84.5

Primary Source of Auto Information by Intended Purchase Date Sources of Information All Intenders—Canada and U.S. (%)

TV ad Canada (2002)

U.S. (2003)16.616.7

17.117.2

18.217.9

14.613.1

10.48.9

8.47.6

6.96.1

Consumer magazine adCanada (2002)

U.S. (2003)15.013.8

19.018.7

19.218.4

18.617.7

15.712.4

10.78.4

8.65.9

Friend/relative Canada (2002)

U.S. (2003)14.513.6

10.811.9

8.38.4

8.25.5

10.010.3

12.913.8

6.94.2

Business associate Canada (2002)

U.S. (2003)10.011.7

9.28.8

7.66.5

7.06.4

7.55.7

8.46.5

8.38.2

Dealer brochure Canada (2002)

U.S. (2003)7.87.1

7.46.7

7.67.2

7.67.1

7.77.4

7.36.4

6.66.2

Consumer Rpt/lemon aideCanada (2002)

U.S. (2003)6.06.9

6.36.8

6.97.4

8.311.1

9.211.4

8.710.3

6.78.3

Newspaper ad (local) Canada (2002)

U.S. (2003)4.53.9

4.84.1

5.34.9

5.96.6

7.36.9

8.78.8

19.018.4

Auto article (any source)Canada (2002)

U.S. (2003)3.44.1

3.43.7

3.34.2

3.95.5

4.54.9

5.67.6

6.07.9

Radio ad Canada (2002

U.S. (2003)1.61.1

1.81.5

2.01.7

2.21.8

2.52.1

2.62.1

3.53.4

Internet Canada (2002)

U.S. (2003)8.98.5

9.28.9

1.19.1

11.29.6

12.010.9

13.010.2

13.512.3

Auto magazine ad Canada (2002)

U.S. (2003)1.41.7

1.51.5

1.51.7

1.72.5

1.82.4

1.72.1

1.71.8

Auto buyers’ guide Canada (2002)

U.S. (2003)4.44.9

4.45.1

4.35.8

4.45.1

4.56.2

4.86.1

5.37.3

Company store/mall displayCanada (2002)

U.S. (2003)0.10.2

0.10.2

0.20.4

0.10.3

0.10.2

0.10.3

0.20.2

Auto show Canada (2002) 2.0 2.1 2.0 2.4 2.7 2.7 2.6

National newspapers U.S. (2003) 2.6 2.8 3.5 3.7 4.4 4.9 4.8

Other Canada (2002)

U.S. (2003)3.62.6

2.91.6

3.42.3

4.13.2

4.34.7

4.33.7

4.34.1

Source: Adapted from CNW Marketing Research, Inc. (http://www.cnwmr.com/) (1) Purchase Path Wave VIII—U.S. 2003 and (2) Purchase Path Study—Canada 2002

The more dealers can demonstratethat they are trying to build arelationship based on trust, the bettertheir chances of staying in theconsideration set as customers narrowdown their vehicle choices. Whathappens once the customer is insidethe dealer showroom is critical toensuring a positive outcome.

We identified three key stages of a customer’s visit:

■ Stage 1: entering the dealership and initial interaction with on-sitepersonnel (receptionist, salespeople)

■ Stage 2: interaction with asalesperson over a particular vehicle (request for information,examining the car, potential test drive)

■ Stage 3: negotiation in thesalesperson’s office (vehicleavailability, extra options, delivery, terms of payment)

Throughout these stages, thecustomer/salesperson relationship is put to the test, with the possibilitythat it could break down completelyat any time. All it takes is the wrongmove or a clumsy word, and the fragileedifice of trust, which has been slowlybuilt, can collapse entirely. A substantialchallenge for those who wish to see asale through to the end.

In general, certain practices should bemaintained regardless of the customer’sstage during the showroom visit. Forexample, we found that customers

What Happens Inside the Dealership

The customer/dealer relationship varies considerably depending on a consumer’sdegree of advance knowledge as well as existing preconceptions on the part ofboth the customer and dealer.

14

Figure 3. Do’s and Don’ts in the Showroom

Bad Practices Best Practices

Stage 1: entering thedealership and initialinteraction

■ Walk up to customers as soon as theyenter the showroom.

■ Use standard tricks such as “happeningto walk by” just as the customer enters.

■ Ask too quickly how to help the customer.■ Insist, even when the customer answers

“No thank you, just browsing.”

■ Let the customer walk around on theirown for five to 10 minutes.

■ Then walk straight up to welcome thecustomer—possibly introduce oneself byname (but not necessarily)—and simplysay “If you need me/if I can do anythingfor you I’m over there at my desk”(indicating where that is).

■ Unless they have questions, leavecustomers alone.

Stage 2: interactionwith a salesperson overa particular vehicle

■ If the customer expresses the desire to be left alone: Stick to them and keepasking questions; follow them around the showroom; don’t respect the personal“bubble” they might try to establish insidea vehicle.

■ If the customer accepts the presence ofthe salesperson: Block the space betweenthe customer and the vehicle by standingin between, by showing the vehicle off, byencouraging the customer to have a seat.

■ If the customer expresses the desire to be left alone: Walk away after havingreminded them that you are available tohelp if needed. Come back 10 to 15 minuteslater (at least) to ask if everything is all right.

