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Monday, June 30, 2014

Beware of Car Dealer Direct Mail Advertising

Of course, you should be careful of all advertising…newspaper, TV, and radio, but direct mail can be especially deceptive. The reason this is so is because direct mail usually “flies beneath the radar” of the regulators. There are so many ads in violation of rules and laws that the regulators are overwhelmed. They focus on the most visible ads, often the ones that they see themselves in the newspaper or on TV. Direct mail represents a very small percent of total advertising. One reason for this is that it is considered by many advertising agencies to be too expensive and relatively ineffective. I believe that the only way to make direct mail effective for many advertisers is to use deception.

I have a couple of direct mail pieces on my desk and will cite some examples of this deception. “We’ll will buy back your present vehicle for up to $5,000 over current Kelly Blue Book Value on trade towards the purchase of a Brand New Toyota or Pre-Owned model.***” The asterisk is for the very fine print disclosure on the back of the letter which reads: On select models. Discounts and rebates will vary from model to model. Of course, with the two words “up to” in front of the $5,000, no disclosure is really necessary. Buying back your present vehicle for $1 over current Kelly Blue Book Value is technically “up to”$5,000.

Attached to the letter is a something that looks like a check made payable to the recipient for $8,207. Here we go again with the “up to”. “You can apply this registered voucher for a discount ‘up to’ $8,207 off MSRP on a new Toyota.” Of course there is another asterisk which states “on select models”.

But there’s more! “Just for attending this event, you will receive 5 “golden” $1 coins as a gift, and you may have won $100, $250, $50, or possibly even $4,500 cash!” We, of course, have another asterisk which says that your odds of winning anything are 1 in 25,000. I often wonder who responds to these ads, not understanding the difference between a “golden coin” and a gold coin. Or, who really think they have a reasonable chance to win anything.

It’s not over yet! “Every application for credit will be immediately submitted and processed for approval and on-the-spot delivery REGARDLESS OF PAST CREDIT HISTORY”. Of course, the operating key word here is “submitted”. There is no guarantee of “approval”. They will simply “submit” you application to the bank and if you have bad credit, the back will reject your application.

“During this weekend event, any new Toyota or used vehicle could be purchase with ZERO cash down!” The key word here is “could” instead of “can”. Of course, there is the old asterisk, which, if you can find and then read the fine print, it says with approved credit. You have to a very high Beacon score to buy a new or used car with zero down payment. Less than 1% of car buyers would have this high a Beacon score. There is also a phrase which says “CASH DOWN IS NOT SUGGESTED”. This dealer might not suggest it but I can almost guarantee the bank will not only suggest it but demand it.

“Due to overwhelming response and customer request, I would like to again offer you a personal invitation to receive 80% of base original MSRP for the car you are currently driving.” This promise doesn’t even have an asterisk. Of course the base MSRP excludes accessories. Sometimes an offer is so ridiculous that you wonder who would ever believe it. Ask yourself how any car dealer could promise to pay 80% of the new base MSRP on a used car that they have never seen. They don’t know how many miles are on the car, whether it has been wrecked, or even if the car will still run.

A customer recently sent me another direct mail scam from a local Honda dealer that I have to admit is pretty ingenious (albeit completely unethical). It is designed to look like an email sent from the dealership’s general manager to one of the sales managers and printed out. The "email" says:

I wasn’t able to get any pre-owned cars from the auction. Get in touch with and offer them up to $6,0061 for their 2004 Honda Civic.
If you didn’t already, you may just want to print this email and send it to again. I will honor this offer through June 30, 2014.

The printed “email” has a "handwritten" note on it that says “I tried calling you about this email from my general manager. If you’re interested, call me at 866…). This, of course, is a mass produced direct mail solicitation intended to fool customers into believing the general manager is personally interested in their particular vehicle. As in all direct mail scams, the fine print negates the offer. In this case, the fine print stipulates a $.40 per mileage deduction, a deduction for the cost of reconditioning, among other disqualifying requirements.

click to enlarge

Direct mail claims like those above, unfortunately do work. People actually come in and buy cars. Unfortunately these ads prey on those who are uneducated, have difficulty reading English, or are simply gullible. My advice is to ignore all car dealers’ direct mail solicitations. I’m not saying that 100% are phonies, but 99% are and the odds are so overwhelming, you’re better safe than sorry.

