“What is your biggest single challenge?”

Although it may not quite come out of their mouths this way, the answer I consistently hear is, “Managing change!” For example, here is a sample response from a recent General Management class that I instructed:

“I’ve always been focused on maximizing my $PVR. Now I’m told that my focus should be on my ‘Price-to-Sale Gap,’ and we’re having difficulty adjusting to this concept.” (What he was really saying was, “The price transparency on the Internet has changed the way we need to price our vehicles and manage gross. I am [and each of my sales managers and salespeople, also are] having difficulty adapting to this change.”)

“But think about this,” I then followed up. “If you adopt, habitually perform, and flawlessly execute a value selling strategy and then manage and measure your Price-to-Sale Gap, your average front $PVR should increase. However, this will require a culture shift within your vehicle sales department.”

This article focuses on value selling. Later this month in Part 2, I will discuss Price-to-Sale Gap.

The objective of value selling is to minimize discounting by replacing negotiation with documentation. The customer’s research has resulted in his putting your dealership on his short list…because he likes your vehicle and he likes your price. Now it’s up to your sales staff to retain the gross profit margin that you established with your pricing policy.

The virtual elimination of both negotiation and discounting from advertised competitive pricing will require a culture shift within the vehicle sales departments of most dealerships. Changing your culture is difficult! When the customer tests you by asking, “But what’s your BEST deal?” or “How much MORE discount can I get?” (and we know they always will), your sales staff must do everything it can to justify your asking price…thereby creating value equal to the transactional cost. Implementing this culture shift requires that you adjust your sales process and that you refine and magnify the value proposition that you present to the customer.

The sales process change begins by requiring the sales department to assume that all customers have performed product and price research prior to making contact with the dealership. The next step is to develop and document your own distinctive 21^st century “method of doing business” that can be quickly, easily, clearly, impressively, and memorably communicated to the customer. The third step is to build a value folder (or evidence jacket) on each new and used vehicle that you have in stock. An important component of this packet is the supporting documentation for how you arrived at the price you are asking for the vehicle. This folder is to be shared with the customer early in the selling process. Sales management must not “desk” a deal until the value folder review has been properly completed. Each folder should include comparative vehicle pricing information (available from the Internet), general dealership information, warranty information on the vehicle, and a detailed description of your dealership’s unique selling proposition (USP). Folders for new vehicles may also include product comparison information. Folders for used vehicles should also include details regarding service history and pre-display reconditioning. There is no such thing as “too much information” in this evidence jacket. The fourth step is to develop a set of sample scripts that salespeople and sales managers must use to overcome price objections. If there is a need to discount, do it in $20.00 increments…not $100.00 increments! The fifth step is to train, continue training, and retrain the entire process. The final step is to measure, manage, and enhance the process. Unquestionably, you will enjoy increased gross!

Be on the lookout for Part 2 of this article, discussing the Price-to-Sale Gap. I’ll even be giving you some fresh ideas on salesperson compensation. Have a great 2016 kick-off!

Warmest regards,

Garry House

(561) 339-0043

ghouse@garryhouse.com