Price to Sell Setting a Pricing Policy Allows You to Quickly, Consistently Manage Quote Requests
Whether your store sells new or used cars — or both — the time to determine how to respond to price requests is before your phone rings or emails land in your inbox. Defining this strategy and consistently executing it allows you to provide the information prospects want and puts you on the path to building rapport. Read more to find out why your store needs a pricing response strategy and how you can implement one.
Why Price Matters Customers ask about price largely because we’ve conditioned them to ask. Consider the emphasis that your store or other stores you’ve seen place on offering the lowest price, without addressing other consumer priorities — service after the sale, large selection, convenient location and community involvement. While some shoppers truly want the lowest price, most customers put greater value on finding the competitively priced car that best meets their needs from a dealer they want to do business with and who will service their car in the future. They understand that driving away with the cheapest choice often carries hidden costs, whether it’s the inconvenience and annoyance of owning the wrong vehicle or the large cost of depreciation they’ll have to pay when they trade the car in for a better match.
When Should I Give the Price? If you're asked for a price via email, respond to the inquiry as soon as possible, preferably within the hour. Confirm with the customer your understanding of the vehicle he or she is considering, state your commitment to help simplify the purchase process, position your store as the place to buy the vehicle and lay out what will happen next. You can provide a quote in the initial email if your store's process calls for it, but we suggest reserving this information until you speak with the customer on the phone. Not only do you avoid giving the prospect license to shop you from the start, but you also eliminate the chance of an error that could leave you pricing the wrong vehicle. Mistakenly giving the shopper your best price on a top-of-the-line EX model instead of the desired entry-level trim package, for example, could cost you the sale. Why? Imagine the customer's confusion when your price is several thousand dollars higher than your competitors who quoted the base model.
What Are the Pricing Options? In determining the pricing policy to implement at your store, there are several options available to you. Keep in mind that no one approach may be adequate for each of the situations you'll face, and that a combination of these tactics may be required. In setting your listings' price, for example, keep in mind that vehicles in high demand but low supply, hot new models and certain highline marques will naturally fetch a premium. Offering these cars for sale at their invoice price would certainly drive traffic, but your gross would suffer. Similarly, you may have to provide a bottom-line, out-the-door price to find a home for that lime-green SUV you've long since relegated to the back of the lot.
Beyond setting the vehicle's price online and on your lot, we recommend that you determine a consistent approach to email and phone inquiries about your internet listings. Let's take a look at some of the approaches you'll want to consider for the various scenarios you'll need to address.
- MSRP: The manufacturer’s suggested retail price, even if it’s unlikely to be the final sales price, provides a good place to start the conversation. From there, you can introduce your store and begin to qualify the prospect. Among the questions you’ll want to ask so that you have a foundation for discussion going forward are: Will this vehicle replace a car you currently own? If so, what features are you most looking for in your next purchase? The answers alert you to other issues involved in the transaction (e.g., a trade-in) and equip you with information you can use to cross-sell your inventory. Knowing what the customer’s core requirements and “hot buttons” are allows you to direct the search and guide the prospect to potentially better choices. This approach sets you apart from dealers who simply respond with a quote and their phone number — then move on to the next sale. Think of your own consumer experience. Which dealer would you reward with the sale and be willing to refer to friends, family and colleagues?
- Model range: To show customers you can work with them to find the right car for their needs and budget, respond with a model range. For example, “The [model name] lineup starts with a price of [$$] and tops out at [$$].” As in the previous scenario, this approach allows you to address price and shift to assessing the shopper’s needs, identifying matches and getting the customer in the store. Even if prospects opt against the highest-priced car, you’ve increased the likelihood they’ll buy from you rather than shopping you at your competitors.
- Invoice: If your store wants to move the metal on a volume basis, giving the invoice price in your response — and calling it out as such — can be an effective traffic driver. And, as you know, once you have the customer in your dealership, you increase the odds of closing the sale or moving the buyer to a higher gross new- or used-car alternative.
- Provide payments: Many shoppers understand what they can afford to spend each month on their car payment, even if they don't know the final sales price. You can help them with their decision-making process by including a monthly payment for each vehicle they're considering. Because you don't yet know the prospect's credit history, down-payment plans and loan interest rate, for example, you'll want to include the appropriate disclaimers and have them reviewed by your store's attorney. The approval process should follow the procedures used for print advertising.
- Average price: If your store sells a variety of trim levels for a specific model, you may want to have your internet sales staff respond with the average price paid by your customers during the time frame you specify (e.g., the last week or 30 days). This data can be calculated on the fly with the help of your dealer management system. You also can maintain a matrix that tracks this information and allows you to access it at a moment's notice.
- Out-the-door price: If you have cars on your lot that are collecting dust rather than generating phone calls, emails and walk-in visits, offering your bottom-line price may yield the traffic you want.
- Competitive price: In the final analysis, customers tell us they want — and dealers indicate they have the most success with — a price that is competitive. Automotive shopping sites such as Cars.com equip you with market-based tools to help you determine the optimal price for your area. These resources include Smart Target Price for new cars and OnlineAdReports for both new and used vehicles. Although intended primarily for consumers, Smart Target Price can be leveraged on your behalf. It takes into account factors such as current market supply and customer demand to equip you with an objective figure that can help move invoice-focused shoppers to a more realistic point of negotiation. Meanwhile, OnlineAdReports provides you with an at-a-glance understanding of how your listings stack up against the market average for cars of the same make, model and trim level. Not only does this information save you from missing out on traffic because your cars are priced too high, but it can also make you money you would have otherwise lost by pricing them too low.
What’s the Bottom Line? Be Flexible At the end of the day, you know best what you’ve invested in the car and the price that allows you to get the gross you want and make a timely sale. Particularly as a vehicle begins to age in your inventory, a flexible approach rather than a stock strategy may best position you to win the business. If, for example, a prospect contacts you about:
- A late-model convertible at an East Coast store, and the inquiry is the first one you’ve received since early fall. Unless you’re prepared to wait until the spring thaw for the next request, offering an out-the-door price may be the way to go.
- A hot new hybrid sedan on the afternoon that gas prices in your market rose by 20 cents a gallon. Based on how available the car is in your area, you have a couple of options: If supply is low, you may provide a full-sticker quote. If supply is high, then a Smart Target Price may be necessary to bring the shopper into your store.
In all cases, we recommend asking probing questions to learn more about the buyer's needs so you can offer alternatives. Also be sure to give details about your store to ensure shoppers have the information they need to make a purchase decision rooted in more than the price tag.
Additional Resources Looking for additional tips you can implement in your store today to drive more traffic with your online advertising and desk more deals with your internet sales processes? Check out Cars.com's DealerCenter. Here, you can read previous editions of our DealerADvantage newsletter or listen to archived recordings of our DealerADvantage LIVE webinar series.