Here’s a question I believe dealers must ask themselves honestly: If three different customers came into your dealership asking about the price on a vehicle, would they all get the same answer?
I’ve posed this question with a lot of dealers in recent months. The answer I get most often is, “Probably not.”
Of course, the dealers quickly explain why it’s impossible to give different customers the same answer. After all, every customer’s circumstances are different. Credit scores, down payments, monthly payments, trade-ins — each of these can make a difference on the price a dealer gives a customer. On top of that, a few dealers admit, the end goal is to get as much out of each customer as possible, which means price depends on the person.
With all due respect to dealers with this view, I’d like to call a “time out.”
Let’s consider, for a moment, what this traditional “price the customer, not the car” approach means for the customers themselves:
It’s far less than straightforward. Let’s say you’re shopping for a new big screen TV. You’re either online or in a store, and you want to know how much you’ll have to pay to buy the TV you want. However, you can’t trust the prices you see, or get a straight answer when you ask. I’m fairly certain most dealers would find this a highly inefficient and unsatisfying experience.
Yet, this scenario isn’t all that much different than the experience most dealers ask their customers to endure when they want to buy a vehicle, particularly if it’s a new car.
The problem, of course, is that today’s vehicle buyers want a faster, simpler and more straightforward way to buy a vehicle — one that the traditional “price the customer, not the car” will never deliver. The fix for this dilemma is obvious to me: Give consumers a more transactionlike price on the car, and spend less energy, good will and time putting a price on the buyer.
It sows unnecessary conflict and confusion. I remember my son’s question years ago when we were talking about the car business. “Dad, how can every dealer offer the best deal in town? That doesn’t seem possible.”
So it goes today — dealers continue to clamor about “best deal” prices without really offering a price that’s transaction-like, and therefore credible, in the eyes of consumers. (A caveat: This indictment applies more to the new vehicle market more than used; the latter now features far more market-based, transaction-oriented prices). It’s no wonder customers arrive at showrooms armed to essentially battle for the prices they’ve seen on value comparison sites like KBB.com and TrueCar.
Dealers can rightfully counter that, at least in new cars, they haven’t been able to rise up and meet consumer desires for more credible and transparent pricing, especially given the complexities of incentives and inability to truly size up the competition. But such competitive market intelligence is now available to dealers — and I believe it will help eliminate the conflict and confusion that today’s new and used buyers consider unnecessary and, quite frankly, unwanted.
It sends business down the street. A lot of dealers scoff at CarMax or their franchise dealer brethren who have adopted one-price (or “near one-price”) retailing philosophies. But, while we’re in our “time out,” let’s ask how many of these dealerships have gone out of business? (Let’s not confuse the question with the case of Saturn, which shuttered due to factory influence more than the merits of the retailing philosophy or dealers running the stores.) The answer is that there are more dealers adopting transparency-minded pricing and business models today than there has ever been. These guys are buying, not closing, retail locations.
Such success owes, I believe, to these dealers recognizing that times have changed — and that they, too, must change to meet the preferences of today’s customers. For them, the traditional “price the customer, not the car” is a relic of another era of automotive retailing.
OK. The “time out” is over. It’s back to business as a key question remains: What kind of business do you want your dealership to be — one where you price cars or you price customers?