Grosses Going South?

A lot of dealers want to blame the Internet and their pricing tool.  Pricing is neither the fix nor the problem. Pricing in and of itself is just a small part of the equation.

There’s a cultural revolution going on and by and large most dealers are fighting it rather than embracing it.  The Internet and the way the customer wants to shop and receive information continue to challenge a dealer’s conventional way of doing business.

The Internet has become “the showroom.” Therefore, until you match your staff, pay plans, selling process and culture to the “new showroom” not only will your
gross continue to go down, but your frustration will continue to go up.

2.  Creating value starts even before the customer shows up. 40 to 60 pictures in a studio setting is an absolute must. If you’re still doing 12 to 20 in a non-studio environment you are at a huge disadvantage from “Jump Street.”

3.  Make sure you have descriptive window sticker prices on your cars. Your window sticker prices should have the full retail value printed on them. Not your selling price or Internet price. The full retail value. That number needs to be part of your sales person’s presentation when creating value with your potential buyer.

4.  Use a “hang tag” with terminology like “Internet Value Price” or “Internet Market Value Price.” Of course that price should match what you have on the Internet. Some dealers are still posting a higher price on the car than the Internet hoping a drunk falls into the dealership and pays “the price.” Very bad strategy.

5.  Make sure you are displaying the “Internet Value Pricing” definition throughout the showroom and that your sales people take the time to explain it to every customer before they start negotiating.

6.  Your sales staff has to be convinced that the prices you are putting out on the Internet are a great value. Make sure you bring pricing tool examples into your sales meetings each week and show the sales staff how “right” your cars are priced. The sales people have to become believers in your “pricing.” The customer “thinks” the price is too high. We have to give the sales staff the ammunition to offset the customer’s thinking.

7.  More documentation. You have access to all the cars in the market. You cannot allow the customer to win the “information battle.” You don’t have to prove to the customer that you are the cheapest. You just have to prove you are competitive and then make sure you sell the value of your vehicle and your dealership. The greatest thing about used cars is there are no two alike!

8.  Make sure you are tracking GAP, which stands for “Give Away Profit.” GAP is the difference between the Internet price and the transaction price. You will find out who is screwing what up when you track GAP. Dealers tracking GAP see an increase in average gross profit by at least $300 per unit. You can’t measure what you don’t track.

9.  Change your pay plan. Sales people need to be rewarded on how little they give up based on the GAP concept. Set your pay plan based on the Internet asking price. The simplest way is if they hold the line on that number they make X. For every dollar they “give up,” X comes down on a sliding scale.

10. Gross Profit Improvement Grid. Develop an under allowance grid based on ACV. If you don’t want to make up your own contact me and I will share mine with you for free. The bottom line is your sales process should be disciplined to serve up an under allowance on the first pass on every trade.