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Fixed Pricing Model


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Jim Farley has been adamant almost since he became CEO that Ford Motor Company embrace non-negotiated pricing combined with sold retail orders and an emphasis on the online experience for consumers, especially for BEV. However, as the Jalopnik article pointed out, Ford and its dealers continue to use the old business model.

 

It’s also worth pointing out that this isn’t the first time Farley has hinted at a fixed-pricing model. Just last year, he said his goal was to move to a sales model where EVs are sold entirely online, dealers don’t keep any inventory on their lots, and dealerships essentially operate as service centers. But that hasn’t happened yet, either, so maybe don’t hold your breath waiting for Ford to make negotiating prices a thing of the past.

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  • ice-capades changed the title to Fixed Pricing Model

It’s funny how people accept fixed pricing on almost everything else except vehicles.  Publix, Kroger, Staples, Costco, Target, WalMart, Best Buy, Amazon……fixed pricing.  It works for Tesla and it’s been working de facto on most Fords for the last 3 years with most vehicles selling at or above MSRP.  If production more closely matches demand with more special orders I think the vast majority would be ok with paying MSRP if they knew that’s the price they’ll actually pay and not have to worry about the dealer adding an addendum unexpectedly.  They know they’re paying the same price as everyone else and they can get delivery from their local dealer and not having to shop around or go out of state.  It also prevents lowballers like Grainger from screwing up the system.

 

Dealers won’t like it.  Customers that like to negotiate down to the last nickel and those who think paying MSRP is philosophically wrong regardless of the actual $$$ won’t like it.  The other 90% will like it and it may even gain new customers.  It will absolutely improve customer satisfaction.

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3 minutes ago, akirby said:

It’s funny how people accept fixed pricing on almost everything else except vehicles.  Publix, Kroger, Staples, Costco, Target, WalMart, Best Buy, Amazon……fixed pricing.  It works for Tesla and it’s been working de facto on most Fords for the last 3 years with most vehicles selling at or above MSRP.  If production more closely matches demand with more special orders I think the vast majority would be ok with paying MSRP if they knew that’s the price they’ll actually pay and not have to worry about the dealer adding an addendum unexpectedly.  They know they’re paying the same price as everyone else and they can get delivery from their local dealer and not having to shop around or go out of state.  It also prevents lowballers like Grainger from screwing up the system.

 

Dealers won’t like it.  Customers that like to negotiate down to the last nickel and those who think paying MSRP is philosophically wrong regardless of the actual $$$ won’t like it.  The other 90% will like it and it may even gain new customers.  It will absolutely improve customer satisfaction.

 

But even with the BEV pricing policy so far, Dealers can only advertise MSRP prices but can still set their own prices on vehicles sold from stock which doesn't solve the ADM issue. Someone at Ford comes up with a new idea, sells it to management which puts the policy in place with proper vetting and they leave loopholes that Dealers will use. 

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39 minutes ago, akirby said:

It’s funny how people accept fixed pricing on almost everything else except vehicles.  Publix, Kroger, Staples, Costco, Target, WalMart, Best Buy, Amazon……fixed pricing.  It works for Tesla and it’s been working de facto on most Fords for the last 3 years with most vehicles selling at or above MSRP.  If production more closely matches demand with more special orders I think the vast majority would be ok with paying MSRP if they knew that’s the price they’ll actually pay and not have to worry about the dealer adding an addendum unexpectedly.  They know they’re paying the same price as everyone else and they can get delivery from their local dealer and not having to shop around or go out of state.  It also prevents lowballers like Grainger from screwing up the system.

 

Dealers won’t like it.  Customers that like to negotiate down to the last nickel and those who think paying MSRP is philosophically wrong regardless of the actual $$$ won’t like it.  The other 90% will like it and it may even gain new customers.  It will absolutely improve customer satisfaction.

 

Here are a few ideas:

 

1) Fixed prices

 

2) A portion of Ford's profits from fixed prices goes into a "dealer incentive pool (DIP)" that is distributed to dealers as a "slice of the pie" reward that increases with volume, either via a straight "$x per unit" or tiers of say 500 units gets $x per unit, 1000 gets $ y per unit, etc.  And if they sell it for less than the fixed price for sales volume, they'll lose money and they don't get a "DIP" percentage back on units sold under the fixed price.  Same for over the price, they don't get any Ford incentives over fixed price.  This way dealers are incentivized to sell more cars at the fixed price like Ford wants. 

