Used car sales – is it time to review how we recruit and reward our staff?

13 June 2018

Malcolm Miller

Used car sales – is it time to review how we recruit and reward our staff?

In a recent television documentary on the commissioning of the Royal Navy’s aircraft carrier, HMS Queen Elizabeth, the Captain said that without his crew this was just a metal box – it takes people to bring his ship to life.

The same is true of dealerships generally and a used car operation in particular: they are a people business. Don’t be confused by the move towards online retailing where customers can increasingly transact without human contact, because in the used car world customers are still viewing cars ‘in the flesh’ to confirm their decision. 

Your dealership’s used car ‘crew’ are only as good as the leadership they are given and the support, learning and development and coaching they receive. Consider what percentage of the Royal Navy’s time is spent on training, compared to the way, in the automotive world, we send our teams to the frontline and trust they will meet the standards or improve without training support and feedback.

Creating and developing a high performing team is not an easy task as we all know. Yet in the used car world this year we are seeing strong activity and profit growth. So, isn’t the time ripe to pay some real attention to the skills of those teams and help to drive further efficiency, profit and customer service? 

There are three basic points to consider in creating a high performing team: Recruitment, Development and Retention. 

Our workforce is getting younger and we as leaders are getting older. No surprise here, this has always been the case. But here’s the difference: many studies and commentators have identified a shift in working expectations and aspirations in the Millennial or Generation Y group i.e. those people in the workforce between aged 20 to 37, in 2018. In general, most business leaders are older and would have shaped their working aspirations as members of Generation X or as Baby Boomers. It is far too easy to stereotype the generations but nonetheless there are some notable differences; in a study by pwc the key findings show that what attracts Millennials to an employer is the opportunity for career progression, not just the salary. The study found:

  • Millennials’ most valued opportunity for progression is the chance to work with strong coaches and mentor
  • The highest-ranking benefit they want is sustained access to training and development (this ranks higher than financial reward)
  • They dislike outdated working practices, rigid hierarchies, fixed hours and the same, uninspiring place of work.

More money is no longer the main attraction. Life is undoubtedly different for people in their 20s and early 30s in the workplace. Broadly, Generation X and the Baby Boomers were happy to work for a lower salary and commission in a sales job, as basic living costs were covered; by putting energy into raising earnings they raised their standard of living – that was the driver. However, we learned recently from the Resolution Foundation that a third of the millennial generation will never be in a position to own a property, given house prices as a multiple of earnings and the need for a healthy deposit. The low basic/high commission model won’t necessarily help them to achieve their goals.

On the subject of housing another traditionally low basic/high commission sales role is that of an estate agent. Yet this model is changing. One Chief Executive of a large chain of some 100 high street branches was clear that the low basic sales job is dead; to recruit and retain talent, he needs to pay a competitive salary and offer the opportunity to earn bonuses. The attraction of the job to people who are likely to have a university degree and therefore a level of debt is one consideration, but the other driver he highlighted was that the customer service ethos and a team of sales hungry negotiators chasing a quick buck was not delivering the behaviours he wanted in his business. Now his agency pays negotiators an attractive base salary, a team bonus on success and individual bonuses on customer service and retained profit. And the upshot is, his staff can prove to a lender that they themselves are worthy of a mortgage. As a side note, the business model is successful in a challenging market; customer satisfaction is up, managers are engaged with sales staff to drive team activity and have a customer focus.

The estate agency model is changing. A 2015 salary survey from Expertagent showed that sales negotiators are generally aged under 39 and their earnings are not driven entirely by commissions. Over 55% of respondents earn less than 10% of their earnings in commission. However, 20% of respondents get over a third of their earnings in commission.

Customers still value the dealership

Let’s consider the used car sales world. The likely reasons for having a low basic/high commission model are firstly that it has always been that way and secondly, sales people need this type of motivation.

But what do customers want? They want a knowledgeable, trustworthy and reliable representative of a secure brand to support their purchase. The 2015 Autotrader Car Buyer of the Future study indicated a shift in how we should be doing business:

  • 84% of consumers in the study indicate that they want to buy a car in person. Further, 43% see the dealership as a place to learn. At the dealership, consumers want to validate information they found online
  • Over half, 56%, of consumers prefer to negotiate, according to the study, and two of the most influential groups in car buying – Millennials and women – also prefer negotiating, and feel that they have to negotiate to get a fair price.
  • While price is important to consumers, the dealership experience can trump lowest price: 54% say that they would buy from a dealership that offered their preferred experience over lowest price. 

