Making Change Happen with Broadband II

1. Personal Inventory. In any buying process, from a grocery list to a trip to the mall, it's best to start off a purchase with some internal work, in order to determine what problem it is you're trying to solve, what needs you plan to meet by making the purchase - in short, your buying criteria. Edumunds.com has Buying Tips & Advice, a list of Ten Steps in Buying a New Car, which I recommend. My needs started with low emissions - I'm growing more and more green with each passing day, it seems. After that, I'm thinking this may be a car my daughter will drive in three years when she turns 16, so I value low operating costs and high reliability. I don't need a large car, or a particulary powerful car. Finally, some might debate if this is a need, but I want a fair degree of comfort, having grown used to the Lexus style of driving.

My personal inventory showed these buying criteria, in the end:
a. Low emissions/fuel economy - a Hybrid was a likely candidate - that one decision really narrows the options
b. Between $20,000-$25,000 target price, to give me a car mostly paid for in three years
c. Toyota or Honda were my personal biases based on experience and previous research

2. Assessment of Market Options. These first few steps are heavily weighted towards information gathering, making the Internet a key ally. In Step One, I used the Internet to get oriented on the car buying process, because I hadn't done that in a while. Now I had to see what was out there that matched my needs - what product was I looking for? I spent quite a lot of time on the Toyota and Honda websites, researching their product lines. I had soon narrowed the search to the Toyota Prius or Camry Hybrid, or the Honda Civic EX (coupe or sedan) or the Civic Hybrid.

3. Demonstration Trial. At some point in the buying process, you need to get physical, to touch the product and try it on for size. By Friday afternoon, it was time to go to the dealers and do some driving. The wireless laptop at home has become for me the Yellow Pages, among other things, so I Googled Toyota+Austin and Honda+Austin and found the dealers and their operating hours. We visited the closest Honda and Toyota dealer, with dinner sandwiched in between. This part was fun. The Honda dealership visit was revealing in two ways - I found that I didn't prefer the Honda coupe as much as I thought I would - didn't like the 2-door aspect especially. And I really didn't like the particular Civic Hybrid that we drove - and it was the only one on the lot, and the color combination of blue and gray was off-putting. The sales guy explained how popular these cars were and that they weren't being discounted, and that this car would be gone by the weekend. "Good for you," I thought. Oh, and one more thing, I did not like the sales guy at all, and that was enough, along with the low inventory, to turn me away from that particular dealership, convenient though it was to my house.

The Toyota dealership was a different experience altogether. The Prius had less to Wow me after this test drive (I had been out in a Prius twice before). My wife was unimpressed with the bells and whistles, such as the Navigation package, the camera for backing up, the push-button start. In contrast, the Camry Hybrid was a dream car - as close to a Lexus I would come to without actually buying one. On a whim, we test drove the Scion TC, and were surprised to find it fun and cool, if a little stripped down. At this point, I was likely thinking more of my daughter in three years than I was of my own needs. I couldn't picture myself in that car in the end.

I drove home that night confused and perplexed - information overload. Time for a good night's sleep.

4. Information Organization. It's good to stay organized, and Microsoft Excel always helps me to make a data table that I can use to help me sort out my thoughts. With a clear head in the morning, and after writing that blog on the Used Car sale, I spent an hour or so laying out some different scenarios. I divided the purchase into capital and operating expense. Now I had to make assumptions on gas prices in the future, financing costs for the vehicle, and what purchase price I would be able to negotiate.

I ended up grouping the purchase data in the table into two categories: a Hybrid (Prius, Camry, or Civic) and a Low-Cost conventional vehicle (Civic or Scion). The spreadsheet helped me to better understand Total Cost of Ownership (TCO is something every buyer should think about before making a purchase).

5. Vendor Engagement. Having turned the process into a more quantifiable exercise in sorting through commodities, I now went back to the Internet, this time to better understand the dealer situation, because that is how one has to buy a new car, through a dealer. Here broadband Internet proved valuable. I spent an hour sending out emails to dealers asking for quotes. The Honda website made it easy, listing ten dealers within 150 miles that would give me a price quote. I used their quote tool and included a note with each request describing a Request for Proposals for a purchase to be made by the end of the day.

