Lexus : ‘Dealers set the price, and that’s the price’

Lexus tests multicity no-haggle retail sales program

Lexus tests multicity no-haggle retail sales program

Lexus tests multicity no-haggle retail sales program

Lexus’ Bracken: No-haggle pricing should “further elevate transaction transparency and customer care.”

TRAVERSE CITY, Mich. — Lexus will take on one of the car business’s most troublesome traditions next year — haggling with customers over vehicle prices — as the brand enlists dealer volunteers and allows them to set their own firm prices.

Lexus revealed last week that it is launching a multicity dealer pilot program for “non-negotiation” retail sales. Throughout 2016, 12 of the luxury brand’s 236 U.S. dealers will try to sell vehicles at set prices that will make customers happier — Lexus hopes — while still allowing the retailers to make money.

“While negotiation-free pricing is not revolutionary, we strongly believe the concept will further elevate transaction transparency and customer care,” Jeff Bracken, Lexus general manager, told an audience at the Center for Automotive Research’s Management Briefing Seminars here.

The devil will be in the details, Bracken acknowledges.

“The dealers set the price, and that’s the price,” Bracken told Automotive News after his presentation. “There’s no wiggle room — that’s the price.

“I’m sure there’s a lot of thought that our dealers will put in about what that price is, based on whatever’s happening in that particular marketplace.”

The idea is taking hold at Lexus as the brand fights to reclaim U.S. luxury sales leadership — a position it lost to BMW in 2011.

Bracken predicted that the U.S. luxury market will be a “dogfight” for the rest of this year among Lexus, BMW and Mercedes-Benz. Lexus topped Mercedes, excluding Sprinter, and BMW in sales last month.

One-price selling made ripples in the car business with the 1990 launch of General Motors’ ill-fated “no-haggle” Saturn brand. The approach has polarized the industry for 25 years. Supporters have hailed it as a brilliant way to woo consumers — particularly young customers — who dread negotiating on price. Critics dismiss it as simply unrealistic for an American public raised on bargaining for the best deal.

In the pilot program, Bracken’s retailers will represent a cross section of markets, geographically dispersed across the country, ranging from small- to big-volume stores.

“We certainly wouldn’t go down this path if we didn’t think we could succeed with it,” he said. He also vowed that “Lexus will never force this onto all 236 of our dealers.”

The company expects the new approach to improve employee turnover, customer retention, conquest rates, dealer profitability and local market share for participating dealers.

“Once we move through this pilot, our plan is that other dealers will see how this will flourish and they’ll pick up on it as well,” Bracken said.

He said that Lexus is also repositioning its online presence to help shoppers learn more before they reach the showroom. As part of the pilot program, dealers will want customers to understand before they arrive that vehicle prices are non-negotiable.

Bracken said it will be possible for a customer to buy a vehicle online. But delivery will still go through a dealership, he emphasized.

“When Lexus began in 1989,” Bracken recalls, “one of the keys for us was creating a level of care to consumers that had never been realized before.

“But the competition never relaxes,” he says. “They’re never going to roll over for us.

“So this is a logical step in our continuous improvement.”

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