Here's the truth that no automotive dealer likes to admit: the car has become a commodity.
We've all heard the numbers. J.D. Power and Associates says that more than two-thirds of new-vehicle buyers use the internet in their vehicle shopping process. But what's changed over the past few years is the level and nature of the research that consumers can find online. Buyers have used the web for several years now to learn about the various makes and models, get detailed specs, research safety features and compare feedback from other buyers, mostly anecdotal product information.
But today some services -- and some competing dealers -- go beyond informational tools to provide detailed price comparisons side-by-side with invoice, MSRP and Kelley Blue Book's New Car Blue Book value, which reveal what people actually are paying for a new car. This evolution is changing the way consumers find dealers, and therefore dealers must adapt the way they allow themselves to be found.
It's no longer about location
The entire dealer network system used to be based on geographic proximity. Buyers went to the dealers nearest to their homes or jobs. That's still true for about one out of every five consumers. Those who happen to live near an auto mall and pass it every day on their way to work will most likely begin their search there. It's convenient, so why not?
But most people don't live or work near an auto mall. And even if they do, just because a dealership happens to be a buyer's first stop -- even one that's just down the street -- doesn't mean that's where the buyer will sign the papers.
Sure, 10 years ago people actually sat down at the kitchen table on a Saturday morning and planned out the day, mapping out the dealerships they would visit, making the rounds and test-driving the cars, gathering information. By late afternoon, perhaps, they'd circle back to the dealer who had the car they wanted.
But today it's different. Once a buyer has identified the car -- options and all -- he or she knows not to make a commitment until thoroughly researching prices online. Location of the dealership is secondary to the best price. Buyers will drive out of their way to get a better deal.
What about brand?
Dealers often counter that they offer more than just sales. Consumers want to buy from someone they trust and a dealership that offers superior customer service. This is true. But the question then becomes, "what says 'trustworthy' to a consumer?" How is the message of trust and service conveyed to the average buyer?
The dealership itself is a very small selling feature. Whether you are big, little, close or far doesn't matter to most buyers. Consumers want the dealer that has the product they want at the best price.
The hardest possible thing for a dealer to win with is the dealership brand. That's not to say that brand isn't important, it is. But the ideas of trust and service don't have to be tied to brand awareness. And that's actually good news for most dealers because the barriers to building brand are fairly high.
If you're a Ford dealer, and Ford isn't popular in your area (or if Ford happens to hit a public relations snag), then you're in trouble. It's the nature of the business: dealers marry their businesses to the brands they've chosen.
Also, it's rare -- though not impossible -- to break out and brand the dealership above and beyond the car brand. Some have done it. In Southern California, Longo Toyota and Galpin Ford come to mind. Both have achieved a brand equity far above other Toyota and Ford dealers in the area. It's wonderful if you can do it, and it's great for walk-in traffic, but it's very, very expensive and very difficult. And, quite frankly, it's unnecessary in the new world of shopping and pricing online.
Price: the ultimate battleground
The auto industry is shifting to an online shopping model because the process and the pricing are becoming transparent. If you offer exactly what the consumer wants, at a price that's lower than your competitors, you'll win the business.
The great thing about the internet is it's the ultimate price equalizer. It drives transparency. Consumers can see prices offered from anywhere. Competition no longer is limited to the rival dealer across town. And make no mistake: car shoppers will go so far as to buy from an out-of-state dealer -- even with a relocation charge -- if the price is right.
I want to be clear. By price, I do not mean incentive, which is what many manufacturers and dealerships rely on to attract customers. I've said it before, but it bears repeating: consumers have less and less patience for offers and incentives that require creative math to figure out what the actual price is. A recent survey by AlixPartners reveals that auto buyers are no longer willing to settle for anything less than totally honest pricing. Those who give it to them will earn their trust.
And we're back to that word. In the end, what most inspires trust and demonstrates customer service is a fair, upfront, no-haggle price, transparent from the start.
The dealership brand will benefit hugely if potential customers see the dealer as moving them effortlessly toward the sale with a straightforward price. And when you're selling a commodity, what matters most is price.
Scott Painter is CEO of Zag, Inc. .