Using Market Pricing Tools
These days the pre-owned market has grown so competitive that you need every possible advantage to stay ahead. Supply is down causing dealers to invest more to stock the right vehicles and turn them quickly. Given the number of online shoppers and research coupled with the amount of competition for consumer eyeballs, it is critical to remain on top with analytics and data. It’s no longer possible to rely on “gut instinct” or even appraisal expertise to make sure you’ve positioned inventory to generate the leads and drive sales; you must keep an eye on the marketplace around you. Bottom line: You must make sure your online listed price is competitive with today’s market.
Price is the most influential piece of information to a customer when shopping. Recognizing this, many dealerships now rely on one of the many tools available to provide a snapshot of how their inventory compares, down to the trim level, to that of the competition. You need that edge to price inventory correctly from the start to protect margins and maintain a good turn rate.
When considering the use of a tool and pricing your inventory, there are a few helpful hints to maximize results.
1. Simple and easy to use
These days it’s a chore to not only remember the passwords to the many accounts you access each day in the course of doing business, but also to actually use all of the tool’s features. Many tools go underused simply because the user is not familiar with all of the functions. As a result, dealership employees find themselves faced with tool redundancy or lack of use, because of an overcomplicated process to get a specific job done. The result is wasted time and money. Make sure you gain a thorough understanding of what a tool will do, how to use it, and if you don’t need all the features don’t “over purchase.” Streamline as many functions as possible and try to reduce the number of programs you need to access. You’ll use it more often, more comfortably and more efficiently while investing less money.
2. Consider market size and your customers’ online research
We all know the world has become a lot smaller and some sales now originate from greater distances than before the explosive growth of internet car shoppers. Still, most of your sales will come from your general area so you need to use realistic parameters to get the most accurate view of competitive vehicles affecting the bulk of your sales. Depending on your location relative to major metro areas and type of inventory you carry, some adjustments might need to be made in how far out you look. Also, make sure you use a full scope of websites to gain vehicle comparisons. With an increasing number of vehicle research beginning with search engines like Google, using information gathered from multiple major classified sites combined with local dealers’ sites in your area will give you the best competitive inventory comparisons.
Another feature to look for in a market pricing tool is one that incorporates a third-party valuation resource. When customers see that your vehicle compares favorably to other available inventory and is in line with what shows as a fair purchase price by reliable, confidence is established, purchase concerns are removed and buyers move forward. The combination of gaining market information from major and local sites and aligning your price with resources used by customers to validate purchase decisions covers all the bases and removes roadblocks form the customer’s decision making process allowing them to move confidently in your dealership’s direction.
3. Don’t be afraid to stretch the parameters for high demand, low supply or specialized vehicles
Of course, there’s an exception to every rule and you’ll certainly have inventory that merits high grosses, because of the desirability of the product. We’ve all seen the customer who will go to great lengths, often literally a few hundred miles, to acquire the one of a kind car, color, or specs. Knowing this, broaden your search parameters on high demand vehicles to get a feel for what the car could bring from greater distances to maximize gross.
4. Know when to hold and know when to fold
The tool itself should provide you a great snapshot of a vehicle’s marketability. If you see a high supply and low demand vehicle saturation of the market, save yourself the trouble of frequent price reductions or sitting on the vehicle for extended periods by recognizing the situation and pricing the unit competitively from the start. The comprehensive “snapshot” provided by the market pricing tool immediately allows you to view the current market and what needs to be done to price inventory for quick, profitable turnover – especially in cases of the high supply and low demand units. In these situations you don’t have the luxury of sitting on low margin inventory, because what could be a profit today quickly could become a loss tomorrow and the likelihood of the walk in “home run” on the “dime a dozen” unit just isn’t as likely as in days of old.
The bottom line is, a good market pricing tool should be simple, easy to use, cost-effective, show you what the marketplace looks like, and allow you to make a quick decision on how to price the vehicle to gain great visibility, a quick turn rate and to retain profit.
Rob Lange is the national sales training director for Kelley Blue Book.