What is the value of the Comparative Sales Method to the automotive industry?

Kevin Bookbinder
As I understand it the Comparative Sales Method is currently exclusive to the real estate industry. In a nut shell it's Comparative Sales that sets the asking price for existing homes. In Automotive the manufactures set the MSRP, much like a home builder sets the "starting from" price. In the end it is up to the buyer and seller to determine a mutually agreeable price to seal the deal. Instructing a buyer to comparison shop makes absolute sense to a real estate agent as they have no ties to the product being sold, translating the instructions over to the automotive space.... that's not so easy. However, the more I think about this the more I believe that we may not have an option, read the statements below to see if you disagree with me- "As a dealer I feel that I need to stand out in the eyes of my potential customers" (I think we all agree with that) "As a buyer I feel that I need to compare the offer's from many dealers" (Again I think we agree) "As a dealer I need my customer to shop at my competition to allow me to stand out" (Who agrees with this?) The connection between the buyer and the seller is generally controlled by the buyer. In the realm of internet sales I would argue that the buyer is in near complete control. Providing a quote to the buyer only becomes relevant when the buyer has independent confirmation of the validity of the quote i.e. they have received the same information from your competitor(s). Which dealers are pushing their internet prospect to comparison shop other like brand dealerships? Are any dealerships utilizing same brand/model comparative sales methodology?
Charles Gallaer
Used vehicle sales are a perfect example of the comparative sale method being used in an auto industry. I would also argue that the same happens with new vehicles. There are certainly differences between markets on transaction prices of new vehicles. The dealer doesn't control the price of the vehicle, the market does. Variances from market pricing will lead to either loss gross (pricing too low in relation to market) or loss sales (pricing too high above market). Dealers that are doing a good job know what the market is on each vehicle they have in inventory and are quick to share their pricing and reasoning for such a price with a consumer. Those that hide their price through "Call for Price" or sales people that are ignorant of how the particular vehicle fares in the market are on the wrong side of history. If the consumer is contacting you, you've made the short list. They've already done their comparative sales method and have selected you because you have the vehicle near the price that they want. Now its up to the dealer to validate their decision by understanding the market dynamics of the particular vehicle and sharing them with the consumer. I think your comparison between real estate and the auto industry glosses over a crucial fact that puts your comparative sale method into context. In real estate, the realtor does not "own" his/her inventory. S/he is free to sell inventory throughout the entire market, including properties listed by other agents and real estate agencies. In our industry, for many reasons, it is more efficient to sell the inventory we have in stock rather than to procure the vehicle from another dealership and then sell to the consumer. In the new vehicle department, this issue is not as pronounced because of the ability to dealer trade (but this is even harder than in the past because of availability concerns). In the used vehicle department, this issue of selling what you have is more pressing.
Kevin Bookbinder
Charles, "Instructing a buyer to comparison shop makes absolute sense to a real estate agent as they have no ties to the product being sold, translating the instructions over to the automotive space.... that's not so easy" I apologize for glossing over the numerous difference's between house's and cars, it was for the sake of space. you wrote: "Dealers that are doing a good job know what the market is on each vehicle" How do you know the market on each vehicle? (aggressive secret shopping, truecar et al?) Beyond the convincing closing methodology of a fair and honest explanation of your pricing position which assumes an engaged buyer; how do you handle this buyer upstream? How do you bring them to the table? Thanks for your feedback I think your thoughts are on the mark, yes the market sets the price and your statements about the fall out of pricing being either too high or too low are fantastic!
Charles Gallaer
Kevin, It seems like your question presented is whether/when it is appropriate to provide information on competitive vehicles in your sales process. The further up on the funnel you go, I think the comparable information presentation happens on the consumer's side. I would say that if you so desired and saw it as value added, a comparative information presentation could happen on the first e-mail response to the customer. Going this route would make the timely phone call to the customer for follow up very crucial as you may send your customer to scout a competitor. I don't know how value added this information would be higher on the funnel or if the customer would view the information as credible if it resides on the dealer's website. AT/Cars/Vehix/Etc provide this information to the customers already (assuming one participates on one or all of these types of sites). If you make the short list, the customer can click-through to your website, call, submit an e-mail, or stealth shop. I haven't seen a comp system implemented on a dealer's website, so I don't have a reference point to the effectiveness of this information or how it would be presented. To answer your question on how a dealer knows what's the market on a particular vehicle, there are numerous tools to aid in gathering this information. AAX, vAuto, FirstLook, etc are some of them. One can also use the tools provided through listing sites like AT and Cars to measure pricing. There are reports (Polk, AutoCount) that can provide information on what kinds of vehicles are selling on a make/model/year level. Technology has turned vehicle pricing more into a science and less of an art. When I worked at Ford, we had a saying. The difference between too few and too many is one. This applies to pricing inventory on the internet as well. Pricing too low or too high can happen by a very small amount of money but can have significant consequences for sales/gross.
Daniel Boismier
Kevin, We use PureCars as a documentation instead of negotiaton. Purecars helps us compare multiple factors beyond price. Just as a good realtor would tell their client, location or amenities etc.. Copy and paste this link to see an example of a report. http://www.purecars.com/comparison/158105/1G1ZK577184200867
Kevin Bookbinder
Daniel, Thank you for that info. That looks like a great tool and sounds like a great sales method. Purecar seems to be in the same vein as vAuto and truecar. The benefit of the site you use is the fact that there are actual vehicles to purchase whereas truecar is really only a best case scenario for the buyer. How do you handle new car customers? Thanks again!

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