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At the auto dealer, internet and floor salesmen are under the same roof but a world apart, close monitoring of sales encounters reveals

March 10, 2015

For more information, contact: Ben Haimowitz, +1(718-398-7642) or +1(917-903-9287), press@aom.org

While almost all shoppers for new cars do research online, those who carry out most, if not all, of the purchase via combined internet/phone remain a distinct minority, with a recent international survey suggesting that only a little over one third of customers in the U.S. and western Europe buy in this way.

Thus, fully two decades after Web sites first offered an alternative to negotiating face to face with car salesmen, the great majority of shoppers continues to venture unscheduled into the showrooms where these dealers hold sway, notwithstanding the fact that a nationally representative sample of Americans accorded the group a status rating of only 25 on a scale of 1 to 100.

What accounts for the durability of a system that has been memorably compared to "haggling for a donkey in Marrakech"? Those who wonder will be have renewed cause for head-scratching from a new study entitled "Why the Internet Makes Buying a Car Less Loathsome: How Technologies Change Role Relations," one of the featured articles in the inaugural issue of Academy of Management Discoveries.

The study, by Stephen R. Barley of Stanford University, analyzes 84 sales encounters monitored from start to finish at two dealerships over the course of 18 months and finds that, despite the fact that internet salesmen work under the same roof as floor salesmen assigned to unscheduled buyers, the two groups operate in profoundly different ways. With scholarly precision, the study documents these differences in detail right down to such items as the number of times customers are turned over to another salesman (usually to the customers' bewilderment), how often embarrassing silences occur, and how frequently shoppers make disparaging remarks to salesmen.

In both dealerships -- one affiliated with Toyota and the other with Chevrolet -- internet salesmen and traditional floor salesmen are almost entirely segregated, with the former largely consigned to a backstage area out of sight of the showroom while the latter mostly performed on the larger stage of showroom and car lot. In the words of the study, "internet salesmen could make no use of the props around which the floor salesmen build their performances. Compared to the lots and showrooms on which floor salesmen performed, the internet salesman's stage was invisible to the customer and impoverished: a cubicle with a desk, a phone, and a computer."

Equally important, the basic sequence of the seller-buyer encounter is reversed, with price being among the first matters settled with internet salesmen and about the last with traditional sellers. With price generally agreed to during an initial phone contact between customer and salesperson (typically after the dealer has been alerted to the shopper's interest by an internet broker), there is no need, Prof. Barley explains, "for the armory of moves that floor salesmen have devised over the years to persuade customers to buy. With the price set, customers no longer arrived at the showroom anticipating the need to negotiate [as a result of which] interactions unfolded more smoothly and less contentiously than in floor encounters, with fewer awkward moments that threatened the success of the encounter."

The striking difference between the two shopping experiences -- with traditional floor salesmen and with those initially contacted via internet and phone -- emerges vividly in such contrasts as these:

■  23% of floor salesmen versus none of the internet/phone group dismissed or ignored customers' comments.

■  16% versus none turned shoppers over to a second salesman, often to the puzzlement of the customers, in most cases to turn up the heat after the first salesman had established rapport.

■  23% versus 9% sought to pressure customers to make up their minds right away.

■  21% versus none told customers they could not offer a lower price because they needed to make a profit.

■  16% versus 4% deprecated other manufacturers' vehicles in which customers might be interested..

■  11% versus none were rude or belittling.

Unsurprisingly, "customers rarely endured such moves passively," Barley writes. "Most expected salesmen to pressure them to buy a car at a price higher than they thought they should pay. Many came ready to do battle or at least protect themselves from too easily falling prey." As a result,

■  25% of floor-sales customers versus none of the internet/phone shoppers made disparaging remarks to salesmen about car dealers and manufacturers.

■  10% versus 4% threatened to go to another dealer.

■  11% versus 4% became confrontational, responding angrily to a salesman's behavior or statement.

Barley and his research team also totaled up what they call "awkward moments," which "called into question, however fleetingly, the civility of the encounter...and, in their most egregious form threatened to transform a negotiation into a dispute." In all, awkward moments had about twice the frequency -- 43% to 22% -- in floor-sales encounters than in those initiated via the internet. The most common instances were uncomfortable silences, which occurred in 18% of the floor-sales encounters and none of those initiated via the internet.

Given the greater customer comfort of internet-initiated encounters and their greater efficiency (the researchers observed a 40% success rate following customer meetings for internet salesmen compared to 8% for the traditional group) what is the likelihood that some of the practices of internet sales will become the norm for all salesmen? Prof. Barley is doubtful. "During the course of the study," he writes, "we documented three floor sales involving internet salesmen [who] told their customers the invoice price of the car and the markup at which they would sell the car at the start of each encounter. In other words, they launched the internet script on the floor and the subsequent interaction then unfolded as a face-to-face version of an internet encounter. All three encounters were devoid of moves by the salesman to create pressure, all three were devoid of moves by the customer to gain advantage over the salesman; and none evinced awkward moments...Conversely, we also witnessed an encounter in which the customer attempted to initiate an internet script with a floor salesman... The salesman reacted to the customer's request with disbelief and anger."

Barley adds that "floor salesmen disliked the internet because they believed it made selling more difficult and reduced their ability make money. As one Chevrolet salesman put it, floor salesmen viewed the internet salesmen as the 'give away guys.' Other floor salesmen told us that the internet had taken 'the fun and challenge' out of selling because customers knew too much about the price that dealers paid for vehicles. Finally, because each dealer displayed the names of top salesmen prominently for all employees to see, floor salesmen were constantly confronted by the fact that the top earner of the week was almost always an internet salesman."

In conclusion, the professor suggests that "organizations might do well to ask themselves when it makes sense to transfer an interaction order from the setting where it emerged to settings where it is not the dominant line of action... What most likely kept the dealers from recognizing that internet scripts could be profitably transferred to the floor was that doing so required abolishing a longstanding institution, which would have violated both the floor salesmen's and the owners' notions of 'the way things are done around here.'"

The paper is among the research published in the March 2015 issue of Academy of Management Discoveries, a new journal dedicated to exploring management issues at ground level. Other papers in the inaugural issue include studies of workplace ethics and of how middle managers responded to major changes in the culture and identity of a leading beer manufacturer. The editor of this new peer-reviewed journal is Andrew H. Van de Ven of the University of Minnesota, a past president of the Academy of Management and author or co-author of 12 books, including, most recently, Engaged Scholarship (Oxford University Press), a guide to collaborative research between academics and business professionals.

The new journal will be published quarterly by the Academy, which, with about 18,000 members in 116 countries, is the largest organization in the world devoted to management research and teaching. The Academy's other publications are Academy of Management Journal, Academy of Management Review, Academy of Management Perspectives, Academy of Management Learning and Education,  and Academy of Management Annals.

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