Monday, November 10, 2014

Luxury Owners Don’t Want To Pay For The Palace
by Benedict Ko

We recently hosted a focus group with luxury vehicle owners who told us about their service experiences at both dealer and non-dealer service locations. What we learned about luxury owners and their decision-making process was surprising.


When I think of luxury owners, I think of people who are willing to pay more. They are willing and able to buy a first class seat, even though an economy seat performs the same function. They buy a name brand suit, when a no-name suit might look just as good. And, they are willing to pay for the luxury and comfort of a BMW or Mercedes-Benz, when a non-luxury car will perform the same functions for a lot less money. So, you’d think that when it comes to repairing that luxury vehicle, they’d also be willing to spend more right?


The answer: not exactly. Through our focus group, we discovered that luxury owners can be just as price sensitive as non-luxury owners when it comes to maintenance and repairs. In particular, the luxury owners we spoke with are sensitive to the perception of higher cost, regardless of the added comfort and convenience associated with it.



“…service advisors, managers, fancy this [and that]; you don’t think you’re gonna pay for it?


This luxury vehicle owner says what many of us are thinking when we enter a luxurious looking place: “This is going to be expensive!” He suggests that the independent shop will be cheaper because the overhead should be lower without all the “fancy”.


Being viewed as the more expensive option is a difficult issue to combat for dealers and the OEM. Customers are paying for higher quality parts and service from a dealer. However, dealers, especially luxury dealers, should be aware that communicating high quality service and products to the consumer can sometimes be overdone and cross the threshold into excess. Consumers, luxury or not, are price sensitive enough to shy away from spending their hard earned money on excess. At the end of the day, luxury and non-luxury vehicle owners are looking for value. Relative to the competition, they want to get what they pay for, and not all the “fancy”. Focusing on providing value through better service processes and pricing are keys to capturing market share. Luxury owners are not any more interested in paying extra for the palace than anyone else.


The Bottom Line: Perception matters. Too much “fancy” at dealerships can drive customers to the aftermarket, in luxury and non-luxury segments. Focusing on the value proposition, including price and service, can win back these customers. Excess glitter and glam might just drive them away.

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