■ If the customer accepts the presence of the salesperson: Open up the spacebetween the customer and the vehicle,respect the customer’s attempts toexamine the vehicle. Maintain an attitudeof politeness, allowing the customer to go first.

Stage 3 : negotiation inthe salesperson’s office

■ If the situation is tense: Show that one issuspicious, in a defensive mode, answerthe customer’s attacks. Use sales trickssuch as pretending to make very specialoffers.

■ If the situation is easy-going: Adopt a coolattitude and behave as if customer andseller were “pals.”

■ If the situation is tense: Do “the little things”that reassure the customer (suggest a cupof coffee, adapt a soothing tone, in somecases take a seat next to the customer).Establish transparency, lay cards on thetable when the negotiation starts.

■ If the situation is easy-going: Keep somedistance without becoming formal; do notmix up statuses.

responded better to less aggressivebehavior on the part of salespeoplewhether they had just entered theshowroom or had been inside for aperiod of time. However, some practiceswere more critical to maintaining therelationship during a specific stage(see Figure 3).

Personalized Approach is Critical to SuccessIn our research, a variety of behaviorswere observed. Salespeople tend to usecertain tried-and-true sales techniquesin their approach to dealing withcustomers. Although these methods are empirically developed and producea degree of success, they are more oftenthan not insufficient to satisfy today’sdemanding customers and do notalways lead to the desired outcome.

Customers who realize they are being subjected to standardizedtreatment, that they are perceived by the salesperson as “the averagecustomer,” are often put off. Successinside the dealer showroom rests onthe salesperson’s ability to deploy aformal sales method in a personalizedfashion. However, it is essential thatthe salesperson make an effort to learn about the individual customer’svehicle wants and needs and factor thatinformation into their approach. Themove toward greater personalizationand customization is an increasinglyimportant element in the entirevehicle buying process, from thefeatures offered on manufacturer and dealer websites, to advertisingand promotional programs,7 to theapproach taken by a salespersoninside the showroom.

Automotive the way we see it

Figure 4. Scenarios Inside the Showroom

Positive

PositiveNegative

Customer Stereotypes

DealerStereotypes

Scenario 3: Open to Buy/Dealer as PartnerConsumer has no negative stereotypes about dealer and is looking for knowledge. Dealer has no negative

stereotypes about customer, builds trust-based relationship, resulting in positive outcome.

Scenario 2: Open to Buy/Wary of DealerConsumer has fewer negative stereotypes about dealer, brings some knowledge, is open to buy. Dealer needs to adapt to customer’s behavior

to ensure positive outcome.

Scenario 1: Internet Savvy/Dealer AverseConsumer has negative preconceptions about dealer, expects unpleasant experience, brings

wealth of knowledge. Dealer has negative preconceptions about consumer, expects

difficult negotiations.

Source: CIRP, Capgemini

During our research, several typical showroom scenarios emerged, demonstrating that the customer/dealerrelationship varies considerably depending on a consumer’s degree of advance knowledge as well as existingpreconceptions on the part of both the customer and dealer. We found that these scenarios can exist on theirown or as phases in a continuum, moving ultimately toward the third scenario.

Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 15

7 Capgemini’s Cars Online 05/06 research found that targeted, relevant, personalized direct-mail offers from manufacturersand dealers were influential in the vehicle selection process. Nearly 80% of consumers said they would respond immediatelyor consider the offer for the future.

During our research, several typicalscenarios emerged, demonstrating thatthe customer/dealer relationship variesconsiderably depending on a consumer’sdegree of advance knowledge as wellas existing preconceptions on the partof both the customer and dealer (seeFigure 4). We found that these scenarioscan exist on their own or as phases ina continuum, moving ultimately towardthe third scenario. However, in eachscenario, there were critical points wherethe potential for a breakdown in therelationship was particularly high.

Internet Savvy/Dealer AverseThis scenario typically featurescustomers who have an extremelynegative preconception about cardealers. Their expectation is that theexperience will be unpleasant, duringwhich they will be accosted by anoverbearing, potentially arrogantsalesperson who won’t listen to whatthey want. This type of customer islikely to avoid the visit to the dealershipas long as possible and will arrivewith a wealth of knowledge, knowingexactly what they want in order tolimit any significant interaction withthe salesperson.

“There’s a breed of car salesmen who youjust don’t feel terribly comfortable doingbusiness with, and this is an almostuniversal experience. The research thathas been done says that most people hategoing to dealerships, it’s one of the worstbuying experiences anyone ever has,”said one buyer who fits this scenario.

In this situation, the customer preparesfor the fight ahead by developing atwo-fold arsenal made up of relativelyprecise technical information on thechosen model and a firm decision onthe maximum price they are preparedto pay and choice of options. Armorpolished and arrows sharpened, thecustomer feels able to counter anypotential attacks by the salespersonand has also prepared a number ofstrategies to avoid being “duped.”

