Car Dealers have been telling consumers for years that a deep focus on the cheapest price is not actually in their best interests, and now it appears they may have been right in more ways than even they thought.

The past decade has seen the rapid growth of websites with widgets and algorithms designed to show car shoppers just how little they may be able to spend on a vehicle. Using this information, the consumer typically then begins searching online listings where they often apply a “Lowest Price First” or “Best Deal First” filter hoping to find that special bargain. Well, no good business just sits around hoping that they can acquire more customers, they are actively thinking of the next way to do it and as we know, some are more creative than others.

Somewhere, someone got the idea that if everyone is looking for the cheapest price, and every listing site out there is designed to show it to them, then be the cheapest! Of course, I don’t mean the cheapest car, I mean the cheapest listed price. What they appear to be doing is putting in 1$ in the “Listing Price” and then at the top of the vehicle description they are declaring that the 1$ is their dealer fee or down payment or something justifiable of the move. If the software starts picking up that your 20k car is listed for 1$ they are bumping up to the Down Payment or Monthly payment amounts.

The bigger question for both dealers and consumers is what effect this trick is having on the pricing tools people are using to then negotiate against a seller? Are these tools able to catch these prices when they scan the internet every day? If they are, how? If they are not, why continue to use them to rate sellers prices?

Why are people falsely listing items they are selling as "free" on Facebook Marketplace?
Answer (1 of 2): > Why are people falsely listing items they are selling as "free" on Facebook Marketplace? Luring in…www.quora.com

Autohitch
The car searching, shopping & buying experience is about to change. Autohitch brings compatible matchmaking to the auto…www.autohitch.com

One quick Google Search for “Car Buying” and there is no question that 
substantially more effort is centered around appealing to the consumer than the dealers or private sellers but, could this approach be adding to the decades' long frustration of what many consumers consider car buying to be, which is a hassle?

Let’s consider just one step in the average car dealers sales process which is to bring you on to the lot. Not many surveys today suggest that the trend of consumers isn’t rapidly shifting to more of an online experience, but this conflicts with a car dealers traditional methodology which is to gain more control over the transaction. The best way (Traditionally) to do that is for the buyer to be in person. So, as a consumer starting out, you may be quickly groomed to expect that more of the process will be possible online or over the phone, yet many times the first interaction with your dealer of choice will not be to inform you of how much they can do for you from home, it’s how much more than can do for you, and in a shorter amount of time if you just came down to the store. This is what the industry would refer to as a “Point of Friction” because you expect one thing and they are offering another. These are the moments when consumer trust can be diminished or the feeling of the process becoming a “Hassle” can begin to set in but, how can this be declared something the dealer is responsible for? Except for some branding on a 3rd party website, this is the first time they have really had the opportunity to present themselves and their process to you. Expectations set by one business are running into the reality of another, and herein may lie a big problem…

Think of current third party sites as a pendulum: Each side must swing freely and equally for the pendulum to continue its motion. By treating Seller and Buyer as having opposing goals, what has been created is the need to constantly ensure that neither side feels the other is favored. So, we do a little for the buyer, then a little for the seller, and on, and on to keep each happy (And swinging). If at any point the buyer or seller feels they are being neglected it’s like one side of the pendulum swinging less than the other, it just doesn’t work.

What should be the underlying principle to any Automotive Retail product is that although the buyer and seller may not have the same priorities, they do have the same goal: The sale of a car. In our opinion, the difference between success and failure may be as simple as decreasing the time and effort it takes to connect the buyer and seller rather than creating extra steps or barriers along the way (For their protection). Think if it like you would government regulations- Regulations are laws that are always billed as existing for the protection of the consumer, but just as often they only serve to slow down business and make it more expensive, which surprise surprise, is a cost that gets’s passed on to the consumer.

Going forward we feel the industry would be better served by finding ways to let car buyers AND dealers do what they each do best. Today's consumer is the most educated they have ever been, and the dealer certainly is no less off than they have ever been. Help each work toward the same goal, not each toward their own.

