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Lindsey Auguste and Dennis Galbraith

Lindsey Auguste and Dennis Galbraith Investigative Reporters

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Impact of Vendor Integration on Price and Service

In the way of product integration, we’ve found that there are more or less two kinds of approaches: vendors who buy up other companies so they can provide their own suite of products with seamless integration, and those that will openly share their products to interact with other vendor products that dealers’ have in place already or will have in place.  Product Integration is also possible when either of these two companies add new products organically through product development.  It's no secret that the largest vendors for dealers are considerably larger today than they were a few years ago. Whether the growth is through acquisition or organic, it generally involves expansion into additional services.  Gradually, this will change the way many vendors interact with their dealer customers and charge them.

Two Types of Selling

Vendors sell to dealers in one of two basic ways, through transactional sales or consultative sales. With transactional selling, the sales person simply sells the dealers on the benefits of their product relative to the price. The ongoing service may include access to the sales person or an account manager, and perhaps even involve a periodic call to the dealer to review some performance reports. Alternatively, with consultative selling, the sales person adds value during the selling process. That sales person may continue to add value after the sale with advice beyond the product itself. Carrying a multitude of products allows the sales person to offer additional solutions as additional problems or opportunities are identified.

Consultative selling, while informative and beneficial, can earn a vendor a premium. Dealers need to make sure that the services they pay for fit within their realm of operation and goals.  They need to constantly reevaluate if they need the additional consultation on strategy and products.  If not, a transactional model might better fit their needs and budgets.  But frankly, many of the companies who think they are providing consultative selling are simply providing an expensive latte delivery service. In one of our articles last week, we mentioned the fact that most dealers do not receive even 70% of the potential value from the products they buy. There is certainly room to add value, but if it's not happening, then the vendor may as well cut the sales staff and reduce prices to dealers.

Additionally, there is no shame in conducting a transactional sales approach. Companies like Member Services have virtually eliminated the expense of having salespeople in the field and are doing just fine passing those savings on to dealers. Sales author, Neil Rackham, studied tens of thousands of business-to-business sales calls before concluding that moving from consultative selling to transactional selling is a natural evolution as the product category matures. Companies refusing to adapt can find themselves at a significant competitive advantage.

Making Consultative Selling Better

Organizations seeking a high share of the dealer's wallet, along with share of mind, often weave consultative selling into the very culture of the organization. Their natural evolution will be to add additional products with which to service the dealer and spread the cost burden of consultative selling. This is clearly and openly the path of AutoTrader.com. As Chip Perry pointed out to us, the firm's sales people make knowing the dealer's business their business. Sales reps will help the dealer get more out of the products they buy, and introduce them to additional services when the rep perceives a need for them. This may involve bringing in someone more expert about the additional product, but the sales agent is expected to be expert enough to know when that additional expertise is called for.  These services can be decidedly valuable, when done right.

Indeed, vendor consolidation can lead to a higher level of service delivered, without an economic burden.  Execution can be a bit tricky; When the rep starts talking about the product they are having an introductory special on this month rather than a clear correlation between an identified need and a product solution, then the system is no longer consultative. We suspect executives at large organizations like AutoTrader.com, ADP/Cobalt, Dealer.com, Dominion, and others have their hands full balancing this challenge with that of meeting short-term financial goals. Some may execute the consultative model well. Some may evolve to a transactional model, and some may flounder in the middle. The challenge for dealers will be to make sure they are not paying a premium for non-beneficial service. Which approach is best for a dealer to team up with depends completely on the goals and strategies of each individual dealer operation.

An interesting wildcard will be the growing community of trainers and consultants. On one hand, well executed consultative selling can be seen as a threat to their livelihood. On the other hand, there is some level of expectation for trainers and consultants to remain vendor neutral. Again the field is mixed. Some trainers refuse to accept any form of payment from vendors, while others are registered agents of various vendors.

One thing is certain, the more diligently the dealer community identifies what works and rejects that which does not, the faster the market will evolve toward maximum efficiency.  Dealers dictate the pace at which that evolution happens; there is no need for lions to evolve as long as there are plenty of lazy zebra around. 

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