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Professionalism trumps price: study

June 24, 2011
Customer treatment often trumps price at car dealerships, according to a new study by CarWoo.com, an automotive marketplace website.
           
Its study, using transactional and behavioral data, found that dealership behavior matters a lot in determining if a shopper accepts a particular deal. The study shows that 54.6 percent of the time the lowest price offer was not the one the buyer took.
That increases to 57.5 percent when eliminating cases where buyers received only a single offer.
           
Behavioral data also indicate price is not what drives buyers’ opinions expressed in online reviews of their dealership experience.
           
In giving five-star reviews, highly satisfied buyers ranked dealer professionalism as the most important factor 47 percent of the time and price only 14 percent.
           
When dissatisfied buyers gave dealers one-star reviews, they cited unprofessionalism as the reason 44 percent of the time, and blamed price only 19 percent of the time.
           
Only when buyers gave middling three-star reviews did price become the driving factor, when it was ranked as primary 52 percent of the time. These reviews, while ostensibly “neutral,” were often negative in tone, much more akin to a grade of a “D” than of a “C,” a CarWoo spokesman said.
           
An analysis of all available data shows four major elements go into the car-buying decision. In order of importance:
           
• Professionalism of the dealership staff, including engagement and responsiveness.
• Right vehicle, and how close what’s offered meets the buyer’s wishes and specification.
• Price in the context of its competitiveness in the market.
• Distance to the dealership.
 
Dale Pollak advocates a modern version of value pricing that precludes negotiating. This means not only convincing customers that vehicles are properly priced in the first place, but also convincing the sales staff, lest they partake in sticker-dicker tactics that can offend shoppers.
           
Pollak founded vAuto, an inventory-management software system that tracks regional demand for used vehicles so dealers can stock and price accordingly.
           
Pollak made his mark on the industry by advocating what he calls “velocity” pricing, which uses inventory-management to price cars right the first time.
           
That turns used-vehicle inventory quicker. In the long run, dealers doing that will make more accumulated gross profit, Pollak said. The converse is pricing high and holding out for high gross. But that risks cars lingering on the lot, their values depreciating daily.
           
A dealer needn’t offer the lowest prices in town, but rather ones that are competitive. Consumers using the Internet during their car-shopping usually know values.
           
Pollak said it can be the kiss of death for a dealer to price a car in such a way that it fails to show up high on search-engine results for customers who are shopping by price.
 
 
 

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