Greg Carrasco was tired of what he called “old-school car guys victimizing” customers. So, he eliminated commissions at Thornhill Hyundai near Toronto.
“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 Carrasco, 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 2016.
Staff at the time consisted of Carrasco and three employees. Most of the sales staff left after Carrasco announced that commissions were being eliminated. They thought they were going to make less money, Carrasco said.
He replaced them with staff from outside the auto business.
“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.
BASE SALARY AND A CAR
Instead of commission, every member of the sales staff gets a base salary and a car. If a salesperson assists with a sale, her or she gets a bonus. If the customer gives the dealership a 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 said.
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.
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 (sales staff) can say they’re not on commission is the real valuable selling point from a positioning standpoint,” Ritchie said.