Monday, June 23, 2014

Undercover Car Dealer

You may have seen episodes of the very popular reality TV show, “Undercover Boss”. If not, the premise for this show is that the CEO’s of companies disguise themselves as “just another employee” and infiltrate their own company. Their purpose is to learn what is really going on when their employees think “no one is looking”.

What these bosses find out is often surprising, shocking and always very entertaining. Undercover bosses find, not only very bad employee behavior, but also very good. Of course they fire the bad employees and handsomely reward the good ones. In a recent episode, the CEO of “Menchie’s Frozen Yogurt”, Amit Kleinberger, bought one good employee a new car. He paid for the college education of another. He fired a third employee who was doing “terrible things” which hurt his company’s reputation with their customers. Of course, the CEO’s must disguise themselves so that they aren’t recognized.

I’ve never gone undercover in my own car dealership, but I regularly do the next best thing. I hire people to mystery shop my company. I would do it myself, but I have only 148 employees and they know me too well not to recognize me even in disguise. Going undercover or using others to infiltrate your company is the only surefire way a boss can really know what’s going on within his business. You’ve heard the expressions, “When the cats away, the mice will play” and “Don’t tell me what you think I want to hear; tell me the truth.”

I know that a lot of car dealers, owners and general managers, read this column and my blog. “Mr. Car Dealer...This one is for you.” If you’re the owner or general manager of a car dealership in South Florida, you probably don’t like me very much. For seven years I did a live radio show with my wife, Nancy, which was critical of many car dealers. In fact, I mystery shopped your dealerships and told our radio audience what happened…the good, the bad, and the ugly. I also write about your dealerships in this column and my blog. I wrote a book about your shenanigans, “Confessions of a Recovering Car Dealer.”

I believe in giving anybody the benefit of the doubt. I know that car dealers can be like any businessman and have things go on inside their businesses of which they are unaware. Therefore, I’m suggesting that car dealers that think my allegations are totally unsubstantiated and untrue go find out for themselves. Send in a mystery shopper to find out what really happens when a prospective customer or a current customer comes in to buy a car or have their car serviced. Right now all a car dealer knows is what his managers and reports tell him. Nobody likes to “tell the boss what he doesn’t want to hear”. Customer satisfaction surveys are very easy to manipulate. Most customers are surveyed by email and car dealers will “accidentally” get the wrong email address for an angry customer or reward a customer with a free tank of gas for a good survey.

Some CEO’s of larger dealerships like the Penske Automotive Group, AutoNation, and even the Ed Morse Auto Group could actually go undercover just like in the TV series, Undercover Boss. Roger Penske, Mike Jackson, and Ted Morse could disguise themselves and find out what’s really going on “behind closed doors’. I guarantee Roger, Mike, and Ted that they will be shocked and surprised at how some of their employees are treating their customers. How can I be so sure of that? It’s because I’ve mystery shopped dealerships run by each of these CEO’s. I regularly shop my competition to keep a competitive edge just like I shop my own company to find out what’s really happening. By the way, Roger, Mike, and Ted, once your employees find out that you are mystery shopping them, it has a deterrent effect. That employee who may be inclined to take advantage of a customer will be more reluctant knowing he might be his boss or an agent for his boss.

Monday, June 09, 2014

You Get What You Pay For (Car Dealers & All Companies)

I know you’ve heard the expression, “You get what you pay for.” It’s often used to justify paying more for a quality product or service because the real cheap products can’t measure up. “That steak was tough and tasted terrible!” “Well, what did you expect for $3.99?” I’m thinking of another meaning for “You get what you pay for.”

Virtually all companies, private and public, pay their employees in some form to motivate those employees to maximize the profits of the company. Obviously, all employees are not paid directly on commission in all companies. There are those that are paid set hourly, weekly, or monthly wage. But, indirectly, even those hourly and salaried employees’ compensation is correlated directly to profits. This is because the supervisors’ (the ones that that hire, fire, and set the pay level of hourly and salaried employees) compensation is tied to profits.