Meanwhile, in the dealership, the salesperson eagerly awaits acustomer—but often with mixedfeelings. On the one hand, a dealerneeds customers in order to make a living. However, customers alsorepresent potential “nightmares” in the words of some dealers and canturn out to be a waste of their time.With the aim of maximizing efficiencyand turnover, salespeople will try todetermine as quickly as possiblewhether they are dealing with a “hotdog” customer, a “window-shopper,”“a tire kicker” or, in contrast, a “lead”or “prospect.”

The Cat-and-Mouse Game BeginsInside the dealership salespeople arestanding watch, closely monitoringfrom their office the comings andgoings of customers. The receptionistis on the frontline, welcoming visitors as they step over thethreshold, immediately asking howshe may be of service to them. Thecustomer is also on the lookout as he walks into the battlefield, wary and ready to counter an attack. Thecat-and-mouse game has begun.

“We’re real human beings. You have to remain polite, you never insult. But we’re not prostitutes either.”

– Dealer salesperson

16

Scenario 1

a salesperson who “just happened to benear the door.” Yet it was clear that thesalesperson had spotted the customer assoon as they drove into the parking lot.This kind of approach often provokedirritation on the part of customers.

In some cases, the salesperson stayedstubbornly at the customer’s side evenafter they had declined the offer ofhelp. Tired of resisting, the customersometimes would end up followingthe salesperson into their office “to sit down and talk about it.” After this usually fruitless exchange, andconsidering their defensive state, thecustomer would try to wrest free andtake their leave. At this point, someAmerican dealers would bring out a form to take down the customer’scontact details.

In one case, after the customer refused to leave a phone number, the salesperson threw an accusatory“Don’t you trust me?” at the customer.He then told the customer that heneeded the phone number so hecould call the customer back if“something comes up.” However, the customer had already told himthat they didn’t really have any idea

In this scenario we observed certainvariances in behavior. Some customerswalk straight past the reception areaand refuse a salesperson’s offer ofassistance. In so doing, they areclearly stating that they would ratherbe left alone to make their ownassessment of a car. Customers whoavoid contact in this manner areperceived in two different ways by thedealer. On the one hand, they may bevisitors who have come to “take a firstlook at a car,” in which case there is achance that the person has previouslyconsulted the web.

On the other, they may be potentialbuyers but do not wish to be perceivedas such. Within this category, thereare some who make sure they do nottouch the car of their choice too muchin case it attracts a dealer’s attention.Indeed, customers who do not engagewith the vehicles in a tactile way areseen by the dealers as “tourists” or“passing faces.” Salespeople often feelthat it’s fruitless to devote time tothese consumers. In contrast, othercustomers stay very close to aparticular car, even going so far as to“hide” inside it, thereby keeping outof sight of the dealer’s gaze.

The Negative Impact of a Forced RelationshipWhen a customer is difficult to “pullin,” dealers, frustrated at being kept atarm’s length, will frequently redoubletheir efforts. For example, in the UnitedStates, we often found that as soon ascustomers entered a dealership, they would “happen to run into”

Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 17

Automotive the way we see it

yet which model they were lookingfor, making the customer wonder howthe dealer would know if “something”came up. It was clear, in this case, thatthe customer simply did not trust thedealer, bringing us back once again to the importance of building arelationship based on trust.

This kind of example reinforces the preconceptions a consumer may have of the dealer as stifling,insistent, disrespectful and verging on the hypocritical. This sort ofsalesperson is bent on pushingthrough a relationship with theircustomer at all costs. During the courseof our research over the past severalyears, we saw little improvement inthis type of behavior on the part ofmany dealer salespeople.

The Importance of Leaving Customers AloneWhy is it that some visitors wouldrather be left alone? One reason is that a salesperson in their midst canwaste precious time and be a sourceof irritation. Other consumers saythey want to be free to control thespace around a particular vehicle.They will approach the car via itsexterior, looking at and sometimestouching the bodywork, opening adoor and sometimes the hatch. They

might then get into the car to see howthe seats feel, looking more closely atthe dashboard, checking out the pedals,opening the glove compartment.

If visitors choose to spend more time inside the car, they might start to imagine they are driving. We observed many examples oftypical driving gestures like placingtheir hands on the steering wheel,leaning back against the headrest and lowering the visor—perhapsimagining what it would be like to drive, or ride in, their future car. To reach this critical stage in testingthe car, the visitor must be able totemporarily forget their immediatesurroundings, which is easier to do if the dealer is not hovering nearby.

Getting close to a car for the first timeis a delicate moment, and a salespersoncan inadvertently make a mistake bytrying to step in between the customerand the car. In our research, it appearedthat more often than not, the dealer“finds himself” closest to the car. Inreaction, customers stand face to facewith the dealer, and by extension,facing the car. In this context,customers often adopt a passiveattitude, standing with their hands intheir pockets, for example. While thedealer may think this position affordsthe customer an overall view of thecar, the customer tends to view it asblocking their access to the vehicle.

Dealers often reinforce this behaviorby being the ones who touch the car,opening and closing doors or thehatch. In so doing, the dealer showsoff the car, keeping the customer atarm’s length, not allowing the latter to take control. Again, the dealer’sbehavior in this case can reinforce thenegative image of salespeople as beingcold and calculating, and inattentiveto a customer’s needs or expectations.

In some cases, we found thatcustomers who had initially feltempowered, believing themselvesto hold reliable information, losttheir confidence, and a feelingof doubt ensued.

