Will The Lexus No-Haggle Price Program Work?

August 7, 2015 1 Comment

We told you yesterday Scion is experimenting with shifting many of their sales processes online. Apparently, Lexus, another Toyota company, is going to try a one-price experiment. In 12 of its retail stores, Toyota will be investigating the results of a “no-haggle” pricing strategy. The change was announced by Jeff Bracken, VP and GM for Lexus in North America during the Center for Automotive Research management briefing seminar. During his remarks, Bracken said, “We haven’t shared this next process in such a public forum before… but, I wanted to announce today that about a dozen volunteer Lexus dealers will pilot a negotiation-free process for all-departments. While negotiation-free pricing is not revolutionary, we strongly believe the concept will further elevate transaction transparency and customer care.”

Is this type of shopping experience popular amongst consumers? A poll on this subject from The Consumerist asked consumers, “Would you buy a car at a no-haggle dealership?” The results were 62.34 percent of respondents would do just that. And 19.32 percent of those surveyed would still prefer to negotiate, while 18.25 percent answered, “I would literally only do this if I were buying a Tesla.” While one poll doesn’t mean everything for dealers, the ever-evolving consumer should mean something.

Toyota is certainly trying to innovate their dealership approach. Their Scion brand is working on one-hour car deals thanks to a new online car-shopping platform. Using this format, the time at the dealership for customers is vastly cut down and is seemingly only spent finishing off a sale they already agreed to online. Logically, no-haggle pricing is meant to cut down the time and effort that consumers have to spend negotiating on price, which could take more time than a dealership experience using one-price. While some consumers and dealers certainly prefer a variable pricing model, these experiments with Lexus will certainly help the luxury automaker decide if they want to make company wide changes that could improve the customer experience.

Now, what pricing model do you prefer? A set price or a variable setup that allows for negotiations? Do you think Toyota will find that consumers like to do a lot of their car shopping online? Finally, if the Scion and one-price pilots are successful, do you see Toyota implementing similar programs company wide?

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    Roger Bendet

    After being in the auto business for 40 years and seeing this model tried many times it certainly has some merrit. As the age demographic changes to a younger group it does make good sense. The question is who sets the price? How does the consumer know the price is “fair”? What happens in a large metro where not everyone plays well together? Who determines trade value where even with today’s electronic valuation tools there will always be somewhat subjective. A real plus for the dealer will be that they will no longer need salespeople with negotiating skills they will only need professional product presenters. They at that point cut the variable expense of sales commissions almost in half . There are plenty of college graduates that would snap at the chance to make $50-75k. There is no doubt no haggle is the proper way but still has issues that need to be addressed.