Professional Community for Car Dealers, Automotive Marketers and Sales Managers
What is different about pricing used cars and new cars online?
New cars are a commodity... sometimes! One size does NOT fit all.
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 sale. We 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