DrivingSales
DrivingSales is the largest automotive marketing resource and car dealer social network, providing industry best…www.drivingsales.com

Driving sales is not directly referenced in this article but much of the knowledge gained for my stories originate from the information offered on their site. It’s a great source!

Autohitch
The car searching, shopping & buying experience is about to change. Autohitch brings compatible matchmaking to the auto…www.autohitch.com

Hi, I am interested in your _____, What's your best price?

If you are a car dealer or have ever just sold a car privately you likely have run across this phrase.  It's not often associated with the thought, "Ohh man, this person is going to buy my car".  But have you ever considered that what may be one of your most popular strategies in responding to this question is actually furthering the concept behind it?

The question (Best Price) is clearly contradictory to what we are told these days which is that the modern car shopper is more informed and educated than ever.  If they truly were, why do so many (Not all) contact you asking about price rather than informing you of what it is they are going to pay?  It seems to suggest that the car remains one item where people realize (Possibly only subliminally) that value must be determined by both parties equally, not by any calculator, algorithm, or book.  They still rely on you to gauge that value, and that can't be a bad thing!

This is important to consider when responding to someone who asks for your best price because it means they may be open to suggestion, and not just yours, but to a good strategy in general because let's face it, "What's your best price" is a weak strategy and they probably know it.  So, what do you tell them?  If you are like many dealers you respond by saying that you prefer to discuss special pricing in person because you care about providing a personal experience and that if they are worried about your flexibility in price, you will guarantee to beat any written offer.  WHOOAA, WHAT?  

Correct me if I'm wrong, but it looks as if you just informed this person how to force your price down without ever negotiating with you?  You also appear to have encouraged them to do this by wasting the time of another dealership, a dealership they have no intention of buying from, a practice that I thought we were trying to limit?  If this person is smart (Always debatable) they will ask themselves, "Well, what if I visited two other dealerships?  Then I could I could really drive the price down."  This is exactly what many dealers said they didn't like about a company called CarWoo a few years back, and the internet in general.  CarWoo was a platform where a customer could post the car they wanted (New only) and the dealerships within their desired radius had the opportunity to win their business.  It was perceived as a bidding war but with factors like distance, availability/stock, and responsiveness to the buyer it proved to have many more factors that played out than just price.  Despite this, many dealers claimed that it was only a race to the bottom of a price war.  No.  Written offer guarantees are a race to the bottom of a price war.  Putting yourself in a position where your competitors are writing your deals for you that you now have to beat, is a race to the bottom of a price war.  In fact, it's not much better than what Truecar does and seems to be the only "Guaranteed" way to finish at the bottom of any price war.  Let me stress, I don't think there is anything wrong with deciding to be cheaper than your competition to make a sale because I did it myself, but the key there is "deciding".  If dealers are ok with guaranteeing to be cheaper, what's wrong with competing to be cheaper?      

Sell your prices, don't guarantee them.  As I usually do, I suggest you turn your attention to an online strategy to play off the consumers' desire to save time and be efficient.  Create value there and in places other than price, and do it upfront.  Starting a down trend in "What's your best price" may be that simple and far more realistic than hoping it ever ends.  Consumers no longer want to drive around getting those written offers to push in dealers faces that guaranteed them the cheapest price, but if you continue to tell them they have to, I am going to bet that they will.  Yes, it may mean openly and directly competing with another dealership, but competition is where the car dealer is and will always be the most comfortable.  

The car searching, shopping, and buying experience is about to change.

Cox Automotive- Top 5 Car buyer Frustrations:

1) The amount of time the entire process took to complete.  41%

2) Negotiating a purchase price. 37%

http://agameautotrader.com/ids/wp-content/uploads/2015/03/TimeStudyWhitePaperFINAL11-7-14.pdf

When I see that the #2 frustration of car buyers is price negotiation I must ask:  If profit margins on car sales are shrinking, why would consumers be frustrated with how they negotiated their price?  Of course, a bit of sarcasm was used in asking that question because as someone who sold cars myself all that mattered in the end was the bottom line.  It isn't any secret however that for consumers this just isn't the case.  We know there are customers that happily overpay and then there are many who get a great deal then subsequently submit the worst reviews imaginable.  For the consumer, every step of the process is part of the experience and it's important for us to always remember that.  Considering that negotiating the price, or the deal in general, is usually the first point of friction, we should try and figure out what we could be doing to improve the experience for that 1 in 3 car buyers cited above.

