Strategies to encourage factory order sales and mitigate delay and price increase problems
Dealerships across Canada are losing anywhere from ten to 50 per cent of their factory order sales. Although there are situations where vehicles are delayed for prolonged and unreasonable wait times, the fact of the matter is that most factory order cancellations (by customers) are preventable. Let’s explore the reasons for cancellations as well as potential solutions.
Factory orders are not being sold with enthusiasm, conviction and a sales process. “Well you know, you will have to factory order that, sir (sigh).”
“Don’t worry, if we factory order a vehicle for you and if (when it arrives) you decide that don’t want it, you don’t have to take it—we can sell it to someone else—and your deposit is fully refundable—and you only need to give us $500 to place the order.”
These are the statements and conversations between sales consultants and customers all across Canada. I refer to this as “unselling.” Many sales consultants are spending more time instructing customers as to how they can get out of a factory order versus selling the vehicle, the brand, and the dealership.
Solution
Dealerships need to stop wimpy conversations about getting out of deals and replacing them with unabashed, enthusiastic salesmanship. Make factory orders “sexy” for your customers; “Mr. Lee, we are going to custom-order your vehicle like a bespoke, London suit. It will be the exact trim level, features, accessories and colour that you want. When your order is received at our manufacturing facility, a team of professionals will see your name and your tailor-made vehicle order will come up on their screen—and the work will begin on your vehicle. As a sales consultant, I love being able to give our customers exactly what they want!”
Financial services managers need to meet customers at time of vehicle sale. When customers meet a friendly, professional and enthusiastic financial services manager at time of vehicle sale, it serves to firm the commitment; the customer is buying a car!
We can still provide an incredible purchase experience—even for a factory order. The following is an example of a factory order sales process (when you have no vehicles on-ground to present and demonstrate). If you would like more detail in the form of a document, e-mail me.
- Welcome
- Trade-in appraisal
- Discovery and relationship
- Sales manager early introduction
- Why order from us
- Finance/lease pre-approval service
- Virtual vehicle presentation
- Dealership tour
- Payment options
- Financial services
- Customer communication
Sales Consultants don’t get paid for months. Many Sales Consultants have shared with me that it’s difficult to get excited about selling a new vehicle when they know they’re going to have to wait three to 12 months to get paid for it. Yes, we all tell them that it’s “money in the bank,” “something to look forward to,” etc. However, many sales consultants are wired for instant gratification—they want it now, whether they need it or not. Others live much more hand-to-mouth and feel stressed waiting for commissions when bills are pressing.
Solution
Many dealerships are paying flat commissions of $200, $300 or even $400 at time of vehicle sale with the balance (if any) paid out at time of vehicle delivery. Some dealerships are even paying as much as half of the payable commission at time of vehicle sale.
Also remember that most Sales Consultants crave recognition as much as or even more than money. Hence, if you have a traditional sticker board in the Sales Manager’s office or meeting room that just tracks vehicle deliveries, change the board.
Beside each sales consultant’s name, have a row of stickers for sales (including factory orders) and a second row for deliveries. As overly simplistic as this sounds, many sales consultants get down or defensive when the sticker board is shy of deliveries, yet they may have sold significant factory orders (and it is not being recognized on the board).
I also witness dealerships excitedly delivering vehicles coming off the transport from factory orders and the atmosphere is jubilant. However, the dealership and sales consultants are distracted with deliveries and not filling the pipeline by selling new vehicles this month.
Factory Order deposits are too little. Deposits for factory orders are commonly $500. Wait, what, $500?
Deposits were $500 when I began selling cars in 1986!
Why is the retail auto industry so timid and afraid to ask for a real commitment in the form of a substantial deposit (yes, I am aware that some provinces have percentage maximums, but we don’t even ask for those!)?
Home sales often ask for deposits of ten per cent or more of the selling price just to accompany an offer. In the retail automotive industry, a $500 deposit often represents one per cent (or less) of the purchase price.
Deposits are about creating a psychological commitment to a purchase. Many customers will walk away from a $500 deposit at the drop of a hat if they see a vehicle on-ground and available at a nearby competitor.
What’s worse, if there’s only a $500 deposit, they will often not only forfeit the $500 deposit, but not even tell the sales consultant that they actually bought a car elsewhere.
If a customer provides a deposit of $3,000 or $2,000, or whatever seems real and current, at the very least, they would be forced to come to the dealership to request and explain why they want their deposit refunded—and whenever Sales Consultants and Sales Managers have the opportunity to meet customers face-to-face, deals are saved!
