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What works best for new cars: MSRP or Internet Price?

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#31
ddavis said:
Alex, let me add to your list:

4. Increase lead count
5. Increase in closing ratio
6. Improved ROI

The market determines the price and the market, for cars, is the Internet. Dealers have their heads in the sand if they think this is going to change. Even if there were no third party sites, you still have dealers sending out net.net quotes. Market value isn't a mystery to the customer.

John, I've been doing this for six years. This isn't a fad; it's the reality. I wasn't in a Toyota store or even Honda but I outsold every dealer in a very large group which included a top 10 (in the nation) Toyota store. Our average total gross BEAT THE FLOOR.

As I said earlier in this thread, there is a large group that is posting record profits with the same game plan.
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My experience is otherwise, but already being the Market Leader, there wasn't far to go. Is that the case everywhere? Certainly not. I would submit that for you, "Culture Change" had a much better impact than actual New Inventory pricing.

But honestly, I have a hard time relating your experiences to the BIG PICTURE simply for the fact that you are always in this US against THEM stance with regard to "Internet vs. Floor."

In the truly progressive world of today, there is no "Internet Department." It's a Store thing -- it's just business.

Follow the argument to it's logical conclusion -- the only way it can end is with an industry-wide One Price platform.
 
#32
JQuinn said:
My experience is otherwise, but already being the Market Leader, there wasn't far to go. Is that the case everywhere? Certainly not. I would submit that for you, "Culture Change" had a much better impact than actual New Inventory pricing.

But honestly, I have a hard time relating your experiences to the BIG PICTURE simply for the fact that you are always in this US against THEM stance with regard to "Internet vs. Floor."

In the truly progressive world of today, there is no "Internet Department." It's a Store thing -- it's just business.

Follow the argument to it's logical conclusion -- the only way it can end is with an industry-wide One Price platform.
Click to expand...

John, it isn't an US versus THEM thing. Old school guys complain that pricing will kill the gross. If that is true, why did we beat them?

That group has stores all over the country in medium to large markets. Why are they doing so well?

I maintained 70% of the sales so I was getting close to the Store-wide Internet department. My biggest problem was infrastructure. I didn't have enough, desks, drops, phones or computers.

I really miss being in a store and I'm looking for the right opportunity. For the old school types that feel this direction will fail, recommend me to the store next door and I will buy you dinner at the place of your choice.
 
#33
ddavis said:
John, it isn't an US versus THEM thing. Old school guys complain that pricing will kill the gross. If that is true, why did we beat them?

That group has stores all over the country in medium to large markets. Why are they doing so well?

I maintained 70% of the sales so I was getting close to the Store-wide Internet department. My biggest problem was infrastructure. I didn't have enough, desks, drops, phones or computers.

I really miss being in a store and I'm looking for the right opportunity. For the old school types that feel this direction will fail, recommend me to the store next door and I will buy you dinner at the place of your choice.
Click to expand...

I'm saying that Sale Pricing all New Inventory has more negatives associated than the silly, simplified "low gross" issue. Why do we crush the stores in our area who do price all of their inventory? One local Honda store prices just about every unit at COST. They're not even remotely in our ballpark.

There are economic principles at stake here which completely overrule the "this store vs. that store" comparison and argument.

Attempts to sale price -- and stick to that price -- new inventory is an attempt to commoditize the product. And if EVERYONE is on-board, it can ONLY work if EVERYONE sticks to their guns. Can that EVER happen in the Dealer world? Absolutely not! Dealers will NEVER agree not to beat a given price on a given day.

So while today it can certainly seem productive in this market or that -- again, follow the logic of the inevitability or attractiveness of Sale Pricing -- or One Pricing -- your entire New Inventory. It's simply illogical to think it is a viable long-term solution.

BUT -- at the OEM level? Bingo. The only question there is how long it will take.
 
