It's quickly becoming a strategy that companies all across the automotive industry are jumping on board: no-haggle pricing. CarMax was arguably the first company to successfully pull off the strategy, and it's worked out very well for the used-car selling juggernaut. We've seen TrueCar build an entire business model on giving consumers pricing transparency online as well as a price guarantee, helping to reduce the time spent at dealerships. Furthermore, two of the nation's largest automotive retailer dealership groups, AutoNation and Sonic Automotive, have both invested heavily in developing an online presence to help lure consumers looking to finish most of the sales process online.
Now, as we approach the ever-lucrative holiday season, even General Motors and Ford Motor Company are getting in on the no-haggle strategy, albeit in different ways.
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Image source: General Motors.
Shop-Click-Drive That's the name of GM's two-year-old online shopping tool, but Detroit's largest automaker is just now starting its first major marketing effort for the program. GM's four U.S. brands -- Chevrolet, Buick, GMC, and Cadillac -- started running advertisements in early November to attract consumers hoping to complete as much of the car-buying process as possible outside of the dealership.
The recent marketing effort is aimed at boosting sales during the Black Friday sales promotion GM launched last week, as the automaker is pitching the idea that online shopping is more convenient and offers more pricing transparency. In fact, GM's Shop-Click-Drive tool delivers the pricing, incentives, fees, and estimated trade-in values for consumers.
When speaking about GM's recent October sales results, Kurt McNeil, GM's U.S. vice president of sales operations, had this to say: "Customers are also embracing our Shop-Click-Drive online shopping program, where the price you see is the price you pay[emphasis added]. We see more growth ahead because it's simple and transparent."
For investors, though, it remains early in this program's story. There are a couple of statistics that look promising. Consider that nearly one-third of sales leads that come through Shop-Click-Drive result in a sale, which makes it one of the dealer's best lead generators, according to Automotive News. On top of that, 43% of the buyers generated from the Shop-Click-Drive program are entirely new to GM brands, which is a big advantage in a fiercely competitive industry.
Friends & Neighbors Ford, on the other hand, is approaching the holiday season with a slightly different strategy. Its "Friends & Neighbors" sale, which will run from Nov. 3, 2015, through Jan. 4, 2016, doesn't involve an online tool, but it does offer consumers a no-haggle price that it says is within about $200 of the dealership invoice price.
It's no secret that car buyers dread the amount of time spent at dealership lots negotiating the price for a new vehicle and their trade-in. The idea behind Ford's "Friends & Neighbors" sale is to reduce that time and stress at the dealership with a pre-set discount minus the haggling when you arrive to purchase.
The downside of Ford's approach is that these types of sales have historically been copied by competitors, and the resulting aftermath is an incentive war that no investor wants to see happen. That said, Ford's management promises this sale won't diminish currently strong North American margins.
"The Friends & Neighbors event does not escalate our incentive spending," said Mark LaNeve, Ford's U.S. sales chief, on October's sales conference call. "We're not going to be out there with Santa Claus and bows on the car. We're going to have a simple, compelling consumer offer that we know from history is highly valued by the consumer."
As automotive sales are nearing record levels, investors would be wise to see how incentives check in during the holiday season. Personally, as a shareholder of both Ford and General Motors, I think the latter's attempt to emphasize its online presence seems like a much better deal for investors, but we'll see how it all plays out. Stay tuned.
The article How General Motors and Ford Motor Company Plan to Drive Black Friday Sales originally appeared on Fool.com.
Daniel Miller owns shares of Ford, General Motors, and TrueCar. The Motley Fool owns shares of and recommends CarMax. The Motley Fool recommends Ford, General Motors, and TrueCar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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