How To Set Up A Successful Negotiation
by Joe Verde
The “Negotiation Process” is one of the weakest steps for most salespeople. It isn’t taught in most dealerships and learning it through “experience” is slower than a snail and very expensive. And the problem is, both the sale and your gross completely depend on you successfully handling this step like a professional.
I’m not looking to change your dealership policy on negotiation and I think you should follow every step your manager outlines in your training. But if I can help you understand it better, you can use any system and negotiate successfully more often. So let’s talk about how to set it up correctly and let’s cover a few tips about the negotiation process itself.
A lot of surveys point out that customers don’t like to negotiate. Well, if that were true, we’d all be one-price stores by now – and obviously we aren’t. When you read between the lines of those customer surveys you’ll find that it isn’t negotiation itself that they dislike – it’s how most dealerships and their salespeople negotiate that bothers them.
Let’s look at a typical conversation out on the lot and see if we can find our where our problems start…
Cust: How much is it?
SP: We’re asking $17,383, but don’t worry, we’re real negotiable.
Cust: What kind of discount are you offering?
SP: I can save you at least a thousand. Where were you trying to keep your payments?
SP: That’s kinda low – how much did you want to put down?
Cust: Nothing – we saw your ad.
SP: What do you want for your trade?
Cust: $7,500 (About $3,000 more than it’s worth wholesale.)
It sure sounds like the salesperson is trying to be friendly and is trying to find the customer’s budget so that they can put them on the right vehicle.
Has the negotiation started? Absolutely. Is it started correctly? Absolutely not. Why not? Well, we already have a couple of problems we’ll pay for later.
1. The negotiation starts as soon as the first figures come out. Talk price on the lot and you’ve started your negotiation.
2. The first person to bring up the figures has the advantage in the negotiation. And the salesperson has allowed the customer to establish those starting figures.
3. We’re supposed to set up a win/win with the negotiation and the way this one has started, if we sell it, it will be a win for us and a lose for the customer.
Think about this…since we know 78% who walk on the lot, buy and 85% of them specifically came to buy – then it’s logical to assume that Bob And Betty customer have already sat around the kitchen table and discussed their budget.
They saw ads for $250 per month and said “I hope we can do that and if we can’t, we could go to $275. And if we had to, I guess we could go up to $300 to $325, and if it really got down to it, we don’t want to, but we could go as high as $400 on the payment.”
They also saw the $0 down ad and said “Let’s try that. And if we can’t do it with nothing down, we’ll put $500 and if we have to, we’ll go $1,000 and if we really have to, we’ll put $1,500, but that’s tops unless we take some out of savings.”
On their trade, they saw one in the AutoTrader just like theirs, figured theirs was nicer and added a couple of grand.
And then of course, instead of just stating the price when asked (“It’s 17-3”) the salesperson just gave away the farm when he opened his mouth. (Tidbit: the average 1st discount offered by a salesperson is $844 and it happens within minutes.)
So what’s the problem? Well… Let’s fast forward into the office where most salespeople only have that extremely loose, fairly worthless commitment for the non-closing questions most of them ask: “Do y’all want to go inside and see what we can do?”
So your manager grabs the write up sheet and starts the deal at…
—$17,383 plus stuff
— $3,750 down
— $3,250 for their trade
— $495 per month
Remind me again about how they feel when you show them this first offer. Angry, insulted, mad, grab their keys and leave kinda stuff.
What did you expect to happen? It was set up completely wrong from the first words out of the salesperson’s mouth. And even if you eventually made this deal, that win/win theory is history. Even though they may agree to the terms, etc. they’ll never be very happy.
So what would I have done differently?
1. State the price and move away from it immediately. “It’s 17-3, by the way, who’s the lucky one, who gets the new car, Bob, you or Betty?”
2. Do not ask payments, down and trade information. Just do your job and get them excited about the vehicle that they’ll step up from their original kitchen table figures when it’s time to negotiate.
3. Don’t get mad at your manager for starting at sticker price – that’s his/her job and that’s where your side of the negotiation is supposed to start. Don’t you remember – you have to start high because they start low so you can meet in the middle somewhere with that win/win.
No, they don’t mind negotiating – they just hate having to negotiate such an important decision with an amateur.
So stay off price – do your job and get them excited – write them up and get a commitment – and then negotiate the win/win professionally and successfully.
©2001 by The Joe Verde Group. All rights reserved. Reprinted here with permission.
Joe Verde has been in the car business since 1973 as a salesperson and manager, and since 1985 he has become the leader in sales and management training for our industry. His company, The Joe Verde Group, advises key decision makers in top dealerships internationally on how to achieve all of their sales and management goals. Joe has spoken at the ’91, ’92, ’93, ’94, ’96, ’97, ’98, ’99, 2000 and 2001 annual NADA conventions and has been invited back again in 2002. Joe is also in constant demand to speak around the world to manufacturers groups, dealer 20-groups, state and local associations and other auto industry groups.
You can contact Joe at:
The Joe Verde Group
P.O. Box 267 San Juan Capistrano, CA 92693-0267
Phone: 1 (888) 717-2782
Fax: 1 (949) 489-3881