June 30, 2008: Building value: A key to sustaining in a challenging economy
June 30, 2008
Filed under Columns
There are millions of ways that consumers can utilize their expendable income. That’s why it’s imperative to do all that you can to build value with every single prospect you have.
It really all comes down to the “Value vs. Price Scale,” where value is on one side of the scale and price is on the other. The customer will only purchase when value exceeds price, so there are two options. Option one is to lower the price until value is higher, and Option two is to increase value until it is above the price. Option one is easier, but who wants to sell more units and make less money? Option two might not be quite as easy, but it’s the best move for your bottom line.
If value must be higher than price for the sale to happen, we must become experts at building value. This is where the Value Triangle comes in. The first side of the Value Triangle is building value in the product, which is done through giving an excellent presentation using features and benefits. A feature describes what something is. Benefits explain why the feature is important to the prospect. For instance, if the feature were fuel injection, the benefits would be improved fuel economy, a crisper throttle response and better cold starting.
The second side of the Value Triangle is building value in the salesperson, which is done through establishing rapport and creating feelings of friendship with the prospect. We’ve all had the experience of wanting to buy a product, but didn’t buy because we didn’t like the salesperson. People buy from people they know, like and trust.
The third side of the Value Triangle is building value in the dealership. I recently spoke with a neighbor who purchased a John Deere mower. After looking at the local home improvement warehouse, he went to the John Deere dealership where he noted that the prices were higher. The salesperson did a great job of building value in purchasing from the dealership by explaining that they had factory-trained technicians and they offered a pick-up and delivery service. The salesperson also explained their parts department is well stocked, and they really believe in service after the sale. My neighbor purchased from the John Deere dealership because of the value the salesperson built in the dealership.
According to a national retail benchmarking study created by Pied Piper Management Company, salespeople in the powersports industry only give a compelling reason for a prospect to buy from their dealership 34 percent of the time. Compare this to the RV industry, which gives the prospect a reason to buy from their dealership 60 percent of the time and we have a lot of room for improvement.
Let’s take a look at the math …
If value in the dealership is only happening with 34 out of 100 prospects, that means 66 leave without hearing a compelling reason to buy. Let’s say we increased this number to 60 out of 100 (we know that 60 percent is realistic based on the RV industry). That’s an additional 26 prospects that are given a compelling reason to do business at our dealership. If we closed 20 percent of the additional 26 prospects, that’s 5 units per 100 prospects. Although this is speculative, it’s still very realistic.
If we want to thrive in a down economy, we have to look for ways to improve our ability to build value. And if our competition, inside or outside of the powersports industry, is doing a better job at building value in the product, the salesperson and the dealership, then they will be the ones thriving in a depressed market.
About this column
Series goal: Each column will focus on one aspect of the sales process and provide tips on improving that aspect.
This edition: Building value into the selling process
National average: On average, salespeople in the powersports industry only give a compelling reason for a prospect to buy from their dealership 34 percent of the time, according to the 2008 Prospect Satisfaction Index, an annual study conducted by Pied Piper Management Co.
Tory Hornsby, general manager of Dealership University, was drawn to the powersports industry more than 10 years ago when he turned his passion for motorcycles into a career. Hornsby worked in nearly every position in the dealership before becoming a general manager. He welcomes your e-mail: firstname.lastname@example.org.