Customer treatment often trumps price at car dealerships, a new study says.
Dealership behavior matters a lot in determining if a shopper accepts a particular deal, according to data from CarWoo.com, an automotive marketplace website.
Its study, using transactional and behavioral data, shows that 54.6% of the time the lowest price offer was not the one the buyer took.
That increases to 57.5% when eliminating cases where buyers received only a single offer.
Behavioral data also indicate price is not what drives buyers’ opinions expressed in online reviews of their dealership experience.
In giving 5-star reviews, highly satisfied buyers ranked dealer professionalism as the most important factor 47% of the time and price only 14%.
When dissatisfied buyers gave dealers 1-star reviews, they cited unprofessionalism as the reason 44% of the time, blamed price only 19% of the time.
Only when buyers gave middling 3-star reviews did price become the driving factor, ranked as primary 52% of the time. These reviews, while ostensively “neutral,” were often negative in tone, much more akin to a grade of a “D” than of a “C,” CarWoo says.
An analysis of all available data shows four major elements that go into the car-buying decision. In order of importance, these are:
- Professionalism of the dealership staff, including engagement and responsiveness.
- Right vehicle, and how close what’s offered meets the buyer’s wishes and specification.
- Price in the context of its competitiveness in the market.
- Distance to the dealership.
Dale Pollak advocates a modern version of value pricing that precludes negotiating.
This means not only convincing customers vehicles are properly priced in the first place, but also convincing the sales staff, lest they partake in sticker-dicker tactics that can offend shoppers.
Pollak founded, developer of an inventory-management software system that tracks regional demand for used vehicles so dealers can stock and price accordingly.
Pollak made his mark on the industry by advocating what he calls “velocity” pricing, which uses inventory-management to price cars right the first time.
That turns used-vehicle inventory quicker. In the long run, dealers doing that will make more accumulated gross profit, he says. The converse is pricing high, holding out for high gross. But that risks cars lingering on the lot, their values depreciating daily.
A dealer needn’t offer the lowest prices in town, but rather ones that are competitive. Consumers using the Internet during their car shopping usually know values.
It can be the kiss of death for a dealer to price a car in such a way that it fails to show up high on search-engine results for customers who are shopping by price, Pollak says.