Michael Price says his move to a hassle-free approach that pays salespeople a salary instead of commissions has taken pressure off the sales force and his dealership's customers. As a result, Price Auto Group in New Castle, Del., has seen a steady rise in sales and customer satisfaction.
The program is in place at the group's three auto malls - in Salisbury, Md., and Dover and New Castle, Del. It offers customers a non-negotiable price and quick service, says Price, 48, a minority owner and general manager in the group.
'You can buy in an hour if you buy from me,' he says. 'Our systems are set up for speed.'
Rising customer satisfaction scores indicate Price Group customers like the speedy transaction and the absence of pressure from salespeople, according to the dealer. He says the pressure was removed when, in 1996, he switched sales reps from a commission-based pay plan to a salary with volume bonuses.
'I felt that paying a percentage of the transaction led to behavior that was contrary to good customer treatment,' says Price, who operates Price Toyota-Dodge-Daewoo in New Castle, Del. 'So we chose a base salary and volume bonus. It makes no difference if they sell a $4,000 car or a $40,000 car; the more they sell, the more they make.'
Price's theory was that salespeople seeking big commissions were tempted to push customers into higher-priced cars that the customers sometimes were not enthusiastic about buying. By changing the pay plan, he figured, that pressure would be gone and customers would respond with repeat business.
Sales figures bear out Price's reasoning. At the group's dealerships, the number of units sold per salesperson has risen from 9.5 per month to 14.5 per month since the new plan was implemented. The top third of the salespeople are moving 22 cars each month. 'That's more than twice the national average,' Price says.
Salespeople are paid monthly 'volume flats' for selling certain numbers of vehicles. For example, cars eight and nine are worth an additional $200 each in bonuses; numbers 10 and 11 are worth $225, and 12 and 13 each bring $250 in extra pay.
Price says the arrangement generates trust because the buyer isn't pressured to make a high-dollar purchase, and it leads to a significant number of referrals and repeat purchases. That, in turn, creates more business for the salesperson. There are other benefits, Price says, such as taking some financial pressure off sales reps.
With a predictable base salary, salespeople don't have to worry about wide variations in their income, he says. 'It allows our salespeople to plan their household budgets.'
Contented workers mean Price Group's turnover rate has plummeted since the plan and other changes, such as improved training procedures, were implemented, Price notes. The turnover rate in one showroom has plunged from 125 percent per year to 23 percent, according to Price. Two other locations have had no turnover in the last year.
He says salespeople are happy with Price Group's pay plan, speedy sales process and the training they receive.
'We're able to recruit a little better,' Price says. 'People who come here from other dealerships are amazed' at how the process works and are eager to settle in and build a following of customers. But getting hired is not as easy as walking in the door, Price warns.
'We screen very carefully,' he says, explaining that the dealership looks closely at the knowledge and professionalism of all applicants.
Change wasn't easy
Price acknowledges that the transition to the new pay plan was 'not always a bed of roses. Some people were a little skeptical of the changes. We lost a few people, but the ones we lost, we probably wanted to lose. They were the reason our CSI was so low.'
The group's Toyota dealership in Newark, Del., is still selling under the traditional commission pay system. 'We have a partnership there with the store operator,' Price says, 'and right now, he's not interested in going through what he considers an experiment.'
Price says it provides an interesting comparison with another Price Group Toyota location that does use the salary system.
'One is a very good traditional sales store with a commission,' he notes, while the other pays salaries and volume bonuses. 'Guess which one sells more and has less turnover.'