With the upcoming launch of the Fiat 500 to North America, Chrysler Group LLC wants its dealers to avoid haggling with their customers. The idea is to make the younger target market of the Fiat 500 feel more comfortable in showrooms.
Laura Soave, head of Fiat in North America said, “The pricing is the pricing” for the new Fiat 500. “The younger generation doesn’t haggle. They don’t feel comfortable with it. They hate the experience.” Chrysler has even established standards that prohibit dealerships on promoting the vehicle for less than the sticker price, although actually being able to regulate and enforce this policy will have its challenges.
If all this rings a bell, it is because Saturn employed the same strategy since its conception in the early 90’s until the brand was discontinued in 2010. Toyota followed by implementing a similar pricing policy for its Scion badge called “Pure Price”, which has been available in the U.S. since 2003 and hit the Canadian market in September 2010.
Many other elements of Fiat’s launch plan are similar to Saturn and Scion. No-haggle pricing, exceptional service and no-pressure sales tactics are meant to create a more comfortable, less intimidating environment for customers. Saturn customers generally loved the no-haggle price policy. During the time of Saturn’s existence, Saturn’s strategy led to industry-leading JD Power and Company rankings for dealership satisfaction. In Canada, the Scion brand is still under a year old so no definitive conclusion can be made about the effectiveness of is pricing strategy on sales. It will be interesting to see what measure of success Scion is able to achieve, but so far industry sources admit that sales have been lackluster.
Does “No-Haggle” pricing work? The short answer is no, and it’s not because Saturn went out of business or Scion is off to a slower than anticipated start. While the ultimate success of a vehicle is not going to hinge on brand’s pricing policy alone, it does play a part. There are many reasons why “no-haggling” policies instituted by manufacturers have not worked in the past. Car buyers have been trained to believe that there is always flexibility in pricing. Changing buyer behaviour is a large hurdle to overcome. On the opposite end, manufacturers typically cannot prohibit discounts since most dealerships are independently owned and operated through a franchise model. Some dealers will always try and find a way to edge-out their competition and bend the system. Manufacturers can, however, influence pricing by limiting inventory, limiting distribution to select dealerships, or both. Chrysler plans to limit distribution of the Fiat 500 to select dealerships to minimize dealer competition. Only time will tell if Chrysler’s strategy for the Fiat 500 will result in successful sales figures.