I began getting automated responses in my email box, and yet only three of those responded in timely fashion with good information. I called the dealers with the best emails, and began to get quotes that were based on Invoice Price rather than MSRP. Dealers like to base the discussion on MSRP, because that puts the price discussion to their advantage, where it looks like they are giving up a lot by discounting off that anchor. In fact, the Invoice price is easy to find, and is a better anchor for the purchaser, because it starts off lower. Sellers are still able to make money around invoice pricing through incentive payments, but they will make a lot less, which means a lower price for the buyer.

Here's a decent discussion on Anchoring in a Negotiation, which is where you are when you start to get serious about buying a car.

Negotiators who are aware of the anchor trap in negotiations can reduce the impact by:
* Consciously resisting the tendency to be "imprisoned" by the first line of thought that comes to mind, deliberately trying to find other points of departure.
* Keeping their minds open long enough to admit new information and opinions that can broaden their frame of reference and generate new solutions.
* Spending sufficient time thinking about all the facets of a problem before entering a negotiation where the other party introduces its ideas.
* Always looking for opportunities to use anchors to their own advantage.

6. Narrow the purchase to a limited set of options. I was able to get pricing at just over Invoice on all the Hybrids, which led me to dismiss the conventional options. And it became clear after I found a volume dealer near Houston that the Toyota Hybrids would not come in less than the high 20,000s. they're popular and relatively more expensive - not much competition to help a buyer here. The Civic Hybrid, on the other hand, emerged as the front-runner.

Now that I had narrowed my purchase to identify what I was looking for, it had come down to a commodity purchase, which hinges on price as the deciding factor. The questions I was asking now had to do with how low I could get the price in a short amount of time, because I wanted to complete this sale before the weekend was out. Now I was in negotiation mode. I was not too harsh here, because I didn't have time on my side. I had a dealer in San Antonio offer a price at $400 over invoice, and another in Round Rock (20 miles north) go to about $200 over. Faced with this information, the dealer in S. Austin gave me a Best and Final Offer on a Civic Hybrid, just a little lower than the other price I had, which I had to conclude was a fair and competitive market price - I'd reached my goal in the negotiation, and then heard the magic words telling me it was time to go make the buy: "and we have plenty of Civic Hybrids in stock to choose from." Only when I had a fair price did I start to consider color choice options and if I would have to compromise my choice in this category.

7. Close the sale. The final process at the dealer was quite pleasant, because I had already negotiated the sale using Internet-provided information and finalizing details over the telephone. After finding the right color combination, I ensured that I could get the financing rate I needed through the dealer (another big plus over Toyota) and it was all over in about an hour. I avoided the "nibbles" at the end, the service contract and other "offers" they make right at the point of sale, as they attempt to nudge up the monthly price in increments of 5-20 dollars with high margin options. The individual offers don't seem like much, until you multiply the numbers by 60. With a $20/month bump, for example, you're at $1200 more for the sale price, or > 5% increase in this case. This is where dealers make money back that they gave away during the negotiation to get to the close, so buyer beware - you're not done yet!

So now I have a !NEW CAR! sitting in the driveway. I'd forgotten how satisfying it is, and spending the time to be thorough makes the satisfaction all the more enjoyable. I know I got the right car at the right price. This blog was helpful for me to diagram this process once again, and it proved revealing to show how much I use the Internet as a tool to access information, identify opportunities, and communicate with buyers and/or sellers.

I don't think I'm alone out there, as more and more buyers will discover that they can now begin to shed the intermediaries in any sales process and do a lot more on their own. I estimate I saved $3000 by spending a little time on both the sale and purchase transactions, probably working out to about $200/hour, which is about right. It just wasn't that hard. But DIY is not for everyone, especially in a complex purchase like metropolitan broadband. Many cities will find that the time and resources needed to get prepared prove just too much to do on their own.

I really believe that there is much to learn from thinking in new ways about how new tools change our options and reshuffle the deck, both as consumers and as purchasing organizations. It helps to go back to fundamental process evaluation to ensure that you are doing your best in any purchase decision. I think about the Project Triangle often: Money, Time, Quality. You can have two, but not three. If you want Money (lowest price) and Quality (highest quality), then you better use Time to your advantage, and that means a thorough purchase process, starting as early as possible - don't delay starting - but not necessarily finishing fast. Use Time to your advantage.

And these lessons apply not only to car purchases but also to wireless broadband systems. Whatever your situation or upcoming decision, I recommend you think long and hard about tools and process, because the world of buying and selling has changed, and whichever side you're on, you will be well served to have your eyes open to the new environment and market dynamics.