5 Reasons Car Dealers Should Put Value Over Price

'Marathon' auto dealerships strive to survive over the long haul.

James E. Binkley

October 29, 2019

3 Min Read
marathon
Instead of running with the lowest price, marathon dealers offer the greatest value in their pursuit of lifetime customers.Getty Images

In his book about globalization, “The World is Flat,” Thomas Friedman recounted a story, often attributed to an African folk tale, about how each day when the sun rises in Africa, gazelles and lions run to stay alive.

Gazelles must run faster than the fastest lion; lions must run faster than the slowest gazelle. It reminds me of what it’s like selling cars.

The retail automotive industry is competitive and volatile. Every day is different. Yet, every day dealers must hit the ground running in order to survive. Running is a given. What varies from dealer to dealer is how they choose to run.

The default in most traditional dealerships is what I would classify as the sprinter group, those dealers who offer customers the lowest price in hopes of securing a quick deal. The lowest price, after all, is what most consumers desire.

Or is it?

J. D. Power created a top-10 list of reasons new-car shoppers choose certain vehicles, based on a survey of 85,000 respondents. According to the results, “reliability” was the No.1 reason for selecting a specific vehicle. No.6 was “price and payment.”

Which brings me to my second classification of dealerships and running, the marathon group, or those businesses interested in surviving over the long haul. Instead of running with the lowest price, they offer the greatest value in pursuit of lifetime customers.

Here are five reasons to stop chasing price and start chasing value, by offering lifetime warranties as well as free roadside assistance.

1. Separate your store from the competition.

If price is the main reason consumers buy from your store, the next time they want to buy a vehicle they’ll look around for someone with a cheaper price. And there’s always another store ready to undercut your price. Do you really want to find out how cheap you can sell a car and still stay in business? 

Dealers have no advantage on price or product, particularly for new-car sales, because automakers charge all dealers the same for their products. Offering a lifetime warranty plan, for instance, can help separate your store from the pack by ensuring much-desired reliability.

2. Help customers sleep better at night.

A new-car purchase typically is a consumer’s second-largest purchase. Yes, price is important because no customer wants to overpay for a vehicle. But every customer wants to be treated fairly and feel secure in a purchase, regardless of price. Adding a lifetime warranty product does that by putting the customer first, offering the kind of peace of mind factory warranties can’t match.

3. Enjoy the benefits of repeat business.

New-car sales provide dealers a small net profit margin of between 1% and 2%. Sure, you want the sale. More importantly you want the customer. And when you become a value-driven culture, you invest in building a long-term customer relationship, not a one-and-done sale. You’re making a commitment that can pay off later with repeat and referral business. If your culture is to sell at the lowest price, it’s harder to create customer trust.

4. Adapt your store’s culture to fit the times.

Car-shopping habits have changed. Almost all car searches begin online. Your average car shopper spends 18.5 hours on the internet researching vehicles but only visits 1.5 showrooms. Successfully transitioning from a price culture to a value culture requires buy-in from the top down.

5. Promote value as your unique selling proposition.

James Binkley.jpg

James Binkley

Let customers know about your value propositions. Your lifetime warranty offering, for example, should be branded to your dealership, not the provider. Display it on signs and marketing materials throughout the store. Make sure it is easy to see on your website. (Wards Industry Voices contributor James E. Binkley, left)

Smart dealers chase value customers, a strategy that sells more cars and service, holds more gross, and keeps customers connected to the dealership. The next time your competition goes low with price, respond by going high with value.

James E. Binkley is the founder and CEO of Binary Automotive Solutions, a provider of customized selling programs for dealerships. He can be reached at [email protected].

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