Training » Are You "Upside Down" in Relational Equity?

Are You “Upside Down” in Relational Equity?

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Are You “Upside Down” in Relational Equity?

Being “upside down” is a phrase that we commonly hear in the automobile business. It usually refers to a customer owing more than their vehicle is currently worth. Another way we describe this is to say the customer has “negative equity”. When heard, it immediately triggers thoughts of getting additional cash down or an attempt to roll the negative equity into a new loan. What if the negative equity doesn’t have to do with vehicle value, but instead the “relational equity” you have with your customer?

Relational equity often is the difference between closing a sale and losing it. The relational equity you have, or don’t have, with customers will greatly affect the direction your sales will go. Many managers and sales reps attempt to move forward with a sale before taking time to build the relational equity that is needed to carry the relationship. They are “upside down” with the customer and don’t realize that “negative equity” is keeping the sale from coming together.

How does this happen? One common way this happens is in the pre-qualification of customers. Think about this. With prime customers, you would not consider walking on the lot and immediately giving a price or payment call to a customer. Instead, you take the time to do a walk around and test drive to build the value of the vehicle. Here is the principle: Build value before you begin provide or ask for information that elicits a commitment from the customer.

In subprime, the sale is not made in the vehicle walk around or the demo. Instead, it is made during the customer credit interview. It is here that we explain the approval and purchase process to the customer. It is here that we set or adjust customer expectations. The constraining factor in a subprime sale is the payment call the bank approves the customer for. It is here that we leverage the fact that “the bank has approved you for these vehicles”. Think of this process as the “credit” walk around and demo.

Don’t put the cart before the horse. The credit interview should almost always be done face to face at the dealership with a “credit manager”. If you pre-qualify customers on the phone before bringing them in for an appointment, you cut short your ability to build value. If you make co-applicants, cash down and a long list of stips a requirement to begin your relationship, you will start your relationship with negative equity. Don’t pre-qualify leads. Bring everyone in. When setting appointments with proactive sales leads, get on the phone, answer basic questions, set an appointment with the customer and get off the phone.

Why is relational equity important and how do we build it? Consider three fundamental principles of sales.
  • People don’t like to be sold but they love to buy.
  • People buy with emotion and justify with logic.
  • People buy from people they like.

If people love to buy, it is important that we find out why they love to buy. Often in the car business we focus on the what questions. What type of vehicle? What payment? What interest rate? What term? These questions are not bad, but I believe they are secondary questions. You will sell more vehicles if you first focus on the why questions. Why questions focus on buying motives. Buying motives are tied to customer feelings and emotion.

What are some of the emotions involved with subprime sales? For a moment, let’s put ourselves in the shoes of a subprime customer. I believe three buying motives stand out to us all:
  • Trust
  • Personal Care
  • Need & Desire for the Vehicle

Trust. Every prospect and customer you face is asking the question “Can I trust this person?” Are you dealing with integrity with your customers? Are you purposeful in all that you do to make sure your customers trust you and your staff? Do you make statements that are not factual or ones that contradict other information you have provided that diminish trust. Build trust and credibility by logically explaining the approval and purchase process. Testimonials from other customers can build trust. Whether written or told, share stories of other people you have helped. Stories connect with people emotionally. Your believability and credibility will build a foundation for relational equity.

Personal Care. A second question customers ask themselves is, “Does this person care about me?” People don’t care how much you know, until they know how much you care. Demonstrate your care by first developing a relationship with your customers. Once at the dealership, build relational equity by taking time to learn your customer’s story and answer the questions they have. Be empathetic and humble enough to share challenges that you’ve faced in your own life. Come along side your customer. Do not speak down to them. Treat your customers with respect…even the difficult ones. You are the professional so hold yourself to a high standard. Consider the customer. If they have to drive excessive distances to get to the dealership, in this case only, consider walking through some of the qualifying process over the phone. Create a different experience with your customers than they will receive anywhere else. Remember people buy from people they like.

Need & Desire for the Vehicle. Serve your customer by not allowing them to have their expectations set on a vehicle that no bank will ever approve them for. Many customers will come to your door with champagne taste but a beer budget. Don’t put champagne in their hand only later to take it away and hand them a beer. It’s your responsibility to find out what the customer’s needs are and then control their desires. Credit challenged customers need vehicles and also need to reestablish their credit. Once you have worked with the bank to determine the finance appropriate price point, land a car on the customer. Then take time to build desire in the product with a proper walk around and demo. Co-signers, cash down and stips come much easier after you’ve made sure the customer has fallen in love with the vehicle.

I highly recommend that you implement these principles for Subprime. They will allow you to sell more vehicles and make more money. If you would like to learn more, e-mail me and I’ll be glad to send a checklist of 49.5 Best Practices to SUPERCHARGE your Subprime Sales & Profits.

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