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Is Pricing a Strategy or just a Tactic?

What do you folks think? Should pricing be an important part of your strategy or just a tactic?

Ed,

Sometimes I'm as dumb as a box of rocks, but, I think the right answer is "It Depends"


IMO, You can use pricing as a core strategy or a tactic... or both.

For example, an old-old-old school retail marketing tactic is "bait-n-switch" (aka "Loss Leader"). I don't care if it's Power Garden equipment, Home Theaters, Swimming Pools, Hot Tubs, Appliances, it's all the tactic. A retailer uses pricing to drive traffic, nothing new here, it's part of the retailers strategy. BUT, deploy this into a retailer that has no strategy (i.e. merchandising and sales training) and you have a... FAIL.
 
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What do you folks think? Should pricing be an important part of your strategy or just a tactic?

Ed,


A tactic is resides inside a strategy.

strat·e·gy /ˈstratəjē/ Noun
1. A plan of action or policy designed to achieve a major or overall aim.
2. The art of planning and directing overall military operations and movements in a war or battle

tac·tic /ˈtaktik/ Noun
1. An action or strategy carefully planned to achieve a specific end.
2. The art of disposing armed forces in order of battle and of organizing operations, esp. during contact with an enemy


Managers prefer to keep price high because THEY NEED IT FOR A TACTIC (read: contact with the enemy).


In my decades of travel I've seen a lot of retail battles, I have been totally puzzled by the lack of strategy in Car Dealer World. I trace it back to 2 causes.


  1. Comfort from the Franchise (creates comfortable & un-creative dealer/owners).
  2. Bizarre management pay plans that create inter-departmental turf battles where the customer is LAST priority in the daily skirmishes (and... our comfy dealer gets his cut from all, while department managers go "alpha-male" or die from the lack of respect).


My Summary.
The factory franchise creates traffic and protects it's dealer/owners. This single fact creates and empowers the culture we all see today. Pull that fancy sign off the front of the store front and everything changes... and I mean EVERYTHING.
 
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Ed,

Sometimes I'm as dumb as a box of rocks, but, I think the right answer is "It Depends"


IMO, You can use pricing as a core strategy or a tactic... or both.

For example, an old-old-old school retail marketing tactic is "bait-n-switch" (aka "Loss Leader"). I don't care if it's Power Garden equipment, Home Theaters, Swimming Pools, Hot Tubs, Appliances, it's all the tactic. A retailer uses pricing to drive traffic, nothing new here, it's part of the retailers strategy. BUT, deploy this into a retailer that has no strategy (i.e. merchandising and sales training) and you have a... FAIL.
Joe, you are so much smarter than box of rocks! And I absolutely agree with you.

My view is that if pricing is part of well developed strategy, it can help you in many ways. If it is simply a tactic it's more likely to lead to failure.
 
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"We don't want to price our cars, it will kill our gross". I hear this daily. If 92% of customers research the Internet before they come into a store, don't you expect that they have a price in mind before they arrive? They are looking for vehicles that fit their life styles and their budgets but they are mainly looking at prices. They don't care if you are the Dealer of the Year or won the Chairman's Award. They want to know that you have a specific car and what you will sell it for.
 
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What if you're an old-school digital marketer, like me? :cool:

I don't think it's wrong to call "pricing" a strategy, or a tactic, a culture, a process or anything else -- just semantics. Pricing may or may not be part of your overall "scheme" (threw another one in there) to get people in your bricks-and-mortar store.

Where the truly "Old-School" guys fail is when they refuse to realize that the "Front Door" is no longer that space 30 feet in front of their desks, and that the "meet-n-greet" is no longer that hand-shake on the lot or on the floor. I've said that before, and often.

But here's a twist: I think the "New School" guys fail when they completely discount the Old School stuff.

Some of the readers here may not understand my reference to APB selling (read-up at your leisure: Automotive Profit Builders Inc- Company), but if you place it all in the following summarized context, I think it's a valid argument.

The Meet-N-Greet and Qualification and Hood-N-Trunk and Demo Drive and Sold Line and Write-Up really boil-down to the intent to build value in 1. the product, 2. the saleperson, 3. the dealership AND the intent to create the ability to generate an offer after the 1st Pencil.

Let me further summarize: our processes are designed so that our clients will like us and our products enough so that when we hit them at sticker while rolling their trade $1000, we can peel them off the ceiling and agree to a reasonable offer.

That is still our game, folks. There's where the gross is. As long as there is negotiation as part of the process (until there is one-price selling), the stores who make the money and get good CSI are the ones who embrace THIS PROCESS.

Now WHERE and HOW and the TOOLS of this process have changed! And the ones who really get it are the ones who have been able to marry the Old with the New. An example: imagine a showroom where all of the Ups on the floor are there to meet the Sales Manager with whom they have an appointment, which was set by an Appointment Setter. They already have enough information that they are comfortable walking through that scary door. They feel "important" because they are meeting the Manager. And when introduced to the "top salesperson," they are provided with a value-ladened presentation and demonstration. How would that effect negotiations? (If you answered, "it would help," you are correct!).

In the aformentioned example, did the meet-n-greet still occur? Yes! Did it occur at the front door? No! Did we qualify the up? Yes! Did we do it on our Yellow Up Card? No! All the crucial elements for high units, gross, and CSI are still there... they're just not where they used to be.

So I hope the New guys will cut the Old guys some slack, and the Old guys are open to learning some new tricks -- because really, now more then ever, they need each other.
 
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My favorite bit of advice touted by this group is, "Don't put your cars up on the classified sites right away. Give yourself a few weeks or a month to make the big gross."

HUH? "Don't put your cars up on the classified sites right away. Give yourself a few weeks or a month to make the big gross." That’s about an ass backwards statement as I have heard in the last 5 years since some nut tried to sell me that the big purple gorilla would help me sell more cars!!

Why in the heck would anyone give that advice when 3rd party classified sites; AutoTrader, Cars, and the 50+ sites Dealer Specialties sends my inventory to are helping drive click thru traffic to my web site, create phone calls, and walk in traffic. Why would anyone want their fresh inventory absent for 30 days? I sat in a Cadillac local marketing meeting today and the local paper was presenting to us the latest in consumer habits in our market with data by CNW, the national data on sources used by consumers showed:

"Other Online sites" (3rd Party) starts out at 6mo from purchase at 25% of the source used by the consumer. Climbs to 75% at the 2mo mark, then 35% 1mo and 25% 2wk. Dealer website was 42% at 1mo and 87% at 2wk.

If we didn’t put our units on until after 1 month, how many of those consumers using 3[SUP]rd[/SUP] party for 75% of their research at the 2mo mark might we miss that might say “wait, here is what I am looking for”. Why the heck would I not want our inventory in its first month on a place that people are going to 35% of the time to look for, and especially the 2 places on the web that consumers are using the most? Where is the data that says that online classifieds in 1st month lower your gross? If anything, with the competitiveness of the market today we want our units on as many reputable sites as possible to capture as many VDP’s as we can on that unit, hopefully sparking interest, leading to an email, phone call, or a walk in. Then it’s up to us to hold the gross or not.

That makes no sense as to everything I read, hear, and experience every day here in the trenches.
 
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