Special Internet Pricing?

Amanda, there are states where it is illegal to advertise a lower price online (or in any media actually) than exists on the physical lot. Colorado for sure is like that... but back to your question.

Your GM's are correct in that if the store embarrasses itself like that they are hurting their goodwill... but that doesn't exempt them from developing a consistent pricing policy that covers online and showroom sales. Otherwise what are they saying? The Internet department can't give prices? All sales conversations that include price must occur in the showroom?

So what to do without having to go "one-price?"

There are several things actually. No one says you have to post all of your prices online. Why not show MSRP (new cars) and NADA retail (used cars) with a call to action button that says "Find out more and get the price." Naturally, clicking the button opens a lead form for them to fill out.

In my company's shopping cart program that dealers use to sell vehicles and F+I products to online consumers, we certainly don't give prices (or credit or interest rates or trade values or rebates or accessories, etc.) until the consumer has created their account which includes their name, phone number and email address.

But after they've identified themselves we give them the price one of two ways... if only price, we just give it to them. If a negotiated profile flag, all cars start out at MSRP + we know the dealer's reserve price. The consumer can input whatever price they want, but if they go below the reserve, then it just comes back with the reserve. Because the dealer has a better / more convenient online experience, the prices online are always now a bit more than the consumer may be able to get in the showroom.

To quote one of the dealers that my company works with... "Just because we are retailing on the web, doesn't mean we should be putzs (and I don't mean you specifically) about sales."

No one from Best Buy will follow up with you if you abandon your shopping cart. There is enough gross in the car business to make it worth doing, so whether it is a lead or a shopping cart account like in my company's product, the only leverage you have to get the consumer to engage in communicating with you is price.

How and when to give up your price is an art, but give it up you must as you balance the necessary engagement - is the consumer at the point that they know exactly which vehicle they want or are they earlier in their decision making? Are they financing? What do they care about most? It is that conversation, not the price that will sell the car. If you listen the best, you sell. If you just fire prices no matter how you do it, you lose.

I hope that helped.

Amada
"many dealerships and trainers have been promoting the benefits of special internet pricing"

I think the answer to your question has more to do with dealers and trainers focusing on conversion ratio and turning those stealth people out there into real live people you can actually contact.
"Special Internet pricing" or "Get your E Price" or "One shot Internet pricing" all serve the same purpose. It's to draw people in, get their information and build your database of possible clients. My question to you would be, what are you trying to accomplish? Are you trying to generate more leads, or do you believe having "special internet pricing" will help close the leads you do have? These are two different issues, and depending on the answer to your questions lies your answer.
Even if you do have "special internet pricing" I would say it's safe to say that customers are still going to use that number as the starting point of negotiation no matter what brand you sell, unless your dealership has branded itself as a "one price no hassel" type operation.

I have struggled with this as well! Great topic by the way!
Why can't the internet price be considered a coupon?
If you go to Red lobster without your $5.00 off coupon they don't give it to you.....so why can't we do that?
Consumers should do their research before their purchase...not after.
Online advertising is cheaper vs physical lot displays that cost millions.
Why does sprint charge me $5.00 to make my payment by phone but nothing if I pay online?
Because less expense is involved....correct?

Great question and one that is highly debatable and sometimes touches a nerve. I have studied this issue for some time now, done a variety of tests and would like to share what I know through that research.

First dealer group I had this issue with was, believe it or not, a "One Price" dealer. Why this was an issue was because we would mark vehicles up an honestly modest amount on the lot and once there, the ambience of the dealership did the rest.

We did not negotiate period on lot ups. So we would apply the same thing online, received a lot of leads, but everyone wanted a "deal" or to make one. We literally applied the same lot philosophy and would let people walk over a few hundred dollars.

Even though these vehicles were very competitively priced, it would turn the Internet customer off. We couldn't sell our ambience through the Internet and the fact that we wouldn't negotiate turned a ton of people off. Plus, by putting ONE PRICE, NON-NEGOTIABLE in the comments field as per the Managers, it dramatically reduced our traffic.