There is no secret recipe.  Negotiating price is something that can be improved now if we allow it to be, and If there is one problem technology has solved and solved well, it's getting two parties together and allowing for a conversation.  So surely by now, we have found a way for our customers to avoid those awkward and tense moments at our desk right?  Well, not quite.  Actually, many times, the moment price comes up online or over the phone that's what we tell people they "must" do if they want to move forward.  People always ask why a dealer would intentionally create such a disconnect and the truth is as simple as a reference to home field advantage.  When the buyer is at their desk they have control over the process, anywhere else and they really can't be sure what or even who we are dealing with.  Although this is somewhat of an understandable strategy it is descended from a time when you had the reasonable expectation that it was your way or the highway (Yes a Pun).  People were visiting 4-5 dealerships before making a purchase and there was simply no reason to cater to someone who would probably still come through anyway.  Times they are a changin!  The consumer used to consider other options to the traditional experience as only being ideal.  Today, 86% of car buyers say if they were choosing between multiple dealerships they would choose the dealership offering more of the process online, and it's not unreasonable to believe many of those consider online negotiating to be part of that package.  That's signals that ideal has become expected and if so much as one of your competitors offers such an experience, they undoubtedly have an advantage over you if you don't.  

The people who are asking you about your pricing are probably on another device ordering their groceries, while outside, an Amazon drone flies in and drops off a package.  How much longer is the modern consumer, largely becoming significantly millennial, going to accept, "This is how we have always done things here".  Sure you want to control the process, sure you want to defend your price, and sure you don't just want to be shopped so that person can take your offer somewhere else.  But, there was never a day when you could control who contacted you and their intentions.  If someone wants only to get a written offer from you so they can get a better deal elsewhere, why force those people to come in to do that and waste even more of your time and resources?  "Well Hitch, maybe we can flip them or change their mind".  Well, OK, but if car buyers were so easily influenced why are they only visiting 1.6 dealerships?  How can we declare car buyers today are more decisive than ever while at the same time implementing policies that treat them as people easily influenced?     

Hitches conclusion:  In a world where the process of elimination has moved from the showroom to the living room, consider this:  Do you want to be the dealership people contacted that provided the least amount of information?  Don't lose someone that genuinely wants to do a deal because you are worried about someone that never will.  We are not suggesting that "What's your best price" should be answered with a number, we are only suggesting it shouldn't be answered with a policy.  For the most part car buyers still don't expect much from dealers which sounds bad, but oddly at times like this can be considered favorable because it makes exceeding those expectations easier.  In this instance, it means you don't really have to agree to a firm deal before an in person visit for a customer to feel you are working with them on their terms, which is really all they want to see at this point.  Dealers should do what it takes to let their customers know they are here to facilitate their purchase, not a sale.  There is a difference there and understanding it is key if we ever wish to see these frustrations dissipate.  

Courtesy of: 9 Clouds: Inbound Internet Marketing for Automotive Dealers

When dealerships/marketers were asked what the highest priority was for their marketing efforts the overwhelming winner at 55% was: Improving conversion. Increasing volume was just over 30% at #2.

When asked what part of the “sales” challenge was the hardest the number one answer was (40%): Prospecting Lead. #2 response was qualifying at 20%.

When asked how much information does your company have about a lead before a salesperson reaches out the overwhelming answer at almost 100% was: Basic Contact Information. #2 response was Interested vehicle information at 45%.

So let’s dig in a bit here, shall we?

