In recent years, some dealerships have adopted a “no-haggle” or one-price model for selling vehicles. This has been in response to several factors, including greater transparency of vehicle prices afforded to customers by the Internet and the general dislike many customers have of negotiating car prices with sales personnel.
For example, it’s easier today for car buyers to locate information about vehicle prices online, including dealer invoice costs. This has removed some of the pricing leverage that most dealerships had in the past.
Improving customer satisfaction
Some dealerships that use a no-haggle selling model have realized several tangible benefits. One of the biggest is increased customer satisfaction. A growing number of buyers don’t want to go through the traditional price negotiation process when buying a car. This is especially true for many women and Millennials.
According to the Rikess Group, a retail automotive consultant, women buy more than half of all vehicles, while Millennials purchase nearly one-third of all vehicles sold. As a result, up to two-thirds of car buyers could be willing to pay more for a simple and transparent sales experience that doesn’t include haggling, the Rikess Group concludes.
The consultants also found that dealerships that adopt no-haggle selling also tend to get better online customer reviews. For instance, before visiting dealerships, many car buyers first check out Yelp, Google or another business review website to see what others have to say about them. One-price dealerships often receive higher customer reviews because of what many customers perceive to be a less stressful and more pleasant buying experience.
No-haggle selling also can help dealerships attract and retain a younger and more diverse sales force. Many young people today aren’t interested in a job where they’re expected to haggle with customers over every sale. The one-price model frees up salespeople to serve in more of a consultative role with customers.
Boosting the bottom line
Some dealerships that have adopted a no-haggle selling model have been able to improve their financial performances. This starts with higher gross sales.
According to some reports, many car buyers who prefer the no-haggle purchase process to the traditional process of vehicle negotiation are indeed willing to pay a higher price in exchange for this faster, simpler and more pleasant experience. In Autotrader’s Car Buyer of the Future study, for example, more than half (54%) of car buyers said they’d buy from a dealership that offers a better car-buying experience vs. one with a lower price.
Using a no-haggle model also can help reduce selling costs. For example, one-price dealerships are often able to hire less-experienced sales managers who don’t have high-level negotiation skills, because there’s no price negotiation. Some dealerships the Rikess Group has worked with that use a no-haggle model have reduced their sales staff costs by up to one-third.
Finally, adopting a no-haggle model can boost F&I sales. Many customers are more open and receptive to the F&I menu presentation if they haven’t just gone through a grueling negotiation over the vehicle price.
Switching to no-haggle selling
Transitioning from a traditional price negotiation model to a no-haggle model requires a commitment to building a culture of transparency throughout your dealership. Not all salespeople and sales managers will be receptive to the switch. You may have to replace some of them with new employees who have the right attitude and skill sets for one-price selling.
For instance, the sales manager’s job at a no-haggle dealership isn’t to work with salespeople in negotiating the best possible price for a vehicle. Rather, it’s to train and develop salespeople who can help customers find the best vehicle for their needs and complete transactions with little or no assistance.
Of course, one-price selling isn’t the right sales model for every dealership. But, if you decide to stick with the traditional negotiation model for selling vehicles, be aware that some of your competitors have likely adopted no-haggle selling.
To better compete with them, you should strive to create the best customer experience you can in your dealership. This includes helping customers feel comfortable throughout the negotiation process by trying to make it as nonthreatening and nonconfrontational as possible.
Could you benefit?
Many different factors will go into determining which sales model is the best one for your store. Talk to your department managers about whether your dealership could benefit from no-haggle selling.
© 2019 Thomson Reuters