Don't lower your price, raise your value!

“People don’t buy what you do, they buy why you do it” – Simon Sinek, New York Times Best Selling Author.

There’s no marketing skill required to advertise a product for a shade over cost in an attempt to generate a high short-term sales volume for the business. In fact, at times, this can be an effective strategy. The underlying problem however, is that it’s not sustainable. As a company, you’re creating no long-term value to your customer because you’re not coming from a place of value to begin with, you’re coming from a place of price. The customer knows that when you promote high volume sales tactics through advertising that they are just a number to you rather than a person. Plus, you’re putting added pressure onto not only your customer but your Financial Services Manager’s because clearly, you’ll need to make the profit up somewhere which will be in the Business Office selling extended service contracts, protection products, insurances, etc. Don’t get me wrong, there is immense value in all of these items, but to rely on selling these and crushing your VPA targets by taking extremely low profits on the front end to generate high volume isn’t a sustainable business model.

When you portray to the public on a regular basis that you’re willing to give your product away for virtually nothing, that’s the culture you create for your company long-term. By creating a consistent message that you’re fully prepared to give everything away right out of the gate, customers come to expect that day in and day out. Unbeknownst to you, you’re allowing price to become the customers focus point rather than the value of the service you can provide which is where the sustainability truly lies.

Here’s what to do when your competition constantly undercuts your price and publicly advertises “your” product for a shade over cost.

#1. Thank Them

You might be scratching your head at this one. Why on earth would you thank your direct competitor for advertising the exact same product you sell for a shade over cost? After all, as an Entrepreneur and Business Owner, you know the level of difficulty in establishing a company and creating sustainable, long-term growth and financial security. Well, here’s my point of view on it, what they do is completely out of your control so there is really no point in wasting your valued time stressing about the situation or contacting your OEM Headquarters to complain about their style of advertising. I believe they are blindly doing a favor for you by spending an absurd amount of money on advertising on your product. You’re bound to receive some fall off from their marketing strategy (which has proven to be the case in the past), so let them ride the wave, continue to sell your way and reap the benefits of the fall off you’ll receive from their marketing tactics.

#2. Challenge It

In a lot of cases, these style of aggressive ads are often put in place to manipulate the customer in an attempt to get them into the dealership. Let’s face reality, it’s marketing, and it works the majority of the time. It’s important now more than ever to ask your clientele high quality questions so there’s transparency on the offer that’s been made to them from that dealership. In the auto industry, I like to ask the customer to put together a check list so they can fairly compare our numbers to the competition. By doing this, and assuring the customer that it’s in their best interest, which it is because they want to be certain that they are getting as good of deal as what’s portrayed to them, you look like the good guy or girl because you aren’t trying to hide anything.

Here’s the check list;

1) What’s the retail (window sticker) price of the vehicle you’re looking at?
2) What’s the pre-tax difference you’re paying to trade your vehicle off?
3) What’s the total amount on the bill of sale, after taxes/fees?
4) What are your payments over 60 months, all in, with no surprises?
5) If the dealership is reluctant on providing this information, they are obviously hiding something

At this point, we aren’t expecting the customer to provide the answers for us, that’s not the goal. The goal is to provide them with the answers to those 4 questions yourself and allow them to fairly compare it to the other dealerships numbers. If they come back and say that the competition is beating your deal, then you need to go to the drawing board and figure out if it makes sense to make the same offer or not. If they come back to you and say that you’re competitive or even beating the competition’s price, they’ll quickly realize that you’ve been honest with them from the beginning and aren’t playing mind games with them to persuade them into buying. I know you’ve heard the term “Buyers are liars”, but give them the benefit of the doubt and you’ll be surprised at how many will be honest with you. I’ve found the more honest you are with them, the more honest they are with you.

#3. Ignore the Ad

Don’t let the ads get to you. That’s exactly what they want. The last thing you want to do is get in an advertising war with your competition. Stay the course. I have yet to lose a deal because of a fancy prize or giveaway that the other guys are doing. It’s crazy expensive to “earn” new customers business and if you’re constantly chasing them, you’ll get sub-par financial results. It’s a simple formula, stick to your roots, find the customer’s needs, provide value and ask for the sale. People willingly pay for value, it’s up to you to provide it. This goes back to the message that Simon Sinek discusses in his book “Start with Why”.

Find your “Why” as a dealership, what’s the message you want to portray to the public and to your employees? Remember that happy employees create happy customers. We’ve shifted our focus to higher employee and customer engagement and have noticed drastic results within the company. The way we advertise now is directed at our message as a company, why we exist, and the leads have picked up immensely. Not only have the leads started flowing in, we’ve found the quality of these leads is a lot higher too because we have a much higher closing percentage.

Creating a culture where you raise your value rather than lowering your price is a recipe for success!