The second stint is with another dealer group (I am with now) that had an entirely different philosophy. They made all the money and the asked for even more.

45 Pontiac G6s is a 30 mile radius, with average median asking price of $15,900 and we were asking $18,781. Yeah we offer a free warranty, but still, we are way off base on pricing typically.

So I pleaded with the owners to allow me to price all the vehicles online. They allowed me to price their inventory online and while I still ask for the money, per their request, it is not so dramatic.

Now the reason I tell you all this is because at the end of the day, I am selling the same amount of vehicles as the previous price driven dealer that is in the same market as I am.

This blew me away as well. Two totally different models and I was always preaching price and still do to some extent. Taking prices off does NOT work. Do NOT do it, trust me, your perceived traffic will go up with junk leads.

So how did I adjust to handle being the highest priced dealer in the DMA?

1. We put killer pictures online and try to give a virtual "walk around".
2. We price everything and don't apologize for it.
3. We put custom comments on most vehicles, and include things like, one owner, four new matching tires, timing belt replaced...
4. Our goal is to make the online experience killer; fast responses, fun stuff on website (see Alex's site) and cool tech stuff (see Brian's AI dealer).

O.k., we have all heard this stuff before..

Alright, here is some of my secret formula:

On the third party sites, put your web site in the comments FIRST. They might frown on it a bit, but most track the dealer site click throughs and you can cross reference it with your referring sites software for your site.

I use things like go to my URL to see specials and receive $200 off this price, just for visiting.

Get a Internet coupon! Big props to DealerImpact, but most site builders have some type of coupon, but make sure they have to fill out applicable fields to receive it.

Now later in the custom comments, I say see my ISM (insert name here) and DOUBLE your Internet coupon!

78% of my Internet sales per month and 37% of the total group's sales hit the coupon. I get the name, phone number, and e-mail address 93% of the time. Simply incredible.

It gives me the trackability I desire and funnels the leads.

Now, why is this relevant to this thread?

Well, we now use the same pricing as they will sell it for on the lot. It simplifies things a ton. So instead of different online pricing matrixes, we use one. The only difference is the coupon that is highly trackable, has to presented at time of sale (no issues) and is physical proof of an Internet deal.

Not only that, the thing that baffles me the most, is that people fill them out, buy the car and never use it!

One last thing and sorry to be so long winded. I do not indicate that the price is not negotiable. In my experience, that will kill you. It is more of an assumptive thing, "Ohh, you got the Internet coupon and you saw me, so now it gets doubled, congrats!

Sign here and press firmly.

I truly appreciate everyone's imput on this because the way we handle it now is that everytime a customer asks for a "best price" or "botom dollar" (after at least to rebuttals, and qualifying questions) We have to call whatever manager is on at the time at the location the car is located (we have 4 dealerships)... The majority of the time they are with a customer or desking a deal and it ends up taking way too long to get a response. For some reason I am not allowed to work the price out myself ( even though I have been selling cars for 10 years now). So, what I would like to have happen is to list the prices online as I normally would, but then have a set amount that I can discount the deal such as $1500-$2000 front end without the almighty approval. I am not really looking to gain traffic from this, but to better utilize the traffic we currently have.
P.S. We have a $200 coupon on the site for contacting the Internet Department.

Great post Chris, I agree with you 100% and I couldn' have said it better. I am amazed that people fill out our coupon for 500.00 and hardley ever use it, and when they do try to use it is when they deal is done, which is ok with me as it is easy to overcome. "great I have given you the discount but I need that coupon to prove you got it" They will just hand it to you, then you always have the disclaimer.