Worth mentioning is that just last year this same survey showed that increasing lead volume was the highest priority for dealerships and marketers over improving conversion. So what’s to blame for the shift? Have dealerships only recently reached the pinnacle of leads that they can actually sort through or have the tactics used to gather this information simply improved overnight overwhelming the dealers? Maybe the industry is just reacting to decreased margins from vehicle sales and this is an effort to reduce costs. I’m sure the answer is different for every dealership or lead provider and I welcome those stories and opinions below.

Our feeling here is that technology isn’t only creating demand in the consumer to know more about the dealer, its creating demand in the dealers to know more about the consumer or simply leads in general. Whatever the companies who source leads feel about this, dealers seem to think it’s possible to do more and I am willing to be it’s related to an improved understanding of technology. People can buy a car now from Carvana like it’s a bar of soap on Amazon (I exaggerate I know) but all we can get from a person is a phone number? We can track them with cookies all over the internet and even hit them with an ad when we choose but you can’t tell me why they’re interested in my 2015 ……?

If knowledge is power for the consumer, it’s power for the dealer too. For example: I want to know if someone looking at my 2015 Tahoe has been contacting other dealers with that same Tahoe. That tells me they are decided and likely know they can afford the vehicle. On the other hand I also want to know if someone asking about my 2015 Tahoe has been contacting other dealers about 2010 Tahoes. Providing I’m not selling a wrecked car, this information tells me this person will be a “What’s your best price lead”, which means they likely can’t afford the purchase and are hoping I’m desperate enough to drop the price down to what they have to spend.

Conclusion: Quality has surpassed Quantity but it’s not just about which lead is more likely to buy, it’s also about just making sure we have access to more than just a phone number. Dealerships and their clientele vary too much for any outside party to declare with any certainty what is and isn’t a solid lead. A dealership armed with more information is a better prepared and more efficient business and that inevitably can explain the recent shift in priorities when it comes to the quality of leads. 

Although 54% of women purchase a vehicle after visiting only one dealership, the remaining 46% continue on to visit an average of 3.2 dealerships. That’s double the national average! Even more surprising is that of the 54% that visit only one dealership, 60% do not purchase from their local dealership.

Numbers often leave us only to search for a deeper meaning so let’s speculate for a moment:

We do know that women report sensing a bias when they go to the dealership. Of course this does not apply to all women, but far more than have this experience than men. This could and likely does lead to more women seeking out and using car buying services and or linking up with friends or acquaintances that work at a dealership. If you are using a service or only going to a dealership where you know someone you will be far more likely to have only visited and/or contacted one dealership by the time you complete a purchase. It is equally plausible that with convenience riding shotgun (Yeah that’s a pun) to experience, the odds that the dealership you happen to end up at is also the closest to home are going to be lower. Considering these factors I believe it easy to see why a majority of women visit fewer dealerships and why the dealership chosen is usually farther from home. (Franchises should be working on trying to figure out the distance effect on fixed ops and service profits)

As for the remaining 46% of women that visit 3.2 dealerships on average, that is a bit more tricky on it’s surface. The top reasons for leaving a dealership are: Presented with a bad price/deal, not treated well, vehicle not in stock, poor trade in value, location not convenient. That last one is a bit off to me because if distance was an issue why would you go in the first place? But I guess it could be that lack of success elsewhere inspires a trip to a less than ideal location where any negatives at all result in a faster than usual exit. As for this list, what stands out to me is the “Not treated well”. This is pure speculation but my theory about these 46% is that they simply have little to no leeway for mistreatment or what they perceive as a lack of respect. So I guess the next question is: Well does that mean men tolerate mistreatment? That answer, like most topics between men and women, really isn't cut and dry. I’m sure there are more men out there that see an aggressive salesperson and welcome a challenge but, I am equally as sure that some salespeople's outward aggressiveness differs between their male and female customers. So sorry for the lame conclusion here but I’m sure the answer lies between expectation and reality. I know, I know, very helpful! But if I got more descriptive I wouldn't leave any room your you to comment and I would certainly open myself up to ridicule!!

