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Lexus recently announced that they are experimenting with a negotiation-free model; they piloting a haggle-free program at 12 stores nationwide. But, you might say, Saturn already tried that and failed, this is bound to fail as well. The big question is; why did Saturn fail? Was it because of the one-price model?
A quick look back - Roger Smith, GM CEO, and Donald Ephlin of the UAW got together back in the 80’s with the idea of reinventing the automobile business to stave off Japanese competition. This is was a pretty complete reworking of the model from manufacturing to sales and one small component of that reinvention was a one-price, no-negotiation sales philosophy.
Customers loved it - Saturn consistently ranked in the top tier for Customer Satisfaction (behind Lexus). The folks who sold Saturns liked the process and made money. The workers that built the cars were proud of what was rolling off the line. Who didn’t like it? There was resentment from the other GM brands and from the more traditional dealerships. They saw Saturn as “moving their cheese” and they didn’t like it.
So what went wrong (and the lesson for Lexus) - There was regime change at both GM and the UAW and the buy-in from leadership at the top evaporated. The commitment, both financially and politically, had disappeared. After GM nearly went bankrupt in 1992, Saturn did not receive money to update its cars. As a result, sales fell considerably. GM, with the UAW’s obvious blessing, broke up the Saturn empire. Production was taken out of Spring Hill and divided among other GM plants. Saturn’s workers, now only one small piece of a larger population, became part of the larger GM workforce in their new locations and subject to the UAW International contract. The lesson is you need commitment to be successful.
I am not necessarily an advocate for one-price – I think there is room for different strategies and philosophies. There are customers whose number one priority is to get the possible deal and there is a growing segment of the market that prioritize saving time and avoiding aggravation above beating the dealership. There are different consumer buying processes, so there is room for different selling processes. But a dealer needs to identify their target market and then commit to their selling process.
It's all about the commitment.