Lisa Schomp is a third-generation car dealer whose family has been in the business for 60 years. But when she took the reigns of Ralph Schomp Automotive in Colorado, she found that the traditional sales process was alienating her customers.
'The customers would say, `I hate what I have to go through to buy a car,' ' says Schomp, 48, who succeeded her father, Ralph Schomp, in 1988. 'They said, `Couldn't we just pay a set price?''
Since people were paying about the same for a new car no matter which dealership they went to, Schomp decided to simplify the sales process.
'Why go through this brain drain when we are alienating our customers?' she asked. 'We know where we're going to end up. Why not just sit down and figure out what the price should be? I felt that was the right way to go.'
After considering the idea for several years, Schomp says that in 1990 she decided it was time to give it a try. With her staff, she formulated a process that called for plainly stating the best market price for vehicles and other items with no negotiations, what she calls a 'pure one price.'
She didn't want to penalize the salespeople, who were paid by commission, so she adopted a salary pay plan that combined a salary with incentives.
Even though the change was drastic, she says the transition has been eased by a built-in trust factor tied to the longevity of the business in the Denver area.
'I lost 85 percent of my sales force at first,' says Schomp, who is president and dealer principal. 'It's amazing how quickly they came back once they had a chance to look at it.'
Sales consultants start at a base pay that is adjusted to tie in with their average monthly sales during the past three months. Salary can go up or down or stay the same, depending upon their average volume.
Also, salespeople receive a bonus for each car sold. Generally, the more cars sold, the higher the bonus for each car. The dealership recently added a bonus based on customer satisfaction.
In 1999, the pay of the sales staff ranged from $24,000 to $97,000.
Schomp says that more than 80 percent of her current business is from repeat customers and referrals. The business also has grown 80 percent in the past eight years.
Once the policy was adopted, she decided that she must adhere to it.
'No, I will not give you floor mats to make a deal or tint your windows for free,' she says. 'But I will clearly state those costs for you. In our opinion, if you throw in a set of floor mats, you have negotiated.'
When price negotiating is removed, the salesperson must become more customer-oriented.
'What you're really selling is yourself, the product and the company,' Schomp says. 'The focus has changed. This is now an educational process. Do you know what you need? If we don't have it, we will try to send you where you will find what you want. That is difficult for dealers who have been negotiating for a long time.'
No `sale of the week'
Customer reaction has been mixed but, for the most part, positive.
'We talk immediately with the customer about what we are and the advantages of one price to them,' Schomp says. 'You've got to do that, or customers think it's a gimmick. Some people say they would never buy without negotiating, but they may come back after they've shopped around.'
The dealership does little advertising except for used cars. Schomp has one major sale a year to benefit a charity and reserves the right to one other sale to reduce excess inventory.
The savings in marketing costs go toward customer service. She gives buyers an extended warranty covering seven years or 100,000 miles and takes care of minor service disputes without questions.
Quality over quantity
The policy has reduced turnover, she says, and improved the caliber of employees in sales and service. She says paying technicians a salary, rather than for productivity alone, encourages quality work.
Her advice to other dealers: 'Understand exactly the process you want to adopt. Be clear on that process, and do not waver a bit. You cannot re-evaluate on a daily or hourly basis. Go for consistency, because once you break the promise, you're no longer one price. And the customer really does watch.'