 

3a) End dealer allocations - dealers can order as many (or as few) as they can sell in whatever combos they order; with fixed pricing, theoretically it's a more level playing field between dealers.  If dealers want to lose money for sales volume, that's on them, and they don't get incentives from point #2.

 

3b) Even if you don't eliminate allocations (especially for lower volume/performance models), verified direct customer orders should NOT be subject to allocation formulas.  If 10 people want to order from a little down dealer, 10 should be able to get it there, not only 3 year 1, 3 year 2, 3 year 3, and 1 year 4 just because of some formula that says they don't sell many so you only get a few a year.  To your point, fixed pricing hopefully eliminates this both ways - so people don't go to a little dealer for a "deal" and on the flip side, folks don't feel obligated to go to a big dealer because they have more allocation).

 

4) Eliminate BS dealer tack on fees for "unobtanium coatings" and the like - this is a sure way to piss customers off with these unnecessary tack on things.  Ford may not be able to require these to be eliminated.......a downside of fixed pricing is that dealers are more likely to add these to make up profits, but hopefully ending allocations can level the playing field to help drive these down, and giving incentives for fixed price sales can hopefully help eliminate their desire to tack on stuff.

Edited by rmc523
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All good points.  Allocation is the trickiest part - I think this is where they may be forced to give dealers some stock vehicles in addition to special orders.  And let them charge whatever they want as long as the buyer has the option to order at MSRP and assuming those orders could be filled in 2-3 months.  And the add on crap - I want to see rules that the dealer cannot add it to stock vehicles and the buyer must opt in to that as a separate optional transaction.

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21 minutes ago, akirby said:

All good points.  Allocation is the trickiest part - I think this is where they may be forced to give dealers some stock vehicles in addition to special orders.  And let them charge whatever they want as long as the buyer has the option to order at MSRP and assuming those orders could be filled in 2-3 months.  And the add on crap - I want to see rules that the dealer cannot add it to stock vehicles and the buyer must opt in to that as a separate optional transaction.

 

Allocation in its simplest terms assigns allocation on a proportional basis, based on the Dealer's sales history, and available production. It's "Turn & Earn", the more you sell, the more allocation you earn. Ford's tried incremental allocation for retail orders with some success, but that incremental allocation still has to come out of available production capacity. The "monkey wrench" was trying to implement it with an order bank including 50% retail orders compared to the very low (< 5%) retail order rate prior to pre-pandemic and supply chain issues. 

 

Retail pricing is a separate issue. It's one thing to implement fixed MSRP pricing for retail factory orders but Ford won't guarantee an OTD (Order to Delivery) window or deadline. Any new pricing model has to include sales from Dealer stock inventory, or the pricing issue will just continue long term. It's easier said than done and requires a "clean sheet" approach that will meet the needs of the Dealers and customers alike, eliminates loopholes and is simple. Unfortunately, no policies or procedures set by Ford are simple which in itself is at the heart of the problem. 

 

Regarding Dealer installed "Add On's"... in many states, Dealers are prohibited from forcing a customer to pay for installed add-on items they didn't agree to purchase. 

Edited by ice-capades
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24 minutes ago, ice-capades said:

 

Allocation in its simplest terms assigns allocation on a proportional basis, based on the Dealer's sales history, and available production. It's "Turn & Earn", the more you sell, the more allocation you earn. Ford's tried incremental allocation for retail orders with some success, but that incremental allocation still has to come out of available production capacity. The "monkey wrench" was trying to implement it with an order bank including 50% retail orders compared to the very low (< 5%) retail order rate prior to pre-pandemic and supply chain issues. 

 

Retail pricing is a separate issue. It's one thing to implement fixed MSRP pricing for retail factory orders but Ford won't guarantee an OTD (Order to Delivery) window or deadline. Any new pricing model has to include sales from Dealer stock inventory, or the pricing issue will just continue long term.


Allocation made sense when 90% of sales came from dealer stock.  You need more stock to get more sales.  It’s not necessary for retail orders but the problem is dealers have relied on sales volume and a certain profit level and they don’t want to see that reduced which is understandable.

