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Over the years I’ve had the pleasure of working with dealers who have embraced a dramatically different sales process – one that doesn’t start off by asking for all the money and then negotiating down. My friends who are traditionalists say, “you need the homeruns so you can afford to take the skinny deals” – not so fast, let me introduce you to the bell curve.
We always like to talk about extremes, the laydowns and the grinders. But in actuality the 80/20 rule applies; we spend 80% of our time talking about the 20% of deals at the ends of the spectrum. The dealers that I opened up talking about who start by advertising an initial lower price – by giving away profit up front – are giving up the potential homeruns. They do this to increase their ‘at bats’. Imagine if you were able to change the rules of baseball to give your team more ‘at bats’ than the competition. Let’s say four outs per inning instead of three. You wouldn’t have to hit homeruns to win the game.
So yes, these dealers are giving up on some potential profit, but I would argue that in the Internet age, the homeruns are coming farther and farther apart anyway. And yes, they probably walk away from a few more of the ‘grinder’ deals. But if they are able to increase their ‘at bats’ even 10%, they win – and win big. Because they are seeing more of their business coming from the ‘fat, juicy center’ of the bell curve.
These newer process dealers aren’t necessarily one-price stores, but when they negotiate, they do it within a fairly narrow range. They make “Asking Price Justification” the cornerstone of their process instead of negotiation. For old school managers and car guys that is a shock to the system. But the increased traffic is worth it. This process isn’t right for every dealership, but I do believe it is the future.