Sonic will put name on stores

Branding, switch to iPad transactions tied to pricing plan Amy Wilson   Automotive News | July 29, 2013 - 12:01 am EST

Sonic Automotive Inc. will brand its stores with the Sonic name beginning in 2014. The national branding initiative will accompany Sonic's rollout of a sales approach in which staffers will use iPads to handle vehicle transactions from start to finish; that approach in turn is linked to Sonic's True Price strategy, which limits price negotiations. True Price was fully launched to stores early this year but has encountered problems. Sonic, the country's third-largest dealership group, plans to convert stores to the iPad process starting next July. The Sonic name will start going up on dealerships at the same time, said Jeff Dyke, executive vice president of operations. "While putting the name up on the building is important to us, it's not the most important thing," Dyke told Automotive News. "The most important thing is to differentiate ourselves with the process. The amount of money and hours we're putting into this customer experience -- this is a game changer." Dyke wouldn't disclose total investment but acknowledged that Sonic is spending hundreds of millions of dollars over several years to implement the changes. In addition to the money being spent on training, Apple devices, software development and information technology infrastructure, Sonic has improved compensation plans and revamped vehicle pricing as part of its True Price strategy. The added spending is why Sonic is talking about the plan now. "We have expenses associated with it that we just can't hide," Dyke said last week after Sonic reported lower second-quarter net income (see box below). Sonic's branding initiative follows that of AutoNation Inc., the nation's largest auto retailer, which rebranded most of its stores with the AutoNation name this year. But Dyke says Sonic will use its name differently. The company will keep existing market-specific names and append the Sonic moniker in a smaller typeface to all signs. Sonic executives intend to start talking to manufacturers about the plan in October. Because the Sonic name will be subordinate to the brand name, Dyke says he hopes to get buy-in from even the luxury brands that resisted AutoNation's branding initiative. Sonic has hired advertising agency Huge, of New York, to develop a marketing campaign to begin in early 2015, once the transition to the new sales process and the rebranding are complete. In the meantime, Sonic will focus on getting all stores to correctly follow True Price, which sets vehicle prices within $300 of the lowest acceptable transaction price. It leaves a very limited negotiating band, and nearly a third of Sonic's 103 stores are having trouble staying within it. The challenges contributed to lower new-vehicle margins and weaker-than-expected volumes during the second quarter. While True Price will get Sonic closer to one-price selling, Dyke isn't saying that Sonic eventually plans to convert to a strict no-haggle model. But limiting negotiations and eliminating the back-and-forth between sales reps and sales managers is crucial to speeding up transaction time and making the iPad-enabled sales process work. Dyke envisions that transactions could take as little as 30 to 45 minutes once a customer has decided on a car. Some skeptics question whether True Price will work. In an e-mail report, Morgan Stanley analyst Ravi Shanker said: "While we believe [Sonic's] efforts to increase transparency and streamline its buying experience is a positive and will generate more leads, we fear that an inflexible no-haggle policy may continue to cost them volume over time as consumers simply use them as a starting point to negotiate elsewhere."

Jeff Dyke, Sonic Automotive: "While putting the name up on the building is important to us, it's not the most important thing. The most important thing is to differentiate ourselves with the process."

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