General Motors is in the news now and probably will be for quite some time. You can’t avoid the news story of GM’s massive recall of cars with defective ignition systems which deactivated airbags causing at least 15 deaths and thousands of injuries. The amazing thing about this terrible and seemingly obvious defect is that it existed for 11 years without anybody raising the safety issue. Investigations have shown that there were several GM employees that knew about the defect, including high level engineers. Fifteen employees have been terminated and the US Justice Department is conducting a criminal investigation. Logic defies one to believe that only 15 employees are guilty. I believe that hundreds knew about this problem.

I posted the following on Facebook last Saturday:

“I listened to Mary Barra's address last Thursday and was struck by this thought. What if Mary Barra was a car dealer, not the CEO of GM, and she was giving this address to the employees of her dealership. Finally, what if the subject of her address was not "safety", but customer satisfaction? If you take the time to listen to this entire speech and mentally substitute "customer satisfaction" for safety, it sends a very important message that all car dealers should take to heart. Unfair and deceptive advertising and sales practices are as embedded in the culture of most car dealerships, as building unsafe cars was in GM.”

This posting let me to think about what caused this disaster at General Motors and is the subject of this column. The cause in just two words is “Pay Plans”. General Motors and all companies whose purpose is to make profits design their pay plans to maximize just one thing…profit. The cost of auto recalls is very high, in the millions and even billions of dollars. GM has just come out of bankruptcy and it’s not inconceivable that this series of recalls could put them right back into bankruptcy. It’s also not inconceivable that GM managers can end up in prison. As you know, the number one instinct of all animals, including humans, is survival. When a GM engineer or any employee thinks he or she may lose their job if they “blow the whistle” on something, they usually won’t. In fact, the higher-ups in the management ladder have a saying, “I don’t want to know about this”. When it “hits the fan,” upper management wants deniability.

There are few companies that have a higher percentage of commissioned employees than car dealers. You know that virtually all car sales people are on straight commission based on how big a profit they make when they sell you a car. But did you know that he mechanic that fixes your car is also paid on straight commission based on how much you are charged for maintenance or repairs? Of course the service advisor who greets you in the service drive and “advises” you on what you need to have done is also commissioned. The service manager, who is in charge the entire department, is also on commission. The same thing applies to all the other departments of a car dealership…the body shop, parts department, and the Finance department.

You should be beginning to understand that the only protection you have against being overcharged at a car dealership is the inherent moral integrity of the person you are dealing with and his supervisor. That car salesman’s livelihood depends on the size of his weekly or monthly paycheck. That paycheck depends on how big a profit he makes on each car he sells. He probably has a family to support and he has to put food on the table, make monthly mortgage payments, and provide healthcare for his family and an education for his kids. As I stated earlier, survival is our most basic instinct. Given all of this, what are your odds of getting the lowest price on that new or used car you’re trying to buy?

This same principal applies to the car dealer advertisements you see. Survival dictates that every car dealer outsells his competition; it’s what drives bait and switch sales tactics in which dealers try to get you to buy a higher priced car than the advertised car. A lot of these advertisements and sales practices are actually illegal. Oftentimes, the actual sales person doesn’t even know or understand this. The guilt usually lies with the managers who design the advertising and the sales systems. Just as in other companies, the higher up the management ladder you go, the “less anybody knows” about anything illegal or unethical. Usually the owner or General Manager has total “deniability” that he or she had any idea that anything wrong was going on. This is because they don’t want to know.

What can we do about this sad state of affairs? Please understand that I’m a businessman and my dealership makes a profit. I’m a capitalist and I believe making profits is a good thing. I only have a problem with this when making a profit is not in the best interest of our society and when ethics and morals are compromised to make it. Crime can be very profitable but nobody advocates crime except criminals. My solution to change the way businesses treat their customers is to introduce different pay plans than those prevalent today which reward on pure profit. Incentives should be based on employees’ actions that promote customers satisfaction, safety, quality, integrity, courtesy, and ethics. This won’t be easy because they’re not as easy to measure as profits. However, the beauty of this compensation plan will be having most of your employees working hard to accomplish these objectives. The profits will follow because customers will want to do business with your company.

