A trainer once told me, “The customer comes into a dealership wanting to get the lowest price they can, even if that means neglecting the dealer any profit.  Why should you, the salesperson, go into that negotiation without an equal motivation to get the highest price you can?”

This shed a whole new light on negotiations for me, a fresh salesperson new to the business.  Like many, I assumed that if I was open and honest with a customer, they’d surely agree to a fair profit for the dealership.  After all, the dealer had to pay the office workers. They had to pay for marketing and for transportation to get the vehicle to the dealership. They had to pay for the detail department to get the car front line ready. They had to pay me, the sales manager, and the finance manager for putting the deal together!  Not to mention the light bill, the phone bill, the insurance, and on and on…  Surely the customer would understand this if given the opportunity, right?

So, I snuck a copy of the invoice away from the desk for a customer.  I showed it to them in black and white.  “Look, Mr. Jones, this is what we paid for the vehicle.  They are offering to sell it to you $300 below cost just to get your business.  This is a great deal!”

Of course, I was met with the response, “I know you guys make thousands of dollars on these cars. That’s not really what you paid for it.”

Value vs. Cost
This is when I started to learn the principal of value versus cost. We begin most deals in which the value in the customer’s mind is below the cost being offered by the seller. One way to resolve this discrepancy is to reduce the cost to meet the customer’s perceived value.  However, in doing so, the seller most certainly causes the customer to second-guess their initial valuation. After all, they’re wondering, “If the price was so easily lowered to meet my offer, surely I’ve misjudged what a fair price should be.” On the other hand, if we, as the seller, endeavor to raise the value in the customer’s mind, we at least reinforce the reasons the customer considered this product in the first place.  And, if we are effective, we provide the customer with enough evidence to convince himself that his initial valuation was too low and that the price being offered is not only fair, but is indeed a bargain.

Still, I have to admit, I was a little annoyed at being called a liar.  I had taken the risk to show the customer the invoice only to be met with disbelief. I was being what is commonly referred to as a “customer advocate” in the car business.  I had theoretically betrayed my employer’s trust on the customer’s behalf only to be met with accusations of being disingenuous.

Looking back, I see why the customer behaved this way.  I see that this most likely came from a feeling of fear.  A fear of paying too much, a fear of future embarrassment or regret from finding out that they could have paid less somewhere else. Although we are getting away from our bad reputation as an industry, I’d expect most customers felt similarly in those days.

So, where does that leave the car salesman?
If customers are expecting a battle over price, how can a salesperson convince a customer to not only do business with him today, but to do business with him for a lifetime? And to suggest to their friends and family to do business with him, as well?

As I know firsthand, it’s not by showing them the invoice.  It’s simple, really: Provide an experience that the customer finds valuable.

Provide an experience that the customer finds valuable.
Now, what each customer finds valuable will undoubtedly be slightly different.  For most, it’s time. Make the whole car buying process quicker and you’ll endear yourself to many customers. For another large percentage, it’s price.  Or, should I say, “value cost”.  Convince customers that the vehicle they are buying is worth more than the cost to obtain it and you will be successful.  Accomplishing these two goals will reward a salesperson with many referrals and repeat buyers throughout their career.

Other customers may find a smooth service experience valuable. Having a go-to “car guy” is valuable to some. Offering a free detail periodically. Loaner vehicles. Pick up and drop off service for scheduled maintenance. 90-days until first payment. I’ve seen dealers advertise “Free Tires For Life”.  I personally sold a vehicle in 2004 simply because I offered free pinstriping.

All of these things are encompassed in the initial proposition: Provide an experience that the customer finds valuable.  If you do, the customer will pay extra for that experience.

Customers pay for value, not products
I have presented figures that were higher than a customer found elsewhere. I knew I was higher. They showed me the buyer’s order from a competitor on the same dealer trade vehicle, with a matching VIN. However, once I explained the value that I and my dealer were offering, they agreed to buy from us.

So, what did I do with the advice I got from that trainer years ago? Did I “go into battle against the customer”?  Absolutely not. In fact, I became a partner with the buyer.  I made it a conscious goal to always make a proposition that made sense to them financially.  Even if my vehicle price was higher than the competition, I made sure that the value they were getting by doing business with me was higher than the cost I was asking them to pay.

Whether you negotiate with inventory, trim, equipment, service experience, or the time it takes to purchase, do this: Build value in doing business with you and your team.  And, don’t be afraid to ask to be paid for those benefits!

#automotivesales #sales #training #salestraining

At SaturdayMorningSalesMeeting.com, you can listen to podcasts, read articles, and learn more about John and Ray. We cover automotive sales/service best practices, staff training, and techniques you can apply today to sell more vehicles and write more RO’s.

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