Does volume make up for giving a low price?

I want to clarify at the very beginning of this blog. When I am referring to a “discount” I am referring to discounts you normally don’t offer. Example: $500 over invoice versus, triple net. Now let’s get started.

How many times has a customer told you that they might be interested in a multiple car purchase if the price on the first one is “the best”?

I remember this very well and heard it from individuals to small businesses and every time the allure of multiple purchases just does something to me.

When I was selling cars many years ago I can remember going in to the sales office and my sales manager starts to hear the all-too-familiar plea. I try to convince my sales manager that it makes so much sense to offer the customer the VERY lowest price the first time on this one vehicle because he may buy more. Of course, I have the expectation that this new customer will buy multiple vehicles, send numerous referrals and make me tons of money. On the other end the sales manager has heard the same plea hundreds of times before, and yet for some reason, my pleas and the lack of current sales, pressure to hit a goal suddenly make offering a discount very attractive to him.
It’s as if we’re watching the unveiling of a very slow accident that is completely avoidable and yet happens at dealerships everyday. Here lies the biggest issue: I would get it into my head that the only way to close the deal was by discounting the price of the first vehicle to rock bottom and all they need to do is convince my sales manager to go along with it. Heck, I remember even getting mad when I thought the discount was not enough. LOL, sorry this is all funny now.

When this occurs, a major shift in the sales process happens. The way a salesperson does their job takes a very dramatic turn in seconds. We are no longer selling to the customer; now we are selling the sales manager. The problem with this is simple – a salesperson gets paid for selling to customers. That’s how both the top-line and the bottom-line are made.

If you’re reading this and you’re a salesperson, here is some very simple advice. Contrary to what you believe will happen, the odds of the customer buying multiple vehicles or sending referrals are similar to me winning the lottery. Is it doable? Yes. Is it probable? NO! In every case this happened to me as a salesperson and sales manager only one time did a customer buy more then the initial vehicle and in that situation I was forced to give the same type of discount on the second vehicle. This is why when you discount the price; the new price is now the price and don’t be surprised if they ask for more of a discount to test you. They will also tell any potential referrals how to get the discount! So, you say well I will just increase the price, right? If or when you attempt to move the price to the ‘normal or regular’ price range, it is seen as a price increase.

As a manager I can guarantee you one thing. You did not cut your cost of goods by the same dollar for dollar discount you just gave, so why do it?

Here’s the deal: Your ability as a salesperson is not in how much you sell, but in how much you earn for your dealership. It’s the bottom-line profit that counts, and anytime you reduce your price, you’re slashing your profit.

There is not a sales manager out there of any quality who will allow any salesperson to spend their valuable time trying to sell internally. The focus must be on external selling. Focus first on creating value by determining the needs of the customer. Then position your product and service as the solution, and do so at a price consistent to market value. Focus on the customer and the sale will follow.

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