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Michael Cirillo

Michael Cirillo Chief Executive Officer

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How Important Is Price Really?


Not always about priceFor those of you who know a little bit about me, you know that I  worked in the print media and advertising industry for nearly a decade and grew up around the industry my entire life. I want to spend a couple of minutes discussing some concepts that I am more than confident will help your dealership in attracting new and returning customers so that you can start seeing more (and better) results for your dealership immediately. That's right - I just said "IMMEDIATELY".

A little bit of background first:

Over the years, you've probably noticed that the ads you see in the newspaper or in magazines haven't really changed much. They consist of a bunch of pictures of vehicles and the prices associated with those vehicles; Starbursts with low finance rates, or bold letters promoting the BIGGEST SALE EVENT OF THE YEAR! Everything always seems to revolve around price.

There's no doubt that price is an important topic, but maybe not as important as you might think - especially if your aiming to get a fresh influx of new customers walking onto your lot.

To demonstrate, let me encourage you to drive down any auto mile wherever you are, and take a look at the signage that dealers are placing near the roadway with hopes that it will capture new business. What do you see? 

  • Employee Pricing Event

  • Red Tag Sale

  • Really Big Sale

  • Year End Clearance

  • Inventory Blowout - unbeatable pricing!

Everything revolves around price!


Not even in the market!

Have you ever considered what percentage of people in your area are even in the market to purchase a vehicle? Think about it. What good is busting your chops over showing people how low your finance rates are, or how low your prices are when majority of people aren't even in the market to buy? Don't believe me? Consider this example.

Have you ever found yourself thumbing through a consumer electronics flyer from the weekly paper? If you're like me, you do it all the time. I'm sort of a gadget geek. But what happens when you get to the appliance section of the flyer? You slam the thing shut or throw it away? Why do you think that is? 

Vehicles are much like appliances. When you have appliances that are working, purchasing new ones are the last thing on the totem pole of priorities aren't they? So it is with vehicles. When people have a vehicle that is working, they aren't really in the market. All the best pricing and finance rates in the world won't do a hill of beans for your efforts in attracting new business.


Plenty of Fish in the Sea...Just Not Where You're Looking

Have you ever heard that saying before? It's absolutely true. There are plenty of fish in the sea. The problem is that by focusing primarily on price, you and all of your competitors are fighting over a very small portion of in-market consumers. Have you ever wondered why your print ads aren't getting you the results you want? Have you considered why your website isn't producing the leads that you want it to? 

When you really take a look at it, Dealers that enter the arena prepared to battle over price may not realize that they are fighting over around 2-5% of the entire population. That's really the percentage of people that are in the market to buy a vehicle today. So much effort for so little potential! It's kind of depressing isn't it?

Let's use the odds in your favor. In order to start seeing immediate (measurable and duplicate-able) results for your marketing efforts, you may be required to change the way you think a little, and perhaps; change some of your current process to meet consumer expectation. All in the name of profitability.


What Drives Consumers to Buy?

If only 2-5% of consumers are in the market to purchase a vehicle today, have you considered how you could tap into the other 95-98% of the market that perhaps would be willing to purchase a vehicle but may not necessarily be in the smaller percentage that cares about price?

It's absolutely vital for every dealer that wants to start selling more vehicles, products and services to understand what drives consumer purchase decisions in order to offer something really unique and actually tap into a never ending pool of customers. Let's take a look at a couple of examples of what drive consumers to purchase.

1. Emotional needs / wants: We all have them and because of that,advertising how your products and services can fill an emotional need will actually help you penetrate a larger market and get your business in front of more interested people.

I'm a perfect example of this. A couple of years ago, when my wife and I received news that she was expecting our second son, one of the first things we discussed is how our small sedan would no longer fill our transportation needs (Emotional need #1 - necessity). Could you imagine two car seats, potentially two strollers not to mention half the house that you have to pack up when you have kids, all crammed into the back of a small sedan? We went from not being in the market to being in the market in a matter of days.

The more we thought about what we would need, other issues came up. Safety (emotional need #2), Comfort (emotional need #3), Room (emotional need #3), Vehicle features (emotional need #4) and so on. Price wasn't even on our mind yet because we were too busy formulating our list of needs.

Then came the emotional wants. Status (emotional want #1), luxury (emotional want #2), add-ons (emotional want #3) get the picture.

You see, not everyone is in the market to purchase another vehicle. Everyone however, is in the market of fulfilling their emotional needs and wants. While all of your competitors are engaged in the price battle over a small percentage of the market, you could be addressing the demand of a larger market and funneling those consumers into your dealership. You will never run into a short supply by focusing your energy on the things that everyone wants fulfilled – Their emotional needs.

When you have your approach set up correctly, you've strategically provided the right information and uncovered the emotions of your customers, the results will be like magic.

2. Reciprocity: Have you ever heard of the law of reciprocity? This is something that successful marketers have been using for decades and let me tell you, it works extremely well! Most cultures have this law hard-wired into the back of their minds. To simply define it, let me sum it up as I give you something and as a result, you give something in return.

Often I find dealers practicing this law, but in reverse. Customers often have to make a purchase before they can get the value added offer, when really it should be flipped the other way around. Give something of value to the customer first, build the relationship and they will reciprocate by making a purchase from you.




Whether you want to believe it or not, it doesn't really matter. The definition of insanity is doing the same things over and over again and expecting a different result. If you truly want to increase the profitability of your dealership, stop focusing so much energy on pricing vehicles appropriately and start tapping into a larger pool of potential customers.

Michael Cirillo
Agreed Bryan. Thanks for checking out my post. What approach do you find works best for you?
Jim Bell
Great post and so true. Yes, people are driven by price, but moreso, they are driven by how they are treated. I know of several stores that can build enough value in their product and not be the lowest price out there in the market. Look at the iPad. Yes, it's not the lowest price, but we all know that it is the best quality out there in the market and they sell a ton of them at asking price and don't have to run sales on them to get them off the shelves.
Michael Cirillo
Great insight Jim. I appreciate your comments.

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