#34
JQuinn said:
I'm saying that Sale Pricing all New Inventory has more negatives associated than the silly, simplified "low gross" issue. Why do we crush the stores in our area who do price all of their inventory? One local Honda store prices just about every unit at COST. They're not even remotely in our ballpark.

There are economic principles at stake here which completely overrule the "this store vs. that store" comparison and argument.

Attempts to sale price -- and stick to that price -- new inventory is an attempt to commoditize the product. And if EVERYONE is on-board, it can ONLY work if EVERYONE sticks to their guns. Can that EVER happen in the Dealer world? Absolutely not! Dealers will NEVER agree not to beat a given price on a given day.

So while today it can certainly seem productive in this market or that -- again, follow the logic of the inevitability or attractiveness of Sale Pricing -- or One Pricing -- your entire New Inventory. It's simply illogical to think it is a viable long-term solution.

BUT -- at the OEM level? Bingo. The only question there is how long it will take.
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John, I can't answer why the stores in your area were not successful. There is a lot more to this than simply changing the prices.

When buyers and sellers have equal knowlege of the market value of a product, it has become a commodity business. Between all of the third party websites, buying services and dealers willing to email invoices, customers have all of the knowledge, they need.

I'm seeing less competition in this market. Mostly due to the fact that they don't have a clue, dealerships are cutting their Internet expenses.

What do you consider to be long term? It's been over six years, and counting.
 
#39
How has automotive retailing been changed (in a super high-level historical view):

Late 1800s - cars invented
Up to the 1930s - horses become obsolete in lieu of the car. Horse traders become car dealers.
1950s - the beginning of the interstate system and urbanization ....larger dealer network*
1970s - OPEC and the shock of high oil prices with low supply leads to Japanese vehicle acceptance
1970s on - Asian vehicles revolutionize the reliability of the automobile
1990s on - the Internet dramatically changes our entire culture and begins to weaken traditional advertising
Oct 2001 - 0% financing starts the destruction of the incentive
Oct 2008 - automotive depression is realized ....necessitates decreases in the *larger dealer network

Possible future

- Recession starts a new era in government questioning
- Potentially reform could happen where an 18th Century system is "upgraded" to the 21st Century (crazy thought, I know)
- Other reform takes place that changes the impenetrable franchise laws....if this were to happen it could be the most significant change to automotive retailing as it could break the barriers the manufacturers have been dictating behind. One Price could be a factor of that.

That's crazy talk, but so was seeing Toyota, Honda, and Datsun becoming coveted franchises for any dealer to want. And let's not even talk about how crazy the Internet changing our world was in the 90s.

However, the possible future is not triggered by things that happen in the car business. With the exception of a few events the car business has always been changed by bigger, more worldly, things.
 
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#40
Alex Snyder said:
How has automotive retailing been changed (in a super high-level historical view):

Late 1800s - cars invented No matter what you have heard, I wasn't there.

Possible future

- Recession starts a new era in government questioning
- Potentially reform could happen where an 18th Century system is "upgraded" to the 21st Century (crazy thought, I know)
- Other reform takes place that changes the impenetrable franchise laws....if this were to happen it could be the most significant change to automotive retailing as it could break the barriers the manufacturers have been dictating behind. One Price could be a factor of that.
Click to expand...

Alex, Didn't you just set all of your clocks back? That just shows you, when the government gets involved, they can even screw up time.

When I graduated from school, I went to work for Nissan and our vehicles were called Datsuns. I can testify that the factory doesn't have a clue how to retail a car. It hasn't been that long when Ford tested the franchise laws. Thankfully, that failed.
If they could overturn those laws, their model would be the department store. Salespeople would be hourly workers and Sales Managers would be low paid salaried workers. You would likely be out of a job.

We have been involved in the Internet for a decade. It is a marketing tool. Dealers have their CRMs and most of their efforts revolve around them. They hire or promote someone to monitor it. They may have a BDC to help. Sure, followup is very important but the Internet is a marketing tool.
 
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