When customers want to research the price of a vehicle, the internet is often the first place they turn. A wide variety of pricing tools help them understand what they’ll have to pay to drive off your lot in a new set of wheels. While these tools are certainly great for consumers, have you thought about how you can use them to enhance your bottom line? Yes, online pricing tools can actually help you increase profitability and expedite the sales process. Read more to find out how you can put online pricing tools to work for your dealership to set competitive prices, level-set customer expectations and build trust for a faster sale.
The same websites that car shoppers visit to research the vehicles they’re considering also are available to you, so why not put them to work? Whether you want to better target your initial asking price or convince a customer the trade-in offer you’ve made is reasonable, these market-based pricing tools provide objective information that can get you and your shoppers on the same page and working toward a faster sale.
Setting Your Price
We don’t need to tell you how important a role pricing plays in the sales process, so why leave it to chance? It’s critical that you base your initial pricing decisions on more than intuition or wishful thinking. Today’s internet-based pricing tools take myriad factors into account before calculating a suggested price, including supply, demand, the vehicle’s condition and actual prices in your market, so you can look to them as a reliable foundation. Consulting these sources on a regular basis ensures that your price is both competitive and current.
There are many online tools that can help you determine a fair initial asking price on both new and used vehicles, and chances are good you’re already putting these to use. Regardless of how you arrive at a price, it’s also essential for you to be aware of what consumers are seeing as they do their research. Remember, what they see in online tools and the price they find in your competitors’ listings will shape their perception of your asking price. While you don’t need to be the lowest price, you do want to be priced competitively. In some instances, you may find you even have room to raise your price.
For used cars, we recommend three simple steps that will ensure you’re on the same track as the market and your shoppers.
- Know the Blue Book value: Regardless of the pricing tool you used, most consumers are familiar with Kelley Blue Book’s used vehicle prices. In addition to availability on kbb.com, these are also readily found on websites like Cars.com. Before signing on the dotted line for a used car, many consumers will check this for a suggested retail price, so you need to understand what they have found when doing their homework, especially if it’s not in line with your offer. That’s not to say your price must match, but when it doesn’t you should be prepared to explain why. Perhaps the vehicle you’re selling has features not found in the car the shopper evaluated, or perhaps it’s in better condition.
- Shop the competition: It’s no secret that your shoppers are also looking to see what kind of a deal they can get from the guy down the street. You should browse competitors’ listings to get an understanding of their inventory and their pricing strategy.
- View the market average price: Sites like Cars.com are offering new tools for dealers, making it easier for you to get a handle on competitive prices for every used car in your inventory. A market-average price is now listed in your inventory reports to give you an at-a-glance view of a vehicle’s average asking price, specific to your market. Not only can this tool help you set a vehicle’s initial asking price, it’s also a great point of reference for aging inventory. If a car has been on your lot for more than 45 days, we recommend you evaluate your asking price based on the current market. A price adjustment may be just the ticket to a fast turnover.
When shopping for new cars, consumers also have a lot of information at their disposal. In addition to MSRP and invoice price, many sites offer market-based estimations that give consumers a realistic view of what they can expect to pay based on a variety of factors, such as actual vehicle transactions and market demand. For example, Smart Target Price was recently introduced to new-car shoppers on Cars.com. We suggest that dealers also consult these tools and understand where their pricing ranks in comparison.
Using market-based tools to set a competitive price creates a win-win situation. Car buyers can see for themselves that the asking price is fair — not so high that they feel you won’t negotiate, and not so low that they feel something is wrong — and you can confidently hold your ground during the sales process. Should a prospect challenge your price, you can readily explain your rationale and objectively show the shopper why he or she is getting a fair deal.
Negotiating With Shoppers
The same tools you’ve used to set a price that will put you in contention for the deal can also be used with shoppers in your store to build their trust and expedite the sales process. The internet can be a whole lot more than a lead driver, it can also be a lead closer. Take shoppers online with you to see how your pricing stacks up and you’ll be on your way to higher profits.
- Build consumer confidence in your pricing: It’s likely that many shoppers have doubts about the price you are offering and will continue to try to negotiate downward. Instead of letting their doubts drive down the deal, get online alongside them and help them understand why you arrived at your asking price. Show them how your offer stacks up against suggested prices online. This transparency will build the shoppers’ trust and expedite their time to purchase. The buyer will feel good and have confidence they got a fair deal. In many cases, you’ll also land a more profitable sale.
- Get beyond invoice: We’ve all had customers who come into the showroom and demand invoice price. While it may seem impossible to negotiate in these situations, we recommend that you take buyers online to Cars.com and show them the Smart Target Price for the new car at hand. In many cases, this value is above invoice and can be an easy way to help the customer understand what’s realistic.
- Manage the trade-in: When the customer is fixed on the wrong value for a trade-in, it’s up to you to shift his or her expectation back to the correct value. The good news is that you can go online with the shopper to help determine the true trade-in value with an online valuation tool. Walk the shopper through each step of the process, explaining the inputs along the way. Before you know it, you’ll be on the same page. See our article “Tricks of the Trade-In” to find out more about how you can manage the trade-in process more effectively.
Though shoppers are savvier than ever before, remember that you too have the tools to be savvy in your sales approach. Pricing tools and information do not have to be your enemy. Put this data to work in your court and you’ll be on your way to pain-free negotiations, faster sales and higher profits.