In-home auto sales: the next “big thing” in automotives?
Hyundai's Equus and VW's Phaeton
If we had a dollar for every customer that had a negative dealership experience, we’d have retired ages ago, example story a la the Chicago Tribune. Anecdotally, auto OEMs would be wise to put great amounts of resources into improving the dealer-customer relationship. The U.S. market is still in credit crisis recovery mode. The rich-poor gap in the country continues to increase. Status quo of the 2000s is no longer tenable and we are paying the price in the industry.
One such change recently proposed by Hyundai is the way in which its dealers interact with customers. Beginning with its new flagship Equus car, Hyundai will have sales specialists show the US$50,000-US$60,000 base price car to potential customers. One has to admit that a car company selling US$60,000 sedans requires more than a little imagination and polish to also sell US$10,000 hatchbacks, and vice versa. The real question is can the new experience lead Hyundai to sales that eclipse the BMW, Cadillac, Lexus, and Mercedes brands. Hyundai claims they wish to achieve a modest 3,000 sales per year. Less clear is how Hyundai’s brand image will convince well-to-do, discerning Bimmer and Benz drivers to toss their keys into the wind and have a go with the Hyundai brand.
Source: http://www.leftlanenews.com/hyundai-equus.html
Hyundai is not the only automaker to predominately sell mass-market cars, and then make a bold move up market. VW famously brought its Phaeton luxury sedan to the U.S. market only to leave 2 years later in 2006, failing to convince customers of the BMW 7, Mercedes S-class, Lexus LS, and of course sister company Audi’s A8. Meanwhile the Phaeton has done relatively well in Germany, and connects its cars with customers who can see the cars being built and delivered in a state-of-the-art sales and manufacturing facility in Dresden. According to Automotive News, “Axel Mees, Audi’s North American chief, was forced to leave the company in November 2004 after he criticized the Phaeton and Piech in an interview, saying he would not buy the car because it has a VW logo and was sold at Volkswagen dealerships alongside other volume brands.” For more on the Phaeton’s eminent return, see: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100819/ANE/100819860/1317
Moreover, if Hyundai’s model works, it could start selling its penultimate sedan, the Genesis, in the same way. For more on the latest Genesis development, see: http://www.leftlanenews.com/hyundai-genesis-sedan-2011.html
But the approach has yet to be thoroughly tested. Concerns for dealers have to include discussions about resources, namely the time and expense that a concierge in-home service would mean. In the first place, dealers and OEMs need to identify the sorts of customers that would be best suited for this treatment. Not everyone will want a salesperson in their own home (movie example: Glengarry Glen Ross with Alec Baldwin, Al Pacino, Jack Lemmon, et al). In the second place, how do you sell to a customer “on the spot” as in many auto dealerships when you have only one example to show customers, rather than the endless colour and options list presented at the dealership. Third, the model calls for the elimination of “bargain basement deals” and “Fourth of July blowouts” and “end-of-the-year closeouts”. The use dealer advertising medium will have to get more clever and personal. Individual car profit will be absolutely essential for this model to work. Customers expecting to haggle, and dealers that give in, will find themselves in an awkward position come time to close the deal and sign the paperwork. Finally, the service model will be drastically changed. No longer can dealerships expect to rely on overpriced service advisors (sic service salespeople) to cater to customers in their garages. Instead,
OEMs are right to challenge the way their dealers do business. Years of lackadaisical management have lead to atrophy in long-term dealer profits, OEM loyalty, and overall customer service. Now is the time for change.