Lexus Plus Negotiation-Free Pricing at USA Dealerships

[Luke111]

In major metro areas like NY and LA, the competition for luxury vehicles is cutthroat. A few hundred bucks here will persuade one buyer to take his business to another dealer like that, where luxury buyers aren't as brand loyal, and are shopping on price and deal (because they're likely leasing LOL). I'm not surprised that Lexus is pushing in places like Nebraska; I'm wondering if both Lexus Omaha and Lincoln have the same ownership as they are the only two Lexus dealers in the Cornhusker state (I know that is the case for Lexus of Albuquerque and Santa Fe in New Mexico).

As far as Lexus Plus not being at dealers where GST and SET operate, its just coincidence, since Lexus dealers aren't under the control of any of them really, unless you count JM Lexus being owned by JM Family, but the dealer itself is separate from SET.

This is still in a test faze and if they decide to roll this out every dealership will be on the same page.. even in NY and LA otherwise it will not work

 

[IS-SV]

This is still in a test faze and if they decide to roll this out every dealership will be on the same page.. even in NY and LA otherwise it will not work

Article (as posted by OP) states this Lexus program will NOT be mandatory.

 

[Tragic Bronson]

If you look at the locations of the dealers in the LP program, all except Lexus MV are in areas where there is little to no competition from other Lexus dealers (and likely few European dealers). As pointed out, the two dealers in Nebraska are under the same ownership, so they practically control the local market per se.

With the Internet age these days, many buyers will go far out of their immediate area to purchase/lease a vehicle if they perceive it to be a better deal than their local store. Vegas comes to mind, as I've read many car buyers there will drive to SoCal to buy instead.

 

[krew]

This is a bunch of baloney. I just bought an IS 200t F-sport at one of these dealers. They quoted me $2000 off which is easy to get at any dealer. I quoted them a TrueCar discounted price of $63000 of which they gave me. They also gave me $700 off the extended warranty which this program supposedly doesn't allow.

Lexus Plus dealers don't quote a price, it's locked in. Also, if you paid $63,000 for an IS 200t F SPORT, you paid $20,000 too much.

Which dealer did this happen at?

 

[krew]

krew

Lexus of Lehigh Valley owner Peter Cooper shares his experience as a Lexus Plus dealer.

View the original article post

 

[mmcartalk]

Lexus Plus dealers don't quote a price, it's locked in. Also, if you paid $63,000 for an IS 200t F SPORT, you paid $20,000 too much.

Which dealer did this happen at?

DarwinOSX may (?) have confused the F-Sport with the full-F model. 63K is more in line for a full-F.....plus, I don't think a full-F-model is even in production for the current 3Gen IS-series.

 

[IS-SV]

Maybe $63,000 not US dollars.

 

[mmcartalk]

Maybe $63,000 not US dollars.

Interesting point. Might explain part or all of it (I didn't know Darwin X was in Canada). At today's exchange rate, 63K in U.S. currency would be 83K in Canadian, and 63K in Canadian would be 48K in U.S. dollars.

 

[Ian Schmidt]

Yeah, that would make more sense as CDN$63K.

 

[Joaquin Ruhi]

Another Lexus Plus dealer weighs in with his thoughts on the system. This time, it's Greg Grimes, vice-president of operations of the Rohrich Auto Group (which includes Rohrich Lexus in Pittsburgh, Pennsylvania) who is interviewed in WardsAuto. Here's the story:

Group of Lexus Dealers Out to Change a Thing or Two
Lexus Plus alters the traditional F&I operation that typically is a separate dealership department.
Nov 28, 2016 - Steve Finlay | WardsAuto

The Rohrich Auto Group raised its hand when Lexus sought a few good dealers to participate in a customer-oriented pilot program called Lexus Plus.

“We were so ready for it,” Greg Grimes, the Pittsburgh-based group’s vice president-operations, tells WardsAuto.

Lexus Plus aims to enhance showroom hospitality and make the buying process smoother and faster by offering no-haggle pricing and a single point of contact.

“The sales consultant, who meets you at the door or takes your phone call or Internet lead, works with you from the start to the consummation of the deal,” says Grimes.

The idea of a single dealership staffer handling a car shopper from A to Z is not new. It has been a topic of industry discussion for decades. Previous automaker attempts to implement it at dealerships have fallen short.

