Let’s assume that you’re doing a great job with your digital marketing. You display great photographs! You write great compelling descriptions about your vehicles! You offer a great competitive price! You have great Search Listings that get the prospect to click on your great Vehicle Details Pages! And your dealership employs a great Unique Selling Proposition! Then the customer votes for your vehicle and your dealership by deciding that you deserve to be on his short list. Now what?

Earlier this month I wrote about implementing, habitually performing, and flawlessly executing a value selling strategy.  Even though the customer likes your vehicle and likes your price, you can be certain that he’s going to “try your sales staff on” for further discounts. Now the job of your salespeople and sales managers is to minimize discounting by replacing negotiation with documentation and retaining the gross profit margin that you established with your pricing policy. My early January message presented some tactics your sales team might use to address this challenge.

Part of the culture change I’m discussing involves changing your thinking about what operational metrics you track and manage. One of the primary tenets of Accountability Management is “measuring what you need to manage,” and the metric that you need to manage during and after this culture change is your average Price-to-Sale Gap. Price-to-Sale Gap is defined as “the average discount, or difference between the vehicle retail asking price (advertised price) and the actual final retail transaction price (net of any trade-in over-allowances or under-allowances).” Tommy Gibbs refers to this “GAP” as “Give Away Profit.”  Very few dealers track this metric today!

Have you ever kept track of this number?  Most of the dealership focus has been on achieving $PVR targets, but it is the Price-to-Sale Gap (P2SG) that gives you the greatest insight into the effectiveness of your sales process. Think about what this will tell you about your sales teams’ ability to create value equal to your retail pricing. Traditionally, dealers averaged a $1,500 (or more) Price-to-Sale Gap. We priced our vehicles at the old “hope to get” figure, and we counted on the occasional homerun. But we’ve recently learned that once dealers begin focusing on competitive pricing, value selling, and measuring the P2SG metric, the average Price-to-Sale Gap can be consistently held below $300.00. To reinforce the importance of P2SG, some dealers have begun compensating their sales staff to maintain this metric at an acceptable level.

As you implement the value selling strategy, I strongly recommend that you immediately install and instill the discipline of tracking, inspecting, and score-boarding the Price-to-Sale Gap into the culture of your vehicle sales department. You will sell more vehicles and generate more gross profit! If you would like a sample of what the P2SG scoreboard should look like, please send me an email or give me a call.

Wishing You a Strong Finish this Week!

Garry House

561-339-0043

Gha4you@gmail.com