It never ceases to amaze me that intelligent people who perpetuate actions that contradict their own self-interest are often unwittingly saved from themselves. The most iconic example that sits on my mind like an inflatable gorilla is the automotive dealer marketing strategy of selling price as the primary benefit to doing business with them. The practice of selling an ultra low price as a dealer’s main advantage has been evolving for years. It tends to be a balancing act between generating sales and devaluing the very product that the dealer dearly needs to sell. This practice by necessity is now becoming less prevalent in large part due to the rise of the Internet. The demand and power of the web based customer has grown steadily and inversely to the demise of newspaper print advertising.
Less than a decade ago the majority of automotive consumers still relied on the weekend newspaper ads or direct mail to guide them in their shopping choices. Then the slogans Lowest Price Guarantee, We Beat any Deal and the slogan Price is the Difference had a more appealing and visceral feel than they do now. The customer then would generally respond with a predictable afternoon trek with a rolled up newspaper in fist to several dealers with the goal of really buying at that price. It was them against the dealer. They not only wanted to find a car they wanted to see who was lying and who had some shred of credibility.
The only objective the dealer really had with gutted prices was to get the customer to the store. Once that occurred the last thing they wanted was to sell their loss leader without making back the lost profit in another area. The salesmen and managers would do all they could to switch to different units with an acceptable profit margin. They would hold back on the true value of the trade and work the back end by marking up the interest rates and packing product into the loan. This was even if they even had the vehicle to show! The use of one stock number in their ads allowed plausible deniability to any dealer that did not to even want to show the automobile.
The unfortunate thing is that dealers are absolutely entitled to make a fair profit on their cars, financing and associated services. The nationwide dealership network employs thousands of people, pays billions in taxes and positively affects the communities in which they reside. The super low price marketing strategy creates an unnecessarily contentious and adversarial relationship that often spills over into other areas of the dealership.
The rise of one price selling was a direct response to this environment but it was the Internet that more significantly altered the culture of automotive selling. The amount of information available to customers rose exponentially with the advent of inexpensive Internet access. This information creates a better educated consumer that demands accurate responses in a timely fashion. The price is no longer the thing. It is of course an important factor. It is not like dealers can charge MSRP for common vehicles but if the price is fairly based on the market and can be defended as such other factors like how quickly questions are answered and convenience of delivery are on the same footing as price if not more important. The cost of a blue F-150 Lariat with a chrome package is basically the same at any Ford dealer to an informed customer. Service is now king. A customer provided with good service in a non stressful and friendly environment will actually pay more for an automobile.
The Internet also benefits dealers by expanding their marketplace. No longer restricted to circulation demographics of newspapers, 11pm local cable ads and drive by traffic on the Interstate an ambitious dealer can market nationally and even globally with video and rich media:
Online auction houses like EBay and services like Craigslist now allow vast marketing of inventory for less than it used to cost to run one full color Saturday ad in the local newspaper. This especially applies to low volume specialty vehicles and used cars. The rarer the car the more advantageous it is for the dealer because now they can ask for the market value of the vehicle as it pertains to the world as opposed to a small local region.
Even mainstream pre-owned vehicles are now more valuable because really no two used cars are exactly alike. For a customer that always wanted a black compact SUV with a sunroof and leather for under $20,000 it makes sense to book a cheap redeye flight from St Louis to San Antonio to get the vehicle you want with low miles and a certified warranty and take a road trip back home in your new ride. The Internet both helps the consumer and keeps the dealers honest while opening up new opportunities. You can bank on that, unless you want to look for a lower price.