Pricing: No One Wins a Race to the Bottom

If the extent of your future marketing plan and strategy is to see how much money you can lose advertising both new and pre-owned vehicles below your net cost — hoping to make it all back on the trade and in the finance office — this article is just for you.

It seems that with many dealerships, ever since the increased focus has been directed to lower-funnel shoppers online, nearly all the emphasis has been on pricing.

After all, nearly all the major third-party lead providers have listings that default to price. Under this strategy, to stay at the top, you must be at the bottom . . . at least with your pricing.

We call that “a race tothe bottom” — and no one wins a race to the bottom.

Not long-term, anyway. Let’s face it. No dealership has a competitive advantage in product, price, or financing. The notion that anyone does is absurd.

We all know that all vehicles are offered and sold for pretty much the same price, to the penny, at every dealership because they all acquire their vehicles — new and pre-owned — from the same sources.

No competitive advantage there. And dealerships pretty much all have the same lenders — and they (not the dealership) make the calls regarding term, APR, advance, and payments. No competitive advantage there either.

So, what do you do?

After all, there must be a better way. First, you must change the culture of the dealership. The reason the third-party lead providers default to pricing is simply that most of the salespeople and desk managers do the same thing.

There’s no talk about building value — just “dropping their drawers” in price. Next, you need a value-added competitive advantage — a USP (Unique Selling Proposition). This is something you offer the consumer beyond just the product and price; for example, a lifetime powertrain warranty included with every new and qualifying pre-owned vehicle.

Now, something like that is a competitive advantage. Your competitors will not know how to compete with that value proposition. Some of the most successful dealerships and dealer groups are employing this USP right now. Then, and most importantly, you must be absolutely committed to this USP. It must be a part of the wording at every touchpoint with the consumer: every phone pop, online chat exchange, text message, lead response, and belly-to-belly opportunity. The dealership must be effectively merchandised reflecting this USP . . . and in most cases, marketing fails because consumers do not find the environment they expected from the advertising.

When this happens, your dealership and its people lose credibility before “Hello!” This (and more) constitutes the dealership's “culture change” mentioned previously.

Without going off into the weeds explaining more details about this plan, let me ask this rhetorical question:

If you could learn about a real marketing plan and strategy — one that will get you out of that price race to the bottom, help you increase sales and gross (front and back), improve CSI and your customer experience, and will increase both customer and employee retention — and do it all not as a cost, but as it an additional profit center — it would be worth a few minutes of your time, right?

Again, some of the most successful dealerships in America are employing this strategy, yet many do not advertise a single price, new or pre-owned. Among these are some of the No. 1 volume dealers in their respective states by franchise.

These dealerships are selling way more new vehicles than their competitors while doubling (or tripling) their competitor’s gross averages . . . front and back. It’s a fact.

If you want to be this kind of dealership, you have nothing to lose by finding out how to change your dealership culture while increasing your profitability, improving CSI, and destroying employee turnover, so please have a look at Binary Automotive Solutions’ video at www.DontRaceToTheBottom.com, then email or call James Binkley, CEO, for more information: [email protected] or 630-258-3439.