18

become an obstacle to the negotiation,since prices listed on the Internet areoften only an indication, and may belower than those offered by the dealer.In some cases, we found that customerswho had initially felt empowered,believing themselves to hold reliableinformation (since they had obtainedit from an “objective” source), losttheir confidence, and a feeling of doubtensued. The salesperson, who has todeal with this shift as it takes place,often seeks justification. “It’s frustratingto explain to the customer; you have tobreak down the barriers. You come acrossas a bad guy,” said one dealer. The result?The tentative and fragile relationshipof trust takes a blow.

We found that many customersbecame suspicious of dealers whenthe negotiations turned to price. “Youhave to negotiate and be patient with thedealer. He’s never going to give you thebest price at the outset. He’ll shamelesslytry to add extras. Then he’ll pretend hegot the price wrong,” said one customer.“Dealers like to take a gamble. Yesterday,I got annoyed because the price that hesuggested was higher than what I’d seenon the Internet, so I picked up my thingsand left. This morning at 9 a.m., hephoned me to say he could give me theprice that I’d asked for. So I returned andthen he just did the same thing all overagain, exactly like the day before.”

The Potential for a Breakdown to OccurIt is difficult for two individuals whoare wary of one another to create aclimate of trust, which is necessary for a smooth negotiation. “In thecustomer’s eyes, the dealer is a thief.He’s there to sell, and puts the interestsof the company first,” noted one dealer salesperson.

Indeed, customers often suspect asalesperson of wanting to “con” themand so feel compelled to test the dealer.Said one buyer, “You always have tomake a personal decision ‘Do I like thisguy, do I think he’s trustworthy.’ In thatparticular case, I thought yes, everythingthat we asked for he was able to produceimmediately, there was nothing dubiousabout the origin of the car, all the paperswere perfect, he was very willing toprovide us everything right there. It didn’t seem like he was afraid of anyaspects concerning the car.”

A critical point in the negotiation occurswhen price is discussed. “If dealers say‘That’s my best offer,’ and you leave, andtwo days later they have still not calledyou, then that means it really is their lowestprice,” commented one customer. “Ifthey call back, it’s the customer who hasthe upper hand. But if it’s the customerwho comes back, then the dealer has the advantage.”

These dynamics highlight the trickynature of negotiation, with each playertrying to put off the moment when theyhave to lay their cards on the table.Well-informed customers know whatthey are looking for, seemingly givingthe dealer less room to make acounter-offer. However, sometimeshaving prior access to the Internet can

Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 19

Automotive the way we see it

According to one buyer, dealers are“expert manipulators.” However, in adifficult negotiating situation, a dealercan also reach a moment of“desperation.” “If you still haven’t madeany headway after half an hour ofnegotiation, you know that whatever youdo, the customer won’t be happy,” notedone dealer. The dealer’s difficulty liesin trying to make the customer awareof his constraints, the point at whichthe price cannot be lowered further.According to a dealer who has been inthe job for 15 years, there is an implicitrule that cannot be broken in thesesituations: “There’s nothing worse than a young dealer saying ‘Honestly, I can’tgo any lower than that,’ as that wouldmean that the rest of the time, he wassimply not telling the truth.”

In this type of scenario negotiations donot always come to a satisfying close.Said one dealer, “Some customers arejust there to gripe, you can tell, it’s pureprovocation.” After prolongednegotiation, another dealer wondered,“Should I throw in the wife and tie too?”as a way of saying they’ve had it andcan do no more.

Some dealers said they feel threatenedin their role. Indeed, the line betweenthe professional and the personal isoccasionally blurred, pointing onceagain to the importance of the“human” aspect of the vehicle buyingand negotiation process. “We’re realhuman beings. You have to remain polite,you never insult. But we’re not prostituteseither,” noted one dealer.

When the level of interaction reachesthis degree of tension, the purchase is jeopardized: “Occasionally, after anhour’s negotiation, the customer can have irritated the dealer so much that the latter ends up saying ‘That’s it. I’m no longer selling you the car,’” said adealer salesperson. “It has to be said that dealers are subjected to intensepsychological pressure and that therecomes a time when they’ve simply hadenough. So then we say ‘I don’t even feellike selling you the car, it doesn’t makeme happy anymore.’”

We identified two critical breakingpoints after which a dealer no longerwants to sell: when the sale wouldamount to a loss, and when the dealer

20

‘Give Me Some Space’

In the first scenario (Internet Savvy/Dealer Averse), customer and salesperson cannotbreak away from their reciprocal negative stereotypes. The behavior of the one servesonly to confirm the negative stereotype of the other. The customer stays on their guard,the salesperson tries to break through but only succeeds in appearing invasive andtactless. This impression is worsened when the customer realizes that the salesperson is using ready-made sales techniques. The interaction is destined to be disagreeable to both parties. This does not always preclude a sale, but it will not leave a feeling ofsatisfaction in its wake. Furthermore, in this scenario, the chances that a customer will be made loyal to the dealership are minimal.

