How important is price in your advertising? According to virtually all important research on consumer purchasing motivation in the past twelve months, price is very important. In reality, price has always been an important factor in sales, but the rules have changed a little.
For the past fifty years many dealers have battled in the marketplace with "smoke and mirrors" designed to confuse the customer. The objective: make the customer believe the dealership priced every vehicle thousands of dollars below the competition with the implication that there was enough margin to do that. Page after full page of wild headlines and unbelievable copy filled the display sections of newspapers coast-to-coast for nearly half a century. Most consumers simply do not believe the lies anymore. However, price is still a major consideration in the purchase equation with today's savvy customer. The big difference: today's buyer has a better understanding of the automotive pricing structure.
A popular clothing retailer's slogan reads, "An educated buyer is our best customer." This doesn't mean they make the most profit on customers with college degrees. They have discovered that the customer with the best understanding of "apples-to-apples" value will appreciate that store's quality and pricing more than someone who is simply shopping price. The Internet may someday be regarded as the retail automobile industry's best friend. Finally, the "educated" car shopper has a source of information that cuts through the smoke to provide an honest pricing "baseline" to help determine the true value of the deal. And as Gomer used to say, SURPRISE, SURPRISE, SURPRISE! There isn't a forty-percent retail markup! At last the dealer who has advertised honestly has been vindicated.
The good news: A better-educated car-buying public has leveled the playing field substantially. The high-priced, "crystal-chandelier service" retailer has to be more competitive in pricing, and the "smoke and mirrors" folks finally have to build a portfolio of real value. Even better news: margins are actually up for some of America's best car dealerships. Educated customers have a better understanding of the "value proposition" these dealerships offer.
So how do you advertise price in this marketplace? First, advertise with an understanding that price alone won't get you there. If the consumer realizes it is virtually impossible for one dealer to undercut the other by thousands when the difference between net invoice and m.s.r.p. is less than twelve hundred dollars, then "dealership brand value" becomes an important factor. Still, you must convince today's buyer that YOU ARE IN THE PRICE GAME! How do you do that? Just say it! One of your advertising components must explain your position on pricing. Here's the rub: clich<130>s fall on deaf ears. "We will beat any deal!" is not only unbelievable, but also illegal in quite a few states. Forget about suggesting your customers do a lot of work to prove your claim. Don't tell your customers to "SHOP EVERY OTHER DEALER IN TOWN FIRST!" They won't like the assignment and you may just lose a customer who had already made up their mind to buy from you in the first place!
If you advertise a substantial difference in your pricing versus the competition, explain your position carefully so that it becomes "believable" to the customer. For instance, you may have a much larger inventory of a hard-to-find popular model. The fact that you're willing to sell these vehicles at a very nominal markup over cost, versus the several thousand dollars in markup competitors with fewer vehicles are offering, is a believable situation.
Recently a large Internet retailer in California announced they would sell computers and accessories at their actual cost, profiting from web-site advertising, fees for service contracts, and a nominal handling fee per order. Be aware that if you use a similar marketing ploy, you'll have to put your money where your mouth is. The "true manufacturer cost" is at your customers' fingertips, including customer cash, dealer cash, rebates, ad funds, holdback, special incentives, etc.
How important is it to be "in the price game"? This past Christmas season was a good indicator of consumer attitudes toward pricing. It was an excellent retail season far beyond the expectations and predictions of most analysts. But if you back out the sales of discount retailers, the season would have been dismal. Price was a critical factor in shopping decisions. Not necessarily the lowest possible price, but the price shoppers deemed a fair market "street price" for the item they wanted in direct correlation to supply, demand, and other value considerations. If you really had to have a "Furby" BEFORE Christmas, you could have one with the understanding you'd be paying at least five times the suggested retail of $29.95.
By no means am I suggesting you plaster the classifieds with discount prices, but it is important for every automotive retailer to understand customer sensitivity to pricing in today's marketplace. Your potential buyers want to know that you are IN THE PRICE GAME. Ignoring the evidence could cost you dearly.
Jim Boldebook is President of Creative Broadcast Concepts (CBC), an advertising/marketing agency working with some of America's most successful dealerships. If you have specific questions or require more information about this subject, please check the appropriate box on the reader response form on page 3. jboldebook@dealeronline.com