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From the Trenches - New Car Pricing Online - A Trap?

 

What is different about pricing used cars and new cars online?

 

New cars are a commodity... sometimes!  One size does NOT fit all.

 

"(The word commodity) is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market.

 

An example is the credit card product, where all suppliers offer almost identical interest rates, fees, rewards programs, and bait & hook incentive models for new customers. Since the core credit card product is essentially identical, the only remaining market differentiators are branding & customer service." - Wikipedia

 

You might being saying, as you read this, "Voila! A car is NOT a commodity because a Nissan, Honda and a Chevy are qualitatively different!"

 

But what happens when you have a certain amount of Chevy buyers shopping for  an Equinox in a metropolitan area with 94 Chevy dealers selling the exact same car?

 

I submit that the Equinox becomes a commodity "for those shopping customers".

 

At that point, price becomes, in the consumer's mind, the only condition of saleWe know however that branding, marketing approach, and customer service have impact.

New car pricing online at that point becomes a drive to the bottom.  It may be acceptable in one's mind to be ultra-competitive and go head-to-head on price.  But that competition ends when the competition begins to stretch the line between ethical and legal price marketing and misleading the customer with pricing they don't plan to honor.

 When online pricing goes below true net/net, it crosses the line of ethics and legality, unless the dealer is giving a "going out of business sale".  (Forget stair-step programs - I'm talking "true" net/net)

 

So what can you do?

 

You can take the LOW ROAD until either the Attorney General of your State comes after you... or your bad reviews for deceptive advertising catch up to you.

 

Or you can take the HIGH ROAD and post MSRP with a form to request a quote.  Even if a customer knows the price from a competitor, they might request a quote from you to compare.  That gives you the opportunity to engage that customer and win them over.

 

Or you can be creative.  Does anyone remember the old adage that, "Every customer is a payment customer"?  Offer them a quick and easy way to "qualify for a payment" that fits their budget.  While others are fighting to be the lowest on price, you're giving them a car at a payment that they can afford and the assurance that they can buy it.

 

Whatever approach you take, keep in mind that the LOW ROAD leads to a dead end, poor reputation, and NO profits. 

 

The HIGH ROAD leads to happy customers that feel you served them well at a great "price" and great personalized service.

 

Written by
 Tom Gorham

Editor, From The Trenches

Automotive Digital Marketing

Professional Community

Views: 183

Tags: Branding, Cars, Compliance, Digital, Marketing, New, Pricing, Reputation, SEO, online

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Comment by Tom Gorham on January 6, 2013 at 8:49am

Joshua, I agree with you that transparency and up-front pricing is a great way to build trust.  The problem with online pricing of New cars is that you may not get the opportunity to engage the customer if your "realistically low price" is $1,000 or more higher than a competitor's price online.

Customers usually don't know that your price is realistic, or that your competitor is stacking his price with limited rebates that they won't receive.  Up front, customers usually believe price is the determining factor and can write you off as being the one that is unrealistically high priced. They won't request a quote (they already know your price) and you won't have that opportunity to engage them with your professionalism, great value and customer service.

In an MSRP and quote system, you have the opportunity to explain your pricing in an up front manner and show how your compeititor arrived at his price.  That gives you the opportunitity to illustrate the value of your proposition.  Do you agree?

BTW, is that from "Stairway to Heaven"? "There's more than two paths you can go on, and in the long run..." ;-)

Comment by Joshua Michael Friedman on January 6, 2013 at 8:34am

There's more than two paths you can go on, and in the long run... the middle road serves your purposes even better.  What's the middle road?  A realistically low price, rather than a ridiculously low price or an MSRP-only price, and, like the credit cards in the Wikipedia definition, an overall focus on customer service and branding.  I guess, if your customer service and branding is strong enough, you don't even have to show your prices, but up-front pricing is a great way to demonstrate that the free sharing of information will follow throughout the process of purchasing a car.

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