As for Price all of our new cars are priced at MSRP and the used are priced over market value, if someone is interested in a vehicle they know they can work you "price does not matter" but you do have to price them. Concentrate on converting your website visitors, all a salesman needs is a phone number and a live person on the other end. The rest of it will follow if you are a "salesman". as an Internet director which is what I see you as. You should have the power to make the decision to do what it takes to get a customer in the door, then the manager can do his job. Price your cars online, get the customer on the phone, and use your phone skills not to price the car "look bob come in and drive the truck if you like it I promise I will not miss your business over price" "Bob if you dont like the truck it wouldnt matter if I sold it for only 10,000" get back to word tracks and selling yourself and the dealership over the phone. But you should have that one last piece of power to get that 1 out of 10 customer in the door and that is price. I find it funny everyday that after you work price the next hurdle is payment " well whats my payment?" In your online ads you might try only 289.00 per month W.A.C. how much gross is in that payment with only 20% down.

Just an opinion

@Alex wrote:

"Even if you do have "special internet pricing" I would say it's safe to say that customers are still going to use that number as the starting point of negotiation no matter what brand you sell"

I agree with this fully, I believe 95% of car buyers want to haggle at least a little. I've been thinking alot lately on how to use the Internet to facilitate the haggling process.



@Chris wrote:

"the thing that baffles me the most, is that people fill them [internet coupons] out, buy the car and never use it!"


Same for me too. Confirms to me that Internet users in general have a hard time remembering their activities as they 'shop' on the Internet.

Amanda - it is just a matter of time before it is common practice across the industry to start doing the same price online as is offered in the store. It is just a matter of time till your higher-ups realize there is no such thing as an Internet customer - they're all Internet customers....or they're all the same people who have been walking into your store forever if you prefer that definition. Creating two different customer types is just stupid, and that is what happens when you give two different prices. It is simply a failure to acknowledge change. I couldn't work for an establishment that represented something that dishonest.

You're an Internet Manager. You are the front line of the dealership, and in (arguably) the most important customer-facing role. If your bosses aren't listening to you, they're just missing it.

Why is the auto business the only industry with full disclosures of pricing (invoices) available within two mouse clicks? Why are there so many books written about all the secrets to negotiate a car deal? Why do consumers hate our guts? Double-pricing is one of the answers to those questions.

Alex,

I agree, the Internet is where its at and heading...it might be too late for some owners out there though. This perfect storm we are in will thin the ranks of US auto dealers.

Wayne

The bigger the ticket item, the more mistrust consumers have. It's hard to compare a product at Best Buy or a meal at a restaurant to a car. They are so far apart in price.

Also, the bigger the price, the mare wary the consumer is. Face it, cars are the second highest priced items right behind homes and there will always be a level of mis-trust. The more we put the consumer at ease, the better. There are too many choices that are just a click away

Alex, I think you are right on in your first paragraph. I couldn't agree with you more! As far as your final comment, you may feel they hate your guts but be glad you aren't a mortgage broker right now...

Just cannot help myself on this one.

Alex said

"no such thing as an Internet customer - they're all Internet customers....or they're all the same people who have been walking into your store forever if you prefer that definition. Creating two different customer types is just stupid,"

All customers are not the same, there are many types of shoppers and then there are some that do not shop at all the are impulse buyers that drive in and buy. So call me "just stupid" if you like but if I can sell one G6 for 12,995.00 and another for 16,995.00 I am going to do just that, but you would make sure both sell for 12,995.00? No one has created these shoppers at all, we are all creatures of our own habits. As a manager or salesman it is our job to maximize profits for the store and our family.

Just another opinion

Frank - you misinterpreted what I wrote. All I was saying is that if you display a price online, you should honor it on the lot and vice versa. The simple answer is to price all your online vehicles at whatever your sticker price is (new & used), and work each person making an Internet inquiry close to the same way you would someone who walks in the door. Now you're not dealing in separate pricing, and every customer is unique.

I'm with Frank on this one. Minimizing your profit/gross is not something I've heard in any of our meetings since I've been in the car business.

