In a sign of shifting consumer attitudes, Costco Wholesale Corp. said its dealership referral programs led to sales of 398,875 new and used vehicles in the U.S. in 2014.
“Customers know more going in. … They don’t want to feel like they got a bad deal,” said Chris Sutton, vice president of auto retail for J.D. Power and Associates. Services such as Costco Auto Program “help provide customers with that confidence.”
Costco Auto Program arranges no-haggle prices with participating dealerships on behalf of the discount retailer’s members.
“Instead of jumping around from dealer to dealer to dealer and getting different pricing and different bids, we’ve already done that for them,” said Gina Paolino, president of Costco Auto Program.
Sutton said the program’s business model caters to the rising intelligence of the average buyer, and should help make vehicle purchases smoother for customers and dealers.
“Whether it is third-party sites or buying services, at minimum they’re providing a level of expectation or limitation on prices,” Sutton said. “I think we’ll continue to see more transparency in pricing.”
Easy to please
Rich DeGregoris, owner of Gregoris Subaru in Valley Stream, N.Y., said Costco Auto Program shoppers who buy at his dealership boost the store’s customer satisfaction.
“I’m selling to them below market price, but the customer satisfaction is much higher with Costco customers,” he said. “They’re easier to please -- people like the ease of the Costco Auto Program.”
Gary Fenelli, general manager at Frank Toyota in National City, Calif., said the Costco program brings in customers his dealership might not have had otherwise.
“Costco customers are very satisfied, and over the years we get referrals from Costco customers,” he said. “I don’t think you can put a dollar amount on that.”
Jim DiMeo, general manager at Charles Maund Toyota in Austin, Texas, said his dealership benefits from the loyalty of his Costco customers.
“After they buy a car through Costco, they’re coming back to patronize the service side of the business,” DiMeo said. “They’re very loyal customers.”
Paolino said Costco Auto Program’s exclusivity adds to its success.
“The deals are exclusive to the members,” Paolino said. “One of the biggest things we have, though, is exclusivity to the dealer.”
Costco selects one dealership per brand in each area to participate in the program, offering that dealership a private customer pipeline.
DiMeo said Costco Auto Program has helped boost his store’s sales.
“It has brought in more customers and we’re selling 15 to 20 cars a month off the program,” DiMeo said. “Anytime I can get 20 extra sales a month, I’m happy.”
A promotion between Costco Auto Program and General Motors led to a big boost in referrals, Costco said. The Oct. 1-Jan. 2 promotion covered 17 select 2014 and 2015 Chevrolet, Cadillac, Buick and GMC models. It offered prices GM typically made available to its suppliers, plus a Costco Cash Card good for $400 or $600, depending on the buyer’s Costco membership level. The promotion led to sales of 43,300 vehicles, Costco said, with a 69 percent closing rate on the eligible vehicles.