Customers now have access to as much information as dealers and they place trust at the top of their consideration. The Global Automotive Consumer Study by Deloitte tells us that while Generation Y, or Millennials, are researching online far more than other generations, they still value the experience at a dealership. It seems that our Millennial customers value salespeople treating them with respect and have a positive attitude towards dealerships.

Some new car operations are moving towards a higher base salary package and while the evidence is fresh, it is clear there is a need for change a similar change in the used car operation. “It’s obvious that the sector is struggling to attract the quantity and quality of the people it needs,” says Steve Nash, chief executive officer of the Institute of the Motor Industry. “Existing pay and incentive models are too inflexible and are not attracting women, in particular women coming back into the workplace after having children.”

Pay is just one side of the equation – retention of great people is another key to success. Here at RTS Group, we are a Sunday Times Top 100 company to work for, so have some knowledge about creating a great place to work and the key is not just in free fruit and table football – it is a cultural shift in how you view your workforce. The key elements to consider are neatly contained in the questions asked by Gallup in their employee engagement polls which include:

1. Does your supervisor, or someone at work, seem to care about you as a person?
2. Is there someone at work who encourages your development?
3. In the last year, have you had opportunities to learn and grow?

A lot has changed from the stereotypical used car dealership with a ‘hire and fire’ operation run by a ‘my way or the highway’ type of manager – but there is still a lot of opportunity for change. Asking about ‘feelings’ and ‘caring’ is not often overheard in dealerships but feelings shouldn’t be ignored – remember, the current generation places a greater value on progression and training and development than they do on hierarchy. They have grown up sharing and validating every decision with social media friends, so you have to respect that your (younger) staff will value people asking how they feel. Retention is about progression, support, development and taking an interest in people’s skills. The good news in a changing sales environment is there is a lot of scope for change – who better to engage with online and video messages than the generation who were born with a smartphone in their hands?

Finally, recruitment. The used car sales role is about dealing with people, using your communication skills via email or video and when you do see customers face to face remembering that they will have researched what they are looking for. It entails a high degree of emotional intelligence and the winners are those who can deliver an efficient, friendly and professional experience. There is huge competition for people with those skills and it is, after all, a retail job with long hours. Flexibility with time, the removal of financial pressure and above all a decent culture and manager to work for are the attracting factors for this generation – not just the opportunity to potentially double your income (maybe).

The world has changed

Dan Ariely, professor of psychology and behavioural economics at Duke University, argues in his book Payoff: the Hidden Logic That Shapes Our Motivations that financial incentives can’t possibly explain it all — and in fact, they can be demotivating. His experiments on motivation and reward in 2017 showed that a pizza had a greater effect on performance than pay reward – the world has changed, we want instant validation and reward.
We have worked with many dealerships in addressing their culture and structures, particularly when the cry for help is “sales are down, we need more training”. More often than not we recognise the challenge is with the managers – times have changed, attitudes and motivations of staff have changed and if the style of the manager does not reflect that then there are issues to address. 

Captaining a happy and profitable crew on your ‘used car ship’ means looking at what is happening in the wider world of employment and not being afraid to make the changes to maximise your opportunity.

If you’d like some expert input into how to help motivate the crew of your used car operation, please get in touch.

Malcolm Miller

Malcolm is RTS Group’s managing director so he oversees everything in the company and spends a large proportion of his time on new business development. He joined us initially as an associate, setting up the Mazda Academy, and became MD in 2013. He is a Fellow of the Institute of the Motor Industry.

Malcolm’s background is as a freelance trainer, largely in the automotive sector but also within the finance industry. His first ever job was as a paperboy – he delivered 40 papers a day from 6am, and was paid double on a Sunday because of the weight he had to carry!

He admits he has a somewhat untidy desk and should probably get the coffees in a bit more often, but his good humour and go-getting approach mean the team let him off. In his spare time, Malcolm is a rugby referee travelling across the south of England, and he has three grown-up children. Malcolm describes himself as “curious” which makes him the perfect person to explore new opportunities for RTS Group.

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