In order to be competitive on the internet, you must price aggressively. If you don't, you may as well not be there. Providing an internet special for a customer viewing your inventory on the internet is not a bad thing. We give discounts to employees, clubs, groups, etc... every day.

Having said that, only a certain amount of vehicles in our online inventory are discounted from the "regular" price. Typically for us it's 40%. The rest are the same price regardless if an internet customer or a walk/drive/phone-up

Several of you have different opinions about pricing, and you all may be correct. There is not a single pricing strategy that works in all situations/markets.

I know firsthand that pricing strategies work different in the Special Finance Markets (a rapidly growing market BTW). These folks are more concerned about obtaining financing. Price is not their top concern, at first. Payment is more important than price in this market.

Also, are you a volume store or high gross store? Many will say, "we want both." But having it both ways is not realistic.

We prefer high gross - you can always come down in price to scoop up the prime, but you can't go up.

OK since nobody liked my restaurant comparison how about real estate?
If one person prices a house at appraised value, one below appraisal and one above will the buyer still negotiate on all three? I would think a since of value would need to be established for a sale to occur? Is this a better comparison?

Ok I typed that a little fast and realized I made a mistake, I meant a sense of value has to be established before a sale can occur,
pricing does not matter if someone does not see the value.
We need great photos, great descriptions and strong follow up skills.
I have been looking at houses and made a offer the other day just because "it's a buyers market" needless to say it got flat turned down.
I based my offer on whatever they were asking minus 20K, after all "it's a buyers market".
The reason I liked it was because they had already reduced it to the bare minimum price and thousands below appraised value, basically it was quite a bit of land and house for a great starting price. I thought I could still deal on it because they seemed desperate and it had been on the market for over six months. No luck, they said they would not budge a dollar. So much for being a buyers market!

Great comments. Great topic. I'm surprised at how dealers worry about losing gross online, yet week-in and week-out they'll put their inventory in the newspaper & weekly shopper mag at prices often thousands below their Internet prices. Shouldn't there be better coordination between the Internet Department and the Newspaper & Magazine Department?

To Alex Snyder's point, they ARE all the same customers, it's just a matter of which advertising medium they have used to see your inventory. If prices are different from one medium to another (including walking on the lot) it only reinforces the mistrust that consumers already have with car dealers. IMHO, of course.

In my experience offering the free prize for the shoppers that stand up and identify themselves can pay off in spades. Make your offers entice the consumer to want to do business with you first and foremost.

Work on building your brand then the brand of those that you work for with secondary.

Speaking from a customers perspective I want simplicity.

I want to do a Google search for the exact vehicle I'm looking for and be presented with the same result sequence as I get when I search for a pair of new home theater speakers, etc.

Alex is dead on - the lines between off line and online are already gone. Embrace the change and run with it... what always pisses someone off and ensures a non-repeat buyer is when ignorance is preyed on to the benefit of the retail dealer (of any product) and the buyer feels taken advantage of.

Our dealership has two distinct sales departments: Land Based, and Web Based. The reason the Internet Prices appear lower are because they are HAGGLE FREE, and our operation costs are lower than the showroom. You might get the internet price if you fight hard enough in the store with a regular salesperson, and haggle, but the showroom dealership reserves the right to make as much money as possible - it's not a crime. However I use this terminology to my advantage. When I advertise a sale price online or in an email, I tell them this price shows "90% OFF" retail, which is similar to what a Furniture Store does or other retail outlets.

A dealerships reluctance to empower their Internet salespeople with a few set prices on certain cars (ie: Invoice, $100 under or over a specific model) shows utter ignorance to reality.

I get people who are shopping me after seeing one of our salespeople in the showroom, then come online, but as soon as I discover what they are doing I refuse to assist them, and advise them this is unethical and refer them back to their original salesperson.