 

OTOH it would force them to compete for business based on convenience and customer service which would be a win for buyers.

 

My assumption on pricing and orders is that retail orders still get priority over stock orders (at least up to a certain point in each scheduling period) - which assumes a relatively consistent supply chain and more predictable build times of 2-3 months at most.  At that point dealers have 2 options with their stock pricing - MSRP or less to match/beat special order pricing to boost overall sales OR a surcharge on stock vehicles due to the convenience of not having to wait 2-3 months.  To me this is no different than trying to buy a PlayStation 5 18 months ago.  You can order at MSRP and wait or pay a premium to buy one now from someone who has it in stock or just bought it.  People who really really want one don’t mind paying a premium.   If nobody wants to pay the premium they’ll have to lower prices.

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24 minutes ago, Rick73 said:

Didn’t GM try no-haggle pricing with Saturn?  If I recall correctly, buyers generally liked it, though it didn’t help Saturn survive.


Yes but that was a different time and market and there were lots of other reasons Saturn wasn’t successful.

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I think many have tried it over the years, Saturn, scion, maybe Hyundai at one point, but none of them stuck with it. 
 

i think there’s 2 ways it would work:

1. The product is priced right. The customer has to believe it’s a good price, or at least that it is worth the asking price.

2. You have a product that increases the customers image and they will pay for that. An example of this is Tesla. It’s the apple of the car industry.

 

Bronco falls into #2 and maybe #1. The rest of ford’s lineup doesn’t meet either. 

 

There is one other way this is successful, if all other automakers do the same thing. People are so used to negotiating and incentives that it will take a while to get used to those being gone. Brand loyalists aside, customers might go to other brands where they feel they get a better deal by negotiating. If every brand is doing it, they have no where to go.

Edited by T-dubz
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1 hour ago, akirby said:


So how do you explain Ford selling most vehicles at or above MSRP the last 2 years while being #1 in sales?


Which other models do you think fall into 1 or 2? Most of Fords top sellers have incentives on them now, including the f150. Maybe you could include superduty into #1. 

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1 hour ago, T-dubz said:


Which other models do you think fall into 1 or 2? Most of Fords top sellers have incentives on them now, including the f150. Maybe you could include superduty into #1. 


Not seeing incentives on F150s around here.  They’re still selling close to MSRP.  But let’s say there was $5K on.a vehicle between discounts and rebates.  Then Ford would simply lower their MSRP by $5K or whatever the market price is at that time.  Tesla changes their prices all the time.  Prices can also go up just as easily as they can go down.

 

I think you’re confusing fixed pricing with premium pricing and that’s not true.  

 

For image you have all the Lincolns, Super Duty, F150, Bronco, Bronco Sport, Maverick, Mustang, BEVs and all Raptors.  The rest are solid vehicles that can stand on their own.  Ford doesn’t have commodity vehicles that can only be sold by being the cheapest.

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3 hours ago, akirby said:

So how do you explain Ford selling most vehicles at or above MSRP the last 2 years while being #1 in sales?

 

Selling most vehicles at or above MSRP was an industrywide phenomenon in 2021 and 2022. Using data from Edmunds in January 2022 as an example, Ford transaction prices for retail vehicle sales were among the closest to MSRP on average of any brand at $163 over MSRP. The industrywide average was $728 over MSRP. Lincoln transaction prices averaged $510 below MSRP in that time period. 8 out of 10 of Car Shoppers Paid Above Sticker Price for New Vehicles in January, According to Edmunds | Edmunds

 

Also Ford wasn't #1 in U.S. new vehicle sales over the past 2 years. Toyota held the top spot in 2021 and GM had that honor in 2022.

 

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Here’s a different way of putting it.

 

Tesla is the luxury department store where the customers go and buy the latest “gotta have it” item without even looking at the price.

 

Ford is like JCPenneys from a few years ago when they tried to drop coupons for everyday low prices and the customers hated it because they felt like without coupons, they weren’t getting a good deal.

 

with that said, things are changing. I don’t think Tesla is the status symbol it was a few years ago, and maybe ford is moving up the ladder a bit, but I still don’t think that’s enough for no-negotiation pricing to work. 