But automakers and dealers work more closely today, and both groups generally recognize the utmost importance of happy customers in the modern marketplace.

Eleven dealers nationwide were picked to participate in the Lexus Plus pilot program, one of a growing number of automaker initiatives to make car buying easier and quicker.

Lexus Plus alters the traditional F&I operation that typically is a separate dealership department. Lexus Plus merges it into the overall sales process.

Rohrich Auto Group consists of two Lexus stores as well as sales points for Toyota, Honda, Cadillac, Chevrolet, Mazda, Bentley and Maserati.

Founder Charlie Rohrich began as a dealer in 1938. His son Jim succeeded him, followed by his son David, the current dealer-principal.

The group became one of the nation’s original Lexus dealers in 1989. “We had a big Toyota store at the time, and David at the age of 28, after the passing of his father, had to decide whether to invest in Lexus,” Grimes says. “He chose to.”

Before joining the Rohrich group last year, Grimes worked as a regional sales manager for Toyota Financial Services, the captive finance unit for Toyota and its Lexus luxury brand.

He currently serves as a mentor for the second-annual “F&I Innovator of the Year Award,” an event put on by EFG Companies and Northwood University. The winning team will be selected next month.

He describes the mentorship as inspiring. “You can tell they take the program seriously,” he says of the students he is working with.

Q&A on How F&I Is Changing

Grimes talks to WardsAuto about F&I in general and specifically how the Rohrich group offers it to customers.

WardsAuto: Where is F&I going these days?

Grimes: It is stronger today than ever. It’s a critical profit center for any dealership, whether it is a high-volume Toyota store or an independent in the middle of nowhere.

For so many reasons, not just profitability, it is a great position for our sales associates to aspire to be in. F&I is the connector to high-productivity car sales.

WardsAuto: Some studies indicate the F&I office can be a customer pain point. How do you balance the need for F&I to be a viable profit center yet also deliver customer satisfaction?

Grimes: I’ll call it like it is. It is not a balance. It is a must. When I think of balancing, I think of compromising. The old adage is that if everything is sacred, nothing is. But in F&I, everything is sacred.

First and foremost is the customer experience. That is everything when it comes to selling or fixing a car.

The differentiating factor is the experience. Shame on us as an industry that for so long the (customer) objection has been that it takes too long to get into F&I and then takes too long once you’re there.

Our industry is wrought with management by financial statement. We have to be able to manage by customer experience. The opportunity to provide a good experience in F&I is so big. We sort of dilute it because so much is riding on it.

WardsAuto: What can you do?

Grimes: Our auto group is at a crossroads. We raised our hands for Lexus Plus. It provides guardrails, a sales-and-pricing process and a theory on how to care for a client.

Earlier, we had started selling with upfront and clear pricing at our Cadillac and Honda stores and one of our Lexus stores, with some level of success.

Lexus helped us build the model of the single point of contact.

Maybe it is not the right model for Chevrolet or Kia stores, but (the industry) can learn something from how our clients behave in that environment and how we should behave. Dealerships can learn from the single point of contact even if they are doing the traditional sales-to-F&I turnover.

There are challenges. We have 20 sales consultants between our two Lexus stores and I have to make them (F&I) managers. I’d like to tell you I’ve completed doing that, but I’m not.

Single point of contact doesn’t have the natural, sort of psychological, breaks in the process. You have to be strategic about where you place the value of F&I products in your sales consultation.

If you have that culture on your showroom floor, then customers spend less time in the F&I office, are more comfortable with their purchases and are more likely to come back.

WardsAuto: Couldn’t that work at a Kia or Chevy store?

Grimes: Yes. I’m not saying we have to remove finance managers from every store in the country.

There are finance managers that dealerships depend on. We’ve got some great people in the industry who provide great service and profitability. They are trustworthy and work their butts off. It is a super-hard job. That job should stay in stores. We just have to evolve.

WardsAuto: Just to be clear, does Lexus Plus call for eliminating F&I managers per se?

Grimes: It’s kind of a chocolate-vs.-vanilla issue, a matter of taste. We’ve chosen to empower our management staff with additional training. One of our general sales managers this week is at a formal F&I training class. They can add supportive mechanisms to the sales process.

We’ve chosen to place contractors in a role that supports the sales staff by doing necessary paperwork, working with the bank, preparing legal documents; everything operational that happens behind the scenes, what the customer doesn’t see.

