Is Your Dealership Beholden to Book Values? – PART TWO
Book Values and Your Customer
How much money would you have if you got a dime every time you heard this phrase from a customer; “KBB says my vehicle is worth more than you are giving me.” How you respond next can make or break a sale…but if your dealership is beholden to book values, you are now in the unfavorable position of having to justify your price, against a price your customer trusts. (I’m going to go ahead and assume we are all clear on the problem of trust in the car buying process.) Often times consumers are beholden to book values as well…just not the same way you are. Your customer will spend hours online visiting multiple dealership and third party automotive websites to arm themselves with information. Buying a car is a major purchase, so it makes sense for a consumer to do all they can to get the best deal.
[bctt tweet=”Avoid having to justify your price against a source your customer already trusts. We can help! #getacue #automotive” username=”dealercue”]
Informed Consumers Crave Transparency
The good news is you’ve already won the customer’s attention online. You’ve done something right if an informed customer has landed at your dealership to buy the car of their dreams. But now you’ve hit your first roadblock, but that didn’t have to happen. The trouble is, your customer has a trade and they KNOW what its worth. They know because a trusted source has told them so; and let the uncomfortable dance begin. Consumers want transparency. They want to know what to expect, and that isn’t possible if you are beholden to book values. If they believe their trade is worth X, and your book value of choice says it’s worth, chances are good things aren’t going to end well. And the problem isn’t what customers think, it’s something our industry has perpetuated. More good news, we are the solution we’ve been waiting for…and you can make this situation end well for everyone, including your used car manager. But how?
Stop it Before it Starts
Put a stop to these unsavory interactions before your customer gets to your lot. Let go of the practice of relying on book values to evaluate trades. Yes, the banks want book values, but that is where their usefulness begins and ends in a consumer-driven marketplace. Using book values to price your cars might seem like the safest bet, but the most successful dealerships have all but eliminated the practice of buying based on a value provided from one source. Forward thinking dealers bid on vehicles based on what they can retail the vehicle for within a certain time frame. After all, the goal is to acquire inventory to retail to consumers, not to wholesale it 60 days later, and for that you need a market price. Dealers who use this retail exit strategy have, and will continue to see significant gains in turn rate and increases in overall customer satisfaction.
Think Like A Customer
Think about it this way: a vehicle priced for the market is beneficial to everyone. A market-driven pricing strategy makes it simple to be transparent with customers in regard to your trade valuation process. So rather than arguing with your customer over book values and potentially losing a sale, you can explain your trade evaluation process, and back it with live retail sales data. This can be an important moment for building trust with your customer. Customers understand pricing based on the market. You know this because they showed up at your dealership to see a car they liked at a price that made sense to them. And even if one or both of you walk away from a deal, at a minimum, you’ve left your customer with a clear understanding of market price…a process that makes sense to more consumers today than using a book, because it’s how buying literally anything else works.
Data to Price for Your Market
The data to execute this new strategy is available for dealerships of any size. Pricing for your market is not a race to the bottom. It is an overall strategy that includes stocking the right vehicles for your market, staying in step with the quickest turn and volume vehicles for your area, and using data to avoid buying cars that we end up sitting on your lot too long. If you want to know more about retail exit strategy to increase turn rate and volume, please reach out to me at anytime. I would be happy to chat more about it.
Next week I will talk about the best way to acquire inventory using the retail exit strategy. Until then, consider your pricing strategy and avoid being beholden to book values!
P.S. I’m honored to have been invited to share how we helped Randy Curnow increase used car sales by 101%, with Dealer Principals and General Managers at the Driving Sales President’s Club in NYC, April 9-10th. As a featured speaker, they have generously offered to give my friends and colleagues a $200 discount to attend. GM Craig Martin will be attending with me, and we’d love it if you’d join us. Click on dealercue.com/driving-sales for more information.