Chris I agree with your statement, "A dealerships reluctance to empower their Internet salespeople with a few set prices on certain cars (ie: Invoice, $100 under or over a specific model) shows utter ignorance to reality".
However, I am curious about how your "NO HAGGLE PRICING" works in terms of customers who may come into the store and not give their information to a salesperson. In this situation they would not be in your CRM tool which would mean they could still get the internet price. Also, what about the customer that buys and then later finds out they could have gotten it on the internet for 2,000 cheaper. Do they ever walk into the showroom again. Does that turn everyone into an "internet customer"?
I think that is a great idea for your pay plan right now. But what about when the dealer figures it out as it relates to "incremental" business. Just some thoughts I wanted to throw out there. I see huge things in the future for us at the forefront and wanted to get everyone's thoughts on where we all know this thing is going. Alex touched on it in one of his earlier posts saying "they're all Internet customers"!

Chris wrote:
I get people who are shopping me after seeing one of our salespeople in the showroom, then come online, but as soon as I discover what they are doing I refuse to assist them, and advise them this is unethical and refer them back to their original salesperson.

Why would you do that? As a manager you should work that deal for that salesperson on the floor. You should do what it takes to get that customer back into the dealership. You should never use a negative like unethical.

As for price, I will say it again, "price does not matter" sell yourself, sell the car, sell the dealership

Chris I do agree with you when it comes to price as you hit it right on the head. Why deal with internet when I can get the same deal by walking in? Because internet prices are "no haggle" prices. That is why there is an Internet shopper. There are many kinds of shoppers, everyone is unique. It is not just black and white.

@Frank:

you wrote:
"Because internet prices are "no haggle" prices."


I, personally, stay away from claiming 'no haggle' anymore. I want to give the customer 'hope for gain'.

No haggle was good back in the early to mid 90's with Saturn because the customer was at an information disadvantage.

Definitely not anymore. Now everyone is armed with vehicle information and feeling a little dangerous...

I believe the majority of people want to haggle a little and view 'no haggle' as another way for the dealer to control the customer. I could be wrong and welcome input from others, but I hear hundreds of phone calls a month and can hear it in their voices.

Overall, the customer's confidence is up. They are not as afraid of being taken...and they know if your 'no haggle' price is a good deal or not.

Besides, with the current economic climate, people are fighting more for any kind of discount they can get. You bet some want to haggle.

Hello Wayne

I agree: Yes they do want to haggel, but we still need to give people a reason to shop the internet and if I can keep my gross on my internet price I sure want to do just that. You know the old term " if I could would you" still works just as good today as it did 25 years ago, and looking someone in the eye and letting them know our internet price is the best available still works also, but let me ask you does price really matter? Or is payment?

Frank,

From my experience & market, payment matters the most once the customer is in the showroom & negotiating. I agree 100%, showroom sales systems used 25 years ago still work today, but the customer has to be in the showroom.

Until we get to that point, we have to go use, as Jeff puts it, 'new marketing'.

Wayne wrote

Several of you have different opinions about pricing, and you all may be correct. There is not a single pricing strategy that works in all situations/markets.

I know firsthand that pricing strategies work different in the Special Finance Markets (a rapidly growing market BTW). These folks are more concerned about obtaining financing. Price is not their top concern, at first. Payment is more important than price in this market.

Also, are you a volume store or high gross store? Many will say, "we want both." But having it both ways is not realistic.

We prefer high gross - you can always come down in price to scoop up the prime, but you can't go up.


Then you wrote the above: you have me a little confused Wayne, Take a look at both statements they are very conflicting to say the least.

Frank,

I'd be happy to clarify those two statements since they were each written with a different context as they relate to the overall purchase process...

Price, payment, and getting financed are the 3 top objections for me. Their ugly heads pop up during different stages of road to sell:


PRICE:
This battle happens before the customer enters my funnel. Customers are making decisions about whether or not they want to engage your dealership based on your displayed (or undisclosed) price. Who knows how many we gain or lose by showing or not showing a certain price. I display "List" prices and remind everyone that nobody pays the "List" price. Again, I should remind you that my market is mostly Special Finance. But most of my customers (including my prime buyers) know they don't pay "List". They want to haggle a little.

