DealershipsUSA

Negotiation-Free Pricing Works for World’s Largest Lexus Dealership

Lexus JM Lexus Plus

WardsAuto has an update on the Lexus Plus negotiation-free pricing program and how it’s working at JM Lexus, the brand’s largest volume dealership in the USA:

“Anybody that’s bought a car from us, I haven’t heard a discouraging word at this point,” [JM Lexus vice president and general manager Jim] Dunn tells WardsAuto in an interview. “As I tell them why we are doing this and what are the benefits for you, they understand it’s time to really do something different.”

“We see if they’re not going to have to go to five or six different dealerships anymore, and they’re really only shopping one, or up to one-and-a-half stores these days, that the consumer wants something different. And we’re listening.”

Dunn says his fellow Lexus dealers are watching and waiting, but he thinks they will opt for Lexus Plus eventually.

“The guys in my (dealer) group, they know at some point it’s going to be incumbent upon them to do the same thing,” he says.

Lexus USA vice-president of marketing Cooper Ericksen also addresses the issue of non-negotiable pricing in a large market like Southern Florida:

“(Undercutting) has happened, it will happen. But again the real value proposition comes in where ultimately a customer is going to make a decision: Is it worth it for me to go dealer-to-dealer, to call and to email and to text, and to negotiate and spend all the time to go to all these different dealers looking to save a small amount of money?”

He notes every dealer pays the same amount for a vehicle and has the same amount of profit margin, so if Lexus Plus models are pre-negotiated at market-based prices, the gap between what they can be sold for and what a buyer will pay a Lexus Plus store is small.

Meanwhile, Dunn believes JM Lexus’ “world-class service” will trump any small pricing difference between it and other South Florida Lexus dealers.

Comments
Nice find, thanks. Interesting (pilot program) experiment, very wisely limited to only 12 stores (probably not top producing stores).
Gecko [​IMG]

Lexus is currently piloting a no-haggle pricing program with twelve dealers in an effort to improve customer satisfaction.
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"Ladies out Night" is nice. Target the female, increase brand appeal, sell more, spend on halo cars (Lexus F), get the male interested, increase brand appeal, sell more.
T
Pure Pricing hasnt been a big hit for Scion, why are they implimenting it to Lexus?
Tinhinnh
Pure Pricing hasnt been a big hit for Scion, why are they implimenting it to Lexus?
I have same concern, especially with Lexus being a premium auto brand. Sounds like an experiment at best, one I don't expect to tried around here at the established and lucrative high volume dealerships.

Plenty of waffling in how they described the experiment, not especially confident:
"The 12 participating dealerships were not announced, but are positioned in both small and large markets. The pricing itself will not be set nationally, with dealerships able to make adjustments based on local conditions. While Lexus hopes all 236 dealerships across the USA will eventually adopt negotiation-free pricing, the program will not be mandatory."
R
  • R
    RAL
  • August 6, 2015
Around the first of the year, the Lexus Advisory Board was surveyed extensively regarding every step and every individual encountered throughout a customer's buy/lease transaction. No-haggle pricing was just one of numerous subjects in the survey. It would seem Lexus is seriously looking to revolutionize (like they revolutionized the customer's service experience) the customer's buy/lease experience from the moment of entering the showroom to driving away in a new Lexus.
M
Given that the price of the vehicle is only one part of the total transaction, I doubt if this will eliminate the for customers need to compare total costs among several dealers. Many, if not most buyers have a vehicle to trade in and most dealers have various add-on charges and those will obviously vary, especially trade-in allowances. Toyota Canada tried fixed prices in Ontario a few years ago but ran afoul of price-fixing laws and had to abandon it.
M
From a sales consultant's point of view, I think this should have been done nationwide years ago. MSRP on a Lexus is already a tremendous value (proven). One price on the best luxury car on the market. Pick the best vehicle for you and be done...can't get any simpler than that. I don't like the vague interpretation that they are broadcasting. It still leaves too much room for confusing the customer.
R
Not going to work at all.

Its the stupidest strategy in a car showroom in all honesty. No-one buys a car unless they feel they're getting a good deal - even if they discount the car by $250 it seems like they've given you a deal and makes you feel like theyve done their most at trying to get you a good price
C
  • C
    CIF
  • August 6, 2015
Not sure how this is going to work frankly. So prices won't be set naturally, but will differ locally? So dealers in the end will still have ability to vary prices compared to other local regions. That sort of defeats the purpose of no-haggle pricing.