To break out of this downward spiral, the dealer must give the customer some space. Anyattempt on the part of the dealer to control the situation will likely increase the customer’sfeeling of being stifled. The chances of creating a trusting and open environment decreasein proportion. The customer does not feel as if they are being treated as an individual withparticular vehicle desires and needs; their wishes are neither heard, nor respected. Thebest thing a salesperson can do in these circumstances is to stand back and let thecustomer return in their own time. Should they return at a later date to the samedealership, the salesperson is then placed in a stronger position.

According to one buyer, dealersare “expert manipulators.”

feels like he is overly pandering to thewhims of a customer in order to getthe contract signed. When thishappens, all the efforts that went intobuilding a relationship are wasted.

Open to Buy/Wary of DealerIn this second scenario the customerhas been reticent in deciding to visit a dealership. However, unlike in thefirst scenario, no avoidance strategy or plan of attack has been conceivedand fewer negative preconceptionsexist. The customer is open to buy,but stays on their guard and is likelyto bring with them some degree ofknowledge acquired in advance of the dealer visit.

A dealer who meets a customer in this frame of mind must quicklypinpoint the barriers and begin workon removing them. The first scenariounderlined the importance of giving a customer space. However, this tacticalone is not always enough. To makethe customer feel relaxed, thesalesperson must be able to discernand adapt to the customer’s behavior.Their relationship is vulnerable, and a single word could lead to a deadend. Salespeople who can empathizeand adapt will increase their chancesof softening a wary visitor.

Getting Personal, Without Overstepping the Mark To make a good first impression, thesalesperson must “invest himself fully.”But that can mean different things in different markets. We found that in Canada, the United States and the United Kingdom this translatesinto shaking the visitor’s hand and

Automotive the way we see it

Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 21

introducing himself on a first-namebasis. In France, by contrast, the first exchange usually begins with a mere “Hello.”

After these introductory exchanges,dealers must emphasize theirpersonality, with the aim of showing a customer who they are as a person.It’s not always possible, however, toidentify tangible best practices in thisregard. Noted one dealer, “You have tobe really personal, you have to get into thecustomer’s bubble. I can’t quite explain; it’sa question of personality, of commitmentto your job, you have to keep trying toserve the customer, respond to their needs,go beyond their needs, convince a customerthat the suggested price is the best. You haveto sell yourself more than the product.”

These remarks underscore theimportance of taking a personalized,customized approach rather thanstandard sales techniques learnedduring a training seminar. The key is for the salesperson to provide anenvironment and atmosphere inwhich a customer is enabled to buya car, rather than the dealer sellingit. Dealers in France repeatedlymentioned the importance of“proximity” in customer relations, of providing “customized service”

Scenario 2

by not treating the customer as ananonymous face among many. Successrequires a delicate balance, since thebonds of trust can be broken if asalesperson becomes too personal (for example, by broachingcontroversial topics).

So how can dealers prevent makingblunders? The most successfultechnique consists of observing how a customer behaves and adapting theirbehavior accordingly. Said one dealer,“Depending on the customer, you’ll eithertake out your Mont Blanc [fountain pen]or your plain Bic biro.”

Success in this scenario also hinges onresponding appropriately to non-verbalcommunication, where body languagecan convey a customer’s state of mind.If a dealer succeeds in making acustomer feel comfortable, “the sale’shalfway there,” noted one dealer. Theobjective is to learn what a customeris looking for (car features, customerservice, opening hours, car replacementin case of repairs, and so on). Thisenables the dealer to pinpoint and thenpress these “hot buttons,” increasingthe chances of closing a deal.

But for customers to confide, dealershave to inspire trust, which they can doby having an open, transparent attitude.“Customers have to know that what you’resaying is true,” said one dealer.

Adapting to a Customer’s Profile For a dealer to earn a customer’s trust,he must also provide clear answers,paying attention to the explicit andimplicit demands of a customer. Onemistake that was observed on numerousoccasions consisted of a salespersonmechanically listing a series of points(of a technical, or worse, a generalnature) that had no bearing on acustomer’s expressed demands ordesires. This kind of rote approachdoes not provide customers with thekind of personalized experience theyare looking for. They may findthemselves trapped in an irrelevantdiscourse and may begin to take on astereotypical view of the dealer, evenif they did not arrive in the showroomwith that kind of preconception.

The successful salesperson must know how to listen to customers, notinundate them with an incessant flowof technical terms that do not relate toany of their queries. In trying to adapt,the first rule is to listen rather thanspeak. It sounds simple enough, but our research makes it clear thatpractical application is lacking inmany dealerships today.

22

“Depending on the customer,you’ll either take out your MontBlanc or your plain Bic.”

– Dealer salesperson

As in the first scenario, allowing the customer some space is a key to success. In many cases, a dealerapproached a customer trying out acar, but without ever getting too close,choosing to speak with them throughthe window or the open door of thecar. In this way, the customer’s personalspace, or bubble, is maintained. In othersituations, the salesperson sat next tothe customer in the car, placing themon equal footing.

This symmetry is also reflected in the way in which dealer and customerconverse. An important best practicefor dealers is to adjust their approachto that of the customer. For example,if the customer is discreet and speaksvery little, the dealer should respond inthe same way. With a more open andverbal customer, a dealer can likewiseexpress their views more openly. Byadapting their attitude and approachto the customer’s profile (self-confidentor retiring, open or discreet), dealerscan provide the sense of a customized,non-standardized atmosphere.