Meanwhile, our sales consultants are doing everything customer-facing, such as asking the right needs-based questions and doing the needs analysis to make sure F&I products make sense for the particular customer.

WardsAuto: Does that eliminate the F&I office?

Grimes: It doesn’t really eliminate it. At our Lexus stores, we don’t have the traditional finance manager. We have those finance contractors. It’s more sales-consultant-effort heavy and more qualitative on our management staff.

Selling value is a hard proposition. (Traditionally), you send a sales manager in to help a sales consultant. Usually what happens, he gives a little more money for your trade-in or takes a little off the purchase price of the car.

Well, that’s not the model for Lexus Plus. It’s that sales consultants have to be value-propositioning and be product gurus; people who give a darn about the customer.

It changes the game of managers who support that process, because they no longer have discounting as a crutch. They have to provide great value and experience to customers. Since we moved to Lexus Plus, our CSI scores obviously are high. It would work differently at our store in Pittsburgh vs. a store in Houston or Seattle. We’re finding our way with it, for sure.

WardsAuto: That was a good decision by David Rohrich to get one of the first Lexus franchises. Some studies rate Lexus dealerships as the highest in throughput profitability.

Grimes: I’ve worked with a lot of manufacturers. I’ve yet to find one that supports its dealer channel like Lexus and Toyota do.

http://wardsauto.com/f-i/group-lexus-dealers-out-change-thing-or-two

 

[IS-SV]

^ Interesting article/interview with surprising amount of honesty

 

[mikeavelli]

^ Interesting article/interview with surprising amount of honesty

That was a very good read and yes very honest.

 

[Tragic Bronson]

http://www.autonews.com/article/20170121/RETAIL07/301239804/penske-ends-no-haggle-pilot

Penske ends no-haggle pilot
Program at Ariz. store didn't save costs nor lift sales

Penske Automotive Group Inc. has backed off a no-haggle pricing experiment. The nation's second-largest dealership group has returned to a traditional sales model and a commission-based pay plan at Toyota of Surprise (Ariz.).

Penske made the switch in the latter half of 2016, finding the no-dicker policy did not deliver the cost savings and sales volume they had hoped, executives said.

"We failed from the standpoint of being able to grow" that business, Penske Chairman Roger Penske told Automotive News.

Since the switch, "volumes have increased, although the sample period is only a few months," Tony Pordon, executive vice president of investor relations and corporate development, wrote in an email. "We are tracking it monthly, so I want to wait for another three to six months before making any further comments about the volume."

Penske launched the no-haggle pricing pilot at Toyota of Surprise in spring 2014. It applied to new and used vehicles, trade-ins and finance and insurance products.

Penske chose that store to test the program because it had recently launched operations as an open point, so it was suitable for training new employees on no-haggle pricing.

The store paid salespeople a salary rather than a commission, believing that doing so would attract fresh talent. Many of the initial salespeople came from nonautomotive retailers such as Starbucks and Dillard's department store. They attended two months of training to handle the entire transaction from start to finish, including F&I.

Meanwhile, customers were briefed on the store's negotiation-free policy shortly after they were greeted, so they would know there was no dickering over any price, including the offer the store would make for a trade-in vehicle.

But Roger Penske said no-haggle pricing did not "lift" sales. "We didn't see the benefit of lower costs [from] having one person do the whole transaction," he said. "I think maybe our execution was poor. We had a brand-new store and a startup from scratch, so there was turnover of people."

Pordon added that the store was "losing a lot of deals" to competitors who would undercut the no-haggle price.

Penske Automotive Group ranks No. 2 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 233,524 new vehicles in 2015.

While this isn't Lexus, here is one Toyota dealer where the no-haggle didn't work.

 

[mmcartalk]

Saturn, though, proved, for years, that no-haggle pricing could work. Yes, like Scion (which also had the no-haggle system), Saturn folded, but not because of that, or any other of its noted customer-friendly features. Saturn folded because of incredibly bad management on GM's part, and the abandonment of its hugely successful plastic-bodied S-class compacts for conventional metal-bodied cloned Opel and other GM platforms. Scion folded because their products ended up competing against other similarly-sourced (but not identical) small Toyota products in the same showrooms.