Edited by T-dubz
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17 minutes ago, T-dubz said:

Here’s a different way of putting it.

 

Tesla is the luxury department store where the customers go and buy the latest “gotta have it” item without even looking at the price.

 

Ford is like JCPenneys from a few years ago when they tried to drop coupons for everyday low prices and the customers hated it because they felt like without coupons, they weren’t getting a good deal.

 

with that said, things are changing. I don’t think Tesla is the status symbol it was a few years ago, and maybe ford is moving up the ladder a bit, but I still don’t think that’s enough for no-negotiation pricing to work. 


What you’re describing would be true for fusion and focus but not for most current products.  The last 3 years showed that buyers are willing to pay MSRP as long as it’s the same price everywhere - so the MSRPs have to be competitive.

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7 hours ago, rperez817 said:

 

Also Ford wasn't #1 in U.S. new vehicle sales over the past 2 years. Toyota held the top spot in 2021 and GM had that honor in 2022.

 

Ford edged out Toyota as the best selling “brand” last year.  
 

Ford - 1,764,267

Toyota - 1,755,552

 

GM is not a brand, it’s a manufacturer. 

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4 hours ago, fuzzymoomoo said:

Including a-plan I can get close to 10k off of one right now. Incentives hovering around 2k. 

 

I've seen 1K plus some sublean financing deals around me.

 

You'd get 10K off an F-150 incentives alone pre 2020...

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16 minutes ago, silvrsvt said:

 

I've seen 1K plus some sublean financing deals around me.

 

You'd get 10K off an F-150 incentives alone pre 2020...


With the glut of inventory out there and a LOT more coming based on what I’m seeing in the various holding lots around here I could see that coming back. 

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25 minutes ago, silvrsvt said:

 

I've seen 1K plus some sublean financing deals around me.

 

You'd get 10K off an F-150 incentives alone pre 2020...


$6K incentives plus about $4K dealer discounts in 2018 but only on XLs and XLTs.  Lariat and above were never higher than $1500 that I saw.  Which is why my XLT was $10K cheaper than a Lariat.

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On 5/25/2023 at 8:53 PM, akirby said:


Not seeing incentives on F150s around here.  They’re still selling close to MSRP.  But let’s say there was $5K on.a vehicle between discounts and rebates.  Then Ford would simply lower their MSRP by $5K or whatever the market price is at that time.  Tesla changes their prices all the time.  Prices can also go up just as easily as they can go down.

 

I think you’re confusing fixed pricing with premium pricing and that’s not true.  

 

For image you have all the Lincolns, Super Duty, F150, Bronco, Bronco Sport, Maverick, Mustang, BEVs and all Raptors.  The rest are solid vehicles that can stand on their own.  Ford doesn’t have commodity vehicles that can only be sold by being the cheapest.

They must not have any stock issues with F-150s where you live, but they are starting to pile up on lots around here. I’ve started to get a lot of mailings from Ford lately that are advertising rebates, cheap lease deals and low APR’s and it mainly involves F-150s. I’ve also noticed in the advertising they are back to pushing high value XL STX models. Every market is different and that’s only my observation where I live, however I definitely live in “truck country” around here.

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3 minutes ago, 2005Explorer said:

They must not have any stock issues with F-150s where you live, but they are starting to pile up on lots around here. I’ve started to get a lot of mailings from Ford lately that are advertising rebates, cheap lease deals and low APR’s and it mainly involves F-150s. I’ve also noticed in the advertising they are back to pushing high value XL STX models. Every market is different and that’s only my observation where I live, however I definitely live in “truck country” around here.


Not surprised but it’s really not relevant to fixed pricing.  Instead of adding rebates Ford would simply lower the MSRP.  Tesla adjusts pricing constantly.

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1 hour ago, akirby said:


Not surprised but it’s really not relevant to fixed pricing.  Instead of adding rebates Ford would simply lower the MSRP.  Tesla adjusts pricing constantly.

Do you think that would be better then to just leave a fixed MSRP and do rebates, cheap leases and financing deals? I mean in the end the customer will save the same amount when sales soften, but it does seem like those things create the image of a good deal just like a big sale at the furniture store.

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