Unfortunately, too many companies out there really don't get it and have pay plans that set up conflicts of interest between their employees and their customers. These conflicts of interest will always tempt employees to cross boundaries of honesty and ethics. So, when looking for companies to do business with, remember to consider attributes of integrity because you will typically get exactly what you paid for.

Monday, June 02, 2014

Google Can Be Your Best Friend If Your Mechanic Can’t Fix Your Car

Most everyone has encountered a problem with their car that baffled the dealer’s service department or your own mechanic. One of the most frustrating things we encounter with car problems is being told “We are unable to reproduce or experience the problem you’ve described.” Another favorite of car dealers' service departments is “That condition is normal for this model car.” With the former, the implication is “you’re imagining this nonexistent problem.” With the latter, they are telling you that just because this manufacturer built a model that’s defective, you had better learn to live with it because they all are defective! In both of these situations, you are often told, we’ve had no complaints like this from anyone else.

Now, this is when you go to Google! If you are one of the few people who has refused to join the “cyber world” and are not computer savvy, just check with a younger friend, your children or grandchildren because they are. Type into Google, in your own words, what the condition is with your car and the exact year make and model. For example, “2014 Mustang rust”. The reason I chose this subject is that an owner of new Mustang called me last Saturday for advice on what do because is car was rusting badly and it had only about 800 miles on it. The dealer told him that all of them rust just like that and offered to paint over the rust. He Googled his problem and found out that lots of Mustang owners were complaining about the same thing. He has contacted Ford directly and they are calling him today about replacing his Mustang with another model that doesn’t rust.

The wonderful thing about the “social media revolution” on the Internet is that everybody now has an amazing and easy way to share their stories of happiness and woe. We can hop on Facebook, Twitter, Instagram, Myspace, or any of dozens of others. Google finds all of your comments and groups them together by subject. In my opinion Google should be recognized as one of the greatest inventions in the history of the World. It rivals the printing press, fire and splitting the atom. Google has become a part of our brains. Today, if you don’t have the answer to something, Google does because Google can instantly recall the answer to every question for which there is an answer. You can open Google on your smartphone and ask (voice recognition) or type, “How old is Brad Pitt or who won the Heat game last night?” But you can also find out if somebody else with a new Mustang is having rust problems.

You will be amazed how many people have experienced the same problem that you have with your car! In some cases you will find out that they found a solution to their problem, either with their mechanic or with the manufacturer. You might find out that the manufacturer even agreed to pay for the repair. In some serious cases you might find out that the manufacturer bought back the car or paid you money so that you could trade your old car back in for another car without losing any money from depreciation.

I’ve written a column about TSB’s which are “Technical Service Bulletins” issued by auto manufacturers to their dealers. These are not made public and there are so many issued that too often, even the dealers don’t know about them. You probably have read the negative publicity about GM cars with the faulty ignition systems. There are millions of these on the roads and if you have too many keys hanging on your key chain, dangling from your ignition, the engine can turn off suddenly right in traffic! With no power, your airbag is deactivated. My point is that GM issued TSB’s on this issue years ago, but very few people outside of GM and some of their dealers knew about them. Why nobody, even GM engineers, understood that airbags won’t deploy with the car’s engine turned off, we may never understand. If more people had “Googled this like the NHTSA, it may have dawned on somebody sooner and a lot of lives might have been saved.

OK, let’s assume that you’ve just Googled your problem with your car that your dealer told you they had never heard of before. Or, they may have told you that they were unable to duplicate your problem (aka, you’re nuts!). And, of course, there’s the absurd explanation that that your car’s problem exists with all cars of that particular year-make-model and this somehow makes it OK. When you contact your mechanic or dealer service department you can show and tell them how many others have experienced the exact same problem with the exact same car you own. You may even be able to give them the number of the TSB that the manufacturer issued telling the dealer how to fix it. You might learn that the manufacturer has paid for these repairs out of warranty (called goodwill). Your chances of winning an argument with the mechanic or dealer are greatly increased and you may even be doing them a favor by telling them something they didn’t know.

If I was the director of the National Highway Traffic Safety Associations, I would have a “Google Division” that would tap all of the social media for comments, complaints, and suggestions from car owners about their cars.