 

[Tragic Bronson]

Saturn, though, proved, for years, that no-haggle pricing could work. Yes, like Scion (which also had the no-haggle system), Saturn folded, but not because of that, or any other of its noted customer-friendly features. Saturn folded because of incredibly bad management on GM's part, and the abandonment of its hugely successful plastic-bodied S-class compacts for conventional metal-bodied cloned Opel and other GM platforms. Scion folded because their products ended up competing against other similarly-sourced (but not identical) small Toyota products in the same showrooms.

Good point, BUT no haggle in this situation is different from either of the product starved defunct brands, as the playing field wasn't the same: A new Toyota store in a still competitive market with multiple dealers didn't work because the brand is still positioned where it still has to compete not only against other Toyota stores but also against other makes as well.

 

[Tragic Bronson]

Looks like one dealer is out, since their page is blank and they're missing from the list of dealers in the program.
http://www.southcountylexusatmissionviejo.com/LearnMore_D?p=lexus-plus-program

The luxury market in Orange County and Southern California is too competitive for this program to work. There's five Lexus dealers in OC alone, and a similar amount of BMW and Mercedes dealers to shop too. A buyer here could also choose to go to LA or even San Diego to go as well.

 

[mmcartalk]

Looks like one dealer is out, since their page is blank and they're missing from the list of dealers in the program.
http://www.southcountylexusatmissionviejo.com/LearnMore_D?p=lexus-plus-program

The luxury market in Orange County and Southern California is too competitive for this program to work. There's five Lexus dealers in OC alone, and a similar amount of BMW and Mercedes dealers to shop too. A buyer here could also choose to go to LA or even San Diego to go as well.

Eventually, I think that the no-dicker system will grow to the point where it will not be so easy to find traditional dealerships any more. You won't be able to just hop in your car and drive a few miles if you don't like one dealer's price, and want to haggle somewhere else. We don't have that yet (I'll admit that)...but I think it is one of the inevitable long-term trends in the industry, just like downsizing, unleaded gas, and the conversion to electronic ignitions were 40 years ago

 

[mikeavelli]

But Roger Penske said no-haggle pricing did not "lift" sales. "We didn't see the benefit of lower costs [from] having one person do the whole transaction," he said. "I think maybe our execution was poor. We had a brand-new store and a startup from scratch, so there was turnover of people."

And sales are the bottom line....

 

[mmcartalk]

Interesting. Though I haven't seen anything firm from Lexus, KBB has a source that Lexus is going to expand the no-haggle pricing policy. I didn't start another thread on it, since we already have an old one on this subject.

https://www.kbb.com/car-news/all-the-latest/lexus-plus-no-haggle-selling-expands/2100004171/

Lexus is expanding its one-price, no negotiation selling plan to several other dealers in an effort to make the buying process faster and less stressful. Called Lexus Plus, 13 dealers have adopted or are in the process of adopting no haggle selling for new and used vehicles as well as service, parts and accessories. An additional six or seven may be operational by the end of the year.

“The car buying process has always been a little bit of a mystery and buyers walk out of the store not knowing whether they got a good deal or not,” said Greg Kitzens, Lexus general manager of future initiatives, global and dealer marketing. “But they seem to be very comfortable with Lexus Plus, knowing that they paid the same as the neighbor next door or the person that followed them in the door behind them.”

Dealers offering Lexus Plus post the car’s price on a large card attached to the car’s window. It lists the sticker price, rebate (if offered) and the Lexus Plus price that includes the discount offered by the dealer.

“All of the research we did kind of let us to believe our customers want a more streamline, a more transparent process just like they are used to when buying other goods and services,” Kitzens said.

Survey-driven program

Lexus Plus addresses surveys conducted by the auto industry that have shown shoppers hate the car-buying experience. Lexus Plus eliminates the back and forth negotiating between the sales person and the buyer, the potential anxiety, frustration and possible anger that might result during a buying transaction. One-price, no negotiation, sometimes called “no dicker sticker” selling is not new. Numerous dealers have tried that strategy over the past decades as well as the now defunct Saturn brand.

With Lexus Plus, the buyer deals with one sales associate who is trained to handle the entire process from the moment the person is greeted at the door through the financing process and right up to the instant the car is delivered and keys handed over. Lexus Plus aims to slash the time it takes to purchase or lease a vehicle by 1 to 2 hours. Since the buyer deals with one person at the sales associate level several layers of management are eliminated such as the desk, sales, finance and used car managers.

