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Online Pricing Myths Debunked

Nov 4, 2012
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Jessica
AutoTrader recently revealed information from a study they did on Online Vehicle Pricing.

Read the full article here.

According to the study, new vehicles priced below MSRP get 34 percent more page views than those priced at MSRP. AND, those page views equal 20 percent more vehicles sold.

How are you pricing your vehicles?
 
Sometimes it is, in fact, about profit. Having a good balance of volume cars and profit cars, as well as knowing the difference, is the key to a healthy bottom line. Many of us are stuck when it comes to new car pricing though, as a lot of manufacturers won't let you advertise under MSRP.
 
Dale Pollak just wrote a blog post on this survey. One of the key take-aways for me was:

"..dealers who offer more transparent prices on new vehicles close 20 percent more deals than those who don’t, and they achieve better front-end margins to boot. I would submit that this finding is both a wake-up call and a warning to dealers who continue to operate under the shroud of traditional new vehicle pricing and merchandising."

So it's not volume OR gross, it's volume AND gross.
 
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Our dealership is on the edge of town 1.5 miles down a dead end road. We have almost zero drive-by traffic and almost zero lotups. While we only sell used vehicles, we would never get a shot at 90% of our customers if we didn't price our vehicles below the rest of the market. We rely on buying the cars right and building value when the customers are here so they still sign up at our "No Haggle Price". We are often able to switch customers to a different vehicle that they haven't seen online at a higher price to allow for higher gross.
 
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Accord*ing to the analy*sis, new cars priced below MSRP get 34 per*cent more page views than new cars priced at MSRP. Pricing-savvy deal*ers not only received more eye*balls on their inven*tory online—they actu*ally sold more vehi*cles, too. The analy*sis showed that deal*ers who priced their new vehi*cles below MSRP sold 20 per*cent more new cars than their coun*ter*parts who used MSRP instead. And, buy*ers traveled an aver*age of 10 more miles to deal*ers who listed their news cars below, rather than at, MSRP.

It takes a study to figure this out? Seems like commonsense to me. :)

A few years ago (2011) ATC published a similar finding -- when using the standard AutoTrader.com ad format, adding actual photos and prices increased the VDP views by approximately 140% and increased shopper interaction by 110%. I wonder if these percentages still hold true?

I like the fact that "buy*ers traveled an aver*age of 10 more miles to deal*ers who listed their news cars below, rather than at, MSRP" - add a few actual photos of the new car, a supporting why buy/reviews and an incentive to visit the dealership to test drive, and I bet we can increase that 10 miles by a decent amount.

Here's another thread on the forums around pricing your new car inventory and trying to figure out HOW to price your new cars under MSRP (if the manufacture allows).

So let me ask this - WHEN you price your new car inventory below MSRP (competitively), are you able to track more traffic/leads/calls and MORE sales??
 
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@Jeff
So let me ask this - WHEN you price your new car inventory below MSRP (competitively), are you able to track more traffic/leads/calls and MORE sales??

Absolutely!!! A couple of things need to be in place first though. First you need to make sure your marketing is in order. If your showing up on page 200 in a autotrader search, then changing the pricing isn't gonna do much for you. It will produce some results for you but, the marketing for the new cars needs to be there first and done correctly. Don't put the cart in front of the horse . Next, you need to merchandise that new vehicle the same way or better you do a used vehicle (photos, videos, descriptions, etc...). Why??? Because there's 10 more like it on your lot and 30 -50 more like it within a 30 min drive in either direction of your dealership.

Here's a true story that I witnessed first hand!!

One of our dealerships was always hitting 80-90 units each month. It was like that for a couple of years. A couple of local dealers with the same franchises started skyrocketing in sales month after month. I ran a few reports for our guys and showed them where they were getting beat. It was purely price. The pricing on the new cars was adjusted for our store at the very beginning of the month and that same month they sold 157 retail units (more than what was sold during cash for clunkers) and have been averaging 140-150 since then. The only thing that changed was the pricing! That's it. Nothing else. Keep in mind we had all the marketing and merchandising set up and in place prior to the pricing change. The pricing was the missing piece of this puzzle. Everything has increased across the boards. Leads, calls, walk-in traffic and sales! Also, since there was a nice increase in new car sales, used car sales increased to because there were more vehicles being traded-in. This developed a nice, healthy used car inventory. That single change made a huge difference for both new and used car sales.
 
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@Jeff


Absolutely!!! A couple of things need to be in place first though. First you need to make sure your marketing is in order. If your showing up on page 200 in a autotrader search, then changing the pricing isn't gonna do much for you. It will produce some results for you but, the marketing for the new cars needs to be there first and done correctly. Don't put the cart in front of the horse . Next, you need to merchandise that new vehicle the same way or better you do a used vehicle (photos, videos, descriptions, etc...). Why??? Because there's 10 more like it on your lot and 30 -50 more like it within a 30 min drive in either direction of your dealership.

Here's a true story that I witnessed first hand!!

One of our dealerships was always hitting 80-90 units each month. It was like that for a couple of years. A couple of local dealers with the same franchises started skyrocketing in sales month after month. I ran a few reports for our guys and showed them where they were getting beat. It was purely price. The pricing on the new cars was adjusted for our store at the very beginning of the month and that same month they sold 157 retail units (more than what was sold during cash for clunkers) and have been averaging 140-150 since then. The only thing that changed was the pricing! That's it. Nothing else.

Keep in mind we had all the marketing and merchandising set up and in place prior to the pricing change. The pricing was the missing piece of this puzzle. Everything has increased across the boards. Leads, calls, walk-in traffic and sales! Also, since there was a nice increase in new car sales, used car sales increased to because there were more vehicles being traded-in. This developed a nice, healthy used car inventory. That single change made a huge difference for both new and used car sales.

Thanks for sharing your experience Rick. I too have seen this happen over and over for dealers that take the time to price their new inventory right. Why I asked the question -- hoping more will chime in.

YES - merely changing the price isn't going to make a big difference. You need to be following best practices with merchandising your new car inventory - photos included!! All the best practices with strategic pricing on your new cars WILL result in more shows AND EVEN MORE IF you can properly answer the phone, chats and email/form leads. I was also very successful at increasing our overall new car SHOW RATE by incentivizing the customer to come into the dealership for a test drive.
 
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@Everybody thats just reading
Come on people. We want some input from ya! Don't be bashful.:)

@Jason Martin
Jason, message me your top 3 competitors. I'll put something together for you. As far as making profit... there are a bunch of areas you can focus on to maximize a car deal. They are still in biz and doing it. You can too! You just need to tweak your strategy. Are you on AutoTrader? If so, are you displaying one price or are you showing both. I had to ask my rep to show both of my prices (MSRP and Discounted Price). They put the request in and the following day it was done. You need to check and see all the websites your inventory is on if you can do that or not and if you can, then do it (display both prices).

@Jeff
Maybe we can get more ppl to chime in. I was at the Kain Automotive workshop last week and I was gonna introduce myself to you but I kept getting side tracked darn-it. I came sooooo close to sending in my new car pricing program for the "Best Idea's Contest". I think it would've won. I know your a fan of home brewed setup's and what I have cooked up over the last couple of months is some pretty stout stuff. It nails Brain P's presentation squarely on the head (Dealer VDP's). Also, Thank you for providing such an awesome forum. I don't think a lot of folks realize the time, energy and effort that goes into it.