Conclusion: The automotive industry has yet to be welcoming to and understanding of women. There are sites dedicated to just this topic:

Women-Drivers.com: Write & read car dealer, dealership, reviews and locate the top automobile dealer rating

Women, probably more so than men, are prepared buyers that are looking for someone to help them buy what they already know they want. A dealer or salesperson who starts into the typical sales process can and will come off as not having any respect for that. There is a fine line that exists between offering assistance and being perceived as pushy or suggestive, and you will have to figure out where that line is because it will be different for each female car buyer. But let’s be clear here: This isn’t the women's fault. Years of bad experiences have caused the red flags to be raised long before they ever pull into the lot. For the most part women expect some sort of bias or mistreatment somewhere in the car buying process, so treading lightly isn’t meeting some sort of unreasonable demand, it’s the industry understanding we spent years getting it wrong but that we are willing to do what it takes to make the necessary changes.

I look forward to your comments and even personal stories as we develop our product….

Dealers and Sales Staff,

Much has been made in recent years about the "Transparency movement" and it's effect on the market.  Consumers claim a re-birth while dealers maintain that it's led to their margins slipping year after year.  Both are certainly right that the market has changed and at the expense of the dealer, but is transparency really at fault?

Honestly, transparency likely isn't to blame, it's the over emphasis on price and the vacancy of real value.  The websites offered it, the consumers used it, and when it was too late the dealers finally gave into it.  At first, it started with just wanting to make a few extra sales.  A few price drops here or there were innocent enough and more of an exception to the rule, or so you told yourself.  What you didn't realize is that "Everyone was doing it".  Now dealers find their margins, and leverage, have been diminished and that they now live in a world of pure volume.  To make matters worse the tidal wave didn't break at just emphasizing price, websites pushing this new definition of transparency caused a departure from any true measure of determining the value of a vehicle.  Take for example the time that a vehicle has been listed.  The longer it's been shown to be posted the less a shopper assumes and is told they should pay.  But the car isn't worth what someone else wouldn't pay for it in a certain amount of time, it's worth what they will pay to have it now.  Transparency, as it's presently being defined, hasn't just lead to more information so the consumer may better determine a fair purchase price, it has also lead to the introduction of distracting factors that can keep that same consumer from ever properly defining a fair price.  What these websites always fail to tell their users is that the factors they claim represent the value of a vehicle better than their competition can also have absolutely nothing to do with it.  Properly educating the consumer, being transparent if you will, requires they know when something matters AND when it doesn't.   

So, margins have faded and transparency is through the roof, car buying for the consumer is better than ever right?  HA!  Consumers are complaining as much as they ever have about car buying and no one has put 2 + 2 together= Price doesn't equal a positive experience!!  In fact, several studies have shown that when car buyers shopped multiple dealers and chose the lowest price offered, their overall experience suffered compared to those who chose to buy from someone offering a vehicle for slightly more than a competitor.  The buyers who chose the lowest price, not surprisingly, said that price was very important whereas the buyers who chose a higher price mentioned other factors influencing their decision such as:  How they were treated, what was in stock, or other incentives.  The real kicker?  More people (50%-60%) of buyers did not choose the lowest price!  

Now that we have determined transparency and an emphasis on price are misleading and bad for dealers, what next?  Well, we never concluded that!  The consumer will always want more information than they are used to and price will likely never be of little concern, so transparency and price are not bad words.  What is bad is letting topics like transparency and price be defined on your behalf.  As technology advances the opportunity for the definition of transparency to spiral out of control, and the number of people ready to cash in on that spiral, will only increase.  Society is being groomed by Amazon and Uber and eventually, dealers will have to embrace the fact that the control over transparency and information is on a decline.  The question is, would you prefer that decline be a controlled descent or a rapid loss of cabin pressure?    

One party that knows too much about the other isn't a recipe for success, it's a recipe for one side getting more creative to restore the balance, and as we see in consumer surveys that isn't making anything better for anyone.  Hitch believes transparency can be a practice dealers embrace but it's going to require it be redefined as something that exists on both sides of the transaction.  Moving forward, dealers must take a more active role to recoup what it means to be transparent because by now it should be clear that leaving it up to someone else is a losing proposition.