I get the intent that Lexus has (improving customer service), but I'm not sure this will work too well. It's an attempt to streamline the whole dealer experience for the customer, however it doesn't go far enough, given Lexus' intent.
M
No such thing as one price, when a trade in is involved, also PAY the salesman!! Been in the business since 1988, currently at a Lexus store for 13 years. GM and Kia etc. pay big spiffs on EVERY car sold. I am a professional and it is sad to say that I would rather sell a used Lexus, more profit for me. Lexus gives big money to stores that meet their quota on new, but they don't pass it on to the sales force!! Hire professionals like me, watch their CSI turn around! Some of our sales people we have are not qualified to sell a Chevy!
T
Wealthy people likes a good deal too (haggling). This aint gonna work!
Tinhinnh
Wealthy people likes a good deal too (haggling). This aint gonna work!
Depends on one's priorities. For some people, a good deal IS no haggling. ;)
mmcartalk
Depends on one's priorities. For some people, a good deal IS no haggling. ;)
For some that IS example of priority of the lethargic and lazy.;):D:)

Let them keep paying through the nose, lol.
IS-SV
For some that IS example of priority of the lethargic and lazy.;):D:)

Let them keep paying through the nose, lol.

It doesn't aways mean paying through the nose. Often, there is a no-haggle discount in the pricing. Not all of the no-haggle systems are (or were) like Scions and Saturns, where no-haggle usually meant full list.
mmcartalk
It doesn't aways mean paying through the nose. Often, there is a no-haggle discount in the pricing. Not all of the no-haggle systems are (or were) like Scions and Saturns, where no-haggle usually meant full list.
Lexus, Mercedes and BMW are very different brands than low price and declining Scion brand and failed Saturn division.

Poor business examples for Lexus to follow (unless sales slowdown or failure is the goal), even if fixed pricing has merit.
Salespeople IMO (or dealership employees in general) are the most important if you want to be invincibly successful in the automobile industry, after you have a good product, and I think no company is excellent at it. The employees at the dealership are the only true interaction between the car company and the customer. The pricing is only one part of the whole equation.
IS-SV
Lexus, Mercedes and BMW are very different brands than low price and declining Scion brand and failed Saturn division.

Poor business examples for Lexus to follow (unless sales slowdown or failure is the goal), even if fixed pricing has merit.

Don't want to get too far off topic, but Saturn failed because of its later (post-2000) products and the way an incompetent GM management ran the division...forcing them to market and sell products they were never intended to have, not because of their well-known purchase or customer-service policies (I owned two earlier Saturns myself as second commuter-cars). They did very well as long as they stuck to what they did best. They failed when they departed from that.
mmcartalk
Don't want to get too far off topic, but Saturn failed because of its later (post-2000) products and the way an incompetent GM management ran the division...forcing them to market and sell products they were never intended to have, not because of their well-known purchase or customer-service policies (I owned two earlier Saturns myself as second commuter-cars). They did very well as long as they stuck to what they did best. They failed when they departed from that.
We know all about Saturn's failure (very old news) and inability to be profitable in every fiscal period of their life. They never did well financially and contributed to GM's downfall and eventual bankruptcy. Too unrelated to have anything to do with this topic regarding a strong premium brand (Lexus). Enough time wasted on that poor business example of failed automotive brand, thank you.
N
I like this idea. Most people aren't going into a dealer looking forward to "dealing" with the salesperson and finance person. Now, if only Lexus could change the luxury vehicle game by adopting direct sales to customers like Tesla. Now THAT would be amazing.
C
  • C
    CIF
  • August 7, 2015
nabbun
I like this idea. Most people aren't going into a dealer looking forward to "dealing" with the salesperson and finance person. Now, if only Lexus could change the luxury vehicle game by adopting direct sales to customers like Tesla. Now THAT would be amazing.
A very notable goal that would be, but an almost insurmountable one. I agree that most people don't look forward to the entire dealership process. As it stands though, dealerships are highly intertwined into the auto industry. It would require a radical industry change in order to get away from the current situation.
^ Agreed, and what competitive advantage would BMW, Mercedes, Audi possibly gain if they continued with their own business as usual sales approach...
B
I buy my cars from the number one volume Lexus dealer in the country and I deal exclusively with a VIP manager. I never have to deal with anyone out on the sales floor.
I've purchased six vehicles in the last seven years and all of them have been deeply discounted.
My two current 2015's were purchased two weeks apart during the month of May and the F Sport was thousands behind MSRP.
A one price take it or leave it CarMax experience will unquestionably end my relationship with Lexus.
I doubt anyone reads this from Lexus, but if they make that mistake, they will lose their loyal base customers like my family who have purchased eight Lexus vehicles in the past nine years.
I've worked in this industry and from both sides of the equation, no luxury automobile manufacturer would survive the implementation of such a strategy over the long term.
C
Mr. Pontiac
Given that the price of the vehicle is only one part of the total transaction, I doubt if this will eliminate the for customers need to compare total costs among several dealers. Many, if not most buyers have a vehicle to trade in and most dealers have various add-on charges and those will obviously vary, especially trade-in allowances. Toyota Canada tried fixed prices in Ontario a few years ago but ran afoul of price-fixing laws and had to abandon it.
I'm skeptical since indeed Toyota Canada tried this about 10-15 years ago and it failed because of competition laws, but as a Toyota buyer, IMO, I feel it's also because the next dealer still always tried to one-up the other by throwing in an accessory, free service, etc outside of the fixed pricing the dealers were supposed to adhere to.

