Chipping Away at the Urban Legends That Get in the Way of Ethics

“You can’t compete without cutting a few corners.” “I’ll be eaten alive if I don’t compete on their terms.” So go a few of the urban legends that give us comfort even as we cross a few ethical lines here and there.

However, we do see data trickling in to indicate that thinking outside the box, i.e., trying the ethics thing in business, may actually solve a host of problems, problems that do cost money. The no-haggling zone has long been a pipe dream of car dealers and car buyers alike. The urban legend that a dealership could not compete effectively without haggling kept us trapped in an inefficient business model. What we now know is that there were costs associated with haggling:

  • Dealerships needed sales managers to approve the deals and keep the salespeople reined in on the parameters of their haggling. And sales managers were not cheap.
  • Negotiating a sale took a long time – a little over one-half of a work day was the average time for negotiating a car sale
  • Dealerships ad budgets were huge as they ran their weekly specials to lure customers in for a little haggling
  • Reputational capital – it was not without some substance that consumers ranked cars salespeople as the least ethical crowd in America

We now have enough evidence, because of the Toyota Scion experience of four years of selling with fixed prices and other pioneer dealership efforts, to show that no-haggle dealers may actually save some money and increase their revenues. The following evidence is emerging:

  • Haggle-free dealerships do indeed sell fewer cars than with haggling, but doubled their repeat customers
  • 70% of haggle-free car customers return to that dealership for their parts and services (it is 40% in the haggle zone dealerships)
  • Haggle-free dealerships save money on sales managers, ads, and staffing because of less time required for closing

Since the days of the first autos, haggling has been a part of car sales. Everyone competed the same way, and not always with unimpeachable honesty and integrity. But, dealers did sell cars! Now we learn that if we had just explored all of the real costs of haggling and then factored in those intangibles that do not find their way into rote Excel spreadsheets we would have concluded that, once again, ethics and integrity are not antithetical to profit. Being straightforward with customers makes more money! Unfortunately, and evidence to the contrary, that concept has always been a tough sell.

FOR MORE BACKGROUND ON THE SHIFT TO HAGGLE-FREE, see David Welch, “Haggling Starts to Go The Way of the Tail Fin,” BusinessWeek, October 29, 2007, pp. 71-72.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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