I just listened to an episode of a This American Life podcast entitled 129 Cars, referring to a car dealership’s monthly sales quota. A team of reporters followed various people at a Long Island dealership for a month and the episode sounds like a sitcom.
But it is very real, reflecting tensions in negotiations between the manufacturer and the dealership as well as between various employees at the dealership — not to mention tension between the dealership and the customers.
This podcast provides an amazing lesson in how real negotiations take place — as well as a primer for buyers negotiating with a dealership. One of the sales people is in the top 1% for the whole country and the podcast analyzes why he is so successful.
The car dealership in this episode of This American Life provided a really interesting context for examining the principles of negotiation because it defied my expectations for the negotiation environment in car sales. At first blush, the car salesman and the customers appear to be adversaries working through an adversarial model of negotiation. The underlying presumption is that a car salesman has a bottom line (a reservation value) for each car on the lot. The customer, likewise, has a reservation value for what they are willing to pay for a car. The customer’s reservation value is also akin to a BATNA because if they can’t negotiate a deal with the salesmen, they will move on to another dealership. Obviously, this means that there are many circumstances wherein the parties will not reach an agreement on the terms of the sale. However, the podcast’s analysis showed that this initial understanding of a distributive negotiation setting is not always the case in cars sales, particularly at the end of the month.
While the podcast certainly made reference to this traditional idea of an adversarial relationship, what was most interesting was how each party’s goals shaped the negotiation model at play. For example, at the beginning of the month, the salesman were more likely to focus on the price of the vehicles just like the customers. However, later in the month, the cars salesmen became more focused on the number of vehicles sold to the point of nearly abandoning realistic prices. This shift in interests to being totally focused on quantity sold rather than price made it easier for the salesmen and the customers to reach a deal because the customers were focused on the lowest while price, while the salesmen were focused on selling the most cars (essentially at any price). With different interests that are not necessarily in direct conflict, the parties were able to reach an agreement because the salesmen were more flexible with the price in an effort to sell more cars. This flexibility also demonstrated a disregard for setting anchors because several of the salesmen described how willingly they are to abandon their initial price in favor of a customer’s price if it means that they can make another sale.
Finally, each of the salesmen featured in the episode present slightly different approaches and preferences for negotiation styles. Some were more upfront or pushy with customers, while others were more reserved or focused on being charismatic. Regardless of their individual approaches to negotiation, they all represented the dealership as their client and focused on the client’s interest to reach the goal 129 cars.
This was a very interesting podcast showing the dynamic of relationships during a transaction. One of the more interesting things I found was the instance in which the salesman got the amount of the monthly payments that the customer wanted ($199) and then went to a manager with a request of $150. This really shows that people will spin information to their advantage for each situation.
I also thought it was interesting the different styles that were shown by the salesman. The top guy had a full glass approach where he believed that we was going to sell a car every time compared with the calm guy that would pressure the customer and just sees what happens.
The style of negotiations were also influenced by outsiders factors more than I expected. As the deadline got closer and closer to sell the cars the deals became better and better for the consumer. As a consumer however there could be no way to really know how close the dealer was to achieving their goal. Knowing that you were the sale that would make 129 might have given you a lot more leverage than you expected.
One thing I thought was interesting was the idea of leads and how as a consumer it might be better to be in contact with the dealer because that may open you up to a better deal at the end of the month. And of course always say you are gonna walk away because it seemed like better deals were always given after that.