Want a Raise? Your raise will become effective when you do.
Are you the most effective business manager you can be? Have you tweaked every detail in your process to perfection? I have a tip for you – $4 000 is the new $3 987. Do you want to make an incremental difference in your production and income by making a minimal change? Pay attention to the details of your current pricing strategy in your F&I office in regards to your product prices.
We have all heard the term, “it’s a numbers game,” right? Well, in sales, it is about the numbers! Typically, we talk about how many ups, or “at-bats” you’ve had. What your penetration rate was, and so on. This month, I am sharing the concept of odd-even pricing with you. I didn’t create this, but I have used this for years, and it helps me move the needle month in and month out. If utilized well, this is a tool that can fit in your holster and effectively allow you to hold more gross profit on every transaction to do. This psychological pricing tactic plays into a customer’s psyche. Utilizing this strategy in your dealership will encourage more impulsive purchases that are also larger in size.
Odd numbers or oddball numbers in pricing can be a very effective strategy or tool to bring more believability that the very best price was given. It deters a consumer from seeking a lower price as opposed to even number pricing. The perception of the deal is that the dealership has wrung out the excess margin, and therefore they got it down to the last penny. The perceived value is higher than the oddball price suggests, which encourages buying and paying a profit.
I am suggesting that when pricing products just under a whole number, for example, a vehicle service contract (VSC), instead of $4,000, price it at $3,987 – it makes it seem like a bargain. I like using a number that also, for the most part is descending. What I mean by this is after the first number, the rest get smaller as you read it. The customer typically focuses their attention to the first number anyway. So rather than price a VSC at $4,000, start it with a 3 and follow it with 987, not 999. This oddball pricing suggests they are getting a “value price” or a “bargain” as opposed to the whole number pricing, which will encourage them to take advantage and enroll in whatever program you are selling.
Since most consumers see the oddball price as a bargain, you should use that perception and play that into your F&I products’ pricing strategy. Since we want our customers to view our products as a good value, this strategy just makes good sense. We can’t control a lot of things in the world or even in each deal. I encourage you to let go of the water cooler talk about things like china, bitcoin, the elections, the dow, tax rates, politics, interest rates, and oil prices. Start focusing on what you can do to make an immediate change in your production.
Remember that we all get the same amount of time each day, 24 hours. It is what we do with the time we have the determines how we live. If you’re going to take the swing, why not increase the likelihood it making contact and completing the sale. The numbers you use will help drive the sales. Try this for 30 days and see for yourself. I wish you the best during the last half of this year, and I genuinely hope this tip makes you and your store some additional profits now and in the future! Go forth and profit!4