Little Things Make a DifferenceEven in this less contentious scenario,an initially calm and smooth discussioncan turn sour. A salesperson who bendsdown to whisper in a conspiratorialtone, “I shouldn’t tell you this, but…,”or one who promises “a very specialprice, just for you” can repel, ratherthan pull in, a customer. Today’ssophisticated consumers know betterthan to believe they are being givenspecial treatment in terms of the dealthey are negotiating. If this approachis used at a crucial point like thenegotiation itself, there is a risk thatthe trust that had been developed canbe damaged, sometimes right throughto the end of the interaction.

To avoid this, best-practice dealersrecognize that little things can make adifference, from offering a cup of coffeeto the customer to sitting on the sameside of the table. The dealer can alsocontribute to a positive atmospherethrough the kind of language used or the subject matter touched upon.

Automotive the way we see it

Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 23

‘Read My Thoughts’

In the second scenario (Open to Buy/Wary of Dealer), once contact has been made, thesalesperson must understand the customer’s state of mind and expectations, and thenseek to satisfy them. These factors are not always as apparent as in the first scenario,where it’s clear that the customer has come into the showroom with negativepreconceptions about the dealer.

In this scenario, the customer is likely to respond well to a personalized approach. The answers a salesperson provides must indicate that he has paid particular attention to the customer’s specific demands. The dealer is not answering any old question, but a question asked by this customer concerning this subject at this time. A key to successalso lies in the salesperson’s capacity to show empathy towards a customer and adapt to the particular situation. A sale carried out in this context will provide satisfaction toboth parties, and the salesperson increases his chances of having customers return if they need advice or have a query, which can help cement a long-term relationship.

But the road to this kind of interaction can be long and ridden with obstacles. A gesturethat does not follow the organic pace of the interaction, or a word that does not correspondto the tone of the conversation can upset the rhythm, break the spell, weaken the bond oftrust that was being established. How a salesperson speaks and behaves is essential tothe successful outcome of an interaction. There are some comments that are spontaneousand “come from the heart,” and some that are spoken by convention, as a “matter of form,”and customers today can tell the difference.

Again, we found some culturaldifferences. Canadian and Americandealers, for example, were morecomfortable referring to personaltopics (talking about theirbackground, travels to Europe, orcomments about their family or pet).In most cases, this approach led toreciprocal comments by the customerwho seemed comfortable discussingmore personal issues (for example,talking about their finances, essentialto obtaining a loan). In the Canadiantraining session this strategy wasreferred to as “mirroring.”

Open to Buy/Dealer as PartnerIn our third scenario customers enjoygoing to the dealership, are impatientto get near the car of their choice anddo not have any negative stereotypesregarding the dealer. This does not meanthat these customers necessarily have aclearer picture of what they are lookingfor. They are there to gain knowledge,but are also confident and their attitudeis neither defensive nor offensive.

The absence of reciprocal negativerepresentations means both playerscan interact in a relatively relaxedmanner. Their words and gestures are comfortable and easy, unlike thoseused in interactions where a powerstruggle is being played out.

Maintaining a Safe DistanceEven in this type of scenario, thesalesperson must pay attention to how he comes across. It is importantnot to misconstrue the situation; thedealer and customer are not friends,and as a result, theirs remains apotentially fragile, touch-and-gointeraction. At the heart of thisinteraction is a need that must befulfilled, and it is always up to thedealer to spot and respond to it.Despite a customer’s open attitude, the salesperson must remain vigilant,as his biggest mistake would be to trustin the apparently laid-back characterof the interaction, or feeling like heintuitively understands the customer.The customer is about to invest a largesum of money and needs reassurancethat the right choices have been made.A salesperson who does not recognizethe serious nature of the interaction canlose credibility. Indeed, customers whoare given too warm a welcome maytake offense and feel that their statusas “Customer” is being downplayed.

A happy medium between distanceand familiarity was often observed in British dealerships. The key is tostrive for an equal footing with thecustomer, so that the interactionbecomes one of two equals sharingthe same aim: to close a deal.

“I felt no pressure at all. Thesales rep would say ‘We believethis is a good car’ but he didn’ttry to sell it. And he wouldn’tsay ‘These cars are going awayfast, you better buy it today.’”

– Vehicle customer

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Scenario 3

In this scenario (the most positive of thethree), a more equal balance of poweris also established by the way in whichthe customer and salesperson movearound the vehicle. There is no attemptto establish one’s territory and thendefend it. Customers in this contextcan go near the car if they wish withoutthe salesperson getting in the way. Thedealer will not try to burst the bubblethat customers may create aroundthemselves. Indeed, some salespeoplewill actually encourage this process,and if the dealership allows it, maydeploy the “puppy dog sales strategy,”which involves lending customers thecar over a weekend. Noted one dealer,“When the customer wakes up in themorning and sees the car out in the drive,she already feels like she owns it; all that’sleft to do is to come back and sign for itat the dealership.”

The attitude that customers mostappreciate is when a sales rep takes on the role of counselor, rather thansalesman. Said a buyer, “I felt no pressureat all. The sales rep would say ‘We believethis is a good car’ but he didn’t try to sell it.And he wouldn’t say ‘These cars are goingaway fast, you better buy it today.’”

