Greg Carrasco was tired of what he called “old-school car guys victimizing” customers. So, he eliminated commissions at Thornhill Hyundai near Toronto and pays his sales staff bonuses based on customers’ happiness.
“I came out of the old school. I was a new immigrant in a new industry and those old-school car guys were ruthless,” said Carassco, who has been in the business for 25 years. “I didn’t want to be part of it.”
That’s why he hired new sales staff and eliminated the age-old commission sales model when he took over as general manager of the dealership in February this year.
Staff at the time consisted of just Carrasco and three employees. Most of the sales staff left after Carrasco announced that commissions were being eliminated.
The former salespersons thought they were going to make less money under the new bonus program, Carrasco said.
He replaced them hiring only sales staff from outside the auto business, people who had zero experience selling cars.
“When you hire people from outside the industry, people who never knew what the motivator was in the first place, there’s no one to retrain,” he said.
Carrasco calls the Internet “the catalyst” behind his new business model. He said today’s customer is too smart and too informed to waste their time haggling over prices.
“The salesperson was looking at alternate or in some cases underhanded ways of making money because they can’t make money on the front end anymore,” Carrasco said. “So every deal was a minimum deal in the first place.
“I said to myself ‘Why argue? Just give it to them and let them come to you.’ And they have.”
Carrasco said Thornhill Hyundai sold 720 vehicles in 2015.
“We passed that number in August and we’re scratching at doubling our sales this year,” he said.
In November alone, his dealership hit 130 per cent of its monthly sales target, he said.
Base salary and a car
Instead of commission, every salesperson gets a base salary and a car. If a salesperson assists with a sale they get a bonus. If the customer gives the dealership a satisfaction rating of 96 per cent or higher on the Customer Satisfaction Index, the bonus is doubled.
“Before, the salesperson who victimized the customer the most, made the most money, too. Today, the one that makes the customer the happiest makes the bonus. You see the difference?” Carrasco asked.
“I always felt the car sales industry wasn’t something you do to people, it’s something you do for people. But on the contrary, people were coming into the dealership and they were being not sold but victimized. I don’t want victims.”
Robin Ritchie, an associate professor at the Sprott School of Business in Ottawa, called Carrasco’s approach “genius.”
“You have a market in Toronto of six million people and if you can get even some small percentage of them to make the choice to come to your dealership because of this thing you’ve done that’s different, and lots of people like it, I think it’s great,” he said.
There is no definitive answer to whether commission, salary or hourly wages work best in the retail industry, Ritchie said.
“But what we hear from consumers is that they don’t like high-pressure sales tactics of the car salesman,” he said.
But don’t expect the entire industry to change overnight.
“We’re talking about one car dealership in a sea of car dealerships that use commission that has decided to set itself apart. He’s positioning himself as the friendly soft-sell dealership,” Ritchie said. “It’s a great idea for a small number of car dealerships to do that.”
Even though Carrasco pays his sales staff bonuses, to a lot of customers that still sounds better than a commission, Ritchie said.
“The fact they can say they’re not on commission is the real valuable selling point from a positioning standpoint,” Ritchie said.