(This interview with Debbie Pruent, President of GfK Custom Research North America an auto industry expert is the second of a two-part series that began in Fast Company).
A couple of weeks ago, encouraged by new GM cars now being sold on eBay, I blogged in Fast Company that it was time to ”go all the way” and reinvent the dealership and turn them into experience centers with web-enabled kiosks so people could buy a car without high-pressure sales tactics. Car shoppers would welcome complete transparency on pricing, no “profiling” so women and ethnic shoppers would no longer pay more. Dealerships would become more like apple stores and the anxiety that car shoppers, especially females (as reported by ABC news) would be gone! I figured if the consumer is boss (as Procter says), why not… especially with GM having the ability to reinvent itself as it comes out of chapter 11. (For the full blog text in @fastcompany, including some great comments, click here.)
Then, I got a dose of reality therapy; sometimes the consumer is NOT boss. Sometimes federal and state laws are passed that institutionalize business practices in a way that are no longer serve the consumer but cannot be easily changed. Welcome to what is called “Dealer Franchise Laws”.
To understand this better, I interviewed an auto industry expert, Debbie Pruent, President of GfK Custom Research North America and who, before that, worked at GM and a major auto industry marketing research firm.
Joel. How do you think dealers would respond if auto manufacturers offered a plan to turn dealerships into experience centers, removing sales pressure?
Debbie. I’m oversimplifying a bit but dealers are primarily interested in selling cars to make money (oversimplifying because they also make a huge amount of their profit on the service side). So if manufacturers could “prove” that experience centers generate an ROI then a huge part of the battle would be won. But that’s not easy as it sounds. Dealers view manufacturers (generally) as product manufacturers and marketers, not retailers. They view themselves as the experts in retailing (and advertising!). And while P&G may decline to deliver a product to a retailer who doesn’t meet their “standards”, or discontinue a product altogether, automotive manufacturers do not have this luxury due to the franchise laws. This is why a manufacturer like GM is unable to quickly or efficiently reduce its overall number of brands.
Joel. Can auto manufacturers insist on a plan? Can’t they retail their auto brands however they want to?
Debbie. Manufacturers have much less control than the buying public may think. Generally speaking, they can’t insist on anything unless they are willing to pay for it (and even then they need agreement from the dealers). Exceptions are start-up brands which can build-in certain requirements like “off-road test track” (Hummer) or Saturn (uniform look and experience parameters). For the most part they must get the dealers to agree that a change to the service model is in their best interest. And while they may be able to convince some dealers on certain things, it is nearly impossible to get a uniform retail/service model in place across all dealers. So the short answer is no – they can’t retail their brands any way they want to – which is a constant source of frustration internally for them.
Joel. Did this situation change when some auto manufacturers declared chapter 11?
Debbie. Not yet although this is what I’m sure GM is hoping for (the breaking of the franchise laws) as one of the positive outcomes of filing for bankruptcy. If anything, additional pressure is being put on Congress right now to pass even more restrictive laws (e.g. to prevent closing of dealerships) and we see a great number of dealers who are petitioning (filing suits) to be reinstated (which Congress appears to be supporting).
Joel. What shopping process would car buyers prefer if they were calling the shots? What does research show?
Debbie. Like much of the retail research across other industries, new vehicle buyers are looking to “have their cake and eat it too”. They want an engaging, entertaining, service-oriented (but not obtrusive) buying-experience where information (both the manufacturer being shopped as well as the competition!) is transparent and… they get the lowest price! Such is the dilemma for all retail since the offering of “experience centers” requires a compensation model. And for auto manufacturers, still more than many other products, there is still a large product component (given the size, durability and importance of the purchase). Even a “new” service model like Saturn did not deliver a return over time because the product was not always in sync with the needs of the target-market vs. competitive offerings.