Mar. 10, 2008 – Staying competitive without dropping prices

By Karin Gelschus
Associate Editor
INDIANAPOLIS – Most dealers have a nearby competitor, some of whom are practically giving away new units. There are numerous actions, however, that dealerships can take to prevent this from affecting their own sales and profit margin.
Dealership University President Rod Stuckey gave a seminar at Dealer Expo to educated dealers on how to handle discounters and be competitive in today’s market.
One of the key challenges Stuckey believes all dealers face is volume vs. margin. He says he has had several dealers make a greater profit by changing their strategy to focus on quality and not quantity.
“One dealer was selling 1,300 units a year by heavily promoting volume and discounting,” he noted. “They changed their strategy the following year and promoted quality and service after the sale, and they didn’t advertise the low ball discounts. This was at this time last year when the industry was going down. They did end up selling about 100 fewer units, but their gross profit was up by a couple hundred thousand dollars.”
A key factor to focusing on quality is singling out the dealership, and to do that, Stuckey says a dealer should determine its unique selling proposition. Stuckey asked during the seminar, “What does your dealership do different than other dealers?”
The difference doesn’t have to be price.
“The sale happens when value exceeds price,” he said. “Therefore, raise the value and keep the price the same.”
Dealers can do this in a number of different ways, such as creating an incentive program for sales staff, adjusting their marketing/advertising focus to concepts other than sales and prices, get the staff up to par with professionalism and/or create a VIP priority maintenance club.
“You have to give the customer a reason to buy today,” Stuckey said. “Believe in your price and services. Remember you have something they (the customers) want.”
A key to making that happen, Stuckey adds, is to assume no customer knows about the discounter down the road. If you acknowledge the price discounter, it automatically brings up price competition, which isn’t necessary in making a sale. There are always going to be price shoppers who are unsatisfied no matter what the outcome, which Stuckey calls “hardballers,” but he adds that even half of those people can turn beneficial to the company if dealt with correctly.
“Fifty percent of hardballers can be converted into a profitable sale when you follow the sales process,” he said. “If they aren’t going to work with you, fire them, but do it politely.”
Stuckey notes if a customer is only going to bring negativity into the dealership, even if you do make a small profit off of them, it won’t be worth it to keep them as a customer because of the pessimistic attitude he or she will spread throughout the dealership and onto other customers.
Although the specific sales process is important, the dealership can adjust its mindset and strategies to be competitive with all dealerships, even discounters, as far as the number of units sold even with higher prices.
There are infinitive ways a dealership can do that, but Stuckey says the No. 1 strategy to be competitive currently is to embrace technology. Dealerships can do so by looking into emerging technological aspects, such as e-mail marketing, updating its Web site, search engine optimization, Web site lead management and/or online training for its staff.
There are some other strategies dealers should contemplate as well. Companies can create a sales culture dealership-wide, have timely accurate financial data, control expenses, emphasize systems and processes within the dealership and build a quality-training plan.