Forgive me, but what’s the old expression, “Money talks, bulls#*t walks”? Consider re-examining your dealership attitude and policy with respect to deposits, not only on factory orders, but on all deals.
Financial Services Managers are not meeting factory order customers at time of vehicle sale. The rationale for this is that the dealership may not have the new 2023 vehicle pricing or a stable interest rate.
Financial services managers also fear that if they take a turnover at time of vehicle sale and successfully sell products/services, that it gives the customer too much time to think, talk to friends and family, and ultimately cancel products that were sold.
Solution
Financial services managers need to meet customers at time of vehicle sale. When customers meet a friendly, professional and enthusiastic financial services manager at time of vehicle sale, it serves to firm the commitment; the customer is buying a car!
The Financial Services Manager should meet with the customer in their office like any other customer and make them feel like a V.I.P.—big thank yous and big congratulations! The financial services manager should explain (in detail) the factory order process including when and how the dealership will communicate to provide information and updates.
Decide how often to contact factory order customers to provide updates. As a dealership, do you want to contact customers weekly, bi-weekly or monthly? Do you want to contact them by phone, text, e-mail or a combination?
This is also an excellent time to complete the credit application. Some dealerships will choose to complete it at this time, but submit it closer to the actual delivery time to accommodate for changing interest rates, etc.
If financial services managers are concerned about selling products and subsequent cancellations, they can choose not to sell their products/services at this time and (instead) meet the customers a second time at time of vehicle arrival/delivery. Selling becomes much easier, because the customer already met and established a relationship with the financial service manager at the time of the vehicle sale.
Sales consultants are not staying in touch and updating factory order customers. Many sales consultants have poor organizational skills and simply forget to stay in touch with factory order customers. Others do not see the need to stay in touch if there are no updates. And of course, others are walking on eggshells; “I made a huge gross on this deal—I don’t want to talk to him!” Other Sales Consultants do not want to contact a customer for fear of disappointing them or worse, having them cancel.
Solution
Decide how often to contact factory order customers to provide updates. As a dealership, do you want to contact customers weekly, bi-weekly or monthly? Do you want to contact them by phone, text, e-mail or a combination? What is the nature of the contact?
For example, often there is no news. In this situation the contact may simply be a Sales Consultant phone call to deliver no news: “Hi Mr. Lee, it’s Chris Wiseman from Langley Chrysler. I don’t have any new information with respect to the delivery time of your new 2023 RAM Sport, however, I wanted to stay in touch—and let you know that I am watching our factory order status reports on a daily basis and that (of course) I am eagerly tracking yours.”
Sales Consultants are afraid to contact Factory Order customers. Earlier this year I was facilitating a large seminar for sales consultants and sales managers. Just a few minutes before the start of the seminar, several sales consultants near the front of the room began to panic. They had just received word that there was a $3,500 price increase on their best-selling pick-up truck and that the increase was retroactive and included all factory orders in the system. Each sales consultant had 10 or more factory orders and they were stressing about making the phone calls and texts to their customers to inform them of the price increase; their entire day was ruined.
Although factory orders are now a permanent and bigger part of our business, the fact is that the majority of sales consultants are afraid of the uncertainty, and often bad news, associated with factory orders; no 2023 pricing, interest rate increases, vehicles arriving at dealerships with missing equipment and of course, the inevitable delays.
When these situations arise and customers need to be contacted and updated, not only do sales consultants dread or delay making these contacts, many simply don’t do it.
Sales managers are often under the impression that factory order customers have been updated on a monthly basis by their sales consultants with respect to the status of their vehicle. In many situations, customers have had no contact whatsoever since the date of placing their order.
Some customers even reach out to the sales consultants seeking news, but their inquiries go unanswered. When this occurs, many customers simply walk away from their deal (and deposit) and buy a new vehicle elsewhere.
Solution
If 2023 pricing is significantly higher than anticipated, if interest rates increase, if vehicles arrive at the dealership with missing equipment and if there are delays, instead of having sales consultants make these unpleasant customer contacts, make it a policy to have sales managers make the contacts instead.
If sales consultants associate factory orders with potential problems and upset customers, then they will lose their desire to sell them—this is already occurring.
If, however, the sales consultant can hand over the unpleasant part to the sales manager, they will not be apprehensive, or worse, dismissive with respect to selling factory orders. When sales managers make these difficult calls, customers appreciate the proactive initiative and the fact that the sales manager took the time to personally make the contact. Most importantly, when sales managers make the calls, deals are saved!
