Negotiating can be done in a professional manner that can increase customer satisfaction while helping to protect both parties’ interests.
Let’s first look at some of the problems that give negotiating a bad name and then look at the solutions. A lack of training in negotiating in the automotive industry has put sales people at a disadvantage. Usually, a sales person is taught how to negotiate in a learn-as-you-go method. Although all learning must be accomplished by doing, some preparation has to be done to make the learning experience more effective. All sales people and managers should go through a course on basic and advanced negotiating. Assuming that sales managers can automatically teach your sales people to negotiate professionally is asking for trouble. How did the managers learn to negotiate?
Sales people should be taught the expected procedures. I like to call these routing procedures. Routing procedures will define everyone’s responsibilities, from the moment a customer is greeted until they are delivered, including the necessary paperwork and who initiates what. Included in the routing procedures are items known as, black and white items. Black and white items are the things that should never vary at your dealership. These items are to be defined by your top management and can include such things as not quoting discounted prices on the lot or never low-balling on price.
Another source of problems in negotiating is the misuse of traditional negotiating techniques. The “higher authority technique” is a technique of always deferring to a higher authority for a decision. The technique is a solid negotiation tactic that has been run into the ground by automotive people. Having your sales people run to the manager more than once or twice in negotiations is a crime. Not giving the sales person any latitude or decision-making capability in negotiations leads to the yo-yo effect that creates mistrust in the sales person and customer.
When is the last time a sales person in your dealership was taught what to do when a customer asks for a lower down payment, lower payment, higher trade values or a reduction of the sales price. Most veteran sales people in dealerships all over the country could not verbally and written give you at least three or four steps to each one of the above objections without having to think or blink. How many objections in negotiation are there? Most objections fall into only a few categories. Have your sales people role played recently on those objections and the potential answer to them? Example: “Mr. Customer, we would be happy to lower your monthly budget $50 a month. Did you want to go 60 months instead of 48, or put $1,500 more cash investment, or look at the car with about $50 a month less in equipment, or look at a lease/Smart Buy program? Which would be best for you?” Whether you like my words or there are some others you prefer is not as important as having a way to handle the objections and practicing them over and over until the sales people know their negotiating skills.
“He or she who prepares the most, wins the most.” A large part of negotiating is knowing when and how to negotiate, as well as being prepared for all situations. The tragic death of John Kennedy Jr. might have been prevented with more preparation. Although negotiating may not be life or death for a sales person, it can feel like life or death to a sales person that wants to help his or her customer and doesn’t know how.
The following are few simple negotiating techniques:
1. Flinch – always flinch at any proposal or counter proposal.
2. Split the Split – When customers offer to split the difference, offer back to split their proposal again. Example: $3,000 apart $1,500 split offered $ 2,250 your counter
3. Bracket proposals – If your desired gross profit is $3,000 and the customer offers you $1,500, propose back as much above your desired profit as they proposed below, example: $4,500 gross would be the same $1,500 amount above your desired gross, as they had offered below. Most likely they will offer to split the difference and it also lends credence to your offer.
4. Give/get – Try always to get something in return for giving something. This will stop the customer from nibbling and eroding your gross. If you don’t use give/get, you will not only give away all your gross but will also create a shopper.
Everyone negotiates everyday. Whether it’s on vehicles, houses, relationships or pay plans etc., everyone negotiates on things we sometimes didn’t even realize we had negotiated on. Somehow people walk away from negotiating things other than automobiles feeling extremely positive about the process. Why? I invite you to ask how you would feel negotiating at your dealership and what you could do to make it better for the customer, sales person, manager and dealership.