Is Pricing a Strategy or just a Tactic?

[Jeff Kershner]

CarMax - is pricing a strategy or a tactic?

 

[ed.brooks]

CarMax - is pricing a strategy or a tactic?

Darn you Kershner... Eight Words. You did a better job illustrating the point in eight words than I did in eighty paragraphs.

(But no mention of Sun Tzu)

 

[ddavis]

CarMax - is pricing a strategy or a tactic?

This is definitely as strategy that has proved effective. Customers hate the process enough to go to CarMax and lay down at a higher price. Think transparency is important?

 

[Jeff Kershner]

It is a strategy for CarMax no doubt. But as others have pointed out - it needs to be the strategy across the whole dealership. Had CarMax not been 1 price from the beginning and made it their message - their strategy and built complete process and marketing around it, I would bet they wouldn't be so successful with it. Let's not forget, it took several years before CarMax to show a profit. I remember working at Circuit City when CarMax was launched and it was loosing money all over the place. Do people still want to negotiate? Do they? Really?

 

[ed.brooks]

EVERYONE HAS A PROFILE THAT IS UNIQUE.
In the case of JQ and myself, we're the big fish in our lil' pond. So we work that angle. Our gigantic inventory (relative to our enemies) is our strongest asset. We work the one stop shop angle. Loss leaders, traditional advertising and a well trained staff are a common approach for players with our profile. A specialist could rip us up and enjoy feeding off of us.

One of the most profound business models is CityAuto.com, an Auto Mall of skilled, self-employed specialists. They'd smoke nearly any market they'd walk into. Thankfully, it's one location and no one else has tried to duplicate it.

Thnx for the morning exercise Ed!

Great point Joe - every dealership does have different strengths (and weaknesses). I don't pretend that any single strategy will be the solution for every dealer in the country. But I do think it is the responsibility of management at every dealership to take a hard look at their overall strategy.

How many dealerships have adjusted their marketing strategy because of the changes brought about by the internet - but then changed nothing else? There are many dealers that have shifted advertising dollars, but have done very little in the way of a thorough examination of their operation in light of a changed (much more transparent) market.

Even a "Big Fish" needs to look at overall strategy. We have a number of dealer groups and dealerships that already were the "500 pound gorillas" in their markets. By taking a hard look at the market and making some fundamental changes in overall strategy, they've grown into "800 pound gorillas"

 

[ed.brooks]

This morning I was listening to Brian Benstock from Paragon Honda on Issues And Ideas With Chris DeBello. I was reminded of this thread. I'd urge everyone to listen to the recorded podcast of this broadcast.

What became obvious to me is that Paragon's rapid journey to being the number 1 Honda dealer in the country wasn't a mishmash of ideas. They didn't take a 50 year-old strategy and cut a few parts out that no longer worked while duct taping in a few additions. Making it to the top requires much more than a patchwork quilt of ideas.

Brian and his team rethought the car business from the ground up. Their strategy isn't just price, but price does play a key part in an integrated, cohesive strategy that is innovative in everything from vehicle acquisition to marketing. Brian lays out how it works in the podcast.

Paragon isn't alone. Jeff mentioned CarMax earlier. It's fairly obvious that they aren't running the same core strategy as most dealers in America. They started with a clean slate and built a strategy that works. You can see this rethinking going on at some of the most successful dealers in the country. Auction Direct USA is another example. They recently became the Independent Dealer of the Year - for the second year in a row.

Paragon, CarMax and Auction Direct don't share the same strategy, but they all share a willingness to move far beyond a foundation held together with spit, bubblegum and hope. A foundation based on old processes and old ideas. They all share a willingness to build a new foundation, a new strategy, built on the realities of today. In all three cases, price plays a vital role in their strategy. Not a patch tacked on to the outside. But rather, a vital element woven into their strategy.