Establishing Equality Through Gestures and WordsDealers are there to respond to questions put forward by thecustomer. Yet they are also there to act as a “thinking aide,” as oneFrench dealer put it. However, therequest for help is not always clearlystated by a customer, and may not in fact be desired, even in this thirdscenario. Salespeople must thereforebe cautious when making an offer to help.

A typical example is when a salesperson immediately hands a catalog to a customer, rather thantaking the time to first exchange a few words. Customers may see this gesture as a form of dismissal. For customers to feel comfortable,they must be able to engage with a salesperson and almost forget thatthey are in a dealership. At one U.S.dealership we observed a typicalinitial exchange between a customerand salesperson, where the conversationmoved onto topics of a general nature.The salesperson did not at any pointtry to “bait” the customer by askingtoo many questions about the desiredmodel or by asking the customer to fill out any forms. This was aconversation between two equalindividuals, not a formulaic, status-based interaction between a customer and salesperson.

Inside the Customer/Dealer Relationship | What Happens Inside the Dealership 25

Automotive the way we see it

A Customer-Oriented ApproachIdeally, a negotiation takes placebetween people who see each other as partners. They collaborate to try to come to an agreement together. Of course, this portrayal of the finalnegotiation does not preclude the factthat both parties have certain intereststo defend. Indeed, the more theseinterests are made explicit and takenon board, the higher the likelihood of developing a climate of trust.

Indeed, greater transparency tends toshow that dealers are not just in thebusiness for personal gain. “There arebad dealers, who are just there to makemoney, but they leave after six months,”said one dealer. “And then there aredealers who focus on quality, developingloyalty, seeking a win-win-win situation.That is, benefits for the customer, for thecompany and for the dealer. Becausewhat you give on one side, you get backon the other.”

The aim is for both parties to gainmaximum satisfaction from the finaltransaction (return of the old vehicle,options that are paid for as extras andthose that are thrown in for free, termsof payment, and so on) and feelreassured (lack of pressure and nosuspicion of hidden motives). Thisobjective is achieved in part through a customer-oriented discourse, such as when an American salespersonpointed out the deadline on a specialoffer, or when a British dealer remindeda customer that a small model is notonly cheaper to buy, but also to insure.

Transparency is also critical whendiscussing price. The clearer and more specific the explanation, the less a customer is likely to suspectthat there is a nasty surprise hidingbehind a price that is lower thanexpected. A dealer who makes a point of specifying prices at the outset will inspire more confidencethan one who promises cheap pricesthat are simply not realistic.

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‘Let’s Do Business’

In the third scenario (Open to Buy/Dealer as Partner), the customer is likely to beresponsive to a positive interaction with the dealer. The first thing a salesperson must dois identify a customer’s expectations and respond to these in a way that is appropriateand adapted to the situation. He must use the right tone and style so as to adapt to hiscustomer’s profile. He must find the right balance between professional distance andpersonal proximity.

The salesperson must be able to spot when a need arises for him to be potentially helpfulto the customer. It is not enough, therefore, to be a good listener; dealers must also knowwhen to be proactive. A customer who wants help and finds none will feel let down, notrecognized as an individual with specific needs.

In this scenario, it is quite possible for dealers to earn a customer’s trust by laying theircards on the table. By doing so, the salesperson invites the customer to do likewise, andthe discussion can be pursued on a clear premise. In a situation of openness andtransparency, the players involved do not have to manage uncertainties, unmaskstratagems, discover nasty surprises. Customer and dealer become partners in a jointcollaboration pursuing the same aims.

increases the diversity and complexityof their search for information,making it more difficult forautomotive companies to predict theirbehavior. It is therefore essential thatdealers and manufacturers learn tounderstand the consumer’s universe,the tools at their disposal, and thestate of mind they are in whendeciding to buy a car in a dealership.

Current training sessions do broachsubjects such as empathy, and underlinethe importance of proximity, but theydo so in a purely theoretical, abstractmanner. What is lacking is anempirical understanding:

■ How do consumers do their researchbefore visiting a dealership?

■ How do they use the Internet?

■ What do they look for on the web?

■ What do they find—and what don’tthey find—on the web?

■ What kinds of websites are consultedand what do consumers think ofthese sites?

■ What other tools and activities dothey use to gather information?

■ How do they behave inside thedealer showroom?

Since customer intelligence, and in factcustomer behavior, evolves, it’s criticalthat automotive companies always keeptheir finger on the pulse. Best practicesinclude sales training seminars thatincorporate intelligence about customerresearch tactics, as well as careful andconstant observation of consumerbehavior through the entire vehiclebuying process.

Moreover, the buying process shouldnot be approached as a one-time activity.Automotive companies must view it asa lifetime relationship—before, during

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Conclusion: Rethinking theCustomer/Dealer RelationshipThe world of vehicle sales must move to a new plane, where the relationship with the customer is established along a continuum—before, during and after the purchase.

Automotive the way we see it

The automotive industry was the first to extensively develop functionalspecialization and minute divisions oflabor through increased mechanization.Gone were the days of craft production,and a new era began: that of massproduction and assembly lines. Thevalues traditionally epitomizing thisprocess are increased efficiency throughsystemization, and rational organizationthrough standardization. These notionsare long-lived and continue to influencethe automotive industry today.