“You take some of those layers out of the process and you give more responsibility, more authority to that sales person because it is not about the back and forth with the desk or the sales manager over the price. They know the price,” Kitzens said.

Also: Kelley Blue Book Best Buy Awards of 2017

Standardized pricing

A benefit for the dealer is that it allows them to have standardized pricing: “It is not about going to war with each individual customer about the price of the vehicle and how much cross profit,” he said. However, there is a tradeoff. While Lexus Plus speeds up the buying process, cars purchased under the program likely will not be offered with the lowest price available for that model. A traditional dealer, one that negotiates on price, may have room to offer a better deal.

“We have had examples of people coming in who absolutely feel like they need to negotiate. Unfortunately we don’t sell to those people” with Lexus Plus, Kitzens said. However, “there are some on the fringe that once you explain the pricing strategy they kind of nod their head and kind of get it. The majority of people don’t like the back and forth. They don’t necessarily have to be affluent. They just want a smoother, streamlined transparency. I think that is the biggest issue.”

So far responses from customers purchasing or leasing their car through Lexus Plus have been positive. “We have this question on our survey, would you recommend this dealer to somebody else for service or sales? We are seeing a significant lift in those scores,” Kitzens said.

Lexus Plus was launched last year at 11 dealerships that volunteered to be part of the new program. One of the original points in Mission Viejo, Calif., dropped out of the program and returned to the traditional way of selling after the dealership was sold. Three dealers were added earlier this year including JM Lexus, Margate Fla., the largest Lexus dealer in the United States. JM Lexus sold nearly 8,000 new vehicles in 2016.

Also: Class of 2018 – New Cars Ready to Roll

Better customer service

Jim Dunn, vice president and general manager at JM Lexus, said Lexus Plus is about improving the customer experience. Dunne said the intent for adopting Lexus Plus is to be “the very, very best dealership in the way we treat our customers. Being No. 1 now to us is no longer enough. We want to raise the bar and that’s the right thing to do.”

Generally speaking, he said buyers have two complaints: Why does it take so long to buy or lease a vehicle, and why do they have to talk to so many people during the process such as the sales and finance managers?

Dunn believes once Lexus Plus is fully operational at the dealership, the time it takes for a transaction to be conducted will be chopped from about 3.5 hours today to 1.5 to 2 hours in the future. The dealership has just started to transition to Lexus Plus, a transition that could take six to 12 months to fully implement across all departments.

Although the average transaction takes about 3.5 hours to complete, it’s not usual for it to take even longer during the dealership’s busy months, October, November, December and January, Dunn noted.

“People are backed up. I mean they could be here for 5 hours,” Dunn said. “I hear customers say they rather do something else than go through the process of buying a car. We are listening to that now. It is important that we respect their time. Time is a customer’s most important asset. It is time for us [as dealers] to respect that.”

As for the future, the 237-dealer strong luxury division is committed to Lexus Plus and expects a higher number of participants in the coming years.

“I think once we begin to reach kind of critical mass, this is going to start catching on especially if we start to see some of the markets go for it,” Kitzens said. “We have some smaller markets with two and three dealers. If we get a couple of dealers in a (small) market going Lexus Plus that third dealer may just fall in line.”


(P.S....as an aside note, I like the no-haggle-idea myself, as long as the asking price is reasonable and includes a nice discount. But I agree that those who have a different view, or don't feel comfortable with it, or who prefer to do the deal the old fashioned haggle-way should be given that option).

 

[CIF]

I applaud Lexus for at least trying new things, even if it hasn't worked out that well. I think putting haggling aside, the vast majority of consumers would prefer a much more straightforward and stress free dealership experience than what many dealerships currently provide. Things like inconsistent service and maintenance, hidden fees, hidden conditions, flip flopping on price despite what is written down on paper and contract, are all things most consumers hate and what gives many dealerships bad reputations and stereotypes. Direct sales from the manufacturer would be ideal, but one has to wonder what else can be done in the meantime. Tesla so far is having partial success with direct sales, but many States are vigorously fighting Tesla on the matter. If Tesla becomes more successful and influential, it will be very interesting to see what effect this has on the dealership industry in North America.

Just like Uber is currently revolutionizing/changing the taxi industry, and various start-ups and companies are now changing the real estate industry, it is possible that Tesla may end up doing the same with the dealership industry.