NADA chair describes how stair-step incentives kills trust in dealers, brands

DETROIT - 

It’s probably been a topic mentioned during sales staff meetings and around the coffee pot at franchised dealerships — stair-step programs sometimes leveraged by automakers to incentivize stores to get new metal rolled over the curb.

Current National Automobile Dealers Association chairman Mark Scarpelli took on the subject this week within a test drive of the three domestic OEMs. Scarpelli urged all automakers to consider how stair-step incentive programs are damaging their brands and alerted manufacturers about the unintended consequences of such programs that erode consumer trust and lead to a lack of loyalty to — and desire for — their brands over time.

“Any dealer who’s had to deal with these programs can tell you that they are not only trust killers, but they’re brand killers, too,” Scarpelli said in remarks to the Automotive Press Association in Detroit, later provided to the media. “Not being able to offer two customers the same price on the exact same equipped vehicle, just because they came into the dealership on different days of the month, destroys consumer confidence.”

The ongoing proliferation of market strategies such as indiscriminate price coupons and unfair stair-step incentive programs are leading to severe, unintended, negative consequences for consumers, dealers and manufacturers alike, Scarpelli said.

The president of Raymond Chevrolet and Raymond Kia in Antioch, Ill., and co-owner of Ray Chevrolet and Ray Chrysler-Jeep-Dodge-Ram in Fox Lake, Ill. then asked this question:  “In a world where customers rightfully expect fairness and transparency in price, why do so many manufactures still deploy unfair marketing strategies that produce huge discrepancies in price between various customers — discrepancies that aren’t transparent, that can’t be explained rationally, and that run afoul of everything our customers really care about?”

The 2017 NADA chairman then followed with, “Shoppers of brands that use stair-step incentive programs see large discrepancies in price for the same or similar vehicles across different dealers. Or, worse, at the same dealer, but at different points in time. Or, even worse still, a discount applied to a vehicle they don’t want, but that can’t be applied to a vehicle they do want.

“So these consumers see wild discrepancies and fluctuations in prices; and discrepancies that aren’t transparent, and that can’t be explained by pointing out meaningful differences in the product itself,” he said.

Scarpelli then made the connection to the badge on the front of the vehicle.

“That lack of consistency, lack of transparency, and lack of explanation is leading directly to a lack of trust — lack of trust in both the individual dealer, and, in fact, lack of trust in every dealer who also carries that make. And when you have a lack of trust in every brand dealer, guess what? You have a lack of trust in that brand itself. And that lack of trust in the brand leads directly to a lack of loyalty to the brand,” Scarpelli said.

“Over time, the consumer’s lack of loyalty to the brand will lead to less consumer demand for that brand. Yes, that’s right: To less demand for that automakers’ vehicles in general,” he added.

Scarpelli closed by mentioning that he hopes to continue having constructive conversations with manufacturers about this issue.

“America’s dealers and manufacturers have the same exact goal — selling our inventory in large volume and at competitive prices. But we believe that goal should be achieved in the right way: Meaning in a way that enhances customer experience, and that maintains the integrity of the brand,” Scarpelli said.

“Ours is a symbiotic relationship that has stood the test of time, and that is ready to take on the next 100 years of making and selling cars and trucks — if we let it. And so to our manufacturer partners, I say: Let us be entrepreneurs. We’re pretty good at it,” he went on to say.

Scarpelli’s entire remarks can be viewed here or through the window at the top of this page.

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