Lexus patient with fixed-price program

DALLAS — A year into the Lexus Plus no-haggle pricing program, the expected waves of dealers joining are only ripples. But brand executives say a slow and steady pace has its benefits.

“Not only are dealers learning in this process, we too as a manufacturer are learning how to better support them in this transition,” said Greg Kitzens, Lexus general manager of future initiatives.

Rather than having a dozen dealerships going through extensive training at the same time, Kitzens said, “now when you’re ready to go, we’re ready to launch you.”

Lexus Plus, which seeks to revamp the luxury dealership experience with the promise of fixed, transparent pricing and a single point of contact with customers, started with 11 dealers volunteering for the first wave last year. One dealership dropped out after being sold, and three others joined this year.

That leaves 13 stores in the program out of 237 nationwide.

That sounds low, but Kitzens says the slow uptake is understandable. After all, he says, Lexus Plus isn’t designed to be an experiment where dealers jump in and out. It represents a fundamental shift in how dealers interact with customers.

“It’s one of these things where you’ve really got to burn the ship,” Kitzens told Automotive News. “You’re not going back, and if you’ve got personnel that are used to doing business very traditionally, they may not fit into the Lexus Plus process.”

Indeed, the Lexus Plus model means changing more than just the pricing conversation in the showroom. Used cars, parts and service also carry fixed prices set by the dealer. The single-point-of-contact promise means salespeople need to be trained in finance and insurance. Vehicle sales can fall during the transition as employees and customers adjust.

While several of the dealerships in the program are in out-of-the-way markets where they can take a chance on a new way of doing business, a few are in urban areas with fierce competition and less room for error.

That’s the case with JM Lexus in Margate, Fla., near Fort Lauderdale, the latest store to join.

It has been the nation’s top seller of Lexus vehicles for nearly as long as the brand has been around, including last year when it sold just under 8,000 vehicles, said Jim Dunn, general manager.

The dealership already had “ready upon arrival,” an in-house program allowing for online negotiation and quick store pickup.

But Dunn said it was time for a bigger shift, for the sake of consumers and the staff.

The store’s high volume “takes a toll on people,” he said. “It’s a toll on our customers, but mostly on our associates. We really want this dealership to reflect a culture that’s caring, that’s sensitive to what our associates need and what our buyers today are really demanding.”

One-price models have come and gone over the decades for new cars, although they are increasingly popular with used cars.

Mark Rikess, CEO of the Rikess Group consultancy, said one-price models can result in lower costs, better margins, less turnover and higher satisfaction if done correctly.

He acknowledged that many new-car dealers are resistant, especially in an up market, but predicted that would change over time, because younger generations don’t want to haggle, either as a buyer or salesperson.

Mark Rogers, a dealer consultant at the National Automobile Dealers Association, said that while he doesn’t see the industry moving to one-price quickly, it could pay off down the road for dealers that make the change.

“Lexus, with this one-price, is thinking long-term,” he said. “If they haven’t got some traction after five years, then maybe they’ll think about it, but I wouldn’t be surprised if they hung on further. They always play the long game.”