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 Have you ever heard of elementary score keeping? In the motorcycle business, that’s when you keep score for your sales department by the number of units you sell rather than the gross profit you make. It happens all the time in this business, in part because the OEM’s have programs, incentives, and rankings based on your retailed units, but the bigger culprit is a solid blend of ego and ignorance. 

Back when I was a dealer the Cycle Trader was a weekly black and white print magazine that was sold for next to nothing at nearly every convenience store here in Atlanta. It appeared that every buyer that came into our stores had a copy and was a ferocious price shopper. They had a solid ‘feet on the streets’ sales team that visited our stores every week and would plop down a copy of last week’s edition on my desk. They didn’t even have to do any selling.Once me (and every other dealer in town) flipped through the magazine and saw that every one of our competitors had a display ad, it was just a matter of what size ad and what content would go in it. Because out-of-state dealers didn’t have to charge sales tax to Georgia buyers, the magazine was littered with dealers just across the state line offering mega discounts that, when stacked with no sales tax, made it nearly impossible to compete.

That’s when I did something really stupid. I adopted the mentality of, “If they can sell them for that cheap than so can we!”  I became so consumed with moving units and competing with the discounters that I fell into the trap of elementary score keeping. I would later learn this marketing incest happens in nearly every industry. Ignorant business owners copy-catting their competitors discounted advertising and unknowingly eroding the price integrity of industries, brands, and businesses (hence the creation of MAP).

That lasted for about a year until it became obvious that we were headed for disaster. We increased our volume which required more staff, more inventory, more facility square footage, etc. but our profits declined, BIG TIME. More overhead, less gross profit is not a good business model. Duh… who’d a thunk it. 

I just read that Sears, K-mart, HH Gregg, JC Penny, Macy’s, Gander Mountain and Payless Shoes are all closing stores this year. Many are quick to blame Amazon and other online retailers like Zappos, but personally I feel that’s the easy excuse. Coincidentally, I’ve seen mega discounted Father’s Day advertisements for nearly every one of these businesses (See Exhibit A). 

In the retail business it’s all about holding margin, how much is Sears really gonna make when they discount tools by 50%? The second some big ego executive decides he’s going to conquer the world by discounting it’s the beginning of the end. Here’s why: Getting customers with discounting and promotional pricing inevitably attracts those who only buy because of price, are high maintenance pain in the asses, and are easily lured away by anyone offering bigger discounts and lower prices. 

Since I’ve made this mistake, and wear the scars to this day because of it, it’s a topic that gets me pretty fired up. I once had a sales person tell me that he felt guilty selling an ATV to our customers for full price when they could drive up the road 2 hours and save a thousand bucks. I should have fired him on the spot. Don’t undervalue, and thus underprice, your services just because your competitor is doing it. He will eventually fade away, they always do. The real disservice to your customers is when you’re not there to do service after the sale because you’ve gone out of business, or worse you can’t afford to employ competent employees so you deliver a unit that was improperly assembled and someone is injured.

Year in and year out surveys show that price is not the number one factor in a customer’s decision to buy.  And, knowingly building your customer list with price sensitive customers and/or unable-to-pay-fair-market-value customers, for the products and services you provide, is destructive. 

In the many 20 group meetings I’ve attended, the top performing dealers have always been those who hold gross profit, not focus on discounting. This leads me full circle back to your advertising. This is the pre-frame for what type of customers you attract, and it’s why our religion here at PSM is to execute quantifiable, lead-generating, marketing without focusing on discounts. We’ve consistently avoided discounted pricing messaging since our inception, by intent, and always will. It’s the easy way out, and we don’t participate.

For more information on how we can help you avoid discounting and attract quality leads for every department in your dealership, contact us at 877-242-4472.