Cars in the lot? Check. Catchy local advertising? Check. Vehicle pricing in place? Check.
Now, time to sit back and watch the customers roll in.
Not so fast.
Do you have the right cars on the lot? And are they the right price?
Gone are days when you can put a clever ad on local TV or radio and wait for people to wander into the dealership. When you think you have all systems in place, you should consider making absolutely sure you have an effective, modernized vehicle pricing strategy.
Assessing Your Vehicle Pricing Strategy
In order to get a vehicle pricing strategy in place, assess your current one. Ask yourself the following questions:
- What exactly is my current vehicle pricing strategy? Do I base it on hunches or data? Do I even have a vehicle pricing strategy that I can explain and defend?
- Which cars have historically sold well in my area, and how does my inventory reflect that?
- Do I consistently have certain make and models that tend to have a hard time moving off the lot? If so, what strategies am I implementing to fix this inventory turnaround issue?
- Do I have a way to reach customers on the Internet to present my inventory in an efficient way?
- What type of software or program am I currently using to manage inventory?
After you have completed your assessment of your current inventory management strategies, it’s time to do some work. If you’ve always done things the same way, it might require you to think outside the box and be open to dive into strategies that are completely new to you or those you hadn’t thought about before.
Don’t just slap the lowest price on that sticker
If you have been basing a vehicle pricing strategy more on what feels right rather than numbers, examining key data factors is a more effective approach.
A well-researched, competitive price goes much further than just offering the lowest price. Does your vehicle have an original package that your competitor’s does not? If so, that original package’s MSRP should be reflected in the vehicle’s price.
It’s important to take into consideration that every vehicle priced in the market may not have the same value propositions that your vehicle does. Doing your research and leveraging data to compare apples to apples allows you to defend your margins while still staying competitive in the marketplace.
According to a study by J.D. Power and Associates, consumers are not as concerned with getting a great deal as the auto industry may believe. In fact, the study shows that consumers would rather find value in a vehicle than get the lowest price.
Examine the data
But what’s the point of pricing a car competitively based on its value if your consumer can’t see the value in it? Today’s consumers spend an average of nearly 14 hours online researching vehicles, according to the J.D. Power 2014 New Autoshopper Study, so it is imperative that you provide the consumer the same data you had when you priced it.
Utilize your dealership VDP pages by providing the consumer relevant vehicle descriptions that include OEM packages, their original MSRP, and pricing proof points that reflect books and market averages. If you stay ahead of today’s tech-savvy shopper and offer your potential customers transparency in the way you’ve priced your vehicle, you’ll give them a seamless, pleasant shopping experience that builds value in your inventory.
Don’t ignore used cars
Studies like the Consumer Reports’ annual Car Brand Perception Study give insight into American’s perception on used cars and how likely they are to seek them out to purchase them. According to the study, two-thirds (65 percent) of respondents said that they are more likely to consider a late-model used car relative to several years ago, and 71 percent reported being likely to consider a late-model used car as an alternative to a new car.
If you were to just assume everyone is looking for a new car first, you’d be missing out on the people who go for used cars first. In fact, in 2013, certified pre-owned (CPO) models helped drive a dealer’s used vehicle profit margins to $2,361, which was nearly double what the margins were for new vehicles sold in 2012.
Choose a system designed to appraise and price inventory
When you understand both consumer trends and the importance of robust used car inventory, you’re on your way to a vehicle pricing strategy. The best way to have access to advanced analytics, cutting edge best practices, and decision making tools is with a fully integrated inventory solution.
At MAXDigital, we empower dealers with software designed to maximize opportunities for generating faster turn and higher gross profits simultaneously. Formerly known as FirstLook, MAXDigital’s Inventory Management Platform is designed to help you stock, appraise, and price the right vehicles for your area.