In short, there was always a form of bargaining even with the fixed "Access Toyota" pricing as it's human nature to try to get more for less, so even if the laws did not take effect, I feel the program would have flopped anyway.
IS-SV
^ Agreed, and what competitive advantage would BMW, Mercedes, Audi possibly gain if they continued with their own business as usual sales approach...

With the German upmarket brands, though, isn't their "business as usual" more geared to leasing than buying?
mmcartalk
With the German upmarket brands, though, isn't their "business as usual" more geared to leasing than buying?
Not exclusively leasing. But yes it's easier to see what I mentioned with straight purchases.

Sure a big percentage of BMW, Mercedes, Audi deals are leases with BMW probably leading with that stat. But since you brought up the good question about leasing it goes along with what I said about giving those German brands a "competitive advantage" via the ability to discount and subsidize leases via cap reductions (just another form of discounting to move metal). So the leasing scenario does apply to what I mentioned in post#23.

Note: When some if use term like "sales approach", usually sales and leases are included. Once the sale or lease transaction is completed title transfers and dealers inventory is decremented, or in other words dealer itself doesn't own the sold or leased car anymore.
C
  • C
    CIF
  • August 9, 2015
corradoMR2
I'm skeptical since indeed Toyota Canada tried this about 10-15 years ago and it failed because of competition laws, but as a Toyota buyer, IMO, I feel it's also because the next dealer still always tried to one-up the other by throwing in an accessory, free service, etc outside of the fixed pricing the dealers were supposed to adhere to.

In short, there was always a form of bargaining even with the fixed "Access Toyota" pricing as it's human nature to try to get more for less, so even if the laws did not take effect, I feel the program would have flopped anyway.
Another good point.
M
We already have this here in the UAE. Probably because the dealer here is a Toyota and Lexus monopoly. However, something like this, in a country with privately owned dealerships, will eventually lead to price fixing.

I am generally against dealerships selling cars. I think cars should be sold by the manufacturer. If I'm not happy with my car, do you think the dealership cares? Not as much as Lexus would. There is far too much disconnect between car manufacturers and their customers. What needs to happen is we need the manufacturers on the ground interacting with the customers.
Mohammed Taha
We already have this here in the UAE. Probably because the dealer here is a Toyota and Lexus monopoly. However, something like this, in a country with privately owned dealerships, will eventually lead to price fixing.
Possibly, but price-fixing, as we know it, is usually a collusion by several different manufacturers or companies to agree on set-prices for a shared commodity or product, not necessarily just one manufacturer, company, or dealership. What you are describing (if applicable) is more among the lines of a monopoly by one dealership or auto manufacturer...which is more of an anti-trust case. And that, of course, would depend on the local laws in the UAE and how they operate.

I am generally against dealerships selling cars. I think cars should be sold by the manufacturer. If I'm not happy with my car, do you think the dealership cares? Not as much as Lexus would. There is far too much disconnect between car manufacturers and their customers. What needs to happen is we need the manufacturers on the ground interacting with the customers.
Again, I don't know about the laws there in the UAE, but, in the U.S., some jurisdictions don't allow auto manufacturers to set up and operate their own company-owned retail outlets. Tesla, for example, operates that way in some states (company-owned outlets)....but is having legal trouble in others and facing some lawsuits over the issue.
So where are they going to try this experiment first? The Southern California market? I don't think it would fly with certain Lexus buying demographics, especially those in which the cultural norm is to "haggle".

T
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