PHILOSOPHY OF CAR PRICING IS CLEAR: CUT OUT GAMES

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One-price selling. Value-price selling.

Both pricing strategies try to lure and keep customers by promoting an honest deal in automotive showrooms. But the one-price method can gain loyal customers by offering more than just an established sticker price; it's typically joined with a determination to treat customers forthrightly.

"The pricing philosophy that we have is really the last step of an entire selling philosophy that treats customers with respect," says Steve Shannon, director of consumer marketing for Saturn Corp.

Saturn helped launch the new pricing policies when it began selling cars with "no-hassle" stickers in 1990. The strategy deviated from the standard industry practice of a negotiated vehicle price.

"It's not just the narrow issue of one-price selling. It's the whole shopping, buying and ownership experience," Mr. Shannon says. "The straightforward, no-games-playing pricing philosophy is just one element in a much bigger experience."

That philosophy has earned Saturn an appreciative following, according to an exclusive survey on car owner loyalty conducted by market researcher J.D. Power & Associates for Advertising Age and Automotive News.

The brand ranked sixth among 20 makes in overall customer loyalty, with 80% of Saturn's owners saying they are loyal to the brand. Some 33.4% of Saturn owners say they will definitely buy the same make again.

But Saturn's results in the showroom were even more dramatic.

Saturn ranked first when owners were asked the likelihood of buying again from the same dealership. And Saturn owners also were most likely to buy again from the same salesperson (see charts on Pages S-6 and S- 14).

Now General Motors Corp. is trying to leverage Saturn's success throughout its six car and truck divisions.

GM is testing the Saturn philosophy in California for select 1994 models. Dubbed "value-pricing," six GM divisions-Cadillac, GMC Truck, Buick, Oldsmobile, Pontiac and Chevrolet-are offering a total of 46 specially priced and equipped models only in that state, the nation's largest auto market.

The vehicles are short-discount, well-equipped cars that must be sold close to sticker price.

GM executives say the change was driven by customers demanding that vehicle buying be simplified. They hope the move boosts customer satisfaction and market share.

"I can't point to any data but based on the feedback we get from customers, it looks like they are going to be more loyal," says Michael Losh, GM VP and group executive in charge of North American vehicle sales, service and marketing. "Just look at Saturn."

Also, part of the marketing pitch behind Chrysler Corp.'s new Neon line involves a one-price sticker. Print ads for the car from BBDO Worldwide, Southfield, Mich., emphasize various aspects of the car but all state the price under a color Neon logo.

Consumers are driving the new pricing trends.

"Techniques such as value pricing are responding to a much stronger need in the marketplace for value than has existed before," says Dennis Ricci, account director in the consulting and training services division of Power.

Some dealers took the first step in 1992 by inaugurating one-price stores. The goal was to reduce the hassle of car buying and increase customer satisfaction and loyalty by ending price negotiation.

Many dealers who practice one-price selling have unshakable faith in its ability to please customers.

Gregory Stewart, chief executive officer of Buick and Subaru of Westwood in Westwood, N.J., says the dealership's sales closing ratio grew to 50%, up from 25% before the conversion to one-price in February 1992.

But Mr. Stewart, whose dealership has its own customer loyalty program, emphasizes that one-price isn't about pricing but about how customers are treated.

Executives at Power echo this opinion.

"The magic of one-price occurs after the price point is established," says Doris Ehlers, account director at Power. "It's a new experience of trust the customer has not had before. With one-price, the retailer is selling the relationship and price is the starting point."

Marketers agree with this idea.

"You can't think that if you have a program or value-pricing that that alone will carry the day. It's just not that simple," says Dave Illingworth, group VP of Toyota Motor Sales USA's Toyota division.

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