Lexus shoppers warm to no-haggle model

Lexus of Omaha is one of 11 dealerships involved in the Lexus Plus pilot program. Brand execs think it's a better way to sell luxury cars.
1 price, 1 salesperson
Lexus Plus, a pilot program being tested at 11 dealerships, has 2 main pillars.
1. Upfront pricing: A Lexus Plus dealer provides a negotiation-free, market-value price for a new or used vehicle and transparent pricing for service work.
2. Dedicated consultants: Customers work with one sales consultant throughout the sales process, from appointment scheduling to F&I to delivery, and have a single point of contact during their service visits.

OMAHA, Neb. -- When customers come in to shop at Lexus of Omaha, one of the test labs for a new sales process called Lexus Plus, salesman Jeff Bahnsen starts off by running through the program's concept statement. It assures them that he alone will take them through the entire purchase and explains why the dealership's prices are non-negotiable.

He then lets the customers decide how to structure the rest of their visit. They can start with appraisal of a trade-in or a test drive or comparisons of different models -- whatever suits them best.

For each vehicle, a label on the windshield shows customers the sticker price, factory incentives and additional discounts that go into the final no-haggle price. (An IS sedan with a sticker price of $46,494 recently carried a no-haggle price of $40,719.)

If a buyer wants to walk out because of the no-haggle policy, Bahnsen reiterates that the quoted final price is indeed final and won't change later. Some customers leave, only to return after doing more research, Bahnsen says. But for the vast majority, it never comes to that.

"They're happy as heck," Bahnsen said. "The fear level is gone. The anxiety is gone."

Lexus execs are convinced that this is a better way to sell luxury cars, and they are betting on it to further differentiate the Lexus brand from competitors. But rather than forcing the change on skeptical dealers, they are rolling it out as a voluntary experiment in the hope that it will spread organically to more of its 236 U.S. dealerships. In some markets, that means a Lexus Plus operator competes against a traditional Lexus dealer not far down the road.

It's still early, but Lexus officials are encouraged by the response they have gotten so far from the 11 dealerships involved in the Lexus Plus pilot program.

"We're seeing some good sales results," said Matt Kaleba, national manager for future retailing and incentives for Lexus. "We're seeing some outstanding customer satisfaction results. So all of the things we're hoping to see, we're starting to see early on."

Two big takeaways, says Robert Mueting, Lexus of Omaha's general manager: Buyers love having a single salesperson to work with -- even more than no-haggle pricing -- and dealership employees enjoy a sales process that is less stressful.

"We were always the person behind the curtain," Mueting said. "We were the bad guys."

Bahnsen: Happy customers

'Everybody's serving Starbucks'

A second wave of Lexus Plus opportunities is likely coming soon, Kaleba said in an interview. Dealers are showing interest in signing up for Lexus' extensive Plus training, which helps dealers set their price matrix for new and used vehicles and devise their own compensation plan.

"We believe in this model, but we also believe that it's got to be right for the dealer," Kaleba said. "The dealer has to believe it's right for them. Otherwise, it's probably going to be a challenge at best."

One true believer is Mickey Anderson, president of the Baxter Auto group, which has 22 dealerships with luxury and non-luxury brands, including Lexus of Omaha and another Lexus store in Nebraska that's also part of the Plus beta program.

Anderson said he already had been thinking about how to build on the service and amenities that luxury buyers had grown accustomed to. Lexus Plus, launched in May, was the answer. But first he had to sell it to his team.

"Here's the speech I give to my employees," he said in an interview at Lexus of Omaha. "Everybody's serving Starbucks coffee and everybody's got free loaner cars, and even Cadillac will wash your car when you come in for service. And so how are we going to break from the pack and truly deliver a better experience? What would it look like if we gave the customers exactly what they wanted?"

And what they want, he said, is to be able to trust the deal being offered by salespeople and get through the process in a couple hours. As long as dealers don't change the process, "customers just have to keep experiencing the same bad experience over and over and over again."

For Lexus of Omaha, changing the process meant a reorganization of the dealership and a steep learning curve. After all, Lexus Plus means a single point person for customers and "upfront pricing" for new cars, used cars, service and everything else that's for sale. Amid robust debate over the implementation, members of the staff had to pore over a huge training manual that Anderson compares with the proverbial Manhattan phone book.

No more back-and-forth

"One of the processes that was really important is to get rid of all of the processes," he said. That gives the control back to the buyer who doesn't want to spend all day in a car dealership jumping through hoops.

The early results at Omaha of Lexus are positive given the radical overhaul going on inside its gleaming, two-story structure, salespeople and executives said. Sales are steady, average transaction prices are comparable, not a single salesperson has left, and few sales have been lost from buyers who insist on negotiating.

And Anderson said he is very strict about the implementation. That's because buyers have been trained over decades to wheel and deal for extras in the hope of getting a fair price in the end. For customers to trust the no-haggle price promise, he said, that kind of back-and-forth needs to be eliminated.

"If we gave one set of floor mats to one guy," he said, "I think it wipes the whole thing out."

1 price, 1 salesperson
Lexus Plus, a pilot program being tested at 11 dealerships, has 2 main pillars.
1. Upfront pricing: A Lexus Plus dealer provides a negotiation-free, market-value price for a new or used vehicle and transparent pricing for service work.
2. Dedicated consultants: Customers work with one sales consultant throughout the sales process, from appointment scheduling to F&I to delivery, and have a single point of contact during their service visits.
You can reach Laurence Iliff at liliff@crain.com

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