TRAVERSE CITY -- Lexus is introducing negotiation-free dealerships as a way to differentiate its dealer experience in a field where the competition has closed the gap in offering a premium experience, said Jeff Bracken, general manager of Toyota's Lexus luxury division.
Bracken announced today at the Center for Automotive Research Management Briefing Seminars that a dozen handpicked Lexus dealers will start a pilot project where prices for new and used cars as well as parts and service have set prices that are not subject to negotiation
Dealers must be willing to let customers walk away if they don't like the set price. Bracken said he expects a dip in sales and share in the short term but that should only last a couple months until customers get used to the new pricing strategy.
The idea goes back to a two-day meeting in the winter of 2013 where the company and a small group of dealers acknowledged there are customers who don't like the dealership experience, largely because of the haggling.
The concept of negotiation-free pricing is not revolutionary, and Bracken said there is a Toyota dealer in Phoenix who has successfully used it for 12 years with success. "So we know it can be done, even in a highly competitive market."
Since General Motors got rid of Saturn, no automotive brand currently adopts the strategy, Bracken said.
The dealers involved in the pilot program will meet in October and their employees will receive training from an outside firm. The program will start in the first quarter of 2016 and run all year. It will be evaluated almost weekly.
Bracken fully expects it to be successful and roll out to more dealers in 2017. He doubts all 236 dealers will embrace it, but would be happy to see the majority switch to set pricing.
Dealers set the price and once it is set, they are not to change it over the course of a sale. Prices can be adjusted periodically but the expectation is they remain unchanged for months at a time. Incentives are applied to the price normally.
Sounds simple. If enough people stop buying Lexus' they just lower the price. What could go wrong.