Title

3 Reasons Why Technology Has Not Improved Car Buying

What these observations might say about tech and higher ed.

June 6, 2016
 

I just bought a new car.

Technology is one of the reasons I purchased this car. We have 2 teenage drivers in the family. The car I purchased has the latest safety features, including: blind spot warning, backup camera, pre-collision braking, and lane departure warning.

In 2014 the U.S. saw 32,675 automobile related fatalities. Car accidents are the leading cause of death for people age 1 to 30.

In my family we customarily drive our cars into the ground (the car that we are replacing was 12 years old), but the introduction of new safety technologies may change our car buying behaviors.

If technology has made such a difference in the quality of cars (at least in terms of safety), then why hasn’t technology fundamentally improved the car buying experience?

And what lessons, if any, can higher ed learn from the failure of technology to improve car buying?

To buy this car I did what you do. I figured out which car (including the options) that I wanted. I went on TrueCar and Edmunds and KBB to try and figure out a fair price.  I e-mailed every dealer within 120 miles to see if they would meet my price. 

It turned out that one dealer (about 70 miles away) was able to meet my price, and also had the car in stock.

My goal was to never negotiate over the phone, and to let multiple dealers compete for my business.

So far, so good. Right? Technology enabled me to figure the car, the options, the price, and the dealer.

The problems come when you actually need to go to the dealership to get the car. The process is not pleasant, as it is difficult to navigate all the upsell options. Extended warranties. Additional safety options. And don’t get me started on the complications of leasing vs. financing.

What could be a straightforward transaction is not. You get the price of the car online, but you work with people face-to-face  (the salesperson, the business manager, the finance person) to actually close the deal. 

The online part of car buying is fine, but you don’t actually buy the car online. (Maybe you have had a different experience?)

Why is the car buying experience so challenging, despite the introduction of the internet into the process, and what might this have to teach us about higher ed?

1. A Zero-Sum Game:

Buying a car is a zero-sum game. Every dollar that you spend less on your car is a dollar that the dealer loses.  And every dollar that you spend more is a dollar that the dealer gains.

Zero sum negotiations are, by nature, adversarial.

Higher education is different from car buying, in that higher education is a co-created good.  Both the school and the student have a part in creating the value of an education. The better the education is for the student, the better it is for the school.

Since the financial goal of a not-for-profit institution is sustainability (not profit), any innovations that drive down costs, increase access, or improve quality are innovations that should be enjoyed by both schools and students.

Yes - this is a simplistic view of the economics of higher education (which are both incredibly complicated and variable across institutional type), but higher ed is fundamentally a positive-sum process.  The impact of introducing new technology on positive-sum relationships will be very different than in other industries.

2.  Asymmetrical Information:

The big problem with car buying is that the seller has more information than the buyer.  In an environment where prices are not transparent (such as the upsells, hidden charges, dealer incentives etc.), this information asymmetry leads to sub-optimal outcomes. The less information the buyer has the less able the buyer is to negotiate a fair price. 

All the incentives run towards the seller (the dealer) retaining (or obfuscating) the information available to the buyer.

I’m sure that if I knew more about the dealer costs, processes, constraints, and motivations that I could have gotten a better deal. You do your best when you buy a new car, but you always know that in some way you are getting screwed.

In higher ed we should be doing everything we can to bring about information parity.  Some institutions do this better than others - but all of us in the not-for-profit world have an interest in having as educated students (and other payers) as possible.

As higher education is a co-created and positive-sum good, the institutional incentives should be towards creating a culture of transparency.

Do you want to argue this point? Do you see examples where colleges and universities are not acting transparently or seeking information parity?

Can you make a case as to why symmetrical information is in the interests of both schools and students?

3.  Transactional Rather Than Relational:

The car buying process is transactional. The higher education process is relational. This transactional / relational difference is at the heart of why higher education is different.

Do you believe that your college or university is an engine of opportunity creation? Does the work that you do each and every day have at its foundation the effort to create future opportunities for your students? Are you working to create knowledge that will benefit future generations?

Do you think that education is a lifetime pursuit - and that you hope to have a lifelong learning relationship with your graduates?

These are the values of higher education. Most of us have devoted our lives to higher education because we believe in these values.

Technology in higher education is a tool that we use to advance our values.

This is not to say that technology can work against our (higher ed) values - in fact it usually does. Nobody should be more critical of technology in higher ed than those of us responsible for introducing technology to our campuses.

Could the car buying experience ever be relational instead of transactional? Probably not. But we should be on careful guard for any time that our higher ed interactions devolve into the transactional.

Can you help us think through what the American way of car buying might teach us about higher ed?

 

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