The problem here is that you think customer negotiate out of free will because they enjoy the process. They negotiate because they are so distrusting of the sales process at most dealerships that they feel if they do not negotiate they are being taken advantage of. The reality today(especially in used cars) is that you do not need to negotiate as a dealer. If you do, you are giving gross away. If a customer walks into your showroom to see a vehicle they have already decided that the price was fair. If it wasn't why would they be there? Because they want to practice their killer negotiation skills? What a shopper needs today is reassurance that the 12 or so hours they have spent researching this big decision was done correctly. Validate for them that the price they saw online was fair. Tell them how you go about evaluating the market the same way they do and that's why the price is so competitive. Being one price can be done from a position of strength. It just takes discipline to stick to it when someone says they are leaving over $100.
Online Shopping to Online Buying
- Thread starter Jewanski
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The problem here is that you think customer negotiate out of free will because they enjoy the process. They negotiate because they are so distrusting of the sales process at most dealerships that they feel if they do not negotiate they are being taken advantage of. The reality today(especially in used cars) is that you do not need to negotiate as a dealer. If you do, you are giving gross away. If a customer walks into your showroom to see a vehicle they have already decided that the price was fair. If it wasn't why would they be there? Because they want to practice their killer negotiation skills? What a shopper needs today is reassurance that the 12 or so hours they have spent researching this big decision was done correctly. Validate for them that the price they saw online was fair. Tell them how you go about evaluating the market the same way they do and that's why the price is so competitive. Being one price can be done from a position of strength. It just takes discipline to stick to it when someone says they are leaving over $100.
- Apr 7, 2009
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Nope, never said that. Give it another chance Cullen.
Ahhh... the ol' urban legend returns! Damn this legend, it's gotta die! Sorry Cullen, my research shows that shoppers are culpable. Let's say you just came here from Mars, you watch a car shopper and you'll notice:
Price Discovery for car shoppers happens in 2 places.
--While Internet Shopping (i.e. sort by price)
--At point of Sale (i.e. shopper makes an offer)
Car shoppers believe that there is a tradition of negotiation to close out the 2 step price discovery process. In my travels, shopper negotiation anxiety is performance anxiety. It's a lot like asking that pretty girl out for a date. The anxiety is rooted in being wrong (i.e. paying more than they should have).
100% Agreed.
I guess I do not disagree with your thought "In my travels, shopper negotiation anxiety is performance anxiety. It's a lot like asking that pretty girl out for a date. The anxiety is rooted in being wrong (i.e. paying more than they should have)." But if you know that to be true why not remove that possible anxious moment? Why not tell him that the pretty girl is available and interested?
As a dealer today I think you have a choice to remove the negotiation and position it as a customer benefit. In the end however I think it benefits the dealer just as much. You will see increases in both gross margins as well as customer experience. The thing you will have to be prepared to lose is the guy who threatens to walk over $100. I know every dealer wants to earn every customers business but lets be hones is that really the guy you want to fight to keep? Is there any chance that the guy that will walk out over $100 will actually come back to you for his next purchase out of dealer loyalty?
Not to discount your research(I happen to be good researching over a few beers as well so I expect an invite to the next brainstorming session) but we have conditioned shoppers over the last 100 years to think that negotiation is a necessary part of the dealership experience. If you do not negotiate you are a sucker. Your neighbor is just a byproduct of that history. If he walked into an environment that validated his discovery process as the correct one and reassured him that he isn't being taken advantage of he may actually buy for the advertised no haggle price and feel better about you for not putting him in that awkward position.
With nothing but respect for you as well as your post, I disagree.
I personally believe that the majority of customers negotiate because they don't know a "good deal" when they see it. They use the negotiation process as an insurance policy to be sure they are not overpaying.
If everyone that comes into my showroom to see a vehicle they found on my website was willing to pay my listed price, I would be leaning into your post. They aren't. They are attempting to negotiate an already very competitive price. Your price validation advice is excellent. That is what we do to the best of our ability. We may even show them a competitors vehicle to further validate our price. Then we negotiate.
With that said, I do believe that my prices need to be competitive or I would have never made the cut.
I agree with you that most(probably all not walking into a CarMax) people who walk into dealerships today attempt to negotiate. I agree with you that they are unsure if the hours and hours they spent online researching have led to the best value in the market. I agree that they use negotiation as a way to ensure they aren't overpaying.
My opinion is that if you negotiate with a customer that is in your showroom looking at a specific car that they already viewed online and determined was a good deal you are simply giving gross away.
The problem is that going to a one price philosophy is hard. Frankly while most people will say that it promotes an "order filler" mentality it is actually much more difficult to sell in a one price environment. It is a lot harder to continually defend market pricing and your value proposition than to reduce a price by $200.
This is what CarMax has done better than anyone in the game hands down. They have built a brand that customers believe is different. Customers are not buying a car they are buying a CarMax car. They do not attempt to negotiate because:
1) they know through tireless commitment and marketing CarMax doesn't negotiate. Most will tell you that they came there because they knew they did not have to negotiate.
2) they have bought into the total value proposition. 125 pt inspection; 5 day money back guarantee; no frame/flood damage or major title disclosures.
It takes consistent messaging and commitment. It will most likely cost you a few deals here and there. However I bet over the long haul you get better customer experience because they do not feel like they have to negotiate to get a good deal and you will be saving gross because of the multitude of deals you didn't give away that extra $200 on.
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Sorry, this came to mind when I read that;
We've been one price for a couple years now. It was a bit of transition to say the least but it's worked for us. As previously mentioned it's all about Value Proposition, on both sides of the pricing coin. If the shopper feels it's worth it, they'll buy.
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An interesting article just published over on the blog - "Online Sales Isn’t The Future Of Car Buying…And I Have The Data to Prove It."
- Apr 7, 2009
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oh oh JK, you'd better open a dedicated thread for this one. Michia's PR is filled with GIANT holes. He's built a fire that'll burn for a few weeks
#InnovatorsAskHardQuestions
p.s. Ed is soooo right.
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- Apr 7, 2009
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Michia,
DR is filled with pioneers. We're way down the road on automotive ecommerce. IMO, your post lacking details. You rest your entire thesis on CTR (Click Thru Rate). You wrote:
Michia, you're selling a "Buy Online" product. CTR does not sell cars. This is not a success.
Then, you follow with:
"Shoppers clicking a “Buy Online” button had a 3-4x higher conversion rate than typical online lead sources on average."
This is a vague statement, open to interpretation.
--Define 'conversion rate'.
--Define 'typical online sources' (you were specific in the table above)
To validate your product, talk about your form completion rate (i.e. bought the car online). Secondarily, for abandoned carts, talk about your lead gen rate.
p.s. This DR forum thread is filled this insights that you and your team will need to conquer.
p.p.s. It would be helpful to post a link to your product on a dealer's site.
