An Alberta auto dealer is experimenting with market-based pricing as a way to ensure the best haggle-free deal and to save his customers time.
The strategy is also known as competition-based pricing, where a company evaluates the prices of similar products on the market, then prices its own accordingly.
Staff at Sherwood Ford, just east of Edmonton, monitor thousands of online sales postings per hour to come up with competitive prices for their vehicles.
While software exists to do the tracking, general manager Kurtis Hicks says its availability in Canada is limited. So for now, staff manually check eight other Ford dealers in the area, directly and through the Internet. “It’s easy to see what the other guys are doing, and we adjust accordingly.”
The price of a particular model can change from month to month, Hicks said, but buyers can still be confident they’re getting a fair price, “one that the market dictates,” he said.
It’s a relatively new approach in Canada. Hicks thinks he might be the first in Alberta, if not the country, to use the pricing strategy. A spokesman for the Trillium Automobile Dealers Association, which represents about 1,000 dealerships in Ontario, wasn’t aware of the practice being used by its members.
In 2015, Automotive News reported on #1 Cochran Automotive of Pittsburgh, Pa., using market-based pricing. At that time, CEO Rob Cochran reported the dealership group's new-vehicle sales had risen 15 per cent about 18 months after launching the strategy. Market share was also up around 10 per cent, Cochran said at the time. He didn’t immediately return calls for an update.
While Hicks uses the method to price new and used inventory, not all vehicles he sells are priced based on the market.
“I’ll have 10 per cent of my inventory as a market-based price,” he said. “On a certain model or trim, if I’m not moving it, I’ll move the entire model to market-based.”
Hicks said market-based pricing can save customers time “by not having them come in and do this grind.”
“When you look at third-party surveys, they say time at the dealership and processes are so long,” he said. “If we can be more up-front about our pricing, that grind in the showroom is a lot shorter. Now, it’s more: ‘Here’s some mud flaps’ rather than, ‘Let’s beat each other up over $3,000.’”
Hicks said thanks to the Internet, “the days of haggling are just about behind us.”
He has been talking with vAuto in the United States, trying to convince the company to bring its Conquest software to Canada. Conquest allows dealers to know exactly which vehicles – including specific equipment – are on other lots and to know how each vehicle is priced.
“You’ll literally know the speed of how fast colours and certain models sell,” Hicks said.