FINANCING:
I fight this battle over the phone mostly. Special finance customers want to be reassured that their time will not be wasted..again.

PAYMENT:
After winning the first two battles and getting them to show, Mr. What's My Payment shows up during the negotiations. I'm not fighting the payment fight over the phone. Mr. Price Objection may show up again, but is easier to overcome because you can shift focus to other areas of deal, like payment.


I do think your dealership's pay plan may be adversely influencing your sales process and having you do things that put up road blocks on the road to sell. (i.e. you wrote: "but as soon as I discover what they are doing I refuse to assist them, and advise them this is unethical and refer them back to their original salesperson.")

This is why I do not prefer seperate Internet departments. They seem to cause more problems then they solve. Every salesperson should be in the Internet Department.

I will stop now as you have this very convaluted, as I did not write :
"but as soon as I discover what they are doing I refuse to assist them, and advise them this is unethical and refer them back to their original salesperson.") Chris said that qoute: Have a great day

Great Question, endless dilemma, read this:

Maintaining optimal pricing manually is a losing battle. Cars are
volatile commodities. Supply & demand are never constant.

Dilemma 1: If you don’t display prices you might not get any inquiries. If you do show prices then they better be interesting, otherwise you certainly won’t get any response. Catch 22! If you are always forced to open negotiations at your lowest, least profitable price, then how can you ever score a home-run?

Dilemma 2: Pitching “No haggle low prices” sounds tempting to some, but how can one price fit all? Every buyer is not the same. Each has their own unique set of circumstances, priorities, and values; so a fair price for one may not be fair enough for another. What about the less demanding buyers who may have been willing to pay you more!

‘So, - either you lose deals because your price is too high, or you end up leaving money on the table, because your price is too low. Either way, you lose!

How about trying to set aside everything you ever learned about pricing, - just for a moment. Open your mind, step back and watch how two trillion dollars worth of securities get sold every day with no fuss; and always at the best price the market can bear.

Brian Ferris
DealMaker.com
'matching supply & demand'

Acura does not allow us to list prices below MSRP on any advertising platform, which includes our website and get this, email blasts. In addition, we cannot even offer $500 accessory credit, since this will decrease the MSRP by set $500 according to Acura. No freebies or add-ons unless you add the additional cost of the freebies to the MSRP of the vehicle.

So we have a coupon on our website (pop-up and under) that says:
"Internet Savings Certificate". It is a big converter on our website as it converts more customers then any other form. Last month for example half of our leads (new and used cars - not looking at service/parts etc) came from this coupon. We also sell a lot of cars of it.

The great thing about this pop-up is that it is essentially an iframe and not a true pop-up, so having your pop-up blocker turned on will not stop it from showing. Check out my website for ideas.

Now back to Special Internet Pricing. I think you should never give someone what they want without giving you what you want - you want their contact info! When you have that, you have to give the customer what they want. They want a price, give them a price, because if you do not, they will not be happy. Acura rates our Internet response based on the information we put in our first two emails:
- do we cross sell
- do give a price
- do we mention special offers
- do we brand our dealer
- do we sell the product (awards etc)
- response time

I would tell your GM that you gotta give the customer what they want when they inquire. Now I do not worry about a showroom customer shopping the same day to see whether he can get it cheaper on the internet, because if you have a good crm, your price quote does not go out automatically if it is a customer that has already been in. In addition, if you do not give them what they want, your competitor down the street will give them that Special Internet Price.....and guess what? You just lost a sale!

Do not lower the new car inventory price on the site. Special pricing is for internet customers only. If a customer does not submit a lead, they are not an internet customer. To avoid the problems of having a high gross customer go home and see the car for less money simply do not advertise it on the site. There are many other tools that you can use to get the customer in the door. Start by generating a lead and giving them what they want before trying to get what you need. This is the only real solution.