Good Selling: Q&A With Niko Karvunidis, General Manager At Santa Monica Audi
How has Audi Santa Monica managed to stay on top of its game amid the constantly shifting landscape in the auto business? By finding new ways to connect with modern consumers, resulting in their rank as the fourth-ranked Audi dealer in America last year. GM Niko Karvunidis sits down with Fair to discuss his management philosophy, the changes in their pre-owned business and the challenges of negotiating with digital-era Millennials. The interview has been edited for length and clarity.
Fair: I understand business is good for Audi.
NK: Sales are up. It’s one of the few companies still growing in sales with this kind of stagnating new car luxury market, which has been receding lately. The people buying the $100,000 cars, a lot of them have bought Teslas. And so you see a big dent.
Fair: How is your pre-owned business faring these days? Are we seeing something different than what was seen in the past?
NK: I would say the dynamics are similar to the market for new autos, meaning there’s a bit of confusion in the marketplace. People wonder, “Should I get an electric car or should I not? Should I wait? Can I afford $60,000?” Because of all this new technology that’s coming out, the market [as a whole] is trending toward lower-end cars.
Fair: Is it a wholesale shift in segment, or are people just getting a little more sensitive on payments?
NK: Sensitivity. Sensitivity of price, term and getting locked in. Lease penetrations have gone up 10 percent in the last five years. So, you definitely do see a shift toward financial flexibility, which is hugely important. Cheaper cars with lower payments and shorter terms are attractive. That’s kind of where Fair comes in. The timing is perfect, because the flexibility of a Fair product is right in tune with the market.
Fair: Can you tell me how you have your sales team organized right now?
NK: We have five separate departments. We are a high-volume store, so we have to segment the sales staff. We have the showroom staff, an internet team, a client retention team, a fleet department, and a pre-owned department. Our pre-owned team has its own separate dealership and separate staff for that facility.
Fair: Wow, that’s a lot of moving parts to manage. What are the key influences of your management philosophy?
NK: I see it as a customer- and employee-focused organization. We, number one, want to make sure our employees are happy. If they are, we feel that carries down to the customer experience. Really, ultimately that’s what we want: To cater to the clientele and deliver “wow”-level service every time.
Fair: In terms of marketing, what are you doing outside of programs like Fair? How are you reaching out and what kinds of things are you finding effective?
NK: We do a lot of direct mail. Outside of email, that’s been one of our most effective tools. Since the market in this area is 90 percent lease, we reach out in order to capture them before their lease is over.
Fair: Do you find that snail mail has a higher response rate than email these days?
NK: Everyone’s so inundated with email, it’s almost easier that way. In the old days, people used to get too much mail at home. So email was more effective. But now, it’s almost flipped. If you can get someone to see it and open it, you might be able to get someone to latch onto it. Like, “Oh, yeah, I should get my new car now.” From there we hope something sticks and they consider us in their purchase path.
Fair: Are you seeing any standout patterns when it comes to Millennial shoppers versus other generations?
NK: Yeah, the Millennial shopper is shopping for a car like they do with anything else. Except with car sales, you can’t always go to multiple websites and price check. We find they’re actually very frustrated by the process because that’s what they want to do. They’ll go to Overstock and Amazon and Wayfair and compare prices, and then whoever’s got the best price they’re going to buy from them. They are very confused by the whole automotive purchasing process. “It’s not like Amazon? Oh, you mean I have to talk to somebody? I have to go to a dealership?”
Fair: The way you describe it, it’s almost like the customer thinks that they are in competition with the general public as to who got the best deal.
NK: They want the feeling that they won. They’re very obsessive about “What’s the best price?” and “Did I get the best deal?” There’s this dialogue that takes place among Millennials that we’ve never seen before. Everyone talks about the car they bought and what they paid for it. And that part of the culture is completely different from the past. So everything’s a comparative. “Oh, but my buddy got this car for this payment last year.” They’re trying to beat the system more than the dealership. They’re trying as much as possible to take the relationship out of it. We’re like, “Let’s go for a test drive, let’s have a relationship.” And they push back against that because they want to maintain complete control. They just want the best deal and the ability to brag to their friends like, “I got this amazing deal!”
Fair: Do they tend to focus more on the price of the vehicle than on the car itself?
NK: Nobody really cares about the price of the vehicle anymore; it’s purely about payment. It’s a value. They don’t care about what we pay or what the MSRP is or anything. They’re negotiating on metrics like, “What does the Internet say the price should be?” Their reference points are just different.
Fair: In the pursuit of a low monthly payment or number they can brag about, are they willing to pony up something like a larger cap cost reduction?
NK: No. The Internet has told them that if they lease a car, they should put down as little money as possible. So that’s the starting point. (They’re) like, “Why am I putting any money down?” “Well,” we say, “you have $2,000 in fees to the state.” They don’t care. So it’s this constant up-negotiation, a constant take-it-or-leave-it. They say “This is my budget and this is what I want.”
Fair: Do you find that Millennials are more likely to walk out than other generations?
NK: Oh yeah, they don’t really care. They’re taking the emotion out of it. They say, “This is what I want and if you’re not going to do it, there’s another website or another dealer that will.” Millennials grew up in a time where you get what you want. If we don’t give them the deal they want, then they’re not going for it.
Fair: Are there any best practices you’ve found for handling Fair customers?
NK: Just make it really smooth and seamless. Be really fluid with the presentation, the transaction. The customer thinks, “Oh, I did it on the app so I can just walk in and pick up the car.” So it makes us think about how we’re going to be more fluid. You want everything to go as smooth as possible.
