I’m all for transparency. As some of you know, I like a Big Mac now and then. They advertise the price, I pay it, and I get a reliable, consistent product. That is a transparent transaction. It’s also a very sane transaction. This is an example of Price Transparency.
In the car business we used to advertise a ‘Loss Leader’ to get the customer in the door and then switch them to a higher price unit – admit it, we all did it. With your reputation not just on the line but ONLINE, this is harder and harder to do. So the trend is towards more upfront pricing and reduced negotiation (not always NO negotiation). Many folks in the business aren’t happy about this change, but it is a fact of life.
Now things started to get a little crazy a few years back when invoices started showing up online. The benchmark for the customer became dealer cost. It was a tougher environment and margins became squeezed, but there was still profit to be made. This Cost Transparency made a competitive environment even more competitive. I can think of no other retailer that shares their cost with their customers. This is a little crazy.
Move on to TrueCar. They not only show your invoice, they show actual dealer cost, with advertising, dealer incentives… everything, subtracted. Damn! Now to make matters worse, they show the lowest transaction in your market in the past month. This Transaction Transparency is lunacy. The new benchmark for a consumer is the lowest price a car has sold for in your market. Let’s say you have a big fleet customer that buys a car for his daughter. He gets a sweetheart deal. THAT is the new benchmark for everyone. Maybe you have a stair-step program and you are ALMOST to the big money. You sell 4 cars at the end of the month at a big loss – but you hit the goal. At the beginning of the following month customers are benchmarking you against those loser deals you made. This has the effect of being a reverse auction – a death spiral.
Stop the lunacy. There is zero reason to share your past transactions with anyone.
In the car business we used to advertise a ‘Loss Leader’ to get the customer in the door and then switch them to a higher price unit – admit it, we all did it. With your reputation not just on the line but ONLINE, this is harder and harder to do. So the trend is towards more upfront pricing and reduced negotiation (not always NO negotiation). Many folks in the business aren’t happy about this change, but it is a fact of life.
Now things started to get a little crazy a few years back when invoices started showing up online. The benchmark for the customer became dealer cost. It was a tougher environment and margins became squeezed, but there was still profit to be made. This Cost Transparency made a competitive environment even more competitive. I can think of no other retailer that shares their cost with their customers. This is a little crazy.
Move on to TrueCar. They not only show your invoice, they show actual dealer cost, with advertising, dealer incentives… everything, subtracted. Damn! Now to make matters worse, they show the lowest transaction in your market in the past month. This Transaction Transparency is lunacy. The new benchmark for a consumer is the lowest price a car has sold for in your market. Let’s say you have a big fleet customer that buys a car for his daughter. He gets a sweetheart deal. THAT is the new benchmark for everyone. Maybe you have a stair-step program and you are ALMOST to the big money. You sell 4 cars at the end of the month at a big loss – but you hit the goal. At the beginning of the following month customers are benchmarking you against those loser deals you made. This has the effect of being a reverse auction – a death spiral.
Stop the lunacy. There is zero reason to share your past transactions with anyone.
