Why do consumers become so agitated about buying a new car?
The answer is the negotiation process. A fascinating 1999 study of automobile purchasers concluded that consumers so abhor the negotiation process they are willing to pay more for a new car if they do not have to negotiate the price.
Thus, the study suggested, a fixed price could benefit both the consumer and the dealer.
Change is inevitable, and the time for a significant change in the current method of automobile pricing is now. Indeed, the public seems to be demanding it. With the tremendous reduction in 2005 car and truck inventory, 2006 offers the industry the opportunity to adopt one-price selling and, ultimately, to satisfy customers while improving business.
The 1999 study, "Fear and Loathing at the Car Dealership: The Perceived Fairness of Pricing Policies," was written by Devavrat Purohit, now a marketing professor at the Faqua School of Business at Duke University, and Harris Sondak, a professor at the David Eccles School of Business at the University of Utah.
They found that it is not the price itself that determines consumer satisfaction but rather the process of arriving at that price.
In terms of customer satisfaction, the study showed, there are two disadvantages of negotiated pricing. The first relates to consumers' feelings before the purchase -- even before they enter the showroom. As the authors put it, "The automobile industry may be forcing many of its customers to do something that they would prefer to avoid."