Stair-step programs erode consumer trust, Scarpelli warns automakers

Speaking at the Automotive Press Association in Detroit last week, NADA Chairman Mark Scarpelli warned automakers that stair-step incentive programs are damaging their brands and eroding consumer trust.

“Any dealer who’s had to work with these programs can tell you that they are not only trust killers, but they’re brand killers, too,” Scarpelli said. “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 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.

“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 worse still, a discount applied to a vehicle they don’t want, but that can’t be applied to a vehicle they do want,” Scarpelli said. “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.

“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,” Scarpelli said.

NADA hired an outside economic research firm, the Analysis Group, to do an independent examination of what stair-step incentive programs accomplish in the marketplace. Scarpelli offered a telling sentence from the group’s key findings:

“Manufacturers who use stair-step programs aggressively risk damaging their brand in the long run and entering a death spiral of declining demand that eventually no amount of discounting can profitably overcome.”

Scarpelli ended his remarks by calling the dealer-manufacturer relationship “symbiotic. And so to our manufacturer partners, I say, Let us be entrepreneurs. We’re pretty good at it.”

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