© 2019 Auto/Mate, Inc. All Rights Reserved.
by Mike Esposito, President and CEO, Auto/Mate Dealership Systems
In the 2015 NADA Workforce Study, one of the most shocking statistics to me was that only 33% of all sales consultants hired reached their three-year service anniversary; which means that 67% of sales consultants that were hired quit within the first three years.
The high turnover rate among car salespeople as a whole leads many dealers to shake their heads and say, “It’s hard to find good help.” Actually, nothing could be further from the truth. There is plenty of good help out there; but the hard-working, smart and personable “help” that you’re looking for prefer to take jobs with companies that have a market-based salary structure.
Here in Albany, a college graduate can go work for many companies and receive a starting salary of $40K to $50K with great benefits. When given a choice between a guaranteed $50K and a sales job that basically pays minimum wage plus commissions, why would anyone choose the latter? Sure, the “potential” may be there, but it takes years to build a book of clients and make $70K to $90K as a car salesperson; and even then, there are no guarantees.
I have long been an advocate of changing pay plans in retail automotive. For several years I was a General Manager for a large dealership, so I know what the dealer’s thinking is. Why would you pay a salesperson unless they sell something? Dealers are afraid if they offer a good starting salary, the salespeople would have no motivation and would just sit around and do nothing.
Unfortunately, this type of thinking demeans the very salespeople you are trying to hire. You hire and pay people salaries to do other jobs in the dealership, and they do their jobs, don’t they? If they don’t do their jobs, they get fired. It’s no different if you think about paying salespeople a salary. Pay them a salary to do their job, and if they do a good job, they get rewarded further with pay increases or bonuses. If they don’t do a good job, fire them and hire someone else. The bottom line is that you want your managers to manage the sales staff, not the pay plan.
Offering to pay a salary with the potential for bonuses and growth will attract a much higher-caliber employee than offering to pay minimum wage plus commissions that all too often these days, amount to a “mini” of $150 per car. If you want to hire someone intelligent and hard working, you have to be competitive. If you’re not willing to be competitive, then you’re going to get what you’re going to get.
Another reason I advocate changing pay plans is because when you hire someone for minimum wage, you can be pretty confident that person is looking for a better-paying job from day one. Whereas if you pay them $50K, that person may not look right away; in fact, they may be motivated enough to stay for a while and work hard so they can make $60K or $70K.
I realize that front-end gross is declining, but in the last few years, dealerships have had incredibly profitable years. They’re making money on trade-ins, on F&I and on service work. Incentives from manufacturers have increased significantly, encouraging dealers to give up front gross as a strategy to meet manufacturers’ stair step programs and to move the customer into the F&I office.
So yes, front-end gross may be low, but dealers are still highly profitable. Isn’t it time to pay our starting salespeople a living wage?
My belief has long been that paying salespeople a good salary will actually increase front-end gross. A salesperson that is motivated only by commissions looks at every customer with the attitude, “What can I get from this person?” Instead, the focus should be on listening to the customer, focusing on their needs and taking care of them with the goal of building long-term loyalty.
Some of the luxury manufacturers and large dealer groups have been dabbling with new pay plans, and the results have been encouraging. Titus-Will Automotive Group in Washington recently changed the title of their salespeople to “product specialists,” and offers a choice between a traditional commission pay plan and a salary with bonuses. According to a recent article in Automotive News, operations manager Court Will says the approach has resulted in better quality applicants and more applicants coming from other industries.
BMW has shifted to hiring “product specialists,” who are hired not to sell cars, but to provide a great customer experience. Sonic Automotive is also rolling out a group-wide, one-price policy with no-commission customer service reps. The goal behind these moves is to improve the customer buying experience, which will ultimately result in higher levels of customer loyalty and profits.
This makes sense to me; salespeople who make a living wage are more likely to be happy in their jobs, which means the customers will be happier too. Happy customers lead to higher profits, so why fight it? The trend seems inevitable and better for all parties involved.