More dealers are adopting a one-price selling strategy than ever before. There are a variety of reasons for this movement.
Due mostly to the Internet, the highly educated customer has taken control of setting transaction prices. If you’re a great pre-owned dealership, you’re barely negotiating because if your prices aren’t highly competitive, you’re losing sales.
Negotiating used to be the way to make money. Now it has become the way to lose money.
Building a strong sales force is almost impossible without attracting young people and women in general. But women and Generation Y hate the negotiations process. They see it as sneaky and non-transparent. They aren’t interested in becoming salespeople at a traditional negotiating dealership. They don’t want to buy their cars that way either.
Here are 10 reasons for moving to a one-price process.
- Give women what they want. They purchase about half the vehicles sold and influence another 20%. They see negotiating as a waste of time, because they’ve done their homework and know what they should be paying. Getting “the sales job” leaves them angry and less likely to buy. Research shows women define traditional negotiating as “arguing.”
- Gen Y sees negotiating as a threat. This group makes up 40% of today’s shoppers. They are professional shoppers who highly value transparency and see no value in negotiating. They see it as an attempt to con them. Why try to deliver a process that discomforts someone?
Recruiting is E-Z. Traditional dealers need to populate their showroom floors with something our society doesn’t produce: good negotiators. Most dealers’ biggest complaint is their inability to recruit high-caliber salespeople.
- That will continue as a huge challenge until a totally transparent sales process is installed. A one-price store’s biggest competitive advantage is an ability to attract quality salespeople who wouldn’t consider a career in auto sales under a conventional sales process.
Grosses go up. Aha. This is counter-intuitive to many people. Most dealers think one price has to be the lowest price. Not so. When you add value to a transaction you can charge more.
- Most customers want a fast, simple and transparent process, one delivered by an empowered sales associate with outstanding product knowledge. The vast majority of customers are happy to pay a small premium for an outstanding sales experience.
Transaction costs go down. Most stores have one manager (including the finance and insurance department and business development center) for every 2.5 sales consultants. No other retail industry has this level of management. One-price stores are 1:4 or better.
- Moreover, traditional stores must pay a premium for managers with outstanding negotiating skills. In a one-price store, managers’ primary goals are to develop people and manage a well-defined sales process. Traditional stores have deal managers, not people developers.
- Sales-cycle efficiency. Research has shown 70% of auto sales take more than four hours. The time it takes to sell a vehicle is a No.1 customer complaint. A one-price process typically takes two hours or less. That time reduction increases productivity of top salespeople because they get to see more prospects. And dealers get happier customers as a result of the outstanding sales experience.
- Pricing to market. When you price your inventory to accepted market values, it turns faster, resulting in higher floor-plan credits and fewer wholesale losses.
- Satisfaction increases. A faster and fairer process during which the customer feels in control results in higher customer-satisfaction scores.
- Social media. Once shoppers have decided on a brand, the next step is selecting a dealership. They start this process by looking up the local dealership’s online reputation. Inventory, pricing and location won’t help dealers that have less than a 4-star rating. Dealers with one-price strategies don’t face challenges associated with traditional stores (see everything above) and mainly get glowing reviews. That’s the best kind of marketing
- It’s inevitable. You can’t defeat the Internet. It’s here to stay. Today’s highly informed consumers have already done their homework to determine what they should pay for the commodity you sell. One-price dealerships have a competitive advantage over those trying to improve the traditional process for a shrinking owner base.
Former dealer Mark Rikess is founder of The Rikess Group, a consulting and training firm. He is one of the original advocates of one-price selling.