The sales techniques used in manydealerships are a powerful example of this, being at times formulaic andindustrialized. Our research foundconsiderable evidence that thisapproach to the customer/dealerinteraction is still quite widespread in the automotive industry. Thispoints to the need to rethink thisrelationship and move toward aprocess that is far more related to “softer” measures.

Customer Intelligence: Keeping a Finger on the PulseCurrently, sales training seminars inthe automotive industry tend to covertwo main areas. The first concerns thebrand itself and the different models,new releases and their technicalspecifications. The other is moregeneral in nature, dealing with thedo’s and don’ts of verbal and non-verbal communication.

Based on our research, we recommenda third area, focusing on customerintelligence. In our comprehensivestudy of customer behavior, theelements that came to the fore werethe customer’s creativity, capacity todig out “good deals” and to search forinformation off the beaten track. Theuse of the Internet by customers

and after the purchase. In the case ofexisting customers, building loyaltydoesn’t start when an existingcustomer enters the showroom to re-purchase. Customer intelligencefrom transactions during the lifecycleof the car should be available, andthis information should be used by the salespeople.

In addition, automotive companiesmust capture customer intelligencecoming from new tools like webforums as well as the informationtraditionally gathered in theshowroom. This valuable insightshould be used to constantly refineproducts and services in a continuousimprovement process.

Establishing Proximity in the Virtual DomainThe ideal relationship betweencustomer and dealer is that of jointcollaboration, based on listening,adaptation, empathy, customization,transparency, honesty and respect, all of which further the developmentof trust. However, our researchdemonstrated that this objective is not always easy to achieve.

While the focus of this research was largely on behavior in the dealershowroom, it’s clear that a parallelapproach should be taken with all

consumer contact points—advertising,promotion, direct-mail, the Internet. Inevery communication with consumers,the relationship should be presented asone of partnering and collaboration.

For example, currently mostmanufacturer and dealer websites do not place enough emphasis on the notion of proximity. Some sitessucceed in providing a degree ofcustomization by enabling customersto configure a virtual version of theirdesired car, an important option formany consumers.8 But most sitessuffer from a lack of personal touches,and it is difficult for the user to feelthe presence of real people behind the digital interface. Improved direct,person-to-person contact between the manufacturer/dealer andconsumer through the use of blogs,free discussion forums and post-salee-mail communications, for example,is one approach to filling this gap.

Initiatives like these can improvetransparency by making processesmore visible to customers. In so doing,companies have an opportunity to rightbalance the customer/dealer relationshipand adapt to the new reality broughtabout by the increasing sophisticationof today’s automotive customer. Whilethe vehicle buying process will notlikely return to the asymmetricalmodel where most of the power andinformation rested with the dealer, it is possible to achieve a morebalanced, symmetrical relationship.

The world of vehicle sales must moveto this new plane, where the relationshipwith the customer is established alonga continuum, which would grant equalimportance to all the stages of purchase(before, during and after). Interactionwith consumers must be carried out ona multidimensional basis, one that takesinto account the full complexity of theirown nature, their level of knowledgeand information, and the changingdynamics of the vehicle buying process.

Automotive companies mustcapture customer intelligencecoming from new tools like web forums as well as theinformation traditionallygathered in the showroom.

8 Capgemini’s Cars Online 05/06.

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About the Car Internet Research Program (CIRP)The Car Internet Research Program (CIRP) is an industry, government and academic-sponsored automotive research program directed at understanding how new informationand communication technology will impact the automobile industry. Administered throughthe University of Ottawa, CIRP is sponsored by a variety of industry stakeholders thatinclude: Capgemini, Ontario Research Network for Electronic Commerce (ORNEC), PSA Peugeot Citroën, Renault SA and The University of Ottawa.

About Capgemini and the Collaborative Business ExperienceCapgemini, one of the world’s foremost providers of Consulting, Technology andOutsourcing services, has a unique way of working with its clients, called the CollaborativeBusiness Experience. Backed by over three decades of industry and service experience, the Collaborative Business Experience is designed to help our clients achieve better, faster,more sustainable results through seamless access to our network of world-leading technologypartners and collaboration-focused methods and tools. Through commitment to mutualsuccess and the achievement of tangible value, we help businesses implement growthstrategies, leverage technology, and thrive through the power of collaboration. Capgeminiemploys approximately 61,000 people worldwide and reported 2005 global revenues of6,954 million euros. More information about our services, offices and research is available at www.capgemini.com.

About Us

www.cirp.uottawa.cawww.capgemini.com

For more information please contact:

Car Internet Research ProgramChristian Navarre+1 613 562 5800 ext. 4688navarre@gestion.uottawa.ca

CapgeminiUnited KingdomNick Gill+44 870 904 5699nick.gill@capgemini.com

FranceEric Piat+33 (01) 49 01 80 04eric.piat@capgemini.com

GermanyChristian Hummel+49 (0) 69 9515 1626christian.hummel@capgemini.com

North AmericaSteffanie J. Anglim+1 310 727 8655steffanie.anglim@capgemini.com