Quoting prices is a delicate balancing act
The primary reason I’m writing these articles is to give sales staff more confidence at the sales counter. This month, I’ll continue my series on pricing.
I like to say that pricing has a mind of its own. Have you ever quoted a price that was too low? Quoting a low price is one thing; quoting a price that is too low is quite another. The goal, of course, is to make the sale, take care of the customer, and make a satisfactory gross profit.
Quoting prices is a balancing act, especially now that customers have more information.
Have you ever quoted a tire price too low and had the customer ask you what was wrong with the tire? Have you ever quoted a price that was too high and have to reduce the price only to lose both your credibility and the sale?
You never really know exactly where a customer is at emotionally in terms of making a decision to buy. It’s a constant battle in our minds to know when to quote because you can’t close until you quote.
Differentiation and limiting choices
Why should you differentiate yourself, your products, or both?
Studies show when customers shop and price compare, if they find similar products with similar prices, it actually causes them to defer their buying decisions rather than go forward with a purchase.
This may sound counter-intuitive, but charging a higher price for one similar item over another usually inclines the customer to make a decision more quickly.
The same principle is true when limiting choices or options. Studies show that too many options slow the decision-making process. I recommend testing this for about one week, and then check your results. This is where confidence comes in; determine the product(s) you are going to recommend and go for it. This is where more is more and less is more. More confidence leads to sales. Differentiate; prepare your price quote(s) on a limited number of products that offer different features and price points.
If you don’t know, don’t wing it
Studies show that customers desire value over price. That being said, they don’t want to overpay. The worst thing you can do is quote a price too quickly that is inaccurate. When I say “inaccurate,” I mean it’s not the right tire for the customer, it’s not in the customer’s budget, nor does the store make a satisfactory return. Having to re-quote tire prices several times hurts your credibility and your customer’s confidence.
I know a tire dealer in California who will not let his sales staff quote a Michelin tire price until they have done fresh research. The sales staff is trained to request the customer’s call back number, and then immediately research both the dealer’s purchase price and the selling price in the marketplace. Then, and only then, is the sales team permitted to quote what they believe to be the right market price.
Don’t let anchor pricing be an anchor
There’s an old saying in the jewelry business, “What’s the best way to sell a $5,000 watch? Display it next to a $15,000 watch.”
There is a human tendency to rely heavily on the first piece of information when making a buying decision. This is a tactical selling approach used by car salesmen for years. Show the customer the fully loaded model before showing the more modestly priced vehicle. This makes the modestly priced car appear to be a better bargain.
In the retail tire business, it has been standard practice to offer the lowest priced tire to a customer who is price shopping.
Today, more than ever, almost every tire sale is a custom sale. In saying that, I mean there are so many optional sizes, features and warranties that quoting a price alone doesn’t get the job done.
This should actually work to you and your customer’s advantage because the selection process requires more time and discussion. Customers are keeping their vehicles longer and are more willing to buy a better tire during the mid-ownership cycle.
Placing premium tires near mid-level and upper mid-level products gives the customer a better sense of value. This is a better way to sell tires and offer real additional value to your customers, along with an improved bottom line.
A store manager once said to me, “I wish my tire GP would go up.” My reply was, “Me, too.” It’s one thing to wish, it’s another to put a strategy in place, a strategy that includes educated quotes, fewer options, and some anchor pricing to build both value for the customer and a satisfactory return. ■
Wayne Williams is president of ExSell Marketing Inc., a “counter intelligence” firm based in La Habra, Calif. He can be reached at firstname.lastname@example.org.
To read more of Wayne Williams' articles, see:
Tire pricing, Part I: Mastering the fine art of pricing