Lexus Plus: No haggle selling expands
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.
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.
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.
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.”