To Bill Krouse, there's just no way around it: A traditional commission pay plan creates a conflict between sales consultants and customers.
'In the traditional automotive culture, the salesperson is trying to extract the maximum profit out of a car, and that puts the salesman at odds with the customer,' says Krouse, 52, vice president, general manager and minority owner of Polar Chevrolet-Mazda of White Bear Lake, a suburb of Minneapolis-St. Paul.
So in 1992, the store switched gears. It adopted a negotiation-free process that covers all products - vehicles, accessories, extended service plans and parts and service. As part of the new culture, salespeople are paid a salary with bonuses rather than commissions.
For the consumer, who usually has little negotiation experience, going up against a traditional car salesman can be daunting.
'If you compare the consumer's experience to the opportunities a car salesman has to negotiate, it's like taking on a Japanese sumo wrestler,' Krouse says.
Customers know about the arrangement upfront: The price sticker on each vehicle includes an icon with the word 'commission' circled and crossed out with a red line. The dealership's Web site, also promotes the policy.
All products are offered at what the dealership determines to be the 'market-based best price.' That's not to say that prices won't change: A car in stock for a long time may be marked down, and manufacturer rebates and incentives affect prices.
As part of the change, Krouse felt it was necessary to remove the conflict that traditionally exists between the salesperson and customer.
'We wanted the relationship between the customer and sales consultant to be stress free,' he says. 'The majority of people do not like to negotiate. It's not a part of our culture, and they don't get to practice it often.'
Sales consultants now are paid a monthly salary of about $1,500 to $2,000, based on their sales volume and customer satisfaction. The salary is reviewed monthly.
In addition, they receive a bonus based on volume beginning at the eighth car each month. The bonus is $250 a unit until they reach the 20th unit, when it increases to $300.
The total pay range for salespeople is about $35,000 to $65,000 a year. Krouse believes that is comparable to a commission plan but with less stress and higher satisfaction.
The plan is designed to provide a salary guarantee and to reward consistent productivity.
In the beginning, the adjustment for salespeople was tough, Krouse says.
'To entirely eliminate the games and gimmicks, and being able to say, `If I throw this in, would you do a deal today?' type thing, is a traumatic process.'
Yet, over time, it has proved to be a winning philosophy, he says.
'This whole culture enabled us to hire a higher-caliber sales consultant who focuses on customer satisfaction and product knowledge,' he says, noting that teachers and employees from apparel and other retail selling environments have come on board.
'You can't reduce the price, so you have to present the features and benefits and advantages. You can't make them buy; the customer has to decide to buy from you. We need somebody with a higher skill level, and we have been able to attract that type of person because of the stress-free atmosphere we have created.'
With eight years of practice, the dealership has reduced employee turnover by 80 percent.
'These people didn't see themselves in the traditional role of car salesman, but they see themselves in the role of an auto sales consultant whose pay is based on their ability to help people make knowledgeable decisions,' Krouse says.
Polar Chevrolet-Mazda also has increased sales volume, and a large portion of its business now comes from referrals and repeat customers. Salespeople receive an extra $100 when they sell to a repeat customer.
With 20 Chevrolet dealers within an hour's drive, Krouse believes Polar Chevrolet-Mazda's strategy sets it apart and shows that a negotiation-free mentality can work in a highly competitive market.
Krouse says the store has one of the highest customer satisfaction ratings in the Twin Cities. 'This has certainly been the best business decision we've ever made. It's led to higher productivity and record profitability.'